Experience of the African Rural Energy Enterprise Development Programme in Mali: Stimulating Energy Enterprise Creation and the Productive Use of Energy
By Pierre Dembele, Mali Folkecenter (MFC), Climate Change department, INFORSE-Africa
and Description of the AREED Initiative
The second phase of the AREED programme, put more focus on the promotion of the productive use of energy through the provision of end-user finance. In the frame of the implementation of this programme, Mali-Folkecenter Nyetaa established in 2008, Nyetaa Finance a micro finance institution specialised in financing energy production activities, and supporting women’s groups in the recovery and processing of local products, through short and medium term credits. The easy access to credit permits the clients to have a working capital and the possibility of acquiring equipment for production and processing.
The programme is targeting newly electrified rural areas where there is need to purchase electric appliances such as electric tools for carpentry, electric sewing machines, welding equipment, battery charging equipment, refrigeration and ice-making, seed oil presses, grain grinders, crop drying, and other equipment for the processing of local agricultural crops (honey, mango, cashew etc.).
Nyetaa Finance work in collaboration with MFC to identify, analyze and select demand from the energy ends users. After this assessment, loans in the range of US$300-5,000 are provided to the borrower according to their ability to pay at an interest rate varying between 18-20%. Some loans can be high as $20,000. Before the loan is disbursed, a down payment in the range of 20% is required from the borrowers. Regular monthly payments of the principal and interest are paid over the 12-24 months term of the loans. In addition to the loan facility, MFC Nyetaa provides technical assistance to the borrowers to support business development. The AREED end use financing model in Mali can be described in the schematic representation here (pdf file).
By the end of 2009 Nyetaa Finance had invested about (€152,675) for energy end use equipments for 1774 clients including 850 Women in 15 Villages. In total, the energy end users portfolio of Nyetaa Finance includes more than 227 loan demands totaling around €400 000.
These positive impacts in just two years of operation has attracted the interest of two Malian banks who are interested to establish partnership with Nyetaa Finance for financing the productive energy end user entrepreneurs. These are BMS (Banque Malienne de Solidarité- Malian Bank of Solidarity) and BNDA (Banque Nationale pour le Developpement Agricole- National Bank of the Agricultural Development).
A number of policy lessons can be drawn relating to the AREED initiative
· With suitable business development assistance combine with start up financing one could incubate/create entrepreneurs capable of delivery energy services,
to energy (supply) does not, in itself, guarantee that poor people will use
at all since monthly recurrent charges at cost-reflective
rates can still be unaffordable to the poor. In this regard, lifeline tariffs
can be used in the short run; but more widely, rural electrification should
be coupled with measures to promote the productive use of electricity to generate
income. This in turn can enable poor consumers to pay for the electricity supplied,
thereby supporting an economically viable supply.