Power to the People

Wednesday, December 3, 2008

In rural areas of India, local midwives have a new device to help them deliver babies: a headlamp. The headlamp, which is solar charged, not only makes their work easier but also replaces kerosene lamps, which provide poor light quality and run on costly fuel that emits heat and pollutes the air. To pay for the lamps, midwives can turn to microfinance institutions for small loans.

The matching of the headlamps and micro-loans was the brainchild of Harish Hande, an entrepreneur who is promoting access to electric power for poor rural populations through Selco, his rural sustainable energy company. Mr Hande?s strategy is an example of the innovations emerging as companies, multilateral institutions and development groups seek new models through which to deliver power to the world?s poorest communities.

Many cash-strapped governments have recognised the role of the private sector in providing access to energy. However, the challenge is to present a business case to investors when the sums needed to spend on infrastructure are high and the tariffs that can be charged to poor communities remain tiny.

Moreover, the developing countries that face power problems also tend to be those with poor governance and weak regulatory regimes, making them a risky bet for a company looking for a secure return on investment.

?One set of requirements for private companies to engage in helping build power infrastructure is how well the basics of the country work ? the legal framework, degree of government interference or how well the country follows the rules that are officially on the books,? says Bernie Sheahan, director for infrastructure at the International Finance Corporation (IFC), the private sector arm of the World Bank.

?This is the big block that most affects the willingness by companies to engage in power distribution or generation activities,? he says.

One new model is that of IFC InfraVentures, an initiative through which the organisation is putting up risk capital and professional expertise to fund early stage project development for infrastructure investments, including power projects.

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Source: Financial Times (link opens in a new window)