Energy for Sustainable Development 14 (2010) 14–21

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Energy for Sustainable Development

Impacts of Electricity Access to Rural Enterprises in Bolivia, Tanzania and Vietnam

Annemarije L. Kooijman-van Dijk ⁎, Joy ClancyCSTM University of Twente, PO Box 217, 7500 AE Enschede, The Netherlands

⁎ Corresponding author. Tel.: +31 53 4893698; fax: +E-mail address: a.l.kooijman@utwente.nl (A.L. Kooij

0973-0826/$ – see front matter © 2009 International Edoi:10.1016/j.esd.2009.12.004

a b s t r a c t

a r t i c l e i n f o

Article history:Received 28 December 2009Accepted 28 December 2009

Keywords:ElectricityImpactsEnterprisePovertyLivelihoodsRural

There is little empirical evidence to underpin strategies of poverty reduction through income generation insmall scale rural enterprises through supplying energy. This paper reports on research findings from a threecountry study in Bolivia, Tanzania and Vietnam which aimed to provide insights into the scope and depth ofimpacts of modern energy services. Qualitative and quantitative data were gathered using structure andsemi-structured interviews. The nature of the data collected was shaped by the Livelihoods framework. Ananalytical framework of four questions was used to synthesise the findings. What energy transitions aretaking place in small rural enterprises, who benefits? Does the presence of modern energy carriers/technologystimulate production? Does an increase in productivity lead to a decrease in poverty in terms of financial capital?What is the impact of the changes in energy carrier/technology on the other four types of capital in the livelihoodframework?For all of the above, the dominant contextual factors influencing the process were noted.Electricity was the modern energy carrier surveyed in the three countries. In answer to the questionsregarding scope of impacts, at least for electricity, the impacts appear to depend on the location of theenterprise with regard to diversity of demand for enterprise services. The section of the population with thelargest direct benefits in terms of increased financial assets and job opportunities consists of the existingbetter-off members of the community and their extended family. However, the benefits of improvedworking conditions for many entrepreneurs and workers and of both time and access to new and betterquality products and services to customers of enterprises reach a much larger group of people, and theseimpacts can provide a substantial impact on poverty, if not on the financial dimension of poverty.

© 2009 International Energy Initiative. Published by Elsevier Inc. All rights reserved.

Introduction

There are still many people in the world who do not have access toelectricity or other forms of modern energy. In total nearly 1.6 billionout of the total population of 6.5 billion do not have electricity access,and 2.5 billion depend on biomass (OECD, 2006). It is typically thepoor who lack access to modern energy and it has been argued thatthe lack of access tomodern energy is a contributory factor to the poorremaining poor. A substantial body of policy makers believes thatcreating energy access will make it possible for the poor to improvetheir lives by creating an income, as can be seen from these quotes:

“Access to energy is central to poverty alleviation. […] Access toaffordable energy services is critical for increasing agricultural produc-tivity, encouraging economic activity, generating employment andincome opportunities, and improving the quality of life particularly forwomen and children.” World Summit on Sustainable Development in2002 (UN, 2002: 10)

“Energy inputs such as electricity and fuels are essential to generatejobs, industrial activities, transportation, commerce, micro-enterprises

3 53 4850.man-van Dijk).

nergy Initiative. Published by Elsev

and agriculture outputs.” The Energy Challenge for Achieving theMillennium Development Goals (UN-Energy, 2005: 1)

One strategy for reducing poverty is to increase incomes of the poor.Electricity is an important factor of input for many energy services thatcan contribute to enterprise operation, and therefore access toelectricity and its cost play a role in the viability and profitability ofthe enterprise. However, there is little empirical evidence to underpinstrategies of poverty reduction through supplying energy, especially bytargeting non-farm income generation (Fluitman, 1983; Rogerson,1997; Fishbein, 2003;Meadows et al., 2003; Ramani and Heijndermans,2003). Indeed the mechanisms that lead from energy supply to incomegeneration are still little understood, and insights are lacking intowhichfactors would contribute to improving the impacts of energy uses onpoverty reduction andunderwhich circumstances (Kooijman - vanDijk,2005).

This paper contributes to filling the knowledge gap on energy andincome generation. It presents a synthesis of the research findingsfrom studies in Tanzania, Bolivia and Vietnam undertaken as part ofthe programme Enabling Access to Sustainable Energy (EASE)1.

1 The EASE programme was funded by the Netherlands Directorate-General forInternational Cooperation (DGIS) and coordinated by the ETC Foundation, Leusden,the Netherlands. The programme ran from 2000 to 2006 with an inception phasefollowed by a research and project development phase.

ier Inc. All rights reserved.

15A.L. Kooijman-van Dijk, J. Clancy / Energy for Sustainable Development 14 (2010) 14–21

Methodology

The research aimed to go a step further than a description of theenergy situation and energy needs of poor people who currently haveno access to modern energy. The programme partners2 set out toincrease the common understanding of factors and processes relatedto under which circumstances energy contributes to poverty reductionand how, including the search for patterns and conclusions on whobenefits, andwhy. As a first step in understanding the energy–povertynexus a differentiation should be made between the direct effects ofenergy in reducing poverty in financial terms through decreasing costof energy services or increasing income from enterprise operation(contributions to financial capital), and from those effects of energy inimproving quality of life in more general terms, that is, in terms ofincreasing other sorts of capital, which in turn means indirectways ofreducing poverty, for example, increase in education level due toaccess to light, which contributes to job opportunities for youngpeople.

