acknowledgements - snv world · sushil acharya, credit officer, bcu, aepc and mr. lava thapa,...

Final Report of Study on Increasing Credit Access for Biogas Plants to Hills and Mountains

Development Vision Nepal Pvt. Ltd. i

ACKNOWLEDGEMENTS

We express our sincere gratitude to Alternative Energy Promotion Center (AEPC) for entrusting us the responsibility of conducting the Study on Increasing Credit Access for Biogas Plant to Hills and Mountains. We are particularly thankful to Dr. Narayan Prasad Chaulagain, Executive Director, AEPC; Mr. Samir Thapa, Senior Energy Officer, AEPC, Mr. Sushil Acharya, Credit Officer, BCU, AEPC and Mr. Lava Thapa, Senior Officer of AEPC for their co-operation and direction in conducting the study. Likewise we express our gratitude to Mr. Balram Shrestha and Mr. Keshav Devan Rai, of Biogas Sector Partnership Nepal (BSP/N) for their due support. In the same manner, we express our gratitude to all the technical staff of the AEPC related with this mission for providing us valuable suggestions and guidelines in the process of conducting this study. All staff of the Development Vision Nepal Pvt. Ltd. (DVN), who labored hard in preparing this document, deserves special thanks. We also express appreciation to the efforts of all experts and individuals who have contributed in the preparation of this document being involved in the relevant assignments.

Ghan Shyam Awasthi, Managing Director

Development Vision Nepal Pvt. Ltd. (DVN) Date: 29 June 2011


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TABLE OF CONTENTS

ACKNOWLEDGEMENTS ................................................................................................................. I TABLE OF CONTENTS ................................................................................................................... IILIST OF TABLES ........................................................................................................................... IIILIST OF FIGURES .......................................................................................................................... IIIACRONYMS ................................................................................................................................... IVEXECUTIVE SUMMARY.................................................................................................................. V 1 INTRODUCTION...................................................................................................................... 1-1 1.1 GENERAL BACKGROUND: ....................................................................................................... 1-1 1.2 INTRODUCTION OF ALTERNATIVE/RENEWABLE ENERGY TECHNOLOGIES (RETS) ......................... 1-1 1.3 OBJECTIVES OF THE STUDY ................................................................................................ .... 1-4 1.4 SCOPE OF WORK.................................................................................................................... 1-4 1.6 STUDY AREA .......................................................................................................................... 1-5 1.7 EXPECTED OUTPUT OF THE STUDY .......................................................................................... 1-6 2 LITERATURE REVIEW............................................................................................................ 2-1 2.1 REVIEW OF PORTFOLIO STATUS OF AEPC/BCU....................................................................... 2-2 2.2 STATUS OF BIOGAS INSTALLATION .......................................................................................... 2-3 2.3 RENEWABLE ENERGY POLICY 2006......................................................................................... 2-5 2.4 SUBSIDY POLICY OF RENEWABLE ENERGY 2009...................................................................... 2-6 2.5 BIOGAS CREDIT FUND OPERATING GUIDELINES ....................................................................... 2-9 2.6 EVALUATION REPORT ............................................................................................................. 2-9 2.7 EXISTING PLAYERS OF BIOGAS PROGRAM............................................................................... 2-10 3 APPROACH AND METHODOLOGY....................................................................................... 3-1 3.1 APPROACH............................................................................................................................. 3-1 3.2 METHODOLOGY ...................................................................................................................... 3-1 4 FINDINGS OF THE STUDY ................................................................................................ .... 4-1 4.1 TREND ANALYSIS OF BIOGAS PLANT INSTALLATION .................................................. 4-1 4.2 STUDY TEAM COMPOSITION ................................................................................................ .... 4-3 4.3 PROBLEM FACED IN CREDIT SERVICES FOR BIOGAS PLANT INSTALLATION ............. 4-3 4.4 SUGGESTIONS FOR INCREASING CREDIT ACCESS ....................................................... 4-5 4.5 FUTURE PLAN OF FINANCIAL INSTITUTIONS FOR CREDIT SERVICING........................ 4-7 4.2 SUGGESTION FOR FINANCING MECHANISM................................................................ ... 4-7 5 CONCLUSION AND RECOMMENDATIONS .......................................................................... 5-1 5.1 CONCLUSION ..................................................................................................................... 5-1 5.2 RECOMMENDATIONS ........................................................................................................ 4-7


Development Vision Nepal Pvt. Ltd. iii

LIST OF TABLES

Table 2-1: Annual Credit transaction of AEPC ............................................................................... 2-1 Table 2-2: Distribution of MFIs in districts ...................................................................................... 2-2 Table 2-3: Sources of Fund for BSP Phase IV ............................................................................... 2-2Table 2-4: Geographical distribution of biogas plants ....................................................................... 2-4Table 2-5: Contribution of credit suppliers ...................................................................................... 2-5Table 2-6: Provision of subsidy in Biogas plant .............................................................................. 2-7Table 2-7: Trend of Subsidy and plant cost in hills (For 6m3) ........................................................ 2-8Table 4-1: Trend of Biogas Plant Installation in last three years..................................................... 4-1 Table 4-2: Trend of Credit Servicing in Biogas Plant Installation for last three years...................... 4-2 Table 4-3: Trend of Credit Portfolio and Forecasting...................................................................... 4-3

LIST OF FIGURES Figure 1-1: Geographical distribution of Nepal ............................................................................... 1-6 Figure 2-1: Status of credit transaction of AEPC/BCU ................................................................ .. 2-2 Figure 2-2: Status of Biogas Plant Installation ............................................................................... 2-3Figure 2-3: Trend of Biogas Plant Construction in Credit ............................................................... 2-3Figure 2-4: Trend of biogas plant installation in cash contribution ..................................................... 2-4Figure 2-5: Geographical distribution of biogas plants ................................................................... 2-5Figure 2-6: Contribution of Credit Suppliers on biogas plants ........................................................ 2-5Figure 2-7: Trend of Biogas Plant Cost and Subsidy Provision ...................................................... 2-8Figure 4-1: Trend of Biogas Plant Installation in last three years ................................................... 4-1 Figure 4-2: Trend of credit servicing by financial Installation ......................................................... 4-2 Figure 5-1: Partner Institutions of different wholesaling financial institutions ................................ .. 5-4


Development Vision Nepal Pvt. Ltd. iv

ACRONYMS

AEPC : Alternative Energy promotion Center ADB : Asian Development Bank ADB/N : Agriculture Development Bank, Nepal BCU : Biogas Credit Unit BoK : Bank of Kathmandu BSP : Biogas Support Program BSP/N : Biogas Sector Partnership Nepal CECI : Centre for International Studies and Cooperation CEDB : Clean Energy Development Bank CRT/N : Center for Rural Technology Nepal DCGC : Debit and Credit Guarantee Corporation DEES/U : District Energy and Environment Section/Unit DFID : Department for International Development DVN : Development Vision Nepal Pvt. Ltd. ESAP : Energy Sector Assistance Program GON : Government of Nepal GTZ : German Technical Cooperation Agency IFAD : International Fund for Agricultural Development ILO : International Labor Organization IWM : Improved Water Mill KfW : German Development Bank MFI : Micro Finance Institution MOE : Ministry of Environment MW : Megawatt NBL : Nepal Bank Limited NBPA : National Biogas Promotion Association NCB : National Cooperative Bank NGO : Non-governmental Organization PAN : Permanent Account Number RBB : Rastriya Banijya Bank REF : Renewable Energy Fund RET : Renewable Energy Technology RMDC : Rural Micro Finance Development Center SACCOS : Saving and Credit Cooperatives SHS : Solar Home System SKBBL : Sana Kisan Bikas Bank Limited SNV : Netherlands Development Organization TOR : Terms of References UNDP : United Nations Development Program USAID : United States Assistance for International Development VAT : Value Added Tax VDC : Village Development Committee WECS : Water and Energy Commission Secretariat


Development Vision Nepal Pvt. Ltd. v

EXECUTIVE SUMMARY

The study has been carried out with the aim of suggesting possible ways to increase credit access to the hills and mountains for the installation of biogas plants and with the scope of reviewing concerned literatures, collecting opinions of stakeholders and users. The study area is taken as 54 districts of the hills and mountains. This study expects to produce status and trend of biogas installation, assessment of credit mechanism, and identification of problems and find out possible ways to solve the problem.

The study reviewed the portfolio structure of AEPC/BCU, status of biogas plant installation, renewable energy and subsidy policies, biogas credit fund guidelines, previous evaluation reports etc. AEPC has extended credit as outstanding amount of Nrs. 158.1 million as of Chaitra 2067 to 232 MFIs over 42 districts of the country. The credit is extended in annual interest rate of 4-6% providing MFIs 10% margin. The sources of fund available for biogas support program are from SNV/DGIS, Kfw, GoN, CDM and participation fee. As of Chaitra 2067, 229093 plants have been installed in total out of which 70% installed in cash contribution of the owners and 30% in credit support of financial institutions. Geographically, the biogas plants installation has been accounted for less than 1% in mountains, 49% in hills and remaining 50% in terai. The percentage of plants installed in credit servicing is less in hills and mountains (37%) compared to terai (63%).

The provision of subsidy for biogas plants installation is focused on small size of plants of 2-6 m3. The bigger the plant size, the lesser the subsidy is provisioned. Likewise, the institutional and community biogas plants are also not in priority of the subsidy allocation. The trend of subsidy allocation has been decreased compared to increment in cost of biogas plant installation.

The trend of biogas plant installation shows that the total plant installation has been increased by 15% annually in last three years and number of plants to be installed in this year comes to be 24295 with that annual increment rate. Regarding the credit servicing, negligible increment (0.12%) has been seen during last three years whereas the trend of plant installation in cash contribution has been increased by 19%. The trend of credit servicing by financial institutions has also been decreased in last three years.

