Executive summary

The Indian context

India's rural economy stands at an inflection point. Agriculture employs 46.1 per cent of the country's workforce, yet contributes only 17.8 per cent to gross domestic product (GDP), highlighting a persistent gap between employment and productivity (MoSPI 2024; National Accounts Statistics 2025). Among the country's 93.1 million agricultural households, the average monthly household income is INR 19,696, underscoring the need to improve the productivity and profitability of rural livelihoods (NSSO 2019; ICRIER 2024). This productivity and income is constrained for two reasons: Low mechanisation and high farm losses. At the production stage, low levels of mechanisation further constrain agricultural productivity. Only around 45 per cent of farm operations are mechanised, despite evidence that mechanisation can reduce labour costs by 20–30 per cent and increase productivity by 10–15 per cent (Tiwari et al. 2019). Post harvest food loss also forms a significant share, exacerbating the decline in farmers’ income and productivity. In 2022, a study commissioned by the Ministry of Food Processing Industries and conducted by National Bank for Agriculture and Rural Development (NABARD) Consultancy Services estimated annual post-harvest losses of INR 1.53 lakh crore across major crop categories. These losses stem not only from inadequate storage, cooling and processing infrastructure, but also from unreliable electricity supply in rural areas, which limits the viability of energy-dependent post-harvest technologies (Kabiraj and Smridhi 2023). This makes it increasingly important to improve the efficiency of farm operations through mechanisation and adequate infrastructure at the farm gate, while enabling higher-value activities such as processing, storage and aggregation that generate greater returns from agricultural produce. Beyond the farm gate, improving agricultural productivity while expanding rural enterprises is also central to India's employment challenge. India is projected to require 90 million non-farm jobs by 2030, with rural enterprises expected to play a critical role in generating them (Sankhe et al. 2020). Rural India is already home to 51 per cent of the country's 63 million micro, small and medium enterprises (MSMEs), making enterprise-led growth an important pathway for income diversification and local economic development (Nagpal 2025; FICCI n.d.).

Reliable, appropriately scaled energy and greater mechanisation can help address these constraints by enabling increased productivity, local value addition and enterprise. Decentralised renewable energy (DRE) livelihood technologies represent one such opportunity. Across applications ranging from irrigation and spraying to food processing, cold storage, dairy and fisheries, these technologies can enable reliable energy access, support mechanisation, reduce operating costs, and facilitate value addition. As a result, they offer a practical pathway to strengthening rural livelihoods while advancing India's clean energy transition.

DRE technologies as a solution

DRE-powered technologies are small-scale, modular energy systems that use renewable sources (solar, biomass, small wind, or micro-hydro) and are deployed close to the point of livelihood or energy use. DRE systems generate and use energy locally, reducing dependence on unreliable grid supply and volatile diesel prices while providing affordable and reliable energy for productive activities. Applications of DRE livelihood technologies span several farm and non-farm value chains, ranging from pre-harvest mechanisation through solar pumps and sprayers, to food processing and value addition through solar drying, processing, and milling, to cold chain, animal husbandry and dairying, livestock and fisheries, and textiles and enterprise creation. These assets have the potential to impact over 37 million livelihoods and unlock a market opportunity of nearly USD 50 billion (Waray, Patnaik, and Jain 2018). Currently, DRE adoption stands at approximately 0.56 million deployments, led by solar irrigation pumps under Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyaan (PM-KUSUM), followed by solar dryers, cold rooms, milk chillers, and food processing equipment; yet this remains well below the sector's potential of over 20 million deployments (Jain, Khalid, and Jindal 2023).

Achieving commercial scale depends not only on technology or manufacturing capability, but also on an ecosystem in which grassroots organisations drive awareness, distributors extend market reach, financiers enable ownership through credit, and policymakers create enabling conditions—together underpinning five interdependent levers: customer awareness, last-mile service capacity, product standardisation, market linkages, and financing. Of these, financing remains particularly critical given the high upfront cost of these technologies and low awareness about the viability of these innovations. For farmers, microentrepreneurs, self-help groups (SHGs) and small retailers who can benefit from such assets, affordable credit access can determine whether adoption happens at all.

