Access to Finance for Renewable Energy and

Energy Efficient Products in Ethiopia

by Yemenzwork Girefe
Development Bank of Ethiopia
Manager, Export Credit Guarantee !pe"ial #und
$dmini%tration Bureau
&ovember, '()'
!enegal, Dakar
)
*ntrodu"tion
+he finan"ial %e"tor in Ethiopia mainly "on%i%t% of,
bank%,
in%uran"e "ompanie%,
mi"rofinan"e in%titution% and
%aving and "redit "ooperative%-
*n )..(/% Ethiopia reformed it% finan"ial %ervi"e indu%try-
+he reform mea%ure% in"luded,
"omprehen%ive re%tru"turing of government owned finan"ial in%titution% and
opening the %e"tor for lo"al private e0uity parti"ipation
'
Cont-

1ut"ome of the reform,

13 privately owned banks,

13 private insurance companies and

31 micro finance institutions up to 2une '()'-

+he newly e%tabli%hed bank% and in%uran"e "ompanie% are all
owned )((3 by lo"al private %hareholder%-
4
#inan"ing Bank% *n Ethiopia

Ethiopia ha% low geographi" and demographi"

penetration of bank bran"he%,

$ll bank head 0uarter% and bran"he% are

"on"entrated in the "apital "ity, $ddi% $baba-

+he number of bank bran"he% went up from .5)

in '()) to )'67 a% at 2une 4(, '()'-

$% a re%ult the ratio of bank bran"he% to total

population de"rea%ed from 86,()9 to 94,955-
5
Mi"ro #inan"e *n%titution% in Ethiopia

+he ob:e"tive of the M#*% i% ba%i"ally poverty alleviation

through the provi%ion of %uitable finan"ial %ervi"e% to the
poor who a"tually do not have a""e%% to the finan"ial
%upport %ervi"e% of the formal finan"ial in%titution%-

+o thi% effe"t, the delivery of mi"rofinan"e %ervi"e to the

poor in Ethiopia i% one of the main effe"tive in%trument% of
in%uring,
food %e"urity,
redu"ing poverty and
in"rea%ing employment in both urban and rural area%-
6
;ural Energy !e"tor #inan"ing in
Ethiopia

+he Ethiopian government i% implementing a

multi dimen%ional and integrated rural ba%ed
development %trategy with the expe"tation of
rapid and e0uitable development of it% entire
population-
9
Cont-

+he %trategy re"ognized that energy i% one of

the "riti"al input% for enhan"ing,

e"onomi" produ"tivity and

building the human "apital through the provi%ion of

"riti"al %ervi"e% in"luding portable water, health and
edu"ation-

Expanding modern energy %ervi"e%, parti"ularly

ele"tri"ity, in rural area% will a""elerate the
e"onomi" and %o"ial development pro"e%%-
7
Cont-

+he government of Ethiopia ha% formulated a national rural

ele"trifi"ation %trategy where both the publi" ele"tri"ity
%ervi"e "ompany, Ethiopia ele"tri" power Cooperation
<EE=C1> and the private non?government %e"tor will be
involved in extending %ervi"e% to the rural population-

*mplementation of the publi" %e"tor rural ele"trifi"ation

program i% already in progre%% and hundred% of rural town%
will be the benefi"iarie% of the program in the "oming year%-
8
Cont-

+he %e"ond private?lead rural ele"trifi"ation

%trategy fo"u%ed on ele"trifi"ation of rural area% not
to be "overed by Ethiopian Ele"tri" =ower
Cooperation <EE=C1> %y%tem expan%ion plan-

+hi% %trategy ha% been implemented through ;ural

Ele"trifi"ation #und <;E#> Bureau, under the
Mini%try of @ater and Energy, the re%our"e% are
available to viable and eligible private and non?
government pro:e"t promoter% on a loan ba%i%-
.
1ff?Grid ;ural Ele"trifi"ation =rogram
;ural Ele"trifi"ation Managed #und ADBE a% a +ru%t
$gentA
+he rural ele"trifi"ation managed fund i% one of the rural ele"trifi"ation
program admini%tered by the Bank-
+he main benefi"iarie% of thi% program are,
rural "ooperative% and
intere%ted private %e"tor%-
!o far the bank ha% managed to admini%ter 4( rural ele"trifi"ation
pro:e"t% in different region% of the "ountry-
1f the total loan advan"ed, ') of them are die%el pro:e"t% and the
remaining . are %olar home %y%tem pro:e"t%-
)(
Requirements to be beneficiary of Rural
Electrification Fund Credit Line
Renewable Energy Technologies
E0uity "ontribution 63 of the total pro:e"t "o%t
Boan amount .63 of the total pro:e"t "o%t
*ntere%t rate 7-63
Gra"e period Maximum of )' month%
Boan repayment period Maximum of 7 year%
Collateral
#or non?movable renewable Energy pro:e"t% like !olar =C mini?grid and Mi"ro?Dydro =ro:e"t%
+he fixed a%%et of the pro:e"t "an %erve a% a "ollateral
#rom movable renewable Energy pro:e"t% like %olar home %y%tem and %olar lantern pro:e"t%
$dditional "ollateral building or other a%%et% e0uivalent to the loan amount or
+hird per%on well known bu%ine%% per%on written guarantee or
#ederal or ;egional Government guarantee
))
Cont-
Non-Renewable Energy Technologies

