1
Green Energy Financing in Bangladesh1
by
Bikash Singha Sutradhar2
Assistant Director, Bangladesh Bank
Head Office, Dhaka, Bangladesh
Email: [email protected]
1 Paper presented in IFAD-APRACA FinPower Regional GreenFinance Forum: Integrated Clean and Renewable Energy and
Environmental Sustainability Components into Rural Financing.
2 Views expressed in this paper are the author’s own and do not necessarily reflect the views or policies of Bangladesh Bank.
2
Preface
Increasing the use of renewable energy is seen by many as a solution to the manifold
problems for developing countries like Bangladesh. Though the initial cost of solar energy is
pretty high (approximately USD 200 minimum, where as income of many rural household is
less than a dollar a day), it can be offset by no or minimum variable cost and can be
installed in the remotest areas including the char (river basin) lands, where people are
deprived of most modern and many primary amenities including health and education.
Integrated cow/poultry rearing and biogas plant can bring in a development movement by
providing nutrition (milk and meat), fuel (biogas) and organic fertilizer (manure) from a
single farm and can help reduce rural poverty. Increasing the use and access of renewable
energy, especially in the households can help combat the power and energy crisis and help
ensure adequate grid electricity and natural gas supply for the industrial usage. Renewable
energy is also an adaptation and mitigation option as it is more carbon efficient and
adoptable in many adverse geographical and environmental conditions and thus might help
Bangladesh in negotiating with the developed world for providing better assistance to
combat climate change, a problem where Bangladesh remains only at the receiving end.
This paper sets forth to provide a brief overview of the renewable energy and its financing
status in Bangladesh and the related issues including the policy strides, actors involved,
success stories and the future prospects.
3
CONTENTS
Preface
1.
Bangladesh: Introduction
An Overview
The Rural Financial System
2. Renewable Energy
Clean Energy and Energy Use
Climate Change
3. Issues and Policies Regarding Renewable Energy
Initiatives by The Government
Renewable Energy: A Chronological Advancement
Renewable Energy Policy
Budget (2009-10) Announcement and Energy Use
Organizations Working on Renewable Energy
4. Participation of Community and Other Stakeholders
Solar Power Brings Hopes for Char People
Solar-Powered Hospital
Major Players In Renewable Energy Expansion
Infrastructure and Development
Research and Development
5. Rural Financing Policies In Integrating Energy And Environmental
Sustainability
Related Policies
Financing Mechanism of IDCOL
Bangladesh Bank’s Refinance Scheme For Renewable Energy
IDCOL Model: A Success Story On Solar Energy
EDCL Model: A Success Story On Biogas
6. Conclusion
Bibliography
4
Acronyms
BB Bangladesh Bank
BERC Bangladesh Energy Regulatory Commission
BOI Board of Investments
BPDB Bangladesh Power Development Board
CC Climate Change
GHG Green House Gas
CDM Clean Development Mechanism
DESA Dhaka Electric Supply Authority
FSA Fuel Supply Agreement
GDP Gross Domestic Product
GOB Government of Bangladesh
IA Implementation Agreement
IPP Independent Power Producer
LGED Local Government Engineering Department
MOF Ministry of Finance
MPEMR Ministry of Power, Energy and Mineral Resources
MRA Microcredit Regulatory Authority
NEP National Energy Policy
PSIDF Private Sector Infrastructure Development Fund
PSMP Power System Master Plan
RE Renewable Energy
REB Rural Electrification Board
RETs Renewable Energy Technologies
RFP Request for Proposal
SCB State-owned Commercial Banks
SEDA Sustainable Energy Development Agency
SRO Statutory Regulatory Order
UP Union Parishad
5
1. Bangladesh: Introduction
1.1 An Overview
Bangladesh is situated between 20.30 - 26.38 degrees north latitude and 88.04 - 92.44
degrees east latitude. Placed between the Bay of Bengal and the Himalayas, Bangladesh is a
South Asian country with a land area of 144,000 sq. kms. populated by around 150 million
people. Dhaka, the capital city and also the most densely populated, is placed just in the
middle of the country. Less than a couple of hours flight from Katmandu, the country is
enriched with the beauty of nature and warmth of the simplicity of common people. The
world's longest sea beach; Cox's Bazar, the Coral Island Saint Martins and the beautiful
mangrove forest Sundarbans are waiting to welcome you all.
Three quarters of Bangladesh population live in the rural areas The fact clearly suggests the
importance of rural financing for the overall development of Bangladesh. Bangladesh's
predominantly agricultural economy depends heavily on an erratic monsoonal cycle, with
periodic flooding and drought. The country's main endowments include its vast human
resource base, rich agricultural land, relatively abundant water, and substantial reserves of
natural gas.
Despite being one of the world's poorest and most densely populated countries, Bangladesh
has made major strides to meet the food needs of its increasing population, mainly through
increased domestic production. The agricultural land here is devoted mainly to rice and jute
cultivation, although wheat and maize production has increased in recent years.
Nonetheless, an estimated 10% to 15% of the population faces serious nutritional risk
mainly due to lack of employment scopes, which again calls for increased financing in the
rural areas of Bangladesh.
Among the recent major developmental issues of Bangladesh, climate change is getting the
highest priority as it is a cross-cutting issue. Poverty reduction through income generation is
another important issue, especially for rural Bangladesh. Being a small country having a very
large population, no Government in Bangladesh can ignore the food security issue. Access to
finance is still a major issue for Bangladesh despite the fact that non-governmental
organizations are playing a remarkable role in dealing with microcredit for the rural poor.
Power is considered as a major factor of production. The people of Bangladesh have very
limited access to energy mainly due to limited availability and network. Electricity and
natural gas are the major sources of power in Bangladesh. But only around 20-25% of the
population has access to electricity. During summer, the country faces a severe load
shedding causing a great concern for the governments. Access to natural gas is much lower
(less than 5%) and is confined in Dhaka and the eastern part of the country (Dhaka,
Comilla, Chittagong, etc) with the recent addition of Rajshahi.
Per capita consumption of commercial energy and electricity in Bangladesh is one of the
lowest among the developing countries. In 1990, more than 73% of total final energy
6
consumption was met by different type of biomass fuels (e.g. agricultural residues, wood
fuels, animal dung, etc.
1.2 The Rural Financial System
Despite substantial bank branch expansion and emergence of microfinance institutions
(MFIs), limited access to basic financial services still remains a deprivation suffered by large
segments of the poorer rural and urban population in Bangladesh, more hurtful than other
deprivations in restricting opportunities of freeing themselves from the poverty trap.
Financial inclusion of the poorest, particularly their access to small-sized credit for income-
generating self-employment activities (microcredit) is a major tool in Bangladesh for
combating poverty. Microcredit was pioneered by Nobel Laureate Dr Yunus in the late
nineteen seventies and by now extensively replicated worldwide. The coverage of financial
services is still incomplete.
In Bangladesh, rural finance consists of formal and informal financial institutions, small and
large, that provide small-size financial services to the rural poor, as well as larger size
financial services to agro-processing and other small and medium rural enterprises. Rural
finance also covers a wide array of microfinance institutions (MFIs), ranging from indigenous
rotating savings and credit associations and financial co-operatives to rural banks and
agricultural development banks. Rural finance is a vital tool in poverty reduction and rural
development.
Figure-1: Rural Financial Structure of Bangladesh
Formal rural financial markets in Bangladesh comprise rural branches of nationalized
commercial banks, a sizeable number of private banks, cooperative banks and societies and
specialized banks such as the Bangladesh Krishi Bank and the Rajshahi Krishi Unnayan Bank.
