Leasing arrangements

5.10 Under a leasing or hire-purchase arrangement, the intermediary retains ownership of the solar home system or some of its components until the cost is recovered. The solar home system is used to secure the lease agreement. Most leasing programs to date have been set up with grants or low- or zero-interest loans from donors and governments and have used NGOs as intermediaries. In Indonesia, Sri Lanka, and the Philippines these grants have been used to establish revolving funds to buy PV systems. The intermediary serves as the manager and guarantor of the funds if loans need to be repaid, registers qualified participants, makes bulk purchases, provides installation and maintenance services, stocks spares, trains consumers, collects fees, and performs other administrative tasks. The BANPRES Project in Indonesia and the Solanka/Sun Societies and Sarvodaya in Sri Lanka use lease arrangements under which customers make monthly payments to the NGO/intermediary responsible for servicing the debt to the donor agency or government. Once a loan is paid off, ownership transfers to the customer. The principal differences between ESCOs and leasing arrangements are that ESCOs retain ownership of the major solar home system components, while in lease or hire-purchase arrangements, fees are essentially loan repayments. Services such as maintenance must be paid for separately. As an institutional model, lease or hire-purchase arrangements share many of the potential advantages of the ESCO scheme but are often constrained by the scarcity of grant financing to set up revolving funds.