Power to the Poor in Laos brings electricity to (almost) all

Building on the story about rural electrification in Laos, let me talk to you about an innovative concept under the electrification program umbrella that focused on those more disadvantaged and with fewer opportunities. This new concept is the Power to the Poor program (P2P).

The P2P scheme was launched in September 2008, although it was identified a few years earlier, in 2005. At that time, a social impact survey was carried out and among all data analyzed, one indicator was outstanding: the pick-up rate in the villages recently electrified was on average only a 70%. What was happening with the remaining 30% of households that were not being connected? It was not a design problem as those households were just a few meters from the electric post. It was, as with many problems in life, a financial problem: the connection fee charged by the power utility, Electricité du Laos (EdL), was too expensive to be paid upfront by the poorest households.

The connection fee of about US$100 covered in-house wiring, the connection from the house to the post, the meter, and the box. For a family with a yearly income of less than US$500, paying US$100 upfront was more than impossible, and the local commercial banks were not ready for this kind of micro-finance business.

Two World Bank teams, one managing Rural Electrification and the other the Gender Action Plan in Laos, started to work together with EdL to set up a micro-financing scheme that would help the disadvantaged to get access to electricity with the least impact to their budgets.

The program set up a revolving fund within EdL seeded by World Bank funds and structured an eligibility procedure to identify the poor and disadvantaged households. In the fall of 2008, the program was piloted in 20 villages in Champasak province and 537 households benefitted from the program. Essentially, eligible households were provided with a free meter and a free interest credit of around US$80 that they can repay in three years.

This informational brochure set out to explain the Power to the Poor scheme among Laotians.

The core issue was to keep household budgets of the targeted population neutral and not to further put it under stress. The program was designed to substitute previous costs in lighting (using kerosene or car batteries) with grid electricity and a free interest loan at the same cost. P2P showed that it was possible to pay the cost of the electricity bill (US$1) plus the micro-credit repayment (US$2), with the previous cost of expensive kerosene.

After the pilot was completed, the electrification rate in those 20 villages suddenly jumped from 78% to 95% on average. The impact on gender was even higher, with an increase in electricity access from 63% to 90% of female-headed households. The remaining 5% of non eligible households corresponded to newly constructed homes that were too far from the post or are too poor to afford repaying the micro-credit.

EdL decided to scale up the P2P program in another 15 provinces with support from International Development Association (IDA) and AusAID. To date, more than 12,500 households are already benefitting from the P2P program, and it is expected to reach 38,000 households in the following three years all across the country.

P2P proved to be a success, and other countries are learning from this experience and replicating the idea in their Rural Electrification Programs. In general, P2P is well received among targeted households and most of them recognize that their lives have improved since they have electricity at home. A few of them, like Phan, Khamtoun, or Grandma Chahn were interviewed in this video:

Talking with these people and being thanked for bringing them electricity is one of the most rewarding experiences I ever had in my work. This is why stories like this encourage me, and should encourage all of us, to continue working hard and make a difference in poor countries like Lao PDR.