Convergence awarded a feasibility study grant to Haqdarshak Empowerment Solutions Private Limited (Haqdarshak) for the design of a blended finance facility that will help rural farming households in India access climate-friendly government subsidies and low-cost debt for acquiring climate-friendly assets, such as solar pumps and solar panels.
Over 60% of India’s population is engaged in the agriculture sector, which is one of the largest consumers of fossil fuel in India. Over 7 million diesel pumps are used on Indian farms everyday, which contribute significantly to carbon dioxide emissions. The Government of India is focusing its efforts to reduce the use of fossil fuel by farms to zero and encourage the agriculture sector to use renewable energy, through the introduction of several climate friendly subsidy schemes.
The Climate Resilience Collective will partner with local non-banking financial entities to offer low-cost debt to farmers seeking finance for the up-front costs of acquiring climate friendly assets. The facility will also support farming households in identifying an appropriate subsidy scheme and applying for the subsidies. Rural farmers in India are largely disconnected with formal financial channels and instead rely on informal financing methods. Through the facility, Haqdarshak will promote financial inclusion and support these farmers in building their credit history. The facility will also support women empowerment and gender equality by engaging local women as field agents to connect with farming households and provide last mile application support.
Convergence's grant will support Haqdarshak in exploring the feasibility of establishing the Climate Resilience Collective. Haqdarshak has been providing assisted-tech services for doorstep delivery of welfare entitlements for individuals and micro-businesses. To-date, they have collectively reached out to over 2.7 million citizens educating them about eligible welfare programs, facilitated over 2.3 million applications, and unlocked over USD 514 million in welfare benefits. With the Climate Resilience Collective, they aim to support about 5,000 farming households in rural India to access low-cost debt to procure climate friendly assets and infrastructure and offer end-to-end support to access relevant government subsidies to reduce the final cost to the farmer.
Design question and learning potential for the market: How can blended finance be used to encourage adoption of climate friendly infrastructure at a grassroots level while promoting gender equality?
Haqdarshak understands the key factors that obstruct a rural farmer’s access to climate friendly assets. These are the farmers’ low level of awareness about various means to access climate friendly assets (such as by taking advantage of available government subsidy schemes), their overall weak financial position and lack of credit profile which restricts them from mainstream financial ecosystem to pay for the high upfront investment required to purchase and install the assets, and the complicated and lengthy subsidy application process. Through the Climate Resilience Collective, Haqdarshak intends to design a simple yet unique solution to this problem using a blended finance approach.
During the feasibility study, Haqdarshak will conduct market scoping and engage with key stakeholders to identify an optimal legal structure and operational mechanism for the blended finance vehicle to provide low cost debt to rural farmers and support them to build their credit history. On the subsidy application front, Haqdarshak will build on their experience of providing doorstep delivery of welfare entitlements to Indian citizens through their tech assisted platform. They will identify, train, and employ mostly women from the local communities as field agents. Field agents will play a crucial role in generating awareness about clean energy subsidy schemes and providing last-mile application support to rural farming households.