USAID, DFC to Grant $41 Mn Loan to Help Indian SMEs Finance Rooftop Solar

USAID and DFC are sponsoring a USD 41 million loan portfolio to help finance investments by Indian SMEs in renewable energy, including rooftop solar.

The United States Agency for International Development (USAID) and the U.S. International Development Finance Corporation (DFC) are jointly sponsoring a USD 41 million loan portfolio guarantee to help finance investments by Indian Small and Medium Enterprises (SMEs) in renewable energy solutions, including rooftop solar installations. These loans will enable SMEs to access reliable power and cut costs.

USAID/India’s Acting Mission Director Karen Klimowski stated, “USAID/India is pleased to promote power diversification and support local businesses in India. Investments in solar solutions, secured by these credit guarantees, will improve access to clean, steady, and affordable energy as well as further progress towards India’s clean energy transition and climate change mitigation.”

India’s commercial and industrial sectors pay high fees for their electricity, making rooftop solar a sustainable, cost-saving investment, but SMEs and residential consumers face obstacles in securing the financing needed to install and use rooftop panels. SMEs account for 48 percent of the total energy consumed in India’s industrial sector. Rooftop solar power generation offers a win-win solution. Lower monthly energy costs drive important social benefits, including job creation and economic growth, while reducing carbon emissions and improving air quality.

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USAID and DFC partnered with the New York-based Encourage Capital, an environmentally focused investment firm, and two Indian non-banking financial companies, cKers Financial and woman-owned Electronica Finance Limited (EFL), to address this challenge. Encourage Capital has invested USD 15 million in EFL, which will use the USAID-DFC loan portfolio guarantee to stimulate the rooftop solar market—representing a USD 9 billion market opportunity—for SMEs.

USAID will continue its support through providing technical assistance to address quality and safety concerns in the rooftop solar market. The agency believes that “once these credit guarantees lower the financial hurdle for installing rooftop solar, India will realize numerous benefits resulting from the transition to this green technology. These guarantees have the potential to unlock lifesaving social benefits and robust economic growth.”

Earlier this month, Union Minister of Micro, Small and Medium Enterprises (MSMEs) Nitin Gadkari had said that micro, small and medium enterprises (MSMEs) can contribute to creating nearly 16 GW of rooftop solar capacity in India by 2022. 

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Speaking at a webinar the minister had said that “of the 40 GW, four gigawatts to come from the domestic solar rooftop, whereas 16 gigawatts potential can be harnessed from MSMEs. MSME is the most critical sector for advancing the country’s growth.”