As evidenced by the example in the "Demand" section, the ability to smooth energy expenditures over time exerts a dramatic influence over how deeply many products are able to penetrate the market. This is especially true for products with high up-front initial costs such as solar PV systems and household biogas plants. There are numerous arrangements that have been experimented with in order to provide end-user finance, some of which are examined below. Each has met with notable challenges.

  • Utility Model - N.R. Utility - In the case, solar PV companies were given geographically defined concession areas where, for a limited amount of time, their products were to receive a certain level of subsidy support based on the fact that they were providing "new connections" to un-electrified households. In the case of the N.R. Utility, a monthly token system was used for payment collection. More specific information is available on the case study page.

  • Fee-for-service / Rental / Lease - Soluz - Similar to the utility model, Soluz experimented with providing PV systems on a fee-for-service basis. This not only helped to make systems more affordable, but also reduced the level of perceived risk by households who wanted to use PV systems only until the grid arrived.

  • Dealer / Agent Credit - Toyola - Partly because of the relatively low price of stoves (as compared to PV or biogas systems), the entrepreneurs of Toyola as well as some of their sales agents often let customers pay for stoves on a short-term, informal credit system.

  • 3rd party financing - SELCO, Zara, SME-RE, BSP - SELCO-India (retail PV systems) has invested considerable time and energy in developing strong relationships with regional rural banks in the state of Karnataka and SEWA Bank (The microfinance institution of the Self-Employed Women's Association) in Gujarat. Zara Solar has done the same with various providers of finance (savings and credit cooperatives) in Tanzania. Lastly, SME-RE, a waste-to-energy engineering company in Cambodia, arranges financing for its large, industrial-scale customers with funds provided by E+Co. In the BSP, part of the initial program arranged for local financial institutions to provide end-user finance.

  • Alternative approaches - One strategy for circumventing the need for end-user financing altogether is to design smaller products that can be purchased in modular form. Barefoot Power is one company that trying to pioneer this strategy by creating solar-powered lanterns that retails for less than USD 20. Additional products can be purchased over time to increase the lighting capacity and it is also envisioned that many smaller systems will eventually be wired together, thus "reversing rural electrification."

This report from the SEEP Network, SEEP - Using Microfinance to Expand Access to Energy Services (2007).pdf , with funding provided by USAID and the Citi Foundation, provides a succinct overview of the energy-microfinance nexus. Six detailed case studies are presented (four from Asia and two from Kenya) in addition to more general analysis. Criteria for successful lending for energy are distilled and presented in chapter 4.