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Behavioural drivers and barriers to energy efficiency investments of micro, small, and medium enterprises in India

Never, Babette
Staff - Other (2015)

in: Pegels, Anna / Aurelia Figueroa / Babette Never, The human factor in energy efficiency: lessons from developing countries, Bonn: German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE) / Pretoria: National Cleaner Production Centre of South Africa (NCPC-SA), 55-67

The analysis of the KfW programme ‘Financing for Energy Efficiency Investments of MSME in India’ in cooperation with the Small Industries Bank of India (SIDBI) is a particularly interesting case study for the field of
finance and behaviour for two reasons: it comprises a technical assistance component and can be directly compared to a similar line of credit at SIDBI financed by the Japanese International Cooperation Agency
(JICA). SIDBI and the micro, small, and medium enterprises (MSMEs) are affected by different behavioural factors. Those influencing SIDBI are staff aversion to unknown and unclear programmes (ambiguity aversion), the framing and communication of the line of credit, and a lack of commitment and positive incentives. Those affecting MSMEs’ decisions on energy efficiency investments are short-term thinking, a lack of business skills (e.g. inability to calculate payback periods), inefficient habits, and a preference for the current situation (status quo bias). Behavioural drivers that could encourage them to invest in energy efficiency are social comparisons, peer effects (e.g. learning from a similar enterprise in a cluster) and first-hand experience with energy efficient technology and energy management practices.

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