Government institutions and programmes such as the Bangladesh Rural Development Board
(BRDB), Bangladesh Samabay Bank Limited (BSBL) are also playing a significant role.
Rural Financing
Formal Informal
� Commercial Banks
� Specialized Banks
� BRDB
� BSBL � NGOs
� Traditional money
lenders
� Landlord
� Relatives
� Neighbors � Shopkeepers
7
However, the non-governmental organizations dealing with microcredit are still playing the
most prominent role and many people in rural Bangladesh call the MFIs like BRAC, ASA or
Proshika as banks.
Currently 48 scheduled banks are operating in Bangladesh under the direct supervision of
Bangladesh Bank (the central bank of Bangladesh) of which 38 are having either private or
foreign ownerships. Apart from the State-owned commercial banks (Sonali Bank Ltd, Janata
Bank Ltd, Agrani Bank Ltd) and the the specialized banks for agriculture- Bangladesh Krishi
Bank and Rajshahi Krishi Unnayan Bank, the other banks have a very slim presence in the
rural areas of Bangladesh. The Central Bank is pushing the banks for expanding their
operations in the rural areas by imposing pro-rural rules but the responses are showing
examples of regulatory dialect. For every three branches in the city areas, a bank must open
a branch in rural the areas (in the union parishad). But the banks usually try to select such
union parishad (UP) areas which are in the transition of urbanization with the typical
business considerations.
After the liberation of Bangladesh in 1971, many non-profit-oriented voluntary organizations
came into place with the relief and reconstruction services. Later, these organizations made
a strong place in the development arena of the country with multidimensional activities
including health, education and awareness programmes, tagged with micro-credit aiming at
income generation for the poor rural and urban households. Popularly termed as NGOs,
many have made fame in the country and beyond boundary as well. Grameen Bank, BRAC,
ASA, Proshika, Bureau Bangladesh, TMSS, RDRS are some of the prominent names.
Recently the NGOs engaged in microcredit actives have been brought under Governmental
regulation with the formation of the Microcredit Regulatory Authority (MRA).
Recent trends show that the NGOs have a stronger presence in the rural areas thanks to
their intensive monitoring and supervision with adequate number of staff. As of end June
2009, BRAC, the largest NGO in Bangladesh, provided loans to more than 6.4 million people,
while the four State-owned commercial banks (who have more concentration in the rural
areas than the privately owned banks) together could reach only around 5.5 million rural
people. This fact clearly suggests the dominance of the microfinance NGOs in rural finance
compared to the banks.
Currently, the banks in many cases are working in synergy with the microcredit NGOs by
mutual cooperation. Many banks feel comfortable in providing large amount credits to the
MFIs who ultimately lend to the rural borrowers. Bangladesh Bank is also taking a liberal
stand regarding bank-MFI cooperation and has allowed banks with limited rural branches to
use NGO linkages for increasing rural finance.
Microcredit is easier to access for the rural poor as it requires minimum or no documentation
and does not require any collateral security. Most importantly, you need to go to the bank
branch for availing credit however small the amount may be. In contrast, the NGO staff will
come to your house to provide you loan and to collect the small weekly recoveries bringing
much convenience to the rural people. However, concerns are growing centering the high
effective interest rate of for micro-credit and the Government of Bangladesh, MRA as well as
8
Bangladesh Bank are trying to put the interest rated down and to increase the access to
bank finance which has comparatively lower interest rates.
2. Renewable Energy
2.1 Clean Energy and Energy Use
Worldwide, there is a major transition underway in the energy sector due to a decline in
fossil fuel availability, the need to drastically cut global emissions for mitigating climate
change and the need for energy security. Although investment costs in renewable energy
are generally higher compared to fossil fuel alternatives, this option becomes economically
viable when all externalities (e.g. environmental cost, health hazards etc.) and lower
operating cost are taken into consideration.
Of the over 1.5 billion people worldwide who do not have access to electricity, over 100
million reside in Bangladesh--approximately 70 percent of the country's population.
The Government also acknowledged that the power deficit is the principal impediment to our
overall development including industrialization. Currently our per capita power consumption
is only 172 kwh as compared to 325 kwh in Sri Lanka, 408 kwh in Pakistan and 665 kwh in
India.
At present, our average power demand is about 5,000 MW, against which the existing
power plants can only generate 3800 MW of electricity. The Government is taking
appropriate steps to increase power generation assuming its demand to be 20,000 MW by
2021.
In Bangladesh, the World Bank suggests 36% of the population are ‘very poor’ and 53% are
‘poor’- most of these being in rural areas (World Bank, 1998). With lighting and access to
communication technologies the potential for education becomes significantly improved.
Electricity can enable cottage industries to become far more efficient and can enable many
rural industries to develop beyond subsistence. Health can be greatly improved as the
simple provision of a fridge in a community health centre enables vaccines and antibiotics to
be kept at hand. Health is also improved if gas or a similar clean fuel replaces smoky wood
and dung in cooking.
The renewable resources of Bangladesh are adequate for wind and sunlight-based
technologies as well as having significant untapped opportunities for providing biogas (from
digesting animal manure), some hydro opportunities in the hills and some potential for tidal
power in the delta islands of the south however the usages are still very limited. These
renewable resources offer the opportunity for the country to ‘leapfrog’ to the 21st century
with renewable technologies rather than keeping to traditional development pathways. The
application of this approach to the developing world in general is well recognized by UN
agencies and other development organizations.
9
The major sources of renewable energy in Bangladesh are:
2.1.1 Solar Energy
Solar photovoltaic (PV) systems are in use throughout the country with over 200,000
household-level installations having capacity of about 12 MW (June 2008). Scaling-up of
solar PV systems assisted by the development partners are being implemented through the
Rural Electrification Board (REB), Local Government Engineering Department (LGED),
Bangladesh Power Development Board (BPDB) and other agencies implementing solar
energy program. Renewable Energy Research Centre of the University of Dhaka has installed
a model 1.1kW grid connected photovoltaic system. There is a strong potential for solar
energy within the country.
Solar Photovoltaic Applications
Different solar photovoltaic applications are gaining acceptance as a technology for
electricity generation in remote and rural areas of the country, including
- Solar home systems
- Rural market electrification
- School electrification
- Health clinic /hospital electrification
- Cyclone shelter electrification
- Microenterprise (grocery shops, tailoring shops, clinics, restaurants, sawmills, rice mills,
cellular phone services, barber shops) electrification
- ICT Training Centre electrification
- Water pumping
- Signaling
- Remote telecommunications
- Remote rainfall measuring station
2.1.2 Wind Energy
Wind energy has also made some inroads but its potential is mainly limited to coastal areas,
and offshore islands with strong wind regimes. These coastal settings afford good
opportunities for wind-powered pumping and electricity generation. Presently there are 2
MW of installed wind turbines at Feni and Kutubdia.
2.1.3 Biomass
Bangladesh has strong potential for biomass gasification-based electricity. More common
biomass resources available in the country are rice husk, crop residue, wood, jute stick,
animal waste, municipal waste, sugarcane bagasse, etc. This technology can be
disseminated on a larger scale for electricity generation.
2.1.4 Biogas
10
Biogas mainly from animal and municipal wastes may be one of the promising renewable
energy resources for Bangladesh. Presently there are tens of thousands of households and
village-level biogas plants in place throughout the country. It is a potential source to harness
basic biogas technology for cooking, and rural and peri-urban electrification to provide
electricity during periods of power shortfalls.
