Solar Loan Program for India’s Small Businesses

Project partners cKers Finance and Electronica Finance Limited have provided loans for 15 projects worth $800,000, including solar projects for the textile, manufacturing, food processing and packaging industries. Photograph courtesy USAID India

In recent times, there has been much progress in increasing access to electricity to people across India. However, access to clean fuel remains quite low, with a stark rural-urban divide. India has set ambitious targets for expanding renewable energy resources but achieving these targets will require increased investment in proven ground-level solutions, such as rooftop solar panels.

The United States Agency for International Development (USAID) and the U.S. International Development Finance Corporation (DFC) announced a $41 million loan program earlier this year to help finance investments by Indian small and medium enterprises (SMEs) in renewable energy solutions, including rooftop solar installations. As SMEs account for almost half of all the energy consumed in the country’s industrial sector, the loan program has the potential to significantly expand access to reliable sources of clean and affordable power, while also reducing emissions and improving air quality.

India’s commercial and industrial sectors pay high fees for their electricity, making rooftop solar a critical cost-saving investment. However, SMEs and residential consumers face obstacles in securing the financing needed to install solar rooftop panels. To address this challenge, USAID and DFC also partnered with the New York-based Encourage Capital, an environmentally focused investment firm, and two Indian non-banking financial companies, cKers Finance and Electronica Finance Limited, on the new loan program.

“In India’s conventional project financing market, the typical approaches that are applied do not scale for smaller projects. This is the gap which cKers has set out to fill,” says Jayant Prasad, executive director of cKers Finance. “A lot of the players in the ecosystem are very young—the segments are barely 5 to 10 years old—therefore the segments or the players are not very well understood.”

According to an independent study by Encourage Capital, the rooftop solar market for SMEs in India has a potential of 15 gigawatts and presents a $9 billion market opportunity for financial institutions. “With increasing energy demand, high electricity prices and decreasing costs of solar, SMEs can find rooftop solar to be an attractive low-carbon solution for their electricity needs, but financing is still a key barrier,” says Adam Wolfensohn, managing partner at Encourage Capital. “Our fund aims to address these barriers by partnering with specialized financial institutions and providing them with growth capital and the operational assistance they need to develop and deploy innovative and commercial financing solutions to scale rooftop solar for this market.”

Anurag Mishra, a senior clean energy specialist at USAID India, says within a short span of three months, the project partners, cKers Finance and Electronica Finance Limited, have provided loans for 15 projects worth $800,000; including solar projects for the textile, manufacturing, food processing and packaging industries. “The goal for the next six months includes loans worth $4 million covering 49 rooftop solar projects, 50 solar-powered micro-cold chains in villages, and solarizing 350 bank branches in remote rural areas,” he adds.

According to the International Energy Agency’s “India Energy Outlook 2021” special report, India’s future energy demand through 2040 will be the highest in the world. With the sustainable energy transition already underway, there will be a significant need for specific forms of long-term capital that are reachable by key segments, such as SMEs. USAID will continue its support during the renewable energy loan program’s rollout by providing technical assistance to address quality and safety concerns in the rooftop solar market. Once these loans lower the financial hurdle for installing rooftop solar, consumers across India will gain access to the enormous benefits resulting from the transition to this sustainable energy.

Jason Chiang is a freelance writer based in Silver Lake, Los Angeles.