The Government of Bangladesh, with help from the World Bank and other donors, has devised a credit scheme for marketing solar home system units and making these an affordable alternative to grid electricity for poor people in remote areas. This paper uses household survey data to examine the financing scheme behind the dissemination of these solar home systems, in particular the role of the subsidy; the factors that determine the adoption of the systems in rural Bangladesh; and the welfare impacts of such adoption. The paper finds that adoption of a solar home system improves children’s evening study time, lowers kerosene consumption and provides health benefits for household members, in particular for women.