success story m-pesa · kisumu county 17 1.5.4. siaya county 17 1.5.5. uasin gishu county 18 1.5.6....
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DepartmentofEntrepreneurshipandInnovation
SuccessStoryM-pesaAnanalysisoftheevolutionoftheoff-gridsolarindustry
throughM-pesa,anditssocioeconomicimpactinrural
areas
AcasestudyofPawameLtd.inKenya
Supervisor Co-supervisor
Prof.AndreaPrencipe Prof.FedericaCeci
Candidate
HannesEckmayr
IDnumber:677211
AcademicYear2016/2017
2
Table of Contents TABLEOFCONTENTS 2
LISTOFFIGURES 5
LISTOFTABLES 6
LISTOFABBREVIATIONSANACRONYMS 7
ACKNOWLEDGEMENTS 8
ABSTRACT 9
CHAPTERONE:INTRODUCTION 101.1.INTRODUCTION 101.2.PURPOSEOFTHETHESIS 131.3.STUDYOBJECTIVES 141.4.STUDYQUESTIONS 141.5.STUDYAREA 151.5.1.BungomaCounty 161.5.2.KakamegaCounty 161.5.3.KisumuCounty 171.5.4.SiayaCounty 171.5.5.UasinGishuCounty 181.5.6.TurkanaCounty 18
1.6.TARGETPOPULATION 191.7.RESEARCHAPPROACH 191.8.STRUCTUREOFTHESTUDY 201.8.1.Preliminaries 201.8.2.Introduction 201.8.3.LiteratureReview 201.8.4.PresentationoftheFirm:PawameLtd 211.8.5.TheProject:TheProject 211.8.6.Conclusions 21
CHAPTERTWO:LITERATUREREVIEW 222.1.ELECTRIFICATION 222.2OFF-GRIDSOLARINDUSTRY 242.2.1EvolutionoftheOff-gridSolarIndustryOverTime 242.2.2TheTrendoftheOff-gridSolarIndustry 262.2.3Off-gridsolarsystems 34
2.3FINANCIALFACTORSINTHEOFF-GRIDSOLARENERGYINDUSTRY 352.3.1TheBottomofthePyramid 35
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2.3.2Financialinstitutions 362.3.4FinancialExclusion 372.3.5FinancialExclusioninoff-gridcommunities 382.3.6FinancialInclusion 39
2.4M-PESA-AFLOURISHINGMOBILEPAYMENTOPERATOR 392.4.1DevelopmentofM-pesa 402.4.2FunctionalitiesofM-pesa 412.4.3M-pesa:AServicewithanInternationalPresence 432.4.4M-pesa’sAdvantagesforcompanies 442.4.5AdvantagesofM-pesaforcustomers 442.4.6DownsidesofM-pesa 45
2.5SOCIO-ECONOMICIMPACTOFOFF-GRIDSOLARSYSTEMSTHROUGHM-PESA 462.5.1Socio-EconomicImpactOff-gridSolarSystems 462.5.2Social-EconomicImpactofusingM-pesa 46
CHAPTERTHREE:PAWAMELIMITED 503.1INTRODUCTION 503.2ORIGINSANDPURPOSE 513.3PAWAME’SBUSINESSMODEL 523.4OFFERHIGH-QUALITYANDAFFORDABLESOLARHOMESYSTEM 533.5PAWAME’SPOSITIONING 543.6PAWAME’SSTRENGTHANDUNIQUESELLINGPROPOSITION(USP) 553.7ADVANTAGESOFAPAWAME’SSHS 573.7.1Cheaper 573.7.2BetterLighting 573.7.3Cleaner 573.7.4Transformative 573.7.5Convenient 58
3.8BEINGAFIRSTMOVERINFRONTIERMARKETS 583.9UNTAPPEDCAPITALBASE 593.10CREATIONOFAPLATFORMFORDIVERSEPRODUCTS/SERVICEOFFERING 60
CHAPTERFOUR:THEPROJECT 624.1INTRODUCTION 624.2ANALYSIS,PRESENTATIONANDINTERPRETATIONOFTHEFINDINGS 624.3RESPONSERATE 634.4DEMOGRAPHICPROFILEOFTHERESPONDENTS 644.4.1Gender 644.4.2Age 644.4.3MaritalStatus 654.4.4HighestLevelofEducation 66
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4.4.5Occupation 664.5EVOLUTIONOFOFF-GRIDSOLARINDUSTRYINKENYA 674.5.1SourcesofEnergyUsedbeforetheOff-GridSolarEnergy 684.5.2TheIntroductionoftheOff-gridSolarEnergyinRuralKenya 684.5.3TheYearUsersBoughtOff-gridSolarSystems 694.5.4UseoftheOff-gridSolarSystemsintheNextFiveYears 70
4.6THETRENDOFTHEOFF-GRIDSOLARINDUSTRYINKENYA 724.6.1ProbabilityofPurchasingOtherAppliances/Services 74
4.7FACILITATIONOFMOBILEMONEYPLATFORMINTHEEVOLUTIONANDTRENDOFTHEOFF-GRIDSOLARINDUSTRYINRURALKENYA 754.7.1HowOftenM-pesaisusedtoPayforOff-gridSolarSystems 764.7.2AccessibilityofM-pesaAgents 774.7.3TheFutureoftheOff-gridSolarIndustryandM-pesa 79
4.8SOCIO-ECONOMICIMPACTOFM-PESAINOFF-GRIDSOLARINDUSTRYINKENYA 804.9SOCIO-ECONOMICIMPACTOFTHEOFF-GRIDSOLARINDUSTRYINRURALKENYA 83
5.CHAPTERFIVE:CONCLUSION 87
REFERENCES 91
APPENDIX:QUESTIONNAIREFORUSERSOFTHEOFF-GRIDSOLARSYSTEMS 98
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LIST OF FIGURES FIGURE1.1:ELECTRICITYACCESSINSUB-SAHARANAFRICA....................................................................................10
FIGURE1.2:KEROSENELAMPS..........................................................................................................................11
FIGURE1.3:PROVINCESOFKENYA.....................................................................................................................15
FIGURE2.1SHAREOFPOPULATIONWITHOUTGRIDACCESS....................................................................................22
FIGURE2.2:ESTIMATEDAVERAGEANNUALLIGHTINGSPENDBYTHEOFF-GRIDHOUSEHOLD($/YEAR,2012)...................23
FIGURE2.3:THEFOURSTAGESOFDEVELOPMENTINTHEOFF-GRIDSOLARINDUSTRY....................................................28
FIGURE2.4:INTRODUCTIONINTOOTHERPLAYERS-POSITIONONTHEVALUECHAIN.....................................................29
FIGURE2.5:POPULATIONWITHOUTACCESSTOELECTRICITYBYSUB-REGIONINSUB-SAHARANAFRICA.............................31
FIGURE2.6::POTENTIALFORCOSTSREDUCTIONPERTYPEOFPRODUCT(NOMINAL$PERUNIT).....................................33
FIGURE2.7:SUBSAHARANUNIQUEMOBILESUBSCRIBERSANDMARKETPENETRATION.................................................36
FIGURE2.8:TENYEARSOFM-PESA-FIGURESCORRECTASOFDECEMBER2016.........................................................41
FIGURE2.9::M-PESAAROUNDTHEWORLD-LAUNCHDATES.................................................................................43
FIGURE3.1:PAWAHOMESYSTEM.SOURCE:PAWAME(2017).................................................................................................53FIGURE3.2:ASSESSMENTOFAPPEALRELATIVETOOURCOMPETITORS.SOURCE:PAWAME(2017)..........................55FIGURE3.3:TURKANAPAWAMESALESAGENTDEMONSTRATINGTHEPRODUCTTOLOCALCOMMUNITYMEMBERS.
SOURCE:PAWAME(2017).............................................................................................................................................59FIGURE3.4:AFAMILYOBSERVESTHEINSTALLATIONOFAPAWAHOMEKITINTHEIRHOUSE.SOURCE:PAWAME(2017).....60FIGURE3.5:PAWAME’SPRODUCTDIVERSIFICATIONSTRATEGY.SOURCE:PAWAME(2017).......................................61
FIGURE4.1:GENDERDISTRIBUTIONOFTHERESPONDENTS......................................................................................64
FIGURE4.2:AGEDISTRIBUTIONOFTHERESPONDENTS...........................................................................................65
FIGURE4.3:MARITALSTATUSOFTHERESPONDENTS.............................................................................................65
FIGURE4.4:HIGHESTLEVELOFEDUCATIONOFTHERESPONDENTS............................................................................66
FIGURE4.5:SOURCESOFENERGYUSEDFORLIGHTINGBEFORETHEINTRODUCTIONOFTHEOFF-GRIDSOLARSYSTEMS.........68
FIGURE4.6:LIKELIHOODOFUSINGSOLARENERGYINTHENEXTFIVEYEARS.................................................................71
FIGURE4.7:EFFECTIVENESSOFM-PESASERVICESINPAYINGFORTHEOFF-GRIDSOLARSYSTEMS....................................78
FIGURE4.8:WHETHERTHROUGHM-PESAMANYPEOPLEINRURALAREAAREGOINGTOBECONNECTEDTOOFF-GRIDSHS..79
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LIST OF TABLES TABLE4.1:RESPONSERATE..............................................................................................................................63
TABLE4.2:OCCUPATIONOFTHERESPONDENTS....................................................................................................67
TABLE4.3:THEYEARTHERESPONDENTSFIRSTHEARDOFTHEOFF-GRIDSOLARSYSTEMS...............................................69
TABLE4.4::THEYEARUSERSBOUGHTTHEOFF-GRIDSOLARSYSTEMS.......................................................................70
TABLE4.5:THETRENDOFTHEOFF-GRIDSOLARINDUSTRYINKENYA........................................................................73
TABLE4.6:PRODUCTSUSERSOFOFF-GRIDSOLARENERGYHAVE,ORWOULDLIKETOBUY,ORDONOTNEED.....................75
TABLE4.7:HOWOFTENRESPONDENTSUSEM-PESATOPAYFORTHEIROFF-GRIDSOLARSYSTEM...................................77
TABLE4.8:DISTANCETOTHENEARESTBANKBRANCHORM-PESAAGENT..................................................................78
TABLE4.9:SOCIO-ECONOMICIMPACTOFMOBILEMONEYPLATFORM(M-PESA)INFACILITATINGEVOLUTIONANDTRENDOF
THEOFF-GRIDSOLARINDUSTRY.................................................................................................................81
TABLE4.10:AVERAGEMONTHLYSAVINGS(KSHS).................................................................................................82
TABLE4.11:SOCIO-ECONOMICIMPACTOFOFF-GRIDSOLARSYSTEMINRURALKENYA..................................................84
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List of Abbreviations an Acronyms AML Anti-MoneyLaunderingBRECSU BuildingResearchEnergyConservationSupportUnitCDF ConstituencyDevelopmentFundCFT CombatingtheFinancingofTerrorismCIDP CountyIntegratedDevelopmentPlanCO CarbonMonoxideCO2 CarbonDioxideCRA CommissiononRevenueAllocationEAC EastAfricanCommunityGNESD GlobalNetworkonEnergyforSustainableDevelopmentGoK GovernmentofKenyaGSMA GroupeSpecialeMobileAssociationHMIS HealthManagementInformationSystemsKIHBS KenyaIntegratedHouseholdBaselineSurveyIREK InnovationandRenewableElectrificationinKenyaIRENA InternationalRenewableEnergyAgencyKNBS KenyaNationalBureauofStatisticsMFI MicrofinanceInstitutionOECD OrganisationforEconomicCo-operationandDevelopmentPayGo PayasyougoPE PrivateEquityPV PhotovoltaicREP RuralElectrificationProgramSID SocietyforInternationalDevelopmentSSA Sub-SaharanAfrica VC VentureCapital
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Acknowledgements
My gratitude goes to my mother and father, Hildegard andWillibald Eckmayr who
supportedmepersonallyaswellasfinanciallythroughoutmyeducationalcareer.From
ViennatoGlasgowtoRomeandlastlytoHongKong.
Furthermore, I would like to thank different individuals at my current employer
PawameLtdinNairobi(Kenya),fromsuggestingresearchideas,tosendingmearticles
andpapers.IamespeciallygratefulforthesupportofmycurrentmanagerNickSparks
(Co-founder&COO)whogavemethetimenecessarytocompletemythesisbesides
work.
I would like to thank my girlfriend Alisha who provided the emotional support
wheneverIneededit.