The mostly demanded sizes of biogas plants have been seen 4m3 and 6 m3 with average cost of Nrs. 33,400.00 and Nrs. 39,400.00 respectively and the subsidy amount allocated for the same is Nrs. 18,700.00 and Nrs. 20,000.00 in hills and remote hills respectively. The credit portfolio of AEPC has been increased by 24% annually during the last three years. With this increment, the outstanding amount of AEPC credit portfolio at the end of this fiscal year 2067/68 should be Nrs. 162.4 million.

The major problems faced by the stakeholders of this program are (i) Low demand of credit for biogas (ii) Low recovery rate of biogas credit portfolio (iii) Lack of fund for credit servicing (iv) Absence of policy priority in financial institutions and (v) Weak monitoring mechanism of AEPC. The reasons behind the low demand of credit for biogas plants installation are conceptual misleading of rural people that biogas plants are not for marginalized people but for high class people and increase in affordability of people in cash for installation of biogas by the income of remittance. In the mean time, the decreasing trend of livestock holding pattern in the hills and mountains and migration of people towards terai, difficulty in access to credit due to limited financial institutions for credit servicing and lengthy procedure for credit delivery and fulfillment of energy needs of people by solar power particularly in hills and mountains poses the low demand of credit for biogas plants.


Development Vision Nepal Pvt. Ltd. vi

The main reasons behind the low recovery rate of credit extended to biogas plant installation are the lack of repayment capacity of rural people. It is caused by the fact that biogas plant itself does not generate any income and it is not linked up with income generating activities. In addition, lack of in-time after sales services from the biogas companies and lack of proper monitoring forces the people not to pay back the loan in time.

Financial institutions are showing liquidity problem to service the loan in biogas plant installation and they found this venture is not financially viable to lend on it. Weak monitoring problem is caused by limited financial and human resources available to conduct the monitoring activities for the authorized agency. Tough competition between financial institutions in the market compelled them to look at better option for lending rather than lend in biogas plant installation.

The suggestions made by the stakeholders to increase the credit access in biogas plants are (i) to increase demand of credit through raising awareness of the people that biogas is not luxury item but a necessity (ii) raise the recovery rate of biogas credit portfolio by proper monitoring and increasing repayment capacity of the people linking up with income generating activities (iii) mobilize fund properly through adopting both centralized and decentralized approaches for credit delivery from AEPC (iv) raise awareness of the people by orientation involving its stakeholders (vi) set policy priority through Nepal Rastra Bank and (vii) develop strong monitoring mechanism by strengthening the district level organization established by AEPC.

Financial institutions are interested to service credit further for biogas plants in case it is launched as special program, interest rate spread is raised for comfortable level, interest subsidy module is adopted and repayment capacity of the people is raised through linking up this program with income generating activities. For this, it is also necessary to raise the awareness of the people regarding the benefit of the biogas plant installation.

It is suggested by stakeholders to make arrangements of lending through selected cooperatives and MFIs working in district level. For this, wholesale lending is arranged by commercial and wholesale lending institutions like National Cooperative Bank and SKBBL and retailing is done by cooperatives, MFIs and local NGOs. Credit to the local level MFIs and cooperatives can be provided through LDF basket funds at low cost and establishing the credit security funds to cover the credit risk.

To achieve above result, the study recommends setting a credit delivery mechanism mobilizing the local level financial institutions for credit servicing. Mapping of potential MFIs is also recommended to increase the credit access. Centralized approach of fund mobilization is recommended to channelize the fund through wholesale financing institutions whereas the decentralized approach is also suggested for proper fund mobilization through local level independent MFIs to provide financial support to the financial institutions for credit servicing in biogas plants. It is also recommended to rationally allocate the subsidy and making provision of fund for promotional activities. Likewise, technical support is also recommended to increase the demand of biogas plant through introducing appropriate model of biogas plants using prefabricated materials in order to reduce transportation cost and providing timely after sales services. It is also recommended to provide technical support for the proper use of slurry and develop linkage between biogas program and income generating activities. An institutional support for development of strong monitoring mechanism is also recommended for proper monitoring of the program by strengthening the capacity of DEES/U and involving stakeholders for awareness campaign.


Development Vision Nepal Pvt. Ltd. 1-1

Chapter 1 INTRODUCTION

1 INTRODUCTION

1.1 GENERAL BACKGROUND

There are huge possibilities of producing energy in Nepal. Availability of enormous water resources and topographic situation gives rise to a potential for 83,000 MW of hydropower of which about 43,000 MW of power production seems to be economically and technically feasible. Till now, where only about 563 MW1

1.2 INTRODUCTION OF ALTERNATIVE/RENEWABLE ENERGY TECHNOLOGIES (RETS)

has been harnessed which is mainly consumed in urban areas, the rural and remote areas of the nation has no access to reliable and clean energy. In the other hand, in spite of enough possibility of producing energy in rural areas in the form of biogas, solar energy, wind energy, improved water mill, micro and mini hydropower, it has not been used as per the needs. In Nepal, only about 230,000 biogas plants have been installed out of the installation potential of 1.9 million biogas plants. There has been savings in the energy consumption by installing 250,000 improved cooking stoves. Similarly, in spite of huge potential of solar energy, only 75,000 solar home systems have been installed. With regard to the wind energy, it has not been possible to harness its potential. Up to now about 2,000 traditional water mills have been improved. Only about 8 MW power is produced through micro hydro. These efforts have made it possible to provide electricity services to about 40 percent of the population in the country. In the rural areas, only 29 percent of the population has access to electricity. The Government of Nepal (GoN) established the Alternative Energy Promotion Centre (AEPC) in 1996 under the Ministry of Environment as a semi-autonomous organization with the objective to promote and develop alternative/renewable energy technologies so as to raise the living standard of the rural people, to protect the environment and develop commercially viable alternative energy industries in the country. Micro-hydro, improved water mill (IWM), biogas plants, solar home system (SHS) and improved cook stove are some of the alternative/renewable energy technologies (RETs) promoted by AEPC. Subsidy is made available to RET users as per provision of the government and different program/projects supported through different agencies. Besides subsidy, provisions of credit schemes have also been made in some RETs particularly for Biogas Support Program (BSP) from German Development Bank (KfW). For solar, credit is made available by mobilizing resources of financial institutions and for micro-hydro AEPC is going to serve as a Fund Manager for Euro 0.5 million GTZ micro-hydro fund.

Micro-hydro, improved water mill (IWM), biogas plants, solar home system (SHS) and improved cook stove are some of the alternative / renewable energy technologies (RETs)

1 Rural Energy Policy 2006, MoE GoN



promoted by AEPC. Subsidy is made available to RET users as per provision of the government and different program / projects supported through different agencies. Besides subsidy, provisions of credit schemes have also been made in some RETs particularly for Biogas Support Program (BSP) from German Development Bank (KfW). For solar, credit is made available by mobilizing resources of financial institutions and for micro-hydro AEPC is going to serve as a Fund Manager for Euro 0.5 million GTZ micro-hydro fund. 1.2.1 Solar Home System Financing Modus operandi of credit mobilization in case of solar home system and micro-hydro differs a bit from biogas. Unlike in case of biogas, no dedicated fund is made available for SHS under AEPC / ESAP, rather financial institutions, mainly commercial banks, are mobilized for the purpose. Capacity building support to local microfinance institutions (MFIs), particularly saving and credit cooperatives (SACCOs), in selected districts are provided through REF under AEPC / ESAP. Technical assistance is provided to financial institutions by covering their costs related to initial assessment, monitoring and supervision for financing. Once MFI's capacity is reached to acceptance level for lending by financial institutions, then the participating banks to extend wholesale loans to local MFI's which in turn provide loans to individual households. Under this modality about 2,200 SHS are installed in 6 districts (Dailekh, Rukum, Rolpa, Panchthar, Sankhuwasabha and Bhojpur). Commercial banks extend loans at market interest rate (12% -15%) to local MFIs (SACCOs) which are further lent to individual clients at 18 % - 20% interest rate per annum. Besides making use of loan fund from commercial banks, SACCOs do also mobilize their internal resource for RET lending. To mitigate risk to both lender and users, accidental insurance for SHS is covered by insurance company. 1.2.2 Micro-hydro Financing In case of micro-hydro it is more community managed and financing is to start from Syarebhumi micro-hydro project in Nuwakot district. Nabil Bank has approved Rs. 205 million for 250 households to be channeled through community based organization for launching the micro-hydro project. Provision for debt insurance has been made in partnership with Debit and Credit Guarantee Corporation (DCGC), Nepal. Recently IWM program implemented by Centre for Rural Technology, Nepal (CRT/N) with funding from SNV Nepal has been merged with AEPC / ESAP. Asian Development Bank (ADB) is extending support to AEPC to promote IWM with credit facility on pilot basis and provision of 0.5 million revolving fund has been made. CRT/N will be the implementing agency for this pilot project. 1.2.3 Biogas Financing Through, earlier Agriculture Development Bank Limited (ADBL) was the sole financial institution to provide credit to biogas users; other actors like Nepal Bank Ltd (NBL), and Rastriya Banijya Bank (RBB) also joined hands later on. However, due to conflict on one hand and lack of interest of these banks in financing biogas plant on the other created gap in meeting credit need for biogas plant installation. Moreover, no other financial institution



came forward to provide credit to biogas users in wider scale. As a result AEPC was entrusted with the responsibility of managing credit fund from KfW. In this context, Biogas Credit Unit (BCU) was established in 2000, so as to provide wholesale loans to grass-root level institutions, mainly cooperatives and licensed MFIs. By mid April 2010, AEPC/BCU disbursed Rs.282 million to help install more than 15000 plants through more than 200 partner institutions including microfinance banks, finance intermediary NGOs, saving and credit cooperatives, other type of cooperatives and community forest users committees. Out of the total disbursed amount, Rs 148 million has been collected and Rs. 134 million is outstanding portfolio with more than 170 partner institutions. The overdue status by the end of mid April 2010 was about 10 percent.

