Linking Energy and Microfinance: Promoting Innovations That Foster Scale

From 2007 to 2011, Arc received several grants from Citi Foundation focused on supporting MFIs to expand energy lending.

From 2007 to 2008, Arc Finance received funding from Citi to establish itself and begin core operations. In June 2009, Arc received funds to promote innovations that foster scale and depth of service in energy lending. In 2010, Arc received additional funding to develop and pilot a Partner Performance Measurement Tool (PPMT). In 2011, Citi committed to funding Arc for a project called “Promoting Livelihoods Enhancement Through Microfinance Initiative.”

The goal of the Promoting Livelihoods Enhancement Through Microfinance Initiative was to document and disseminate in-depth research on new financial products that MFIs are developing to blend financing with energy and water around the world. The creation of these financial products, which include lending, savings, remittances and leasing products, resulted in new alliances between MFIs and other entities – such as energy and water enterprises – to provide livelihood enhancement products to the poor. The focus was to conduct research in three key regions – Asia, Africa and Latin America – to identify both successes and failures in these efforts.

The research identified different business and partnership models, the range of distribution channels available, as well as the motivations MFIs have identified for entering this area. As part of its research, Arc Finance evaluated the success of existing energy- and water-lending programs and reported on results using a set of metrics embedded in the Partner Performance Measurement Tool (developed though Citi funding). By the end of the grant term and under the auspices of the grant, Arc produced several case studies plus multiple smaller pieces, including video clips, that it disseminated as broadly as possible in order to encourage MFIs to successfully enter the area of livelihood finance and to encourage more investors and donors to focus on the area of impact investing and financing.

For Arc Knowledge Products relating to Arc’s Linking Energy and Microfinance project, please see these case studies:

Solar Sister’s Energy Consignment Model — Women Micro-Retailers Drive Solar Product Adoption in East Africa

Stima Systems’ Group Microleasing Model — Promoting Payment and Reducing Risk at the Group Level

XacBank’s Eco-Banking Department — Improving Air Quality with Credit, Carbon Finance and Smart Subsidies

NWTF’s Business Partner Model — Bolstering Both Energy Demand and Supply Through Microfinance

The Buksh Foundation’s Solar Loan Initiative — Sparking a “Clean Energy Movement” in Pakistan

FWWB-I’s Solar Microloan Initiative — Leveraging a Network to Reach India’s Most Isolated Region