2.1.5 Hydro
Microhydro and minihydro have limited potential in Bangladesh, with the exception of
Chittagong and the Chittagong Hill tracts. Hydropower assessments have identified some
possible sites from 10 kW to 5 MW but no appreciable capacity has yet been installed. There
is one hydro power plant at Kaptai established in the 1960s with installed capacity of 230
MW.
2.2 Climate Change
Bangladesh is considered as the country which is most vulnerable to the impacts and
consequences of climate change in terms of the number of population supposed to be
affected. According to a World Bank estimate, around 17% of the total landmass of
Bangladesh is supposed to be lost by the year 2050 due to sea level rise- a great threat of a
densely populated country having a population size larger than Russia, whose landmass is
120 times larger than Bangladesh. Many parts of the South-west part are already showing
signs of permanent water logging and agriculture is seriously hampering due to salinity
intrusion. Other adverse impacts from anthropogenic climate change will include floods, and
cyclones and droughts. Tens of thousands of people affected by Cyclones Sidr (2007) and
Aila (2009) in South-west Bangladesh are still striving to go back to normal life. With a
population of 150 million, most of whom earn less than U.S. $1 a day, it has some of the
poorest people in the world. The impacts of climate change will only exacerbate the
problems already facing the population.
Although Bangladesh emits less than 0.1% of global greenhouse gas emissions (compared
to 24% for the United States), it is nevertheless taking steps to reduce its future emissions
through the development of renewable energy and the use of (relatively clean) natural gas.
Because Bangladesh has only been able to supply electricity to less than a quarter of its
rural population, this means that most of the future energy infrastructure can be developed
using renewable energy including solar energy, biogas and other relatively clean energy
sources.
3. Issues and Policies Regarding Renewable Energy
11
Providing power without intensifying the effects of climate change is a priority for the people
of Bangladesh, who know all too well what rising seas and more frequent storms can do to
the deltaic plane. The Government of Bangladesh has established a goal of providing
electrical power to all its citizens. Renewable energy is a key component of the initiative,
and Bangladesh. In many rural areas, people live too far from the main electrical grids to
make connections reliable or affordable. Without access, these families are forced to rely on
more expensive—and nonrenewable—energy options such as kerosene or batteries. Even
with 400,000 new households gaining access to electricity every year, it could take another
40 years for all the people of Bangladesh to have access to electricity.
3.1 Initiatives by the Government
The Government of Bangladesh (GOB) considers energy as one of the basic ingredients
required to alleviate poverty and socio-economic development. GOB issued its Vision and
Policy Statement in February 2000, to bring the entire country under electricity service by
the year 2020 in phases, in line with the direction of the Article 16 of ‘The Constitution of
the People’s Republic of Bangladesh,’ to remove the disparity in the standards of living
between the urban and rural areas through rural electrification and development. The
energy prospect is generally assessed on the basis of available commercial sources of
energy i.e., fossil fuel like gas, coal, oil, etc.
The Ministry of Power, Energy and Mineral Resource of Bangladesh is the sole authority
administering all activities related to the energy including the rural and renewable energy.
Although, the institutionalization of a Renewable Energy Development authority (REDA) was
proposed in 2002, by the end of 2005, the Government of Bangladesh (GOB) decided to
establish an alternative independent unit, the Sustainable Energy Development Authority for
expediting the use of renewable energy and alternative sources of energy for power
generation (Uddin 2006). Infrastructure Development Company Limited (IDCOL), a state-
owned non-banking financial institution, that was established in 1997, administers the
financing for the rural energy and renewable energy development projects (solar home
system, biogas) with 15 participating national non-government organizations (IDCOL, 2007).
3.2 Renewable Energy: A Chronological Advancement
- The Bangladesh Power Development Board (BPDB) installed the first solar
photovoltaic installations in Bangladesh In 1981. A total of 55 solar powered
signaling lights were installed on 11 towers of the East-West Power Interconnector in
Aricha. The solar panels are still operating satisfactorily.
- In 1983, Bangladesh Inland Water Transport Authority (BIWTA) installed 125 solar-
powered beacon lights in different parts of Bangladesh to identify the marine routes
at night.
12
- In 1988, the Bangladesh Atomic Energy Commission (BAEC) carried out a Solar
Photovoltaic Pilot project at Sandwip island, where a solar-powered beacon light was
installed on top of a watch tower, solar-powered refrigerators in a veterinary hospital
for storing life saving vaccines, and solar light and microphone in a local mosque. But
all of these systems were destroyed by the 1991 cyclone.
- On June 1997, the Rural Electrification Board (REB) has implemented the largest
solar PV electrification project for rural households and commercial enterprises at a
remote island in Narsingdi district with assistance from the French Government. This
pilot project served about 900 households of the island community. The total
installed capacity is 62 kWp, divided among three battery charging stations and
stand-alone solar home systems. The PV systems are owned by REB and the users
paid a monthly fee.
- The Local Government Engineering Department (LGED) introduced and disseminated
renewable energy in Bangladesh. Already a number of Solar Photovoltaic (SPV)
installations are operating successfully in different parts of the country demonstrating
innovative application of the technology for improving the quality of life in the off
grid rural Bangladesh.
- In 2008, the Government of Bangladesh adopted a Renewable Energy Policy
3.3 Renewable Energy Policy
With a view to promote renewable energy use in Bangladesh, the Government has declared
a Renewable Energy Policy in 2008. A major drive in the REP is to establish an independent
institution namely Sustainable Energy Development Agency (SEDA) under the Companies
Act, 1994, as a focal point for sustainable energy development and promotion. As per the
policy, ‘sustainable energy’ comprises renewable energy and energy efficiency. SEDA Board
will consist of representatives of stakeholders including business community, academics
and/or representatives from Bangladesh Solar Energy Society, NGOs, financial institutions
and implementing agencies.
Earlier a draft renewable energy policy of Bangladesh was released in 2002. This draft policy
provided modalities and procedures mechanism, tariff regulations, fiscal and other incentives
for implementation of renewable energy technologies and guidelines for establishment of an
independent renewable energy authority, namely Renewable Energy Development Authority
(REDA) (MEMR, 2002).
The Policy sets targets for developing renewable energy resources to meet five percent of
the total power demand by 2015 and ten percent by 2020.
The objectives of renewable energy policy are to:
- Harness the potential of renewable energy resources and dissemination of
renewable energy technologies in rural, peri-urban and urban areas;
13
- Enable, encourage and facilitate both public and private sector investment in
renewable energy projects;
- Develop sustainable energy supplies to substitute indigenous non-renewable
energy supplies;
- Scale up contributions of renewable energy to electricity production;
- Scale up contributions of renewable energy both to electricity and to heat
energy;
- Promote appropriate, efficient and environment friendly use of renewable energy;
- Train; facilitate the use of renewable energy at every level of energy usage.
- Create enabling environment and legal support to encourage the use of
renewable energy.
- Promote development of local technology in the field of renewable energy.
- Promote clean energy for CDM; and
3.4 Budget (2009-10) Announcement and Energy Use
The Budget outlined a long-term vision to solve the gas and power crisis at present and in
future, and as part of it proposed an allocation of Tk 4,310 crore for the sector in the next
fiscal year (FY). The allocation is 48 percent higher than that in the revised budget for the
current FY.
The Budget 2009-10 states that our development efforts are severely constrained by the
dismal state of the energy and power sector. We were aware that there was a huge gap
between demand and supply in this sector but we did not know that the snag is not only in
the supply of gas and generation of power but also in the transmission of power as well. Not
only is there a huge lag in the exploration of new gas fields, there has in fact, been serious
neglect in taking up new work in known gas fields in order to augment gas supply as well.
