Promoting solar power in Pakistan

The city of Lahore is renowned as the literary, educational and cultural heart of Pakistan and has a long history of beautiful architecture dating in particular from the Mughal period with buildings such as the Badshahi Masjid and the Shahi Qila or Lahore Fort.

Shakeel and Rehan from Akhuwat on the roof  where the solar panels are located

Although on a much more modest scale the new, purpose built headquarters of Akhuwat, Lendwithcare’s partner in Pakistan, continues this custom of bold, innovative design while respecting historical tradition.  The seven storey offices, completed in 2014, is the first large building in Lahore that can be run exclusively on solar power as up to 48 kilowatts of electricity can be generated from the 160 large solar panels located on the roof of the building. The energy is stored in 136 batteries all housed in a special control room on the top floor. When fully charged the batteries can power the entire building, which houses almost 70 staff, for almost eight hours or the whole of the working day. 

Furthermore, rather than install air conditioning units that are expensive and use lots of electricity, the narrow, open plan design of the building incorporates natural ventilation systems to simultaneously cool and channel fresh air throughout the building. Even during the hot summer months in Lahore when the average daily temperature routinely exceeds 40 degrees centigrade, the temperature inside the building remains much lower at around 25-30 degrees centigrade.

Shakeel  from Akhuwat in the control room

Dr Amjad Saqib, Akhuwat’s Founder and Executive Director, explains that the motivation to install solar power was not only an attempt to reduce carbon emissions and promote the use of renewable energy, but also in fact a response to the daily reality of frequent and often prolonged electricity cuts in Pakistan or ‘load shedding’ as it is referred to locally. Load shedding means that households and businesses alike receive electricity continuously only for a few hours each day, with power outages longer in rural areas. Whereas larger buildings and businesses can afford to rely on generators for power when there is no network electricity, small businesses are often forced to simply down tools and wait for the power to return. The costs to the economy in terms of lost production are staggering; one estimate is that annual gross national product has been reduced by 7%. Arguably nothing causes as much frustration and inconvenience for ordinary Pakistanis as load shedding.

Dr Amjad explains “I am convinced that solar energy can offer a practical and affordable solution to the thousands of microentrepreneurs that Akhuwat supports”. Therefore, to enable them to continue working during the frequent bouts of load shedding, Akhuwat intends in 2015 to start providing loans of between 20,000 and 100,000 rupees (approximately £130-£650) for small businesses to purchase and install solar power systems.  Since monthly electricity bills are often in the range of 2,000 to 3,000 rupees a month, Akhuwat estimates that the investment in solar power for most borrowers will actually pay for itself after a couple of years as their electricity bills will be much lower.

Such loans should soon be featured on the Lendwithcare website.

By Dr Ajaz Ahmed Khan, Microfinance Advisor at CARE International UK

How to increase investment in micro-enterprises (and get your money back)

This blog was orginally posted on CARE Insights.

Today CARE has submitted written evidence to the International Development Committee (IDC) of the House of Commons on our peer-to-peer lending network, Lendwithcare. (For a snappier and more entertaining overview of Lendwithcare, see our new Christmas animation above.) The IDC is currently looking at jobs and livelihoods and is interested to understand more about the role that a relatively new way of funding micro-enterprises can play in generating growth and jobs in developing countries.


Lendwithcare.org has been hugely successful since its launch four years ago, and now supports over 14,000 MSMEs by engaging online with over 18,000 lenders who have each, on average, loaned £35, raising nearly £5 million in the last four years. These really are loans – almost all are repaid within the agreed timescale. To date, only death and major disasters, like Typhoon Haiyan, have prevented our microentrepreneurs from repaying. Of course, our committed lenders very frequently recycle their loans to other entrepreneurs, keeping money in the system and reaching more businesses.

Lenders find Lendwithcare a compelling proposition: they can choose who to lend to, based on detailed information on the individual and their business plans, they get regular feedback on progress, and they know that they are helping resourceful individuals lift themselves and their families out of poverty. And they get all of this within a web experience in their own language, culture and currency. The other compelling aspect is that, when you put money into Lendwithcare, 100% of the money goes to the entrepreneur who is borrowing – CARE does not take a slice off the top. Rather, our modest administration costs are met from other funding within CARE, and until recently, by sponsorship from the Co-operative Group.

The opportunity (and the key issue)

There is a lot of scope for expanding Lendwithcare’s operations – there is certainly no shortage of small enterprises requiring loans. And we believe that there are many more microfinance institutions out there who are likely to meet our (demanding) criteria. We know this because Lendwithcare only lends in nine countries, compared to the 80 countries in total in which CARE International works.

We also believe that there are considerable opportunities for expanding the lender community of the Lendwithcare model. For instance, we believe that it is likely to be successful in other European countries where there already exists a CARE office. As this includes Germany, France, Austria, Norway and Denmark, there is a lot of opportunity. We would also like to explore rapidly developing countries such as India and Brazil. We know that lenders find it important to link with an organisation in their own country, for reasons of language, currency, tax laws and cultural affinity.