Region-wise plant installation with credit support indicates that about half (48%) of the total plants built on credit are in the Eastern Development Region, followed by 22% in the Western Development Region, 12% in the Central Development Region and 9% each in Mid and Far Western Regions. Interestingly, Jhapa district alone accounts for 29% of total plants built with credit facility. It was mainly due to close partnership/coordination between MFIs and construction companies in Jhapa district that led to such a great success. Despite such achievement and the loan amount disbursed to MFIs exceeding the target of KfW fund, there are some constraints hindering smooth operation of the AEPC/BCU in the capacity of a professional unit/entity. The key ones are:

• Limited Manpower vs. Geographical Coverage: With only four staff it is difficult for AEPC/BCU to take care of more than 170 partner institutions stretching over 41 districts from Panchthar district in the east of Baitadi and Kanchanpur districts in the Far-west region for assessment of loans and monitoring and follow up for timely collection. This not only adds cost but equally difficult to manage with the limited human resource strength the AEPC/BCU currently has.

• Service Delivery: Credit disbursement mechanism is not under entire control of AEPC/BCU thus at times leading to delay in disbursement of loans to MFIs thereby resulting into negative notion about AEPC/BCU's delivery performance particularly to those MFI's which have easy access to commercial funding. Due to lack of independence in financial management, constraint is noted in terms of financial analysis/ management of the AEPC/BCU operation itself. Besides, lack of proper monitoring and follow up for timely collection of loans has also been problematic as some partner institutions have not paid back borrowed loan for more than 5 years.

• Lack of Credit Fund: Based on increasing demand for biogas loan from different parts of the country, AEPC/BCU is neither in a position nor is likely to meet the demand with the limited biogas credit fund. Thus AEPC/BCU needs to prioritize its lending area and the biogas sector needs to look into other possible options for accessing credit fund for biogas lending.

• Interest Rate: AEPC/BCU currently lends at 4% to its partner institutions and they further lend to ultimate borrowers at 14% (with 10% margin max. as per AEPC norm). Compared to the market rate, interest rate charged on loans by AEPC/BCU is low thereby increasing demand for loan from not only existing partners but also from new ones. Current liquidity crunch in the financial market has aggravated the situation.



With this background and realization from key stakeholders like AEPC, KfW, SNV and Biogas Sector Partnership Nepal (BSP/N) it is necessary to look into possible option that would help the biogas credit component operate more smoothly in the days to come. AEPC serving in the capacity of a Fund Manager would be one of the way outs by channeling fund to intermediary wholesale lending institutions or any other possible option that may crop up from this review.

1.3 OBJECTIVES OF THE STUDY The major objective of this study is to suggest possible ways to increase the credit access to the hills and mountains for the installation of biogas plants. However, it has following specific objectives:

• Review the portfolio status of the AEPC/BCU, particularly outstanding and overdue status and the interest rate structure.

• Assess the credit mechanism within AEPC/BCU for other RETs and suggest if lessons learnt thereof could be incorporated in a new modality.

• Explore the possibility of using different organization in the hills and mountains to channel credit funds for biogas installation.

• Identify potential intermediary wholesale lending institutions to channel biogas credit through different MFIs in the hills and mountains.

1.4 SCOPE OF WORK

The scope of work for this study will be: 1.4.1. Review of Program Documents The consultant, under guidance from AEPC and support from AEPC management will review the existing documents in the AEPC/BCU including the following, but not limiting to.

• BSP AWP 2011 • Mid-term evaluation report • Previous studies undertaken on credit aspect • Other relevant documents, if any

1.4.2 Meeting with different Stakeholders The consultant will meet the following key concerned institutions/program:

• Alternative Energy Promotion Center (AEPC), • Energy Sector Assistance Program (ESAP) • Renewable Energy Fund (REF), • German Development Bank (KfW), • Netherlands Development Organization (SNV), • Biogas Sector Partnership Nepal (BSP/N) and • Nepal Biogas promotion Association (NBPA)



• Prominent biogas companies to seek their views on the study objectives.

1.4.3 Meeting with Financial Institutions

The consultant will hold thorough discussion with following potential financial institutions to see the possibility for wholesale lending through these financial institutions:

• Clean Energy Development Bank Limited (CEDBL), • Sana Kisan Bikas Bank Limited (SKBBL), • National Cooperative Bank (NCB), • Rural Microfinance Development Centre (RMDC), • Bank of Kathmandu (BoK) etc,

In the process, it is necessary to find out that if they would be interested to take over the biogas credit portfolio and support in increasing credit access to the hills and mountains as per the objective. 1.4.4 Field Visit

Besides visit to key institutions in Kathmandu, the consultant will visit selected MFIs (Microfinance Institutions, Financial Intermediary NGOs and Cooperatives) in the field to know their perception on increasing the access to credit facilities for biogas plants installations in hills and mountains. One of the key institutions to visit will be the District Energy and Environment Sections/Unit in the district to access their capacity to handle credit aspects and mechanism to deliver biogas credit to the potential farmers. Besides, the consultant will also visit potential non Financial Institutions in the hills and mountains to assess the possibility of involving them as second or third tier institutions to deliver biogas credit. This will involve assessing the possibility in terms of policy implications, and institutional objectives and capacity of such institutions.

1.5 STUDY AREA

The study will be carried out focusing in all location as described in the ToR. Besides, visit to key institutions in Kathmandu, it will also be necessary to visit selected MFIs (Microfinance Banks, Financial Intermediary NGOs and Cooperatives) in the field to know their perception on increasing the access to credit facilities for biogas plants installations in hills and mountains. One of the key institutions to visit will be the selected District Energy and Environment Sections / Unit in the district to access their capacity to handle credit aspects and mechanism to deliver biogas credit to the potential farmers. In addition with that, the study team will also visit potential non FI institutions in the hills and mountains to assess the possibility of involving them as second or third tier institutions to deliver biogas credit. This will involve assessing the possibility in terms of policy implications, and institutional objectives and capacity of such institutions.

In totality, the biogas installation program has been launched in 74 districts out of 75 except Manang. Geographically, 8 districts of mountain region, 46 districts of hilly region including



chure, low and high hills have been covered by this program. Out of total biogas plants installed so far, 49% have installed within this hilly region and less than 1% in mountain region.

Figure 1-1: Geographical Distribution of Nepal

Out of total eight districts in mountain region, two districts have contributed above average. Likewise, in hilly region, 12 districts have contributed above average out of 46 districts. Only three districts have contribution of installing more than 10,000 plants.

1.6 EXPECTED OUTPUT OF THE STUDY

As the main objective of the study aims to study with possible ways to increase the credit access to the hills and mountains for the installation of biogas plants by suggesting new mechanism for credit service. The expected output of the study may be:

• Review of portfolio status of AEPC/BCU • Status and trend of credit delivery in study area • Assessment of credit mechanism within AEPC/BCU • Identification of problems faced by the stakeholders in increasing credit access to the

biogas users • Probable mechanism for increasing credit access for biogas plants in hills and

mountains • Mapping of MFIs to increase the credit access

The following documents will be produced and submitted to the AEPC: • Inception Report • Draft Report and • Final Report



Chapter 2 LITERATURE REVIEW

2 LITERATURE REVIEW The main purpose of review of literature, previous reports and studies is to assess the status of credit delivery and to be aware of existing policies of the concerning authorities to address the issues of credit delivery to the biogas user in hills and mountains. The main reports and studies that were reviewed are:

i. Review of portfolio structure of AEPC/BCU ii. Status of biogas installation iii. Renewable Energy Policy 2006 iv. Subsidy Policy for Renewable Energy 2009 v. Biogas Credit Fund Operating Guideline 2011 vi. Evaluation Report vii. BSP AWP 2011 viii. Existing players of biogas program

2.1 REVIEW OF PORTFOLIO STATUS OF AEPC/BCU

With the establishment of Biogas Credit Unit in 2000, AEPC is extending credit facility to the biogas users through its partner Micro Finance Institutions (MFIs) and other financial institutions with the credit support of KfW. It has already disbursed Rs.292.5 million and collected Rs. 161.6 million out of that and it has credit outstanding of Rs. 130.9 million as of end of F.Y 2009/10. It has already disbursed Rs. 353.1 million and has outstanding of Rs. 158.1 as of Chaitra 2067. The trend of credit disbursement, collection and outstanding has been increasing drastically during last ten years.

Table 2-1: Annual Credit Transaction of AEPC Fiscal Year Disbursement Collection Outstanding

2001/02 3450000 - 3450000

2002/03 8256750 1757236 9949514

2003/04 5538500 5684627 9803387

2004/05 16210000 7342413 18670974

2005/06 28473202 10705069 36439107

2006/07 32048864 16114562 52373409

2007/08 48463395 33134602 67702202

2008/09 89358744 35235076 121825869

2009/10 60655489 51625886 130855472

Total 292454944 161599471 130855472



Figure 2-1: Status of Credit Transaction of AEPC/BCU

Currently, it has about 232 partner MFIs out of 266 MFIs over the 42 districts of the country. AEPC is not being able to meet the credit demand from its partner MFIs due to lack of adequate fund and low recovery rate. In 27 districts, there are only one to five MFIs whereas in two districts there are more than 20 MFIs. In six districts more than ten MFIs are concentrated.

Table 2-2: Distribution of MFIs in Districts No. of MFIs 1 to 5 6 to 10 11 to 20 > 20 No of Districts 27 9 4 2

The overdue rate of its credit is comes to be at 10% with some of the bad debt. AEPC is lending its partner MFIs since 2058 in annual interest rate of 4-6% providing them 10% margin allowing them to lend their client in 14-16%.

1. Since 2058 to 2065/10/29 : 6% per annual (Diminishing Balance) 2. Since 2065/11/01 to 2067/10/13 : 4% per annual (Diminishing Balance) 3. Since 2067/10/14 to till date :6% per annual (Diminishing Balance)

The prominent credit suppliers for biogas program, Agricultural Development Bank, Nepal Bank Limited and Rastriya Banijya Bank are being distracted from this credit activity and other financial institutions also are not showing their interest towards this program regardless of government priority. The low recovery rate and high cost of operation are the reasons shown by those banks for decreasing trend of their lending in biogas plants.

