The Inter-American Development Bank (IADB) has approved a US$20mn soft loan to Bolivia to finance a rural electrification programme that will mobilise private investment in underserved areas.

The project will introduce an incentive system that will induce private companies to invest in rural electrification, especially by using renewable energy or natural gas as a fuel, to benefit consumers who do not now have access to electricity.

At the same time the resources will strengthen the capacity of departmental governments and municipalities to design, execute, monitor and evaluate electrification projects. The programme will also encourage the involvement of the beneficiary community in the design, execution and sustainability of the programme. The project will provide electricity to 44,000 Bolivian homes.

Although the national electricity system covers about two thirds of Bolivia’s total population, only about a quarter of the population in rural areas has access to electricity.

The programme reflects the IADB’s strategy for Bolivia to enhance social equity and sustainable development of the private sector. It will be carried out by the ministry of public works and services through its office of the vice-minister for electricity, alternative energies and telecommunications.

The loan is for a 40-year term, with a 10-year grace period, at an annual interest rate of 1% during the grace period and 2% thereafter.