MicroEnergy Credits is a social enterprise which links microfinance institutions to the carbon markets when they lend for clean energy. MEC sells the carbon credits earned by replacing dirty fuels like kerosene, wood, coal and dung on the voluntary carbon markets and passes the carbon revenues along to its partner institutions. The institutions can then use the revenues to offset their costs of running the clean energy program or can pass the savings along to the client in the form of reduced interest rates, free battery replacements or other benefits. In 2008, MEC won the Global Social Venture Business Plan Competition for its innovative business model which makes accessing the carbon markets easy for MFIs.
MicroEnergy Credits has partnered with EcoSecurities to provide a unique carbon finance option for microfinance institutions. MicroEnergy Credits also provides implementation services to help MFIs rapidly scale up their clean energy product lines.
MEC provides the handshake between the carbon markets and the microfinance industry by automating the monitoring and tracking of carbon offsets with its Credit Tracker technology. Credit Tracker uses a combination of mobile technologies, location aware devices, and web technologies to turn local field agents into accurate carbon monitors. By building on existing microfinance loan monitoring processes, MEC’s approach provides unprecedented transparency into the validity of the carbon offset projects. This creates carbon credits that are both investment grade, and demonstrate tangible social benefits.
MEC’s vision is that getting on a clean energy path with become an integral step of every microentrepreneur’s journey out of poverty.
MicroEnergy Credits aspires to make a clean energy market for households worldwide
In order for small-scale clean energy to reach significant scale, it must be propagated through a system capable of exponential growth. Microfinance is an example of such a system. As the first loans are paid back, this creates greater demand for loans, and strengthens the capacity of the institutions to offer them. A similar system can work for sustainable small energy investments, by using standardized financial instruments (Credits) to reward Microfinance Institutions (MFIs) for brokering clean, healthy energy investments among their clientele (a market of over 250 Million households globally).
MicroEnergy Credits is a social enterprise that has developed two financial instruments that MFIs can use to offset risks they face entering sustainable energy markets.
1) MFI-originated carbon credits have key features which allow them to be originated locally and then aggregated for sale. They are attractive to MFIs for their lower transaction costs and greater ease of use than standard carbon market approaches.
2) MDG credits are a new financial product based on the Millennium Development Goals. One MDG credit represents 1% of one household achieving that MDG in a specific country. For example if a household raises its income over $1/day solely as a result of an energy investment, that is worth 100 MDG 1 credits.
Poor households currently pay high prices for unclean, unsafe energy
Households and small businesses at the bottom of the pyramid (BOP) typically spend billions of dollars a year for carbon-emitting fuels for cooking and lighting. These may include burning wood or dung linked to infant mortality, kerosene lamps that limit childhood reading and charcoal linked to deforestation. Clean energy alternatives include solar home systems, biogas digesters and improved cook stoves among others. In many cases households would be happy to shift their spending to a clean alternative. However currently no one locally promotes, markets, finances, and maintains these alternatives.
MicroFinance Institutions can be a channel for clean energy investments
Microfinance-originated credits work by leveraging the ingenuity of local MFI product designers to identify simple energy investments that reduce carbon emissions and/or help meet the MDGs and then create microfinance loan programs to make them accessible. These MFIs can use their long term local presence and client relationship to become a channel for energy access. Grameen Shakti, a sister company of the Grameen Bank, has demonstrated that this can be done, having sold over 220,000 solar home systems, and now expanded to biogas digesters and improved cookstoves in Bangladesh. However MFIs cannot instantly start up an energy division. They need to overcome a technical learning curve, identify price points and educate their clients. Usually they begin by piloting a few simple systems, and then develop a business case for scale up.
The Microfinance Carbon Program allows the poor to benefit from carbon markets
MicroEnergy Credits provides catalytic support to MFIs who enter the energy market by buying carbon credits from them when they lend for clean energy. At first, carbon funds provide a new, reliable, source of grant co-financing for piloting energy initiatives. Later the carbon funds become a factor in building the business case for growing the energy venture. MFI-originated carbon credits are marketed to companies, and individuals who offset their carbon footprint.
MicroEnergy Credits’ lean web application enables MFIs to easily create and track carbon credits
MicroEnergy Credits’ proprietary mobile-phone based monitoring system allows MFIs to easily track emissions reductions when they lend for standard clean energy technologies. When MFI loan officers monitor clean energy loans, they use their handheld device to report the operational status of the investment. These loan officers also record the GPS location of each investment. By leveraging existing microfinance loan monitoring processes, MEC’s mobile phone-based technology reduces the audit and verification costs that typically drive up the costs of carbon credits for small projects.
MicroEnergy Credits will tackle other drivers of poverty by marketing MDG credits
Building on the success of cap and trade markets for carbon mitigation, MicroEnergy Credits has pioneered methodologies for valuing of credits for social benefits such as meeting the Millennium Development Goals (MDGs). These credits allow a new generation of philanthropists to contribute to poverty alleviation, health, education, gender equality and clean water with transparency, efficiency and guaranteed local impact. MicroEnergy Credits sells this boutique line of MDG credits to donors, governments, corporations (CSR), and individuals on a private-placement basis.
