The paper explores a model of sustainable rural development and poverty alleviation in Bangladesh, based on the creation of village businesses that sell solar electricity generated from the photovoltaic (PV) technologies. The model shows that the solar electricity business model is in principle economically viable up to the maximum investment available from a micro-credit organisation. Furthermore, the transfer of the existing subsidy from the centralised power system to these businesses would create significant additional income for one-third of the total landless and marginal farmers (LMFs) to meet their income deficits for basic needs. It would also electrify all rural wealthier households. From this additional income, the LMF households employed by the scheme would be able to conserve their environmental resources of animals, land and trees that otherwise are being lost. Appropriate government policies are proposed to disseminate PV technologies. (C) 2003 Elsevier Science Ltd. All rights reserved.