Renewable energy perspective plan of nepal 200-2020 an ... - SNV

3. Financial Institutions
According to rural credit survey conducted by the Nepal Rastra Bank only about 25
percent of the credit need is met by institutional sources (Nepal Rastra Bank. 1994).
Financing rural energy programmes need to be looked at from two aspects – access to
financial services and sustainability of services .in the long run. Financial
sustainability, on one hand can be achieved by financing institutions by limiting their
services to less risky project and location but this means poorer access in rural areas
and hence does not address the social equity aspect of the development. The trade-off
between these two is, therefore, very delicate and needs proper policy guideline and
assistance. Access can be improved by properly designed subsidy programmes and
other fiscal incentives. Biogas Programme in Nepal can be considered as one of such
example. The need of intermediating activities to improve accessibility is key to
successful implementation of rural energy programme. Such intermediation role can
be played by extension units of development banks. NGOs. etc. The role of
Agricultural Development Bank of Nepal in the past in rural energy programme does
demonstrate some characteristics of intermediation but due to high cost of
intermediation the bank slowly withdrew its activities in this regard.
Financial institutes (bank and non-bank), private sectors specifically manufacturers
and NGOs have been playing a role of financial intermediaries of various forms and
scale. Sources of financing for rural energy investments in Nepal demonstrate a very
wide range of sources. They are international donors, government subsidy, national
financial markets and/or local rural markets in the form of debt, equity or grants.
3.1 Agriculture Development Bank, Nepal
Among the financing institutions, the Agricultural Development Bank Nepal (ADB-
N) is the main development finance institute which played an active role in rural
energy programme. It is a semi-autonomous agency with a network of about 700
offices covering 75 districts in Nepal. Most notable ones in rural energy are micro
hydro and biogas. It has also started to finance the stand-alone solar photovoltaic
home system for which government started to provide subsidy on the cost of system
of 50 percent or Rs. 15.000 which ever is less. Often, the ADB/N also acts as liaison
between technology users and manufacturers by involving itself in technology
promotion and developing marketing channels. The ADB/N is one of the major
promoters and shareholders in setting up the Gobar Gas Company. The ADB/N also
financed five solar PV sets for running water pumps with a total capacity of 7.6 kW.
The ADB/N's objective behind supporting the rural energy technology is to see the
rural economy grow.
In general, the ADB/N requires borrowers to provide collateral as security. However,
for smaller loans, it has been implementing 'Small Farmers Development Programme
(SFDP)' whereby it provides loans for activities identified by groups and their
members on a group guarantee basis. This programme is implemented through its
network of 422 out of about 700 offices covering 75 districts. The SFDP programme
has been, recently, discontinued and replaced by various forms of micro-financing
programme by the ADB/N and other commercial banks using cooperative and NGO
mechanism.