How this pay-as-you-go firm hopes to include rural communities in the financial inclusion system.
By Tullah Stephen
In Kenya, like most sub-Saharan African countries, access to electricity remains a huge challenge. Families rely on batteries, kerosene or oil lamps to light up their homes. This does not only present a health hazard, but has also proved expensive to many households. Families spend close to US$150 monthly on electricity alternatives.
To solve this challenge, solar entrepreneurs have stepped up to bridge the challenge by offering a range of solutions to households. Solar home systems, lanterns and mini hybrid systems have been common products offered by solar pay-as-you-go (PAYG) solar companies.
But opportunities abound beyond just offering the solar products. The growth of mobile money platforms such as Mpesa and Airtel money, has aided solar financing options with PAYG companies collecting reams of data proving to be crucial in enabling rural communities to be included in the financial system.
Pawame, a company that has incorporated the provision of solar products and mobile technology, distributes and finances PAYG solar power systems and accessories such as lights, radio, and TV. The cost is spread to the consumer through an affordable monthly subscription plan. Customers pay their subscription through existing mobile money platforms. This ecosystem enables Pawame and other PAYG companies to provide a holistic support of PAYG financing while collecting reams of data.
The firm’s solutions and mission according to its CEO Maurice Parets, is to be a pay-as- you-go Solar Home System that enables customers to immediately benefit from clean and affordable electricity, while building a credit history that can unlock access to other life-changing products and services such as scholarship loans and micro-insurance.
Algorithm
Parets adds that having this data, ensures customers previously unbanked with no known payment streams can unlock other financial services. For Pawame, an algorithm they are developing allows it to target products to the right customers based on the data they have on them. Already, the payment and credit history is being used by the firm to provide follow-on credit in form of upgrading to aspirational appliances such as fridges, internet bundles among others through short term payment plans.
Since its launch two years ago, the company has been among the fastest growing PAYG solar companies in the country. Pawame began operations in July 2016 and since then has sold over 400 solar home system impacting over 20,000 lives.
Key to realizing this result has been the fact that it learned from its predecessors on pitfalls to avoid. “In business, gaining greater insight into you competition or firms that launched before you is a key strategy to improving your own results,” Parets believes.
“When we entered the market we found for instance that PAYG model was accepted and we understood the importance of product quality. Customers were dissatisfied of the products and value they were getting for their money. We are positioning ourselves as a premium customer experience provider at a non-premium price.”
Capital investment
Straight from raising US$2 million from Gulf based investors, Parets says the firm is cautiously exploring chances of expanding to other cities in the country and the region as well.
“A lot of capital we have raised has gone to funding the business and financing the products we sell as well lending to customers off our own balance sheet. We have reached a level of scale and degree of traction that we are attracting debt investment which is cost effective for us.
One of the lessons we have learned since launching has been on the perils of expanding too quickly. We want to expand and grow systematically. I do expect to move into one or two countries by 2019. This will be contingent on us raising a series A capital round in 2019,” he adds.
Series A financing is the first round of financing given to a new business once seed capital has already been provided. Typically, this is when external investors are given company ownership for the first time.
Challenges
Being able to sell and provide after sales support cost effectively has been challenging according Parets. However the company is adopting a moderate growth strategy to make sure that it gets the model right.
While the solar power market has been perceived as crowded, Parets feels the market is still largely unexploited. The technology cost is today also declining. This has made making decentralized options extremely competitive with traditional approaches. Technology, Parets says, is improving functionality both at the electric system level and at the appliance level, and financing is becoming more widely available. This will further make the market attractive for even more players to come in.
Parets adds that having this data, ensures customers previously unbanked with no known payment streams can unlock other financial services. For Pawame, an algorithm they are developing allows it to target products to the right customers based on the data they have on them. Already, the payment and credit history is being used by the firm to provide follow-on credit in form of upgrading to aspirational appliances such as fridges, internet bundles among others through short term payment plans.
Since its launch two years ago, the company has been among the fastest growing PAYG solar companies in the country. Pawame began operations in July 2016 and since then has sold over 400 solar home system impacting over 20,000 lives.
Key to realizing this result has been the fact that it learned from its predecessors on pitfalls to avoid. “In business, gaining greater insight into you competition or firms that launched before you is a key strategy to improving your own results,” Parets believes.
“When we entered the market we found for instance that PAYG model was accepted and we understood the importance of product quality. Customers were dissatisfied of the products and value they were getting for their money. We are positioning ourselves as a premium customer experience provider at a non-premium price.”
Capital investment
Straight from raising US$2 million from Gulf based investors, Parets says the firm is cautiously exploring chances of expanding to other cities in the country and the region as well.
“A lot of capital we have raised has gone to funding the business and financing the products we sell as well lending to customers off our own balance sheet. We have reached a level of scale and degree of traction that we are attracting debt investment which is cost effective for us.
One of the lessons we have learned since launching has been on the perils of expanding too quickly. We want to expand and grow systematically. I do expect to move into one or two countries by 2019. This will be contingent on us raising a series A capital round in 2019,” he adds.
Series A financing is the first round of financing given to a new business once seed capital has already been provided. Typically, this is when external investors are given company ownership for the first time.
Challenges
Being able to sell and provide after sales support cost effectively has been challenging according Parets. However the company is adopting a moderate growth strategy to make sure that it gets the model right.
While the solar power market has been perceived as crowded, Parets feels the market is still largely unexploited. The technology cost is today also declining. This has made making decentralized options extremely competitive with traditional approaches. Technology, Parets says, is improving functionality both at the electric system level and at the appliance level, and financing is becoming more widely available. This will further make the market attractive for even more players to come in.