Within the broader programme which included both research andcommunication and implementation activities, each partner had thefreedom to select topics for specific focus, such as on a specific energycarrier or a type of use (consumption, production, communityservices). However, based on a conclusion from the programmeinception phase that modern energy for production is potentially avery significant input in bringing an effective and structuralcontribution to poverty reduction (Snel et al., 2002), the use ofmodern energy for production was given priority, as this is one of theleast understood factors that can contribute to poverty reduction. Thisapproach is in keeping with the need to provide empirical evidencethat tests the hypothesis that improved access to energy services willlead to improved opportunities for income generation. Such a studywill also contribute to better grounded policies.

It was decided to include a common element to the researchconducted in all three countries. This was not so much to allow forcomparative research but to enable sharing of lessons learnt andsolutions for common problems. The partners chose the impacts ofelectricity on non-farm income generation as a common aspect intheir research.

The livelihoods framework was used for structuring data andguiding analysis (DFID, undated). The tool also recognises a broaderdefinition of poverty than a purely economic one. Using a livelihoodsframework entails identifying a person's (or household's) assets(which are grouped into five categories: human, natural, financial,social, and physical) and considering these as starting points for thelivelihood strategies that people have taken within a context ofvulnerability and under the influence of institutional structures(including the government and the private sector) and externalprocesses (such as policies and culture).

Quantitative and qualitative data were gathered using structuredand semi-structured interviews. The type of data required was shapedby the use of the Livelihoods Framework which helped to identifyaspects within the assets or the context in which entrepreneurs workthat may influence both the uptake of modern energy and its impacts(Clancy and Kooijman, 2006). Triangulation of quantitative data withobservations and qualitative data from entrepreneurs is particularlyrelevant for the study of potentially sensitive issues such as income.

In Bolivia, data were collected by project partner Energetica in 40communities within the Department of Cochabamba located in threedifferent geographic zones in the high plains, the valley and themountains, but all in areas with more than 85% poverty occurrence3.The communities in this area are small, with an average size of 65households, the 10 largest communities having 100 households or

2 TaTEDO (Tanzania), ENERGETICA (Bolivia) and RCEE (Vietnam)3 The National Institute of Statistics in Bolivia defines the poverty level as an income

below 440 Bs per month (ENERGETICA, 2005).

more, and the other villages with an average of only 43 households(ENERGETICA, 2005). Non-farm enterprises were scarce in thesecommunities, with on average one per 143 households, and weretypically small shops, bar /hotels, grain mills and tailors.

In Tanzania, data were gathered by project partner TaTEDO inthree communities in the northern part of the country which includessome of the most prosperous rural regions in the country, partly dueto the fertile soil and good climate, and also because of tourism. Thethree communities selected vary in size: Foo has a population of over9000 (Arusha region), Patandi has 6000, andMahango has about 2000(both in Kilimanjaro region). The focus here was on enterprises usingelectricity and/or modern stoves. In total 60 enterprises wereinterviewed: in Patandi (32), Foo (15) and Mahango (13). Barbershops/salons, local beer shops/producers and grain milling are themost common type of enterprises found in the three villages. Non-food retail shops, carpentry, food vendors, battery charging andtailoring are also common in all the three villages though they werenot interviewed due to limitation in sample size (TaTEDO, 2005).

In Vietnam six villages in three communes in two provinces wereselected by project partner RCEE: Thai Nguyen and Gia Lai. The sixvillages were selected as pairs each with one electrified and one non-electrified village so that insights can be gained from comparisonsboth between electrified and non-electrified villages in the same area,and between electrified villages in different areas (RCEE, 2005).

Two of the research villages (Ba Nhat (electrified with 147households) and Cao Bien (unelectrified with 40 households) in VoNhai district, Thai Nguyen Province, are in Phu Thuong (4575inhabitants) which ranks among the communes with an averagepoverty level, and the other two villages Ngoc My (electrified) andNac (unelectrified) are in LienMinh communewhich ranks as a ratherpoor commune in this district. The commune has about 4000inhabitants spread over 9 villages. The district is located on the edgeof the plains area with fertile land and cash crops such as paddy. Theother two research villages are in the middle of the country in DakRoong Commune (600 households), K'bang District, Gia Lai Province:Kon Lanh (electrified February 2004) and Ha Dung 2 (unelectrified).

There are few enterprises in these villages. Productive uses ofelectricity are linked directly to the agricultural produce in thevillages: tea crushing and drying, cereal milling, which is carried out atthe household level and sometimes is also done for neighbours. Theonly other type of enterprise in the villages is a carpenter.

The research by the three partners was supplemented by studiesby three Masters students from the University of Twente. Thestudents examined specific issues in more depth. In Bolivia thefocus was on micro-credit for electricity uptake in 32 of theCochabamba communities (Sologuren, 2006), in Tanzania data werecollected about the electricity services impact on micro-enterprises inthree villages in the Kilimanjaro region (Foo, Mahango and Lyason-goro) (Maleko, 2006) and in Vietnam 110 entrepreneurs spreadacross 11 communes in the provinces of Phu Tho, Lao Cai and Son Lawere interviewed about electricity use as a poverty reduction strategy(Zwebe, 2005).

