Decentralized Energy Services to Fight Poverty : Outcome Driven Engagement of Small and Medium-size Enterprises in the Provision of Energy Services in IDA Countries
2009
World Bank
The Department for International Development (DFID)-Funded Energy Small and Medium Enterprises (SME) Program was created to support SMEs by helping countries unblock the factors that prevent their potential in the delivery of energy services. With thirteen energy projects in twelve countries and one regional program in Africa, the implementation of the program started considerably slower than expected but has demonstrated potential to make an impact in a relatively neglected area of delivering energy services to the poor. Lack of access to sufficient and sustainable supplies of energy affects as much as 90 percent of the population of many developing countries. Some 2 billion people are without electricity; a similar number remain dependent on fuels such as animal dung, crop residues, wood, and charcoal to cook their daily meals. Widespread inefficient production and use of traditional energy sources, such as fuel-wood and agricultural residues, pose economic, environmental, and health threats. Uneven distribution and use of modern energy sources, such as electricity, petroleum products, and liquefied or compressed natural gas, pose important issues of economics, equity, and quality of life. The Energy Sector Management Assistance Program (ESMAP) Energy SME program focused on off-grid electrification and biomass use as many communities and households that have yet to be electrified are relatively isolated, and off-grid electrification may be the only economically rational choice. Pilot initiatives were launched in 12 countries to address specific economic, institutional, and technical characteristics of small medium size enterprises. Baseline assessments revealed that many of these enterprises will not be economically viable, unless they receive an initial direct or indirect capital cost support in the form of subsidies or grants. Even with such subsidies, the underlying economics of the enterprises remain fragile. The pilot programs focused on the following activities: 1) assessing the legal, institutional, and financial framework under which SMEs can function in the energy sector; 2) supporting training, pilots, and tests of technology or financial schemes; 3) assisting SMEs develop their investment plans, and 4) studies and analyses needed to promote SMEs in general as well as in the context of ongoing World Bank Group investment programs. One of the biggest challenges for SMEs is the need for further support to acquire investment loans from commercial financiers.
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