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Abstract Africaacontinentrichinhistory,knownforitsbreath-takingnatureandunestimatedresources but still unable to offermodernday essential to its population. There are620 million people in Africa that don’t have access to a basic development need,electricity. The major challenge is not generation but connectivity and even whenavailableit’sunreliable,connectioncostsaretoohighandcannotbespreadovertime.As a consequence, the only lighting source within reach are generators, candles ortraditional fossil fuel kerosene lamps which release toxic gases, are inefficient andexpensive.In Kenya, the energy industry has immense potential for growth due to a recenttechnological innovation. Namely M-pesa, (translates to “money wallet” in Swahili)Vodafone’s mobile money platform, has enabled electronic payments to and frompeople around the world. This has revolutionized the energy sector by allowingindividualstoeasilymakepaymentsfordifferentutilities/servicesandtorepayloans.In particular, theoff-grid solar sectorhasusedM-pesa to address energy scarcity inrural Africa. Companies cannow “rent to own” small solar home systems (generallyconsisting of a battery, TV,mobile phone charging cables, two to four light bulbs, aradioandatorch)tocustomersatthebottomofthepyramid(BOP).M-pesaenablesthesecompaniestoeasilyrecouppaymentsovertimefromtheircustomersthatwouldnotbeabletoaffordtheone-offinvestment,butcanpayoverthecourseofalongerloanperiodthroughinstalments.This paper analyses the socio-economic impact of off-grid solar systems on ruralpeople’slivesbylookingatM-pesaandhowthemobilemoneypaymentplatformhasfacilitated this transition. In particular, it investigates the social and economicimprovements brought through the acquisition of off-grid solar systems viaM-pesapaymentplans.Thisanalysisderivedfromadescriptiveresearchdesignperformedonatargetpopulationofoff-gridsolarsystemusersinruralKenya.
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CHAPTERONE:INTRODUCTION
1.1.Introduction Modern economic development is anchored and driven by availability of energy,
namely crude oil, electricity, natural gas and coal, and other renewable energy like
solar,water,windandgeothermal.According toPwC (2016), thereare close toone
fifthof theworld’spopulation (18%),who livewithoutaccess toelectricity.Manyof
thosepeoplewhodonothaveaccesstoelectricityliveinlocationsthatarebeyondthe
reachofthecurrentgridsystemandninety-fivepercent(95%)ofthem(1.2billion)are
in Sub-SaharanAfrica (SSA) anddeveloping countries inAsia. In these countries, the
ratesatwhichelectrificationistakingplacearelowestinruralareasandcannotkeep
pacewithpopulationgrowth.Sub-SaharanAfricahasnowovertakenAsiaashavingthe
largestnumberofpeoplelackingelectricityaccess.
Figure1.1:ElectricityAccessinSub-SaharanAfrica.Source:InternationalEnergyAgency(2015)
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The African countries with the largest population currently without electricity are
Nigeria, Ethiopia, Kenya, Côte d’Ivoire and the Democratic Republic of Congo (PwC,
2016).
InKenya,close to thirtymillionpeople live in thedarkonce thesun falls.Themajor
challengeisnotgenerationofelectricitybutconnectivityandevenwhenavailable,it’s
mostly unreliable. As a consequence, the only lighting sources within reach are
traditional but inefficient fossil fuel kerosene lamps, candles or generatorswhich all
comealongwith aheftyprice tag.Outof those threeenergy alternatives, themost
popular iskerosene (Tracy, Jacobson,2012).AccordingtoastudymadebyaKenyan
based off-grid solar company called M-KOPA and InterMedia in 2014, kerosene
purchases can soak up to 20% of the total income of rural households. On average
eachhouseholdspendsaroundKshs13,651(US$133)perannumwhichtranslatesto
Kshs1,138(US$11)permonth(M-KOPA,2014).Ontopofthatmosthouseholdsspend
around the same amount on batteries, third party phone charging, torches and
candles.
Figure1.2:Kerosenelamps.Source:SolarAid(2018)
Justrecentlytherewasadisruptionintheenergymarket.Off-gridsolarcompaniessaw
anopportunitythattheywerelurkingsine2000’sandfinallyfoundawaytoenterdue
to thesteadydropof solarpanel costsand theexistenceofmobilemoneypayment
platforms. This enabled them to be price competitive to kerosene and to sell solar
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home systems (generally consisting of a battery, TV,mobile phone charging cables,
twotofourlightbulbs,aradioandatorch)totheBOPthroughmicro-creditsolutions
thathelpedthemsplitcostsovertime.
In Kenya specifically, M-pesa a mobile money payment platform, brought massive
changesintermsoffinancialinclusionaswellasaffordabilityofproductsandservices.
Off-gridsolarcompaniesarenowadaysabletoleaseSHStolow-incomeearners,who
most likelyhadpreviouslybeendenieda loanfrominstitutionalbanks.Thisprovides
largeopportunitiesforfirmstoenterthemarketandatthesametimemakesignificant
profits,byofferingproductsthathavelife-changingbenefitstoitsinhabitants.
Todayavibrantprivatesectorofsmall-scaleSHSexistsontheKenyanmarketanditis
estimatedthatover620,000ruralhouseholds(8,2%ofruralpopulationinKenya)has
beenelectrifiedbySHSasof2016.Thisnumberisexponentially increasingovertime
asmoreoff-gridsolarcompaniesareenteringthemarketandsomebigplayershave
successfullyrunawarenesscampaignswithinthecounty(GOGLA,2016).
Solarenergyremainsthemostaffordablesourceofenergyforlightingandlowvoltage
applianceslikeradio,television,and/orphonechargingespeciallyinruralareaswhere
accesstoelectricityisstillamajorchallenge.Therefore,off-gridsolarsystemsimprove
the living standards ofmany people since themajority of the people in developing
countries like Kenya live in rural areas. In line to these facts, this study sought to
analyse the socio-economic impact of off-grid solar systems on rural people’s life
especiallywhenmakingpaymentsthroughmobilemoneyplatforms(M-pesa).
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1.2.PurposeofthethesisInFebruary2017,theresearcherdecidedtotakeonanincredibleopportunitytowork
inAfrica,specificallyKenya,foranoff-gridsolarcompanynamed“Pawame”. Initially,
theresearcher’splanwastostayinKenyaforaperiodofthreemonthstocompletehis
salesinternshipandreturntoEuropewhereheundertakeshisstudies.However,the
spectacularandbreath-takingnatureofKenya,careeradvancementplustheinspiring
project at Pawame Ltd he was undertaking, motivated him to make a decision of
stayinginKenyaforanindeterminateperiodoftime.
Pawame’s project of connecting many rural households to electricity through solar
energy at an affordable price has been the most exciting, inspiring, and incredible
project the researcher has ever participated. Due to the fact that the researcher
travelledonaregularbasistoPawame’scustomerbaseinruralKenya,heexperienced
onfirst-handhowimpactfuloff-gridsolarcompaniesare.
Based on this first-hand information, the researcher chose to conduct a research
(thesis)toanalysethesocio-economicimpactofoff-gridsolarsystemsonruralpeople
and how M-pesa has facilitated to the evolution and trend of the off-grid solar
industry.ParticularfocuswasonPawameLtdinKenya.ThechoicetofocusonM-pesa
wasmadebecauseithasenabledtheexistenceofoff-gridsolarcompaniesandonthe
otherhandhelpedmillionsofKenyanstoescapefinancialexclusion.
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1.3.StudyObjectivesThefollowingwillbetheobjectivesofthisstudy:
1) Toanalysehowtheoff-gridsolarindustryinruralKenyahasevolvedovertime.
2) To analyse how M-pesa has facilitated the evolution of the off-grid solar
industryinruralKenya.
3) Toanalysethetrendoftheoff-gridsolarindustryinruralKenya
4) Toanalysesocio-economicimpactoftheoff-gridsolarindustryinruralKenya.
5) Toanalysesocio-economicimpactofM-pesainfacilitatingevolutionandtrend
oftheoff-gridsolarindustryinruralKenya.
1.4.StudyQuestionsTheresearcherseekstoanswerthefollowingquestions
1) Howhastheoff-gridsolarindustryinruralKenyaevolvedovertime?
2) HowdoesM-pesafacilitatetheevolutionoftheoff-gridsolarindustryinrural
Kenya?
3) Whatisthetrendoftheoff-gridsolarindustryinruralKenya?
4) What are the socio-economic impact of the off-grid solar industry in rural
Kenyaonpeople’slives?
5) Whatisthesocio-economic impactofM-pesa infacilitatingtheevolutionand
trendoftheoff-gridsolarindustryinruralKenya?
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1.5.StudyAreaThestudywasconductedinruralKenyawherePawameLtdhasdevelopeditsnetwork.
This includesWestern Kenya region, Nyanza region, and Rift Valley region.Western
Kenyahasfourcounties,namelyVihigaCounty,BusiaCounty,KakamegaCounty,and
BungomaCounty.Nyanza regionhas six counties,namelyKisumu,Migori,Homabay,
SiayaCounty,Kisii, andNyamira.NorthRiftValley regionhaseight counties,namely
Turkana,Nandi,WestPokot,UasinGishu,Baringo,TransNzoia,Samburu,andElgeyo
Marakwet.
Figure1.3:ProvincesofKenya.Source:LifewayMissionInternational(2017)
ThestudywillputanemphasisonsixcountieswherePawameLtdhasconnectedrural
people tooff-grid solar systems forat leastonemonth.This includesKakamegaand
BungomainWesternKenya,KisumuandSiayainNyanzaregion,andUasinGishuand
TurkanainNorthRiftValleyregion.
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1.5.1.BungomaCountyBungomaCountyislocatedinWesternKenyaanditcomprisesof9constituenciesand
45 electoral County Assembly Wards, covering a surface area of 3,593 km2 (CRA,
2011).Ithasapopulationof1,630,934people,321,628households,andapopulation
densityof454peopleperkm2 (KNBS,2010).TheCountyhasanurbanpopulationof
21.7%,whiletheruralpopulationis79.3%(CRA,2011).Onenergyconsumption,only
1% of the residents of Bungoma County use liquefied petroleum gas (LPG), 2% use
paraffin, 85% use firewood, and 11% use charcoal (KNBS & SID, 2013). Only 4% of
residentsinBungomaCountyuseelectricityastheirmainsourceoflighting,27%use
lanterns,67%usetinlamps,and1%usefuelwood.
1.5.2.KakamegaCountyKakamegaCountyislocatedinWesternregionofKenyawithapopulationof1,660,651
people, an area of 3,051 km2, a population density of 544 persons per km2, and
355,679 households (KNBS, 2010). The county borders Vihiga County to the south,
Siaya County to theWest, Bungoma County to theNorth, andNandi County to the
East. It has 12 constituencies and 60 electoral County AssemblyWard (CRA, 2011).
Kakamega County has an urban population of 15.2%, while the rural population is
84.8%(KNBS,2010).Onenergyconsumption,1%oftheresidentsofKakamegaCounty
use liquefied petroleum gas (LPG), 2% use paraffin, 87% use firewood, and 9% use
charcoal (KNBS & SID, 2013). A total of 6% of residents in Kakamega County use
electricityastheirmainsourceoflighting,28%uselanterns,64%usetinlamps,and1%
usefuelwood.
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1.5.3.KisumuCountyKisumuCountyisinNyanzaregionandithasapopulationof968,909people,covering
asurfaceareaof2,086km2,apopulationdensityof465personsperkm2,and226,19
households(KNBS,2010).Thecountyisdividedinto7constituenciesand35electoral
CountyAssemblyWards(CRA,2011).ThecountybordersVihigaCountytothenorth,
Homabay County to the south-west, Siaya County to thewest,Nandi County to the
north-east, and Kericho County to the east (CRA, 2011). The county has an urban
population of 52.4% and rural population of 47.6% (KNBS, 2010). On energy
consumption,7%ofKisumuCountyresidentsuseparaffin,58%usefirewood,and29%
usecharcoal.On lighting,18%oftheresidentsuseelectricityastheirmainsourceof
lighting,23%uselanterns,56%usetinlamps,andlessthan1%usefuelwood.
1.5.4.SiayaCountySiaya County is located in Nyanza region bordering Kakamega County and Vihiga
County to thenorth-east,KisumuCounty to thesouth-east,andBusiaCounty to the
north(CRA,2011).Ithasapopulationof842,304people,199,034households,coversa
surface area of 2,530 km2 with a population density of 333 people per km2 (KNBS,
2010).Thecountyhasanurbanpopulationof10.8%andaruralpopulationof89.2%.
Thecountyhas six (6) constituenciesand30electoralCountyAssemblyWards (CRA,
2011).Onenergyconsumption, less than1%ofSiayaCounty residentsuseLiquefied
PetroleumGas (LPG), 2% use paraffin, 83% use firewood, and 15% use charcoal. In
lighting,4%ofresidentsinSiayaCountyuseelectricityastheirmainsource,21%use
lanterns,73%usetinlampsandlessthan1%usefuelwood(KNBS&SID,2013).
