Renewable Energy Micro-Financing in Rural Communities of Pakistan /

Abstract

In the twenty-first century, one of the utmost requirements for development and poverty reduction is energy. Yet, more than 1.6 billion people around the world do not enjoy access to modern energy. While providing access to energy for all has been the top priority of the governments around the world, it requires an extensive amount of capital and resources to achieve this goal. This is why in many developing countries including Bangladesh, India and Sri Lanka, this unmet need is being greatly fulfilled through renewable energy micro financing. However, in Pakistan, in spite of the ever worsening energy sector situation, this avenue remains largely untapped. In this context, this study aims to explore the prospects of renewable energy micro financing in rural communities of Pakistan. The study has followed different methodologies at various stages. Firstly, a specialized demand assessment questionnaire was prepared for conducting household surveys in a selected case study village. All 156 households from the case study village were surveyed and the results analyzed through Statistical Package for the Social Sciences (SPSS). The survey results established that majority of the households are willing to take micro-loans for switching to renewable energy technologies. However, most of them showed their reservations about the element of interest-rate in conventional microfinance and emphasized that the proposed microloan should be based on Islamic principles. Moreover, considering the locally available resources and the preferences of the survey respondents, it was assessed that solar home system is the most feasible renewable energy technology for the households. Subsequently, solar home systems sizing, designing, economic and environmental costing has been conducted through RETScreen simulation software and 3 different sized packages have been proposed for catering the needs of lower, middle and higher income households in the village. Since One-Hand model is currently the most successful implementation model for renewable energy microfinancing in the developing world, and Diminishing Musharakah financial model currently holds the largest share in Islamic finance industry of Pakistan, the study concludes that an interest-free renewable energy microfinance model established on the Islamic finance concept of Diminishing Musharakah and implemented under One-Hand Model is the most viable option for Pakistan.