Exposure programs: fostering South South knowledge exchange

Moderator
  • Raluca DUMITRESCU, MicroEnergy International GmbH
Speakers
  • Tesfaye BEFEKADU, Harbu Microfinance Institution, Ethiopia
  • Chris KARAYIL VICTOR, ESAF Microfinance, India
  • Martine SANDERS, FMO

PRESENTATIONS

Raluca DUMITRESCU introduced the topic by referring to Sustainable Development Goal (SDG) 7: Ensure access to affordable, reliable, sustainable and modern energy for all. SDG 7 has become an emerging investment area in microfinance. Access to energy calls for technological innovation at the household level and this has created an appetite among practitioners for exchange and learning. Essentially, nearly all elements of the SDG definition need to reinforce one-another in order to create massive impact from a social, environmental and economic perspective, resulting in the key components of sustainability: bearable, equitable and viable. 

In her own program, Dumitrescu organised visits to Bangladesh to study the advanced take-off of solar heating systems in the lower end of the market. These exposure visits are designed along the following five objectives: learning on the spot (direct contact with stakeholders and target groups); learning by doing (field and household visits); corporate vision (in-depth understanding of mission statement and values of green microfinance programs); potential discovery (identification of business opportunities) and enhancing energy and microfinance networks (cross-sectoral implementation partners). Lastly, green banking is to be recognised as the emerging key lever to stimulate a sustainable economy.

Martine SANDERS of the Dutch development bank FMO explained that the bank has embarked on an ambitious journey to half its footprint and double its impact by 2020. Increased impact will be measured in terms of job creation and ecological progress will be measured in terms of reduction of greenhouse gasses. FMO’s vision and mission are now directing its strategy to become the leading impact investor. Its track record traditionally has shown matching results in positive impact and attractive return, based on a three-pronged investment approach: additionality to the market taking a major stake in project risk, allowing other financiers to come aboard; at least 70% of investments directed to low and lower middle income countries and at least 35% in the 55 poorest countries; and promoting knowledge sharing. The latter is done through technical assistance for clients aiming to become more competitive in a sustainable way, a reference centre in the form of FMOxCHANGE, and broader, sector-wide promotion, learning and exchange activities. The latter included a recent green microfinance study tour by clients from Cambodia and India to Bangladesh.

Chris KARAYIL VICTOR started his presentation by introducing his organisation. ESAF is an Indian microfinance organisation with a track record in three major environmental product lines: solar products, improved cook stoves, and water filters. It was founded in 1992 and has gradually evolved into a triple bottom line organisation, now active in 10 states with 264 branch offices, reaching 1.1 million clients with an aggregated loan volume of USD 356 million. Karayil Victor explained that microfinance that stays directed to promoting savings and borrowings for sustained health improvement is likely the best way to achieve considerable environmental impact in the process; health and environment, thus, go hand-in-hand. He showed how daily health and social challenges directly translate into the design of problem-solving household appliances. It does require a community effort, though, to maximise impact. To that end, ESAF is not only a financial service provider but it provides technical and community support as well. To date well over 145,000 solar units, 75,000 cooking stoves, and 47,000 water filters have been distributed. In addition, 450 biogas units have been installed (producing 490 m3 biogas per day), leading to a carbon dioxide reduction of 212,000 tons.

Harbu Microfinance (Harbu), represented by Tesfaye BEFEKADU, is a mid-size Ethiopian microfinance organisation that is increasingly specialising in green loans for households and businesses. It is operational in the Oromia and Amhara regions, as well as in Addis Ababa. It has 17 branch offices, reaching almost 38,000 clients with a loan volume of 60.9 million and deposits of more than 25.5 million until June 2016. Just over half of its portfolio is currently outstanding in agriculture, followed by informal trade, services, manufacturing, and consumption. However, green energy lending is planned to play a major role in the near future. 

In partnership with other Ethiopian MFIs, namely Buusaa Gonofaa and SFPI, and the organisations Nordic Climate Facility, Gaia Oy, MicroEnergy International and Swan Management – who provide technical and financial assistance - Harbu has developed a green credit line which allows for the financing and delivery of clean energy technologies for households and small businesses. As Befekadu explained, offering finance for clean energy products might be the first step towards developing a green portfolio driven by the high demand across the MFI clients. However, investments for scale-up and replication are needed. 

The participation in the Exposure Program in Bangladesh was for him of great benefit from a perspective of learning more about clean energy technologies, socio-economic and environmental impacts and strategies so as to offer more energy options to clients but also in terms of subscribing to the green agenda. 

DISCUSSION

The key questions from the floor dealt with the scaling up of green investments by MFIs. How to design more green financial products, how to step up performance, how to ensure that intended impact will be realised? All panellists emphasised the importance of linking and learning for which exchange visits are very useful. Other elements include strengthening of resource centres and partnering with like-minded MFIs, investors and support agencies. It starts, however, with formulating a clear corporate objective which is then put into practice. As one panellist suggested, this may require making a lot of noise but one cannot go green halfway or with a partial commitment only. 

The discussion also included a reference to other exchange visits made or under preparation. Often these entail visits from Africa or Southeast Asia to programs in South Asia where, in selected cases, green loans have become mass products already. Scalability may not be as easily pursued elsewhere, but these visits help nonetheless in pushing for innovative local sol­utions. A suggestion was made to entice national, regional and thematic networks in microfinance to stimulate green thinking and exchange and give more priority to the climate change finance agenda.