(A partnership between UKaid Sakchyam and Janautthan Samudayic Laghubitta Bittiya Sanstha Ltd )
According to a 2013 report published by the IFC, 76.1% of employment in Nepal is generated through Small and Medium Enterprises (SME). The same survey shows that 68.8 % of SMEs identify electricity supply as being a major constraint on productivity. Owing to lack of finances and reliable energy, entrepreneurs are finding it difficult to make investment decisions for business start-ups and the expansion of SMEs. Existing SMEs face financial challenges to purchase machinery and new technology. So, they instead utilize manual labor which is slower and reduces productivity. Using costly energy sources such as fossil fuel to run machinery is not viable for SMEs, consequently their hours of operation are limited, or they must adjust work time based on grid power availability.
Though the use of climate resilient technologies help people reap the benefit in many ways, due to lack of financial resources, marginalized people are not in the position to properly utilize those technologies. In addition, formal financial services offered are inadequately reaching the marginalized people and their SMEs. Due to this, marginalized and disadvantaged populations tend to rely on informal lending networks and end up paying a higher rate of interest. In order to address this issue, it is important that Banks and Financial Institutions (BFIs) develop a credit financing designed to cater to rural population’s needs and narrow the financial need for energy disparity while ensuring affordability.
With UKaid Sakchyam Access to Finance’s (Sakchyam’s) support, Janautthan Samudayic Laghubitta Bikash Bank Ltd (Janautthan) aims to provide necessary financial services to the marginalized group to help them purchase appropriate climate resilient technologies. The project will provide a new credit facility for climate resilient technology for SMEs and households which can be used to create or expand businesses and income generation activities (IGAs). In addition, Janautthan will also link their financial products with insurance on credit products to reduce the risk to both clients and MFIs. Winrock International, a pioneer Climate Resilient Energy promotor in Nepal, is the technical partner of the project.
With the help of Sakchyam, Janautthan plans to launch the project in six districts namely Kanchanpur, Kailali, Bardiya, Dang, Rupandehi and Kapilvastu and open three new branches in Kanchanpur, Bardiya and Kapilvastu districts. The project will design new financial product for Climate Resilient Technologies, assess business opportunities of energy financing specifically for SMEs, orient and train the staff and its members on the new products. They also plan to conduct training on financial literacy which will empower entrepreneurs and aid in their business development. They plan to replicate the project activities in other branches to make the new product viable.
Investing in SMEs for productive uses of energy is anticipated to improve rural economy by increasing incomes, jobs, and the demand for financial services. The availability of finance for climate resilient products will not only accelerate the productivity and profitability of households and SMEs, but it will also increase their resilience to climate change by increasing incomes, improving the efficient use of available energy, and decreasing dependency on wood and fossil fuels. During the project period, Janautthan is expected to reach 7,500 beneficiaries with new and existing financial products. They have also estimated to serve 1,000 SMEs beneficiaries during the project period.
As of December 2019, Janauthhan has:
- Reached more than 3,000 clients (96% women) through new financial services at 21 branches (out of total 39) in 7 districts
- Disbursed about 1,800 loans valued more than NPR 127 million, including 964 for MSMEs valued over NPR 92 million
- Designed and disbursed 814 Energy Loan valued about NPR 42 million for Climate Resilient Technologies (CRTs) for households and SMEs notably for furniture, irrigation, fishery, poultry, e-rickshaw, hotels and vegetable/ fruit drying micro-enterprises
- Conducted SME Energy and Financing need survey in 1,300+ households
- Organised staff training, client orientations, demos, information campaign at center meetings, individual counselling, and established a network with 6+ CRT vendors and wholesale loan providers to promote Alternative Energy and its financing
- Collected deposits of NPR 12 million
- Offered financial literacy to nearly 6,000 clients
- Introduced tablet banking in 21 branches with 72 tablets
- Expanded Energy Loan in all 39 branches