Director,
T.E.(Terry)
Manning,
Schoener 50,
1771 ED Wieringerwerf,
The Netherlands.
Tel:
0031-227-604128
Homepage:
http://www.flowman.nl
E-mail: (nameatendofline)@xs4all.nl : bakensverzet
Incorporating
innovative social, financial, economic, local administrative and productive
structures, numerous renewable energy applications, with an important role for
women in poverty alleviation in rural and poor urban environments.
"Money is not
the key that opens the gates of the market but the bolt that bars them"
Gesell, Silvio The
Natural Economic Order
Revised English
edition, Peter Owen, London 1958, page 228
Edition 11: 15
August 2006
Published in
"Refocus" ed. October 2001
Innovative self-financing integrated development
concepts enable even the world's poorest to finance their own development. Mass
applications for PV (and alternative energy in general) offer ethical
least-cost solutions to some of the most widespread problems facing mankind.
This article describes how PV technologies can be usefully incorporated without
subsidy or paternalism in development projects .
Most
development projects incorporating PV systems to date appear to have privileged
highly subsidised water pumps for irrigation purposes and (mostly subsidised)
solar home systems for non-productive purposes. While these applications may be
to the advantage of the usually large corporations operating with a
"business as usual" approach keen on getting their large slice of the
development aid cake, the benefit to the necessarily few users is far from
clear. With the present cost of PV panels, the cost of a PV irrigation pump,
where most of the water pumped is destined to be lost through evaporation, and
where up to 70m3 of water per day may be required for each hectare of land, is
so high that cost recovery from the increased productivity of the land is
unlikely. The highly decried installation of PV home systems for
non-productive, or comfort, purposes simply encourages on-going financial
leakage for the unsubsidised part of the purchase or leasing contract from poor
areas where they are installed. Such applications are anti-economical,
detrimental to the reputation of the PV industry, and increase the financial
dependence of the poor they claim to be helping.
Yet carefully
conceived development projects offer a unique opportunity to the PV industry.
The industry can supply ethical unsubsidised least cost solutions to many
development problems, with an annual business turnover potential many times
greater than the present world production of PV generators.
Integrated
self-financing development projects have been designed to cover a complete
package of basic services for sustainable development in poor rural and urban
areas. They will usually include, but not be limited to, hygiene education, the
provision of drinking water and sanitation services, PV lighting for study, PV
lighting and refrigeration in clinics, waste removal, high-efficiency stoves
and bio-mass to fuel them. They will provide a strong thrust for on-going local
development, productivity, and employment and contain many decentralised solar
energy applications.
One of the
most important causes of poverty is on-going financial leakage from poor rural
and urban areas and nations to richer national and international havens. This
financial leakage is caused mostly by interest, which constitutes up to 40% of
the end user cost of a typical western product, and the cost of imported energy
and capital goods.
Self-financing
systems aim to set up cooperative, interest-free, inflation free economic
environments. They use technologies permitting the construction of most items
necessary for basic development in low cost labour intensive project level
production units with 100% local value added. Items imported into the system
must be necessary for essential services such as water pumping or to increase
local productivity.
Project
applications are self-financing because they allow the recipient communities to
fully exploit a network of sustainable development activities using an
interest-free seed loan, Local Exchange Trading (LETS) systems, and multiple
re-cycled interest-free micro-credits. The micro-credits are generated by
recycling seed loan repayments and project reserves during the loan term, and
by recycling repayments of the micro-credit loans themselves.
The interest-free seed loan is repayable in 10
years. The minimum amount needed is just US$ 60 per user, which covers the
entire basic package of structures and services, and calls for a monthly
payment of US$3 per family of five into a Cooperative Development Fund. A
typical project area would include about 50.000 users or 10000 families. The
projects are structured so that some, if not all, of the monthly payments can
be recovered by savings on the current expenditure of the families for the
(inadequate) structures and services available to them.
Since the seed
loan is interest-free, funders in fact make a gift for the amount of the unpaid
interest. This may be justified since most economic activities in the
communities in question are non-monetised and the communities in developing
countries play little direct role in the creation of inflation. Another
justification is that payment for development aid is often made by way of gift
anyway. Under self-financing systems the seed capital at least is returned to
the lender after ten years and can be re-invested in more projects.
The
self-financing projects will usually be carried out in countries and areas
where political stability over the long term (at least the period of the ten
year interest-free seed loan) necessary for development cannot be guaranteed.
While capital structures installed within the framework of project applications
may, if rarely, be insurable against loss or damage by Act of God such as
lightning, hurricanes, or earthquakes, it is not usually possible to insure
them against loss or damage deriving from Act of Political and Military
Authorities, civil war, commotion, rebellion, and strikes. Even if insurance
were to be available the cost would be so high that it would constitute a major
on-going financial leakage from the project area, which is just one of the
major problems self'financing projects are designed to stop. What happens in
case of loss of or damage to capital structures installed under a given project
before repayment of the interest-free seed loan after ten years must therefore
be clearly addressed at the time the project application is being financed.
Most people in
project areas are by definition poor and the loss or damage in question derives
from causes entirely beyond their control. To require these poor people to
repay a loan after ten years for capital structures they have lost for reasons
beyond their control is in profound contradiction with the short term and long
term goals of development. Some lending organisations may have forms of
insurance available to cover funds at risk in projects in developing countries.
In such cases they would ensure, at their own cost and by way of gift, that
projects are insured. Where insurance is not available, lenders should accept
that in the case of loss of or damage to project structures deriving from
causes beyond the power and control of the users the interest free loan be
converted into a gift so that users are freed from their contractual
obligations. Apart from the mentioned "gift" aspects relating to the
interest-free seed loans, the projects are entirely self-financing. The second
of the three financial instruments involved is the Local Exchange Trading
(LETS) concept, which allows any goods and services supplied locally using local
materials to be paid for under the local LETS currency without the need for any
formal currency at all. LETS systems
To take full
advantage of the LETS systems projects must be based on technologies, and in
particular the Dutch Beosite. technology, which allow most items needed for
basic services in the project area to be built or carried out within the LETS
systems with 100% local value added.
Some examples of items which can be supplied this way are:
Well linings
Drinking water tanks
Water harvesting tanks
Water containers
Urine tanks
Faeces tanks
Toilets
High efficiency stoves
Fig. 1 : Structure for LETS systems within a self-financing
development project application
LETS systems
are operating world wide, mostly in the West. However, their incorporation as a
fundamental element of integrated self-financing development projects is
thought to be new. Interest-free micro-credits
The third
financial instrument used in the proposed package comprises multiple re-cycled
interest-free micro-credits to provide formal money needed to develop local
production capacity.
The formal
currency capital available for recycling in the form of micro-credits is made
up of :
a) Part of the
initial seed loan money until it is needed for the project application
b) Seed loan repayments
c) Micro-credit repayments
d) The long term maintenance fund
e) System capital replacement fund which will be built up after the ten years'
seed loan has been fully repaid
For instance, a
woman may need a sewing machine to be able to make clothes. She will need
"formal" currency to buy the sewing machine (and perhaps some cloth),
which is presumably not made in the project area itself. That money will be
made available to her in the form of an interest-free micro credit. She will
sell outside the local LETS system some of the clothes she makes to earn the
"formal" money she needs to repay her loan. The rest of the clothes
can be sold within the local currency LETS system. As she repays her loan, the
repaid capital can be promptly recycled for another interest free micro-credit
project, so the available seed money repeatedly re-circulates within the local
economy.
The proposed
micro-credit systems will be different from most of those formed up till now.
Formal currency loan capital repayments and longer term reserves within the
projects themselves will be used to finance the micro-credit systems. These
funds are already available for multiple re-cycling, interest-free. When, at
the close of the ten years' seed loan repayment period, the original project
capital is repaid, the users will continue to pay their monthly contributions
into the Cooperative Development Funds to build up capital for system
extensions and/or to replace system hardware after 20-30 years. These fresh
Cooperative Development Funds will become quite large. They in turn become
available for interest-free micro-credits within the project area until they
are needed, so that permanent on-going sustainable development in ten-yearly
cycles is ensured .
Final
repayments of blocks of micro-credits will be co-ordinated so that money for
long term capital investment purposes (system replacement and extensions) will
be available when it is needed. An example of this is shown in columns 37, 38,
39 and 40 of the chart in fig 3 , where the higher columns indicate shorter
payback times for the last lots of micro-loans so that the entire interest-free
seed loan capital of US$ 3.000.000 is available for payment in the 41st
quarter.
Money for the
interest-free formal currency micro-credits granted is therefore generated by
the users themselves within the framework of the project applications. The
money and the micro-credits belong to the users. They are interest-free and
continue to re-circulate within the local economy. Based very conservatively on
an average payback time of two years, the theoretical average interest-free
micro-credit finance made available during the first ten years to every family
of five persons in a given project area is US$ 1500. If the average payback
time were to be shorter, the interest-free funds available would be greater
still.