It was said that, Bangladesh is producing 20 MW of electricity by using renewable energy.
The Government is encouraging the production of renewable energy by providing various
financial incentives through both public and private channels. Besides, the Government has
taken initiative to conduct a feasibility study for setting up small hydro-electricity projects.
So far, the use of solar and bio-gas as mainly been tried in rural areas. The Government is
taking initiatives to use this technology in population concentration areas in cities also.
3.5 Organizations Working on Renewable Energy
3.5.1 Governmental Organizations/Ministry
� Bangladesh Energy Regulatory Commission, TCB Bhaban (3rd Floor)
1, Karwan Bazar, Dhaka-1215.
� Ministry of Power, Energy and Mineral Resources, 10th Floor, Biduyt Bhaban, 1, Abdul Gani
Road, Dhaka-1000, Bangladesh.
14
� Sustainable Energy Unit (SEU), Bidhyut Bhaban(10th Floor), 1 Abdul Gani Road, Dhaka-1000,
Bangladesh.
� Bangladesh Bank, Motijheel, Dhaka-1000
3.5.2 Research Organizations
- Bangladesh Renewable Energy Society (BRES)
- Bangladesh Solar Energy Society Renewable Energy Research Centre, Energy Park, University
of Dhaka.
- Center for Energy Studies, Bangladesh University of Engineering & Technology (BUET),
Dhaka-1000, Bangladesh
- Institute of Appropriate Technologies, Bangladesh University of Engineering and Technology,
Dhaka-1000, Bangladesh
- BIDS
- Unnayan Samunnoy
3.5.3 Non-Governmental Organizations/Companies3
• Bangladesh Rural Integrated Development For Grub-Street Economy
• BRAC Foundation
• Centre For Mass Education in Science
• COAST Trust
• Enterprise Development Company Ltd
• Grameen Shakti
• IDCOL
• Integrated Development Foundation
• Padakhep Manbik Unnayan Kendra
• Palli Daridra Bimochan Foundation
• Rural Services Foundation
• Shubashati
• Srizony Bangladesh
• Thengamara Mahila Shabuj Shangha
• Upokulio Bidyuatayon O Mohila Unnayan Shamity
4. Participation of Community and Other Stakeholders
4.1 Solar power brings hopes for char people
Hundreds of solar power units set up in the remote and hardly reachable char (river basin)
villages in greater Rangpur on the Brahmaputra, Teesta and Dharla basins have ushered in a
new era for uplifts and change in life style of the isolated people. Further steps from both
3 There might be other organizations in Bangladesh working on renewable energy but inadvertently are not
mentioned in the list.
15
government and private sectors could accelerate setting up of more solar plants at lower
costs in the char areas of Rangpur, Gaibandha, Lalmonirhat, Kurigram and Nilphamari in the
river basins of the region.
Besides, Grameen Shakti jointly with the PDB and the Dhaka Solar Power Project, set up
over 150 solar power plants free for nearly 15,000 inhabitants of Dahogram- Angarpota
under Patgram Upazila in Lalmonirhat district a couple of years ago.
Over 60,000 char and enclave people are presently using about 6,000 solar power units set
up under the assistance of different NGOs in the char villages of greater Rangpur districts in
recent years and the process continues. Reputed NGOs including BRAC, Grameen Shakti,
RDRS, Protyashya, and many others have installed these solar-power units at a cost ranging
between Taka 11,000 to Taka 45,000 each depending on power generation capacities on
down payment basis. (The New Age, February 5, 2010)
4.2 Solar-Powered Hospital
Kamarul is a small village in southwest Bangladesh. Here, among the palms and flooded
fields covered with water hyacinths, Dr. Haran Chandra Vokta brought about a miracle of
sorts. Haran built a small clinic - the only hospital in all of Bangladesh powered by energy
from the sun. He said it is probably the only solar clinic in the entire world.
The hospital was financed 10 years ago by the UN Development Program. It cost the
equivalent of about 10,000 euros ($15,000) at the time. It's a comparatively small
investment with a big impact, since the roughly two dozen families living in Kamarul can
finally be given medical care. The conditions in Bangladesh, which include rivers, water
canals and flooded rice fields, make laying an electrical network almost impossible.
4.3 Major Players in Renewable Energy Expansion
4.3.1 Infrastructure Development Company Ltd (IDCOL)
The Infrastructure Development Company Limited (IDCOL) was established on 14 May 1997
by the Government of Bangladesh (GOB). The company now stands as the market leader in
private sector energy and infrastructure financing in Bangladesh.
IDCOL promotes dissemination of solar home system (SHS) in the remote rural areas of
Bangladesh through its Solar Energy Program with the financial support from the World
Bank, Global Environment Facility (GEF), KfW, GTZ, Asian Development Bank and Islamic
Development Bank. IDCOL started the program in January 2003 and its initial target was to
finance 50,000 SHSs by the end of June 2008. The target was achieved in September 2005,
3 years ahead of schedule and US$ 2.0 million below estimated project cost. IDCOL then
revised its target and decided to finance 200,000 SHSs by the end of 2009. This was also
achieved by May 2009. Now IDCOL’s target is to finance 1 million SHSs by the end of year
16
2012. Up to December 2009, a total of 438,000 SHSs have already been installed under the
program.
SHSs are sold (mostly through microcredit) by POs to the households and business entities
in the off-grid areas of Bangladesh. IDCOL provides refinancing facility to the POs and also
channels grants to reduce the SHS cost as well as support the institutional development of
the POs. In addition, it provides technical, logistic, promotional and training assistance to
the POs.
4.3.2 Grameen Shakti (GS)
On June 1996, Grameen Shakti (GS) came into existence as a renewable energy company.
The main program of GS is its Solar Photovoltaic Program. Under this program GS sells Solar
Home System (SHS) in credit and cash. Grameen Shakti has already opened 50 unit offices
through which Grameen Shakti will research on marketing policy. This network allows
Grameen Shakti to quickly disseminate and commercialize any improvement in the
technology. Since the systems are expensive for the rural people Grameen Shakti has
introduced a soft financing system for the customers. GS has linked this technology to some
income-generating activities as well.
4.4 Infrastructure and Development
4.4.1 Recent Development in the Energy Sector
In the year 2008, there has been an additional power generation of 307 MW in the private
sector. In 2009, 500 MW of additional power is supposed to be generated through 4 projects
under public sector and 440 MW will be added from 11 projects under the private sector. It
is hoped that by 2013, 2810 MW of power will be produced though 13 projects under public
sector and another 1350 MW, under the private sector including Bibiyana. Besides, the
Government is continuing dialogue with the neighboring countries to import power for
mitigating the power crisis on a short-term basis. After a recent (February 2010) India-
Bangladesh meeting at the Secretary level, it was declared that the countries are jointly
planning to establish a collaborative power plant at Khulna in Bangladesh. The electricity
produced here will be shared by the two nations.
4.4.2 Renewable Energy Projects
• 250 kW Biomass Based Power Plant Project: IDCOL financed a 250 kW
Biomass based power plant at Kapasia, Gazipur. IDCOL provided concessionary loans
and grants to Dreams Power Private Limited (DPPL), the Project Sponsor, for setting
up the plant. Total cost of this project is Tk. 2.50 crore. The plant uses locally
available agricultural residues i.e. rice husk as fuel for power generation. Ankur
17
Scientific Energy Technologies Pvt. Ltd, India is the equipment supplier of the
project. Being located in an un electrified area, the plant is expected to supply
environment friendly grid quality power to 300 households and commercial entities of
that area.
