Hivos International

Micro-Finance institutions boosting clean biogas technologies in Ethiopia

Lack of financing has been increasingly noted as one of the obstacles to the dissemination of bio-digesters in Ethiopia. However, Micro-Finance Institutions (MFIs) are now leveraging this opportunity to provide credit to farmers in rural areas, some specifically for clean energy.

For example, Meklit Micro Finance Institution Share Company (Meklit MFI SC) has been keen to champion the dissemination of biogas through its bio-digester loan product. The company understands the benefits of bio-digesters both to their users and the environment and has been providing loans to rural farmers for close to six years now.

Launched in October 2011 at Meskan, Woreda District, Meklit MFI has already provided more than 360 households with credit amounting to ETB 2,541,000.00 (equivalent to USD 112,245). This has gone a long way in enabling farmers to install bio-digesters and ultimately contribute to reducing greenhouse emissions and deforestation.

The company has also partnered with Ethiopia’s Regional Biogas Program Coordination Unit through a Memorandum of Understanding that includes creating awareness amongst potential users. The partnership explains the various benefits of biogas to households before they apply for loans.

To ease loan repayment, the MFI has introduced a schedule with repayment intervals and favourable interest rates.

“I find Meklit’s system less complicated as compared to other MFIs. It has an efficient monitoring system which lessens the need for frequent follow-up,” said Jemal Mohammed, Head of the Water, Mines and Energy (WME) Office in Meskan Woreda.

Bio-digester masons also partly attribute the success of their businesses to Meklit. ‘’Meklit is a significant supportive mechanism to my business. I have more jobs thanks to their loan product to farmers,’’ said Tsegaye Gabre Selassie, a mason in the region.

With close follow-up and monitoring in partnership with local government agencies, Meklit has been able to ward off risks of non-repayment. To date only six households have defaulted on their loans.

Keen to scale up to other forms of clean technology, the MFI is looking to forge a partnership with the Development Bank of Ethiopia to access the World Bank’s Financing Renewable Energy Funds. This new deal will enable Meklit to provide more loans to boost clean energy products.

Hivos East Africa’s Africa Biogas and Partnership Programme has applied a market-based approach in partnership with the private sector to disseminate the use of biogas. Through this approach, we have enabled local companies to market, install and service biogas plants for households that are willing to invest. Banks and microfinance institutions such as Meklit continually prove that this model is effective in scaling up the use of biogas to those in dire need of clean energy.