Default Risks, Moral Hazard, and Market-Based Solution: Evidence from Renewable Energy Market in Bangladesh
Hossain, Monzur; Yoshino, Naoyuki; Taghizadeh-Hesary, Farhad | September 2019
Abstract
This paper analyzes a unique case of default risks and associated factors of a solar home system (SHS) program in Bangladesh and, within that context, proposes a theoretical market-based solution to finance a renewable energy (RE) program. The paper first develops a theoretical framework that highlights the problem of moral hazard in a subsidized government-sponsored program and then empirically assesses the default risks under the program. Using a primary survey data of 1,300 households, and applying probit and cox’s proportional hazard model, we find that financial constraints, higher prices, natural disasters, and poor after-sales service are the factors that increase the probability of default, but in a different magnitude depending on the nature of customers. The factors that increase the probability of default for the group who are not willing to pay back (about 35% of total defaulters) are linked to adverse selection, perhaps due to moral hazard problems. The proposed market-based solution predicts that if the government uses a spillover revenue-based financing approach, it will increase the rate of return for private investors as well as the efficiency of RE programs.
Citation
Hossain, Monzur; Yoshino, Naoyuki; Taghizadeh-Hesary, Farhad. 2019. Default Risks, Moral Hazard, and Market-Based Solution: Evidence from Renewable Energy Market in Bangladesh. © Asian Development Bank Institute. http://hdl.handle.net/11540/11231.Keywords
Household Energy Consumption
Industrial Energy Consumption
Results-Based Monitoring And Evaluation
Evaluation Techniques
Evaluation Studies
Evaluation Methods
Commercial Energy
Urban Development Finance
Trade Finance
Small Business Finance
Rural Finance
Roundtable on International Trade and Finance
Regional Development Finance
Public Service Finance
Public Finance
Project Finance
Private Finance
Nonbank Financing
Non-Bank Financial Institutions
Municipal Finance
Local Government Finance
Local Currency Financing
Limited Resource Financing
International Financial Institutions
Infrastructure Financing
Industrial Finance
Government Financial Institutions
Government Finance
Financing of Infrastructure
Financial Sector Development
Financial Regulation
Domestic Energy
Energy Demand
Energy Prices
Energy Pricing Policy
Energy Supply
Primary Energy Supply
Development Indicators
Social Participation
Low Income Groups
Income Generation
Newly Industrializing Countries
Taxation
Public Accounting
National Budget
Municipal Bonds
Local Government
Local Taxes
International Monetary Relations
International Financial Market
International Banking
Central Banks
Business Financing
Capital Resources
Budgetary Policy
Capital Needs
Corporate Divestiture
Capital Instruments
Pension Funds
Insurance Companies
Banks
Portfolio Management
Fiscal Administration
Economics of Education
Development Banks
Subsidy
Default
Default risk
Solar battery
Renewable energy resource
Green Energy
Power resource
Electric power
Energy development
Renewable energy resource
Energy assistance
Energy tax credit
Electric power consumption
Cost effectiveness
Supply and demand
Prices
Energy resource
Energy consumption
Price Indexes
Infrastructure
Use tax
Taxing power
State of taxation
Tax-sales
Tax revenue estimating
Tax planning
Spendings tax
Special assessments
Tax administration and procedure
Sales tax
Real property and taxation
Progressive taxation
Effect of taxation on land use
Effect of taxation on labor supply
Intergovernmental tax relations
Inheritance and transfer tax
Energy tax
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Citable URI
http://hdl.handle.net/11540/11231Metadata
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