The common topic of impacts of electricity on non-farm incomegeneration in rural areas was studied in all three countries. Asynthesis of the data related to the energy-poverty nexus is providedthrough a framework of common questions which arose fromexplorative research in each of the countries.

The first common question identified is essentially one of factfinding, establishing which changes are taking place at the level ofenergy carriers and technologies for use in productive activities:

• What energy transitions take place in small rural enterprises followingaccess to electricity? Who experiences these changes?

The second question involves a deeper view of the findings relatedto the functioning of small scale enterprises and which relate tofinancial capital:

16 A.L. Kooijman-van Dijk, J. Clancy / Energy for Sustainable Development 14 (2010) 14–21

• Does the presence of electricity stimulate production?

This leads to a third question which is still limited to the incomeaspect of poverty:

• Does an increase in productivity lead to a decrease in poverty in termsof financial capital?

However, since it is evident that many of the benefits of electricityare not directly related to affecting financial capital, but to the othercapitals of the livelihoods framework, these impacts also need to beidentified, thus a fourth question was:

• What is the impact of changes in energy carrier/technology on theother four types of capital in the livelihoods framework?

From the initial findings it was clear that energy is a necessary, butnot a sufficient factor, for development, and that context factorsinfluence both which transitions take place and who experiencesthem. The difficulty is to place the factor energy in its proper placeamong other factors such as access to roads, information, and policysettings. Such factors need to be carefully catalogued as the influencethe process of developments following energy technology dissemi-nation in each case. Therefore the second part of the first fourquestions is:

• Which contextual factors influence access, use and benefits ofelectricity?

Finally, the conclusions and recommendations for improvement ofimpacts of energy projects follow from an analysis of the above.

Findings

What energy transitions in energy carriers and technologies are takingplace in small rural enterprises following access to electricity, and whobenefits?

Themajor energy transitions following access to electricity in ruralcommunities take place in both households and enterprises: thereplacement of traditional lighting by electric lighting, and thereplacement of manual labour for agricultural processing andpumping water. These transitions differ from village to village,where the economic position of a village seems to be more relevantthan the country. For example, electric lighting is not used for theenterprise activities in the poorer villages in Vietnam even when theyare based at a household with a connection, whereas in the moreaffluent villages in Tanzania, electric lighting was used during the day.This daytime use of light follows from the design of typical shops inwhich daylight only enters the building through the door opening.

The second common energy transition is agricultural processing. Inthe research areas in all three countries rural areas are defined by theagricultural occupation of the inhabitants. The reason why electricityuptake is so popular in these uses is that it links directly into theactivities that are already being undertaken. In Vietnam electricoperation of machines for tea crushing and drying saves manuallabour or diesel. In Tanzania, as in many other countries, grain millingfor own consumption is the main agro-processing activity. Becausethe farms are small scale and machine milling would only take a fewhours per month, milling is commonly not done at individual farmlevel, but in separate enterprises. The third main transition, waterpumping, is reducing drudgery enormously where manual watercollection was the alternative: electric water pumping is used mainlyfor agriculture in the research villages in Vietnam, and for bothhouseholds and enterprises in the research villages in Tanzania.

Next to the substitutionmentioned above, developments in energyare often new services. Diversification of energy services is directlyrelated to diversification of income generation. The field study areasillustrate the range of diversification of income generation and related

energy uses. Whereas in the poor villages selected in Vietnam,electricity is only used for agro-processing, in more wealthy villages itis used in a range of income generating activities, from tailoring to icecream making. The villages in Bolivia show an in-between position,with by far the most enterprises engaged in a very limited number ofpre-existing sectors (shops, bars/hotels, tailoring) but also newenterprises being established making use of electricity in metalworksand communication services. In the villages in Tanzania, the largestdiversification was found in the relatively wealthy and centrallylocated village Patandi.

Looking into the question of who benefits, our findings haveshown some interesting insights into howwomen are benefiting frommodern energy in their enterprises. For a few women, electricity hasopened up new possibilities. One reason is that starting up an electricengine is much easier than a diesel engine (this benefited womenespecially in Vietnam, where women were strongly represented asowners of rice and rice mills). However, compared to men, womentend to make less use of technologies operating on electricity inenterprises. One reason for this is gender differences between sectors,as enterprise sectors in which women are typically stronglyrepresented such as tailoring and home brewing have no other usefor electricity other than lighting, while sectors in which men aretypically strongly represented such as carpentry or metalworks, havea stronger dependence on electric appliances.

Extending the question of who benefits to comparisons betweencommunities, it was found that the proximity of entrepreneurs tomarkets for enterprise products makes a big difference. A significantfinding that is often overlooked in energy impact studies relates to theissue of location as being a determinant of opportunities for incomegeneration. In all three country studies it was found that theopportunities to use electricity for enterprises depend on the marketsfor enterprise products, and that this in practice depends very muchon the location of the enterprise. In Bolivia location along a good roadwas found to be a main determinant for the existence of most types ofenterprise activities. Similarly, in Vietnam, the more remote villages(equally with and without electricity access) were found to have onlyvery few enterprises, all directly related to agriculture, while villagescloser to towns had a much larger scope of enterprise sectors, whichwas fastly developing after electrification. In Tanzania, the variety ofenterprises was highest in Patandi, a village with higher income levelsand more demands for a larger variety of services related to tourism.Location near an exploitable resource, be that in terms of an input or amarket opportunity, appears to be important. The size of the localvillage and the location within the village are also important foreconomic benefits of electricity.

