MFI INVESTMENT DOSSIER PARTNERSHIP TO ADVANCE CLEAN ENERGY–DEPLOYMENT TECHNICAL ASSISTANCE PROGRAM ESAF SMALL FINANCE LTD. BACKGROUND

Snapshot: ESAF Ltd. ESAF Small Finance Bank (previously ESAF and Investments Pvt Ltd.) is a leading microfinance START OF OPERATIONS: NUMBER OF LOAN OFFICERS: institution (MFI) based in . ESAF started microfinance 1995 3,750 lending in 1995, with the vision of creating “sustainable holistic transformation of the poor and the marginalized NUMBER OF BRANCHES: NUMBER OF CLIENTS (ACTIVE BORROWERS): for a just and fair society”. ESAF recently became a Small 284 1,141,277 Finance Bank and employs more than 3,750 people, across 284 branches, in ten states of India. As of March 31, WEBSITE: CONTACT EMAIL: www.esafbank.org [email protected] 2017, ESAF had a customer base of 1,141,277 clients with an outstanding loan portfolio of USD 360 million. ESAF was founded by Mr. Paul Thomas.

ENERGY LENDING

ESAF started its energy lending program in 2012 and not active, and partners will be selected after rigorous due expanded operations with technical assistance and support diligence. ESAF will offer support in terms of MIS, extended from the USAID-funded Partnership to Advance Clean credit, training support, and a range of clean energy products Energy - Deployment Technical Assistance Program in 2015. to these small NGO partners. ESAF’s clean energy business operates through the extensive ESAF’s Energy Program: Context ESAF Retail network and has the capacity to scale up fast. GEOGRAPHICAL SEGMENTATION As of March 31st 2017, under the MSP, ESAF has already provided over 127,724 energy loans to its clients, 100 percent 52% | 48% of which are women. ESAF finances a range of clean energy products, including portable solar lanterns with mobile POPULATION WITHOUT ELECTRICITY charging, mini solar home systems, improved cookstoves, 200 and water purification devices. ESAF plans to scale its energy TOTAL POPULATION MILLION program by expanding outreach to existing and new clients in 572 MILLION CLIENT HOUSEHOLDS WITH INCOME OF LESS THAN USD 2 PER DAY energy-poor states such as Jharkhand, Bihar and Odisha. ESAF MAIN REGIONAL LIVELIHOOD plans to reach non-ESAF clients through small NGO partners. FARMING, SERVICES 68% These partnerships will be formed in states where ESAF is CUMULATIVE ENERGY LOAN DISBURSEMENT (USD)

CUMULATIVE ENERGY LOAN DISBURSEMENT (USD)

6,000,000

5,057,896 5,000,000 4,824,474 4,438,445

4,000,000 3,448,823

3,000,000

2,310,768

2,000,000

1,041,411 1,000,000 702,251

178,240 - FY 14-15 Q3 FY 14-15 Q4 FY 15-16 Q1 FY 15-16 Q2 FY 15-16 Q3 FY 15-16 Q4 FY 16-17 Q1 FY 16-17 Q2

ESAF’s energy lending program has been growing at a consistent pace and is well-positioned to continue scaling. Recovery post- demonetization is solid. ESAF’s clean energy program has received various prestigious awards globally including the European Microfinance Award (2014) for Clean Energy for the Poor.

ESAF’s Microfinance and Energy Loan Products

AVERAGE MICROFINANCE LOAN TERM 1 OR 2 YEARS

AVERAGE MICROFINANCE LOAN SIZE 20,000 TO 60,000 INR (USD 298 to USD 894)

MICROFINANCE LOAN REPAYMENT FREQUENCY EVERY 2 WEEKS MICROFINANCE LOAN INSTALLMENTS TOTAL WEEKLY, BIWEEKLY, OR MONTHLY

ENERGY LOAN TERM 6 TO 12 MONTHS

ENERGY LOAN SIZE 1,000 TO 10,000 INR (USD 6 to USD 36) ENERGY LOAN REPAYMENT FREQUENCY WEEKLY, BIWEEKLY, OR MONTHLY

ENERGY LOAN INSTALLMENTS TOTAL 6 TO 52 PHOTO: USAID PACE-D TA PROGRAM

MARKET OPPORTUNITY: ENERGY PORTFOLIO

ESAF’s energy operations began in the state of which has expansion into the sale of larger solar systems. ESAF has a one of the highest electrification rates in India (100 percent). captive client base of 1,046,260 customers, of which 89 ESAF was able to persuade clients to puchase clean energy percent have not yet purchased solar devices. In order to based on the economics of solar and as a way to support the reach this segment, ESAF is expanding its energy offerings into government mandate to increase local solar production. Kerala energy efficient consumer durables and rooftop solar. ESAF is depends on electricity produced in other states for 70 percent also expanding into other states with an innovative partnership of its grid supply and has a mandate to offer solar solutions model where ESAF lends to smaller NGOs and supports them in order to reduce dependency on other states for energy with its management information systems, extended credit on production. This has created a huge market opportunity for energy products, and provides training to scale up operations. IMPACT: ENERGY PORTFOLIO*

