SPECIAL REPORT: PAYGo Firms Struggle Less with Nonpayment, More with Supply of Solar Products, Equity Funding Since Onset of Pandemic

Mariama Kamara of Smiling Through Light, a women-run provider of solar products in rural Sierra Leone, stayed in business during the COVID-19 pandemic thanks to emergency funding from the Shine Campaign. Demand is high for Smiling Through Light’s products, but the last shipment of solar appliances from the manufacturer took five months to arrive, causing a delay in paying staff. Only since the onset of the pandemic – and at the request of customers – did Smiling Through Light expand its payment choices from cash up-front to include a pay-as-you-go (PAYGo) option.

GOGLA, also known as the Global Off-Grid Lighting Association, surveyed 13 firms on their pandemic experience and found that write-offs doubled during 2020 to 14 percent. Daniel Waldron of Acumen Fund described the pandemic-caused decrease in sales and repayment as “not an implosion.” Meanwhile, he added, “The resilience the companies have shown has been really impressive to us as investors.” However, Mr Waldron finds that there are not enough equity investors to support the range of strong, up-and-coming firms offering clean energy options in developing countries. The established firms could benefit from additional financing, as well, to help them expand into more difficult-to-reach communities. The lack of fresh investors means that some early investors are having trouble exiting. Mr Waldron expressed chagrin that Acumen’s peer investors were not as motivated as his firm had expected to help PAYGo firms make it through the pandemic downturn.

Alexander Brummeler of Azuri Technologies agreed with many of these points, adding that the remote lock-out technology that defines PAYGo has helped encourage users to continue making payments. Another factor that leads people to prioritize PAYGo over other expenses is that energy is such an essential service to users.

Like Smiling Through Light, Azuri Technologies has had supply chain delays. To manage this, the firm is ordering more appliances in advance. For other material, it is paying premiums of up to 15 percent relative to before, whereas prices dropping over time had been the norm before the pandemic. In other cases, Azuri is redesigning products to accept different chipsets when the original type has become unavailable.

Early in the pandemic, some PAYGo firms were interested in giving their customers a period of usage at no cost. This impulse was tempered by concerns that users would not begin paying again at the end of the grace period. However, Mr Waldron said that being very clear with customers that the relief was temporary prevented most difficulties with customers resuming payments.

All of the panelists noted the trend of PAYGo firms diversifying from solar products into consumer products such as mobile phones. Mr Waldron cited d.light as having become one the largest smartphone distributors in East Africa. One concern with this trend is that the firms may be lured by the profits of up-selling existing customers to consumer products at the expense of reaching new customers who still lack basic services.

This feature is part of a sponsored series on European Microfinance Week 2021, which took place online November 17 through November 19. The event is held annually by the European Microfinance Platform (e-MFP). MicroCapital has been engaged to promote and report on the conference each year since 2012.

Additional Resources

European Microfinance Week 2021 agenda
https://registration.european-microfinance-week.eu/website/27793/agenda/

MicroCapital coverage of European Microfinance Week, including the European Microfinance Award
https://www.microcapital.org/category/european-microfinance-week/