The Development Bank of Rwanda (BRD) has launched a series of new facilities aimed at connecting 360,000 rural households with solar energy.

One consists of a subsidy of $15 million through domestic solar companies while the other is a $20 million guarantee framework covering lending institutions.

The partial grant schemes, financed by the World Bank, the Swedish International Development Cooperation Agency (SIDA) and Belgium’s Enabel, were launched Friday, October 2 in Kigali.

The subsidy facility will be offered to eligible households living in off-grid areas.

Beneficiaries from Ubudehe 1 category will be subsidised by 90 per cent, Ubudehe 2 by 70 per cent and Ubudehe 3 by 45 per cent.

On the other hand, the guarantee scheme will cover lending risks on loans provided by financial institutions to households as well as small and medium enterprises.

As opposed to what has been the practice, clients now will not need to pledge their property as collateral.

The new products are part of Renewable Energy Fund (REF), a joint project of the World Bank and the Rwandan government aimed at supplying 445,000 off-grid systems and benefit an estimated 1.8 million Rwandans.

According to the BRD Chief Executive Officer Kampeta Pitchette Sayinzoga, the products were designed to address affordability of solar home systems which the lower-income population and solar companies identified as a key hindrance.

Since its establishment in 2017, only 6 per cent of REF loans were exploited and the experts attribute the low utilization to issues of affordability of solar systems, limited collaterals for loans and weak marketing.

"We had previously been observing a low uptake of the loans among the intended beneficiaries in the rural areas, so we had to act fast to ease the challenges of affordability and securities or collateral,” Sayinzoga said.

"For me, this is the story of the development of the energy sector and development of Rwanda where different partners are able to come together and work towards the same goal which is connecting rural households to off-grid solutions.” 

As a response to low levels of awareness of the fund across the market, an agreement was also signed between BRD and selected saving-lending cooperatives to boost demand for solar home systems through Deal Origination Agencies (DOAs).

"The government of Rwanda considers energy as one of key sectors that will stimulate the development of the country as reflected in the National Strategy for Transformation which sets out as a target universal access to electricity for all the Rwandans by the year 2024,” said Claver Gatete, Minister of Infrastructure officiating the launch.

Currently, electricity is accessed by 56 per cent of the population of which 16 per cent is off-grid.

Gatete emphasized that the role of the private sector and development partners will be critical in achieving the hundred percent target.

"I wish to further emphasize and appreciate the existing strong collaboration of the private sector players in the energy sector and the different financial institutions that have shown interest in this REF financing instrument,” he added.

Christina Wedekull, Head of Development Cooperation at the Swedish Embassy said that lack of access to electricity still hampers economic development and education of millions of Rwandans. She said that Sweden is to support the strides Rwanda has committed to in powering all households.

The launched initiatives are expected to bolster social economy as well by creating new jobs of deal agents and powering over 27,000 small and medium enterprises, the World Bank country manager Rolande Pryce said.

To benefit from either scheme, citizens approach lending institutions or solar companies to apply for solar loans while institutions apply at BRD for a maximum of $1 million per institution.

Applications are open until March 2021 and the schemes will last three years.