Proven viability and the case for accessible finance

In its market viability report (Jain, Khalid and Jindal 2023), the Council on Energy, Environment and Water (CEEW) assesses technologies spanning agriculture, livestock, food processing, cold chain, and textiles, and demonstrates strong economic viability of various DRE assets. Asset values range from approximately INR 19,000 for a solar sprayer to more than INR 20 lakh for a cold storage unit (20 metric tonnes (MT)), with discounted payback periods ranging from five months to around 52 months depending on the technology and financing terms.

This viability translates into measurable impact on the ground: evidence from CEEW and Villgro’s Powering Livelihoods programme shows that 87 per cent of 660 surveyed users experienced income gains after adoption, with median increases of up to INR 40,000 (or 33 per cent) annually, driven by more earning days, lower input and energy costs, and improved productivity and product quality. Among users who experienced income gains and made some upfront contribution towards the technology, 46 per cent could repay their initial loan using their increased incomes alone; this share rises to 68 per cent if loan tenures are extended, indicating that better-structured financing and increased access to credit could make repayment viable for a large share of users (Yasaswi, Gaur, and Jain 2025). Beyond income, users report reduced physical drudgery, greater financial resilience and confidence in building assets, and reduced migration pressures, with benefits particularly pronounced for women through greater mobility, skill-building, and decision-making agency. Together, this evidence points to DRE livelihood technologies as both financially viable investments and a meaningful driver of economic and social empowerment in rural India.

Despite growing evidence of commercial viability, financing remains a key constraint to scale. DRE livelihood assets are capital-intensive, requiring high upfront investment relative to end-users' incomes, despite comparatively lower operating costs over the asset's life. Ticket sizes vary widely across technologies, and financing therefore needs a tailored approach: lower-ticket assets impose disproportionately high origination, appraisal, and monitoring costs relative to loan size, while higher-ticket assets require stronger evidence of utilisation and successful deployment before lenders will finance them at scale. This is compounded by limited lender familiarity with DRE technologies and the absence of standardised appraisal benchmarks, which make risk difficult to assess. Consequently, most deployments currently rely on philanthropic capital, or subsidies rather than commercial credit, keeping the sector dependent on concessional funding. Within the Powering Livelihoods programme's own experience, non-banking financial companies (NBFCs) and peer-to-peer (P2P) platforms have been the primary financing partners, helping build early evidence of the sector's commercial viability. However, scaling further requires the participation of commercial and institutional credit, particularly as many DRE technologies already qualify under government schemes involving subsidy-linked loans routed through banks. Leveraging commercial and institutional credit is therefore essential to unlocking the sector's full livelihood and economic potential.

Objectives

This whitepaper aims to map the DRE livelihood financing ecosystem, diagnose the barriers limiting institutional credit flow, and propose practical recommendations to help banks and financial institutions (FIs) integrate DRE livelihood technologies into mainstream lending portfolios. In doing so, its objective is to equip the financing ecosystem with a clearer picture of the DRE livelihoods sector and technologies available, the policies and schemes that can be leveraged to support their uptake, learnings from the sector, and the key considerations involved in financing these assets.

