Microfinance: The Sustainable Financing System for Electrification and Socio-economic Development of Remote localities by Solar Home Systems (SHSs) in Bangladesh

Bangladesh is a developing country facing with acute electricity shortage. The rural communities of Bangladesh are the worst sufferers of this crisis having limited or even in many cases no access to grid electricity. Solar energy has been proven to be a very promising resource to improve the ongoing electricity shortage. This paper investigates the role of microfinance to develop a sustainable energy management system by the use of Solar Home Systems (SHSs) in the remote communities of Bangladesh. Infrastructure Development Company Limited (IDCOL) funded by international donor organizations is the pioneer of the SHS program in Bangladesh. Grameen Shakti (GS) is a leading partner organization of IDCOL in implementing the program. These partner organizations offer a number of SHS packages that include a solar panel, charge controller, battery, lamps and other accessories. But the lowest package offered by GS costs approximately US $155 whereas the per capita Gross Domestic Product (GDP) of Bangladesh is only US $621. Microfinance has been successfully utilized by the IDCOL partner organizations as a solution of this problem. From this research, it is found that the number of SHS sales has been rapidly increasing during the recent years which is an indication of the success of Microfinance based financial system. Microfinance is also playing a significant role in socio-economic development of the rural communities. Improved telecommunication, better entertainment activities, involvement of rural women in mainstream economic activities, better healthcare and mass awareness etc. are some of the outstanding achievements of this Microfinance based SHS program. This paper also shows a significant impact of SHS program in reduction of CO2 which is one of the major contributors to environmental degradation.