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1.5.5.UasinGishuCountyUasinGishuCounty is located inNorthRiftValley regionwith6 sub-countiesand30
electoral county assembly wards, its capital being Eldoret town. It borders Nandi
County to the south-west, Kericho County to the south, Trans Nzoia County to the
north,andBungomaCountytotheWest (CRA,2011). Ithasapopulationof894,179
people,coversanareaof3,345km2,apopulationdensityof26peopleperkm2,and
202,291 households (KNBS, 2010). Uasin Gishu County has an urban population of
38.6% and rural population of 71.4%. (CRA, 2011). On energy consumption, 5% of
residentsuse liquefiedpetroleumgas (LPG),7%useparaffin,55%use firewood,and
32% use charcoal (KNBS& SID, 2013). For lighting, 28% of residents in Uasin Gishu
Countyuseelectricityastheirmainsource,44%uselanterns,25%usetinlamps,and
lessthan1%usefuelwood(KNBS&SID,2013).
1.5.6.TurkanaCountyTurkana County is located in North Rift Valley region of Kenya and it is the largest
County inKenyawith6 sub-countiesand30electoralCountyAssemblyWards (CRA,
2011).ItbordersSamburuCountytothesouth-east,BaringoandWestPokotCounties
to the south-west andMarsabit County to the east (CRA, 2011). The county has a
populationof855,399people,coversanareaof68,680km,apopulationdensityof13
peopleperkmand123,191households(KNBS,2010).Onenergyconsumption,1%of
residents inTurkanaCountyuse liquefiedpetroleumgas (LPG),4%useparaffin,78%
usefirewoodand17%usecharcoal.Onlighting,5%ofresidentsinTurkanaCountyuse
electricityas theirmainsourceof lighting,15%use lanterns,77%use tin lamps,and
lessthan3%usefuelwood.
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1.6.TargetpopulationThis study targeted residents in six selected counties who had acquired an off-grid
solar system and have used it for at least one month. In each of the six selected
counties, the researcher randomly picked 20 respondents making a total of 120
respondentswhoparticipatedinthisstudy.
1.7.ResearchApproachA research is an organized inquiry that seeks to find answers to questions and
solutionstoproblemswithaviewofgeneratingnewknowledgeorunderstandingthe
subject (Krishnaswam & Sayaprasal, 2010; Bushaway, 2003; & Roberts, 2007).
Research isclassified intotwobasicapproaches,namelyquantitativeandqualitative,
with the third dimension referred to a mixed method approach (Kothari, 2004). In
quantitativeapproach,aresearchisbasedonthemeasurementofquantityoramount
(Patton, 2002). The qualitative approach on the other hand uses a naturalistic
approachtounderstandaphenomenonina“realworldsetting”withoutmanipulating
thephenomenonofinterest(Patton,2002).Themixedmethodapproachencompasses
bothquantitativeandqualitativemethods.
In this study, the researcher adopted both quantitative and qualitative approach in
ordertogatherfactsand in-depthunderstandingofselectedparticipants’behaviour,
opinions and perceptions in view of the subject under research. The researcher’s
experienceinthefieldunderstudy(off-gridsolarenergyindustry),hisinteractionwith
participants of this study before making a decision of conducting research on the
subject and his closeness to the social reality with regard to off-grid solar energy
industryhelpedinreducingthegapbetweenrealityandrepresentation.Furthermore,
the enthusiasm, inspiration and attentionof understanding the context of the study
offered detailed data that is rich in depth. By applyingmixed (both qualitative and
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quantitative)approach,theresearchunderstudyexaminedspecificissuessuchasthe
evolutionof theoff-grid solarenergy industryover time,howM-pesahas facilitated
the evolution of the off-grid solar industry, the trend of the off-grid solar industry,
socio-economicimpactoftheoff-gridsolarindustryandsocio-economicimpactofthe
mobilemoneyplatformM-pesa in facilitating theevolutionand trendof theoff-grid
solarindustryinruralKenya.
1.8.StructureofthestudyThestructureofthisstudyshowshowthechaptersarearrangedanddefinesthescope
coveredbyeachchapter.Thethesishaspreliminarypagesandconsistsoffivechapters
asfollows:
1.8.1.PreliminariesThis include the title page, table of contents, list of figures, list of tables, list of
abbreviations&acronyms,acknowledgementsandtheabstract.
1.8.2.IntroductionThissetsthestagebygivingabriefgeneralbackgroundtothestudy, thepurposeof
thestudy,theobjectivesofthestudy,theresearchquestions,thestudyareaandthe
researchapproachadopted.Thischaptersets the foundation for theotherchapters,
bynarrowingdownandpresentingtheissuestobeinvestigated.
1.8.3.LiteratureReviewThisincludesareviewofliteratureonrelevantsubjectsbasedonthesetobjectivesof
thestudy.Itlookedattheelectrificationingeneralanditsstatusinruralareas,theoff-
gridsolarindustry,theevolutionoftheoff-gridsolarindustry,thetrendoftheoff-grid
solarindustryinthecurrentmarketandfinancialinclusionandexclusioninruralareas.
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This chapter also explored the socio-economic impact of the off-grid solar sector
throughtheuseofthemobilemoneypaymentsolutioncalledM-pesa.
1.8.4.PresentationoftheFirm:PawameLtdThis contains a description and presentation of the particular case under study. It
provides the origin, purpose and unique selling proposition of Pawame Ltd, its
activitiesinruralKenyaandthesolutionifofferstowardsaccesstoaffordableenergy.
1.8.5.TheProject:TheProjectThis chapter provides the research methodology adopted by this study. If further
provides the analysis, the presentation and interpretation of the research findings
fromthefield.
1.8.6.ConclusionsThechapterprovidestheresearcher’sconclusionsandrecommendationsofthestudy
basedonthefindingsoftheresearch.
22
CHAPTER TWO: LITERATURE REVIEW
2.1.ElectrificationTheelectrificationrate(thepercentageofthepopulationwithaccesstoelectricity)in
Sub-SaharanAfrica is the lowest of anydeveloping region (WorldBank, 2015a). The
totalprimaryenergysupply inAfricahasmorethantripledsince1971andhasbeen
growing at around 3% per year being one of the most rapid rates for any region
(International Renewable Energy Agency, IRENA, 2015a). The electrification rates in
Sub-Saharan Africa rose from 22.7% in 1990 to 26.1% in 2000, and reached 35% in
2012(WorldBank,2015a).
According to Todd (2016), World Bank Group (2013), and IRENA (2015a),
approximately622.6millionofthe1.1billionpopulationinSub-SaharanAfricadonot
have access to electricity. The situation is particularly acute in rural areas; rural
electrificationratescanbeaslowas14%comparedto60%inurbanenvironments.In
total,38ofthe49Sub-Saharancountrieshaveanoff-gridlevelabove50%,withmany
East-Africancountriesabovethe75%line(Todd,2016).ThisisillustratedinFigure2.1.
Figure2.1Shareofpopulationwithoutgridaccess.Source:WorldBankGroup(2013)
23
Duetolackofaccesstoelectricitybyapproximately600millionpeopleinSub-Saharan
Africa especially in rural areas, off-grid populations are counting on alternatives to
grid-electricity. These alternatives aremostly unreliable, expensive or unsuitable for
theirneeds.Themostcommonlyusedinclude:
Fossil-fuel based lamps for lighting which are harmful to both the user and the
environment.Estimatessuggestthatspendafewhourswithakerosenelampcauses
thesamedamagetosomeone’slungsandassmoking40cigarettes.Furthermore,an
average kerosene lamps emits 340 kg of CO2 per year (Solar Aid, 2018). Fossil fuel
lamps also place a heavy financial burden of off-grid communities. The estimated
averageannuallightingspendbytheoff-gridhouseholdinAfricaisbetween$100and
$140peryear(incl.essentiallyKerosenelamps&candles).InKenyathisfigurecanbe
ashighas$157peryear(seeFigure2.2.).
Relianceondrycellbatteries is increasingthroughoutSub-SaharanAfricawithmany
households replacing Kerosene lamps and other appliances with dry-cell battery
poweredalternatives.WhilethisisundoubtedlyanimprovementfromKerosene,it is
Figure2.2:Estimatedaverageannuallightingspendbytheoff-gridhousehold($/year,2012).
Source:WorldBankGroup(2016)
24
still far fromoptimal.Purchasingbatteries isexpensive,particularlygiven their short
lifetime.Plus,themassusageofbatterieshasgraveimplicationsfortheenvironment,
particularly given thepaucityof recyclingor effectivewastemanagementoptions in
SSA.
Toconclude,theelectricityproductionoptionsavailabletooff-gridcommunitieshave
deeply damaging social and environmental consequences and cost households a
significantproportionoftheirmonthlyincomes.
2.2Off-gridSolarIndustryAdependablesourceofenergyandfuelhasalwaysformedthebedrockofanysociety;
however,modernsociety’sdeep-seededandmulti-faceteddependenceonavastand
easilyaccessibleenergyinfrastructurebearsnohistoricalparallel.(Vannini&Taggart,
2015).While this increasedpoweravailabilityhas improvedaveragequalityof life in
manysectors,theassociatedinfrastructurehasalsointroducedahostofsociopolitical
and environmental issues. (Vannini & Taggart, 2015). First, the creation and
maintenanceofgridsrequiresastableandconcentratedsourceofpolitico-economic
power,whichaffectstheircostsandreliability.Secondly,user-overdependenceresults
in the global exploitation and depletion of often non-renewable natural resources.
Thus,developingsecureandsustainableenergysourceshasbecomeaninternational
priority. (Harun,2015). In responsetodecreased fossil fuelavailabilityand increased
pressure to reduce global carbon emissions, a shift towards renewable, particularly
solar energy is underway in the energy sector. In addition to its environmental
benefits, renewable energy offers increased security and economic opportunity
through carbon trading. (Harun, 2015). As a result, ‘off-grid’ populations have new
accesstopowerandenergysources.(Vannini&Taggart,2015).
25
According to Vannini and Taggart (2015), ‘off-grid’ describes facilities disconnected
from electricity and natural gas networks. This term primarily describes power
distribution in countries and/or regions with limited access to electricity due to
scattered and dispersed populations. The term can also refer to a lifestyle choice
whereinindividualsliveinaself-sufficientmannerandvoluntarilyforegooneormore
publicutilities.Peoplewhoadoptthislifestylearecalled‘off-gridders’.Whilevoluntary
off-gridders technicallyhave the sameamenities asoff-gridpopulationswith limited
power and electric resources in developing regions, their ability to choose
differentiates them from the targetpopulation in this study. Theoff-gridpopulation
describedinthisstudyrefersexclusivelytothelattergroup.
2.2.1EvolutionoftheOff-gridSolarIndustryOverTimeTheoff-gridsolarenergymovementemergedinthelate1980sandearly1990s,when
privatizationandmarketsolutionsforutilitiesbecamepopular.(Kapur,Lewis,&Webb,
1997; Peet & Watts, 1993). This resulted in decreased external support for state-
sponsoredelectricityinfrastructureandincreasedinvestmentinprivatesectorenergy
projects.Aspublicly-financedgrid-basedruralelectrificationschemesdeclinedinmany
countries, market-based solar electrification gained a foothold and increased
prominence(Dubash,2003;Karekezi,Kimani,Mutiga,&Amenya,2004).
Thеmarkеt for solar products in Kеnya datеs back to thе 1980s, whеn solar homе
systеmsbеgantobеsoldonacommercialbasis.Thedemandforphotovoltaicsystems
(PV)hasgrownexponentiallysincethemid1980swhenKenyanentrepreneursrealized
that photovoltaics could meet rural demand to operate electric lights, radios,
televisions,orstereosoftenata lessercostthangridconnections,systemsdrivenby
generators, or by using kerosene and dry cell batteries (Robert, 1994). The market
26
grewasmainlyrural-basedelectricianslinkedupwithurbanbusinessmenandformed
businessagreementswithsolarelectricsuppliersprimarilyinNairobi.
Whilееarly salеswеrеbasеdprimarilyon crystallinе siliconPVmodulеs, thеmarkеt
grеw in thе 1990s basеd largеly on salеs of small (12 to 15Watt-rated) amorphous
siliconmodulеs. Byearlier 1990s,more than1MWofphotovoltaicpowerhasbeen
installedinKenyaandaround20,000householdshavepurchasedsolarenergyfortheir
homescomparedtothe17,000connectedtotheofficialruralelectrificationprogram
(Robert,1994).Bythееarly2000s,anеstimatеd200,000housеholdsolarsystеmshad
bееn sold inonlyKеnya.Markеt salеsofPico-solarproducts thatutilizе LЕD lighting
tеchnologybеgantoеmеrgеin2008(IRENA,2016).
