The poor, across the world, are always in crisis management mode- dealing with one disaster after another. Be it the COVID-19 pandemic or climate related emergencies like droughts or floods, they are the worst affected. The primary source of livelihoods for many of the poor families across the world, is physical labor. The services they provide using their physical labor is expendable and thus most lead very insecure lives with no social safety nets to buffer their fall during times of crisis, keeping them in a state of perpetual poverty.
Inclusive sustainable livelihoods, banking on various expertise the poor possess, are a critical aspect for enabling the poor out of poverty. Many of these sources of livelihoods, e.g. sewing machines, silk weaving machines, hammermills, roti-rolling machines, are assets that the poor can rely to create the appropriate social safety nets. All of these can be powered by Decentralized Renewable Energy (DRE) solutions like solar, thus making the option long term and sustainable.
The ecosystem required for the poor to own and run the livelihood assets consists of highly efficient appliances, stable market linkages and affordable financing. The biggest challenge out of the three is the ability for the poor families to avail of financing that would match the cash flows, resulting from the sustainable energy-driven intervention. Till date, only a handful of innovations have happened in this critical part of the ecosystem.
Innovations in financing livelihood assets will open a whole new world of DRE related interventions for the poor across the globe. The poor in society fall into three distinct parts: poor, very poor and abject poverty. Cash flows and links to markets differ for all the three, and thus, need different forms and instruments of financing. The complexity of financial products are as much as technology innovations, if not more.
SELCO Foundation has over the last three years strived to experiment with numerous financial instruments that could then be replicated and scaled in other parts of the developing world, focused on SDG7-driven livelihood interventions.
The financial products ranged from revolving funds for very poor segments to reduced interest rates for those having access to slightly more mature ecosystems, without which philanthropic monies may end up subsidizing the wrong link leading to unsustainable interventions.
The document delves deeper into some of the key financial innovations with specific examples, case studies and potential channels for scale up. The various implementations and replications have further strengthened the hypothesis that DRE focused livelihood interventions have not only enabled several families to come out of poverty but also made them a part of the formal banking sector. DRE and financing has the potential to push numerous poor families multiple rungs in the social and financial ladder.