E0uity "ontribution )63

Boan amount 863

*ntere%t rate 7-63

Gra"e period Maximum of 9 month

Boan repayment period Maximum of 6 year%

Collateral #ixed a%%et of the pro:e"t a%

"ollateral
)'
Cont-

Currently 48( %olar home %y%tem pro:e"t%

with a total number of '6,((( benefi"iarie%
are under pipe line and they are expe"ted
to be benefi"iary of the %y%tem at the end
of the "urrent fi%"al year or at the
beginning of the "oming fi%"al year
)4
Market Development for ;enewable Energy and Energy Effi"ient =rogram ADBE a%
a lead program implementerA

+he Market Development for ;enewable Energy and Energy

Effi"ient =rogram %eek% to "reate a "u%tomer ba%e large
enough to allow %u""e%%ful private %e"tor operation and
"ompetition, whi"h i% in line with the general dire"tion
adopted in the power %e"tor of Ethiopia-

$t the end of the pro:e"t, the private %e"tor% that are now
ba%ed in the "apital "ity will expand their operation% to rural
area% by %etting up lo"al offi"e% re%pon%ible for,
marketing,
in%tallation and
maintenan"e of the ;enewable Energy %y%tem% or "omponent%-
)5
Cont-

+he overall goal of thi% program i% to promote private

%e"tor led development of the renewable energy and
energy effi"ien"y produ"t%-

DBE will be the lead implementing agen"y for thi%

program and will work with a network of M#*% and the
$E+=DD to enable %u""e%%ful promotion of renewable
energy produ"t% and %ervi"e% in Ethiopia by addre%%ing
the main bottlene"k%-
)6
Cont-

$ "redit line u%ing *D$ finan"ing would be e%tabli%hed

within DBE and would be u%ed to inve%t in pro:e"t%
related to promotion of renewable energy and energy
effi"ien"y produ"t%-

DBE will allow two line% of "redit to %upport thi%

"omponent,
1ne would be to support the working capital requirement of
project deelopers <=rivate !e"tor Enterpri%e% <=!E%>, !mall and
Medium Enterpri%e% <!ME%> et"> and
the other to proide on!lending support to "F#s to lend to $mall
%ouseholds-
)9
;etail lending to private %e"tor enterpri%e% <=!E%>,

+he retail loan% will be "arried out by "urrent

loaning department% a""ording to the Bank/%
lending poli"ie% and pro"edure% with minor
modifi"ation%-

!pe"ial attention will be paid to the development

role of the pro:e"t while at the %ame time trying
to fulfill the %u%tainability re0uirement
)7
+erm% and "ondition% for Bending under ;etail =art
E0uity "ontribution 4(3 of the total pro:e"t "o%t
*ntere%t rate 8-63
Boan amount Minimum of E!D ',6((
Gra"e period on average from 9 month% to ) year
Boan repayment period Maximum of 6 year%
Collateral #ixed a%%et for movable pro:e"t%
)8
@hole%ale lending to Mi"ro #inan"e *n%titution% <M#*%>-
1n?Bending +erm% and "ondition% from DBE
to Mi"ro #inan"e *n%titution% <M#*%>
*ntere%t rate 93
Boan amount ba%ed on their finan"ial %trength
Gra"e period maximum of ' year%
Boan repayment period maximum of )( year%
DBE will bear the full ri%k of the loan% to M#*%
).
1n?Bending +erm% and Condition% from M#*% to final Benefi"iarie%

M#*% will be free to %et their own on lending rate% on the ba%i%
of market "ondition% and without intere%t rate "ap%-

+he M#*% will bear the full ri%k of the loan% to the borrower%
*ntere%t rate free to %et by M#*%
Boan amount Maximum of E!D ',6(( for individual
Gra"e period &o gra"e period i% re0uired
Boan repayment period Maximum of 6 year%
'(
!olar Mobile Charger for ;ural
Community
')
!olar Dome !y%tem for the =oor of the
=oore%t
''
;ural Dealth =o%t one of the benefi"iary
of ;E# =ro:e"t
'4
Die%el Generator for !mall ;ural Group%
'5
=artial view of Ele"trified ;ural Cillage%
'6
!olar Cooker Demon%tration
'9
!olar Dome !y%tem for Bighting +C
'7
!olar Dome !y%tem
'8
Con"lu%ion

$""e%% to finan"e for rural hou%ehold% that have

moderate to high "a%h in"ome% but little pro%pe"t of
obtaining ele"tri"ity %ervi"e from the grid with affordable
and reliable renewable ele"tri"ity %upply i% a "orner
%tone- +hu% it help%,
to "reate an enabling environment "ondu"tive to inve%tment in
renewable energy

to promote private %e"tor market penetration in rural area% and

to "reate rural delivery me"hani%m% through a parti"ipatory

approa"h
'.
Development Bank of Ethiopia
+D$&F Y1E
2anuary '()'
30