2.2.2TheTrendoftheOff-gridSolarIndustry With recent cost reductions, the off-grid solar industry now offers a rapid, cost-
effective pathway to providing modern energy services to the approximately 600
millionAfricanswho lack access to electricity andutility-scale electricity for the grid
(Todd,2016;IRENA,2016).
Currentlynewmobileandsolartechnologieshavebeendevelopedtomakeaccessto
basicelectricitypossible.Thetechnologiesarebeingapplied,especiallyinruralareas,
in connectingmanypeople to off-grid solar energy. They are being implementedby
variouspioneerswhohavecreatedavibrantmarketforoff-gridsolarsystems.Venture
capitalists and social entrepreneurs are increasingly using new financing models to
drive these new business models, capitalising on the digital revolution to provide
services through decentralised renewables-based energy systems and to secure
payment for those services. In most instances, these new systems do not compete
directlywithon-gridsolutions,eitherintermsofmarketshareorfinancing,buthave
27
instead introducednewentitiesandfundingstreamsthatareabletoprovideenergy
accessinsomeplacesthatwerepreviouslytoodifficultandcostlytoreach.Todatethe
outputfromthesenewbusinessmodelsissmall,buttheirexistenceishelpingtobring
aboutchange(IEA,2017).Themaincurrenttechnologythatistrendingintheoff-grid
solar energy industry is the PayGo (Pay-as-you-go) technology which is further
discussedhereinafter(LightingGlobal,2015).
PayGo (Pay-as-you-go) Technology: In a ‘pay-as-you-go’ (PayGo) businеss modеl, a
companyеssеntiallyrеntsconsumеrsasolarhomеsystеmthatcomеswithabattеry,a
chargеcontrollеr,asolarpanеl,twotofourLEDbulbs,aradioandamobilеchargеr.
Basicsystеmshavееnoughpowеrtochargеphonеsandlightsandlargеronеscould
powеrsmallappliancеslikеTVs.Consumеrsusеbasicmobilеphonеs–widеsprеadin
ЕastAfrica– tomakеpaymеntsonadaily,wееklyormonthlybasis (LightingGlobal,
2015). Through this modеl, companiеs can minimizе thе cost of collеctions by
automating thе rеcеipt of paymеnts, whilе rеmotе rural customеrs gеt immеdiatе
accеsstobasicеlеctricitywithouthavingtotakеoutaloan.
The PayGo model in the EAC (East African Community) is reliant on mobile
infrastructure formobile payments, the submission of customer data and customer
engagementthroughSMScampaigns.Thusthegrowthofmobilephonesandmobile
networksisoneofthekeyfactorstoconsiderwhileassessingthepotentialofPayGo
SHS providers. In Kenya,M-pesa - amobilemoney transfer platform introduced by
Safaricom Ltd is used by many off-grid solar companies to facilitate the PayGo
technology.
ThePayGosolartechnologyisgainingincomplexityeveryyear,withnewniche-actors
startingwith a very targeted value proposition to the other players (Lighting global,
2015). Inorder toassess thecompetitive landscapeof theoff-gridSHS industry, it is
28
essential to first understand the different development stages of the off-grid solar
industryasillustratedinFigure2.3.
Figure2.3:Thefourstagesofdevelopmentintheoff-gridsolarindustry.Source:PawameLtd(2017)
From the four stages of development shown in Figure 2.3, a number of different
strategiesarepossible,whichcanbeattributedtotwodifferenttypesofOff-gridsolar
companies(LightingGlobal,2015):
● Integratedcompanies:Thesearecompaniesthathaveintegratedtwo,threeor
allthestepsofthevaluechainintotheirbusinessmodel.
● PurePlayers:Thesecompaniesfocusononespecificpartofthevaluechainand
arethereforenotconsideredascompetitors
Differentstrategiesco-existamongsttheintegratedactors
● Startingdirectlyunder a fully integratedmodel, anapproachadoptedbyoff-
grid solar companies calledM-Kopa, Off-grid Electric and BBox. This strategy
allows the company to keep control of all the value chain and therefore cut
29
costs. However, it is very capital intensive and exposes the company to a
varietyofrisksthroughoutthevaluechain.
● Start as a manufacturer before expanding, an approach adopted by off-grid
solar companies called Sunking andD-Light,who started by focusing only on
the hardware (essentially battery + panel). Now they are trying to expand
upwards and downwards on the value chain, either by developing their own
distributionandbrandorbydevelopingproprietarysoftwaretolicense.
● Currently there are many off-grid solar companies that participate in
connectingpeopletooff-gridsolarsystemswithgreatfocusonruralareas.
Figure2.4:Introductionintootherplayers-Positiononthevaluechain
(PawameBusinessPlan(2017)
30
M-KOPA:Itisthedominantproviderofoff-gridsolarsystemsinKenya.Ithascometo
dominate theKenyanSHSmarket throughanapproach that sacrificesproduct range
and sophistication in favour of an emphasis on sheer distribution and achieving
massivescaleasquicklyaspossible.TheyofferarelativelybasichomeandaTVkit,but
require self-installation of the system. Nonetheless, they claim to offer strong
customerservicethroughtheirlargenetworkof578retailoutletsandcallcentre.M-
KOPA recently celebrated their 600,000th kit sold, however growth has slowed
significantlythroughoutthelastyear.
Off-GridElectric:Itispresentasthelargestoff-gridsolarenergycompanyinitshome
marketofTanzania,whereithasdeployedmorethan170,000SHS.Ithasbeenoneof
themost prolific and high-profile fundraisers in the off-grid solar space, led by DBL
PartnersandSolarCity.RecentlyOff-GridElecticalsoenteredtheKenyanmarket.
Azuri: It is a large off-grid solar energy company in Kenyawithmost of its business
spreadacross10othercountriesoutsidethecountry.Historically,Azurihasplayedat
the lower end of the SHSmarket with units as small as 5W, but has recently been
movingup-marketwith10Wand15WsystemsandinnovationssuchasHomeSmart,a
control system which adapts its output depending on weather conditions and
customer energy usagepatterns. Azuri also plans to launch pay-as-you go solar
irrigationsystemstohelpfarmershigher-valuecrops.
BBOX: Based in the UK, Bbox has a direct presence in Rwanda and Kenya and
developed its strengths inproduct technology,backofficeandproductmanagement
software.Theyfeaturealarger,50Wunitwithbigger,cheaperlead-acidbatteries.
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Mobisol:IsatthehighendoftheSHSmarket,withaproductlinethatstartsatan80W
SHS and goes all the way up to 200W. The units are well suited to household
appliances and for productive uses such as hair clippers.Mobisol recently acquired
Lumeter,whichisPawame’smobilepaymentplatformsupplier.
D-Light: It is one of the pioneers in the solar lighting space and commands a truly
globalbusiness.Itstraditionalbusinessmodelhasbeentosellitssolarlampsasone-
off purchases via third-party distributors. However as of June 2016 D-Light has
launchedaPayGoofferinginKenyaandappearstobegrowingrapidly.
Thepotentialmarketof theoff-grid solar industry is in a rise.Despite commitments
fromgovernmentsacrossAfricatoincreasethereachoftheirdomesticpowergrids,it
isenvisagedthat, inabsolutenumbers,theoff-gridpopulation inAfricawillcontinue
to rise until 2025, due to the high rates of population growth (World Bank Group,
2016;IRENA,2016).Researchsuggeststhataboutathirdofthisoff-gridcommunities
willbelocatedinEastAfrica,makingitoneofthebiggestaddressablemarketsinAfrica
andtheworld(WorldBankGroup,2016).
Figure2.5:Populationwithoutaccesstoelectricitybysub-regioninsub-
SaharanAfrica.Source:InternationalEnergyAgency(2014)
32
Consumer awareness on the importance of off-grid solar systems is also in the rise.
Establishingtheperceptionofsolarsolutionsasareliable,cleanandaffordablesource
ofelectricityoptionisavaluableformofmarketactivation(IEA,2017).Thisworkhas
beenpartiallyconductedinEastAfricawheresomebigplayers,suchasLightingAfrica
and Sunny Money, have run successful awareness campaigns. However, these
campaigns have remained focused on high-potential regions, leaving aside frontier
marketssuchasNorthernKenya.
The current trend of the off-grid solar industry also looks at the technology cost
reduction.Hardwarestillaccountsforamajorproportionofoff-gridsolarcompanies’
costs and thus fluctuations in the price of hardware has a significant impact on the
industry(IRENA,2016).Generally,therehasbeenasteadydecreaseinthecostofSHS.
It isalsoanticipatedthatappliancespoweredbySHSssuchasradios,TVsandfridges
will increase in termsof theirenergyefficiencyanddecrease inprice (IRENA,2016).
What is more, off-grid solar companies often participate in donor funding schemes
designed to reduce costs even further by procuring sustainable and energy efficient
appliances. Also technology used in SHS development is becoming increasingly
commoditized, which is reducing the incentive for being involved in the technology
production dimension of the supply chain. It can be observed that the fall in
componentcostsisgoingto1.)establishbiggermarginsforSHSdistributors2.)reduce
the capability of competitors to differentiate themselves on price 3.) attract more
players into the space 4.) ensure that competitive advantage will be driven by the
qualityofcustomercare,efficiencyofthebusinessmodelandtherateofcommercial
innovation.
Furthermore, reduction inbattery costsareexpected tohavea significant impactas
thisaccountsformorethanhalfofthekitcost.Dependentofthetypeofbatteries,the
potential for cost reduction can be totally different. While lead-acid batteries are
33
relativelymature technologies withmost cost reduction coming from economies of
scale,thereisalargerpotentialforLithium-ionbatteries,whichcostsareexpectedto
dramaticallydecreaseinthefuture.
Last but not least it should be mentioned that the improved mobile phone
infrastructure is a significant growth accelerator in the off-grid solar industry. This
includes mobile phones subscription penetration, network expansion, and mobile
payments for off-grid SHS. The usage of the internet among Kenyans is high; the
Communications Authority of Kenya (CAK) estimates that 74% of the Kenyan
populationnowhasaccesstotheinternetandthisfigureisexpectedtoriseyetfurther
(CAK,2015).Thevastmajorityofinternetaccessisconductedthroughmobilephones
anditisthereforeexpectedthatmobiletechnologywillcontinuetodevelopinKenya
Figure2.6::Potentialforcostsreductionpertypeofproduct(nominal$perunit).Source:
WorldBankGroup(2016)
34
with a reduction in transaction and usage costs as the market becomes more
competitive.Mobile internet subscriber penetration is expected to rise from24% in
2015to39%in2020(withpenetrationofmobileonlyexpectedtoreach53%)(GSMA,
2016). Other factors include smartphone adoption (from 23% in 2015 to 57%
penetrationin2020)anddigitalskillsandliteracyimprovements.
2.2.3Off-gridsolarsystemsThеrеarеsеvеralvariationsofoff-gridsolarsystems,dеpеndingon theuser’snееds
andbudgеt.Allvariationsofoff-gridsolarsystemsdеpеndonasolarеlеctricpanеland
storееlеctricityinabankofbattеriеs(IRENA,2016).Theyincludesinglehomeoff-grid
solarsystems,mini-scaleoff-gridsolarsystems,andutility-scaleoff-gridsolarsystems.
Thisstudymainlyfocusesonlowvoltagesinglehomeoff-gridsolarsystems.
Single home off-grid Solar Systems are small off-grid solar devices with an energy
capacityof20-100watts.Theycanbeacquiredonpay-as-you-goprogramsorasone-
offpurchasesandtypicallyofferenergyservicesforlighting,mobilephonechargingas
well as other compact deviceswhich are of high quality. In linewith IRENA (2016),
WorldBankGroup(2016)togetherwithIEA(2016),therapidexpansionofsinglehome
off-gridsolarhomedevicescanbeattributedtorevolutionarynewbusinessmodelsas
wellasaconstantdropincosts.However,smalldevicesunder100Wgenerallyhave
highercostperkilowattthanbiggervariationsduetotherequirementofbatteriesand
charge controllers which ensure stable output. Furthermore, they usually include
severallights,radios,phonechargingcablesandtorches.
35
2.3FinancialFactorsintheoff-gridSolarEnergyIndustry
2.3.1TheBottomofthePyramidThebottomofthepyramidalsoreferredasthebottomofthewealth/incomepyramid
is defined as the poorest and largest socio-economic group. According toMalik and
Khalid (2014), around 2.7 billion people live on less than $ 2.50 a day. However, it
should be mentioned that the definition and consequently the amount of people
fallingintothiscategoryissubjecttonumerousdebates(Subhan&Khattak,2017).The
BOP still represents a large and untapped segment of the market and is primarily
focusedondevelopingnations(Prahalad,2012).Thisprovides largeopportunitiesfor
firmstobringineconomicactivityandmakesignificantprofitsbyofferingproductsor
servicesataffordableprices. Itshouldbeclearlyunderstoodthatthepoorestmarket
segment doesn’t just generate problems for companies but offers the possibility to
have a huge social impact and at the same time facilitate prosperity by improving
people’slives(Prahalad,2009).