Key findings

• The estimated financing requirement for five high potential technologies is up to USD 5.7 billion
  Estimates from CEEW and Villgro’s Powering Livelihoods programme place the current financing requirement for just high potential DRE technologies (solar dryers, solar refrigerators, solar food processors, vertical fodder grow units and solar cold storage) at up to USD 5.7 billion per current market potential. A detailed scenario analysis is expanded on in the main report.
• Two structural bottlenecks exist in financing DRE livelihood technologies: a ‘missing middle’ for mid-tier assets, and an inverse interest-rate relationship that raises costs for small borrowers.
  A "missing middle" exists for mid-tier assets (INR 1–5 lakh, including solar dryers, micro-processors, micro cold storages, and looms), which are too large for typical microfinance institution (MFI) ticket sizes, yet small relative to the fixed costs of origination and appraisal that larger banks incur, thus offering lower returns against their cost of funds and giving these lenders limited incentive to prioritise such loans over larger-ticket exposures, an effect compounded by the absence of standardised technology benchmarks. Second, an inverse interest-rate relationship persists, where smaller-ticket assets attract higher interest rates and shorter tenures than larger ones, raising costs for the borrowers least able to absorb them.
• DRE livelihood technologies vary widely in ticket size and use case; different lender types are therefore suited to financing different segments of the market.
  Microfinance institutions, SHG–bank linkage models, and small finance banks (SFBs) are best placed for small-ticket, first-time, collateral-free borrowers. SFBs, regional rural banks (RRBs), and NBFCs are better suited to mid-sized productive assets using enterprise cash-flow assessments. Public sector banks (PSBs) and commercial banks are best positioned for capital-intensive assets requiring long-tenure project finance, subsidies, and refinance support. A differentiated, ecosystem-based lending approach, rather than reliance on a single channel, is required to appropriately match capital to each segment.

Source: Authors' synthesis based on Abraham (2006); Ahmed, Casiraghi, and Ogawa (2023); Ahmed, S. (n.d.); Berger and Udell (2002); Business Standard (2025a, 2025b, 2026); Department of Financial Services (n.d., 2026); Kumar, Kaveri, and Shah (2024); KPMG (2024); MFIN (2024); NABARD (n.d., 2024); PIB (2025, 2026); Reserve Bank of India (2017, 2022 [updated 2025], 2025a, 2025b); Sa-Dhan (2025); Sarthak Law (2025); Sebastian (n.d.); Sudarshan and Hegade (2024); The New Indian Express (2019); and Vision IAS (2025).

Methodology note: This comparative assessment draws on a synthesis of secondary sources, authors' analysis and insights from the Powering Livelihoods programme's engagement with lenders, DRE enterprises, and end-users. Parameters were selected to reflect dimensions relevant to a lender's decision to finance DRE livelihood technologies, spanning outreach, risk appetite, operational capability, strategic alignment, and use of government subsidies/guarantees. Ratings are qualitative and relative, indicating how a lender category compares to other categories on a given parameter. 

• Last mile support on loan screening and collection offer a replicable model.
  Ground-level ecosystem partners are central to scaling DRE finance. Beyond generating leads and supporting users after installation they help reduce lending risk by screening borrowers, identifying early signs of repayment stress, and assisting with collections and troubleshooting when repayments are missed. Their unique value comes from their sustained local presence. Familiarity with borrowers allows them to assess repayment capacity beyond formal appraisal, build confidence in financing, and provide low-cost follow-up and collection support. Financing outcomes also show strong geographic concentration, suggesting scale is best achieved by replicating successful local partner ecosystems rather than uniform national rollout or purely demand-driven expansion. Early traction indicates that embedded actors with both sales influence and repayment responsibility can be essential to unlocking rural credit uptake at scale.
• The presence of a credible anchor institution can enable financier entry into this asset class.
  As DRE livelihood technologies are still an emerging lending segment, financiers have often relied on anchor institutions such as enterprises or ecosystem partners to aggregate demand, provide after-sales support, and build confidence in the technology and market. Assessing the strength of the anchor partner can therefore serve as a practical entry strategy alongside conventional borrower and asset appraisal.

Recommendations

This paper proposes key recommendations to scale financing for the DRE sector moving forward:

Capacity building

• Build institutional capacity through specialised training for PSBs, RRBs, cooperative banks, and other FIs through dedicated training programmes on DRE technologies, business models, and risk assessment. Institutions such as the National Institute of Bank Management (NIBM) and the Bankers Institute of Rural Development (BIRD) can play a leading role in designing and delivering these programmes.
• Develop technology-specific standardised appraisal benchmarks and model credit assessment frameworks for commonly financed DRE livelihood technologies. Standardised benchmarks would improve consistency in credit appraisal, reduce reliance on individual lender expertise, and increase confidence in financing newer technologies.
• Develop lending guidelines for DRE technologies to support loan structuring, documentation requirements, collateral assessment, and monitoring practices across FIs.

