Small businesses are open to adopting rooftop solar if loan repayment is not an additional burden and is equal to their savings on electricity bills. Entities in the commercial and industrial (C&I) segment are increasingly moving towards renewable energy options, including rooftop solar, given the immense benefits they bring in terms of cost savings and reputation as sustainable companies.

Vikas Agarwal, the co-founder of non-banking financial company Credit Fair, said in an interview with Mercom India that there is an uptick in rooftop installations in the residential segment after the Union government launched a national portal for rooftop solar to submit applications.  The government has also started direct transfer of subsidies to the consumers’ bank accounts.

Can you briefly introduce Credit Fair to our audience, specifically your green loan offerings?

Credit Fair started operations in 2018 as a non-banking financial company regulated by RBI. One of the four categories of businesses we finance is solar rooftop installation which makes up roughly 20% of our loan book.

What loan products do you offer for residential rooftop solar, and what are some of the criteria to qualify for these loans?

We finance three categories of rooftop solar installation: residential (standalone units), housing societies, and MSMEs. The residential rooftop systems range between 3-5 kW. The systems for MSMEs could range from 20-50 kW. We are currently processing 500 applications in a month from all over India.

What are the other concerns that keep individual households away from adopting solar rooftop solar?

With the improvement in the timely disbursement of subsidies from the central government, individual households have started adopting rooftop solar solutions.

Depending on the project, the subsidy covers about 20-25% of the cost. Earlier, the subsidy would come to the installer, but now the central government has dedicated a web portal for such applications. Consumers can fill in the details and receive the subsidy amount directly into their bank account within 40-50 days of commissioning.

What is the average cost of constructing a residential system at 3 kW? What loan amount can Credit Fair release for such a system? Will you finance 100% of the project value?

Depending on the quality of engineering, procurement, and construction (EPC) work, a 3 kW system can cost up to ₹225,000 ($2,718). Credit Fair provides about 80% of the total cost as loans, while the remaining 20% is a down payment from the customers. We disburse the loan, and then the installation work starts. Usually, we pay the installers directly on behalf of the consumer.

Do you provide loans directly to households or through partnerships with rooftop installers? How does a rooftop installer become a partner of Credit Fair?

We have recently onboarded Tata power as the installer. They have 400 dealers all over India. So, all these dealers will now be on board with us to do this business. We are also working with Solar Square.

Is the disbursal of subsidies from state governments a challenge for residential rooftop solar?

There is barely any subsidy from state governments, but the central government system of timely disbursal of subsidies has improved with the advent of the new central portal for rooftop solar installations.

What is the profile of C&I consumers to whom you provide loans? What is the average size of C&I projects that you finance?

Currently, we cater to small businesses that typically require up to 50 kW systems. We have clients that include flour mills and other metalwork firms.

What are the typical concerns that deter small C&I consumers from adopting solar?

We have found that medium enterprises with turnover above ₹500 million (~$6 million) usually know the benefits of bringing solar into their energy mix. But smaller units are reluctant about the upfront investment. However, installers and financial companies like us have a substantial role in convincing these businesses to adopt solar.

 Do you customize EMIs so that they can be covered within the energy savings for a C&I entity?

We structure our EMIs to ensure that it’s equal to the amount of savings accrued to the business, and the tenure is typically 3-5 years. This model ensures that there is no additional interest payment burden for the firms, making it easier for them to adopt solar.

The loan ticket size is typically ₹1.5-2 million (~$18,125-$24,166) and can go up to ₹5 million (~$60,388).

During the underwriting process, we ask for data regarding electricity bills for the past three months and cash flow status. Based on this, we calculate the power saving and design our EMIs so that the savings are used to pay off the loan.

Do you have loans for electric vehicles?

We do have loans for electric vehicles, but it’s not a big portfolio currently.

What are your plans for the next five years? Do you see the green loan business growing?

We are aggressively focusing on the green loan business and target 40% of the total loan book to be green financing in the next two years.

It translates to assets under management (AUM) of ₹10 billion (~$121 million) with ₹4 billion (~$48.4 million) of green loans by FY 25.