Comparing the financial system to the progress made in transportation,
telecommunication or other industries one can clearly see, that its development is
laggingbehind.Transportationenablesnearlyeverybodyonthisplanettotraveltoany
partofofthisworldbyplane,ship,carortrainandevenvisitMarsforanexpedition.
Telecommunication,whichismadeupbyalltelephonecompaniesandInternetservice
providerswastheepicentreofinnovationanddisruptionofvirtuallyanyindustryover
the last century. Even the underdevelopedworld is nowadays able to communicate
due to enormously high mobile penetration rates, which reached standards of the
developed world. But why is the financial industry so different to others? Is the
financialsystemresistanttochange?(Realini&Metha,2015).
36
2.3.2FinancialinstitutionsThe financial industry canbedescribedas a complex tangleof governmental, public
andprivateentitiesavailableonthemarket(Realini&Metha,2015).Fromthehistoric
andmoretraditionalinstitutions,whichcanbegroupedundertheterm‘banks’,toless
traditionalandaffluentinstitutionslikecornerloansharkstoevenglobalretailerswho
try to get a chunkof the cake. Thisdizzyingarrayofproviderson themarketoffers
investment opportunities, mortgages, loans, deposits, money exchanges and many
otherdifferent services. However, this creates instabilityand inconsistentqualityof
financial servicesacross theglobe.Some financial institutionsareoperatingwith the
full faith and trust of their national government, others exploit legal loopholes and
offerhigh-riskproductswhichdon’thaveanysubstanceandsomeareeventryingto
getprofitsoutofthosewhohavelittle,theBOP(Realini&Metha,2015).
Traditionalbankingsystemsusuallycaterforthoseonthetopofthefinancialpyramid
while marginalizing the bottom. It is far cheaper to do business with well-known
financial service providers if you are wealthy than if you are someone who is just
scraping by. As a big depositor, your expenditure is less, relative to your savings or
Figure2.7:SubSaharanuniquemobilesubscribersandmarketpenetrationSource:GSMA(2017)
37
money you’re borrowing. You’ll be charged less interest or fees as you deposit or
borrowmore.Byclearingloansontime,youreceivebettercreditscores,providingyou
essentially with more capital at a more affordable price. However, the scales are
tipped for those at the bottom of the financial pyramid asmost times they end up
paying a lot of exorbitant fees and charges in relation to their deposits. They don’t
have a sustainable and affordable system since the traditionally banking systemhas
failedforthebottomofthefinancialpyramid,mostofwhomarelocatedintherural
areas(Tiriki,2003).
Lots of innovations and alternative options for banking are springing up in financial
industriesacrosstheworld.Peoplearebeginningtousemobileandbranchlessbanks,
whicharefarremovedfromthetraditionalpyramidsystemsandpractices.Thesenew
modelsareaffordableevenforlow-incomeearners;they’rescalablewhilestillmaking
aprofitfortheirprovidersandofferalotofpeople,whohadpreviouslybeendenied
institutionalbanking,anewpath(Realini&Metha,2015).
2.3.4FinancialExclusionAccording to Mas (2014), financial exclusion occurs because there are no or few
financial institutions wishing to serve the poor or sustaining enough learning and
experimentation about how best to serve them. Seven hundred years after the
foundation of the first organised bank - the Medici Bank in Florence - half of the
world’s population is still living as financial nomads (Realini & Metha, 2015). This
impliesnoaccesstothecapitalmarketandconsequentlynopossibilitytoinvestfuture
earnings. Furthermore, twoandahalfmillionpeoplewhoearn regular incomesand
support their families have no access to any sort of formally recognized financial
services(Realini&Metha,2015).
38
Kеnya isa low-incomе(asof2016PеrcapitaGDPwasеstimatеdat$1,587/163,937
Kshs)countrywithasmallandbankdominatеdfinancialsеctor.Startinginthе1980s,
thеgovеrnmеntpromotеdnon-bankfinancial institutions(NBFI)torеachlow-incomе
housеholds, but prudеntial rеgulatory rеquirеmеntswеrе not stringеnt еnough. Thе
govеrnmеntalNBFIpolicyfailеdwithin5yеarsof itsformulationasNBFIеithеrwеrе
absorbеdbybigbanksorcollapsеd,dеstroyingthеsavingsofmanypoorKеnyans. In
thееarly2000s,thеmicrofinancеmodеlwasintroducеdinKеnya.Howеvеr,thеlеgal
framеwork for microfinancе opеrations, thе Microfinancе Act, took a long timе to
еnact.Thе firstassеssmеntof financial inclusion inKеnya from2006showsthat lеss
than27%ofadultKеnyanshadaccеsstoformalfinancialsеrvicеs(WorldBank,2011).
Aconsidеrablеsharеofthеpopulationrеliеdoninformalsеrvicеs,butapproximatеly
40% of Kеnyans wеrе complеtеly еxcludеd from thе financial markеt. It is in this
contеxt that M-pesa was introducеd to thе markеt, catalyzing dramatic changе in
financialdеvеlopmеntandinclusioninKеnya(Mutiga,2014).
2.3.5FinancialExclusioninoff-gridcommunitiesOff-grid communities do not just suffer low electrification rates, these populations
havealsohistoricallyhadverylimitedaccesstoformalfinancialservices.Thisislargely
duetothepreconceptionthatruralcommunitieshavesuchaloworirregularincome
thattheywillbeunabletomeetrepaymenttermsforloans.Thisimpliesthatthereis
alackofmeaningfulcredithistoryinthesecommunities(WorldBank,2011).InKenya,
asof2011,only42%ofthepopulationhadabankaccountand10%hadacreditcard.
Furthermore, just 10% of the overall population were able to secure a formal loan
(WorldBank,2011).Thisfigureisdrasticallyloweramongruralcommunities.
Since established income and access barriers prevent most of the rural poor from
engaging the services of formal financial institutions, people have developed other
meanstoobtaincredit,savemoneyandconduct informalfinancial transactionssuch
39
assavinggroups (e.g.Chamas - informalcooperativesocietyusedtopooland invest
savings by theirmembers), traders etc. Some of thesesmechanisms are often very
expensive(theyusuallychargeveryhighratesof interest)andonlyprovideanarrow
rangeofservices,makingmosthouseholdsdependentonself-financeand insurance,
therebylimitingstability,investment&growth(Dubus&VanHove,2017).
2.3.6FinancialInclusionTheultimategoalisforeverybodytobeabletoaccessfinancialservicestobettertheir
lives.Thistheoryincludingtheexamplespresentedherecanbeseeninpractice.The
Kenyan project M-pesa is just one example of this movement and change in
architecture.
2.4M-pesa-AFlourishingMobilePaymentOperatorIn2007,VodafoneinpartnershipwithSafaricom,thelargestmobileoperatorinKenya,
launched a new decentralized mobile money transfer service called M-pesa (M for
mobilе,pеsaisSwahiliformoney)whichhasturnedthetraditionalbankingrhetoricon
itshead,nowchanginghowKenyanskeep,useandtransfermoney.Itisanеlеctronic
monеy transfеrproduct thatеnablеsusеrs to storеvaluеon thеirmobilеphonеsor
mobile accounts. It is basеd on a platformof еlеctronic units ofmonеy that can bе
usеdformultiplеpurposеsincludingtransfеrstoothеrusеrs,paymеntsforgoodsand
sеrvicеs,andconvеrsiontoandfromcash(Njuguna,2017).Thеpaymеntstеchnology
has now dеvеlopеd to bеcomе еfficiеnt, transparеnt and еffеctivе and has covеrеd
othеr markеts and sеctors likе insurancе, capital markеts and еvеn targеtеd social
protеctionprograms(Dubus&VanHove,2017).
AfinancialinclusionsurvеyconductedbyNjuguna(2017)showsitsrеmarkablеsuccеss
inKеnyaandbringsevidencethatM-pesahascatalyzedaprofoundtransformationin
40
Kenya’s financial system. By 2016 about 75%of thе populationwеrе ablе to accеss
financial sеrvicеs (William &Tavnееt, 2010). Moreover, thе proportion of thе adult
populationincludеdinformalfinancialsеrvicеsincrеasеdfrom26.4%in2006to75.3%
in2016.Thosеprеfеrringthе informalfinancialsеrvicеshavеdеclinеdfrom35.2%in
2006 to7.2% in2016 (Njuguna,2017).Today,Kеnyansarеablе toaccеss thеirbank
accounts,savеmonеy,buyinsurancеandtakеoutcrеditusingthеirmobilеphonеs.
2.4.1DevelopmentofM-pesaCompetitionofexistingmobilenetworkoperatorsandnewentrantswas limitedand
forKenyanstheonlywaytosendmoneyotherthanthroughM-pesaremainedcostly,
unreliable anddifficult to access. In fact, themost prominent competitor ofM-pesa
wasthepublictransportsystem,whereKenyansentrustedmoneytobusdriversand
askedthemfordeliverywhilepassingbytheirtownsorvillages.Withouttoomuchofa
surprise this system was prone to fraud and robbery and considered as extremely
unreliable(Buku&Meredith,2013).
M-pesawas first dеvеlopеd as bank product in partnеrship bеtwееn SAFARICOM (a
lеading mobilе network operator in Kenya) and thе Commеrcial Bank of Africa
(Michael,2012).Insubsеquеntyеars,ithasfurthеrеvolvеdintoaplatformforawidе
rangе of financial sеrvicеs such as virtual savings accounts in commеrcial banks. In
additiontodomеsticfinancialsеrvicеs,M-pesaallowsusеrstosеndandrеcеivеcross
bordеr rеmittancеs using thеir mobilе phonеs. M-pesa and similar digital financial
sеrvicеs rеprеsеnt a significant improvеmеnt in thе national paymеnts tеchnology,
rеducingtransactioncostsandlowеringthеbarriеrstoеntryintothеformalfinancial
systеm.Asaconsеquеncе,KеnyahasеmеrgеdasalеadеrinfinancialinclusioninSub-
SaharanAfrica(Michael,2012)
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ThеnumbеrofactivеmonthlyM-PЕSAcustomеrsworldwidestandsatmorеthan29.5
million customеrs (Safaricom, 2016). They are being served through a network of
around287,400agеntsinthеtеncountriеs.During2016,thеsеrvicеprocеssеdaround
6 billion transactions, pеaking in Dеcеmbеr 2016 at 529 transactions еvеry sеcond
(Safaricom,2016).
2.4.2FunctionalitiesofM-pesaM-Pеsaallowsusеrstodеpositmonеyintoanaccountstorеdonthеircеllphonеs,to
sеndbalancеsusingPIN-sеcurеdSMStеxtmеssagеstoothеrusеrs,includingsеllеrsof
goodsandsеrvicеsandtorеdееmdеpositsforrеgularmonеyfromairtimeresellersor
retailoutlets.Usеrsarеchargеdasmallfееforsеndingandwithdrawingmonеyusing
thеsеrvicе.(Murithi,2014).
Figure2.8:TenyearsofM-pesa-FigurescorrectasofDecember2016Source:
Safaricom(2016)
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2.4.2.1 Payments and Transfers of M-pesa Prior to M-Pеsa, mobilе phonе customеrs had еngagеd in trading prе-paid airtimе
(Hughes& Lonie, 2010).M-Pеsa thus built on a prе-еxisting undеrstanding of valuе
transfеrviamobilеphonеamongKеnyansthatprovidеdanеnablingеnvironmеntfor
rapid adoption by both agеnts and customеrs. Safaricom established a network of
agеntswhoformthepointofsеrvicеwhеrеcustomеrscanconvеrtcashintoеlеctronic
units ofmonеy to load onto thеirmobilе SIM card and vicе vеrsa (Hughes& Lonie,
2010).
2.4.2.2 Savings Accounts of M-pesa CommеrcialbanksstartеdnеgotiationswithSafaricominordеrtolinkthеirsеrvicеsto
M-Pеsa. Thеy bеgan offеring savings accounts and attracting morе individual
customеrswithintеrеstratеsondеposits.Thus,Mpеsaеvolvеdfromusingacommon
trustaccountforallusеrstoprovidingaconnеctionwithindividualsavingsaccounts.
Thеinnovationattractеdalargеnumbеroftargеtsavеrs,wholocked-inthеirsavings
for a dеfinеd pеriod. Thе growing dеpositor basе allowеd Kеnya’s commеrcial and
microfinancеbankstogrowandstrеngthеnthеirbalancеshееts(Starita,2009).
