FINANCING FOR LOW-CARBON AUTO RICKSHAWS

The briefing outlines a sustainable finance instrument designed to transition Indian auto-rickshaw drivers from conventional vehicles to electric ones. By providing 100% debt financing, eliminating collateral requirements, and offering lower interest rates (22%-24% per annum), the instrument aims to replace the current rental model and predatory informal loans. The proposed NBFC structure will pool equity, commercial debt, and concessional capital, utilizing a community-driven loan appraisal and collection system to mitigate default risks. A pilot project targeting 500 vehicles in Bengaluru, Chennai, and Chitradurga is planned to demonstrate the model's viability and environmental impact, with a long-term goal of capturing 5% of the Indian market to avoid 9 million tons of carbon emissions.

• Current financing for auto-rickshaw drivers in India is severely limited; mainstream banks require 30% self-funding and collateral up to 1.5 times the loan amount, while microfinance institutions are regulated to lend no more than INR 60,000 in the first cycle.
• The proposed instrument addresses these barriers by offering loans for 100% of the electric auto-rickshaw cost, requiring no collateral, and providing interest rates between 22% and 24% per annum, which is significantly lower than predatory informal rates that can reach 120% per annum.
• To mitigate default risk, the instrument employs a community-driven model involving a non-formal loan appraisal process based on saving behavior and social norms, and a team-based collection system that uses social recognition and cash discounts to incentivize timely repayment.
• The NBFC's cost of debt can be reduced by at least 200 basis points if a 50% credit guarantee from an AAA-rated entity is secured, which would help the NBFC achieve an investment-grade credit rating.
• The pilot phase targets 500 electric auto-rickshaws in Bengaluru, Chennai, and Chitradurga, with an estimated investment of US$ 1.1 million and a projected avoidance of 18,500 tons of carbon emissions over 10 years.
• Scaling the instrument to 5% of the Indian market (approximately 250,000 vehicles) could mobilize over US$ 535 million in capital and avoid 9 million tons of carbon emissions over the vehicles' lifetimes.
• Transitioning from a rental model to ownership via this instrument is estimated to increase daily savings for drivers by 6% during the loan tenor and 31% after the loan is repaid.

APA

Climate Policy Initiative (2018). FINANCING FOR LOW-CARBON AUTO RICKSHAWS. https://www.climatepolicyinitiative.org/wp-content/uploads/2020/08/Financing-for-Low-Carbon-Auto-Rickshaws_Instrument-Analysis.pdf

Chicago

Climate Policy Initiative. FINANCING FOR LOW-CARBON AUTO RICKSHAWS. 2018. https://www.climatepolicyinitiative.org/wp-content/uploads/2020/08/Financing-for-Low-Carbon-Auto-Rickshaws_Instrument-Analysis.pdf.

Wikipedia

{{cite report |author=Climate Policy Initiative |title=FINANCING FOR LOW-CARBON AUTO RICKSHAWS |date=September 2018 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2020/08/Financing-for-Low-Carbon-Auto-Rickshaws_Instrument-Analysis.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{climatepolicyinitiative2018financing, author = {{Climate Policy Initiative}}, title = {{FINANCING FOR LOW-CARBON AUTO RICKSHAWS}}, institution = {Climate Policy Initiative}, year = {2018}, month = sep, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2020/08/Financing-for-Low-Carbon-Auto-Rickshaws_Instrument-Analysis.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }