Solar light outside a house in rural Sri Lanka

Grid electricity, mainly generated by large hydropower schemes, extends to about 70% of Sri Lanka’s population, but to only 40% in rural areas.

Sarvodaya Economic Enterprise Development Services (SEEDS) therefore financed the installation of solar home systems and other ways of accessing electricity, in rural areas of Sri Lanka.

The organisation

SEEDS is a micro-finance institution which belongs to the Sarvodaya Group, the largest development NGO in Sri Lanka. The aim of SEEDS is to eradicate poverty by promoting economic empowerment for a sustainable livelihood. SEEDS operates an energy financing division to carry out renewable energy lending initiatives. Its main focus is on financing and managing solar-home-systems (SHS).

SEEDS works through accredited solar installers to identify potential loan customers. These loans enable poor households in rural areas to purchase SHSs, and receive the benefits of improved light, communications and entertainment. The monthly repayments are set at a rate which the household can afford to pay, and the loans are paid back over a period of one to four years. Local field officers employed by SEEDS collect monthly repayments, and also carry out checks and minor repairs to the systems. SEEDS has financed the installation of around 52,000 SHSs (out of a total of 71,000 installed in Sri Lanka) since 1998. They have also installed 13 micro-hydro schemes in rural areas which run local grids to supply about 370 families. A further 1,800 poor rural families have received loans to enable them to connect to the mains grid.

The solar-home-systems bring great benefits to the rural communities of Sri Lanka.

The technology

Solar-home-systems (SHS) are small, stand-alone electrical systems. They consist of a photovoltaic (PV) module (usually rated at between 20 and 80 Wp), which generates electricity from sunlight; a re-chargeable 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; wiring and fixtures. Modules and many of the components used are imported from various countries, including Australia, India and Germany. The SHS supplies power to four to six compact fluorescent lamps (CFL), a TV and sometimes a mobile phone charger or DVD player.

SEEDS provides finance but does not undertake SHS installations. Instead, they partner with approved installer companies, through an agreed Memorandum of Understanding (MoU). MoUs are currently in place with 11 installers, which range in size from small, local start-up companies to multinationals.

How users pay

At the time of writing (July 2006) 190 Sri Lankan Rupees (Rs) = UK£1 = US$1.8

The main role of SEEDS is to provide affordable financial packages to enable users to pay for their off-grid electricity systems. However, the way in which they do this goes far beyond the role of a conventional bank.

When a decision is made to promote solar home systems in a particular village, representatives of SEEDS and a partner installer company visit the village and demonstrate the operation and benefits of SHS. The partner companies also market the systems by advertising in the local media and canvassing business through sales staff.

Once a potential customer is interested, a representative from SEEDS visits them at home to carry out a preliminary loan assessment. If the customer has no cash to invest, details of the loan scheme are provided and the representative helps with filling in a loan application form. Customers must pay the full price of the system over an agreed period in instalments. The system prices vary between Rs 26,000 and Rs 75,000 (£130 to £400) depending on size. A minimum down-payment of 15% is required, and is collected up front by the installation company. The balance is granted as a loan and repayments are made over one to four years. This period may be extended to cover the cost of replacing the battery, which needs to be done about every four years.

Solar panel on the roof, Sri Lanka.

Training support and quality control

Under the terms of the MoU, the Technical officer from the installation company provides training to the users. This training covers practical issues, such as how to read the indicator lights; when to top up the battery and clean the PV module; and how to ensure that the electrical connections are clean and tight; and how to manage their electricity demand to match the supply – for instance, turning off two lights if they want to watch TV. One month after the system has been installed, an employee of the installing company visits the user to check that the system is working satisfactorily and to answer any questions. The householder is given a card which explains common faults, and they can fill this in and return it if they need help. Customers are encouraged to phone up the installation company or the SEEDS office if they have problems.

All system components have warranties, ranging from one year to three years for the batteries, and 15-20 years for the PV modules. Any work needed following the expiry of a warranty has to be paid for by the customer. SEEDS extends credit for replacement of batteries and other components.

Working by solar light, Sri Lanka.

Benefits and replicability

Environmental benefits

Solar home systems replace kerosene lamps, and in doing so they provide several benefits. The immediate benefit to users is avoiding the fumes and fire-risk of kerosene lamps. There are also substantial savings in production of greenhouse gases. SEEDS used an independent agency to estimate kerosene usage in 1998. This survey found that the average household used 25 to 30 litres of kerosene per month. This is higher than many studies elsewhere have found, because Sri Lankan households use more kerosene wick lamps (typically four or five) and also use kerosene pressure lanterns (“Petromax” lanterns) and some kerosene for cooking. Assuming that an average household saves 25 litres per month using the SHS, the total kerosene saving for the 52,000 systems installed is about 16 million litres per year, which prevents the emission of about 40 thousand tonnes of CO2.

Social benefits

Children do better at school as a result of being able to do their homework in the evenings (although the access to TV which the SHS provides is also sometimes a distraction!) A CFL is brighter than a kerosene lamp and is safer to use. SEEDS knows of cases where children have been severely burnt as a result of the kerosene lamp falling over when they had fallen asleep studying. These benefits are greater for families with more than one school-aged child – where children often had to take it in turns to study with a single lamp. Many rural families choose to have one light outside, as a deterrent to elephants which can trample and destroy crops.

An SHS can power a mobile phone charger. This makes it easier to use a mobile phone to talk to relatives overseas or to check the market prices of farm goods. Some people hire out phones or sell a phone re-charging service. SHS users are enthusiastic about being able to watch television or DVDs or listen to music.

Rural Sri Lanka.

Economic and employment benefits

The average household using kerosene for lighting spends about Rs 1,000 (£5) per month at the current price of Rs 39 per litre. A survey undertaken for SEEDS suggested that the average rural household spends 19% of their income on energy for lighting, so once the repayments on an SHS are completed, the owners have significantly more available income. The repayments are set at an affordable level (ranging from the same to double the amount previously spent on kerosene and battery re-charging), so that, even during the repayment period, the financial demand is affordable.

Many SHS owners have also increased their income by starting new businesses or expanding existing ones. One example is the owner of a fruit and vegetable stall near a bus station, whose kerosene lamp would never stay lit on windy days. Using an SHS improved the lighting which attracted many commuters and substantially increased income from the stall. From his savings, the stall owner has been able to buy a two-wheel tractor which he hires out to farmers.

An estimated 250,000 to 300,000 people have benefited from SEEDS solar installations.11 companies supply systems and several thousand people are employed. Demand for SHS exceeds the capacity of SEEDS and the partner companies to finance and install them. Currently, SEEDS is financing 1,000 to 1,300 new loans per month, and it expects to finance 45,000 more SHS within three years. Two commercial companies now use the SEEDS model to run their own solar financing schemes.