Although incomes are generally higher in villages with electricitythan in those without, the study in all three countries indicated thatthis difference only partly followed from electricity use itself. A majorreason for differences in income between villages with and withoutelectricity is the location and function of villages, which often coincidewith electricity access, as electrification typically reaches roadside andmarket villages before it reaches more remote communities. Sub-stantial changes in income levels occur at the individual enterpriselevel rather than at the level of the community as a whole, and mainlyto the already better off sections of the community.

Does the presence of modern energy carriers/technology stimulateproduction?

At the smallest scale enterprises, typical for rural areas, the mostcommon electricity service: light, does have impact on production.The flexibility that electric light brings to income generation activitiesin allowing entrepreneurs to work at times convenient to thehousehold is linked with enterprises being located in the household,a well known and frequently cited impact of electricity. In particularfor women it allows them to combine income generating tasks with

4 1 US$ = 1100 TZS during research period (2004–2005).

17A.L. Kooijman-van Dijk, J. Clancy / Energy for Sustainable Development 14 (2010) 14–21

household duties. The studies in all three countries found evidence inagreement with this general finding.

So does the presence of modern energy carriers/technologystimulate production other than by providing a time opportunity?The answer from our empirical evidence from this and the previousquestion is “yes…but…”. Certainly energy alone is not sufficient, thereneeds to be other factors in place. The empirical evidence showsclearly that energy alone is insufficient to stimulate production, butthat it can under the right conditions. For poor villages, there is littleopportunity to usemodern energy to expand services and products, asthe market for luxury goods or services is limited, and the market forbasic goods is stable so that increased production by one entrepreneureither follows from replacement of manual labour or would lead toreduced production of a “colleague”. This becomes evident in the lownumber of non-farm enterprises in poor areas, such as in the researchvillages in the hills in Vietnam and Bolivia.

Key enabling conditions to expansion of markets are thereforeeither a growing economy with a market for non-basic goods andservices and a willingness to pay for those, or access to other markets.Access to other markets can be very difficult to develop by peoplewithout social networks to these markets. In the research villages,tourism and the nearby schools and government offices have provedto be important markets for new services in Tanzania. In the villagesnear Hanoi in Vietnam, a growing economy has led to increaseddemand for new products and services which are associated withluxury goods, such as welding or repairing of vehicles, andrefrigerated drinks. However, in the villages in Bolivia, the marketshave remained stable, and energy transitions here have not led to anincrease in production.

Both in wealthy Vietnam villages and in Tanzania, new enterprisesthat have come up due to the use of modern energy have had moreproblems than enterprises using energy for existing products orservices. This is due to fast saturation of the market (ice cream inVietnam, grain millers in Tanzania) and due to lack of businessexperience.

In all villages, whether poor or rich, we do see that modern energyallows increased production in peak seasons. Tailors work longerhours and use electric machines to produce more during the season,grain millers process larger volumes of grains per day. These seasonalpeaks do form an addition to the total production rather thanreplacement.

Does an increase in productivity lead to a decrease in poverty in terms offinancial capital?

The question of attribution is often overlooked in energy studies:both at the level of economic development, and at the level offinancial capital of individual entrepreneurs. The questions to beconsidered in this regard are: in how far have the energy uses that canbe noticed contributed to economic development, and in how far hasenergy followed economic development? At micro level thesequestions are: in how far have energy uses led to increased financialcapital, and in how far have entrepreneurs with higher financialstarting capital been able to make use of energy? The equity issues ofwho benefits and who does not need adequate attention, as this is notstraightforward.

Increased mechanization of activities substituting lengthy manuallabour such as in tea processing and (in a distant past for someresearch areas) grain milling, this frees time. This time may be usedfor other income generating activities, commonly farming, but also forother tasks and chores. In this manner, impacts of efficient productioncan also take place outside of the enterprise, by increasing timeavailable for other income generation activities. Such impacts onincome are indirect and difficult to measure, as some use this time forrecreation and some use it for doing other productive activities likecaring for cattle and crops farming. In Tanzania, the impacts on

working day length are mixed, with electricity bringing a shorterworking day in some enterprises due to increased efficiency ofproduction, a longer working day in service enterprises such as shopsand barbers, and scatteredworking hours over the day and sometimesinto the night depending on availability of electricity for others,especially grain millers dependent on electricity.