• 400 KW Biomass Based Gasification Plant: IDCOL’s is financing a 400-kW rice
husk gasification-based power generation facility along with a precipitated silica plant
at Chilarong, Thakurgaon sadar, Thakurgaon. IDCOL provided concessionary loans to
Sustainable Energy & Agro-resource Limited (SEAL), the Project Sponsor, for setting
up the plant. Total cost of this project is BDT 64.25 million. The plant will use locally
available agricultural residues i.e. rice husk as fuel for power generation. Orbit, India
is the turn key solution provider of the project. Once completed, the annual silica
production capacity of the plant is expected to be 918 tonnes. Generated electricity
from the Project will be supplied to the adjacent silica production plant with a captive
consumption of 75kW. The project may also supply power to a nearby poultry
hatchery (minimum requirement 300kW), thirty irrigation pumps (10kW each) and/or
numerous rice mills in the area.
This Project of generating electricity using gasification process will ensure efficient
and environment friendly utilization of rice husk. Moreover, the Project will also
produce a high value by-product such as precipitated silica. Precipitated silica is used
in rubber, toothpaste and other chemical industries, and currently almost the entire
local demand is met through imports. Therefore, apart from generating power from
renewable sources, the Project is also expected to save the country’s hard earned
foreign currency.
• Biogas Based Electricity Generation Plants IDCOL is financing setting up of
three biogas-based electricity generation plants, one in Mymensingh and two in
Gazipur, and one organic fertilizer plant in Gazipur by Paragon Agro Ltd. Electricity
generated from these plants will be supplied to the adjacent poultry farms of
Paragon Poultry Ltd. (PPL) at BDT 4 / kWh, while organic fertilizer will be sold in the
market at BDT 15 per 1 Kg packet and BDT 400 per 40 Kg packet. Total project cost
is BDT 149.40 million.
Poultry waste supplied by Paragon Poultry Limited, a sister concern of Paragon Agro
Limited, will be used as feed material in the biogas digesters for production of gas
which after purification will be used to run three 100kW, and one 50kW biogas
generators. The slurry produced as byproduct from the biogas digesters will be
transported to the proposed organic fertilizer plant located at Sripur, Gazipur for
composting purposes.
• Solar Irrigation Pump IDCOL-Grameen sgakti are financing a 11.2 KWp solar
photovoltaic (PV) power plant to run a submersible solar water pump at Shapahar,
Naogaon with a capacity of 250,000 liters per day at 35 meter head. A total of 64
solar PV modules with 175 Wp capacity each will be installed to provide the required
power to run the pump. Total project cost has been estimated to be BDT 5.275
18
million, it will be financed through term loan facility following project financing
mechanism and a grant from GEF fund. Once completed, it is expected to provide
irrigation facilities to land owned by a number of farmers in three seasons. The
whole land area under the project will be utilized for paddy cultivation (3 crops)
using buried pipe method.
• Solar Micro grid
IDCOL board recently approved financing a 100-kW solar photovoltaic (PV) based
micro-grid by PUROBI Green Energy Limited (PGEL) at Sandip island, Chittagong. A
40-kW diesel generator will be integrated into the proposed power plant in order to
ensure adequate power supply during periods of low solar radiation. Total project
cost is BDT 55.37 million and it will be financed through a mix of debt, equity and
grant from KfW. PGEL is a consortium of four NGOs namely Bangladesh Rural
Integrated Development Grub-Street Economy (BRIDGE), Integrated Development
Foundation (IDF), Upokolio Bidyut and Mohila Unnoyon Samity (UBOMOUS) and
Rural Energy and Development Initiative (REDI). Once completed, this Project is
expected to supply electricity to adjacent 390 shops, 5 health centers and 5 schools.
• National Domestic Biogas and Manure Program Infrastructure Development
Company Limited (IDCOL) is implementing National Domestic Biogas and Manure
Programme (NDBMP) with support from GoB, SNV- Netherlands Development
Organization and Kfw. Under the project a total of 37,269 domestic sized biogas
plants will be financed during the period 2006-2012. The overall objective of the
NDBMP is to further develop and disseminate domestic biogas plants in rural areas
with the ultimate goal to establish a sustainable and commercial biogas sector in
Bangladesh.
Gas produced through these plants is used for cooking purposes and lighting of rural
households. In addition, the slurry, by-product of biogas plants, being a very good
organic fertilizer is used to maintain soil fertility and increase crop production. The
slurry is also used as fish feed.
The programme is being implemented in all the districts of Bangladesh. IDCOL
provides Taka 9,000 as investment subsidy to the biogas households who install
biogas plants as per the specifications and standard set by IDCOL/SNV/Kfw. IDCOL is
also providing refinance covering 80% of the LCPOs loan to households at 6%
interest rate and 7 year tenor with 1 year grace period. Total project cost is
estimated as EUR 23.61 million and will be borne by individual households, SNV, KfW
and GOB.
4.5 Research and Development
Feasibility study on R&D of Renewable Energy Solar, Wind, Micro-Mini Hydro)” has been
undertaken by the Institute of Fuel Research Development (IFRD), of Bangladesh Council of
Scientific and Industrial Research (BCSIR).Under this program, wind speed data have been
19
collected in the following sites: Saint Martin (offshore island), Teknaf and Meghnaghat,
Dhaka.
The maximum velocity obtained at St. Martins Island is 20 m/s and yearly average wind
speed in 4.9 m/s. The maximum velocity obtained at Teknaf is 16 m/s and yearly average
wind speed is 3.8 m/s. Available wind speeds in Saint Martin’s Island are also found
potential for wind energy. However, risk factors regarding possible cyclones are also high in
these areas.
4.5.1 Micro/Mini Hydro Prospect in Bangladesh
Bangladesh is an extremely flat delta area built up by the three major rivers, the Ganges,
Brahmaputra, and the Meghna. In contrast to this huge delta area the districts of
Chittagong, Cox’s Bazar, Bandarban, Rangamati, and Khagrachari, which are hilly. Some hilly
areas also lie along the border of the Indian State of Tripura and the districts of Sylhet,
Moulavi Bazar and Habiganj. A large portion of the country is less than 33 meters above
mean sea level. Flat topography of Bangladesh does not permit building of large scale
storage of power generation. However, there are certain locations within the country where
small hydropower stations could be set up.
4.5.2 R & D Activities on Solar Energy in IFRD, BCSIR
IFRD, BCSIR has been engaged in carrying out R & D on Solar thermal and have developed
the following solar thermal technologies: reflector-type solar cooker, absorber- type solar
cooker, cabinet-type solar dryer and solar water heater.
IFRD has completed a project on the feasibility Study on R & D of Renewable Energy
Technology (solar, wind, Micro-minihydro)” project with a total cost of Tk. 17,387 million.
Under this project, solar insulation data at different places such as St. Martins island,
Banderban hilly area, Chittagong, Meghnaghat, Dhaka, etc. have been collected and
processed in the solar laboratory. Solar PV system have also set up in the above places and
studied its performance. It was found that solar insulation is higher in hilly areas than plain
lands in Bangladesh.
5. Rural Financing Policies in Integrating Energy and Environmental
Sustainability
5.1 Related Policies
Per the Renewable Energy Policy 2008, a renewable energy financing facility is supposed to
be established that is capable of accessing public, private, donor, carbon emission trading
(CDM) and carbon funds and providing financing for renewable energy investments. In
20
addition to commercial lending, a network of micro-credit support system will be established
especially in rural and remote areas to provide financial support for renewable energy.
