Implementation of Technical Assistance for Green Microfinance Lending

The microfinance initiative for Asia Debt Fund S.A. (MIFA) was set up in June 2012 by major investors such as the German Ministry for Economic Cooperation and Development (BMZ), European Commission (EU), KfW, IFC, as well as private institutional investors.   MIFA maintains an investment target of USD 175 million and makes debt investments in qualified microfinance institutions (MFIs) across the Asia region, including South, East, and Central Asia. The fund includes a renewable energy/energy efficiency (RE/EE) segment that provides loans to MFIs to encourage them to lend to micro and small enterprises and low-income households for investments in RE/EE home applications. Since many of the supported MFIs need accompanying technical assistance (TA), MIFA established a TA facility of EUR 3.8 million, 0.8 million of which is allocated to strengthening the RE/EE lending capacities of MFIs. BlueOrchard acts as the MIFA fund and TA manager.   BlueOrchard, on behalf of the MIFA TA facility, commissioned Econoler to assist in the investment appraisal process of MFIs and in designing, tendering, monitoring, and reporting of TA measures for MFIs.

In the investment appraisal process, the task of Econoler was to: (1) Appraise the technical capacity of MFIs for RE/EE lending and identify possible beneficiary MFIs; and (2) assess the RE/EE enabling environment including relevant technology providers. In total, six to eight MFIs were expected to be selected at the end of this appraisal process. Although six MFIs were assessed, only four were selected, two in India, one in China, and one in Sri Lanka.   As for the accompanying TA measures, the tasks of Econoler included:

1. Draft Terms of References (TORs) for local TA consultants, tender and assign local TA consultants;
2. Monitor and report on capacity building measures for MFIs (and other stakeholders) and provide advisory services, training, as well as product, organizational, and strategic business development;
3. In parallel, Econoler supported MIFA in the selection of a dedicated software tool for analyzing carbon footprints. Namely myclimate, a Swiss foundation, was selected to develop the reporting tool for up to three RE/EE technologies, including e-rickshaws, solar lamps, and solar fans, since those technologies were to be financed by partner MFIs.

  The TA measures were aimed at strengthening MFI capacity to lend to micro and small enterprises and low-income households for investments in RE/EE home applications. Specifically, the TA measures were aimed at: (1) Improving basic knowledge and understanding of RE/EE household applications; (2) generating and increasing awareness about RE/EE solutions among rural households; (3) strengthening strategic business planning and implementing green lending; and (4) improving the quality of green finance product development as well as expanding and strengthening the related credit process, among others.   The RE/EE TA projects were very well received by beneficiaries, provided much impetus to their RE/EE lending, and contributed to notable energy savings and CO2 reductions. Only two MFIs reported results on the myclimate reporting tool. By Q3 2019, they reported a total of USD 115,333 in disbursed loans for solar lamps and e-rickshaws and an accumulated loan portfolio of USD 4,831,320. As a result, the equivalent of 15,790 MWh in energy savings were achieved and those savings translate into a reduction of 5,540 of tCO2e.