The unreliable and low quality electricity supply forces manyenterprises such as welding to stop operation, leading to reducedproduction or services. Some entrepreneurs have backup options suchas tailors with both electric and manual machines. Therefore theinvestment in electric machines needs to be compensated byadditional income in order to lead to financial benefits. Suchadditional income is often assumed in energy literature, but theempirical data in this report show mixed results. Triangulation offindings from quantitative results, qualitative perceptions andobservations was used. Conclusions on this issue were taken mainlyfrom qualitative findings and perceptions of entrepreneurs ratherthan from attempts at gathering quantitative data. Quantitative dataon income were both difficult to obtain and often unreliable, due toentrepreneurs being generally reluctant to divulge earnings andsecondary sources from taxation authorities not being comprehensivesince many small and micro-enterprises are not registered. However,it was possible to get general qualitative indications of changes. Forexample, 172 of 182 (92%) households in Vang (Vietnam) considerthat their income has increased as a result of being able to use electricrather than manual tea drying machines. The increase in income wasmainly related to increased efficiency, allowing more time spent onpicking of tea leaves in the season where there is a shortage of labour.Occasionally individuals are prepared to divulge earnings. One electrictea drier owner (in Nho, Vietnam) reported that his annual income isUS$494 which is almost double the income of other households(approximate average US$250). In this case, the difference in incomecan be explained by the fact that he not only uses the drier for his owntea, but also rents his drier to other villagers. Similarly, the grainmillers in Tanzania indicated an increase in incomes due to a switchfrom diesel operation to electric operation due to faster operation andtherefore being able to serve larger numbers of customers (despitefrequent electricity cuts). Here, diesel operated grain millers wereoperating at lower profits, and many had closed down or hadswitched to electric operation.

Regarding changes in financial assets due to difference in energyexpenditures between electricity and other energy carriers, general-isations from this study were hardly possible on the basis of thelimited data. Does electricity use lead to an increase in financial assetsthrough saving of costs? Based on the data from Vietnam whereoperational costs for an electric rice miller are lower with electricitythan diesel (milling 1 ton of rice, cost at the time of the survey aboutUS$ 0.6 with electricity while it cost about US$ 2.6 with diesel) theanswer would be “yes”. However, in Bolivia, production costs had notdecreased by using electricity when substituting for other purchasedenergy sources, due to other input costs increasing. Indeed 20% of theenterprises in the Cochabamba survey had increased the selling priceof their goods. The profitability energy intensive enterprises like grainmilling is highly dependent on the cost of electricity services. Forexample, in Tanzania, for grain mills, with monthly earnings betweenTZS4 70,000 and 100,000, the electricity cost per month averaged TZS50,000 (Maleko, 2006).

Further, in the search for indicators of impacts of electricity onfinancial aspects of poverty we have used proxy indicators in terms ofaccumulation of assets gathered through observations and responses,as well as statements by entrepreneurs about impacts. It wasconcluded that access to electricity had brought increased incomewhich had been converted into physical household or enterprise

18 A.L. Kooijman-van Dijk, J. Clancy / Energy for Sustainable Development 14 (2010) 14–21

assets or human capital (for example, children's education and healthcare). In our surveys it was possible to see accumulation of physicalassets with differences between communities and between membersof communities. Not surprisingly it is the wealthier members ofcommunities who benefit most. They are already well placed to takeup modern energy carriers and are already running enterprises.However, it cannot be assumed that a reduction of costs for energyservices that can be performed by electricity will automatically lead toreduction of poverty since other input costs may have an overridinginfluence on expendable incomes. For example, in Bolivia andVietnam where government policies are increasing the cost of woodas part of environmental protection, households and enterprises usingwood for processing or as a fuel are faced with a considerable raise ininput costs which cannot be compensated by electricity use.

An illustration of the impact of modern energy carriers andtechnology on income is provided by the case of the owner of acarpentry workshop in Vang, Vietnam. This owner has purchased anumber of electric machines including a sawmill, a plane and a lathewhich enable him to meet local demand. The owner reported hisannual income from selling wood products at about US$ 900. Tofurther increase income from the electric energy services, the owner isplanning to join with 14 other households in a cooperative for woodprocessing which he expects will offer more opportunities to accesscustomers.

Employment opportunities as a consequence of access to electric-ity do occur but they consist mainly of flexible and unpaidinvolvement of family members, and real jobs are typically of aprecarious nature, while the numbers of jobs created remains small,and can be considered insignificant inmany of the researched villages.

5 Defined as houses constructed using cement blocks and roofed with corrugatediron sheets.

What is the impact of the changes in energy carrier/technology on theother four types of capital in the livelihood framework?

The previous questions focused on the impact of modern energycarriers/technology on the financial aspects of poverty which werethe central theme of the studies. However, data collection alsocontributed to building empirical evidence on other aspects ofpoverty. The three national partners found the livelihoods frameworkuseful for analysing and presenting data and this is used to provide aframework for the fourth question. The data were analysed to assessthe impact on the other four capitals: social, human, natural andphysical.

The factors considered under social capital include: exchange ofgoods and services; assistance to or from extended family networks(rural, urban, abroad); membership of community groups; nature ofinteraction with other households; and level of social isolation. Socialcapital can be assessed both at an aggregated level of the communityand at the individual level. An interesting finding is which group is themost significant beneficiary at the community level from access tomodern energy services in enterprises: women. They have gainedsignificantly with the appearance of electric operated grain millswhich are not only quicker but there appears to be more of them.Their waiting time has been reduced considerably and with theproliferation of mills, their journey time has also decreased. (Thereduction in noise level from the reduced number of diesel engineshas also been appreciated by communities.)