Table 2-3: Sources of Fund for BSP Phase IV Remarks SN Donor Fund Required Remarks

1 SNV/DGIS NRs 315.52 m (Euro 3.73) {Euro 0.95 m + Euro 2.78m}

25.5% for subsidy & 74.5% for program

2 KfW NRs 642.5 m (Euro 7.09 m) For subsidy only 3 GoN NRs 240.32 m (Euro 2.82 m) For subsidy only 4 CDM NRs 18.62 m (Euro 0.22 m) Fund program mgmt. only 5 Participation Fee NRs 20.90 m (Euro 0.25 m) Fund raised from companies and used Total NRs 1,376 m (Euro 14.08 m) 23% for program mgmt. rest for subsidy



2.2 STATUS OF BIOGAS INSTALLATION 2.2.1 Trend of Biogas Plant Installation The consultant has reviewed the status of biogas installation during Fiscal years 2051/52 to 2067/68. In total, 229,093 biogas plants have been installed during that period, out of which 70% has been installed in cash contribution and only 30% have been installed through credit support of different financial institutions. The trend of biogas plants installation is increasing along with the increment of biogas plant installation in cash contribution whereas the installation of biogas plants in credit servicing has been decreasing day by day.

Looking at the trend of biogas plant installation, the practice of installing biogas plants with credit servicing was decreased drastically from F.Y. 2055/56 to F.Y. 2062/63 following the slight improvement but after F.Y. 2065/66 it again started to decrease significantly. In the contrary, the practice of installation of biogas plants with cash contribution has been increased significantly until F.Y. 2062/63 following the decrease in three consecutive years. It is due to the decrease in total number of plants installed. From the F.Y. 2065/66 onward the practice of installing biogas plants in cash contribution has been increasing constantly with the constant increment in total number of plants installed.

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of P

lant

2051/2052 2053/2054 2055/2056 2057/2058 2059/2060 2061/2062 2063/2064 2065/2066 2067/2068

Fiscal Year

Trend of Biogas Plant Installation

CreditCashTotal

Figure 2-2: Status of Biogas Plant Installation

Figure 2-3: Trend of Biogas Plant Construction in Credit



Figure 2-4: Trend of Biogas Plant Installation in Cash Contribution 2.2.2 Geographical Distribution of Biogas Plants Out of total plants installed, geographically, only 782 plants have been installed in mountain region which is less than 1 % of total, whereas 49% has been installed in hilly region including chure, low hills and high hills excluding the Chitwan and Dang districts. The construction of biogas plants with credit servicing is high in Terai (63%) compared to hill (37%). In contrast, the percentage of biogas plant installation in cash contribution is higher in hills (55%) than in terai (45%). Similarly, the biogas plants installed with cash contribution is higher in mountain region (0.43%) than credit servicing (0.14%) out of total.

Table 2-4: Geographical Distribution of Biogas Plants S.N. Region Credit % Cash % Total %

1 Mountain 96 0.14% 686 0.43% 782 0.34% 2 Hill 25636 37.06% 87653 54.81% 113289 49.45% 3 Terai 43436 62.80% 71586 44.76% 115022 50.21% Total 69168 159925 229093



Figure 2-5: Geographical Distribution of Biogas Plants

2.2.3 Contribution of Credit Suppliers

Among the financial institutions who delivered the credit to the biogas users, ADBL contributes 58%, Rastriya Banijya Bank 5%, Nepal Bank Limited 2% and other banks and financial institutions 34%. The trend of biogas installation during last five years has been seen increasing except in fiscal year 2064/65. However, the contribution in credit delivery of Nepal Bank Limited and Rastriya Banijya Bank has seen almost zero and the contribution of ADBL have also been decreased drastically.

Table 2-5: Contribution of Credit Suppliers

S.N. Region Credit

Cash Total ADBN NBL OTH PPP RBB

1 Mountain 62 0 34 0 0 686 782 2 Hills 16,186 475 8,134 90 751 87,653 113,289 3 Terai 24,118 1,141 15,245 453 2,479 71,586 115,022 Total 40366 1616 23413 543 3230 159925 229093

Figure 2-6: Contribution of Credit Suppliers on Biogas Plants

2.3 RENEWABLE ENERGY POLICY 2006

The Rural Energy Policy 2006 has been formulated to create conducive environment that will Self motivate and mobilize local institutions, rural energy users groups, non-government organizations, cooperatives and private sector organization for the development and



expansion of rural energy resources taking into account that there is an absence of the overall rural energy policy. In the context of Nepal’s rural areas, clean and reliable energy technologies seem to be less expensive and require less time to develop and effective management of which can contribute directly in the improvement of the overall rural population’s living standard. This policy provides general guideline for the rural energy development of Nepal.

The overall goal of this policy is to contribute to rural poverty reduction and environmental conservation by ensuring access to clean, reliable and appropriate energy in the rural areas. In order to achieve this goal, the objectives of this policy are to:

• reduce dependency on traditional energy and conserve environment by increasing access to clean and cost effective energy in the rural areas.

• increase employment and productivity through the development of rural energy resources.

• increase the living standards of the rural population by integrating rural energy with social and economic activities.

The Rural energy Policy 2006 has also developed the working policies for each of the rural energy technologies such as micro hydro, solar, biogas, biomass, wind, improved water mill, improved cook stoves, rural electrification etc. On top of that this policy has made number of arrangements such as subsidy, resources, coordination, monitoring and evaluation, institutional and other arrangements. The working policies formulated for biogas plants are to:

• give emphasis to carry out necessary research and studies to increase efficiency, reduce cost of the household biogas production technology, and to promote it in high mountains.

• give emphasis on research, development and dissemination of community and institutional biogas plants.

• establish biogas related information centre and exhibit encouragement in coordination and support of the local institutions.

• use of animal dried dung, as household energy will be discouraged.

2.4 SUBSIDY POLICY OF RENEWABLE ENERGY 2009 2.4.1 Objective of Subsidy Policy

Considering the fact of maximum utilization of renewable energy resources, AEPC formulated the subsidy policy in 2009 to make the subsidy arrangement equitable, effective and inclusive. The main objectives of this policy are to:

• maximize the service delivery and service delivery efficiency in the use of renewable energy resources and technologies in the rural areas and to provide opportunity to low-income rural households to use RETs.

• support rural electrification as well as gradually reduce the growing gap of electricity supply, consumption, etc. between rural and urban areas.

• make the use of grant assistance provided by donors, existing and forthcoming, in a more effective and objective oriented way and thereby attract additional donors and other investor in RETs sector.



• support development and extension of RET market by attracting private sector entrepreneurs.

• support the envisaged long-term targets of GoN in providing rural electrification and energy services.

2.4.2 Subsidy Policy in Biogas Plant It is envisaged that, biogas has occupied an important role in order to provide maximum benefit to rural households and to mitigate the environmental degradation and to meet the household energy requirements among all the Renewable Energy Technologies. Taking into consideration to this fact, the GoN, and various donor countries have been providing the subsidy to biogas plants since 1992 (2049 B.S.). Due to the potential benefits of this technology, the subsidy policy to biogas plants has been continued mobilizing different donors and investors. The current subsidy policy is applicable to only GGC 2047 Model or the revised model of same of capacity 4-8 cubic meter. As per the objective of timely revision of the subsidy and increase the access of this technology to low income population, the subsidy delivery process has been simplified and made internationally accredited (ISO 9001 – 2000), subsidy rates are periodically adjusted based on either according to the monetary inflation rate of Nepal Rastra Bank or with the market analysis of construction materials and services related to biogas plant. The current provision of subsidy on biogas plants are as follows.

Table 2-6: Provision of Subsidy in Biogas Plant

S.N. Subsidy

Individual Additional Institutio

nal Commu

nity 2-6 m 8 m3 Poor 3 Toilet attached

1 Terai (20 districts) 9700 9000 2000 3500 8000 6000 2 Hill (40 districts) 12700 12000 2500 4000 12000 9000 3 Remote hill (15 districts) 18700 18000 3500 4500 16000 12000 4 Very remote hill 20000 20000 3500 4500 16000 12000

5 Additional Subsidy for low penetration districts

700 700

6 Additional for dalit, depressed, conflict affected

2000 2000

7 Transportation subsidy for 12 districts 2000 2000 8 Transportation subsidy for 3 districts 4000 4000

2.4.3 Trend of Subsidy Allocation The trend of subsidy adjustment does not follow the cost of constructing the plants although the subsidy policy has made provision of adjusting the subsidy periodically being based on the inflation rate and market rate for construction material. The cost of plant construction has been increased continuously from the fiscal year 2005/06 but the subsidy allocated for the same has not been increased subsequently in one and the percentage of subsidy in relation to cost has been decreasing on the other.



Table 2-7: Trend of Subsidy and Plant Cost in Hills (For 6m3

Fiscal Year )

Plant cost Subsidy % of Subsidy 2000/01 23648 10000 42.29 2001/02 23673 9500 40.13 2002/03 23673 9500 40.13 2003/04 23298 8500 36.48 2004/05 24129 8500 35.23 2005/06 24621 8500 34.52 2006/07 31515 9500 30.14 2007/08 35153 9500 27.02 2008/09 42673 12700 29.76 2009/10 42673 12700 29.76

Figure 2-7: Trend of Biogas Plant Cost and Subsidy Provision

Figure 2-8: Percentage of Subsidy in Relation to Cost



2.5 BIOGAS CREDIT FUND OPERATING GUIDELINES

The Government of Nepal, Alternative Energy Promotion Center, Biogas Credit Unit has developed a biogas credit fund operating guidelines in 2011 with the objective of increasing credit access to the biogas owners through the intermediary financial institutions. Biogas credit Fund was established in 2058 under AEPC with the grant support of 2.5 million Euro from KfW to GoN. The main objective of Credit Fund is to:

• increase access to credit for the installation of the biogas plants to consumers. • grow as a secure capital fund to provide wholesale loans to FIs for the installation of

biogas plants. • grow as a secure capital fund to provide wholesale loans to FIs for the promotion of

renewable energy technologies • enhance the capacity of the FIs to provide easy access for the installation of biogas

plants This guideline has set the roles and responsibility of each of the bodies working to support the biogas program. Those bodies are:

• Biogas Coordination Committee • Alternative Energy Promotion Center • Biogas Sector Partnership Nepal • Nepal Biogas Promotion Association • Financing Intermediaries

This guideline has also set the eligibility criteria for getting fund, documents required, credit approval and disbursement procedure, loan repayment procedure along with the credit approval and disbursement procedure from MFIs. It has also set the supervision and monitoring activities to be carried out.