OUTREACH FINANCIAL ENVIRONMENTAL • Over 127,724 clients (100% women) ACHIEVEMENTS IMPACT have received financing for clean equivalent of solar capacity energy products • Over USD 5 million has been • 206 kW disbursed as energy loans has been installed • Over 630,000 household members have benefitted • 11% of ESAF’s client base now has clean energy products

• Over 57,125 tons of CO2e have • Over USD 8 million worth of clean been displaced energy products have been sold

*As of March 31, 2017

COMPETITIVE ADVANTAGE: OVERALL AND ENERGY PORTFOLIO

ESAF is one of the largest MFIs engaged in energy as well as extended warranty and after-sales service finance. Its energy program is highly integrated into (with an online complaint registry and instant product the core mission and vision of the organization. A tracking through cloud-based technology). ESAF sister company, ESAF Retail, has robust processes and has secured solid product margins that have made systems that support the stability and growth of the the energy business sustainable and the small bank solar lending program. The systems include supply approval gives the organization the capacity to scale management (warehousing and delivery mechanisms) across all of India.

MANAGEMENT TEAM

MR. K. PAUL THOMAS MR. GEORGE THOMAS CHRISTUDAS K.V. FOUNDER & MANAGING DIRECTOR DIRECTOR OF OPERATIONS GEN. MANAGER, ESAF MICROFINANCE

• Has over 28 years experience in • Has over 13 years experience in • Has over 30 years experience in management with 20 years experience the government sector with 9 years manufacturing with 9 years experience in the microfinance sector. experience in the microfinance sector. in the microfinance sector. • Is Chairman of the Kerala Association of • Serves on the Boards of ESAF • Prior to promoting ESAF worked in Microfinance Institutions and serves on Swasraya Producers Company Ltd.; the fields of quality control, Research the Board of SA-DHAN and MFIN (the ESAF Health Care Services Pvt. Ltd.; & Development, technical services, leading microfinance networks in India). ESAF Homes & Infrastructure Pvt. engineering projects, and environment • Serves on the Boards of ESAF Swasraya Ltd.; ESAF Retail Pvt. Ltd.; and ESAF departments in various capacities. Producers Company Ltd.; ESAF Health Staff Welfare Trust. Care Services Pvt. Ltd.; ESAF Homes & • Has a Masters degree in Applied Infrastructure Pvt. Ltd.; ESAF Retail Pvt. • Prior to promoting ESAF worked Chemistry from Calicut University, Ltd.; Takyon Systems Solutions Pvt. Ltd. as: an Agriculture Officer for the India, and a Post Graduate Diploma and Nirman Bharathi. Government of Kerala for a period of in Industrial Pollution & Control from • Prior to promoting ESAF, worked 18 14 years. the Institution of Chemists (India), years as an Area Manager (sales & • Has a Masters degree (Env. & Eco.) Annamala University, India. marketing) at IFFCO, India’s largest from Allahabad Agriculture University, fertilizer cooperative. India. • Has a Masters Degree in Business Administration from Mahatma Gandhi University, Kerala. GROWTH STRATEGY: ENERGY PORTFOLIO

ESAF plans to offer larger clean energy products such as extend credit for energy products to smaller NGOs to help rooftop solar and solar water pumps to exisiting and new them begin energy lending. The model will identify suitable clients. It plans to expand its energy finance program to organizations (post due dilligence) and offer credit terms newer geographies through a partnership model where it will beneficial to the partner organizations along with MIS support.

INVESTMENT NEED: ENERGY PORTFOLIO

ESAF IS SEEKING INVESTMENT TO: ➤ Introduce larger products to the client base which typically require longer loan terms, as well as other adaptations to a typical MFI loan such as adjustments to risk assessment and appraisal processes, loan officer training, new product partnerships, and different approaches to warranty and after-sales service. ➤ Innovate the business model by entering new regions and targeting new segments through partnerships, enabling ESAF to secure better terms from energy product suppliers and provide more product choices to their clients.

INVESTMENT ASK: ENERGY PORTFOLIO

FINANCING NEEDS USD 9.4 MILLION STAGE SCALE UP

REGION ALL OF INDIA

ABOUT PACE-D TA PROGRAM: The Partnership to Advance Clean Energy – Deployment Technical Assistance Program (PACE-D TA Program) is a five-year bilateral initiative led by the U.S. Agency for International Development (USAID) and the U.S. Department of State, and implemented in partnership with the Ministry of Power (MOP) and the Ministry of New and Renewable Energy (MNRE). The Program has three key components: energy efficiency (EE), renewable energy (RE) and cleaner fossil technologies. One of the focal areas of the Program is to provide technical assistance to microfinance institutions to scale up energy lending. Nexant is the key implementation partner for the PACE-D TA Program and is supported by a consortium of Indian and U.S. companies including Arc Finance which leads the microfinance component of the Program. As a part of this Program, Arc Finance is providing technical assistance to seven partner microfinance institutions in nine different states: Uttar Pradesh, Odisha, Madhya Pradesh, West Bengal, Jharkhand, Kerala, Bihar, Tamil Nadu and Chhattisgarh. For more information, please visit www.pace-d.com.

USAID/India PACE-D TA Program

CONTACT CONTACT ANURAG MISHRA NITHYANANDAM YUVARAJ DINESH BABU SENIOR CLEAN ENERGY SPECIALIST CHIEF OF PARTY

EMAIL EMAIL [email protected] [email protected]