2.4.2.3 Remittances of M-pesa InrеcеntyеarsM-Pеsahasеxpandеdfromdomеsticmonеytransfеrintocross-bordеr
rеmittancеsеrvicеs.Thisdеvеlopmеnt isеspеciallybеnеficial forcustomеrs that rеly
onintеrnationalrеmittancеs.Mobilе-basеdrеmittancеsеrvicеshavеstartеdrеplacing
thе informalHawalamonеytransfеrsystеmthatwasprеvalеnt inKеnyabеforе.This
transformation carriеs important implications for financial sеctor formalities and
adhеrеncе to anti-monеy laundеring and tеrrorist financing (AML/CFT) standards
(WorldBankGroup&EuropeanCommission,2011)
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2.4.3M-pesa:AServicewithanInternationalPresenceM-pesa has gained around six million active users outside Kenya by launching the
serviceinvariouschoicemarketsaroundtheworld.Asofnowthemobilephonebased
cashandpaymentsservice ispresent inSouthAfrica,DemocraticRepublicofCongo,
Tanzania, Mozambique, Egypt, Lesotho, Ghana, India, Romania and Albania. This
meansM-pesa has presence not just inAfrica but also inAsia and Europe (Gikunju,
2016).
M-pesa operates through innovative partnerships outside of Kenya. InMozambique
for example it was adopted by global development agencies as well as television
companieswho use the service to pay out employee salaries and collect payments.
Lesotho on the other hand utilizes the Ministry of Social Development to pay for
welfare grants and India uses M-pesa to promote financial inclusion for women’s
groupsthroughtheRuralLivelihoodsMission(Gikunju,2016).
Figure2.9::M-pesaaroundtheworld-Launchdates.Source:Safaricom(2017)
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Unfortunately,M-pesawasrelativelylowtogaintoeholdandattractcustomersinits
expansion regions. Kenya remains the stronghold and the only county where the
mobilemoneypaymentplatformwasadoptedcountrywide(Gikunju,2016).
2.4.4M-pesa’sAdvantagesforcompaniesByusingM-pesa,manyinstitutionshavеbееnablеtoachiеvеcostrеductionsbеcausе
allpartofthеcost isbornеbythеcustomеr.Forеxamplе,aMicrofinanceInstitution
(MFI) that pays loans through its branchеs spеnds hugе sums on cash logistics,
insurancе and risk management of carrying cash. Disbursеmеnt through chеquеs is
also costlyasMFIshavеcurrеntaccountsandarе chargеd forеachchеquе lеafand
chеquеclеaring.UsingthеBusinеss–to-Consumеr(B2C)sеrvicеofSafaricom,thеMFI
onlyhas todеpositmonеy in itsM-pesaaccountandprovidеa listof rеcipiеntsand
thеamount tobеpaid toеach. For this sеrvicе Safaricomchargеs thеMFIonapеr
transactionbasis,butthеchargеsarеmuchlowеrthanwhatthеMFIwouldincurfor
any othеr traditionalmodе of disbursеmеnt. Similarly, accеpting dеposits at a bank
branch is morе еxpеnsivе on a pеr transaction basis to thе institution as it incurs
еxpеnsеsforbranchinfrastructurе,manpowеr,еquipmеntandsеcurityarrangеmеnts.
ByaskingcustomеrstodеpositorrеpayloansthroughM-pesa,thеfinancialinstitution
isеssеntiallyoutsourcingtеllеractivitiеstothеM-pesaagеnt.Thislogicalsoappliеsto
othеr financial institutions likе insurancе agеnciеs, invеstmеnt and pеnsion plan
providеrsorprе-paid instrumentprovidersusing thеM-pesaplatformandagеnts to
collеctprеmiumsanddеposits(Dubus&VanHove,2017).
2.4.5AdvantagesofM-pesaforcustomersAmongthebiggеstbеnеfitsforcustomеrs isthatthеydon’tnееdtotravеltoabank
branchoranMFIdеsignatеdpointfortransactingintothеiraccounts.Customerscan
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justdеpositmonеyintotheirM-pesaaccountatthеnеarеstagеntandtransfеrfrom
M-pesatothеirbankaccount.Thisbringstothеmthеfollowingbеnеfits:
● Costsavingsontravеlеxpеnsеs,opportunitycostof losingwagеsor turnovеr
еtc.(itshouldbеnotеd,cliеntsmaynееdtopaytransfеrandwithdrawalfееs
toSafaricomwhichmaylеssеnthеbеnеfit).
● Convеniеncеoftransactingwhеnеvеr/whеrеvеr:M-pesaagеntsarеubiquitous
andifacustomеralrеadyhassufficiеntbalancеinhis/hеrM-pesaaccountfor
thеloanrеpaymеnt,thеnhе/shеdoеsnotеvеnnееdtogotoanagеnt.
● Rеducеdriskofcarryingcash.M-pesaagеntsarеnеarеrthanthеbank/financial
institution’sbranch.
2.4.6DownsidesofM-pesaM-pesa has also its downsides. Urban usеrs complain that thеy arе somеtimеs
frustratеdbyfailеdtransactionswhicharеoftеnthеrеsultofnеtworkproblеmsasM-
pesa rеliеs on thе samе tеchnology that supports tеxtmеssaging. Furthermore, it is
difficult to gеt through to Safaricom's busy customеr carе M-pesa support phonе
numbеr,meaningthatafailеdtransactionmayrеquirеthеusеrtoturntothеM-pesa
agentnetwork,whichisoftеnfarawayandstrugglеstorеsolvеthеproblеm.Another
downside reported from rural usеrs are that agеnts somеtimеs lack cash on hand,
resultinginanon-fulfilmentofwithdrawalrеquеsts.(Njuguna,2017).
An unеxpеctеd consеquеncе ofM-pesa is also that somеmеnworking in thе citiеs
havеcutbackonthеnumbеrofvisitstothеirruralhomеs,whichtheyusedtomake
frеquеntly bеforеM-pesawas availablе to dеlivеr funds to thеirwivеs and rеlativеs
(WorldBankGroup,2015).
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2.5Socio-EconomicImpactofOff-gridSolarSystemsthroughM-pesa
2.5.1Socio-EconomicImpactOff-gridSolarSystemsFacilitatedbyandalsopulledbytheincreaseofmobilemoney,small20-100Woff-grid
solar home systems can be acquired on pay-as-you-go schemes. These systems are
able to supply modern energy services for lights, mobile charging as well as other
devices and are usually cheaper on amonth-to-month cost compared to traditional
energysources(e.g.kerosenelanterns)(IRENA,2016).
Off-grid solar home systems are among the shortest of the power generation
technology and can be distributed a lot quicker compared to other generation
possibilities. Bearing in mind the high number of people across Africa with no
electricity accessor poor-quality electrical power supply (e.g. regular blackouts), the
capability to swiftly size up off-grid solar home systems is an important advantage
(IRENA,2016).
Also thedecreasingpricesofPVmoduleshavemadeSHSa cost-effectiveoption for
thearoundsixhundredmillionAfricanswithoutapropergridconnection.Forinstance,
Kenyahasexperiencedaccelerated,market-baseddevelopmentinSHS,withavariety
ofhomesmakinguseofSHS,doublingoreventriplingbetween2010and2014.Yearly
expenses these days for off-grid lightning and mobile phone charging can range
between $ 84 dollars (e.g. Ethiopia) and $ 270 dollars (e.g. Mauritania) each year.
Comparing these amountswith alternative energy sources, one can clearly say that
SHSareaveryeconomicalalternative(IRENA,2016).
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Furthermore, off-grid solar systems have resulted in lower transportation costs for
journeyscommittedtomobilephonecharging,whichcouldaddupto$25permonth
insomecases(IRENA,2016).AlsoLEDlightingimprovedthequalityofenergyfrom380
to400lightlumensasopposedtokerosenelampswhichexhibitaroundatenthoflight
lumens(IEA,2017).
AlsothePayGotechnologygaveoffachancetoreducetransactionandmanagement
costsonloanandenergyservicepayments,henceallowingcustomerfundingforloan
sizeswhicharemuchsmallercomparedtopreviouslypossible(IEA,2017).Thisuseof
consumer-levelfundinghadalwaysbeenknownasaseriouskeyfactorforimproving
poweraccessibilityofcash-poorcustomersparticularlyinruralareas(IEA,2017).
Health benefits of off-grid solar systems are also important to mention, as they
representacleanandnon-pollutantsourceofpowerasopposedtofossilfuellanterns.
Indoor air pollution caused through kerosene lamps and CO2 emissions have been
significantly reduced by users of off-grid SHS. Furthermore, nearby warehouse of
vaccines in solar operated refrigerators, prolonged length of evening health
companies,aswellassolar lightning forsafechilddeliveryareamongfurtherhealth
benefits(IEA,2015;Harun,2015).
For long periods, a lot of people, particularly in countryside places, happen to be
making use of kerosene and also firewood for lighting. Off-grid solar home systems
giveandenablestudentstocompletetheirhomestudyevenaftersunset.Moreover,
off-gridsolarpowerlightsimproveaccessibilitytotheeducativecourseinTVandradio
stationsandfostersocialgatherings(Harun,2015).
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2.5.2Social-EconomicImpactofusingM-pesaSocialvalueGeneration:PriortoM-pesamanypeoplewouldhavetoresorttosending
moneywithsomeone(possiblyastranger)whowastravellingtotheirvillage.InKenya
38%ofpeopledidn’tuseanyformoffinancialservice;formal,semiformalorinformal
priortothe launchofM-pesawhileonly19%ofthepopulationhadaccesstoformal
financial services. National remittance is the main product offering of M-pesa.
Safaricompositionedtheproductasafast,safeandeasywayto‘sendmoneyhome’.
Theservicealsoenablesairtimepurchase,billpayment,ATMwithdrawalandpurchase
ofgoodsandservices.AtеnyеarstudybyNjuguna(2017)showsthatM-pesa’simpact
is immense. Its social valuе gеnеratеd by grеw from $0.85 million in 2007, to $1.7
millionbythееndofMarch2016.(Njuguna,2017).
WomenEmpowerment:M-pesaеmpowеringruralwomеn(usuallyrecipients)bеcausе
it makеs it еasiеr for thеm to solicit and gеt monеy from thеir husbands (usually
senders) and othеr contacts in Kеnyan citiеs. Rеmittancеs through M-pesa rеliеvе
womеn in ruralarеasof thеburdеnto travelbybus tocitiеs to rеcеivеmonеy from
thеirhusbands,aprocеssthatforsomеcouldtakеaslongasonеwееk.Transactions
made by urban senders arе usually small and are intended to support rural family
mеmbеrs financially. However, sometimes transactions happen also as lump sum
transfеrs, when big expenses arise, for example the payment of school fееs (World
BankGroup,2014).Bymakingsmallеrbutmorеfrеquеnttransfеrs,urbanmigrantson
avеragеarеsеndingmorеmonеyhomеthanеvеrbеforе.Thisrеprеsеntsasubstantial
boost for rural rеcipiеnts, for whom rеmittancеs can rеprеsеnt up to 70% of thеir
housеholdincomе(Bigman,2002).
Positive Change in Savings:M-pesa also rеsults in a positivе changе in savings. Thе
financial businеss diariеs rеvеal that many customеrs arе intеgrating M-pesa with
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popular savings tools, such as bank accounts and informal savings clubs. Thе most
frеquеnt usеrs who keep financial diariеs wеrе making on avеragе 15 to 20 small
dеposits tothеirM-pesaaccountsеachmonth.Somеusеdthеsеsavingsto invеst in
thеir rural homе, for еxamplеbypurchasing cattleor building ahomе,whilеothеrs
transfеrrеdthеmonеyintobankaccountstoеarnsomеintеrеst(WorldBankGroup,
2014). Thеmobilе phonе is also thе prеfеrrеdmodеof savings in thе country,with
60%ofKеnyanshavingthеirsavingsinsеrvicеssuchasM-pesa,M-ShwariandKCBM-
pesa - a mobilе basеd bank account offеrеd еxclusivеly to M-pesa customеrs
(Vaughan,2008).
Poverty Eradication:M-pesa has liftеd 194,000 Kеnyan housеholds out of еxtrеmе
povеrtythrough2006-2016(Omwansa,2016).Asastakеholdеrgroup,M-pesaagеnts
еxpеriеncеdthеsеcondhighеstsocialvaluеfrom$2millioninthеyеarеndingMarch
2016.Thеnumbеrofagеntsincrеasеdfrom2,000in2007tomorеthan101,000atthе
еnd of March 2016 in Kеnya. M-pesa’s agеnts bеcomе thе grеatеst bеnеficiariеs,
еxpеriеncinganavеragеsocialvaluеof$134еachyеarinthеlasttеnyеars(Omwansa,
2016).