The surveys of impacts of electrification in rural communitiesshow, however, that the main impacts of electricity cited are notrelated to use in enterprises but to use in homes. Although theperception that “there are more jobs” was cited as an impact, thesocial impacts “there is lighting at the soccer field”, “it's safer to walkthe streets at night” and feelings of modernity (“we feel like a city”)were both voiced more frequently and more strongly. The opportu-nities for accessing information through TV and radio were used morefor improving social assets, increasing their knowledge about political

events as well as information useful in daily life, rather than forinfluencing enterprise operation.

Before electrification social interactions among community mem-bers in the evening hours were low because there was no street light/security light so people were reluctant to move around outside.Businesses closed early and if necessary, they were forced to usecandles or kerosene lamps for lighting. With access to electricity,business hours are extended and community meetings can be held aswell as social activities which bring an improvement in the quality oflife.

Human capital encompasses skills; entrepreneurial ability; educa-tion level; ability to work (health); security of employment; andincome–earner dependency ratio.

Skills and knowledge (human capital) are found to accumulatethrough the use of equipment using modern energy carriers.Interestingly in Tanzania there has been no significant outwardmigration once such skills that can be used in urban areas for betterremuneration employment have been acquired. This is contrary toperceived wisdom.

Electricity has brought improvements to theworking environmentwhich have impacts on health. Electric machines are less polluting,have lower noise levels, dust and smoke which make for a healthierand less stressful working environment.

Physical capital, which consists of the basic infrastructure for thesupply of energy, shelter, water, transport and communications,production equipment and location for production and serviceprovision (permanent structure/shop/stall/pitch), is related directlyto investments in electric appliances, but also forms an indication ofpoverty or wealth and of accumulation of assets related to enterpriseoperation. The investments in productive equipment related toelectricity are, with few exceptions, at the same low scale as purchaseof household appliances including those in carpentry and grainmilling and tea drying.

There seems to be a strong link with enterprises having anelectrical connection and having a connection at home (where theenterprise is not located in the household). In Tanzania it was foundthat the owners of these enterprises also had tended to accumulateassets that required electricity to operate, such as radio cassette,mobile phone, TV and fridge. They also tended to live in modernhouses5 and own cars. In Bolivia, an overview of the types ofappliances owned indicates that after lights, radio and TV are themostcommon appliances purchases following electrification, with 63.5%households having a radio or TV. Devices that typically benefit mainlywomen are far more scarce, with only seven of the 318 householdsinterviewed having mixers or irons.

The evidence about the impact of modern energy carriers on na-tural capital has to be based on inference since there was no directsurvey of changes in natural capital. For example, in Bolivia, 32% ofhouseholds surveyed were using gas and firewood to cook and 8%switched to gas completely. Therefore, such a transition can beassumed to have relieved pressure on local biomass. Certainly indoorair quality has improved due to switch to electric light from smokycandles and other fuel-based lighting sources.

Using electricity for radios has reduced the need for batteries.Batteries are disposed of by informal dumping resulting in soil andwater pollution. In the Cochabamba survey 20% of households werefound to be still using batteries. So battery use has diminished but notstopped entirely so pollution from battery disposal continues albeit ata reduced level.

So how has women's capital benefited from the availability ofmodern energy services and technologies? Certainly the switch toelectric powered grain mills seems to have significantly improvedwomen's time poverty. The newly found time has been put to a variety

19A.L. Kooijman-van Dijk, J. Clancy / Energy for Sustainable Development 14 (2010) 14–21

of uses which are not always linked (at least directly) to economicproductivity. What is particularly important is that women seem to befinding time for relaxation and if rural women the world over work atthe same intensity as appears in rural Tanzania (17 hours a day) rest isbadly needed.

Contextual Factors

The livelihoods framework also requires an analysis of contextualfactors which influence livelihoods and in the EASE programme theinterest lies on their influence on access to modern energy services.Identifying the contextual factors is important since these factorsoften require a different type of intervention to promote or overcomethem than the sorts of interventions to build rural people's assets.These factors are often outside of the control of individuals in acommunity. It should be remembered that these factors appear indifferent ways in the three countries and to different degrees.

An analysis of the contextual factors identified as influencingenergy access, use and benefits, found that the following factorsemerged as being dominant: income sources in the community,access to credit, attitude of the utility, culture, political leadership, andvulnerability.

The income sourceswithin the community are key to opportunitiesfor local enterprises as described under the above analysis of whobenefits. This context factor influences the enterprise opportunities,and therefore potential to use and benefit from electricity, in twoways. Firstly, there may be opportunities for entrepreneurs to relatetheir activities to the type of economic activities in the community,such as tea processing for tea farmers in Vietnam, or providinginternet and photocopying services for civil servants in Patandi inTanzania. Secondly, the level of income above subsistence level isimportant for the demand for services which could be provided byentrepreneurs and allows for diversification in livelihoods. A higherincome level allows more expenditure on non-basic products andservices, such as hairdressing or cool drinks.

The sources of income within the case study areas could be putinto three livelihood groups: agriculture and crop processing; small-and micro-enterprises; sources external to the community. Notsurprisingly, the majority of rural people's livelihoods still centre onsmall scale agriculture. There are services industries linked toagriculture and a number of these appear to be using modern energyservices, for example vehicle repair and grain mills. The second groupof income sources, the small and micro enterprises, was varied butmainly was providing local services. Grocery stores predominate witha wide variety of other services such as restaurants, car repair, mills,food processors, internet, carpenters, tailors, hairdressers, mortuary,and electrical technician (repair of TV and other electrical equip-ment). It was only in Tanzania that there was any evidence ofenterprises being established which indicated a transformation of thebasis of the rural economy or exporting new products or servicesoutside of the local economy6. Only one enterprise (poultry) wasidentified which had been established to serve markets outside theircommunities on the basis of access to modern energy carriers.

