In the last ten years PayGo – the method of distribution and financing of off-grid solar home systems (SHS) – has revolutionized the effort to bring clean, renewable energy to people in Africa without access to electricity.
While the achievements of the PayGo sector are a cause for celebration, the companies that employ this business model have struggled. Several notable companies have failed outright. Others have slowly wound down or continue to struggle. Most – although not all – of the remaining companies have not achieved profitability after five or more years of operations.
Today, those of us working in the PayGo sector are making an effort to understand why PayGo companies have generally not achieved profitability and what can be done about it.
This paper presents our analysis of one of the key weaknesses in the PayGo industry and provides a prescription for the next stage of the industry’s evolution. Our analysis centers around a central feature of PayGo companies: each PayGo company is essentially two businesses. One is a solar products retail distribution company. The other is a consumer finance company, or
“Finco”.
It is estimated that 490 million people are accessing energy through off-grid solar solutions worldwide. In Africa, nearly 50% of these are people that would not have been able to afford solar home systems without the financing provided by PayGo. This is nothing short of remarkable.
