An Overview Of Our Solution
BUN-CA is an NGO active in Central America since 1991. Since its inception, it has implemented innovative regional initiatives by triggering clean energy markets, enabling policies and mitigating climate change based on large interventions in renewable energy and energy efficiency. Recently, it has been setting up a twofold financial scheme -the first of its kind in Latin America- named “Sustainable Energy Access Fund for Poverty Reduction in Central America (FOCAEP)”.
FOCAEP is a second-tier financial and technical assistance initiative for reducing energy poverty and increasing economic growth for the most vulnerable people in the region, through a diversity of financial mechanisms and commercially-driven low-power solutions, such as improved firewood stoves (IFSs); besides two other technologies: off grid solar systems and micro-hydro electrical plants.
- Population Impacted: 300,000 people
- Continent: North America
Last name
Organization type
Context Analysis
The energy appetite in Central America has increased, highlighting wood as the primary source for cooking in the residential sector and, to a lesser extent, for commercial and industrial activities. Despite the increase in electricity grid coverage in recent decades, demand for firewood has grown in the poorest countries, because the end price of cleaner alternative fuels, such as LPG, are still not fully affordable for the lower income population.
With a goal of a 100% renewable world, FOCAEP has helped to change the use of traditional open fire technologies to modern energy cooking services, as nearly 21 million people in the region use firewood for cooking their meals at least three times a day using the traditional stove, a technology that has a very low thermal efficiency and a high source of gas emissions in the family environment, causing recurrent health problems to women, children and the elderly and a growing expense in family income.
Describe the technical solution you wanted the target audience to adopt
FOCAEP is a financial instrument that would directly benefit users who are “non-eligible” in the conventional financial system, involving energy-poverty-financing aspects. FOCAEP proposes innovative financial schemes with technical assistance for those participating in the Renewable Energy Technologies (RETs) value chain, such that users requiring financial facilities to access technologies in differentiated conditions through the intermediation of microfinance institutions (MIFs) and community-based organization (CBOs) that are constituted in the region.
The Fund operates under two investment windows. One is a non-reimbursable funding to partially cover up-front of the IFSs. Each subsidy depends on the conditions of each CBO working environment, including technical assistance and capacity building. The other one is the reimbursable funding by providing lending capital through MIFs as well as technical assistance to leverage larger equity investments to reach the end-users of IFSs.
Type of intervention
Describe your behavioral intervention
In the region, there have been initiatives for the low-power energy solution provision with donation focus, this approach has not guaranteed the adoption. FOCAEP approach guarantees high adoption by bringing technical assistance (TA) to end-users and CBOs, particularly towards women as the IFSs promoted by FOCAEP help decrease firewood consumption in at least 50%, nearly eliminate smoke of indoor environment and reduce firewood collection time, mostly by women and children by 40%.
FOCAEP funding complements part of the total cost of the IFS, bringing approximately 33% (up to US$40) of the cost, the remaining is covered by the CBO and the end-user. By changing the paradigm of 100% subsidies, FOCAEP also ensures a higher level of adoption, as the end-user contributes co-financing the IFS. Besides, FOCAEP provides TA by establishing a series of minimum quality requirements the stoves must comply and by training the women on use and maintenance. FOCAEP has trained so far about 35,000 women as a means of women’s empowerment.
Through the implementation of reimbursable funding via micro-loans, opens the market to users who have the willingness to pay but do not apply for commercial lending options. This enables the poor to improve health status, economic growth, gender equality and to inspire other market players, promoting non-conventional financing initiatives, while contributing to BUN-CA´s operational sustainability.
As needed, please explain the type of intervention in more detail
FOCAEP business model includes the provision of technical assistance, capacity building, and on-lending options through CBOs and MIFs where the supplied technologies should fulfill minimum technical specifications. From a financial perspective, the Fund provides loans, equity participation, leasing, and issues partial credit guarantees.
For productive uses, as a financing facility, the Fund is operating to add value to new micro and small rural business enterprises in the region to grow and consolidate themselves through the support in the use of those small-scale renewable energy sources, together with technical assistance on business development, best management practices and on-going monitoring of field interventions.
Describe your implementation
FOCAEP is an attractive showcase for a new cooperation development model in Central America, including community-based and microfinance organizations. FOCAEP is operating with six main tasks:
• Promoting user acceptance: solutions that meet end-user needs and income are essential for a successful “transformational change”.
• Enhancing financial resources: in an immature marketplace where distribution networks and maintenance services are lacking, FOCAEP has started to stimulate the markets and attract private sector involvement.
• Increasing production capacity: successful upscaling of small-scale sustainable energy initiatives is contingent upon a stable supply-side and reliable production capacity of local manufacturers.
• Providing after-sales support: many initiatives fail to reach scale because the installed devices break down and there is no warranty or after-sales support; technical assistance throughout the whole investment cycle is essential.
• Providing technical assistance along the production chain: the local capacity building is established at the community level, enabling new opportunities for family income generation.
• Monitoring and Evaluation System (M&E): the M&E system, has been a valuable tool for the real-time monitoring and evaluate impacts and approaches in the last years.
From a social stand-point, FOCAEP faces a key challenge since many of the investments take place in geographic areas with high levels of crime, drug trafficking, and low governance. In this regard, FOCAEP has already established a set of criteria and operational procedures for partnering with Community-based Organizations.
