State of the Planet

News from the Columbia Climate School

,

Alumni Startup Brings Pay-as-you-Go Solar Energy to Sierra Leone

Nthabi Mosia (SIPA ‘ 16), chief financial and marketing officer at Easy Solar (left), and Anika Bahra (MPA-DP ’18), visited Easy Solar’s point-of-sale agents across Sierra Leone to find out their challenges and aspirations.
Nthabi Mosia (SIPA ‘ 16), chief financial and marketing officer at Easy Solar (left), and Anika Bahra (MPA-DP ’18), visited Easy Solar’s point-of-sale agents across Sierra Leone to find out their challenges and aspirations.

by Anika Bahra

Just one percent of the rural population in Sierra Leone has access to energy. No television in the evening, no outlets for charging phones, no lights to turn off before going to sleep—just darkness. Meanwhile, those with energy access are “energy poor,” spending an unsustainable percentage of their household income on an irregular supply of energy. In many countries in sub-Saharan Africa, like Sierra Leone, energy expenditure can exceed 9 percent. In contrast, households in wealthier countries normally spend only 1-2 percent.

One method for reducing the energy burden of low-income households is the pay-as-you-go (PAYG) model, which allows customers to pay installments of as much as they can afford to access electric light. In the PAYG model, customers take home an off-grid solar home system and repay over time. (Here, “off-grid” refers to households that are equipped with their own personal solar panel that is connected to a desk lamp, set of hanging bulbs, or other solar light product.) Companies remotely control functionality of the lights. When customers repay their weekly balance, either through an agent or through mobile money, they receive a code via SMS that allows them to ‘unlock’ their product for a week’s worth of energy.

The PAYG model is not new, but has never been applied to solar light in Sierra Leone because of technological challenges. In eastern Africa, the PAYG solar model has piggy-backed off of advancements in mobile money. Companies like M-KOPA in Kenya faced fewer operational barriers related to facilitating repayment because mobile money use is nearly ubiquitous. In Sierra Leone, this direct consumer-to-company repayment channel is currently not possible to rely on at scale.

This family gained lighting access for the first time this year. / Photo: Photo: Nthabiseng Mosia
This family gained lighting access for the first time this year. / Photo: Nthabiseng Mosia

Easy Solar, the local brand of Azimuth, a start-up launched in 2016 by graduates of Columbia’s School of International and Public Affairs (SIPA), is building out a network of last-mile distribution agents who facilitate in-person transactions within their own communities to overcome the challenge of ‘unreachable’ customers. These agents then ‘remit’ the money to Easy Solar using company-provided mobile phones. In just one year, 25,000 people in Sierra Leone gained access to light through Easy Solar’s model.

I spent the past summer as a credit analyst with Easy Solar. For asset-financing companies, customer credit assessment is critical to ensuring a healthy portfolio-at-risk and a sustainable business. My work was to lay the foundation for their credit scoring model. This entailed identifying repayment risk factors and providing strategic recommendations on credit scoring results. A credit assessment system is a necessary step for Easy Solar to scale from 25,000 to 100,000 customers, which they want to achieve by the end of next year.

I spoke with Nthabiseng Mosia (SIPA ‘2016) and Eric Silverman (SIPA ‘16), Easy Solar’s chief financial and marketing officer and chief operating officer, respectively, to find out more about how the PAYG solar industry is changing the energy and development landscape in Sierra Leone, and the sector’s biggest challenges to growth. 

Describe the energy landscape here in Sierra Leone. How does it compare to the rest of Africa?

NM: Two-thirds of sub-Saharan Africans, roughly 600 million people, lack access to modern electric services. That number is much higher if you consider the fact that for the bulk of people who do have access, their service is often highly unreliable.

Easy Solar markets to small-scale business owners who may rely on inconsistent energy access and stop-gap lighting. / Photo: Nthabiseng Mosia
Easy Solar markets to small-scale business owners who may rely on inconsistent energy access and stop-gap lighting. / Photo: Nthabiseng Mosia

However, it’s quite misleading to frame this lack of access or reliability as energy poverty, because what we realized very quickly was that people who are off the grid are spending inordinate amounts of money on what is often called “stop-gap lighting”. The average household in sub-Saharan Africa is spending anywhere between $120 – $160 per year on lighting alternatives to the conventional grid, mostly for kerosene or batteries for torch lights.

If you want to zone down into Sierra Leone,  where close to 90 percent of the population lacks access to the grid and only one percent of the rural population has electricity, spending on average is similar, with $120 per year on lighting and an additional $60 per year on community-based mobile charging.

ES: The numbers speak for themselves—Sierra Leone is ranked 178 of 179 countries for energy access, according to the World Bank.

What is the business landscape for PAYG solar in Sierra Leone?

NM: In terms of the business landscape, it is a market that is extremely underdeveloped when it comes to off-grid. The government has some plans to expand grid capacity, but it’s not like what you’re seeing in countries like Ghana or Rwanda that set very aggressive targets by 2020 to have at least 50 percent of their population electrified if not more.

Secondly, there aren’t very many actors here. You have some companies, like BBOX or Azuri, that have made a play here, but none of them are operating at scale or penetrating rural markets where it really matters. I think the confluence of that makes it a really interesting opportunity.

What is Easy Solar’s value proposition?

