Decline in IDCOL's solar home system sparks loan waiver appeal

The government's various rural electrification initiatives have led to a sharp decline in the Solar Home System (SHS) programme of the Infrastructure Development Company Limited (IDCOL), forcing the non-bank financial institution to seek loan waivers from the government.

In a letter to the Economic Relations Division on 25 July this year, the IDCOL requested a waiver of Tk210 crore for Grameen Shakti, a participating organisation (PO) of the SHS programme and a leading social enterprise founded by Professor Muhammad Yunus. 

Due to rapid grid expansion, free SHS distribution, and an unregulated SHS market have made it challenging for POs to collect payments from customers, and therefore they are facing a difficult situation to repay IDCOL loans, according to the letter.  

The matter was presented to Finance Minister AHM Mustafa Kamal for approval. However, the minister has yet to make a decision on the matter, according to finance ministry officials.

Earlier on 10 July, Grameen Shakti sent a loan waiver proposal to the IDCOL office, requesting a waiver of at least 50% of the outstanding balance of Tk420.51 crore. 

"Once this approval and process get formalised, in one instalment, we will pay Tk210.26 crore as per balance as of 31 December 2022," Grameen Shakti said.

The letter further mentioned that the SHS programme has been facing a serious crisis since 2014 and went into virtual closure. "The crisis was characterised by the total stoppage of repayment of dues by the households who purchased the SHS."

IDCOL's SHS and Grameen Shakti

IDCOL's SHS programme has so far successfully installed 4.13 million solar home systems in rural Bangladesh with support from the government. 

The programme has ensured the supply of clean and reliable solar electricity to 2 crore people or  12% of the country's total population, who previously used kerosene lamps for lighting purposes.

Grameen Shakti joined the programme as a participating organisation (PO) in 2002 and installed 1.58 million SHS, which is 38% of total installed SHS under the programme.  

The IDCOL disbursed a total of Tk1,900 crore to the Grameen Shakti under the programme from 2003 to 2017, according to IDCOL. 

Till December 2022, Grameen has repaid Tk1,480 crore as principal and Tk522 crore as interest.

Therefore, the total repayment by Grameen Shakti is Tk2,002 crore and the total loan now stands at Tk420 crore, IDCOL's letter said.

IDCOL's waivers

IDCOL in its 273rd and 276th board meetings decided to partially waive and write off Tk691 crore outstanding loans of 44 POs. 

However, the proposal for waiver of 39 PO accounts was approved by the government and the central bank.

Finally, the IDCOL in its 292nd meeting approved the waiver of Tk278 Crore loan under 39 PO accounts. 

This leaves Tk412 crore pending for potential waiver, as IDCOL suggested in the letter, could be used to consider partial waiver of loan of Grameen Shakti. 

In view of this, the renewable finance company in its 303rd meeting, decided to waive Grameen Shakti's Tk210.25 crore (50% outstanding) loan, subject to approval from the government and Bangladesh Bank.