To understand the barriers before SME financing, TERI, on behalf of IFC, undertook a “Feasibility study for the SME EE finance project” under the Eco-Cities India Program. The study focused on identification and analysis of small-scale industry clusters/sectors in and around the cities of Bhubaneswar, Chennai, Bangalore and Greater Mumbai. After the study, the Program has identified three key financing needs in the energy efficiency sector:-
- Financing of SMEs to upgrade to more energy-efficient technologies
- Financing of Energy Saving Companies to support energy efficiency and renewable energy projects for SMEs
- Educating/training of financial institutions (FIs) on energy efficiency/renewable energy financing products
IFC is addressing the needs by:
Promoting resource efficiency in selected SME clusters: A training program for Energy Service Companies/industry on energy efficiency projects has been rolled out in the five eco-cities in collaboration with the Bureau of Energy Efficiency (BEE). IFC is also supporting the BEE’s Partial Risk Guarantee Fund to increase the number of loans for energy efficiency projects. IFC will be conducting over 150-200 audits in the eco-cities, which will result in many SMEs adopting energy efficiency measures in their respective units. These units will be supported by financing from FIs and a guarantee from BEE.
Removing access-to-financing barriers for SMEs: IFC and BEE formalized their partnership in July 2017, and are working with FIs/industry to increase sustainable energy financing to SMEs, build knowledge through training programs on providing loans to SMEs for energy efficiency projects, and support them on leveraging the risk-sharing facilities. IFC has already reached out to 42 FIs and over 300 personnel through trainings. In addition, a joint toolkit (work started in November 2017) is being designed for FIs to encourage adoption of energy efficiency technologies and operational practices in SMEs. This is expected to be ready by October 2018 and will be hosted online.
Raising awareness by engaging with multiple stakeholders: Stakeholder buy-in is critical for the success of energy efficiency projects. While FIs are interested in energy efficiency projects, the sector is a challenging space for them because of lack of awareness and technical capacity of SMEs. Also, energy efficiency financing is not a formal product for most banks in India. To build the sector, IFC is regularly engaging with the stakeholders. The “Feasibility study for the SME EE finance project” was one such initiative. The study, conducted over four months, included meetings with various stakeholders - FIs, SMEs, and donor partners.
The energy efficiency project team has also been a part of other several stakeholder events such as SAMEEKSHA (Small and Medium Enterprises: Energy Efficiency Knowledge Sharing). SAMEEKSHA is a collaborative platform aimed at pooling in knowledge and synergizing the efforts of various organizations working towards the common goal of facilitating the development of the SME sector through the promotion and adoption of clean energy, efficient technologies and practices. In addition, the team has been collaborating with stakeholders like BEE, SIDBI, GiZ, among others.