Results-Based Financing(RBF)

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INTRODUCTION

Government of RWANDA co-financed by world Bank are working closely with TAHACEL COMPANY Ltd to improve access to clean cooking via subsidies Government of RWANDA aims to provide 500 million low-income households with access to modern, renewable energy services and clean cooking solutions. The program offers results-based financing incentives to private-sector companies to reduce the short-term risks of developing a market for renewable energy.

Results-Based Financing (RBF)

Results-Based Financing (RBF) pilot program aimed to accelerate access clean cooking for low-income households in Rwanda.

Switching to the application of clean cooking technologies is very important for Rwanda because it will help in the reduction of firewood needed for cooking, reduce deforestation, mitigate climate change, and reduce health hazards to users. In addition, clean cooking solutions will reduce smoke emissions from cooking, decrease the burden of disease associated with household air pollution, and improves the well-being of Rwandans. It also saves households time and money associated with firewood collection and buying hence accelerating social-economic development.

The CC-RBF does not offer a hundred percent subsidy. It is believed that customer contribution supports market development. The possibility of market distortions due to hundred percent subsidy needs to be taken into consideration. It is important to learn from experiences elsewhere that free distribution (100% subsidies) of improved cookstoves resulted in low adoption rates and subsidy leakages (reselling of products).

The household eligibility criteria are listed below:

  • The CC-RBF subsidy will be provided only to Ubudehe 1, 2, and 3 households. Ubudehe 3 households are only eligible for CC-RBF subsidy for tier 4 and tier 5 clean cooking technologies
  • The CC-RBF subsidy will only be provided to a household once.
  • Each household is eligible for a double-burner or two single burner cooking set up.
  • Households currently benefitting from other stove subsidy (i.e. grants that lowers end-user pricing) programs are not eligible for CC-RBF subsidy.
  • Households already fully using a clean cookstove without stacking (i.e. using a traditional stove) at the time of registration, are not eligible for the CC-RBF subsidy.

Currently, the households in Ubudehe 1 are not eligible to purchase LPG cookstove. An extensive due diligence will be conducted to ensure the impact and sustainability of LPG cookstove subsidy to Ubudehe 1 and Ubudehe 2 households. The due diligence will assess Ubudehe 1 and Ubudehe 2 househlds’ willingness and capacity to pay for LPG fuel before these households are allowed to purchase the subsidized LPG cookstove under this program.

Our stove eligible clean cooking technologies are tested, evaluated, and certified by the stove testing lab under RSB based on the established performance criteria. Another form of quality control is the verification and follow-up on the quality of after sales service, which will be conducted by EDCL.

The RBF subsidy program prioritize Gender and Social Inclusion (GESI), in alignment with the Rwanda Gender Action Plan. Tahacel Company Ltd, focus on GESI throughout the implementation of the subsidy program, taking into consideration the existing gender gaps related to affordability:

  • Female- and male-headed households are nearly equally likely to use an improved cookstove, despite the higher stove price.
  • Female-headed households are less willing to pay for a clean cooking technology than male-headed households are, especially at the full price.
  • While willingness to pay increases when a payment plan is offered, 25 percent of female-headed households not pay for a cookstove under any given terms, compared with 19.3 percent of male-headed households.

The subsidy scheme implemented by Tahacel Company Ltd, consider the existing affordability gap between men and women in clean cooking, and take into consideration what targeted incentives for women are needed. Additionally, the Tahacel Company Ltd, include sensitive design/consultations for women, as part of the public awareness campaign and stakeholder consultations activities.

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The subsidy will be provided only to Ubudehe 2, and 3 households.

The Clean Cooking Result-Based Financing subsidy will only be provided to a household once.

Each household is eligible for a double-burner, or two single burner cooking set up (given by the same Clean Cooking Companies at the sales dates).

Households currently benefitting from other stove subsidy (i.e., grants that lowers end-user pricing) programs are not eligible.

Households already fully using a clean Cook stove without stacking (i.e., using a traditional stove) at the time of registration, are not eligible.

Subsidy levels

The subsidies are expected to be fully passed on to final beneficiary households. The subsidy levels are progressive, depending on the Ubudehe level of the household. The lower the Ubudehe category, the higher the subsidy. Ubedehe 1 households are not eligible for Tier 5 clean cooking product subsidies. Subsidy levels will be regularly reviewed to reflect market changes and to ensure sustainability of the program. The value of the subsidy paid per system may thus reduce over the life of the program, to a nominal level during the final period of the program. For customers already included in the CC-RBF program, subsidy levels at the time of sales registration will be honored until the completion of the subsidy payment even if the subsidy levels for new customers changes over time.

Customer contribution

A large portion of the price will be paid for through the RBF subsidy, as summarized in Table 1. The remaining portion will be paid by the customer, as a customer contribution. For example, if an Ubudehe 2 customer purchases a Tier 5 stove with a price of RWF 100,000, CC-RBF provides RWF 67,000 subsidy and the customer will pay RWF 33,000 as customer contribution. The customer may pay in cash or pay in instalments if the PAYGO service.

The customers should pay their contribution only through a trackable payment system such as Mobile Money, cheque, or bank transfer. In cases where the Clean Cooking Company is dealing with clients that do not own a telephone set, payments can be made on cash basis, but the Clean Cooking Company should issue a receipt showing all the details of the sale for the Gas stove including subsidy amounts among others to the client and keep a copy.