Productive Use in Myanmar: Fisheries Case Study
Key finding: Targeted, replicable and affordable financing and technical support for rural mini-grids can strengthen community resilience and business incomes.
Productive uses of electricity (PUE) play a critical role in ending energy poverty and promoting economic development. Increasing consumers’ ability to utilise affordable, clean energy to build micro-businesses helps to grow incomes and create resilient, sustainable communities that are able to weather hardships of all descriptions. PUE, such as grain milling, cold storage and irrigation, allow communities to translate electricity access into increased income, additional employment creation, and provide vital economic opportunity at scale. Mini-grids will be needed for Myanmar to reach universal electrification by 2030.Without investment and support for PUE to help grow the local economy and demand for electricity, mini-grids are likely to be unsustainable in the long-term.
Women-owned micro-enterprises are particularly crucial. Evidence from across the world indicates that successful women entrepreneurs increase other women’s confidence and inspire them to set up businesses, stimulating additional demand.
In this Impact Brief, we highlight an archetypal impact story from a fisheries business in the far south of Tanintharyi Region to illustrate how a variety of highly practical, tailored interventions were deployed to encourage PUE growth and income growth. This business success is being used by SPM and our private sector partners to help design and replicate other similar interventions across Myanmar as part of a broader strategy encompassing digitalised electrification planning and finance for community connections.
The fisheries micro-business is located on an island in Myanmar’s Tanintharyi Region. It has 120 workers who harvest and prepare fresh cockles, making it one of the most significant employers on the island. These cockles are exported to Thailand where they help to satisfy the country’s growing domestic demand for fishery products. The business is led by Daw Ni, a local entrepreneur and mother of five.
The 4,000-strong community on the island have spent most of their lives without access to affordable, reliable energy. This fisheries micro-business could purchase electricity from the owner of a diesel generator but, priced at MMK 2000 ($1.40) for four hours, it could only run small appliances and lights for a few hours each day. It spent MMK 3,000 ($2.10) on fuel for a diesel pump used to wash cockles prior to export and workers spent several hours each day physically transporting drinking water. The island is prone to storms which can disrupt supply chains. When this happened, because the island lacked cold storage solutions, Daw Ni’s produce would spoil and the micro-business would suffer.
The community on this island is not unusual in this respect. The World Bank estimated in 2018 that around ninety percent of households in Tanintharyi lacked access to the national grid. In Myanmar, approximately five and a half million households lack access to a reliable, affordable source of electricity.
Early in 2020, things began to change for Daw Ni and her fisheries business. Techno-Hill Engineering, a local private mini-grid developer led by women CEO and entrepreneur Daw Barani Aung, received financing from Myanmar’s World Bank-sponsored mini-grid program to build a solar mini-grid in the village. With help from AYA Bank’s Equipment Financing Facility, modelled on the Myanmar Equipment Financing Facility developed by Smart Power Myanmar in late 2019, Barani accessed MMK 67,000,000 ($48,000) in affordable finance to cover the initial costs of the project.
In order to address the connection financing barrier, SPM deployed MMK 30,000,000 ($21,000) in connection financing to 116 households through the Energy Impact Fund.** This financing ensured that the lowest income households benefitted from the mini-grid. As it raised overall demand for the mini-grid, which enhances the long-term viability of the grid, this financing also ensured that business owners benefitted from affordable electricity on a long-term basis.
SPM’s Applied Energy Lab (AEL) conducted tailored capacity building. SPM staff delivered a connection financing workshop to teach community members about loan tenors, payment terms and other important information regarding their loans. Staff also delivered two workshops to the community’s Village Electrification Committee (VEC), the group responsible for supporting the electrification process in the village. The VEC clarified roles and responsibilities, learned how to open bank accounts and learned practical skills including how to use a calculator. The AEL provides Techno-Hill with technical assistance to optimise the performance of the mini-grid. This includes regular reports that highlight any technical issues and identify opportunities to stimulate demand and promote mini-grid viability.
Businesses and community members capitalised on the opportunities that the new electricity infrastructure provided. The fisheries micro-business purchased two electric water pumps and Daw Ni bought several household appliances.
As of January 2021, less than a year after the mini-grid was developed, access to electricity was having an impact.***
Since the fisheries business gained access to electricity, it benefitted from reduced costs, increased productivity, and significantly higher orders. Previously, the business’s monthly energy bills totalled MMK 150,000 ($106). In January 2021, with 24/7 access to electricity and the use of two electric pumps, it paid MMK 90,000 ($64), a reduction of 60%. With a drinking water pump, the workers no longer needed to spend hours carrying water each day.
Sales — and, more importantly, profits — were also up. Before the mini-grid arrived in the community, the business’s wholesaler would typically place orders for around 2,000kg at a time. With a more efficient electric pump to transport salt water to wash cockles, workers were able to harvest more each day. Knowing this, the wholesaler typically placed orders for 3,000kg or more, an increase of 50%. As electricity boosted productivity without raising costs, profits were healthy: the business makes up to MMK 6,000,000 ($4,200) in profit on orders like these. Another business owner has now established a cold storage solution on the island, meaning that the business owner does not worry about storms disrupting supply chains.
The success of the micro-enterprise has had a broader impact. The business’s owner, Daw Ni, used some of the extra revenue generated by her business to donate a new zagat, a traditional Burmese building, to her village. When the World Bank part-funded the construction of an overhead water tank to distribute water in the village, Daw Ni donated to ensure that some of the lowest income households could connect their homes. Thanks in part to donations from Daw Ni and other entrepreneurs, more than three-fifths of the village benefit from the tank. In the near future, Daw Ni plans to expand the fisheries business and create new opportunities for young people on the island.
For the decentralised energy sector, micro-stories like these are important because they illustrate how a variety of interventions are often required to accelerate energy access and catalyse economic development. The mini-grid in this village was developed because of a financing facility that provided the developer with access to capital to cover CAPEX costs. Targeted loans and trainings were required to stimulate demand. This maximised the likelihood that the developer would receive a steady revenue stream that justified the continued operation of the mini-grid. Each intervention was required to help the community become more economically resilient and to catalyse an upward spiral of growth.
The specific interventions required to accelerate the growth of PUE in villages differ across Myanmar. In some communities, specialist support teams should be deployed to identify opportunities for PUE. In other communities, loans should be dispersed to fund the purchase of new electric-powered machinery. By identifying which interventions are required, and deploying these as part of an integrated approach to electrification, decision-makers can ensure that the successful economic development exemplified by Daw Ni and her community can be replicated elsewhere.
*This figure is the sum of the total amount accessed from a Smart Power Myanmar-supported bridge financing facility and the total amount of connection financing dispersed by the Energy Impact Fund.
**Based on extensive experience working with communities, SPM estimates that approximately 30% of households in rural villages require connection financing in order to connect to a mini-grid.
***All data was collected prior to February 2021.