Determinants of microfinance facility for installing solar home system (SHS) in rural Bangladesh

Access to electricity in rural areas of the developing parts of the world is yet to reach a minimum satisfactory level. Bangladesh is no different, and hence widespread dissemination of solar home system (SHS) is a suitable vehicle to ensure greater access to electricity in remote rural areas of the country. A substantial portion of four million installed SHSs in Bangladesh has availed microcredit provided by various microfinance institutions. However, what determines the users' preference towards microcredit in installing SHS on the rooftop is yet to be answered. This research aims at analyzing the determinants of microfinance for installing SHS in rural Bangladesh. This research employed binary logistic regression to analyze the factors that affect selection of different mode of purchase: upfront payment or installment purchase. It identified a set of independent variables based on existing literature in order to investigate their influence on households' choice between cash payment and installment purchase. The research found that more than 63% of the rural households in the study areas used SHS financed through microcredit. Level of education, location, family size and occupation affects choice of purchase mode. Logistic regression analysis showed that age, location and size of SHS affect the likelihoods of choosing upfront payment or installment purchase.