In the era of deregulation, banks in Bangladesh are free to choose where they will invest
and at what rate their funds since the risk of recovery lies with the banks themselves.
Bangladesh Bank as the central bank uses 'moral suasion' i.e. motivates the banks for
funding in the priority sectors. For example the central bank issued a circular (September 9,
2008) to make agricultural/rural (according to the current policy, agricultural and rural credit
are considered together, however at least 60% of which has to be given for crop
production) lending compulsory for the bank. According to the said circular, banks are
supposed to set an annual target for agricultural/rural lending taking a significant portion of
the bank's total loan portfolio at the beginning of each fiscal year.
To facilitate the banks’ disbursement of adequate amount of agricultural/rural credit,
Bangladesh Bank issued Agricultural/Rural Credit Policy and Program for FY 2009-10 in July
2010. In the said policy, banks with inadequate number of branches have been advised to
disburse agricultural/rural credit by establishing linkages with NGOs/self-employment
supporting groups if and when needed.
Besides supplying credit to agriculture and supporting sectors, credit has to be made
available for different self-employment or income generating activities on individual or group
basis with a view to expediting growth momentum in the rural economy.
In addition, banks are directed to give priority to relatively underdeveloped and neglected
areas such as char (shoal), haor and coastal areas in disbursing agricultural credit.
According to the Agricultural/Rural Credit Policy and Program, women entrepreneurs are
supposed to get priority in agricultural/rural credit disbursement.
5.2 Financing Mechanism of IDCOL, the Market Leader
5.2.1 Infrastructure Development Company Ltd (IDCOL):
To provide finance to the large infrastructures and venture capitals, the Government of
Bangladesh established the Infrastructure Development Company Limited (IDCOL) in May
1997. The company was licensed by Bangladesh Bank as a non-bank financial institution
(NBFI) on 5 January 1998. Since its inception, IDCOL is playing a major role in bridging the
financing gap for developing medium and large-scale infrastructure and renewable energy
projects in Bangladesh. The company now stands as the market leader in private sector
energy and infrastructure financing in Bangladesh. IDCOL is managed by an eight-member
independent Board of Directors composed of four senior government officials, three
prominent entrepreneurs from the private sector and a full time Executive Director and Chief
Executive Officer.
5.2.1 IDCOL’s Lending Terms:
21
While lending to investment projects, the lending terms on such loans shall be determined
as follows:
- For medium and large infrastructure projects:
• Interest rate - a fixed rate equivalent to the weighted average yield on the Treasury
bills and bonds of GOB of all maturity for the past six months plus a spread of 400
basis points, provided however, that the interest rate shall not be less than the
Bangladesh Bank Rate plus a margin of 250 basis points. For the purposes of this
clause, the term "Bangladesh Bank Rate" means the Rate published by Bangladesh
Bank in accordance with Article 21 of the Bangladesh Bank Order, 1972;
• Final maturity will be a maximum of twelve (12) years including maximum three (3)
years grace; and
• In case of syndicated lending, IDCOL’s interest rate plus fees will not be higher or
lower than that of other lenders offering similar loans.
- For projects implemented in rural areas that receive grants or subsidies from
multilateral agencies and/or GOB:
• Interest rate – up to 8% per annum; and
• Final maturity will be a maximum of ten (10) years including a grace period of
maximum two (2) years.
5.3 Bangladesh Bank’s Refinance Scheme for Renewable Energy
With a view to promoting green financing in the country, Bangladesh Bank, the central bank
of Bangladesh has recently launched a refinance scheme namely Refinance Scheme for
Solar Energy, Biogas and Effluent Treatment Plant (ETP). The refinance scheme has
been initiated with BB’s own fund of Taka 20 million for providing refinance to banks and
financial institutions against their finance to solar energy, biogas and ETP.
Under the scheme, banks will finance households both at rural and urban areas and
industries in some specific areas at a maximum of 10% interest rate and get refinance from
Bangladesh Bank at 5% (bank rate).
Sector Description Loan Limit
Solar Panel For Rural Areas BDT 70 Thousand
For Urban Areas BDT 175 Thousand
Solar Photo Voltaic (PV)
Assembling Plant
- Will be determined based on
assembling capacity
Biogas Plant For existing farms BDT 36 Thousand
Integrated cow rearing and
biogas plant establishment.
(four cows and bio-digester)
BDT 300 Thousand
22
Effluent Treatment Plant
(ETP)
Chemical or Biological BDT 10 million
USD 1= BDT 70 (Approx)
Maximum term of the loans for solar panel and biogas are 3 years and in such case the
banks are allowed to engage company/NGO for finding customers, monitoring and recovery
of the loans, while for PV assembling plant and ETP, the maximum loan term is 5 years and
the loans are supposed to be dealt solely by the banks.
The interested banks and financial institutions have to sign a participation agreement with
BB to avail of the said refinance facility.
The banks are liable to ensure the proper utilization of the said credit while BB will monitor
on sample basis and will call back the refinanced amount with 5% penal interest in case BB
finds that any refinance was availed with incorrect information.
Update: 16 banks have signed participation agreement with Bangladesh Bank. Banks have
started to finance. Recently The Trust Bank Limited financed in Integrated Cow Rearing and
Biogas Plant Sector where Governor of Bangladesh Bank was present as chief guest.
5.4 IDCOL MODEL: A Success Story in Solar Energy
IDCOL started its solar energy program in January 2003 with the support from IDA and GEF.
Initial installation target was 50,000 solar home systems (SHS) in off-grid areas within five
and half years. Target was achieved in August 2005, 3 years ahead of completion date and
US$ 2 million below estimated cost. Following this success, the World Bank, GTZ and KfW
have extended support. Asian Development Bank is also expected to support the program.
Following the success IDCOL revised its target to 1 million SHS by 2012.
Installation of SHS up to May 2008 is 211,000 (11+ MW) from which more than 1 million
users are getting electricity.
IDCOL signed Emission Reduction Purchase Agreement (ERPA) with IBRD on December 19,
2007, to avail of the Community Development Carbon Fund. IDCOL is acting as bundling
agency for the fund. This fund will be passed to the POs for further development of the
program.
IDCOL works through a collaborative effort of five partners:
- IDCOL: A GoB-owned financial institution having project finance and project management
expertise that works only for private sector development.
- Multilateral Agencies: Global experience in renewable energy projects, and financial resources
- NGOs/Micro NGOs/Micro-finance institutions: Operate at grass roots level and have expertise
in microfinance activities
23
- Manufacturer/supplier: Dynamism in operation
- Professionals: Expertise in technology and rural development
IDCOL provides soft loans/refinance to POs on project finance basis and grants to POs to
reduce SHS cost and capacity building.
NGOs and MFIs identify areas/zones, select customers and install SHS extend micro-credit to
customers, provide after sales service. Manufacturers/ suppliers sell SHS or its components
to POs. Professionals participate in technical specification and social impact assessment of
the program.
Division wise installation of SHSs
Division Number of SHSs Installed
Barisal 64,734
Chittagong 86,195
Dhaka 99,655
Khulna 58,107
Rajshahi 59,280
Sylhet 53,222
Total 421,193
Development Impact
- Improves quality of life of rural households through access to electricity
- Provides clean lighting/energy
- Improves health of children, females and other household members
- No energy bills (recurring costs) for rural and less fortunate households
- Provides opportunities for developing local entrepreneurship, income generating activities
through micro/small business as well as extended hours of business activities
- Establishes link with the outside world –entertainment, news through use of television
- Promotes domestic industry and technology: batteries, solar lamps, charge controllers, wires
etc.
