Consulting Services for a Solar Home System Finance Program Through the Pakistan Microfinance Investment Company (PMIC)

In Pakistan, 75% of the population lives either off-grid or experiences regular power outages, although the country has great potential to generate electricity from renewable resources. Pakistan does not benefit much from solar power generation, but the potential to scale up the use of off-grid solar devices and solar home systems (SHS) is promising. However, financing is needed to make these products accessible to underserved households. The objective of this assignment was to conduct a feasibility study to identify and design a workable model with market stakeholders and the Pakistan Microfinance Investment Company (PMIC), as the program executing agency, to expand the market for off-grid solar electrification.

Econoler was commissioned to develop an SHS microfinancing program. The target market comprised poor households and micro and small enterprises that are not connected to the electricity grid and predominantly located in rural areas. The assignment was rolled out in two phases. Phase I – Market Assessment involved undertaking a comprehensive desk and field study to:

• Assess the existing market, including assessing the green lending capacity of microfinance providers (MFPs);
• Conduct a SWOT analysis of stakeholders, namely MFPs and SHS distributors;
• Develop three cooperation models between MFPs and SHS distributors with the aim of installing from 100,000 to 150,000 SHSs under the initial program phase.
• Conduct an environmental and social impact evaluation in compliance with the national regulatory framework and international environmental, health and safety standards, including the KfW Development Bank Sustainability Guidelines, the BMZ Directives on the Human Rights Strategy, and the World Bank Group Environmental, Health, and Safety (EHS) Guidelines (general and sectoral). Assess the state of battery recycling installations in Pakistan (including work conditions and respect for environmental laws.
• Evaluate gender equality in relation to access to energy and finance to issue recommendations for the integration of gender aspects in program design.

  Phase II – Designing the SHS Microfinance Program consisted of the following tasks:

• Determine the financial feasibility of the selected cooperation models;
• Develop an environmental and social management system (SGES) to, among other things, ensure the adequate disposal of SHS batteries and that the needs and barriers specific to women and other vulnerable social groups are taken into account in the program design;
• Develop technical assistance measures;
• Recommend capacity building activities for the different program stakeholders, including MFPs.

  The feasibility study provided PMIC and KfW with a comprehensive program design to scale up SHS financing in Pakistan. The program was officially launched in November 2019.