Opinion – India’s Green Economy Can Accelerate If Rural Credit Breaks Away From Business As Usual

In India’s trillion-dollar push for energy transition, one massive opportunity often escapes the mainstream financing radar: small-scale solar-powered technologies for livelihoods. This goes beyond massive utility-scale solar farms or urban rooftop installations to include solar dryers for women-led agri-businesses, hydroponic fodder units for small dairy farmers, and solar refrigerators for fish retailers, to name a few. These technologies represent an untapped financing opportunity of USD 50 billion, according to research by the Council on Energy, Environment and Water, that can potentially impact 37 million livelihoods across India.

As India deepens its green transition and pursues ambitious employment goals, two challenges stand out: building a robust demand pipeline and ensuring financing models are ready to meet that demand—at scale, speed, and flexibility. But mainstream lenders remain cautious, particularly with new-to-credit borrowers lacking collateral or formal credit histories.

At present, rural clean-tech adoption depends largely on one-time grants, heavily collateralised loans, or slow-moving subsidies. For many customers, these are either inaccessible or unsuitable. This is where we need to reimagine credit to be designed not as a uniform financial product, but as a fit-for-purpose responsive to user context.

Structured risk-sharing in practice

Experience from the Council on Energy, Environment and Water and Villgro’s Powering Livelihoods initiative shows that blended finance and structured risk-sharing tools—like first-loss default guarantees and innovative financing such as peer-to-peer lending—can unlock affordable credit for solar-powered livelihood technologies in underserved markets. One example  illustrates both the potential and the mechanics:

Devidayal Solar Solutions (DD Solar) supplies solar-powered cooling systems to value chains from dairy to fisheries across India. Strong demand existed for their solar refrigerators in Uttar Pradesh, but high upfront costs and limited access to institutional finance kept adoption low. Partnering with Ashv Finance, DD Solar deployed a first-loss default guarantee (FLDG), where a third party covers a predefined share of any defaults, lowering the lender’s risk.With a 25 per cent FLDG, Ashv Finance disbursed INR 1.36 crore in loans for solar refrigerators, averaging INR 37,313 per borrower. Non-performing assets remained at about 2.5 per cent. Fifty-seven per cent of DD Solar’s customers who availed loans were new-to-credit; the rest had CIBIL scores above 650. As borrowers repaid on time, confidence grew, and the same FLDG pool was used to extend further loans to DD Solar’s customers, scaling from the initial 238 borrowers to 362. This built trust between lenders and borrowers, and established repayment track records where none existed.

But tackling rural finance at scale needs more than a few success stories; it demands systemic innovation.

Peer-to-peer lending for clean tech

While structured guarantees address lender risk, other models focus on improving the speed and affordability of credit. Rang De, a pioneering peer-to-peer (P2P) lending platform, has carved a niche as India’s first model offering direct loans for DRE livelihood technologies. It connects individual lenders directly with rural entrepreneurs, helping them afford clean-tech solutions like hydroponic fodder systems or solar-powered dryers.

Partnering with the Powering Livelihoods Fund, Rang De has channelled INR 4.91 lakh in loans to first-time borrowers, creating 18 new livelihoods. What stands out is not just the total value, but the velocity: every loan listed has been fully funded within 20 hours, compared to the weeks or months common in rural lending. Interest rates average 8-9 per cent due to minimal intermediation, and every loan is vetted, digitally verified, and listed on a live platform.

Repayment performance has been encouraging—INR 1.3 lakh already repaid, with less than 10% in current non-performing assets. Instead of relying on impersonal recovery notices, Rang De’s approach emphasises borrower engagement and problem-solving.

For borrowers like Sowmya Soundarajan, a dairy farmer from Karur, Tamil Nadu, this has been transformative. With eight years experience, but no access to formal credit, she secured INR 32,000 for a solar-powered hydroponic fodder unit to feed her four cows. The technology improved milk yield by a minimum of 500 ml, reduced fodder shortages during summer, and freed up time in her schedule to work a part-time job, which was earlier spent in fetching fodder. Just as important, it marked her first step into the formal credit system, giving her a track record for future borrowing.

Rethinking risk assessment for a clean energy future

These examples show that financing rural clean tech is not a matter of product availability, but of financial design. For financial institutions seeking viable lending avenues, DRE technologies represent an untapped opportunity. Solar silk reeling machines, micro horticulture processors, and micro solar pumps, etc., improve incomes, productivity, and women’s participation in the workforce. Yet most lending criteria—fixed income, property-based collateral, established credit scores—are calibrated for urban or asset-backed contexts. Clean-tech adoption does not fit those profiles, but it is not inherently high-risk. It calls for new assessment frameworks and financing tools—structured guarantees, peer-to-peer lending, and blended capital—that can de-risk transactions and reach borrowers that traditional systems overlook.

When risk is shared, credit flows. If India is to build a green and inclusive economy, financial institutions must move beyond conventional risk thresholds and adopt innovations proven to work in rural lending. The mechanisms already exist. Structured guarantees can protect lenders while building borrower credit histories. Peer-to-peer models can move capital quickly to where it is needed most. Both can accelerate clean technology adoption that transforms livelihoods.

The clean energy transition cannot afford to exclude those most ready to benefit from it. The task now is to integrate these models into the mainstream financial system—co-creating a credit ecosystem that supports sustainable technologies, strengthens rural economies, and makes inclusive growth a defining feature of India’s energy future.

By Urwa Tul Wusqa (Research Analyst) and Wase Khalid (Programme Lead), CEEW