Nairobi, Kenya-based M-KOPA Solar is an off-grid company founded in 2012 which uses the now popular PAYGO model to provide solar appliances to Base of the Pyramid (BoP) populations. Between their inception in 2012 and 2016, they have connected over 300,000 homes in East Africa and have made about $40 million in revenue within that same period. M-KOPA now has a presence in three African countries (Kenya, Tanzania and Uganda) as well as a franchisee in Ghana. Its story and that of other operators utilizing PAYGO model has led to many emerging questions about the role that traditional tariff collectors, such as banks, can still play in the market.
Could mobile money be the future of tariff collection for off-grid solar?
Areef Kassam, head of Mobile for Development (M4D) Utilities at GSMA says “Financial institutions have been involved in tariff collection for off-grid companies in varying degrees in different markets and with varying success. However, mobile operators have a dramatic advantage in providing this service considering there are 37 global markets that have ten times the number of registered mobile money agents compared to bank branches and other 19 markets that have more mobile money accounts than bank accounts.” According to GSMA, “Sub-Saharan Africa continues to account for the majority of live mobile money services (52%),” with West Africa seeing dramatic growth over 2015, with “year-on-year growth at 60.1%, twice the growth rate of any other region,” GSMA says.
Do these advantages make telecom companies indispensable to the growth of off-grid solar solutions? Could they become an alternative to banks and other financial institutions?