2.6 EVALUATION REPORT The evaluation of the Financial Co-operation (FC) project "Programme for the Promotion of Biogas Plants" was conducted by Tentscher et.al. (2001) under the leadership of KfW in accordance with the terms of reference established by the BMZ. In this context, the first phase of the third biogas extension programme (BSP III-1) was evaluated. The Main Findings of this evaluation was:

• The project made a major contribution to the sustainable use of biogas and digested sludge in farmers' households and to the development of an efficient biogas infrastructure which helped to improve the living conditions of the target group and at the same time reduced negative impacts on the environment.

• The most important positive ecological impact of the use of biogas is the substitution of equivalent quantities of firewood or fossil fuels (kerosene) and the subsequent



improvement of the environment and protection of resource whereas protection of the environment and resources is a major side effect of the project.

• The project has brought an improvement of living conditions of families in rural areas by making work easier, reducing health hazards, killing of parasites, etc.

• The project contributed to improve the qualifications of the staff of BSP and most of people employed in the biogas industry.

• The programme has set a positive example for other countries, however, the project was less successful than expected with respect to increasing the use of biogas lamps, and in households, which are connected to the power supply system (electric light) biogas lighting does not make sense.

• Another weakness of the programme was inappropriate use the sludge without fully exploiting its potential fertilizing value.

• Due to lack of innovative marketing strategies and support measures to promote the spread of biogas technology to more remote regions, poorer or disadvantaged group could not be benefited.

• One critical aspect that the evaluation pointed out is that so far the project has not been able to establish a structure in the sector, which is stable in the long-term and is commercially viable.

2.7 EXISTING PLAYERS OF BIOGAS PROGRAM Existing players of biogas installation program comprised of:

• Government agencies: MoE, AEPC • Donor agencies: ESAP/REF, KfW, SNV, • BSP/N • Nepal Biogas promotion Association (NBPA) • Private sector biogas companies • Financial Institutions



Chapter 3 APPROACH AND METHODOLOGY

3 APPROACH AND METHODOLOGY

3.1 APPROACH 3.1.1 General Approach The general approaches adopted by the Consultant for the study of increasing credit access for biogas plants in hills and mountains during the study period were:

• Selection of methods and technologies which have been tested and proven optimum, • Application of an optional combination of the methods and technologies based on

practicality, Client's requirements, and sound judgment, • Close contact and effective coordination with the Client and with all the concerned

persons and authorities, • Regular briefing to the Client and concerned personnel and authorities on the

progress of the study, • Full use of available and relevant reports, standards and other norms, which can be

obtained from all concerned agencies. • Clearly defined roles and responsibilities for each member of the proposed study

team personnel, • Strict adherence to the work schedule, • Sufficient flexibility to respond to desired changes and directions, • Systematic procedures for quality control, • Systematic monitoring of both process and performance, • Completion of the proposed services within the stipulated time and budget, • No compromise to the quality and standards of outputs of the study.

3.2 METHODOLOGY

An attempt has been made to combine both qualitative and quantitative methods to complete the assignment. Since this assignment aims to study with possible ways to increase the credit access to the hills and mountains for the installation of biogas plants, participatory approach of study method was preferred. For this, primary and secondary information has been collected and analyzed for the review of the project. For primary information, a checklist, containing required outcome level information, has been developed and consultations were made with the beneficiaries directly through interview, focus group discussion, field observation and personal consultation with project staffs and other concerned organizations and individuals. Secondary information regarding status of biogas plant installation, policy documents, information on biogas companies and partner MFIs, AEPC monitoring report have been collected from concerned offices. All collected primary and secondary information has been compiled and analyzed to review the project



status and make fruitful recommendation for the achieving the targeted goal of the project to give a clear picture of possible ways to increase the credit access to the hills and mountains for the installation of biogas plants. The consultant has followed steps described as below for this study. 3.2.1 Desk Study In this step, the consultant reviewed the secondary information, arranged consultative meeting with the client and prepared and submitted inception report. Review of Secondary Information / Program Documents The DVN, under guidance and support from AEPC management reviewed the secondary information comprised of policy documents, status of biogas installation, previous study reports available at different sources such as AEPC, BSP, Financial Institutions, Biogas Promotion center. Following documents have been reviewed during this phase.

• Credit Portfolio Structure of AEPC/BCU • Status of biogas plants installation • Renewable Energy Policy 2006 • Subsidy Policy of Renewable Energy 2009 • Biogas Credit Fund Operating Guideline, 2011 • Evaluation Report • Existing players of Biogas Program

Consultative meeting with the Client A consultative meeting with the client was arranged to ease the study by getting feedback for preparing action plan of field visit. During the consultative meeting the team of consultants met with Senior Energy Officer, Mr. Samir Thapa and Credit Officer Mr. Sushil Acharya at AEPC. Similarly the consultant met Mr. Keshav Rai, of BSP. During the meeting the consultant reviewed the focus of the study, study methodology including field visit and the outputs to be produced. Preparation of Action Plan In the consultation with the AEPC, detail action plan of study visits along with the questionnaire and checklists was developed for the study. Separate questionnaires for interview with financial institutions, biogas companies and biogas users were developed. In addition, separate checklist for meeting with stakeholders and conducting focus group discussions at field level were developed. Preparation of Inception Report An inception report was prepared incorporating the information available from literature review, suggestions from consultative meeting along with the detail action plan of study visit, questionnaire and checklists for key informant interview and focus group discussion and submitted to the client. The comments given in inception report by the AEPC have been taken into account while conducting the field study.



3.2.2 Field Study

During the field study, meetings with different stakeholder and financial institutions at central level and visit field level institutions were conducted. Primary data were collected through key informant interview at central level and focus group discussion and individual interview at field level. The five districts i.e. Tehrathum, Dolakha, Palpa, Pyuthan and Dadeldhura were visited for field study.

Meeting with different Stakeholders At central level, the consultant met with key concerned institutions / program namely AEPC, ESAP/REF, KfW, SNV, BSP/N, Nepal Biogas Promotion Association (NBPA) and Prominent biogas companies to seek their views on the study objectives.

Meeting with Financial Institutions During the study, the consultant visited the existing and potential financial institutions to see the possibility for wholesale lending through these financial institutions. The visited institutions were Bank of Kathmandu, Mega Bank, Kist Bank, Clean Energy Development Bank, Sana Kisan Bikash Bank, National Cooperative Bank, Rural Microfinance Development Centre (RMDC). In the process, it was found out that whether they are interested to take over the biogas credit portfolio and support in increasing credit access to the hills and mountains as per the objective.

In addition, the consultant also interacted with previous prominent financing institutions such as Agricultural Development Bank Limited, Nepal Bank Limited and Rastriya Banijya Bank and found out the reasons behind their distraction towards financing in biogas.

Field Visit Besides visits to key institutions in Kathmandu, the study team visited selected MFIs in the field to know their perception on increasing the access to credit facilities for biogas plants installations in hills and mountains. The study team found out the potential project activities in the program areas and program targeted communities. The study team visited Micro Finance Institutions, Financial Intermediary NGOs, Saving and Credit Cooperatives, District Energy and Environment Section/Units, Local level biogas companies and Potential financial institutions at local level.

During the visit of key institutions, the study team visited District Energy and Environment Sections/Unit in the districts and assessed their capacity to handle credit aspects and mechanism to deliver biogas credit to the potential farmers. Besides, the study team also visited potential non FI institutions in the hills and mountains and assessed the possibility of involving them as second or third tier institutions to deliver biogas credit. The study team also assessed the possibility in terms of policy implications, and institutional objectives and capacity of such institutions. Primary Data Collection Primary information has been collected through key informant interviews and focus group discussion at district level. Selected financial institutions currently involved in financing biogas in hills and mountains were also consulted for this purpose.



• Key Informant Interviews: Similarly, rapid appraisal through semi structured interviews of key-informants, focus group discussions, direct observations and site visits and key interviews with local informants on possible ways to increase the credit access to the hills and mountains for the installation of biogas plants has been conducted through defined tools.

• Individual Interviews: People's experiences, knowledge, feelings, opinions have

been obtained through interviews at their workplaces. Observation became useful for describing people’s activities and behavior as well as organizational processes and interpersonal interactions.

• Focus Group Discussions: Different focus group discussions at community level

have been organized with biogas user families, VDC authority and line agencies to understand the concerns that they would like to address by the program.

3.2.3 Office Study In this step, the collected data has been processed, analyzed and interpreted for the purpose of developing mechanism to increase the credit access for biogas plants in hills and mountains. A draft report has been prepared and submitted to the client for comments and report will be finalized incorporating the comments made by the client in draft report. Data Processing, Analysis and Interpretation Collected data has been processed with a view to reducing the errors in data collection. Processing of data comprised of editing, coding, categorizing and tabulation. Editing has been done to detect errors and omissions. As far as possible, the edited data made accurate, consistent, and complete and accepted for tabulation. Processed data has been analyzed using cross tabulation and percentile methods for quantitative data while qualitative data has been analyzed subjectively. Draft report Preparation and Submission A draft report has been prepared after the completion of data collection, processing, analysis and interpretation. A draft report has been presented for review by concerned officials. The comments made by the concerned officials will be incorporated in the final report as and where necessary. Draft report has covered the contents prescribed in the annex II. Finalization Workshop The consultant will organize a half day finalization workshop in the participation of concerned authorities and stakeholders to present the findings of the study and recommendations made by the consultant. The consultant will finalize the report incorporating the comments made by the participants of the workshop. Final Report Submission A final report will be produced after incorporation of the comments on draft report submitted to the client and presented in the finalization workshop.



