Pay as you go Model (M-KOPA)
Digitalization is currently playing a big role in fostering access to electricity in Sub-Saharan Africa. Since the early 2010s, companies have been adapting traditional business models for the installation of Solar Home Systems (SHS) to the specific African context where the rural populations have limited means to pay for its electricity.
The Pay As You Go (PAYG) Model gives the possibility for small customers to pay small amount each month through Mobile money transfers to pay for the solar system.
If the customer stops paying, the system switches off and works again as soon as the customer pays the remaining credit.
M-KOPA Solar is a Kenyan company, one of the world leading providers of PAYG energy for off-grid customers. M-KOPA (M= mobile, KOPA= to borrow) combines mobile payments with GSM sensors to enable consumer financing of solar power systems.
Created in 2011 by the same founder of M-PESA, one of the largest mobile banking systems in SSA, their offer includes an 8 W solar panel, providing energy for 3 LED light bulbs, a portable rechargeable torch, a home charging USB with five standard connections, a rechargeable radio and a 20 W SHS which has a 16” digital television. For an up-front payment of USD 30 and USD 60 respectively, and daily instalments of USD 0.50 and USD 1 respectively.
Prices are similar in neighboring Uganda and Tanzania. The payment frequency and size are up to the customer’s choice, but the entire value has to be paid within the payment period agreed (from 380 to 570 days).
Many retailers are encouraged to look for new customers since they receive small sales commissions. One of the key drivers of this model is the increased penetration of mobile use among the poorest in subSaharan African countries.
African phone companies offer payment services linked to a mobile phone account, without the need to open a bank account.
Kenya, Namibia and South Africa are the leaders, but mobile money usage penetration is very high in countries such as Gabon, Ghana, Uganda, Zimbabwe, Rwanda and Tanzania. Countries like Guinea, Senegal, Togo, Burkina Faso, Benin, Gabon, Madagascar, Zimbabwe and Congo are also witnessing a soaring increase suggesting a bright future for this technology.
Source:Solarize Africa Market Report | May 2019
What’s interesting to note is that, after making successive payments towards their solar system for roughly a year, under M-KOPA’s model, customers build creditworthiness and can purchase other products, such solar-powered televisions, energy-efficient cookstoves and smartphones on a similar payment scheme.