Case Study 9: EcoEnergyFinance: Distribution of Solar Pay-as-you-go in Pakistan
In 2013, we launched the M4D Utilities Innovation Fund (formerly MECS) to test and scale the use of mobile to improve or increase access to energy and water services. With the support of the UK Government, GBP 2.4 million in Seed and Market Validation grants was awarded to 13 organisations in 11 countries across Africa and Asia.
Today we continue our Case Study series on lessons learned from these 13 projects. A core output of the Innovation Fund is the lessons and evidence base developed throughout the grant timeline that can inform ecosystem players, such as commercial benefits to mobile operators, and social and economic impacts for the underserved. By making these lessons public, we intend to accelerate scaling and sector growth. Since the inception of these grants, we have already seen significant expansion and innovation to mobile-enabled products and services for water and energy delivery as well as sanitation, and the business models that support them.
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The ninth Case Study in our series focuses on EcoEnergyFinance (EEF), a hybrid organisation, composed of a non-profit 501(c)(3) in the USA and a Private Limited Company in Pakistan. EEF delivers affordable solar energy solutions to remote and off-grid customers in Pakistan through its integrated sales and service network.
In January 2014, the M4D Utilities Programme awarded EEF a GBP 24,614 Seed grant to validate the viability of EEF’s distribution models for PAYG lanterns and solar home systems (SHSs) as well as to verify to what extent the GSM network coverage would support the deployment of M2M-enabled SHSs. In a country where 69% of the population is un-electrified, yet 85% have access to GSM networks, EEF saw an opportunity to offer off-grid customers PAYG solar lanterns and SHSs.
EEF developed a partnership with UBL Omni, a third-party mobile money operator for payment collection and used Vodafone’s global roaming SIM through an arrangement with BBOXX, its SHS vendor, for M2M connectivity. Although EEF was unable to meet its target for SHS sales due to the unavailability of working systems, and nearly met its revised target for lanterns sales, they learned several lessons that have shaped their future strategy.
Although the lanterns and home systems were both powered by solar technology, selling them required entirely different skills
EEF expected to exploit operational efficiencies using the same sales force to sell lanterns and SHSs. However, EEF came to the conclusion that selling lanterns and SHSs was not synergistic due to the difference in the nature of the sale. Specifically, EEF found that village agents could easily sell lanterns, but struggled with the more complicated configuration and sale of an SHS. As a result, EEF shifted to direct sales of the SHS through its staff. Furthermore, EEF have also decided to focus exclusively on SHSs for the near term.
The repayment rate of EEF’s PAYG lantern portfolio was 94 per cent as compared to the non-PAYG portfolio rate of 70 per cent
EEF has been selling lanterns without PAYG technology on cash or credit since 2013. During the project, EEF reduced PAYG lantern pricing from PKR 360 (USD 3.47) to PKR 295 (USD 2.85) per month for five months. Despite the price reduction, PAYG lanterns are still more expensive than non-PAYG lanterns. Although repayment rate is defined differently for the two portfolios, the significantly higher repayment rate clearly indicates the importance of PAYG technology to ensure timely repayments.
For 68 per cent of EEF’s customers, the nearest mobile money agent was at least 5km away
The sparse presence of mobile money agents in EEF’s sales area requires EEF staff to be involved in payment collection and dampens EEF’s potential to scale.
Affordability is a barrier despite adjustments to SHS pricing and configuration
After experimenting with SHS configurations and pricing in early 2014, EEF settled on an 18-month term with prices ranging from PKR 2500 to PKR 4500 per month (USD 24.12 to 43.41). To reduce the monthly payment, EEF also experimented with a rental plan for a short time. EEF is now considering longer term loans (24-36 months) to further increase affordability.
In trying to resolve technical issues encountered by EEF, BBOXX was able to make significant improvements to the new version of its SHS. Moreover, as a result of BBOXX’s commitment to supporting EEF through the technical difficulties, EEF gained confidence in BBOXX and decided to form a closer, longer-term relationship. With the stronger partnership, EEF aims to replicate BBOXX’s securitisation deal with OikoCredit and sell 1,000 BBOXX SHSs in 2016.
Watch our webinar on EcoEnergyFinance’s lessons from this grant.