Chapter 4 FINDINGS OF THE STUDY

4 FINDINGS OF THE STUDY

4.1 TREND ANALYSIS OF BIOGAS PLANT INSTALLATION

4.1.1 Overall Trend of Biogas Plant Installation

The overall trend of biogas plant installation in the country has been increasing significantly until fiscal year 2057/58 however the number of plants installed after that period has been remained constant until fiscal year 2064/65 with a slight increment in last two consequent years. The consultant studied the trend of biogas plant installation during last three years and found out that it is increased by 15% however increment in biogas plant installation in last year was not significant compared to pre-last year. With this annual increment trend, the number of plants need to be installed this year is 24,295. 4.1.2 Trend of Credit Delivery in Biogas Plant Installation

The number of biogas plant installation in credit support has remained almost constant during last three years with annual increment of 0.12% whereas the numbers of plants installed in cash contribution has been increased significantly by annual increment of 19% in the same period. In the same manner, the total plants installed have been increased by 15% annually during that period. The trend of biogas plant installation shows that there will be no significant increment in plant installation with credit support.

Table 4-1: Trend of Biogas Plant Installation in last three years Biogas plant Installation by

1 2 3 Annual Forecast 2064/65 2065/66 2066/67 Trend Percent 2067/68

Credit Servicing 4,519 5,910 4,530 6 0.12 4536 Cash Contribution 10,365 13,569 16,628 3132 18.83 19760 Total 14,884 19,479 21,158 3137 14.83 24295

Figure 4-1: Trend of Biogas Plant Installation in last three years



The contribution of financial institutions in credit servicing for biogas plant installation has decreased drastically in last five years. The credit delivery of prominent banks such as agricultural Development Bank Limited and Rastriya Banijya Bank has decreased drastically and another prominent bank, the Nepal Bank Limited has stopped lending in biogas plant since fiscal year 2059/60. However, the credit servicing from other banks like Bank of Kathmandu, Clean Energy Development Bank and other Micro financing institutions has been increased significantly from fiscal year 2062/63 to fiscal year 2064/65 but remained almost constant after that period. Most of the banks and financial institutions have stopped lending in biogas plant due to low recovery rate of the portfolio and high operating cost with low profit margin.

Table 4-2: Trend of Credit Servicing in Biogas Plant Installation for last three years

Fiscal Year ADBN OTHERS RBB Total 2062/2063 566 1789 14 2369 2063/2064 310 3259 1 3570 2064/2065 199 4,320 4519 2065/2066 36 5,874 5910 2066/2067 5 4,525 4530

Figure 4-2: Trend of Credit Servicing by Financial Institutions

As per majority of responding financial institutions (60%), it is revealed that the trend of credit servicing for biogas plants in most of the banks and financial institutions has been decreased due to low recovery rate, low demand for credit, lack of fund for credit servicing and changed policy priority of commercial banks. Majority of biogas companies (More than 90%) have constructed the biogas plants in cash contribution by the plant owners. The reasons behind this are inaccessibility of credit, high interest rate and lengthy and troublesome credit procedures. Majority biogas owners (67%) did not use credit facility from the financial institutions due to high interest rate, unfavorable credit procedure and lack of access to credit.



4.1.3 Trend of Biogas Plant Installation by Size and Cost

The study also revealed that the mostly demanded size of biogas plants are 4 m3 and 6 m3 with the average cost of plant amounting Nrs. 33,400 and Nrs. 39,400 respectively in hills and mountains whereas the average cost for 8m3 plant comes to be Nrs. 46,300. The subsidy allocated for the same size of plants in hills and remote hills is Nrs. 18,700 and 20,000 respectively where as the subsidy allocated for the plants of more than 6 m3

4.2 ANALYSIS OF CREDIT PORTFOLIO STRUCTURE OF AEPC

is 18,000 and 20,000 for hills and remote hills respectively. The reason behind the attraction of people for small size of plants seems to be the same amount of subsidy allocation and varied cost of plants by size and the decreasing trend of livestock holding by people in hills and mountains. If the plant is constructed attaching the toilet and by poor family the additional subsidy amount of 8,000 has been provisioned. In this case, the total subsidy a poor family can get attaching the toilet is Nrs. 26,700 and 28,000 in hills and remote hills respectively. The provision of low subsidy for institutional plant and community plant has discouraged the people to construct the large size of plant at community level.

The trend of credit disbursement for MFIs from AEPC and collection of the same has been increased by 10% and 18% respectively whereas the outstanding loan has also been increased significantly by 24% during last three years. With this annual increment trend, AEPC has to lend Nrs. 66,751,536.00 and collect Nrs. 60,871,528.00 in this fiscal year making the loan outstanding amount of Nrs. 162,432,107.00. The study revealed that one of the reasons of decreasing trend of credit servicing for biogas plants by financial institutions is lack of fund for lending. In this scenario, AEPC has to disburse more funds in order to raise the credit servicing capacity of the financial institutions. The more financial institutions are attracted to this program, the more fund will be required and the AEPC has to manage adequate fund for the same otherwise the expected output cannot be achieved.

Table 4-3: Trend of Credit Portfolio and Forecasting

Particular 1 2 3 Annual Forecast

2007/08 2008/09 2009/10 Trend Percent 2010/11 Disbursement 48463395 89358744 60655489 6096047 10.05 66751536

Collection 33134602 35235076 51625886 9245642 17.91 60871528 Outstanding 67702202 121825869 130855472 31576635 24.13 162432107

4.3 PROBLEM FACED IN CREDIT SERVICING FOR BIOGAS PLANT INSTALLATION

The study revealed that there are number of problems faced by different stakeholder in credit servicing for biogas plant installation. The main problems associated with credit servicing are:

• Low demand for credit • Low recovery rate of biogas credit portfolio • Lack of fund for credit servicing • Lack of awareness on people • Absence of policy priority • Weak monitoring mechanism



4.3.1 Low Demand for Credit The study found out that there is a conception of rural people that biogas is a luxury thing for marginalized people and it is affordable only by higher class people. Biogas companies used to avail the biogas equipments in credit and people are motivated not to take loan. One of the reason for low demand of credit due to construction of biogas plants in cash contribution by biogas owners. It is also revealed that affordability of biogas owner has been increased due to income from remittance and it is reached only to middle class people and plants are not accessible to marginalized people. Another reason for decreasing demand for biogas plant is that livestock holding pattern has been decreasing in hills and mountains due to labor export and local migration to terai. Low access to credit in hills and mountains due to no presence of adequate financial institutions is also a reason of low demand for credit. Demand for biogas plant could not be increased as expected due to difficulty in transportation of biogas equipment and construction material as the subsidy is available only for GGC model. Energy need is fulfilled by solar energy in hills and mountains instead of biogas plants. Low credit demand is also caused by lengthy troublesome process of credit servicing of the banks and financial institutions. 4.3.2 Low recovery Rate of Biogas Plant Financial institutions are facing problem of low recovery rate of biogas loan causing bad portfolio due to high overdue amount and high operating cost caused by small size of loan and scattered project site. Lack of repayment capacity of marginalized people because it does not generate any income to repay the loan and the time saved for collection of fuel wood due to installation of biogas plant is not utilized properly to generate income that is another reason for low recovery rate. Similarly, lack of proper understanding and proper monitoring from concerned authorities and lack of support for after sales services from the biogas companies is also the cause of not repaying loan in time. It is also envisaged that the people are not aware of repaying loan in time. 4.3.3 Lack of Fund for Credit Servicing Commercial banks are not interested to lend in biogas plant due to high operating cost, small size of loan and lack of fund for credit servicing in biogas plant because the liquidity crisis has put the pressure on commercial banks to mobilize their fund properly and wisely and they have opportunity to use available fund in better way rather than to lend for biogas. It is also envisaged that biogas is a social program and not linked with income generating activities and financial institutions did not find this venture financially viable to lend on it. 4.3.4 Weak Monitoring Mechanism The study found out that there is no strong mechanism developed to monitor the program implementation. AEPC has made its effort to control the quality of biogas plant installation through prequalification of biogas companies and has established District Energy and Environment section/Unit under the umbrella of DDC but these section and units are not



capable of conducting monitoring activities of biogas plants. It is because they have limited human and financial resources and they have to look after other renewable energy activities as well. The study also found out that there are no records of biogas plant installation in District Energy and Environment Section /Unit. The study also revealed that the subsidy for biogas plant is channelized centrally and there is no participation of local people in subsidy process. 4.3.5 Lack of Awareness Among People The study revealed that the rural people have conception that biogas plant is for high class people due to high rate of interest charged by the financial institutions for credit and marginalized people have no access to credit. This is because the rural people are not aware of benefit of biogas plant and subsidy provision made by government for the installation of biogas plants. Also people are not aware of the use of slurry as a better fertilizer for high value crops and use of time saved in income generating activities which can be helpful in repaying the loan. Lack of promotional activities regarding use and benefit of biogas plants is the reason of not being aware. 4.3.6 Absence of Policy Priority Rapid growth of financial institutions in the market raised the level of competition between the financial institutions for survival which lead the financial institutions to set their priority in more profitable and viable projects rather than lending in biogas plants. Therefore, most of the commercial banks take off the biogas plants from their priority list of lending.

