This blog is part 4 of a 5 part series on what is financial inclusion and how is it informing the design of the curriculum for IDDS Kenya.
In Nyeri (2.5h from Nairobi) Faith and Robert Omondi recently gave birth to Angela, their 3-month-old baby. Faith and her mother focus pretty much all day on taking care of the little one while Robert leaves for about 4 to 5 days every other week as a tourist guide for a company that offers trekking services to Mount Kenya, one of the closest and most famous tourist attractions in the area.
When Angela was born, the Omondis realized the urgent need to have electricity available for specific household tasks. In Kenya, as most of Sub-Saharan rid access is partly non-existent in some rural areas and poorly reliable where it exits. In fact, rural access to electricity according to a recent World Bank report reaches only 48.39% of the population. Despite these challenges that consider around 8 million off-grid households countrywide, Kenya leads the ranking of electricity access in the region at 56%, surpassing Tanzania at 32.8%, Rwanda at 29.37%, Uganda with 26.7% and Burundi at 7.5%.
Without any other options, the population is forced to either go without power or use kerosene, an expensive, inefficient and often times dangerous fuel that pollutes the air and creates fire hazards. Effectively, it takes $8/month to fuel one kerosene lamp, and with the widespread use of cell phones, users like Faith who needs to keep in touch with her husband pays around US$0.20/day or $10/month to charge her phone at her neighbor's house.
The Omondi's neighbor happens to have a home solar pack that he was able to acquire using a market scheme that became popular is rural and urban Africa and Asia called PAYG (Pay as you go). This payment mechanism helps consumers and also solar firms themselves by bypassing the traditional hurdle of consumers having to make large upfront investments for solar products. Using PAYG services, solar customers can purchase a solar home system (that comes with a battery, a charge controller, a solar panel, LED bulbs and a mobile charger) on credit and make small daily payments using mobile money at a lower price than using kerosene lamps.
After making successive payments towards their solar system for roughly a year, customers build creditworthiness and can purchase other more sophisticated products, such solar-powered televisions, energy-efficient cook stoves and smartphones on a similar payment scheme and according to their needs.
The last-mile-centric software and IoT (Internet of Things) solutions around the solar devices allows them to be remotely shut off, in case the customer stops paying the agreed installments. This allows for high flexibility for the customer in terms of payments but also ensures a high repayment likelihood; and based on all the data gathered, the opportunity to access profound customer affordability predictions as well as logistics and stock management adopted to suit the requirements of the target markets.
Among the companies that have adopted the PAYG model, we can find M-KOPA, Pawame and one of IDDS' Kenya partners Green Light Planet. These companies are bringing their innovative distribution model at the bottom of the low income US$2 to US$10 per day segment.
Until multi-million dollar electrification and renewable energy projects are executed in the medium term, financing of off-grid solar home systems is a step toward broader financial inclusion for rural, unbanked consumers like the Omondi across Kenya. And with them Angela's generation to have access to more opportunities such as better quality care, more lit productive time; consequently, a better quality of life.
Stay tuned for the next story from the field!
IDDS Kenya 2018 will be held in Embu from July 8 to 23 with the aim to co create solutions to boost access to innovative financial products and services focused on rural populations. We encourage to follow our journey. We are also crowdfunding for selected participants with high potential that are unable to pay for their transportation and expenses during the summit. If you or anyone you know would like to contrtibute to the cause please click in in our StartSomeGood crowdfunding campaign https://startsomegood.com/projects/financialinclusionkenya.