The following
chart (fig. 3, which has been drafted in Euros) shows a typical build-up of
micro-loan investment over the first period of ten years of a project
application. It shows the amount of new micro-loans actually (re)invested each
quarter during the first period of ten years. The amounts are net of current
outgo for project administration and maintenance of structures.
Fig 3 - Amounts invested each quarter in interest-free
micro-loans
In the chart
in fig. 3, the original interest-free seed loan is paid back in the 41st
quarter. The capital available for micro-loans temporarily falls back to the
amount actually being paid into the Cooperative Development Fund each month by
the users. It will then gradually build up again over the next period of ten
years, so that a further amount of at least US$ 1500 can be made available (on
an average) to each family in the form of interest-free micro-loans. This time
the funds accumulated belong to the users themselves, and are available for
renewal and/or extension of project structures when needed.
The purpose of
the planned Micro-Credit systems is to ensure that individuals or co-operatives
without access to formal currency can get interest-free micro-credit loans for
capital investment for production purposes to boost the local economy. The
interest-free Micro-credit loans are therefore applied mainly to buy items
necessary for production purposes which are made outside the local currency
trading (LETS) systems.
The pay-back
time for the interest free loans will vary from case to case. Some micro-credit
investments will generate more goods and services that can be sold outside the
local LETS currency area than others. Some users will therefore be able to earn
formal currency to repay their micro-loans more quickly than others. The users
themselves will decide from case to case during their monthly meetings on what
is acceptable to them.
The
possibility of sale of some of the production to consumers outside a project
area for formal currency will usually be a condition precedent for the granting
of a micro-credit loan. This condition of partial "export" sale
lapses as soon as the micro-loans have been repaid. In project applications
where an export-import cooperative has been set up, the cooperative may often
be able to help the beneficiary of a micro-loan export part of his or her
production in exchange for formal currency.
Foreign
currency for the importation of capital goods for productivity development in
the project area must also be covered by exports outside the national
boundaries so that the international currency balance over the whole duration
of the project also tends to zero. The national government must, however, grant
a franchise on the need to export during at least the first, two, executive
years of the project application, and allow the project area a reasonable time
to gradually build up its international exports.
Within the interest-free, inflation free,
cooperative economic environment created, not all items needed for the basic
package to improve users' quality of life can be made locally. Some items need
to be imported into the project area. One of the major goals of self-financing
development is to block financial leakage, and one of the most important causes
of on-going financial leakage from a project area is energy. That is just where
alternative energy technologies and in particular PV come in. Interest-free
purchase of PV equipment for self-financing development opens new worlds for
the PV industry. Here are a few examples.
Drinking water supply will be decentralised. Large
diameter wells and bore holes will be dug or drilled using wherever possible
local labour, construction methods and materials supplied under the local LETS
money systems.
About 6-9 high
pressure solar submersible pumps will be installed in each well or borehole.
Each of the pumps will supply water to a dedicated water tank serving a local
community of up to 40 families (200 people). The well is the hub of the supply
system. The water pipelines radiating from it are its spokes. The water tanks
should not be more than 150 meters away from the users' houses. The distance
between the water source and the dedicated water tanks can be several
kilometers.
Adoption of
the mulitple pump solution means that fewer wells/boreholes need to be dug or
drilled than would otherwise be the case. Savings on well and borehole costs
may sometimes alone be enough to compensate for the costs of the solar pumping
systems.
Fig. 4 : Solar pumping system layout
The solar
submersible horizontal axis piston pump technology recommended enables water to
be pumped against heads up to 150 meters (500 feet) and more, and to be
transferred over kilometers where necessary to the dedicated water tanks as
well.
Fig. 5 : A solar submersible horizontal axis piston pump
Generalised
use of solar pumps for irrigation purposes is not foreseen, as the cost of PV
pumping systems, and in particular of PV panels, is still such that the application
is economically unjustifiable . Where high value cash crops are to be grown
using drip or seepage installations, users can apply to finance these under the
interest-free micro-loans system.
The projects cover PV lighting at a local level,
usually involving about 200 users or 40 families, for study purposes provided a
suitable study room is available or has been built under the local LETS system
for the purpose by the local community. This application can be extended to community
television systems for study purposes where security of the equipment can be
guaranteed and where suitable programmes are available in the local language of
the users. PV lighting for clinics is also covered as is PV lighting for
schools where evening classes are needed, especially for adult education. PV
refrigeration for vaccines and medicines will be installed in clinics where
necessary.