The FOCAEP has a specialized team, technical and administrative staff that has developed the skills for working in different cultural and social settings in the three target countries, i.e.: Guatemala, Honduras, and Nicaragua.
External connections
FOCAEP operates and targets mainly in countries that are considered lowest-income countries with high levels of poverty, restricted access to energy, and limited capacity for micro-entrepreneurial innovation. The Fund’s top-down/bottom-up approach engages a wide variety of stakeholders (customers) through the value chain, whose participation at the moment is described as follows:
End-users: 35,000 disadvantaged families made up mainly of women, children and the elderly, who cover part of the up-front cost and are responsible for appropriate use and maintenance.
Community Based Organizations (CBOs) and microfinanciers: 50 organizations operating as liaisons between FOCAEP and the end-users, leveraging a percentage of the total cost, and responsible for providing field technical support and follow up.
Local manufacturers and suppliers: responsible for open-technologies suppliers for IFSs. FOCAEP works only with technology packages that fulfill its efficiency, security and quality criteria. In 2018, FOCAEP has been working with 15 technology suppliers throughout the region.
Policy Makers: FOCAEP also supports the national governments mainly of Guatemala, Honduras and Nicaragua in the preparation and approval of technical standards for IFSs in each country, bringing its field experience.
Besides, FOCAEP has received the support of Energizing Development Program (GIZ/EnDev) as an important stakeholder in the implementation of pilot projects during the first stage of the Fund.
Who adopted the desired behaviors and to what degree?
To evaluate impacts and follow-up the activities of the stakeholders involved, FOCAEP developed its own Monitoring and Evaluating System (M&E), based on institutional guidelines established by GIZ/EnDev. The M&E verifies by in-field visits the capacity of end-users to solve any issues during the operation of the unit, tracks progress and evaluates impacts: technology quality, efficiency and adoption percentage by end-users. To date, based on information collected by FOCAEP, up to 95% of end-users still use the IFSs to cook their daily meals since 2014.
As part of the monitoring system, each IFSs information is uploaded on digital platforms (35,000 entries) that can be accessed in real time, including its global positioning coordinates.
As FOCAEP has implemented a variety of financial tools, the monitoring process also involves the follow-up of after-sales services with manufacturers or suppliers, and verifications of spare parts availability by the community-based organization.
How did you impact natural resource use and greenhouse gas emissions?
On the environmental side, intensive firewood consumption is severely affecting an extensive geographic area with deforestation, and globally, each improved firewood stove mitigates the emission of at least 2 tons of CO2 per year and reduces firewood consumption by about 50%. The installation underway of 35,000 improved firewood stoves mitigates 70,000 tons of CO2 per year and reduces pressure on 4,000 hectares of tropical forest.
What were some of the resulting co-benefits?
FOCAEP has identified four main co-benefits:
• Social: creation of at least one new community-based organization job position during and after the execution of projects with FOCAEP.
• Health: reduction of respiratory diseases in children and the elderly (mostly), by reduction of intra-domiciliary contamination.
• Sustainable development: ensuring sustainability by spreading the importance of installing improved firewood stoves with minimum efficiency indicator, quality and security tests developed by certified organizations in Guatemala.
• Economics: expenses reduction in the firewood purchase, especially in the women small-businesses up to 50%, positively impacts on the empowerment of women.
• Biodiversity conservation: the deforestation reduction on 4,000 hectares per year of tropical forests in Central America.
Sustainability
BUN-CA, with collaboration from the Hivos and GIZ/EnDev in 2013, triggered the concept as a pilot intervention to cope with one main challenge: lack of access to non-conventional finance to sustain long-term energy markets for the poor. From a technology supply perspective, local manufacturers lack working capital to increase their production, and from the demand side, even though end-users are willing to pay, they are not able to cover full costs. Thereafter, FOCAEP has addressed both challenges, by providing up-front subsidies to end-users through CBOs and MFIs, accompanying with technical assistance.
FOCAEP has high growth viability due to its potential for scaling up for a target population with at least 4 million IFSs as noted above.
Return on investment
FOCAEP aims at operating as an independent legal entity, which is now in the process of being structured. As per the Business Plan, the financial scheme has been conceived to combine financial and non-financial services to sustain market development for the poor over the long-term through the RETs value chain, with a social business vision (inclusive). With seed grant funding from GIZ/EnDev of about $2M and $1M in pre-investment allocations from Hivos, the proposed Business Plan targets a fund closure of $30 million (M) to reach at least 150,000 low-income families, in total benefiting about 1 million poor Central Americans.
How could we successfully replicate this solution elsewhere?
The foreseen total investment to be raised is $15M over the next five years to install at least 150,000 IFSs in the poorest countries of the region, whose expected capitalization is $5M in grants to support subsidies and technical assistance. Of this, $2M has been pledged by GIZ/EnDev to accomplish the installation of 35,000 IFSs through the two financial models. BUN-CA has already identified a portfolio of socially responsible investors worldwide in order to raise $8M from equity and $8M from debt.
Finally, this innovative financial mechanism pro-poor can be easily adapted to support other commercially driven technologies, such solar, biodigestors, and small-hydro for productive uses. Using the same management principles and institutional architecture, FOCAEP can also contribute to increase energy access for the poor, as BUN-CA is developing a pilot initiative to finance small hydro units for productive uses in rural areas, another regional market niche for a least US$30 million.