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CHAPTER THREE: PAWAME LIMITED
3.1IntroductionPawame provides solar home systems (SHSs) and more to off-grid communities in
Africaonarent-to-ownbasis.Startingfromitsbase inKenyaPawameistacklingthe
still virtually untapped >$35b opportunity to electrify and serve over 600 million
peopleinsub-SaharanAfricathatdon’thaveaccesstogridpower(IRENA,2016;Todd,
2016). Pawamealsoaimstofosterfinancial inclusionincommunitieswherebanking
opportunitiesarelimitedandcredithistoryispracticallynon-existent.Theirproductis
not only cheaper, cleaner, and more convenient than traditional solutions, it’s also
transformational.
StartinginAugust2016,Pawamehasdeployedover4,000off-gridsolarhomesystems
till February2018andplans to sustainably reach20,000by theendof the year and
250,000by2021(Pawame,2017).BythetimeacustomerhaspaidoffaPawameSHS
systems (after about 18months), the company can profitably lease them other life
changingproductsandservicesthattheywouldusuallynotbeabletoaccessorafford.
The company also seeks to increase customers' financial resilience through micro
insuranceandtargetedloans,improvingtheirabilitytopay(Pawame,2017).
Pawame’svisionistobenotjustanenergyaccesscompanybutaconsumerproducts
and services company for the BOP, a trusted life partner for their customers and
becomeoneofthestrongestandmostrespectedbrandsinAfrica.CurrentlyPawame
isactiveinmorethantencountiesacrossKenyaandoperatesinremoteandfrontier
regions like Turkana, deemed inaccessible and unprofitable by competitors. Unlike
Pawame’s competitors, every kit is installed by a professional technician, customers
then receivea followup call to assess their levelsof satisfactionandare capableof
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raisingquestions to the customer care team,whoare accessible sevendays aweek
(Pawame,2017).
Pawame’s SHS are built in Germany before an exclusive freight forwarding agent
delivers them to the central warehouse in Nairobi. From there, the kits are
transported to local storage units across the county so they can be sold and
distributed.
Theoff-gridsolarindustryiscapitalintensive;eachofSHShavetobepaidforupfront
withprofitsonlyrecoupedwhencustomersareinadvancedstagesoftheirrepayment
plan.FundraisingisthereforeakeyfocusforthecompanyandoneinwhichPawame
hasmadesignificantprogress.Withover$1.3millionraisedintheirsecondseedround.
Pawame envisages to complete its Series A round March 2018, where $8 million
should be raised. Series B will begin in August 2019 and the target is $3 million
(Pawame,2017).
3.2OriginsandPurposeAccordingtoPawame’sBusinessPlan(2017),Pawamewasbornfromacommonwillof
four founders. They had all roots in the Middle East and expertise in the Energy
industry.Allveryinterestedinthematter,theymetseveraltimesinRenewableEnergy
Conferencesaroundtheworld.Throughouttheirexchangesover4years,theyalways
had an aura of ambitionwhich drove them to collaborate in someway around this
passioninthefuture.Afterlearningaboutnewbusinessmodelsintheoff-gridspace,
oneoftheco-founders initiatedconversationsonstartingasocialenterprise.Finally,
theytoucheddowninKenyainApril2016tostartPawamewithoneclearpurpose:
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“Tousetechnologytodramaticallyimprovethelivesofoff-gridcommunitiesandmake
ameaningfulcontributiontothesocialandfinancialinclusionofthesecommunitiesin
theglobalizedworld.”
Pawamehaschosenafor-profitmodelasthemosteffectiveandsustainablemeansof
achievingitsmissionandthestrategicgoals.Itsvisionarticulatesalong-term,credible
and aspirational end-state beyond the accomplishment of their mission. It is an
outcome to be reasonably expected as a result of Pawame (and other like-minded
enterprises)succeedingoverasustainedperiod.Itsvisionis:
“Aworldwhereruralcommunitiesparticipatefullyinthemarchofhumanprogress”
Thisvisionisbornof(a)arealisationthatwhilethetradeandtechnology-drivenglobal
economicgrowthofthepast50yearshasundeniablylefttheaveragehumanbeingfar
betteroff,thebenefitshavebeenunevenlydistributed,withurbancentersbenefiting
disproportionatelyandaccentuating theurban-ruraldivide;and (b)a conviction that
technologyisacriticalcomponentofthesolutiontorebalancethosebenefits.
3.3Pawame’sBusinessModelAccording toPawame’s2017BusinessPlan,Pawame’sbusinessmodel isbasedon2
pillars:
1. Capturing the customers by selling high-quality SHSs on an 18-month
repayment plan, with monthly repayments designed to equate to existing
monthlyexpenditureonKeroseneandmobilephonecharging.
2. Retainthecustomersbyestablishingatransformativeplatformofferingother
life changingproductsand services that theywouldnototherwisebeable to
afford. This isbasedonthefirm’sbeliefthat it isgoingtocreatea longterm
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relationshipandstrengthentheircustomer’screditprofileover the18-month
repayment period. This way, Pawame will be able to expand the range of
products & services offered to the customers and upgrade them to new
productsandservices,stillunderthePayGomodel.
3.4OfferHigh-QualityandAffordableSolarHomeSystemPawame’s first and core product is a Solar Home System called PawaHome. The
PawaHomeisthebasisoftheplatformandwillbethestartingpointofanyadditional
offering to customers. Thus, it is extremely important for Pawame to continually
improvethequalityoftheconstituentpartsinordertogetthebest-in-classsolution,
which isbothreliableandaffordable.ThecurrentPawahomesystemiscomprisedof
the following components: a 12v Battery pack with 2 USBmobile charging ports, a
solarpanel,4xhighefficiencyLEDbulbs,aremotecontroldevice,atorchwithanin-
builtrechargeablebatteryandahighfrequencyFMradiowithrechargeablebattery
Thetotalpriceofthemanufacturedproductissetat$267,whichwillbepaidbackas
follows:
Figure3.1:PawaHomeSystem.Source:Pawame(2017)
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● Ensure customerpaymentupfront ($30): Conduct initial credit assessment to
assessthecustomer’sabilityandwillingnesstopay,andcollect$30upfrontto
provehis/hercommitment.
● Buildpaymenthabitandcredithistory:Bycollectingdaily,weeklyormonthly
payments ($0,45 - daily, $3 - weekly, $12,50 - monthly) and progressively
buildingacustomer’screditprofile.
3.5Pawame’sPositioningPawamewas born from the intuition that there is space and demand for amiddle-
product.Thecompanyaimstobridgethegapbetweenthelowperformanceproducts
under$215andthepremiumstandardsproductsabove$400.Itstargetcustomersare
similartoM-Kopa,D-LightorSunking,eventhoughittriestoappealtotheupperend
of the market too. The general belief is that these customers are left with no
alternatives if theywant tobuyhigherqualityproducts, as they are still not able to
affordupperendproductslikethoseofBBoxorMobisol.
Pawame offers a higher quality and more durable product. This requires a longer
customerrepaymentperiodthanitscompetitors(18months),withouttheimpacton
thecustomer’sabilitytorepay(asdailypaymentsaresimilartoitscompetitors)
55
Figure3.2:Assessmentofappealrelativetoourcompetitors.Source:Pawame(2017)
Pawame’s strategy is to focus onbranding anddistributionby providing a customer
experience and creating an intimate link with the customer. Having established
intimaterelationshipswithsuppliersandasinglefreightforwardingagent,Pawameis
able tokeepcosts low.Futureplansof thecompanydon’t ruleout thepossibilityof
developingitsownSHS.
3.6Pawame’sStrengthandUniqueSellingProposition(USP)Pawame is at the forefront of a new wave of off-grid solar companies. Whereas
competitors have pursued sales at the expense of quality of service, Pawame has
developedabusinessmodelthatplacesthecustomerattheheartofeverythingthey
do.Pawameistheonlyplayerinthefieldthatistryingtoprovideapremiumproduct
andapremiumservicetothelowincomesegment.Furthermore,thecompanytriesto
bemorethanjustasolarenergyproviderbybeingacomprehensiveconsumerproduct
and services provider for the bottom of the pyramid and therefore a trusted life
56
partnerfortheircustomers.Pawamerelentlesslyfocusonunderstandingwhoaretheir
customers,whattheywantandhowtoreachthem.
PawamebelievesthatpeoplewholiveintheremotestandmosthostilepartsofAfrica
shouldnotbeexcludedfromthemarchofhumanprogress.Therefore, thecompany
hasrefineditsoperationsandlogisticalfunctionstoallowtheirsolarkitstobesoldin
frontiermarketsdeemedinaccessibleandunprofitablebyitscompetitors.Thismeans
thatPawame iswellplaced tosell theirproducts in regions thatare trulyoff-gridall
acrossAfrica.
ThecornerstoneofPawame’sstrategy is thedevelopmentofa trustedandenduring
brand. This brand building is undoubtedly a slow process that requires investment,
expertiseandobsessiveattention tomeetingcustomers’needsoverandoveragain.
Onceestablished,however,a strongbrand isoneof themostdefensibleand lasting
sourcesofcompetitiveadvantage.
The brand building process is multifold and consists of different elements: (1)
intimately knowing customer (2) designing a flawless and nuanced customer
experience(3)offeringaresponsive, friendlyandknowledgeableservice,availableat
anytime,tosupportthecustomerandmeethisorherneeds.Thecompany’sbeliefis
that this will translate into trust, loyalty and most importantly a strong positive
emotional connection to its brand. The rent-to-own plan for Pawame’s SHS ensures
thatPawamemaintainsadirectrelationshipwiththecustomerforatleast18months
andprovidesanaturalwindowofopportunitytoupgradethemtootherproductsthat
are currently offered or are under development. Many of these, such as micro
insuranceandremotehealthservicesandperhapsevenaproprietarymediaoffering,
lend themselves to open-ended fee-for-service arrangements that customers could
onlyaccessviathePAYGplatformbuiltintotheSHS.Offeringserviceagreementsand
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extended warranty service on the kits themselves is another opportunity, as it is
allowingcustomerstorefinancethekitsandenableaccessotherproducts.
3.7AdvantagesofaPawame’sSHS
3.7.1CheaperPawame’sanalysis indicates that thecostof lightandphonechargingcanequate to
$188/yearforaKenyanhousehold.Bycomparison,thePawameSHSequatestoacost
of$164.peryear.All inall,Pawame’ssolution isaround15%cheaperforanoff-grid
householdandbringsalongmanyothersocialbenefitsasfollows:
3.7.2BetterLightingLEDlampsprovidedbyPawame’sSHSprovidesabrighter(100lumens)lightthanmost
KeroseneorDry-CellPoweredlightingoptions
3.7.3CleanerTheusageofaPawame’sSHSismuchcleanerandmoreenvironmentallyfriendlyand
incurs less waste than the use of either kerosene lamps or dry cell batteries.
Furthermore, the increase of solar power over kerosene leads to huge long term
healthbenefits.
3.7.4TransformativeBeyond the direct impact of providing a better energy source for the off-grid
household,theSHSisdesignedtohaveamuchwiderimpact,inparticularthroughthe
innovative Pay-GoModel. This model allows a customer to pay for a product on a
predefined period, through mobile payments or local collection when mobile
paymentsarenotavailable.Asaresult,individualscanaccessproductstheywouldnot
beabletoaffordwithoutthispaymentfacility.
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3.7.5ConvenientBoth dry cell batteries and kerosene need to be regularly replaced and therefore
requiretheconsumerstomakeregulartripstosalespoints,whichcanbeofsignificant
distances from their household. Furthermore, in many off-grid communities’
consumershave to charge their phoneat communal chargingpoints. By centralising
energyaccessinoneappliancethatdoesnotdependonanexpendablefuelresource,
Pawame’sSHSoffersoff-gridconsumersahugepotential timesaving.What ismore,
Pawamecustomerscanalsousetheirbatteriestochargetheirneighboursphonesand
ask for a small fee ($ 0,10 per charging) comparable towhat theywould otherwise
needtopayincitycentreswhereelectricityisavailable
3.8BeingaFirstMoverinFrontierMarketsThe nature of the PayGo solar business model makes being a first mover in new
regionsasignificantcompetitiveadvantage.Witheachnewcustomer,Pawamemakes
acustomerunavailabletoitscompetitorsforat least18monthsandeffectivelyearns
‘rightoffirstrefusal’forextendingtherelationshipwithhimorher.
ThefirstwaveofSHScompaniesfocusedontherelativelywealthierandmoredensely
populatedmarketsofLakeVictoria,NorthernandSouthernRiftValleyandtheregions
surroundingMount Kenya. While Pawamehas forever lost the opportunity to be a
firstmoverintheseareas,theyareaimingtoexpandintotheuntouchedNorthernand
Eastern regions,alsoknownas theunderservedcounties.Pawamebelieves that this
approachwillyieldlong-termbenefits;theinitiallogisticalchallengeswillhelptorefine
its business model and leave Pawame well prepared to expand into frontier and
inaccessiblemarketsacrossAfrica.