- Creates jobs opportunities and skilled resources in rural and urban areas at three levels –
technical, staff employed by PO’s, self employed and employment by manufacturers’ of
components
- Benefits students through extended hours of studies
- Reduces carbon emission (200,000 SHS will reduce 85,000 tCO2e per annum)
Success Factors
- Sustainable partnership model. Apex entity managing finance, administration business of the
program with various partners and other stakeholders.
- Collaborative effort harnessing strengths of all other partners
- Participation of customers, PO’s and IDCOL in procuring SHS
- Using expertise of the POs in expanding the use of SHS by using the microfinance tool
- Customers become owners between 12 to 24 months after full payment of microloans
- Technical and promotional support from IDCOL
24
- Necessary support from donor agencies
- Independent technical committees for approval of components
- Physical inspection by IDCOL, of systems installed by POs
- Ensuring after sales service to end users by POs
- Prompt resolution of operational problems
- Building a healthy competitive atmosphere among the POs
- Facilitating continuous availability of SHS components by suppliers
- Private sector participation
- Transparency in dealing with stakeholders
5.5 EDCL Model-A Success Story in Biogas
Currently the average daily milk consumption in Bangladesh is only 42ml per person per day
against a WHO recommended intake of 250ml per day; despite the fact that the
environment and climate of Bangladesh, especially the rural part is very suitable for
household-based mini-dairy farm. Despite over half a century of government interventions,
the dairy industry remains at a very nascent stage and concentrated in only a few districts.
The cow dung from such daily farms can also be good source of biogas which may be used
for cooking in a very environmental friendly manner (most rural households are dependent
on woods, branches and tree leaves for their cooking needs). The cow dung left out by the
biogas plant can be used as compost or natural fertilizer in the agricultural fields. The milk
and meat from the cow can meet the nutrition need of the country and still maintain the
multiplication chain by producing one calf in every 14 months. Integrated dairy farm (cow
rearing plus biogas) can also help reduce poverty by generating employment at the rural
places by through creating direct labor and marketing opportunities.
Extrapolating on the pilot mini-farm, a conservative estimate indicates that 4 million mini
dairies with 4 cows each, has the potential to annually produce:
Energy
• 4.8 billion cubic metres of gas
Organic fertilizer
• 117 million metric tons of high quality organic fertilizer
• 5 million tons of vermi-compost
Food security and nutrition
• 17 billion litres of milk
• 1 million metric tons of meat
Income generation and employment
• 12 million people, largely women, employed
• 26 million square metres of hide
25
• 0.3 million tons of bones for export and/or internal use
This indicates a 35% increase in gas production, eighty times increase in fertilizer (manure)
production, and tenfold increase in milk production compared to 2005 figures4. Overall, this
initiative has the potential to lift half the population currently living below the poverty line
out of poverty in less than a decade.
On the other hand, institutional financing is still very low in Bangladesh, especially in the
rural areas. True that NGOs are operating quite considerably with their microcredit
programs, they are not in a position for financing such “large” projects. Banks that are
interested to finance in these areas have problems in identifying appropriate customers and
recovery due to their lacking in staff force.
Although small and medium farmers may have some fixed assets, they do not have any
surplus to engage commercially in livestock, fisheries or any non-farm enterprises in the
rural areas. In addition, those who own small enterprises are unable to take advantage of
emerging market potentials and expand because of the lack of access to capital.
Against this background, the Integrated Energy and Food Security Farming model of EDCL
aims at providing solution to providing food security, renewable energy, income and
employment and bridging the financial gap in the rural areas.
The EDCL model:
The EDCL model has been developed and refined over the past three years. The model
involves working with commission agents who identify the borrowers and do the initial
screening of their business. They also monitor the business throughout the entire financing
period to ensure recovery. The agents are not employees of EDCL but work on a
commission basis. The incentive structure for the agents is designed such that they are
rewarded for successful loan recoveries. Agents also invest Tk 100,000 in EDCL to give them
a financial stake in the company.
EDCL operates with very little overhead. The head office in Dhaka has only 5 full time staff.
Each agent works as an independent profit and loss unit under the supervision of divisional
coordinators.
EDCL has developed a successful model to select suitable candidates. Agents vet financial
statements and business plans by observing the clients business activity, talking to
customers, suppliers and neighbors. The data helps build a scoring system to identify
potential clients. Clients also provide two guarantors for the loan.
4 Bangladesh Statistical Yearbook 2005, Bureau of Statistics
26
Per the model, the fund is provided by the bank to the borrowers selected by EDCL. In
return EDCL gets a commission of 1% upon disbursement. It is EDCL who provides technical
support to the farms and also act as the recovery agent for the bank. Upon total recovery of
the loam, EDCL again gets a commission of 1.5% from the bank. As the bank does involve
very low operational cost as the monitoring and recovery are done by EDCL, it can provide
bulk amount of loans through EDCL at a comparatively lower interest rate.
FLOW Chart of EDCL Model:
Recent Development: Recently around Taka 24 lakh were disbursed among 8 borrowers
at Manikgunj district by the Trust Bank Limited, a privately owned commercial bank who
have recently signed participation agreement with Bangladesh Bank under Refinance
Scheme for Solar Energy, Biogas and ETP. As per the scheme terms, the banks may get
refinance at 5% interest rate against investment in the specified areas highest at 9%
interest rate. In case a bank use an intermediary company/NGO, the interest rate may go up
to 1% higher, ie. 10%, so that it can have the cushion to stay profitable even after paying
off the intermediation cost.
Keys to Success
Low overheads: EDCL outsources most of its activities to commission based agents. This
allows it to have a small staff for back-office activities and keep overheads extremely low.
Maintaining this low overhead is a key to the success of this model.
Experienced team: Since this is a business that depends on the ability and diligence of its
agents, it is vital that the right agents be selected. At EDCL, agents are carefully selected
and have an average of over 12 year of experience in providing financial services in rural
areas.
27
Local agents: Agents of EDCL operate in a small area. In most cases they are themselves
local to the area allowing them to develop a personal relationship with the client. Like
microcredit companies, personal relationships are important for in SME credit as well. This is
essential in order to evaluate client creditworthiness in businesses where bookkeeping is not
up to banking standards.
Focused marketing: The business model was designed to cater to a segment of
businesses that are underserved by other commercial SME programs. While serving the
higher end of the market can be a lucrative temptation, that segment also has other strong
competitors.
Turning competitors into partners: Today EDCL faces very few competitors. Most banks
do not operate in the space that EDCL targets. EDCL offers its marketing services to other
banks and will sell financial products for other financial institutions. Financial institutions
which see the benefits of outsourcing some services to EDCL will not compete in the same
space and focus their own marketing efforts on the higher end of the SME market.
28
6. Conclusion
Bangladesh, being a country highly susceptible to climate change and given the demand-
supply gap of power and energy in the rural areas, has a huge scope to further expand
renewable energy use in the country. With a high initial investment requirement compared
to the income level of rural Bangladesh, financing needs is crucial for such expansion. The
current financial structure in the rural Bangladesh is not fully satisfactory in terms of services
and reaches. However, a public-private partnership plus GO-NGO collaboration can help
utilize the best opportunities to improve access to renewable energy for the rural population
and there by facilitating a better life for them through providing better scopes for income,
education, health as well as communication.
