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Financing of Renewable Energy Projects for Microfinance Institutions in India

Funding for Renewable Energy Projects

Indian Renewable Energy Development Agency (IREDA), established in 1987 as a Public Limited Government Company, under the administrative control of MNRE, is a specialized developmental financial institution with the objective to provide financial support to specific projects and schemes for generating electricity and/or energy through new and renewable sources and conserving energy through energy efficiency.

It offers term loans to renewable energy projects at rates slightly more favorable than general commercial lending rates. As of March 31, 2010, IREDA financed 1,921 projects with a loan commitment amounts totaling over Rs.121.8 billion.

Other government agencies that actively fund renewable energy projects are the Power Finance Cooperation (PFC), the Rural Electrification Corporation (REC), and National Bank for Agricultural and Rural Development (NABARD). Corporate financiers of renewable energy projects in India are primarily concentrated on the large wind and hydropower projects, where captive power generation and the application of accelerated depreciation benefits play a significant role.

Of late, the growing awareness and favorable government policies & regulatory mechanisms (both at Central & State level) have led to gradual increase in confidence of domestic commercial banks providing loans to renewable energy projects.

Renewable Energy and Microfinance

A number of microfinance institutions (MFIs) facilitate the purchase of renewable energy systems like solar cookers, solar lanterns, or small biogas plants in off-grid areas of the country. The Self Employed Women’s Association (SEWA) is perhaps the most well-known example of an MFI in India.microfinance renewables

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