Wednesday, February 5, 2014

Summary: Microfinance Solutions for Clean Energy in Latin America

By Cara Caponi

Panelists discussed harnessing microfinance and green solutions as a way to close Latin America’s energy gap.

Speakers:

Nicola Armacost, Founder and Managing Director, Arc Finance
Amy Wang, Investment Officer, Deutsche Bank
Greg Watson, Head of Strategic Planning, Multilateral Investment Fund, IADB (Download his presentation)
Christian Gómez, Jr., Director of Energy at the Washington office of the Council of the Americas (Moderator)

Summary

On January 30, AS/COA hosted an expert panel on microfinance and clean energy in Latin America. Participants discussed how microfinance can increase access to renewable energy and improve quality of life in the region. By investing in clean energy, microfinance institutions can bridge the gap between climate change and competitiveness, panelists said.

How Does Green Microfinance Work? The panelists began the discussion by commenting on the expansion of green microfinance in Latin America. The Multilateral Investment Fund’s Greg Watson noted that 63 microfinance institutions (MFIs) across the region dispersed almost $400 million last year to fund clean energy initiatives. Watson explained that microfinance can serve as a solution to the issue of product distribution in rural areas when it comes to this type of energy infrastructure. For example, the EcoMicro program—financed by the Multilateral Investment Fund and the Nordic Development Fund—demonstrates increased demand for green microfinance in Latin America. This program aims to allow micro, small, and medium enterprises and low-income households to access clean energy and energy efficient products. The EcoMicro program received over 120 applications during two selection rounds in which eight winners were ultimately selected. Watson noted that EcoMicro “speaks the language of competitiveness and it speaks the language of low-income development.” Deutsche Bank’s Amy Wang explained that to meet the growing demands for green microfinance, financial organizations have strengthened partnerships with MFIs while also lending to commercial enterprises that seek to develop working capital programs. Arc Finance’s Nicola Armacost gave an example of an innovative pilot project in Haiti. This project uses remittances to finance clean energy solutions for low-income populations in a country with a low rate of electrification and a high rate of remittances. Those who send money had more control over how the money is spent and instead of collecting cash, remittance receivers picked up a small lantern or another clean energy device paid for by the sender.   Measuring the Social and Financial Impacts of Green Microfinance Armacost spoke about how she measures the success of green microfinance by its impact on her clients. These types of projects offer people an opportunity to boost their income, reduce spending on energy sources like kerosene, cut carbon emissions, improve their education, and live more safely. She provided metrics used to measure the gains of the remittance program in Haiti. In one year, 6,000 light units were sold which reduced carbon emissions by 484 tons and saved consumers $218,000 in energy costs. “It’s actually real money in poor peoples’ pockets,” she said. Watson added that financing organizations must continue to track the amount of money saved, the tons of carbon emissions reduced, and the numbers of households impacted by green microfinance so that successful models can be brought to scale. Looking Ahead: The Future of Green Microfinance Panelists agreed that getting management to sign on is crucial to the success of organizations involved with green microfinance.  Watson expressed a need to “translate good climate intentions and good energy intentions into numbers and good business.” By demonstrating that green microfinance is a solid business model, more organizations will opt for clean energy solutions as a way to increase efficiency and decrease costs.  The panelists were hopeful that the current interest surrounding green microfinance continues to grow as programs like EcoMicro and the Haiti remittance project prove their success and are brought to scale.

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Summary: Microfinance Solutions for Clean Energy in Latin America

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