There is an urgent need to address climate change and it has become increasingly clear. With it, the importance of finding sustainable energy solutions is also increasingly apparent.
Microfinance institutions (MFIs) can emerge as key players in promoting access to financing for renewable energy projects, especially at the household and small business levels.
By offering specialised loan products tailored to finance renewable energy solutions like solar panels and energy-efficient appliances, MFIs can help make clean energy more accessible.
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Haaris Mahmood Chaudhary, Interim CEO of Mobilink Bank, highlighted the pivotal role that MFIs can play.
“MFIs can become key drivers in promoting access to financing for renewable energy projects, especially at the household and small business levels,” Chaudhary stated.
He emphasiaed that Mobilink Bank is actively promoting climate finance in Pakistan, enabling individual borrowers and SMEs to access financing for solar energy products.
He said Mobilink Bank’s commitment to sustainability is evident through its initiatives under the Change to Sustain programme.
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“We understand that urgent action is required to safeguard our planet for future generations, and we are dedicated to implementing and promoting practices that foster environmental stewardship and resilience,” said Chaudhary.
Over the past year, the bank has facilitated the adoption of renewable energy solutions through solar loans, empowering individuals, households, and businesses to invest in solar energy systems sustainably.
“By offering competitive interest rates, flexible repayment terms, and dedicated support services, we empower our customers to adopt clean energy solutions and contribute to a greener, more sustainable future,” he added.
Mobilink Bank has already provided Rs1.7 billion in solar financing products and aims to reach Rs2.5 billion by the year’s end.
Yasir Hussain of Climate Action Center, an organization dedicated to raising awareness about climate change initiatives, pointed out the significant barriers low-income households face in accessing solar energy solutions.
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“Low-income households face significant barriers to accessing solar energy solutions, primarily due to high upfront costs, limited access to credit, and lack of awareness about the benefits and options for solar installations,” Hussain explained.
He noted that microfinancing can address these barriers by providing small, accessible loans with flexible repayment terms, enabling households to afford the initial investment.
Hussain also stressed the importance of measuring the social and environmental impact of solar installations.
“Social impact is evaluated through the number of households and businesses gaining access to electricity, the reduction in energy poverty, job creation or livelihood, and income generation due to energy cost savings,” he said.
On the environmental front, the impact is assessed by the reduction in fossil fuel consumption, decrease in greenhouse gas emissions, and increase in renewable energy adoption.
Government policies and regulations play a crucial role in supporting the growth of renewable energy financing.
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Hussain recommended measures like subsidies, tax incentives, and supportive legal frameworks to enhance the effectiveness of these programmes. He also highlighted the importance of collaborations among stakeholders and consumer education initiatives to increase awareness and demand for solar energy solutions.
Drawing parallels from international examples, Hussain cited Bangladesh’s off-grid solar power programme, which is the world’s largest.
Launched in 2003 with a pilot for 50,000 households, the programme now provides electricity to 20 million people and covers 16% of the rural population.
Supported by the World Bank and implemented by IDCOL, the programme combined infrastructure financing and micro-financing to create a scalable off-grid model. It reduced greenhouse gas emissions by 9.6 million tonnes and decreased indoor air pollution by avoiding 4.4 billion liters of kerosene.
Key to its success were public-private partnerships and government incentives like tax breaks for solar rooftop installations.
Despite these promising developments, a research report titled ‘Greening Pakistan’s Future: Facilitating Loans for Electric Vehicles and Distributed Solar PV’ reveals that distributed solar PV (DSPV) and electric vehicle (EV) lending in Pakistan is still in its infancy. The report is published by Policy Research Institute for Sustainable Development.
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The reluctance of many banks to extend financing for EVs and DSPV systems highlights a significant gap in the market. This shortfall not only represents a missed opportunity for financial institutions to align with environmentally conscious consumer preferences but also underscores the broader hesitance within the banking industry to embrace and promote sustainable energy initiatives.
The report highlights several challenges that hinder the broader adoption of green lending options. For instance, the State Bank of Pakistan (SBP) introduced a renewable energy financing scheme, but the voluntary nature of the scheme’s regulations has limited its impact. Many banks have not yet embraced the scheme, opting instead to focus on low-risk, high-profit products.
Additionally, the absence of a proper monitoring or evaluation mechanism for assessing the progress of financing under the facility has further complicated efforts to promote renewable energy lending.
To address these challenges, the report recommends several policy changes.
These include revisiting regulatory frameworks to ensure a people-centered transition, establishing confidence-building measures to address banks’ concerns regarding the risks of defaults in renewable energy financing, and exploring innovative financing mechanisms such as green bonds and revolving funds.
The report also suggests learning from international best practices, such as Thailand’s Energy Efficiency Revolving Fund and Germany’s Solar PLUS programme, which offer favorable terms and incentives to encourage participation in sustainable energy projects.
While challenges remain, particularly in the broader banking sector’s reluctance to embrace green lending, the recommendations from the research report provide a roadmap for overcoming these barriers.
By adopting innovative financial strategies and learning from successful international examples, Pakistan can accelerate its transition to sustainable energy and build a greener, more resilient future.
The article does not necessarily reflect the opinion of Business Recorder or its owners
The writer is a Reporter at Business Recorder (Digital)
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