Responsible Finance Forum

Digitally Financed Energy: How Off-Grid Solar Providers Leverage Digital Payments and Drive Financial Inclusion

Daniel Waldron and Xavier Faz
01 March 2016
Source:  CGAP

Energy poverty is a development challenge that traditional, centralized approaches have been slow to overcome. Globally, 1.1 billion people remain without access to electricity, including 589 million in sub-Saharan Africa (SSA) (SE4All 2015, p. 45). They rely on dangerous and inefficient alternatives to light their homes and operate appliances: kerosene lamps, diesel generators, and dry-cell batteries. By providing longer access to cleaner sources of energy, electrification brings immediate health benefits, improved educational outcomes, and opportunities for small businesses. Unfortunately, connecting households outside of densely populated areas to centralized electric grids is prohibitively expensive: up to $2,300 per rural household in SSA (McKinsey 2015, p. 24). Alternatives such as photo voltaic solar panels have existed for decades, but their upfront costs have been unaffordable for most low-income customers, with the vast majority unable to access the credit necessary to extend repayment over time. And where credit is available, the geographic dispersion of rural customers makes routine payments to a fixed branch or agent prohibitively expensive.