Uganda announces 45 pc subsidy for solar power through microfinance network

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Sep 2007
Uganda, September, 24 2007 - Uganda has announced a 45 per cent subsidy — up from the current 14 per cent — on all solar power equipment.

This is the latest move to increase access to electricity in the country.

The offer was made last week during the launch of the solar power component of the Electricity for Rural Transformation (ERT) programme by the government, the Private Sector Foundation of Uganda and nine donor agencies.

The launch comes six years after the Rural Electrification Agency (REA) was created to increase access to electricity across the country, but with little or no achievement in the promotion of usage of solar power.

Only five per cent of Ugandan households have access to electricity, according to government figures. Currently, the country is in the middle of an energy crisis occasioned by lower hydropower generation due to drought.

Although solar power is viable in Uganda, available devices are expensive, with the smallest solar lantern (5 watts) going for Ush150,000-Ush250,000 ($88-$147) in a country where four out of 10 people live on less than a dollar a day.

Through the new scheme, the government will encourage private solar equipment suppliers to invest in rural areas, thereby meeting the ERT goal of achieving 80,000 new connections by 2010. In the past six years, the government has installed less than 10,000 solar systems.

According to REA executive director Godfrey Turyahikayo, the strategy will drastically reduce transaction costs and make solar systems more affordable, especially for rural dwellers. 

The programme introduces subsidies through microfinance institutions, either as a cash payout to those who install the solar systems on loan or a loan-offset.

It also extends subsidies to an REA-defined market. The subsidy will be factored in the final prices to be offered to customers.

The scheme will be implemented through a network of rural micro-finance institutions, community-based organisations as well as non-government organisations.

Incentives available to these organisations are direct subsidies from REA for solar system customers and line-of-credit for participating micro finance institutions (MFIs) or credit guarantees to participating micro-deposit taking institution; grant advances to enable market entry or expansion, in the form of time-limited soft loans to the solar power companies, including rural dealers and one-stop application for REA subsidies, public-private sector grants and credit from MFIs, using one consolidated application form. 

The programme follows the relatively successful model of Sri Lanka and Bangladesh, based on micro-credits and the use of rural-based networks.

The programme calls for delivery and installation of a solar PV system to a consumer before payment is made to the dealer, a condition that most financial institutions would shy away from. 

The programme will be funded by the Rural Electrification Fund, the World Bank Credit Fund, the United Nations Development Programme and microfinance institutions.



Source : The East African
 

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