Single title

Scaling up access to renewable energy financing in Cambodia

Case Study Analysis for Small and Medium Agri-Food Businesses

The purpose of this research is to provide an evidence-based assessment of Renewable Energy adoption by small and medium agri-food businesses and farms in Cambodia in order to offer recommendations for Financial Institutions on the key entry points into Renewable Energy financing and appropriate business models to match these entry points.
The agriculture sector plays a key contributory role to Cambodia’s economic development. However, Cambodian farmers have difficulty competing with neighboring countries such as Thailand and Vietnam given their high dependency on grid electricity, which is expensive and unreliable. About 6.9 million people, or 43.1% of the country’s population, have no access to dependable electricity in Cambodia. This issue is more prevalent in rural areas where the farmers operate and results in many farmers turning to alternative sources with a predominant reliance on back-up diesel generators, which leaves farmers vulnerable to diesel price fluctuations and also contributes to greenhouse gas emissions. Fossil fuel energy sources in the agricultural sector are expensive, inaccessible, and unreliable. These difficulties hinder agricultural productivity, which has major impacts on the country’s prospects for sustainable economic growth and development. There are increasing opportunities for Cambodian people in rural and remote areas to gain access to electricity through the installation and use of renewable energy (RE) technologies. Access to affordable, reliable, and RE is “a vital input for a productive agriculture value chain”, and thus RE technologies such as solar systems and biogas digesters have already gained some traction and have been adopted by Cambodian farmers. Despite the potential for widespread use of RE technologies in Cambodia, the adoption rate remains low. Key barriers to broad adoption are lack of awareness and experience, lack of trust in the technology, and high upfront costs, but the most crucial inhibitor is a lack of access to appropriate financing alternatives. Although Cambodia has one of the most vibrant microfinancing sectors in the world, RE loan products are not considered as a potential market by local financial institutions (FIs). The FIs are hesitant to engage in RE investments as they believe market opportunities are limited and investments are risky and unprofitable. In addition, the FIs do not have a good understanding of renewable energy technologies offered in the market, the requirements of an energy assessment to support due diligence and risk management, or the possible return prospects for such investments. The purpose of this research is to provide an evidence-based assessment of RE opportunities in the context of small and medium agri-food businesses and farmers in Cambodia in order to offer recommendations to FIs on the key entry points into the RE market and financing opportunities with suggestions on appropriate business models to match these entry points.