Value proposition: joining two financial markets
MEC creates a handshake between the microfinance market and the carbon markets. For the carbon markets, MEC aggregates a previously untapped source of carbon offsets – emissions reductions created by enabling customers of Microfinance Institutions (MFIs) in developing countries to improve their daily lives by purchasing clean energy technologies. Previously only a few carbon offsets from such small projects were available for purchase on the carbon markets because of high transaction costs associated with carbon project development. MEC’s program standardizes and aggregates small projects to dramatically reduce these transaction costs. For Microfinance Institutions, MEC provides an easy way to receive carbon revenues when they provide finance to help their clients purchase clean energy systems. MEC provides implementation services to help MFIs quickly launch and scale clean energy product lines. MEC links MFIs with suppliers and provides the operational processes necessary to get energy products to their clients. This enables many households and microenterprises in the developing world to have access to modern, healthy, clean energy technologies for the first time.
Market potential
MEC works at the intersection of two rapidly growing markets: microfinance and clean energy products. Over 2.5 billion people worldwide currently use traditional fuels which could be replaced by clean technologies. MEC conservatively calculates the potential market size for microfinance-linked carbon financing for such clean energy products at over $8 Billion per year.
Expanding the capabilities of microfinance institutions
Grameen Shakti, a sister organization of the Grameen Bank in Bangladesh, is an example of a microfinance institution that has successfully launched an energy product line. Grameen Shakti has financed over 220,000 solar home systems and is growing at 75% per year. A typical client of Grameen Shakti would have once used kerosene for lighting which was insufficient for her children to read at night, and a smoky indoor fire which caused respiratory ailments. Thanks to Grameen Shakti, she has purchased an electric light powered by solar and a biogas digester which converts cow manure to cooking gas. She has improved her quality of life and she offsets about 3 tons of carbon emissions per year.
Operational model
MEC partners with MicroFinance Institutions, trains them to lend for clean energy, buys the carbon emissions reductions, and then sells them on the carbon markets. MEC provides its financial institution partners with training to establish a clean energy product line, carbon monitoring technology, carbon project development and carbon purchase. MEC has worked with dozens of microfinance clean energy lending programs, and brings a proven program to help each MFI rapidly establish a successful clean energy lending program. For example, MEC’s partner XacBank, in Mongolia, has reached 60,000 households with energy efficient technologies within six months and has continued to grow.
Patented IP
To lower the transaction costs of monitoring and verification of energy investments, MEC has developed Credit Tracker, a technology which enables microfinance loan officers to report the installation and operational status of the energy system from field using gps-enabled cell phones. The MFIs loan officer or agent monitors the energy systems quarterly for the life of the carbon credit. MEC then audits these reports on an annual basis using licensed DOE verifiers, or licensed financial auditors located in the same country as the MFI.
Social impact
MEC’s roots are in the social enterprise space. In 2008, MEC’s founders worked with a team from Columbia Business School to win first place in the Global Social Venture Business Plan Competition for a game changing approach to bring energy access to the Bottom of the Pyramid through microfinance. MEC has analyzed the social return on investment and found significant impact in poverty alleviation, education, health and the environment. Since then, MEC has impacted the lives of over 100,000 households across several countries.
Business model
MEC has a sustainable business model, which uses a margin on the sale of carbon credits to enable scale up. For more information please contact info@microenergycredits.com.
