Inadequate electricity continues to be a stumbling block to development for many people in Tanzania’s rural areas. Renewable energy can solve such challenges, but the cost of packaging the natural energy into electricity, result into expensive solar kits that are out of reach to the villagers.
One solar company, however, has learned that the best way to light up villages in Tanzania is by selling the solar lamps on credit. Eight years ago, ARTI Energy came to Kiromo village in the eastern district of Bagamoyo, with an aim of providing sustainable energy to the community members. On realization that the lamps were too expensive for the locals, the company had to change strategy and adopt the use of a traditional credit system, called “mali kauli.”
Tanzania’s Bureau of Statistics, indicate that only 11 percent of its rural population have access to electricity. And while electricity demand is growing at 10 to 15 percent per year, the government says rural households are often excluded from economic activities due to a lack of power.
But ARTI Energy has made it possible for villagers to access light which they can use to light up their homes and business premises.
Salum Ali a resident of Kiromo was excited when the lamps were brought to the village. "I really liked those lamps, but I could not imagine then that I would ever own one," he told the Thomson Reuters Foundation.
Ali, who uses a set of solar lights he bought several years ago - says they still work perfectly. "I have nothing to complain about, I use the lights at home and for my fishing activities," the 48-year-old added.
Due to the informal credit system, which is widely used in the village founded on trust between customers and shop owners, and interdependence between sellers and suppliers, ARTI Energy has been able to light up more than 6,000 families in Bagamoyo. The initiative has been made possible through the World Bank-funded Lighting Rural Tanzania project, jointly implemented by ARTI Energy and the Rural Energy Agency.
While solar power is a sure way to boost electricity access in rural communities, maintaining businesses that supply solar products on credit can be challenging. Without the much-needed capital, the businesses are not able to grow.
Enters SunFunder, a solar energy finance business based in Tanzania and the United States, and such businesses can now access loans to expand their scope.
Lais Lona, Africa Business Development Manager for SunFunder, told the news agency that banks are often unwilling to lend money to them (solar businesses) without knowing how the sector works. Aimed at bridging the gap between investors and businesses specializing in off-grid solar energy, SunFunder provides loans to business that want to scale up.
Using a strategic mechanism, SunFunder has been able to bring in investors in the solar energy sector, who make loans to solar companies. The loans are tailored to meet the needs of a specific business model and to minimize the risk of default. SunFunder’s specialized knowledge of the industry is of great benefit to investors, who do not lend to individual businesses but rather put money into solar loan vehicles, each of which lends to a number of companies, spreading the risk, Lona said.
With households being able to get clean energy, they save on kerosene for lighting and fees for charging phones. Eliminating the use of kerosene also reduces health damages from indoor pollution, as well as cuts carbon dioxide emissions into the atmosphere.
Image credit: Solar Now