4.4 SUGGESTIONS FOR INCREASING CREDIT ACCESS

The consultant has gathered some useful suggestions during the study to increase the access to credit for local community of hills and mountains by:

• Increasing demand for credit • Increasing recovery rate • Mobilizing fund properly • Raising awareness of people • Setting priority for biogas installation • Developing strong monitoring mechanism

4.4.1 Suggestions for Increasing Credit Demand The respondents have suggested raising the awareness of rural people especially of hills and mountains about the benefit of the biogas plant construction along with the provision of subsidy for the same and this program is not only for high class people but also for all household of the country. It is also suggested to make easy access to credit involving Micro financing institutions and local level cooperatives in this endeavor. The respondents suggested using prefabricated material for biogas plant to reduce the transportation cost in



hills and mountains which ultimately increases demand for biogas plant. It is also suggested that biogas companies needs to guarantee the after sales services for biogas plants which can raise the demand of the same. 4.4.2 Suggestions for Increasing Recovery Rate The study found out that biogas program needs to be linked with income generation activities such as Livestock development program, agro-processing, cultivation of high value crops using slurry etc. to make the credit holder capable to repay the loan in time. It is also suggested that incorporation of interest subsidy on biogas credit helps to raise recovery rate of biogas credit. Development and implementation of package approach or cluster approach for biogas plant construction can lower the operating cost of the financial institutions making it viable for lending. Community biogas plant construction in commercial scale encourages the financial institutions to lend on biogas plant considering it as financially viable project. Linkup the subsidy with credit recovery and increase subsidy for hills and mountains may raise the recovery rate of biogas credit. 4.4.3 Suggestions for Mobilizing Fund Properly The commercial banks and financial institutions are not interested to lend in biogas plant due to liquidity crunch. Therefore, it is suggested to link up the biogas program with youth self employment program by transferring the fund available to youth self employment to biogas fund. The study is also found out that the wholesale lenders such as RMDC, SKBBL, Grameen Bikas Banks, Cooperative Bank, and commercial banks as well are comfortable to lend on biogas plant if the interest rate to be charged by AEPC to wholesale lenders is differentiated from retailers. 4.4.4 Suggestions for Raising Awareness of People The stakeholders suggested to raise the awareness about the benefit of biogas program through orientation and other promotional activities by involving BSPN, AEPC, NCDB, National Cooperative Association and also Involving the local level cooperatives in this venture. The AEPC has to make some financial provision for promotional activities of the same. The promotional activities need to incorporate the benefit of biogas plant installation as well as it is necessary to link up it with some income generating activities such as farming of high value crops using slurry produced from biogas plant or to market the slurry or to use the time saved from installing biogas plant in some income generating activities. 4.4.5 Suggestions for Setting Priority for Biogas Plants Installation The stakeholders have suggested that the government through Nepal Rastra Bank needs to make it mandatory by policy enforcement to the financial institutions for lending certain percentage of its asset to biogas plants.



4.4.6 Suggestions for Developing Monitoring Mechanism The respondents suggested that the DEES/U at DDC should be made responsible for monitoring and approval of credit fund and small scale piloting is necessary to launch the program through LDF. They also suggested channelizing the government subsidy through DDC. For making monitoring effective, it is suggested to form a committee in coordination of Energy Development officer involving representatives from district level financial institutions, biogas companies and other stakeholders which regularly monitor the activities of the program.

4.5 FUTURE PLAN OF FINANCIAL INSTITUTIONS FOR CREDIT SERVICING Among the responding financial institutions, 63% have their future plan for financing in biogas plants whereas the 37% are not interested and does not have future plan for the same. Among them, some financial institutions are willing to stop the financing in biogas plant due bad portfolio with increased overdue. Financial institutions have following suggestions for enhancing credit servicing in future.

• Launch a special program for piloting in hills and mountains • Raise awareness in coordination with AEPC • NGOs need to gain confidence of commercial banks • Lending through cooperative model • Policy enforcement for awareness program • Interest rate spread needs to be appropriately fixed • Needs to make credit security arrangement for biogas credit • Needs to make provision of interest subsidy • Make mandatory for lending in biogas • Needs to raise interest rate in credit • Needs to develop a coordinated approach for credit recovery • Make biogas companies responsible for credit recovery • Raise repayment capacity of the people through income generating activities • Make arrangement of guarantee fund to cover credit risk

4.6 SUGGESTION FOR FINANCING MECHANISM During the study, it is envisaged that National Cooperative Bank and Sana Kisan Bikas Bank Limited are interested to mobilize the AEPC fund to lend in biogas plant through its member organizations via wholesaling if interest rate spread is in comfortable level and Clean Energy Development Bank is interested in wholesaling to MFIs to construct biogas plants if guarantee fund is available. ADBL has also shown interest in financing biogas in case a low cost fund for the same is available. In this scenario, the respondents suggested developing financing mechanism through:



• Making arrangement of lending through selecting some capable cooperatives and

micro financing institutions working in district level • Wholesale lending by commercial banks to cooperatives, MFIs, local level NGOs

making them responsible for loan recovery • Providing credit through LDF basket fund and community development fund at district

level • Developing the capacity of local level financing institutions through involvement of

National Cooperative Federation, donors and INGOs with coordinated approach • Increasing the role of BSPN, AEPC in awareness raising and fund mobilization • Developing lending mechanism to go directly through the partner MFIs of RMDC but

with the approval of RMDC • Developing partnership with financial institutions for fund mobilization • Making available low cost fund to the wholesalers with reasonable interest rate

margin • Creating a revolving fund for credit delivery and a credit security fund to cover the

credit risk



Chapter 5

REPORTING

5 CONCLUSION AND RECOMMENDATIONS

5.1 CONCLUSION In conclusion, the study team tries to summarize the findings of the study obtained during the study period. The study team reviewed the relevant documents, collected information regarding the problems faced and the possible ways to solve the problems. The study has produced status and trend of biogas installation in hills and mountains, assessment of credit delivery mechanism, identified problems faced by stakeholders of this program and found out possible ways to address the problem in order to increase the access to credit for biogas plants in hills and mountains. The study reviewed the relevant literatures to assess the status, policies and procedures established for launching the program and analyses the trend of biogas plant installation in cash contribution and credit servicing. It is also found out that small size biogas plants 2-6 m3 are in focus of subsidy allocation by AEPC. Likewise, small size plants are mostly demanded by people however the trend of subsidy allocation has been decreased compared to cost escallation. The total number of plants installed during last three years has been increased by annual increment rate of 15% however the numbers of plants installed by credit servicing remained almost constant. The outstanding amount of credit extended to financial institutions by APC/BCU has been increased by 24% annually. The study identified the problems of low demand of credit, low recovery rate, scarcity of fund for credit servicing, low priority set by financial institutions for biogas credit, weak monitoring of biogas program. The study also observed the reasons behind the existence of these problems and also explored the ways to solve the problems. The solution of those problems are raising awareness of the people, raising repayment capacity of the plant owners incorporating the income generating activities with biogas program, mobilizing fund adopting centralized and decntralized approaches and developing strong monitoring mechanism. Credit access for biogas plants can be increased by making arrangment of lending through selected local level MFIs, Cooperatives and NGOs however wholesaling of credit can be channalled through commercial banks and wholesale lending institutions. The local level financial institutions can also be suported by LDF basket fund mobilizing through DEES/U established in each district. Weak monitoring of biogas program has been found due to lack of financial as well as human resources at district level organizations. DEES/U established by AEPC in each district has to strengthened in order to develop strong monitoring mechanism for effective implementation of biogas program.



Lack of awareness of the people about the benefit of biogas plants perticularly in hills and mountains can not increase the demand of biogas plants. Similarly, no practice of utilizing the leisure time saved by the installation of biogas plants in income generating activities, which can support the repayment of the loan, creates the low recovery of loan making bad portfolio of the financial instituions and this helped the financial institutions to divert the lending activities to other better options available to them rather than lending in biogas.

5.2 RECOMMENDATIONS The basic objective of the study is to recommend the appropriate ways of solution to the problems faced by the stakeholders involved in biogas program. On the basis of review of relevant documents, policies and procedures and the findings of the study obtained from the respondents of questionnaire survey, focus group discussion, consultative meetings with stakeholders; the consultant recommends the following mechanisms to increase the credit access for biogas plants to hills and mountains.

• Credit delivery mechanism • Financial support • Technical support • Institutional support

5.2.1 Credit Delivery Mechanism Strong and effective credit delivery mechanism is a felt need of the day to increase the credit access to biogas plant owners of hills and mountains. Therefore, it is recommended to develop a mechanism for credit delivery to the biogas plant owners to increase the credit access to them in hills and mountains. It can be done by:

• Developing easy access to credit • Assuring credit recovery for the banks and wholesalers • Policy enforcement for credit delivery in biogas plants in hills and mountains • Preparing a map of MFIs and cooperatives for credit servicing

Developing easy access to credit Limited access to credit in hills and mountains pertains due to low presence of financial institutions. Most of the financial institutions are concentrated in urban sector and terai region. Only limited financial institutions have their branches in hills and mountains. Therefore, develop easy access to credit is recommended through:

• Wholesaling by commercial banks and other wholesaling institutions like SKBBL and NCBL

• Retailing by local level MFIs, Cooperatives, NGOs and bank branches



Assurance of Credit Recovery for the Banks and Wholesalers Credit recovery in time is a prerequisite of financial institutions to increase credit delivery rate for biogas plants. Banks and wholesaling financial institutions are required to be assured of in time recovery of credit. It is recommended to assure the financial institutions by:

• Making biogas companies responsible for credit recovery • Establishing credit security fund to cover the credit risk

Policy Enforcement for Credit Delivery Most of the banks and financial institutions are in pressure of qualitative lending to be competitive in the market. In this scenario, biogas plants are not in policy priority of the financial institutions due to its low recovery rate and bad portfolio. In the mean time, the financial institutions are not taking biogas as a financially viable venture for lending as this does not generate income directly. Therefore, the study recommends enforcing the policy by the regulatory body to increase the credit delivery in biogas plants particularly in hills and terai considering the benefit of this activity. Preparing a map of MFIs and cooperatives for credit servicing The study team has prepared a map of potential MFIs/Cooperatives/Bank branches for credit servicing as discussed with the wholesaling financial institutions. The recommendation is made on the basis of discussion made with wholesaling financial institutions like SKBBL, NCBL, RMDC and ADBL. The district wise numbers of partner MFIs/Cooperatives/Branches is provided in Appendix II and a map showing the same is presented in Figure below.



