Microfinance Helps Sri Lanka to Leapfrog

Are you familiar with the concept of “leapfrogging“? It’s the idea that, in certain instances, developing countries can leapfrog over early versions of a technology and move onto a more efficient form now available. The most lucid example is fixed line versus mobile phones. Since mobiles do not require the vast infrastructure (and the upkeep) of fixed line phones, they are a more efficient and readily distributable technology. As a result, many developing countries are skipping over the fixed line phase of telecommunications and focusing almost solely on mobile phones.

A new leapfrog is electrical infrastructure. In the developed world, we built vast electrical grids that distribute electricity from huge generating facilities across great distances. The system has its weaknesses. One break in the chain can result in large scale blackouts. Transporting electricity over vast distances is inefficient (since much of the energy is lost to heat along the transmission lines). It also requires huge amounts of capital investment to build a single nuclear plant, coal plant, or hydroelectric dam.

Imagine an alternate form of electricity production and use. Instead of centralized electrical generation, what if electricity were produced by individuals or small groups? This idea was a pipe dream a generation ago, because renewable energy technologies were too costly. Now, however, with the advent of thin film solar and other innovations, cheap, renewable energy is available.

A Sri Lankan MFI called SEEDS has helped 52,000 families to install solar systems on their homes by providing them with the financing to purchase the system. In a country where 40% of the population is “off the grid”, leapfrogging to small scale solar allows the rural poor access to electricity.

What other instances of leapfrogging have you heard about associated with microfinance?