Instrument design

• Strengthen refinance and risk-sharing support for DRE livelihood lending and establish a dedicated credit guarantee mechanism, anchored by NABARD or the Small Industries Development Bank of India (SIDBI), to provide partial credit guarantees and loss covers for DRE livelihood portfolios. This would reduce lender risk, encourage wider participation by FIs, and catalyse lending for DRE livelihood technologies. Concessional climate finance could further enhance the facility and improve credit affordability.
• Reduce the cost of originating and appraising small-to-medium ticket size loans through aggregation models bundling small borrowers into bankable portfolios, technology-specific standardised appraisal benchmarks, and digital loan origination. Potential aggregators include DRE enterprises, farmer producer organisations (FPOs), SHG federations, cooperatives, and other rural intermediaries with existing customer relationships and networks.
• Promote the integration of DRE livelihood financing across existing rural credit programmes and institutional networks to enable wider outreach, particularly through PSBs, RRBs, and cooperative banks that have an extensive rural presence.
• Leverage concessional climate finance to mobilise commercial capital. Blended finance mechanisms can improve the bankability of DRE livelihood investments by absorbing early-stage and default risk. NABARD and SIDBI, both accredited to the Green Climate Fund (GCF) already manage climate finance, guarantee, and concessional lending facilities that could be adapted for DRE livelihoods. These existing multilateral and domestic financing channels provide an institutional platform through which concessional capital and risk-sharing instruments could be directed towards DRE livelihood technologies. Commercial lenders and development finance institutions can work with NABARD and SIDBI to structure guarantee and credit-enhancement facilities under existing accreditations, thereby unlocking private sector participation. Multilateral platforms like the Asian Development Banks’ India Green Finance Facility (IGFF) demonstrate how blended credit lines and risk-sharing mechanisms can mobilise private investment in DRE. Under this, the DRE sector has an IGFF allocation of USD 130 million and total mobilised financing of USD 322 million (Green Climate Fund 2024).
• Adopt cash flow-based lending approaches for productive assets. Given that repayment capacity is closely linked to income generated by productive-use DRE technologies, credit appraisal frameworks may progressively incorporate projected enterprise cash flows alongside conventional borrower assessments. Loan tenures and repayment schedules aligned with seasonal income patterns would further improve product suitability and repayment outcomes for rural livelihood investments. Commercial banks, NBFCs, and SFBs can pilot such lending approaches, while NABARD and NIBM can support the development of standardised appraisal methodologies and operational guidance.

Policy

• Integrate DRE livelihood technologies within mainstream lending portfolios. FIs may consider integrating DRE livelihood technologies systematically within their agriculture, MSME, and renewable energy portfolios. Such investments align with Priority Sector Lending objectives and complement the increasing integration of climate and ESG considerations into banking operations. PSBs, RRBs, Cooperative Banks, and SFBs are well positioned to expand lending across different borrower segments, and NABARD's refinance support could be extended to DRE livelihood technologies to reduce the financing burden on RRBs and Cooperative Banks and strengthen affordable rural lending.
• Strengthening policy convergence for DRE financing. Existing government schemes offer instruments that can support DRE livelihood technologies, but these are typically accessed in isolation rather than combined, and further have no dedicated DRE category. Each instrument addresses a different barrier, and together they can make financing more viable than when deployed independently. The ambiguity in classifying DRE livelihood technologies under the existing Priority Sector Lending (PSL) framework further underscores the need for guidance mapping commonly financed technologies to the relevant PSL provisions. Given DRE's potential in enhancing rural livelihoods and climate goals, there is a case for creating dedicated DRE windows or ring-fenced allocations within existing schemes, rather than requiring these technologies to compete within broader agriculture or MSME budgets.