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November 12, 2008

Energy and Microfinance in Rural Bangladesh

Juan Aristi ’09 and Gaurav Podar ’09
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We must admit that we knew very little about Grameen Shakti when we filled in the application for the International Development Club project at the beginning of the summer of 2008. The information package outlined a rural energy company related to the Grameen Bank, the Bangladeshi microfinance organization created by 2006 Peace Nobel Prize winner Muhammad Yunus. However, the intersection of microfinance and rural energy piqued our interest.

On the one hand, energy needs in developing countries’ rural areas are overwhelming: more than two billion people do not have access to modern forms of energy like electricity or oil while a third of the energy consumed in these countries comes from burning wood, crop residues and animal dung (PDF). On the other hand, microfinance, pioneered by Professor Yunus in the 1970s and probably the most successful business innovation to serve low-income consumers, has opened new possibilities to fight poverty beyond traditional government programs and international aid.

 

How can innovations in microfinance be applied to rural energy?

Yunus and Dipal Barua, one of his students when he started Grameen Bank, founded Grameen Shakti (the name literally translates to “Rural Energy”) in the mid-1990s with the mission of empowering rural people by giving them access to green energy and income. Grameen Shakti’s clients purchase green energy equipment such as solar panels with an in-house microloan that they can pay back over three years. After that, they own a source of electricity that usually lasts up to 20 years. In addition to solar energy, Grameen Shakti provides energy products like Improved Cooking Stoves and Biogas Plants.

The organization also makes smart use of available technology; for example, Barua receives daily text messages with solar panel sales per office. And they are a truly grassroots organization: all employees are Bangladeshis and most of the funding comes from their own operations.

Like the bank, Grameen Shakti achieved almost immediate success and has grown very quickly. Barua now heads the organization, which employs more than 2,000 people and has offices all over rural Bangladesh. It has installed close to 200,000 solar panels in households across the country and plans to reach one million in the next three years.

During the three months we worked in New York and the two weeks we spent in Dhaka, we helped them refine a plan to train young women to install and repair the solar home systems. We had the opportunity to see first hand how poor rural women provided with appropriate training and tools are able to earn a living by producing and repairing electronic accessories for the solar panels.

Nilufa, pictured at the top of this post, left a profound impact on us: she is 21 years old and has one son. Abandoned by her husband, she is now supporting her son and her family by producing at home hundreds of electronic accessories every month.

We returned to New York with the feeling that we had learned much more from them than they had learned from us and convinced that local social businesses have a great potential to change the lives of the poor.

Comments

by Sohel Abdullah | December 18, 2008 at 2:26 AM

Promising report. Bangladesh approching a dire straight on energy. The country now needs 5-6 thausand MW; but can produce hardly about 3-4 thausand MW. Wind, solar are clean source; but I suspect it may be very expensive for those poor people. Do you have an estimate on how much per KWH those solar energy? Just to give you an idea that energy from coal power may cost 6 cents KWH. Looking forward to your response. Sohel Abdullah http://abuabdullah-sohel.blogspot.com/

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