NM: The biggest value proposition we have is savings directly to households. It was important to us to have a business model that addresses some of the challenges that we were seeing emerging in the off-grid landscape in East Africa. The industry is starting to prove that it is commercially viable to rapidly deploy solar home systems with the PAYG model, though the jury is still out on whether it works from a credit risk perspective.

We looked at a lot of the companies in East Africa as benchmarks, but it became very clear that a lot of them were targeting middle income households and not really meeting the needs of the bottom of the [income] pyramid. That was because they were largely charging anywhere between a 15 percent and 20 percent deposit on a $200 home system, which doesn’t sound too costly but to most households it’s utterly unaffordable. So we went to the drawing board and decided to come in with an entry-level product which allows solar to get into almost anyone’s home. It’s a $20 product financed on a pay-as-you-go basis, which means that if you benchmark that against what people are spending on other energy sources, they can generate savings in as little as 4 to 6 months.

Anika (right) and regional manager Robert (left) visit a school where teachers are using solar energy provided by Easy Solar. / Photo: Nthabiseng Mosia
Anika (right) and regional manager Robert (left) visit a school where teachers are using solar energy provided by Easy Solar. / Photo: Nthabiseng Mosia

However, the value proposition goes beyond a really affordable product and the opportunity to save, and goes to fact that we are selling a service, which is two-fold: on the one hand, we offer a relationship with a company you can trust that is delivering high quality products to your doorstep, through our agents that are responsive and trained with a high level of customer service. On the other hand, we have the financial inclusion and credit aspect. It’s not only energy we are selling, it’s a financial service product built around energy.

How does the impact of PAYG solar manifest?

ES: For customers in general, there is the access to energy that Nthabi just mentioned, and also the opportunity to buy further products and appliances that can definitely transform people’s lives or just help them with whatever they are doing currently—either generate more income or let their children study later at night because they have lights. Additionally, having an official credit line will be really important for a lot of people.

A shop owner with one of Easy Solar's lanterns. / Photo: Nthabiseng Mosia
A shop owner with one of Easy Solar’s lanterns. / Photo: Nthabiseng Mosia

NM: I think Eric captured the customer side. As an industry, we are at the nexus of a lot of interesting things because there are tech, microfinance, and energy aspects. From Nairobi you can see that PAYG solar is generating a new wave of startups and start-up culture in East Africa and it would be great to see this industry being a beacon for innovation. It shows that business models that are targeting lower income, more last-mile consumers can still be viable, which opens up a lot of complementary potential business and development areas like water or health. I think that the viability of this industry can have a ripple effect. The whole concept of using tech to address issues that have been challenges for decades, but didn’t have rapidly deployable and scalable ways to address those problems, is an exciting space to be in and watch evolve.

Would you say that there is a lot of potential now because of the Internet of Things?

NM:  Yes, definitely. I dislike the term “leapfrogging” because it is used so often in sub-Saharan Africa to the point it sounds a bit trite, but I do think that having smart energy systems like GSM-based solar home systems creates a plethora of different opportunities.

What is the biggest obstacle for companies like Easy Solar?

ES: Without a doubt, lack of widespread mobile money use is the biggest challenge. There’s a few critical components to that. Firstly, the customers either need to go find an agent or the agent needs to go around to every customer and collect cash directly. It’s a pain for the customer and for the agent. Then of course there is the company’s pain that comes from trying to collect money from agents. This is probably the biggest challenge we face. It is fairly costly as well because we can deliver products one time but we need to constantly be collecting cash at different times and so we have to make up a whole cash collection schedule for when our field staff go to different areas to collect. In comparison, if this was through mobile money there would be no transaction of actual money.

There is some advantage to this system, such as the fact that our agents spend a lot more time with their customers and get to know each of our customers well. This is a good thing because if there are any issues they can be solved right there. The biggest operational and financial challenge is making sure that there is no fraud or theft in the system.

Anika Bahra and Nthabiseng Mosia in front of Easy Solar’s first public wall painting advertisements in Freetown, Sierra Leone.
Anika Bahra and Nthabiseng Mosia in front of Easy Solar’s first public wall painting advertisements in Freetown, Sierra Leone.

NM: To add to that: on the marketing and distribution side, with implications as well for finance, piggy-backing off of an existing mobile money network—like Airtel—means that we can potentially have a relationship with them and minimize agent identification costs and training, and we can leverage their existing brand to build loyalty and trust in our own. So that means that we cannot only focus just on the energy provision —there is a lot more investment we have to do to enter new areas. When we go to these places it’s not only that people do not know about solar, they also do not know about mobile money. Therefore, if these companies existed here and were able to do the leg work, it would be easier to convince customers that solar is a service that makes sense to them.

Anika Bahra is in her final year of the MPA in Development Practice (MPA-DP) programThe 21-month program trains students to become specialists in the design and management of integrated, results-based approaches to sustainable development challenges, drawing upon the distinguished faculty, practitioners and scholars of the Earth Institute and the School of International and Public Affairs. As part of the curriculum, students undertake a three-month summer field placement with established partner organizations around the world. This summer, Anika was a Tamer Center Social Enterprise Summer Fellow, undertaking an internship as a Credit Analyst with Easy Solar in order to help the fast-growing solar energy start-up scale effectively.

Science for the Planet: In these short video explainers, discover how scientists and scholars across the Columbia Climate School are working to understand the effects of climate change and help solve the crisis.
Subscribe
Notify of
guest

0 Comments
Inline Feedbacks
View all comments