Three Challenges in Bridging the Energy Gap in Nicaragua
by Morgan Babbs, Green Technology field associate intern, Global Partnerships. Morgan is a rising junior at Tufts University, majoring in economics and international relations, with a focus on development economics. Morgan spent her internship navigating through rural terrains in the extreme heat of a Nicaraguan summer with a MiCrédito loan officer; together, they raised awareness about the benefits of solar energy to rural, off-grid communities that lack access to electricity. Morgan reported to our GreenTech team in Seattle and served as our contact on the ground as we continue to assist MiCrédito in the formation of its new solar-lending program.
MiCrédito is a new Global Partnerships (GP) partner in Nicaragua that aims to connect rural, off-grid populations with access to solar technologies. With technical assistance and funding from GP, as well as new relationships with Nicaraguan solar companies Tecnosol and NicaSolar, the social enterprise will begin offering financing for solar products, thus potentially connecting thousands with electricity that they otherwise could not access.
My role was to work on-site with MiCrédito full time, and work with their staff on the ground to design and implement a solar lending portfolio. With daily direction from the GreenTech team, I assisted MiCrédito in establishing partnerships with solar suppliers, overseeing product movement from suppliers to MiCrédito clients, and developing models of product delivery for both the large solar home systems and the smaller solar lamps. I learned a great deal during my two month internship, and would like to share three main challenges that GP is addressing in its GreenTech work with MiCrédito:
Challenge #1: How do we connect rural, off-grid populations with electricity?
MiCrédito’s pilot solar-lending program is currently operating in its Teustepe branch (one of seven branches), an extremely rural area where 70% of households do not have access to electricity. Most households spend anywhere between $2 and $10 dollars per month on alternative lighting solutions such as kerosene, candles, or battery powered flashlights. Furthermore, most households need to send one or two cell phones into town twice a week for charging. Not only are such “solutions” insufficient, but they are also costly, harmful to one’s health and the environment, and limit productive hours of the day.
GP is helping MiCrédito innovate its product offerings by establishing a wider range to accommodate clients with varying financial capacities. It is also assisting MiCrédito in designing distribution channels that can reach these rural families. GP’s provision of technical assistance comes from its ability to leverage its connections to local solar suppliers, provide knowledge of different business models, and share experiences designing solutions to similar problems.
With GP’s support, MiCrédito will be able to provide households with appropriate solar technologies; clients have the option to take out a loan to invest in large solar home systems that can power several light bulbs and a television/ radio, or they can instead purchase smaller, more affordable solutions such as solar lamps that include cell charging capability. Providing access to the larger solar home systems is rather straightforward because clients would just need to apply for a loan with MiCrédito. The bigger challenge in implementing MiCrédito’s solar program is the provision of access to the smaller solar products.
Challenge #2: How do we deliver smaller, more affordable solar solutions?
For a household that spends $2-$10 per month in lighting expenses and cell phone charging, an investment in a $50 dual solar lamp and cell phone charger pays for itself in just a year. Additionally, considering that the product has a 5+ year battery life, the investment provides benefits to families for years to come. However, because MiCredito’s minimum loan amount is $100, it means they are unable to finance smaller-scale solar solutions such as the $50 dual solar lamp and cell phone charger.
GP is working alongside MiCrédito to design and implement a potential business solution which consists of MiCrédito recruiting solar micro-resellers from its client base. This accomplishes three things:
1. MiCrédito can provide clients with loans to buy a large quantity (at least $100 worth) of solar products. GP is helping MiCrédito with the design of this loan product.
2. Client resellers serve as a valuable distribution channel of solar products to rural areas because of their connections to local communities.
3. Clients can earn additional income from solar product sales.
Challenge #3: Building a network of solar micro-resellers
Currently, it is a challenge to recruit clients that are willing to sell solar products. This is caused in part by lack of awareness of the benefits of solar products.
MiCrédito loan officers host micro-reseller info sessions for current clients; attendees are shown solar product demonstrations and receive basic sales tactics based on GP and MiCrédito’s experience in the field. Attendees are also informed of their possible loan term and amount. The first info session took place in the last two weeks; two men decided to sign up for a loan and test out the market for themselves with a consignment product. If all goes well, they’ll return in a week and finalize the loan request and MiCrédito will have its first two solar micro-resellers/microentrepreneurs.
In the past two months I have seen GP and MiCrédito’s pro-poor delivery system come together quite well. Providing credit for solar products through MiCrédito means that we’re able to tap into their understanding of the socio-cultural context, and adapt sales to their client demographic.
As we all get ready to celebrate Independence Day and our collective spirit of patriotism, it’s a good time to reflect on U.S. generosity around the world. When President Obama pledged $7 billion to support energy access in sub-Saharan Africa this week, we at Global Partnerships nodded in support. The “Power Africa” initiative that the President announced is not so much about energy as it is about empowering families to help lift themselves out of poverty.
He put the need more eloquently: “Access to electricity is fundamental to opportunity in this age. It’s the light that children study by, the energy that allows an idea to be transformed into a real business,” Obama said while speaking to students at Cape Town University in South Africa today. “It’s the lifeline for families to meet their most basic needs, and it’s the connection that’s needed to plug Africa into the grid of the global economy.”
Worldwide, over 1.3 billion people live without access to electricity. Of those, roughly 30 million live in Latin America and the Caribbean. In under a year, Global Partnerships has invested $500K towards sustainable solar-lighting projects for off-grid families in Latin America and Haiti.
As an impact investor, we’ve seen the transformative power of solar lights. And as an OPIC investee, we applaud OPIC’s $1.5 billion investment in addressing the global energy access gap through the President’s “Power Africa” initiative.
- CNN video on President Obama’s $7 billion pledge to power Africa.
- Read about the International Energy Agency’s global status on modern energy access.
- Check out ONE's blog post on 6 ways energy poverty threatens healthcare of people living in poverty.