The third group of income source could be classified as economicactivities with their origins outside of the communities surveyed. Theseinclude employment opportunities in large scale industries estab-lished in the communities with external investment (such as miningin Bolivia and tourism in Tanzania). One of the communities inTanzania could be classified as “peri-urban” due to the expansion ofArusha town bringing the influence of urban life closer and with goodtransport opened up the opportunities for daily commuting to work intown. Both of these types of employment opportunities potentiallyallow for higher incomes than those who remain in the villages and

6 We interpret “local economy” here as the village community and the immediatehinterland up to the nearest significant town (administrative and/or market centre).

also for exposure to new ideas which in turn can lead to innovativeinitiatives in rural communities. The role of diverse income sourcesand associated diversification in client types is illustrated by thecomparison of the villages Foo and Patandi in the same coffeeproducing region of Tanzania dependent on coffee. There has beenless livelihoods diversification in Foo than Patandi and that can beattributed to the smaller diversity of potential customers.

An important source of financial remuneration to rural householdsis remittances from family members who have migrated due to thelack of work opportunities. On the one hand this can be seen aspositive, in terms of the impact on household incomes. On the otherhand, it is usually the young and able bodied who migrate, reducingthe rural work force of the physically strongest and potentially mostcreativemembers leaving behind the children and the elderly who aregenerally not best placed to be innovative in their approach tobusiness (in other words, a reduction in human capital but withpossible compensation by an increase in financial capital).

Access to financial capital is a rather obvious input in businessdevelopment. However, what our evidence shows is that it is notsimply a matter of providing “micro-credit” to enterprises for ruraldevelopment to take off, with the use of electric appliances. Oneaspect of this is that the objective of entrepreneurs in rural areas is notnecessarily growth of enterprises, and that if investments were made,priorities would be in goods or in the building rather than in electricappliances (Sologuren, 2006). Secondly, the cost of some of theproductive equipment to operate on electricity (such as moreadvanced carpentry machines or grain mills for larger than villagescale operation) is beyond the level of micro-credit. This implies thatmicrocredit, the commonly promoted financial instrument to pro-mote enterprise establishment and enterprise upgrading, is insuffi-cient for the entrepreneurs who typically cannot access mainstreamcredit infrastructure to move beyond small scale appliances. A thirdlimitation of formal credit infrastructures is that they often do notmatch the way rural entrepreneurs work (especially in informalenterprises), their attitudes to borrowing money and their motiva-tions for running a business. Formal financial services are only foundin rural towns. Although micro-credit schemes are available,entrepreneurs and households prefer to draw on family sources. Inpart, providing the right type of financing mechanisms meansunderstanding gender issues. Rural small scale enterprises are oftenthe domain of women who have different motivations and assets tomen which influence their attitudes to and capacity for borrowingmoney. Understanding these aspects will ensure that micro-credit istargeted appropriately.

The third key factor identified in the transition to modern energyservices/ technologies related to electricity is an adequate supply.However, a reliable and good quality electricity supply is far fromreality in all three countries: in public (Vietnam and Tanzania) andprivatised (Bolivia) distribution systems. The attitude of the utilitiesdoes not appear to be positive to the rural areas which are consideredas burdens rather than as potential markets to be developed. Thequality of supply is typically low, with insufficient electricitytransformers to meet even the current small electricity demandwhich is dominated by households, resulting in black- or brown-outs.The lack of provision of a three phase power supply hinders thetransformation of the livelihoods profile in rural areas to take part inmore than the first step of the product value chain, as a three phasepower supply is necessary for many mechanical processes necessaryin larger scales of agricultural processing and in manufacturing.Utilities' policies towards stabilising their income seem to focus ratherone-sidedly on “plugging financial leaks” by addressing illegalconnections and ensuring payment of bills, rather than improvingthe market for electricity services. A change in mind-set would benecessary to value the rural client and stimulate rather than hinderthe business potential. It is interesting that, at least in Tanzania, tariffincreases did not deter applications for connections, indicating that

20 A.L. Kooijman-van Dijk, J. Clancy / Energy for Sustainable Development 14 (2010) 14–21

“willingness to pay” for electricity may not be the main barrier toextending the market for electricity services.

Gender issues are an aspect of culture which concerns many facetsof access, use and benefits of electricity and entrepreneurship, as canbe seen from the frequent mentioning of gender disaggregatedfindings. A second crosscutting question of culture as an influencingfactor is that of entrepreneurship. It is clearly weak in the rural areaswe surveyed — at least in terms of being modern market savvy andlooking for opportunities for expansion. It is however “strong” interms of diversification of income sources and reducing householdvulnerability (which can also mean low exposure to borrowing fromanyone other than the family network). Anyone looking for a radicaland rapid transformation of the rural livelihoods, in particular todiversify the possibilities, is unlikely to find this transformationspontaneously occurring. The majority of rural entrepreneurs areuncertain about how to develop market opportunities and the rolemodern energy can play and the prospects this opens up.

