Biomass - Energy Toolbox

Credit and Finance Issues

The ability to access well managed credit facilities is a key issue in any agricultural-based development and this can often prove to be the major constraint to the development of farmer and community-based projects. The development of agricultural and rural enterprises is often constrained by the need for credit and the difficulties of farmers and the rural community to gain access to financing institutions. The range of credit co-operatives and micro-credit organisations is not always adequate to meet demand and farmers are faced with trying to access funds from commercial banks. Rarely are such institutions sympathetic to the needs of the rural community and demand collateral for their loans and impose commercial rates of interest. In the attached paper "The Role of Credit in the Development of Renewable Energy" some of the issues related to the provision of credit are discussed with reference to Sri Lanka and India.

In terms of major international donors, the World Bank and the Asian Development Bank have supported the development of this technology. In the context of Sri Lanka, of special note is the programme of support that has been provided through the World Bank together with the Global Environment Facility (GEF) as part of the Renewable Energy for Rural Economic Development Project (RERED). The handling of the credit system of this project has been undertaken by the DFCC Bank, which has been in operation since 1955 as a development financial institution. Reference is made to the organisation of this programme in the above paper; however the subject is given special attention in the conference paper entitled Financing Small Scale Energy Development in Sri Lanka prepared by the Vice Chairman of the DFCC Bank.

Land Issues

Land is a critical issue in the whole question of the agricultural development and links in directly to the issue of the availability of credit. If dendro-power is going to be a viable alternative energy, then there will need to be adequate areas of land that can be put under suitable short-rotation plantation crops without seriously affecting the area of land dedicated to food crops and key cash crops. We believe that in the case of Sri Lanka, land should not be a major issue, in that there are large areas of under-utilised land associated with the drier areas in the Eastern half of the country. This subject can be examined in more detail.