Figure 5-1: Partner Institutions of Different Wholesaling Financial Institutions



5.2.2 Financial Support Liquidity problem has limited the credit access for biogas plants. In order to solve this problem, financial support for financial institutions is recommended by:

• Creating a revolving fund for credit servicing • Developing fund mobilization module • Rationalizing the subsidy allocation • Making provision of funding for promotional activities

Create a Revolving Fund Financial support to the financing institutions has become the pre-requisite for the credit servicing in biogas plants due to liquidity problem and competition in the market. Therefore, a revolving fund is recommended to support the financial institutions as and when they need it. It is recommended to create this fund by involving:

• Donor support • Participation of commercial banks via mandatory policy enforcement • Government support

Developing fund mobilization module The study has recommended developing a module for mobilization of funds for the financial institutions. Right now, AEPC has adopted a centralized approach for fund mobilization. It is revealed that this module could not make easy access to the fund for financial institutions and create a monitoring problem. Therefore, It is suggested to mobilize the fund through:

• Centralized module – mobilize fund to wholesalers through AEPC • Decentralized – mobilize fund to local level retailers through DEES/U at DDC

Rationalizing the subsidy allocation The study also found out that the allocation of subsidy does not match with the cost involved in installation of biogas plants. Therefore, it is recommended to allocate subsidy by percentage of total cost involved including transportation cost Making provision of funding for promotional activities The study revealed that a basic reason of low demand of biogas plants in hills and mountains is the lack of awareness. Therefore, it is suggested to raise the awareness of the people by making provision of fund for promotional activities involving the stakeholders of the biogas program. 5.2.3 Technical Support Technological constraints also obstruct the increasing access to credit due to cost ineffectiveness and high cost of transportation in hills and mountains. Considering this fact, it is recommended to:

• Develop appropriate model of biogas plants for hills and mountains using pre-fabricated materials to save the transportation cost



• Assure the plant owners for after sales services and spare parts making the biogas companies responsible

• Provide technical support for proper utilization of slurry in crop production and marketing the same

• Link up the biogas program with other income generating activities such as livestock development program, high value crop production, marketing of farm products etc.

• Encourage to develop community biogas plant to reduce cost per unit energy production and raise access to credit

5.2.4 Institutional Support Proper institutional arrangement is equally necessary as financial and technical support to increase the credit access. Therefore, an institutional support is also recommended to facilitate the increment in credit access in biogas plants such as:

• Develop a strong monitoring mechanism by forming a coordination committee at central as well as at district level

• Strengthening the capacity of DEES/U for program monitoring and fund mobilization • Involve stakeholders such as AEPC, BSPN, Nepal Biogas Promotion Association,

National Cooperative Development Board, National Cooperative Federation, NEFSCUN in awareness raising campaign

• Launch the program developing biogas clusters/villages/pockets to ease the monitoring and to attract the financial institutions for credit

• Mobilize community for biogas development


Development Vision Nepal Pvt. Ltd.

APPENDIXES



Appendix I District Wise Distribution of Biogas Plants

Mountain Districts S.N. District ADBN NBL OTH PPP RBB Cash Total

1 Dolpa 4 4 2 Humla 1 1 3 Mugu 4 4 4 Mustang 12 12 5 Rasuwa 244 244 6 Sankhuwasabha 57 34 284 375 7 Solukhumbu 66 66 8 Taplejung 5 71 76

Total 62 0 34 0 0 686 782 Hill Districts S.N. District ADBN NBL OTH PPP RBB Cash Total

1 Achham 17 17 2 Arghakhanchi 150 26 489 665 3 Baglung 88 534 622 4 Baitadi 13 6 13 32 5 Bajhang 68 37 105 6 Bajura 5 5 7 Bhaktapur 4 19 719 742 8 Bhojpur 16 8 187 211 9 Dadeldhura 4 5 102 111

10 Dailekh 23 27 33 83 11 Darchula 2 269 271 12 Dhading 571 156 32 3,768 4,527 13 Dhankuta 273 31 6 1,965 2,275 14 Dolakha 29 118 808 955 15 Doti 7 11 20 38 16 Gorkha 674 768 81 2,854 4,377 17 Gulmi 316 23 14 1,092 1,445 18 Ilam 355 1,176 80 1,354 2,965 19 Jajarkot 1 1 20 Jumla 5 5 21 Kalikot 60 60 22 Kaski 3,006 5 249 181 10,228 13,669 23 Kathmandu 54 78 1,076 1,208 24 Kavrepalanchowk 342 8 1,166 1 6,034 7,551 25 Khotang 6 4 18 28 26 Lalitpur 16 101 1,104 1,221 27 Lamjung 1,810 12 806 71 4,852 7,551 28 Makwanpur 1,294 63 68 63 3 14,979 16,470 29 Myagdi 41 27 775 843 30 Nuwakot 548 32 5 1,712 2,297



S.N. District ADBN NBL OTH PPP RBB Cash Total 31 Okhaldhunga 37 75 112 32 Palpa 1,168 480 29 3,475 5,152 33 Panchthar 144 204 260 608 34 Parbat 210 14 607 831 35 Pyuthan 309 25 467 801 36 Ramechhap 87 94 13 826 1,020 37 Rolpa 1 15 16 38 Rukum 20 14 34 39 Salyan 30 48 55 133 40 Sindhuli 210 28 12 4,675 4,925 41 Sindhupalchowk 115 140 637 892 42 Surkhet 705 2 239 1,264 2,210 43 Syangja 898 163 3 5,051 6,115 44 Tanahu 2,100 157 1,748 23 10,480 14,508 45 Tehrathum 54 1,565 1,619 46 Udayapur 456 102 116 27 185 3,077 3,963

Total 16186 475 8134 90 751 87653 113289 Terai Districts S.N. District ADBN NBL OTH PPP RBB Cash Total

1 Banke 603 718 26 1,795 3,142 2 Bara 380 107 11 51 2,944 3,493 3 Bardiya 1,097 4 253 122 19 4,535 6,030 4 Chitwan 3,717 372 887 86 138 9,047 14,247 5 Dang 1,885 1 1,032 11 4,011 6,940 6 Dhanusa 81 9 26 447 563 7 Jhapa 2,941 280 6,097 65 9,708 19,091 8 Kailali 1,700 33 1,155 70 8,245 11,203 9 Kanchanpur 1,301 612 184 2 6,282 8,381

10 Kapilbastu 629 48 134 515 2,307 3,633 11 Mahottari 132 2 18 25 928 1,105 12 Morang 3,156 76 2,430 316 4,565 10,543 13 Nawalparasi 1,679 64 354 3 1,134 5,704 8,938 14 Parsa 40 2 27 555 624 15 Rautahat 511 1 34 1,055 1,601 16 Rupandehi 1,495 87 468 30 4,336 6,416 17 Saptari 79 17 1 1 321 419 18 Sarlahi 1,093 48 160 30 2,545 3,876 19 Siraha 102 12 361 475 20 Sunsari 1,497 108 762 19 21 1,895 4,302

Total 24118 1141 15245 453 2479 71586 115022



Appendix II

Mapping of Potential Partner MFIs/Cooperatives/Bank branches of Financial Institutions by district

Mountain Districts S.N. District AEPC SKBBL RMDC NCBL BoK

ADBL (Branch) Total

1 Dolpa 1 1 2 Humla 1 1 3 Mugu 1 1 4 Mustang 1 1 5 Rasuwa 1 1 2 6 Sankhuwasabha 1 1 2 7 Solukhumbu 1 1 8 Taplejung 1 1

Total 1 0 1 0 0 8 10 Hill Districts S.N. District AEPC SKBBL RMDC NCBL BoK

ADBL (Branch) Total

1 Achham 1 2 3 2 Arghakhanchi 1 3 1 2 7 3 Baglung 4 3 106 3 116 4 Baitadi 1 2 3 5 Bajhang 1 1 2 6 Bajura 1 1 7 Bhaktapur 1 3 4 8 Bhojpur 1 1 9 Dadeldhura 2 1 3

10 Dailekh 1 1 2 11 Darchula 1 1 2 12 Dhading 1 20 4 25 13 Dhankuta 1 1 1 3 14 Dolakha 3 83 1 87 15 Doti 2 2 16 Gorkha 4 1 2 3 10 17 Gulmi 2 1 2 5 18 Ilam 10 3 3 16 19 Jajarkot 1 1 2 20 Jumla 1 1 21 Kalikot 1 1 2 22 Kaski 4 3 127 4 138 23 Kathmandu 6 4 22 32 24 Kavrepalanchowk 18 2 2 4 26



S.N. District AEPC SKBBL RMDC NCBL BoK ADBL

(Branch) Total

25 Khotang 1 1 2 26 Lalitpur 1 3 4 8 27 Lamjung 2 2 3 7 28 Makwanpur 4 4 2 2 12 29 Myagdi 1 1 30 Nuwakot 2 74 3 79 31 Okhaldhunga 1 1 32 Palpa 1 2 2 2 7 33 Panchthar 6 1 7 34 Parbat 3 1 2 6 35 Pyuthan 1 1 1 3 36 Ramechhap 1 1 2 37 Rolpa 1 1 2 38 Rukum 1 2 2 5 39 Salyan 1 1 1 3 40 Sindhuli 2 1 3 41 Sindhupalchowk 3 3 6 42 Surkhet 9 6 4 87 2 108 43 Syangja 2 1 39 3 45 44 Tanahu 3 1 4 88 3 99 45 Tehrathum 1 1 46 Udayapur 3 3 3 9

Total 82 66 48 604 0 109 909



Figure 2: Meeting with s takeholders in Pyuthan

Figure 1: Mee ting with s takeholders in Dade ldhura Dis tric ts



Figure 3: Dis cus s ion with Farmers , Pa lpa

Figure 4: Cow Farm, Palpa