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Awarding of microcredits for solar products: Eight tips

The costs of purchasing solar home systems are usually too high for customers in rural areas to pay in cash. As a rule, payment through an installment plan is possible without any problem. Experiences in Asia, and also Africa are evidence of this.

The Stiftung Solarenergie – Solar Energy Foundation has five years of experience with microcredits for solar products in Ethiopia. The repayment rate is one hundred percent.

What has to be done to make installment plan financing so successful?

1. Integration
A successful installment plan model demands integration in a village community's social structure. It is not advisable to support isolated individual customers living in remote areas, but rather, much more sensible to link into a social network such as a village community, a church community, or the members of a cooperative. The head of such structures or other authorities should be informed and should also take part in the responsibility.

2. Contracts
Mutual rights and responsibilities – installation and maintenance of a solar system, on the one hand, and prompt repayment, on the other – must be established in a written contract. The contract must also contain possible sanctions for non-fulfillment of terms (for both parties).

3. Repayment moral
Even more important than contracts are social and moral obligations. Contracts made with customers in remote regions are difficult to legally enforce. It is thus crucial to clarify to customers, the social and moral obligations that they are entering into. Guarantors within the customer's personal environment can also provide support, for example, informing the neighbors works as a form of social control. Customers must understand that their non-compliance with the contract will be known by third parties.

4. Keeping to rules
You must also stick by the rules! A contract is always binding for both parties involved. Therefore, the installation firm remains responsible for not only giving customers good advice and installing solar systems professionally, but also for carrying out periodic maintenance, service, and customer service as agreed upon in the contract. Poor customer service after installation is the basis for poor repayment moral.

5. Installment collection and maintenance
Periodic technical maintenance and collection of installments should be carried out in conjunction as this increases obligation for both parties. Experience with models in which technical maintenance and financing operate separately show that this often leads to considerable organizational problems.

6. After-sales service
The contact persons for technical matters and installment credits must be easily reachable. When a problem arises, customers must not only be able to reach a technician without any problem, but the technician must also appear at the customer's within the agreed-upon period. The Solar Energy Foundation's credit customers are assured that at the latest within three workdays after reporting a problem, a technician will appear. This not only creates trust, but also increases customers' willingness to stick by their side of the contract.

7. Intelligent solar technology
Prompt payment of installments can be supported by intelligent charge controller technology. The products used by the Solar Energy Foundation have a clock timer. After entry of a payment, the charge controller is sent information as to how long the system should continue to operate. If the next payment is not made on time, the system turns off automatically. The system cannot be started again by the user. A code is required that is sent only when the payment has been made.

8. Credit management
Credit management should be supported by appropriate software, such as a Management-Information-System (MIS). Administration and professional supervision of tens of thousands of customers cannot be managed by long-hand or excel lists. The use of an MIS that is maintained by local technicians and management is necessary. The MIS of the Solar Energy Foundation also manages additional, important information, such as the customers' GPS data and information on maintenance work that has been carried out.  (hs) 

You want to introduce a microcredit system for solar products? The Stiftung Solarenergie – Solar Energy Foundation offers individual support and supervision. Questions and further information: mail@stiftung-solarenergie.org

Source: sun-connect 6 | July 2011 (p.13)