All of which would take some more investment – but we know that we can raise loans to the value of seven times the marketing and administration investment. This is a powerful win-win-win between CARE’s mission to end poverty, an individual’s desire to use some of their own hard-earned cash to help others, and entrepreneurs’ drive to build strong businesses to lift themselves and others out of poverty.

So now all we have to do is find the cash to pay for some administration and marketing…

By Gerry Boyle
CARE International UK's Senior Policy Adviser on Private Sector Engagement

Download our written evidence in full here.

Is peer-to-peer (P2P) lending an efficient way to support microfinance?

The Lendwithcare.org Homepage

Peer-to-peer (P2P) micro-lending platforms, such as lendwithcare, have become a popular method of supporting small businesses in developing countries. Local microfinance institutions (MFIs) select borrowers and appraise their loan applications, which if approved, are financed by the P2P platform. Lendwithcare was established in 2010 and to date some 17,000 individual lenders have financed loans to more than 8,000 borrowers across ten countries.  Our experience over the past four years is that as their loans are repaid, lenders invariably re-lend; rather than withdraw their money. While lendwithcare has proven to be very popular with supporters, is it an efficient way for MFIs to access funding?

The obvious attraction for MFIs is that they do not have to pay any interest whatsoever on the capital they receive from lendwithcare. Although some MFIs are permitted to accept savings, most of our partners are legally prohibited from accepting deposits. Therefore, in common with many other MFIs, they must rely on external loans to finance their lending. Typically, they access capital from Microfinance Investment Vehicles (MIVs); these are specialist microfinance investment investors such as Blue Orchard, Oikocredit, Triodos and responsAbility, and from local commercial banks. Both these categories of lenders charge interest on their loans, although the MIVs typically charge lower rates than commercial banks and some also provide technical assistance and expertise.

Although lendwithcare does not charge any interest, the funding we provide is not cost free for our MFI partners. This is because they have to visit borrowers, collect details regarding their businesses, take photographs, upload all this information onto the lendwithcare website and then provide further updates on borrowers’ businesses. If the MFI’s clients are living in isolated villages spread over a large area then the administrative obligations associated with participating in lendwithcare could be considerable. This could mean that any benefits arising from interest free capital might be negated by an increase in operational costs. This raises the question, might it actually be cheaper for MFIs to simply access capital from the MIVs and other commercial lenders, even though they have to pay interest, than from lendwithcare?

During a recent visit to Cambodia, this is a question I posed to the Cambodian Community Savings Federation (CCSF) who have been working with lendwithcare for the past three years. CCSF works with rural clients, mainly rice farmers, in the provinces of Battambang and Banteay Meanchey in North West Cambodia. Pisey Phal, CCSF’s CEO, confessed that while they do access loans from several MIVs they prefer funding from lendwithcare because it is much cheaper for them.

Lendwithcare Entrepreneur with CCSF loan officer © CARE/Nancy Thomas

Pisey mentioned that during 2013 lendwithcare provided CCSF with US$416,000 to fund loans to more than 500 individual borrowers as well as a small grant to help with administrative costs. CCSF used the donation to cover the salary paid to one employee who was contracted specifically to work on lendwithcare – the grant just about covered all of his annual salary, although it did not cover his expenditure on fuel and the small amount of time that other staff, particularly the finance manager, spent on lendwithcare related duties. To access an equivalent amount of funding from an MIV or commercial lender, CCSF would have had to pay at least US$32,800 in interest charges, possibly more. Pisey added that lendwithcare funding would still be cheaper for them even had it not received the administrative grant. She added that the greatest advantage of lendwithcare funding is that it provided CCSF with a secure source of funding over a longer period of time, loans from MIVs in contrast are generally for shorter periods of 1-2 years. Furthermore, since loans from lendwithcare are repaid monthly and transfers simply offset against new loans being financed, Pisey mentioned that the exposure to possible currency fluctuations is greatly reduced.

From discussions with lendwithcare’s other MFI partners, they make an effort to ensure that any extra administrative costs are kept to a minimum by integrating lendwithcare duties with other routine operational tasks. For example, our partner in Ecuador, Fundacion de Apoyo Comunitario y Social del Ecuador, requests several loan officers from three branch offices to each collect four borrower profiles every month. The loan officers estimate that lendwithcare adds on average just an extra 1-2 hours to their monthly work burdens – they already visit borrowers to assess the feasibility of their loan application, the only extra work associated with lendwithcare is taking photographs and preparing a narrative for the website.  By dividing extra responsibilities related to lendwithcare between several staff, there is actually only a marginal increase in administrative work.

By Dr Ajaz Ahmed Khan, Microfinance Advisor at CARE International UK

Guest blog | Lending: the new giving?

This blog was originally posted on Tim Bishop's definitelymaybe blog and has been re-posted here with his permission. 

