Linking Energy and Microfinance: Promoting Innovations That Foster Scale

Since 2008, Arc has received several grants from Citi Foundation focused on supporting MFIs to expand energy lending. From 2007 to 8, the funding Arc Finance received from Citi was 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 has committed to funding Arc for a project called: “Promoting Livelihoods Enhancement Through Microfinance Initiative”.

The goal of the 2011 funding 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 - including 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 3 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 the 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, we will produce a thought-leadership piece and multiple smaller pieces (including video clips) that we will disseminate as broadly as possible so as to encourage MFIs to successfully enter the area of livelihood finance. We hope that these efforts will influence at least 5 MFIs to pilot livelihood financing and that it will also encourage more investors and donors to focus on the area of impact investing/financing.