26 September 2007 – A 45 percent subsidy – increased from 14 percent – on all solar power equipment has been announced at the launch of the solar power component of the Electricity for Rural Transformation (ERT) programme in Uganda.

The offer, made by government, the Private Sector Foundation of Uganda and nine donor agencies comes six years after the Rural Electrification Agency (REA) was launched.

In a country where only five percent of the population have access to electricity, expensive solar products (a small solar lantern costs between $88 – $147) are out of reach for most consumers. Statistics indicate that four out of five people live on less than a dollar a day.

However, this new scheme, encourages private suppliers to invest in rural areas. It is hoped that strategy will reduce transaction costs and make solar systems more affordable, especially in rural areas.

The programme introduces subsidies through microfinance institutions, either as a cash payout to those who install the solar systems on loan or a loan-offset.

Based on the models of Sri Lanka and Bangladesh, which use rural- based networks and micro-credits, incentives are available as direct subsidies from REA for solar system customers and line-of-credit for participating micro finance institutions (MFIs) or credit guarantees to participating micro-deposit taking institution; grant advances to enable market entry or expansion, in the form of time-limited soft loans to the solar power companies, including rural dealers and one -stop application for REA subsidies, public-private sector grants and credit from MFIs, using one consolidated application form.

The programme calls for delivery and installation of a solar PV system to a consumer before payment is made to the dealer, a condition that most financial institutions would not easily accept.

The programme will be funded by the Rural Electrification Fund, the World Bank Credit Fund, the United Nations Development Programme and microfinance institutions.