Innovative Finance for Sustainable Energy Access: Lessons from the World’s First Result-Based Loans in the Energy Sector – an Independent Verifier’s Perspective
ADB is supporting PLN, the Indonesian state electricity company, with the world’s first result-based lending (RBL) programs in the energy sector to help realize the nation’s goal of sustainable universal electricity access. The loan’s disbursements are linked to the achievement of the program results rather than to upfront expenditures – a complete flip in the approach from traditional project lending – and uses the borrower’s systems, including monitoring and evaluation (M&E), fiduciary, safeguards and other areas. One of RBL’s core strengths is in handling large numbers of small transactions and in some cases intangible interventions such as behavioral change. In the energy sector, it is well suited to support last-mile power connections and energy efficiency efforts. Since an RBL program relies almost entirely on the borrower’s M&E system, highly credible independent verification of results is a necessary condition. This presentation describes the progress achieved through the financing innovation, the various results verification methods applied by the Independent Verification Agent (IVA), and the lessons learned in supporting and enhancing a power utility’s system to accelerate sustainable energy access.