PV array on the roof of a branch of the AG Bank, providing backup in case of power cuts

It is not only technology companies that are pivotal in the spread of sustainable energy. Banks are critical too.

In Uttar Pradesh, the Aryavart Gramin Bank has provided the finance for solar photovoltaic systems, bringing lighting to 28,000 rural families across the state by 2009.

With the kerosene light, I had less time to study, as my eyes became strained. Now with solar light, I can devote much more time to study and I get better marks.

Binu Gupta, post graduate student

Background

Uttar Pradesh is one of the poorer states in India. For centuries, most people have been subsistence farmers, and farms have become smaller as the land is divided between children. Many rural areas have no grid electricity, and even where the grid is available there are frequent power cuts.

The Aryavart Gramin Bank operates in six districts of UP. It is one of a network of regional rural banks, set up by the Government of India to make banking facilities available in remote rural areas, and to provide small loans to farmers and other rural people. Having installed solar systems at five of its own branches to provide back-up power during mains power cuts, the Aryavart Gramin Bank decided to initiate a major programme to provide loans for its customers, so that they could purchase solar home systems (SHS) for lighting.

Medical shop with solar lighting finance by the AG Bank.

The organisation

The Aryavart Gramin Bank was established in 2006 from the merger of three smaller Regional Rural (Gramin) banks. In 2009, it had nearly 300 branches in the rural areas of Uttar Pradesh, 230 of which provide solar loans, and held customer deposits worth US$ 560 million (Rs 23 billion).

The technology

How does it work?

An SHS consists of a photovoltaic (PV) module, which generates electricity from sunlight; a rechargeable battery, which stores electricity so that it can be used during both day and night; a charge controller, which prevents the battery from being over-charged or deep discharged; fluorescent lamps; wiring and fixtures. Systems should provide lighting for four hours per day, with autonomy of three days (i.e. continue to supply power for two dull days after one sunny day) - although in practice up to eight hours of light is often possible. The systems can also support a mobile phone charger, a DC fan and/or a black and white TV.

How much does it cost and how do users pay?

US$1 = Rs 40 (Indian Rupees) [April 2008]

The Aryavart Gramin Bank has negotiated a bulk supply deal with Tata BP Solar, so that a Venus I system costs the customer US$340 (Rs 13,520) and a Venus II US$680 (Rs 27,040), including installation.

Solar powered computer in bank.

The bank supplies SHS only to its own ‘Kisan (farmer) Credit Card’ (KCC) customers, who have an established track record for reliable credit repayment. KCC customers pay US$63 (Rs 2,520) up front for a Venus I SHS and are provided a loan of US$275 (Rs 11,000), repaid in instalments of US$6 (Rs 245) over five years. For the Venus II package the down payment is US$126 (Rs 5,040) and the instalments are US$12 (Rs 490) per month. The repayments are deposited through the customer’s existing bank account, and the branch manager is responsible for keeping a check on payments. No subsidies are involved.

The KCC is a loan scheme offered to farmers by all rural banks in India. Under the scheme, a loan limit is worked out for every farmer borrower for a period of three years, based on the area of the farm, the proportion used for different crops, and independently-assessed cost and yields for each crop in the particular district. The farmer is then able to withdraw up to the loan limit at any time. The Aryavart Gramin Bank’s KCC scheme is currently used by 293,000 farmers.

We are able to do chikkan (embroidery) all night now we have the light. We can also use the sewing machines. We earn IRs 400 to 500 extra.

Mrs Siertaz Ali, tailor

To promote the idea of the SHS, the Aryavart Gramin Bank branches hold ‘credit camps’ in villages. Speakers from the bank and solar industry demonstrate the SHS and explain how it works. They also explain the details of the finance package, and invite participants to sign the contract agreement for a SHS. Both the Aryavart Gramin Bank and Tata BP Solar keep detailed records of all installations. Solar loans are also offered to women’s self-help groups. For example a group of three of four women may apply for a loan for a SHS so that they can develop a handicraft business.

How is it manufactured, promoted and maintained?

