Case Study 8: Kamworks – Introducing GSM-enabled PAYG Solar in Cambodia
In 2013, we launched the Mobile for Development (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 eighth Case Study in our series focuses on Kamworks, a Cambodia-based solar energy company which has provided solar power to over 150,000 people since its evolution in 2006. Kamworks offers a range of solar energy solutions and products such as solar pumping, custom-designed solar home systems, the award-winning MoonLight lantern and PAYG solar home systems.
In November 2013, the M4D Utilities Programme awarded Kamworks a Seed grant to develop PAYG solar home systems with GSM-based machine-to-machine (M2M) connectivity and to trial the sale and rental of 300 such systems in Cambodia. In a country where 66 per cent of the population is un-electrified, yet 99 per cent have access to GSM networks, Kamworks saw an opportunity to offer off-grid customers pre-paid solar home systems through a 24-month loan term or a perpetual rental. Kamworks developed a partnership with WING, a third party mobile money operator and dominant service in the country, for payment collection and signed a service agreement for connectivity with Cellcard, a large mobile network operator.
By May 2015, Kamworks achieved its target of selling and renting 300 SHSs to customers, albeit five months later than expected, and learned a number of useful lessons along the way.
Larger solar home systems, which power more aspirational appliances, are highly preferred in Cambodia
In Cambodia, access to the electricity grid is low, yet many households have access to electricity through automotive batteries, charged by a diesel generator operator. Therefore, there is less aspirational value for solar in Cambodia compared to East Africa where solar provides users with their first experience of electricity. Despite Kamworks expanding its portfolio to include cheaper SHS40 and SHS60, 75 per cent of customers preferred the largest solar home system, the SHS100. With increased access to electricity, customers could climb the energy ladder by purchasing new appliances. Indeed, over half of the surveyed customers purchased new appliances, with 71 per cent of those customers purchasing flat screen LED TVs, and 15 per cent purchasing fans.
Ensuring customers pay on time is a challenge
In the first few months of operation, on-time payment rates were high but quickly deteriorated, dropping from 100 per cent in October 2014 to 47 per cent a year later for the rent-to-own portfolio. A large part of the problem was the lack of consistent mobile coverage preventing systems from being switched off remotely. Currently call centre staff must authorise the disabling of the SHS. However, Kamworks employees were sometimes unwilling to switch off systems of delinquent customers as they did not want to be viewed as being unfair when they switched off a system in coverage. This had a compounding effect in that customers then refused to pay if their delinquent neighbours’ systems were functioning. Kamworks is therefore planning to make a fundamental change to the M2M capability so that an on/off function would be integrated into the SHS rather than requiring an external control command. Further, Kamworks is ensuring the strict implementation of the consequences of delinquency and have also hired experienced and qualified staff to improve customer vetting and strengthen the overall lending and collections process.
Rural Cambodians adopt new payment channels through mobile money quickly
Kamworks’ customers appreciated the convenience of using WING mobile money to pay, and exclusively preferred using their agent’s account rather than opening their own, which is consistent with the prevalence of the Over the Counter (OTC) model in rural Cambodia. Having the agent transact on behalf of the customer also overcame the language barrier, as most feature phones do not support the local language, Khmer. Visiting a WING shop once per month to top up their solar home system balance was far more convenient than making several trips per week to charging stations for batteries, with only 2 per cent of surveyed customers reporting they would prefer another payment channel.
Is an entrepreneur model more efficient than an employee model?
In April 2014, Kamworks began to build its project sales team, however with slow initial sales, paying the fixed component of sales staff compensation became difficult. Six months later, Kamworks transitioned to a commission-only entrepreneur model in which entrepreneurs stood to make more money whilst reducing overhead and fixed costs for Kamworks. The long term benefits of the entrepreneur model remain to be proven but Kamworks are seeing early signs of success. We welcome your views or experiences on this topic or any other issues that this blog raises.
Watch our webinar on Kamwork’s lessons from this grant