The factor of political leadership as an influence on access to andbenefits of electricity in enterprises manifested itself particularlystrongly in Bolivia. It was evident that local government officials,particularly mayors, can play a major role in bringing electricity totheir communities. Such officials wield considerable power even tothe extent of determining which businesses can open which in turninfluences the demand and capacity to pay for energy both at anindividual and a regional level. At the level of districts, politicalleadership and/or lack thereof has led to the finding that areas wherethere is little demand (or even no demand) have been electrified atsometimes great costs, and that other areas with higher demandwhere willingness to pay was high, have been neglected. There areinvestment funds from central government to promote ruralelectrification but this does not go hand-in-handwith complementaryinvestment in roads, irrigation and other infrastructure which couldhelp stimulate the local market. In its turn, this links to the attitude ofthe utilities to rural electrification because investment and mainte-nance costs are too high and the return on tariffs is too low. Specialfunds have been set up to compensate for the electrificationdifficulties that are related at least partly to political leadership.

A broad range of the contextual factors form the last category ofvulnerability of which the most generally significant is the weather.Droughts have a direct negative impact on agricultural output andhence on household incomes, which in their turn were found to havemajor impacts on short term trends in demand for enterprise productsand services, and therefore also on the benefits of having electricappliances. Floods cause power disruptions, which reduce consumerconfidence in the electricity supply, and wash out roads, which maketransport of goods impossible (including repair of power lines). Again,the poorest in society tend to be the most vulnerable to these risks,and therefore also run the greatest risk of not benefiting of thepotential plusses of electricity on income generation. A more specificcase of vulnerability is provided by the case of the villages in Tanzania,where coffee was the main cash crop. The driving force fordiversification of enterprises could be attributed not to the access toelectricity but to the shock to the local economy brought about by thedramatic decline in the price of coffee. The diversification here wastherefore initially not so much pulled by opportunities created byaccess to electricity, but by the push factor of lack of alternatives inagriculture. Over time, the pull factor has increased, especially in thevillage of Patandi which has an advantageous location for a diversedemand for enterprise services related to schools, other governmentorganisations and tourism, increasing the diversity of electricityservices in enterprises further.

Conclusions

The evidence shows that access to electricity in enterprises ishaving a stronger impact on non-financial aspects of poverty

through the products and services of the enterprises than onfinancial poverty reduction through increasing incomes fromenterprise operation. For customers of enterprises, the impacts ofnew or reduced travel time to energy services, such as mobilephone charging, or grain milling, were considered to have a largeimpact on village life, and reduced travel time and waiting time forcustomers of grain mills were experienced as some of the mostbeneficial impacts of electricity. For the entrepreneurs themselves,the changes in incomes to entrepreneurs are generally small, andreduced profits per enterprise due to market saturation are acommon phenomenon. At the village level, the increase in numbersof enterprises is largely compensated by closures, growth in termsof employment creation is typically limited to casual involve-ment of members of the (extended) family, and the increase indiversity of enterprises in rural areas is small and slow. Agriculturecontinues to form the basis of the rural economy, even decades afterelectrification.

The motivation towards businesses development as well as thefinancial assets to realise this have emerged in this research as a keyfactor in transformations of rural livelihoods. Enterprises for manyare a secondary activity, forming part of a strategy to diversifyincome support to reduce the vulnerability of rural households.Making use of proxy indicators for incomes of entrepreneurs, it wasestablished that the already better off members of the communityappear to benefit most from access to electricity in terms of increasingfinancial assets. It is noticeable that micro-credit both as a generalfacilitator or business development and specifically for enabling accessto energy services does not figure significantly in our three studycountries.

The greatest livelihoods diversity was identified in Patandi inTanzania where the shock to the local economy related to pricing ofcash crops was followed by an increased demand for diverse services,and the population density allows a customer base for such services.We would conclude that while location close to markets and goodroads is important, it may be that location close to an exploitableresource (be that natural, such as good quality agricultural land, or ofhuman construction, such as tourism) is also significant. The findingsappear to be valid across continents, and are also in line with findingsin India (Kooijman - van Dijk, 2008).

We consider that the utilities could play a key role in promotingenterprise development. The utilities need to be encouraged tochange their approach from a supply-side infrastructure company toone that also engages in demand-side management, to become acompany that stimulates and develops its market. By encouraging andsupporting business development they can help create the financialcapital in their client base that helps pay for their services, in otherwords a “win-win” situation.

Regarding the scope and depth of the impacts of electricity insmall scale enterprise we would have to answer that electricityappears to come to villages with a good income level rather thanelectricity driving rural economic development. In relation tostimulating production, the section of the population that expe-riences the largest benefits in terms of increased financial assetsand job opportunities is formed by the existing better-off membersof the community and their extended family. However, allmembers of the community can potentially benefit from the newand better quality products and services that modern energyaccess enables.

Acknowledgments

We would like to thank the ETC Foundation for the financialsupport from the EASE programme. Also we would like to thankENERGETICA, TaTEDO and RCEE for sharing their research findingsand Jaime Sologuren, Godfrey Maleko and Dagmar Zwebe for theirexcellent work in the field.

21A.L. Kooijman-van Dijk, J. Clancy / Energy for Sustainable Development 14 (2010) 14–21

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