Bartering Banana, Tapiok and Taro for Solar Power in the Solomons
There are rumblings of a new micro-finance revolution, all in the name of renewable energy, occurring in our Melanesian neighbours Solomon Islands and it’s based on the ancient yet simple trading arrangement so entrenched within our cultural demeanors – the barter system.
It all started when a team of renewable energy developers working for SOPAC, the Pacific Islands Applied Geoscience Commission, and funded by Renewable Energy & Energy Efficiency Partnership (REEEP), tried to promote the merits of renewable energy in Solomon Islands when they realised that the village people who they were promoting their message to simply did not have the cash to invest in purchasing solar power units.
So the team developed a unique financing mechanism that has the capacity to be applied across various rural communities, including PNG. They reasoned that if Solomon Islanders were not able to pay for solar power units with cash, why not pay with crops? They discerned that bartering is quite commonplace in the region and crops are often exchanged for fish, for instance. Through simple lateral thinking, an innovative micro-finance scheme was invented in which crops are exchanged, not for food, but for another commodity – electricity.
So how does the micro-finance scheme actually work? Villagers make a small deposit on the cost of the system prior to the installation, which is a prerequisite to joining and eligibility for a solar LED lighting system. To pay for the investment, the local people, most of whom are subsistence farmers, plant enough tapiok, taro, banana and other crops as is necessary to make the planned monthly repayments. They then take the crops to a cash-for-crops exchange which arranges to repay the bank.
Ideally it is envisaged that the set-up is paid off within 24 months. Though recipients are encouraged to pay half or full costs upfront through discount incentives. Purchasers who are not consistent with monthly repayments have their systems removed after two consecutive months (8 weekly payments) of non-repayment. This is in line with the credit sales agreement between the solar entrepreneurs and the purchaser, which evolved after extensive community consultations.
The managers involved hope to see the concept expanded not just in the Solomons but also elsewhere. For the Solomons, this may be more likely given the support of the island authorities during the first phase. The government requested the project for access to better lighting in rural and remote communities as part of its development objectives.
SOPAC believe the seeds for a successful microfinance model have been sown: the use of existing enterprise in tandem with a less vulnerable payment system. They believe that, if the right combination of business is in place – with appropriate financial returns, a robust system with a good reputation, and affordability for the purpose of meeting the rural communities’ needs – then the project should be successful and replicable.
That the project creates jobs is another bonus: local technicians are responsible for the installation of the systems while those who operate the micro energy service company at the heart of the project also receive monthly income for this work.
As Melbourne-based Eva Oberender, REEEP’s Southeast Asia and Pacific Regional Secretariat, remarks:
“It can have an enormous impact. The success of the pilot showed that barter is a viable and most needed financial mechanism where access to cash is limited. Allowing for this innovative approach has the potential to impact many communities. Plans have already been sketched for a new phase. The project can be rolled out and the solar entrepreneur in the Solomon Islands intends to install at least 5,000 systems within the next three years“.