29
BIBLIOGRAPHY
Abavana, Clement G. Solar PV for rural electrification in Ghana.
Ali, Monshof, 2005. “The Use and Status of Biogas Plants in Pabna District in Bangladesh”,
Bangladesh Power Development Board, 2006. http://www.bpdb.gov.bd/installed_fuel.htm
Barnes, D. 2002. Rural electrification and development in the Philippines: measuring the
social and economic benefits. World Bank.
Bhagavan, M. R. and S. Karekezi, eds. 1992. Energy for rural development. London, Zed
Books: 89-107.
Boudri, J. C., et al. 2002. The potential contribution of renewable energy in air pollution
abatement in China and India. Energy Policy 30(5): 409-424.
Byrne, John, Gerard Alleng and Aiming Zhou. 2001. Economics of building integrated PV in
China. University of Delaware, Center for Energy and Environmental Policy.
Chakrabarti, Snigdha and Subhendu Chakrabarti. 2002. Rural electrification programme with
solar energy in remote region-a case study in an island. Energy Policy 30(1): 33-42.
Chaurey, Akanksha. 2001. The growing photovoltaic market in India.. Progress in
Photovoltaics: Research and Applications 9: 235-244.
Cromwell, Godfrey. 1990. What makes technology transfer? Small-scale hydropower in
Nepal's public and private sectors.. World Development 20(7): 979-989.
Drennen, Thomas E., Jon D Erickson and Duane Chapman. 1996. Solar power and climate
change policy in developing countries. Energy Policy 24(1): 9-16.
Foley, Gerald. 1992. Renewable energy in third world development assistance: learning from
experience. Energy Policy 20(4): 355-364.
Fuchs, Doris A. and Maarten J. Arentsen. 2002. Green electricity in the market place: the
policy challenge. Energy Policy 30(6): 525-538.
Gunaratne, Lalith. 1999) Challenges for a new millennium: solar energy business in the
developing world.. Renewable Energy World 2(4): 80-85.
Hankins, M. 2001. Commercial breaks--building the market for PV in Africa. Renewable
Energy World 4(4): 164-175.
30
Huque, Asma, 2002. “A Proposed Guideline for Equitable Utilization of Renewable Energy
Technology by the Public Sector in Bangladesh” ADB/ESCAP
Huque, Asma, 2004. “Opportunities for Women in RET Utilization in Bangladesh- A Case
Study”, Energy & Development, Newsletter October,
http://www.energyanddevelopment.com/issue0304.htm
Infrastructural Development Company Limited). 2007. http://www.idcol.org.
Intergovernmental Panel on Climate Change. 2000. Special report on methodological and
technological issues in technology transfer.
Islam, Mazharul. 2002. Utilization of renewable energies in Bangladesh.. Grameen Shakti E-
book.
Johansson, Bengt, et al. 2002. The use of biomass for energy in Sweden: critical factors and
lessons learned. Department of Technology and Society, Environmental and Energy Systems
Studies, Lund University.
Kammen, Daniel M. 1999. Bringing power to the people: promoting appropriate energy
technologies in the developing world. Environment 41(5): 10-15; 34-41.
Kapadia, Kamal. 1999. Offgrid in Asia: the solar electricity business. Renewable Energy
World 2(6): 23-33.
Karekesi, Stephen and Timothy Ranja, eds. 1997. Renewable energy technologies in Africa.
Zed Books.
Karekezi, Stephen. 2001. Renewable energy technologies: potential for Africa. UNEP.
Karlson, G. V. Generating opportunities: case studies on energy and women.
Langniss, Ole and Ryan Wiser. 2003. The renewables portfolio standard in Texas: an early
assessment. Energy Policy 31(6): 527-535.
Murdoch University. Policy, , Australia.
N. Wamukonya and M. Davis. 2001. Socio-economic impacts of rural electrification in
Namibia: comparison between grid, solar and unelectrified households.. Energy for
Sustainable Development.
Nes, Wim Van and Mathew Mendis. 2000. Biogas in rural household energy supply: the
Nepal biogas support program. Renewable Energy World 3(2): 100-113.
Nieuwenhout, F.D.J. et al., 2001. Experience with solar home systems in developing
countries: a review. Progress in Photovoltaics: Research and Applictions 9: 455-474.
31
Niewenhout, F.D.J., et al. 2000. Monitoring and evaluation of solar home systems:
experiences with applications of solar PV for households in developing countries.
Netherlands Energy Research Foundation ECN.
OECD. 1997. Key issues in developing renewables. International Energy Agency,
Piscitello, E. Scott and V. Susan Bogach. 1998. Financing incentives for renewable energy
development: proceedings of an international workshop, Feb. 17-21, 1997, Amsterdam,
Netherlands. World Bank.
Posorski, R. 1996. Photovoltaic water pumps: an attractive tool for rural drinking water
supply. Solar Energy 58(4-6): 155-163.
Rahman, Atiur. Financial inclusion as a tool for combating poverty- the Bangladesh approach
by Governor, Bangladesh Bank. Keynote paper presented at the Central Bank of Uganda.
Richter, M. and B. Meunier. 1997. Accelerating rural electrification in Inner Mongolia with the
use of wind and solar energy.
Siddiqui, F Ahmed. 2003. “Linking Innovation and Local Uptake in Rural Development,
Potential for Renewable Energy Cooperatives in Bangladesh”, Institute for Sustainability and
Technology SESAM-Sustainable Energy System and Management, University of Flensburg,
Germany.
Simm, Ian, Amir Haq and Vikram Widge. 2000. Solar home systems in Kenya--unlocking
consumer finance. Renewable Energy World 3(6): 46-53.
Stassen, H. 1995. Small-scale biomass gasifiers for heat and power: a global review. World
Bank.
Tampier, Mart. 2003. Effective green power policies: green power marketing is not enough.
RE-focus, Jan/Feb, pp. 30-33.
Timilsina, G. and T Lefevre and SK Noim Uddin. 2001 New and renewable energy
technologies in Asia. Renewable Energy World 4(4): 52-67.
Urmee, Tania and Nancy Wimmer. 1999. Transforming lives: microcredit promotes
renewable energy in Bangladesh. Renewable Energy World 2(4): 120-129.
van Campen, B., D. Guidi and G. 2000. Best Solar photovoltaics for sustainable agriculture
and rural development.. Food and Agriculture Organization of the United Nations.
Vaupen, S. 1999. Renewable energy markets in China: an analysis of renewable energy
markets in Guangdong, Jiangxi, Jilin and Yunnan provinces with updated information from
Beijing, National Renewable Energy Laboratory..
32
Wachsmann, Ulrike and Mauricio Tiomno Tolmasquim. 2003. Wind power in Brazil: making
up the energy shortfall.. RE-focus, Jan/Feb, pp. 38-41.
Williams, Robert H. 2001. Addressing challenges to sustainable development with innovative
energy technologies in a competitive electric industry. Energy for Sustainable Development
5(2): 48-73.
Winrock International. 2001. Renewable energy state of the industry report.
World Bank. 1996. Rural energy and development: improving energy supplies for 2 billion
people.
World Bank. 2000. Energy services for the world's poor. Energy Sector Management
Assistance Program.
Yang, Hong. 2003. Status of photovoltaic industry in China. Energy Policy 31(8): 703-707.
Yunus, Muhammad. 1999. The Grameen Bank. Scientific American 281(5): 90-95.
Zhu, Jungsheng, William Wallace and Bernard McNelis. 2000. Commercializing renewable
energy in China.. Renewable Energy World 3(5): 86-91.
