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CASE STUDY 15:                SRI LANKA – POWER FUND FOR THE POOR

 Barriers               High connection charges

 Instrument             Energy access / customer finance

 Application            Micro-loans to poor households funded from a project grant

 Amount                 US$1.5 million


PROJECT BACKGROUND AND OBJECTIVES                           - Credit tenor: two to three years, repaid monthly.

The rate of household electrification in Sri Lanka stands   - Interest rate: 16% p.a. was the interest rate set for the
at 82% with a government target of 88% by 2016. Many        microfinance institution.
villages within the distribution remain unconnected due     - Down payment: 20% of                installation    costs,
to the high cost of connections. The main barrier was       approximately SLR 1,200 - 1,400
the lack of finance for the poor population. The
connection charges are prohibitively expensive even if      - Qualifying criteria: Household income must be above
the actual cost of electricity is not.                      SLR 6,000 - 7,000 per month.

INSTRUMENTS USED                                            INSTITUTIONAL ARRANGEMENTS

Initially a revolving fund was created with a US$1.5        A micro finance institution was partnered to disburse
million grant from the Japan Fund for Poverty               the credits to provide local knowledge of household
Reduction. The fund was used to fund micro-loans to         conditions which enabled the facility to be targeted at
poor households through local micro-finance                 poor households.
institutions. Over the period 2004 – 2009 this enabled      OUTCOMES
almost 15,000 households to gain access to electricity.
                                                            Initially over 14,000 loans totalling US$2 million were
Building on this success the ADB provided a loan of
                                                            made with a recovery ratio of 95%. The target is for an
US$3.5 million to the government of Sri Lanka which
                                                            additional 60,000 households (8% of poor households)
was used, by the Ceylon Electricity Board (the national
                                                            to be provided with new electricity connections by
utility), to provide instalment credits to poor
                                                            2016.
households. The credits were structured as follows:




1 | R E F I N e www.worldbank.org/energy/refine