 

Vietnamese hill tribe handicrafts © CARE / Tim Bishop

I live in Saigon, Vietnam, and it’s hotting up once more as we approach the muggiest time of the year.

Luckily, for me, this week I have been in Hanoi and luckier still, yesterday spent the day visiting local hill tribe communities about 180 kms north west of the capital. Not only did the mercury drop down lower for the day, as we snaked our bus round the mountains through wispy clouds and potholed roads, but we were privileged to meet incredibly talented individuals, tucked away as they are from the life of urban Hanoians, and cut off from the collective consciousness of the world outside Vietnam.

 

The objective of the visit was as part of an expansion of an initiative in the UK that CARE International have built over the past four years, called Lendwithcare.org.

Local Hill Tribe Community © CARE / Tim Bishop

The brainchild of CARE’s former marketing director, Lendwithcare set out to establish an online micro-lending community within the UK, whose members (or “lenders”) are able to loan money to individuals (“borrowers”) in the developing world, to help establish and grow micro-enterprises and small businesses.

The borrowers repay the lenders on a monthly basis, and once the loan is fully repaid the lender can re-loan the same amount back into the system, and onto a new borrower.

This lending cycle can continue for years, and support multiple borrowers.

Lendwithcare now has 17,000 lenders supporting nearly 8,000 borrowers in eight countries (Zambia, Malawi, Pakistan, Togo, Benin, Cambodia, Philippines and Ecuador) and the intention is to expand further.  65% of those lending have so far gone on to make additional loans.

Handicraft Group - painting in beeswax © CARE / Tim Bishop

The initiative offers transparency - as a lender, you can track the progress online of the borrower in which you invest your loan – and also maintains an appeal to a range of audiences (in my family not only did I sign up to make a loan, but my father did also, as did two other family members of ours, both now in their 90′s).

The appeal is simple: Lendwithcare makes your money work very effectively and it also helps include up until now some of the billions of people in the world who are simply looking for the same things in life as everyone else.

As anyone who has ever worked will testify, there are times for all of us when the requirement of a loan to help us move forward are too pressing to ignore. Growing up in the UK, I borrowed money from the bank to purchase numerous things, and the process to do this was typically quite straightforward (often too simple, but that point would require a separate post on the ways and wherefores of the banking system in the UK).

 

Duck and cow breeding © CARE / Tim Bishop

 The plain reality for so many people living in Vietnam, and elsewhere, is that accessing any form of loan – even from family members – is often impossible, and typically those loans on offer might only be obtainable from individual (black market) money lenders, operating with high interest rates.

For the groups I met yesterday, most were made up of women, and they were fortunate enough to be receiving loans from a Hanoi based micro-finance institution (MFI), specialising in lending to remote communities.

And it is via MFIs through which Lendwithcare operates.  MFIs loan money to individuals, usually at favourably low interest rates, however many often lack access to regular and affordable capital, to be able to actively plan long term.

Through Lendwithcare CARE seeks to overcome this issue, offering MFI partners interest free capital as well as giving them small grants in order to cover administration costs, and support staff training.

It is CARE’s aspiration to help grow the outreach of MFIs in a way that also promotes positive social outcomes for borrowers. Which means providing loans not just to grow small businesses (such as breeding chickens and ducks, or selling handicrafts) but also loans to help install toilets and water pipes, loans to carry out house repairs, and loans to help train people in business development skills.

Every borrower we met yesterday could have added further items to their wish list.

Whilst micro-finance does not solve all the world’s problems, what it can do is help address the inequity of the current paradigm.

When I lived in Uganda in 1996, teaching English, the needs and wishes of those in the village I stayed were no different to what I saw and heard yesterday here in Vietnam (itself accredited with being a “middle income” country and economically vibrant after thirty years of positive growth).

In so many ways the world has changed since 1996.  Many of the hill-tribes in Vietnam have mobile networks, many have learnt new farming techniques to improve their yield, or had access to new markets to sell their handicrafts.  More children are attending primary school.

But much remains unchanged.

For many countries in a similar situation to Vietnam, economic growth has not been inclusive of all, and has not addressed issues of gender, nor exclusion for many people from accessing markets, information and resources.  As we saw again yesterday, women still do the brunt of the domestic and the labour work, and access to clean water and sanitation exists only for those households in each commune fortunate enough to have them.

So, is lending the new giving?

Time will tell.  Until then, however, why not take a look yourself at the Lendwithcare.org website today, and become a part of the potential answer.

Loans can be given as a gift voucher to a friend or family member, who can choose which entrepreneur they would like to support. The entrepreneur uses the loan to help grow their business, and later pays the lender back. The lender can either withdraw the money and keep it, or lend the same money to another entrepreneur.

Gift vouchers range from £15 and are available in various designs, which can be sent via email, downloaded and/or printed. They are available at www.lendwithcare.org/gift_vouchers.