Tata BP Solar manufactures all products to recognised international standards since much of its production is exported. It provides a ten year warranty on the PV modules. The batteries last about four to five years, provided they are properly used, but overloading a battery will shorten its life.

PV systems need checks and occasional maintenance, even if they are manufactured and installed to high standards. The Aryavart Gramin Bank branch managers identify and engage young people with reasonable education in each village to become part-time ‘business facilitators’. These facilitators are trained by the local Tata BP Solar dealer in system installation, maintenance and repair, and the company provides them with a basic tool kit and a mobile phone. Each facilitator is allocated 100 SHS customers, and helps the Tata BP Solar engineer to install their systems. The facilitator then trains the customer in the use of the system, answers any questions, and is available to solve basic problems. If any more serious problems arise, or spare parts are needed, then the facilitator can contact the local Tata BP Solar dealers.

Family with solar light.

Facilitators are each paid a fixed fee of US$13 (Rs 500) per month, with the incentive of a US$100 (Rs 4,000) bonus at the end of the year if all their systems are working well. A facilitator can earn a further US$3 (Rs 100) for assisting a dealer with the installation of an SHS.

Benefits

By April 2008, 10,103 customers had signed up for solar loans, and 8,007 families had already been supplied with SHS, benefiting over 40,000 people.

Environmental benefits

The replacement of kerosene for PV reduces the emission of greenhouse gases. A typical household using eight litres/month of kerosene would have produced about 240 kg/year CO2. Thus the 8,007 systems installed up until April 2008 saved about 1,900 tonnes/year CO2.

My neighbours like to come to sit around the light at night to talk and watch TV. Before, we did not open the door at night, because we could not see who was there. I was worried about the pollution from kerosene; the solar light is a miracle.

Mr Latshri Ragughu Singh, Banki village

Social benefits

Solar lighting enables school and college-going children to study for longer and in brighter light, without the fumes and fire-risk of kerosene. Group study sessions are organised in schools, and often pupils do homework and examination preparation together in the school by solar light. Improved lighting has made it easier for people to have more social interaction. Neighbours visit each other more often and enjoy watching TV together, especially cricket. People have started pooling solar lights with their neighbours when organising social functions like marriages, to save on the cost of hiring diesel generators.

Economic and employment benefits

Previously most people used kerosene lamps, with households consuming on average eight litres/month of kerosene, which cost them up to US$7 (Rs 280) per month in rural areas. The monthly repayments on a 35 Wp system are about US$6 (IRs 240) including interest. Many SHS owners are paying less than before for a far better service.

Solar home systems have enabled people to work in the evenings and earn more, which is particularly useful to women. The main cottage industry in the area is fine embroidery (Chikan work), for which bright light is a real benefit. One family of nine female tailors and embroiderers has seen their earnings increase by about US$11 (Rs 450) per month each as a result of the PV lighting.

I feel it’s great with the amount of light after dusk. The children study and it’s made our life more healthy as I can cook properly in the house and keep things tidy and clean.

Santi Bibi

Potential for growth and replication

The Aryavart Gramin Bank finance scheme has been very successful. Credit camps sign up more customers than they targeted, and customers of other banks sometimes come in the hope that they might get an SHS loan. There is potential for using this type of finance scheme to make solar PV mainstream in rural areas, using the national Gramin bank network.

Update: what happened next?

The Aryavart Gramin Bank used part of the 2008 Ashden Award funds to set up ten service centres, to provide after-sales service for SHS customers. Funds were also used to train more business facilitators, and provide them with the basic tools for their work.

The bank has provided continuing training for branch staff, so that they can provide information to customers on the technology and benefits of SHS, as well as the finance package.

The bank has signed a six-year carbon finance agreement with US-based Micro Energy Credits. The carbon finance will enable the cost of SHS to be reduced, and the after sales service to be strengthened.

By December 2009, over 20,000 more SHS had been financed by the Aryavart Gramin Bank, bringing total sales to 28,214. The bank has also started providing finance for larger PV systems, to replace diesel generators.