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

1. Background and Description of the AREED Initiative

The African Rural energy Enterprise Development (www.areed.org), is a UNEP founded programme, which started in 2001. This regional programme covers five African countries (Ghana, Senegal, Mali, Tanzania, Zambia). Mali-Folkecenter Nyetaa is the implementing partners of AREED in Mali. The AREED programme combines enterprise development service (EDS) in areas such as business planning; financing and start up loan for entrepreneurs to expand or create new clean energy SMEs. This help increase the performance of the business plan of the entrepreneurs and hence it ability to attract financing. The AREED approach has also been instrumental in promoting business-based deployment of renewable energy and energy efficiency technologies (solar drying, solar electrification, distribution of LPG gas, commercialisation of efficient light bulbs, etc.).

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).

2. Benefits

Through the AREED programme more than 1 million USD has been mobilised in financing small and medium enterprises in Mali involved in clean energy delivery including: efficient light bulbs distribution company, solar drying enterprise, LPG distribution company, and rural electrification enterprise. These enterprises are contributing to increased access to energy thereby improving the human welfare. They also contribute to job creation.

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).

3. Lessons Learned and Policy Implication

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,

· Access to energy (supply) does not, in itself, guarantee that poor people will use electricity 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.

More information:
http://www.malifolkecenter.org/
http://www.inforse.org/africa
http://www.areed.org/