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| Sunday, 25 April 2004 |
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Power for poor households The Asian Development Bank (ADB) has approved a US$1.5 million grant from its Japan Fund for Poverty Reduction (JFPR), financed by the government of Japan, to enable more poor households in Sri Lanka to enjoy the direct benefits of rural electrification. Sri Lanka has made great progress in extending the power grid throughout the country. Rural villages once electrified undergo a profound transformation in terms of economic and human development. While all households benefit from the higher economic activity in the village, many poor households miss out on the direct benefits of lower energy costs and better quality lighting because of their inability to afford the upfront connection charges and internal wiring costs. The project will pilot a sustainable micro finance revolving fund that will allow poor households to amortise the upfront capital costs required to electrify their homes. The micro finance scheme will be supported by a training and public awareness program. The training program will help the Ceylon Electricity Board and the participating micro finance institutions to better address the needs of poor rural clients in obtaining and maintaining electricity services. Two Sri Lankan micro finance institutions - Sarvodaya Economic Enterprise Development Services (SEEDS) and SANASA Development Bank - will implement the pilot loan scheme. SEEDS and SANASA were chosen because of their geographic outreach, experience in working with foreign funded projects, and financial discipline. The two institutions have the largest clientele of any non-government micro finance institution in Sri Lanka. "Previous loan schemes for power connections did not take into account the particular needs of the poor," says Joseph Zveglich, ADB Economist handling the project. "By using a micro finance approach, the project will better target low-income households strengthening the link between rural electrification and poverty reduction." The lending arrangements will be decided between the micro finance institutions and the target communities to tailor the scheme to local conditions. This could include flexible repayments that take into account seasonality or group lending arrangements to guarantee individual loans. A Sri Lankan non-government organisation will be contracted to develop a project benefit and poverty impact monitoring system. The monitoring system will not only look at what has been achieved, but also the process of how it was accomplished. Effective monitoring will guide project implementation and increase the potential for successful replication of the pilot initiatives in the future. The project is open for implementation throughout Sri Lanka. Initially, 10 districts will be selected for the pilot phase. The JFPR was set up in 2000 with an initial contribution of ?10 billion (about US$90 million), followed by additional contributions of $155 million and a commitment of $50 million. |
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