PV lighting
and power systems will be provided under the interest-free micro-loans scheme
where required for the purposes of productivity increase. As already mentioned,
it is a condition of the micro-loans that part of the new production or
services be sold outside the project area for formal currency to enable
repayment of the micro-loan. Some examples are communications centres,
consultancy services, home production in the evening. PV solar home systems in
general
In so far as
they are intended for "comfort" purposes, PV solar home systems are
in principle not included under the projects. Such investments do not lead
directly to an increase in the production of goods and services. As the
financial base of the individual users gradually improves, centralised
cooperative purchase of solar home systems for financing by a local bank under
a separate micro-credit scheme will be introduced. However, where current outgo
for lighting, radios and similar is such that savings in petroleum, gas, and
battery costs would be enough to repay the cost of an interest-free solar home
system over a period not exceeding three years, project applications will
include a separate fund for the installation of solar home systems. PV powered
information centres
The following
four types of PV powered information centres will be set up as business
enterprises under the cooperative interest-free micro-loans scheme. They are:
-Local
consultants to help local people choose crops to grow, instruct on agricultural
methods, and give professional advice on productivity questions
-Information shops with telephones, faxes, computers.
-Cultural and economic websites ( see recent experiments in India), where
individual interest groups make their cultural activities and their wares known
to the outside world, either independently or through the information shops.
- A project level radio station
The far-reaching effects of bio-mass production and
use incorporated in the self-financing projects tend to be more indirect than
direct. Small scale electricity generation from biomass is not specifically
foreseen, although there is no reason why this cannot be included where
considered appropriate as is sometimes the case in India. The qualifying
feature of biomass related initiatives under self-financing integrated
development projects is that they can usually be entirely financed under the
LETS local money systems, and no formal currency at all is required. This means
there is in principle no limit to the number and nature of the initiatives
taken.
Here are some examples:
High efficiency cookers built at project level from
Beosite., using 100% local value added will be introduced. The cookers will be
fuelled by mini-briquettes made from waste materials and bio-mass using recipes
varying according to the type of basic (waste) materials locally available. The
mini-briquettes will be produced and sold within the local LETS systems, so
that current outgo for traditional cooking fuels such as firewood, charcoal,
and gas can be used for the monthly payments made by each family into the
Cooperative Development Fund. In many cases, savings on cooking costs alone are
expected to pay for the entire costs of a given project application.
The bio-mass
needed for the mini-briquettes will be sourced in the project area in the form
of waste products or purpose grown bio-mass crops. Care will be taken to ensure
that adequate natural fertilisers and soil conditioners be retained for
agricultural purposes. Use of biomass crops to make mini-briquettes for high
efficiency stoves will help reduce CO2 emissions in the project areas and have
an immediate effect on forest conservation . Local forests will be
automatically protected once wood and charcoal are no longer required for
cooking purposes. Communities in project areas will be encouraged to proceed
with re-afforestation programmes to be executed under the local money LETS
systems. Re-afforestation initiatives create CO2 sinks, help combat erosion,
and with time create a high value resource for recreation and a sustainably run
quality timber industry.
Dry sanitation systems involving the separation of
urine and faeces and their re-cycling at household level for productive
purposes are foreseen. Urine appropriately mixed with water or waste water in a
ratio of 1:10 can be used directly as a high quality fertiliser in home
gardens, including vertical roof gardens where no other garden space is
available. Assuming an average family of five the annual amount of fertiliser
available is about 27.5 cubic meters.
Faeces are
composted separately in locally built Beosite. tanks. The fully composted
faeces are an excellent soil conditioner which can be used in the home garden
or collected under the LETS systems.
Self-financing integrated development projects offer
vast opportunities for expansion world wide of PV and other alternative energy
applications. They are often the best and least-cost solution to development
problems, and, intelligently used, can play a major role in limiting on-going
financial leakage from project areas, which is one of the main causes of
poverty.
Highly
subsidised anti-economic solar pumping for irrigation purposes and the
indiscriminate installation of (subsidised) solar home systems for non
productive purposes are, on the other hand, harmful to the reputation of PV in
the longer term, cause serious on-going financial leakage, serve no practical
purpose, and are to be avoided. The Model on which self-financing integrated
development projects are based has been placed in the public domain and can be
freely downloaded together with all associated documents through the homepage
of website www.flowman.nl
"Money is not the key
that opens the gates of the market but the bolt that bars them"
Gesell, Silvio The Natural Economic
Order; Revised English edition, Peter Owen, London 1958, page 228
List of articles on subjects related to the Model.
List of attachments to the Model.
