The role of microfinance in reducing energy poverty among Tanzanian micro-borrowers is examined in this chapter. A standardized questionnaire was used to conduct a survey of 490 micro-borrowers. The data was analyzed using the multiple regression technique. Micro-borrowers are eager to spend on modern energy sources for cooking and other activities, according to the findings. Affordability and willingness to spend on contemporary energy sources for cooking have a substantial positive impact on their usage. The willingness to utilize modern energy sources for other purposes has a significant positive impact on their usage. Age, marital status, and education have no bearing on the use of modern energy sources for cooking and other purposes. The use of modern energy sources for other purposes, but not for cooking, is significantly influenced by household size. Microcredits customized for contemporary energy sources should be implemented to combat energy poverty.
TopIntroduction
Access to clean, affordable, reliable, and contemporary energy sources has been connected to the Sustainable Development Goals (SDGs) (Crentsil et al., 2019). 2.5 billion People utilize traditional biomass for cooking, 120 million use kerosene, and 170 million use coal (IEA, 2017). Around 905 million people in Sub-Saharan Africa (SSA) do not have access to clean cooking fuels, while 578 million do not have access to electricity (IEA, 2020). Around 80% of all Tanzanian families rely on traditional energy sources like firewood and charcoal, with over 90% of rural and disadvantaged households doing so (World Bank, 2016).
The high prevalence of energy poverty has serious socioeconomic consequences for people's health, livelihoods, and social well-being (Churchill et al., 2020a). As such, energy poverty can be seen as one of the drivers underlying extreme income poverty among households. Hence, lowering energy poverty serves as a catalyst for many other development goals through bolstering microfinance institutions’ social aim of alleviating income poverty and improving the well-being of micro-borrowers (Rafay, et al., 2020). Low purchasing power, on the other hand, is mentioned by Koomson and Danquah (2021) as one of the issues impeding households' exit from energy poverty. This implies that energy and income poverty are intertwined. In other words, energy poverty leads to income poverty and vice versa (Boutabba, 2020; Groh & Taylor, 2015; IRENA, 2019; PAMIGA, 2020; World Bank, 2019; Aziz et al., 2020). Since microfinance has been identified as a way to alleviate income poverty and improve household wealth (Allet, 2016; Du Can et al., 2018; Koomson & Danquah, 2021), it is also expected to relieve energy poverty among the poor (Yunus, 1999).
Despite increased access to microfinance among Tanzania's poor (Kasoga, 2020), the majority of Tanzania's poor still live in energy poverty (World Bank, 2016). This circumstance necessitates an empirical study of the effects of microfinance on energy poverty reduction, with a special focus on the following research questions: Are micro-borrowers willing to use and afford contemporary sources of energy? Is there a relationship between micro-borrowers’ willingness and ability to use contemporary energy sources and the use of contemporary energy sources?
Adusah-Poku and Takeuchi (2019) argue that in order to alleviate energy poverty, households must be ready to spend on contemporary fuels as they become more widely available. Similarly, a home may be in energy poverty due to low income and high energy costs (WEO, 2017). Income poverty is a significant driver of energy poverty, but it is neither the only reason nor even a required condition for energy poverty (WEO, 2017). Because there is no universal consensus on the influence of microfinance on energy poverty reduction around the world, and because energy poverty is a context-specific phenomenon (Kumar, 2020), it is necessary to investigate the role of microfinance in eradicating energy poverty in Tanzania.
Boutabba et al. (2020), Groh and Taylor (2015), Levaï et al. (2011), Mohiuddin (2006), Morris et al. (2007), and Rao et al. (2009) are among the few research studies in the literature that has focused on microfinance and energy poverty. This chapter adds to the body of knowledge by presenting evidence of the impact of microfinance on the decrease in energy poverty among Tanzanian micro-borrowers. This was important because, while energy poverty is a context-specific problem, there is no general consensus on the influence of microfinance on the decrease in energy poverty around the world (Kumar, 2020). The findings are also crucial for policymakers working to alleviate energy poverty among the poor.
Specifically, the objectives of this chapter are to determine micro-borrowers' willingness and ability to use modern energy sources, as well as to investigate the relationship between micro-borrowers' willingness and ability to spend on contemporary energy sources and their use of contemporary energy sources. The chapter also looks into the impact of micro-borrowers' demographic characteristics (age, marital status, level of education, and household size) on their use of contemporary energy sources.