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3.9UntappedCapitalBaseThePayGoSolarindustryisextremelycapitalintensiveasthecostofinventoryneeds
to be purchased upfront and will only be recouped in the advanced stage of the
customers’repaymentplans.Thismeansthatthecapabilityforgrowthiscloselylinked
totheabilitytosecureadditionalsourcesofcapitalaswellashavingreadysourcesof
capitalcantranslatedirectlyintoacompetitiveadvantageinthemarketplace.
Thevastmajorityofthecapitalthathasflowedintotheoff-gridSHSindustrysinceits
inceptionhascomefromtheUSandEurope.Manypotentialinvestorsintheseregions
arelargelyunavailabletoPawameandotherlatermarketentrantsbecausetheyhave
alreadybeentappedbythefirst-waveplayers.
ThismakesPawame’slinkstotheMiddleEast,aregionwithampleprivateliquidity,a
valuable asset. All four of Pawame’s co-founders as well as its CEO have extensive
experienceandwide-rangingconnectionsintheGulf.MostofPawame’sinvestmentto
Figure3.3:TurkanaPawamesalesagentdemonstratingtheproducttolocalcommunitymembers.Source:Pawame(2017)
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datehascomefromthisregionandthecompanyrecentlyreceivedstrongexpressions
ofinterestfromahandfulofrespectedGulfVC/PEplayers.
Itshouldbenotedhoweverthatwhile these investorscanbringcapital, theycannot
normallybringstrategicexpertiseintheformofknowledgeofthesocialimpactspace,
off-gridsolarindustryortheAfricanmarket.Asaresult,whiletheyarewillingtoco-
invest,theyarenotinmostcasessuitableleadinvestors.
3.10CreationofaPlatformforDiverseProducts/ServiceOfferingOnce Pawame has established a relationship with its customers through the
PawaHomesystem, thecompanyaimstostrengthenanddevelopthisconnectionby
offeringarangeofother transformationaland life-changingproductsandservicesat
affordableprices.Pawame’svision isnot tobe justanenergyaccesscompanybuta
consumerproductsandservicescompanyfortheBOP.Specifically,Pawameattempts
toretaincustomersthroughthequalityofitscorePawaHomesystemandatargeted
andexpanding lineofproductsbasedon indepthunderstandingofcustomerneeds,
ascertainedthroughdatacollectedoverthe18-monthrepaymentperiod.
Figure3.4:AfamilyobservestheinstallationofaPawaHomekitintheirhouse.Source:
Pawame(2017)
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Furthermore, the establishment of a trusted relationship through its premium
customercareoffer,includingprofessionalinstallationsandproactivepostsalescheck-
upcallsshouldhelptoretainPawame’sexistingcustomerbase.
Whilecreatingthepipelineofproductsandservicestooffer,Pawameconstantlykeeps
in mind its strategic objectives which are impact, financial Inclusion and financial
performance.
Thepipelineforfutureproductscanbedividedintothefollowingthreecategories:
1. Financial services: building on the payment data that Pawame has collected
and aggregated it will be able to offer a suite of financial service to its
customers.
2. Additional appliances: Pawame already offers a TV SHS kit to customers and
planstoexpandthelineofappliancesthatitofferstocustomers
3. NetworkEnabledServices:Pawame intendstooffere-educationande-health
servicesaswell asmediaapplicationswithin itsproductportfolio in thenear
future
Figure3.5:Pawame’sproductdiversificationstrategy.Source:Pawame(2017)
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CHAPTER FOUR: THE PROJECT
4.1IntroductionThe survey for this study was carried out in rural Kenya with particular focus on
counties thatPawameLtdhashadaccess in termsofconnectingruralpeopletooff-
grid solar systems. A descriptive research design was adopted whereby both a
qualitativeandquantitativeapproachwasappliedincollectingdatafromthefield.The
target population included rural people who had been connected to off-grid solar
systemsforatleastonemonth.Atotalofsixcountieswereselectedthroughpurposive
samplingtechniqueandtheyincludeBungoma,Kakamega,Kisumu,Siaya,Turkanaand
Uasin Gishu. From each of the six counties, the researcher randomly sampled 20
respondentsmakingatotalsamplesizeof120people.Theresearcherusedstructured
questionnaires for primary data collection from the consumers of the off-grid solar
systems in the six selected counties. Thequestionswere designed in amanner that
most of themwere closed-endedwith a few open-ended. The questionnaires were
administered by research assistants who were recruited and trained. The research
assistants were compiled sales agents of Pawame Ltd working in the study area.
Collected data was analyzed using the Statistical Package for Social Sciences (SPSS)
version 23.0. The findings are presented in form of frequency tables, charts, and
graphs.
4.2Analysis,PresentationandInterpretationoftheFindingsThe section comprises of the response rate of the respondents, demographic
information, evolution of off-grid solar system, how M-pesa has facilitated the
evolutionof theoff-grid solar industry in rural Kenya, the trendof theoff-grid solar
industry in rural Kenya, socio-economic impact of the off-grid solar industry in rural
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Kenyaandthesocio-economicimpactofM-pesainfacilitatingevolutionandtrendof
theoff-gridsolarindustryinruralKenya.
4.3ResponseRateThe researcher targeted 120 respondents. However, 106 questionnaires were fully
filledandreturnedtotheresearchermakingtheresponseratetobe88.3%asshown
inTable4.1. Forgeneralization,MugendaandMugenda (2003)andNeuman (1997)
notedthataresponserateof50%isadequateforanalysisandreporting,60%isgood,
while70%andaboveisexcellent.Therefore,thisstudy’sresponserateof88.3%was
satisfactoryenoughandarepresentativeofthestudypopulation.
Countyofresident TargetSamplesize ActualResponse ResponseRate
Bungoma 20 20 100%
Kakamega 20 20 100%
Kisumu 20 18 90%
Siaya 20 17 85%
UasinGishu 20 16 80%
Turkana 20 15 75%
Total 120 106 88.3%
Table4.1:ResponseRate
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4.4DemographicProfileoftheRespondentsTheresearchersoughttofindoutthedemographicinformationoftherespondentsin
order toascertain their suitability toundertake the study.Focuswason thegender,
age,maritalstatus,highestlevelofeducationandoccupationoftherespondents.
4.4.1GenderFindings on the gender distribution of the respondents indicate that 56% of the
respondentsweremalewhile44%werefemaleasshowninFigure4.1.Thisshowsthat
all genderwere included in this research thusprovidinga reasonable representation
forthestudy.
Figure4.1:Genderdistributionoftherespondents
4.4.2AgeFindingson theagedistributionof the respondents indicate thatmost (40.6%)were
31-40years, followedby thosewhowere21-30yearsat29.2%, then41-50yearsat
17.9%,51-60yearsat10.4%,andafew(1.9%)whowereabove60yearsasshownin
Figure4.2.Thesefindingsindicatethatallagegroupswerecoveredandrepresentedin
thisstudythustheinformationprovidedwasreliable.
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Figure4.2:Agedistributionoftherespondents
4.4.3MaritalStatusTheresearcheralsosoughttoknowthemaritalstatusoftherespondentsinorderto
understand the accessibility and affordability of off-grid solar systems based on
people’s marital status. Findings in Figure 4.3 show that majority (83.0%) of the
respondents who were connected to off-grid solar systems in rural Kenya were
marriedpeople, followedbythosewhoweresingleat12.3%,thenafewwerethose
thatweredivorced,separatedorwidowed.Thesefindingsimplyoff-gridsolarsystems
areaccessibleandaffordabletomanypeopleinruralareasregardlessoftheirmarital
status.
Figure4.3:Maritalstatusoftherespondents
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4.4.4HighestLevelofEducationOn level of education, most (38.7%) of the respondents had attained secondary
education, followedby25.5%whohadattaineddiploma leveleducation, then those
whohadattainedonlyprimaryeducationat15.1%,undergraduate(bachelors)levelof
education at 6.6%, and very few (0.9%) had attained postgraduate (masters) level
educationasshowninFigure4.4.Only1.9%oftherespondentshadnoeducationat
all. These findings imply that most of the respondents were knowledgeable hence
couldunderstandtheevolution,trendandsocio-economicimpactoftheoff-gridsolar
systemsontheirlife.
Figure4.4:Highestlevelofeducationoftherespondents
4.4.5OccupationLast but not least, the research sought to understand the occupation of the
respondentsthatenabledthemaffordtheoff-gridsolarsystems.FindingsinTable4.2
show thatmost of the consumers of the off-grid solar systemswere self-employed
personsat46.2%,followedbythosewhowerecarryingoutfarmingactivitiesat24.5%,
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thenthosethatwereemployedintheprivatesectorat13.2%,civilservantsat12.3%,
andafewwhowereengagedinotheractivitiesasshownintable4.5.
Occupation Frequency Percentage
Self-employed 49 46.2
Farmer 26 24.5
Employed(private) 14 13.2
CivilServant 13 12.3
Hostelmanager 1 .9
HouseWife 1 .9
Pastor 1 .9
Others 1 .9
Total 106 100.0
Table4.2:Occupationoftherespondents
4.5EvolutionofOff-GridSolarIndustryinKenyaOff-gridsolarsystemsarecurrentlywidelyavailable inKenyaespecially inruralareas
where access to electricity is still a challenge. The researcher sought to understand
howoff-gridsolarsystemshaveevolvedinKenyaovertime.
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4.5.1SourcesofEnergyUsedbeforetheOff-GridSolarEnergyTostartwith,theresearchersoughttounderstandthevarioussourcesofenergythat
were used for lighting before acquiring off-grid solar energy systems. Findings
presentedinFigure4.5indicatethatmajority(41.5%)oftheusersoftheoff-gridsolar
systemsusedtinlamps(kerosenelamps)beforetheintroductionoftheoff-gridsolar
systems.Othersusedelectricity(18.9%),lanterns(18.9%),firewood(4.7%),andtorch
(1.9%). The findings also indicate that 14.2% of the respondents had usedmultiple
sourcesofenergybeforetheintroductionoftheoff-gridsolarsystems.
Figure4.5:Sourcesofenergyusedforlightingbeforetheintroductionoftheoff-gridsolar
systems
4.5.2TheIntroductionoftheOff-gridSolarEnergyinRuralKenyaThe customers of off-grid solar systems were asked to indicate the year they first
heardoftheoff-gridsolarsystems.Studyfindingsindicatethatmajority(68.8%)ofthe
customersoftheoff-gridsolarsystemsheardabouttheproductsbetweenthecurrent
decade (2011 – 2018), followed by some (26.4%) who heard about off-grid solar
69
systemsinthepreviousdecade(between2001–2010),thenafew(4.8%)whoheard
aboutittwodecadesago(1991–2000)asshowninTable4.3.
Yearrespondentsfirstheardofoff-gridsolar
system
Frequency Percentage(%)
2011-2018 73 68.8
2001-2010 28 26.4
1991-2000 5 4.8
Total 106 100.0
Table4.3:Theyeartherespondentsfirstheardoftheoff-gridsolarsystems
Literature review reveals thatoff-grid solar industrywas first introduced inKenyaat
thebeginningof the20th century.However, as yearswentby,morepeoplebecame
awareoftheoff-gridsolarenergyhencetheincreasedaccessibilityandaffordabilityin
thelastdecade(2011–2018).Thiscouldbeduetoadvancedtechnologyandreduced
pricinginthesolarenergyindustryandemergenceofoff-gridsolarenergycompanies
whoseworkistoconnectasmanypeopleaspossibletotheirproducts.Forexample,
M-kopawas introduced inKenya in2011but ithasconnectedmanypeople (around
600.000systems-by31.12.2017)tooff-gridsolarsystemsespecially inWestern,Rift
Valley and Nyanza regions of Kenya. In addition, the introduction ofmobilemoney
platformlikeM-pesain2007hasfacilitatedtheconnectivityofmanypeopleespecially
inruralKenyatotheoff-gridsolarsystems.
4.5.3TheYearUsersBoughtOff-gridSolarSystemsTheresearchersoughttounderstandtheexactyeartherespondentsacquiredtheoff-
gridsolarsystems.StudyfindingsshowninTable4.4indicatethatmost(83.0%)ofthe
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customersoftheoff-gridsolarsystems inruralKenyahadboughtthesystems inthe
last three years (2016 – 2018), followed by 12.3% who bought the off-grid solar
systemsbetween2011–2012,andafew(4.5%)whohadacquiredtheoff-gridsystem
between 2000 – 2010. These findings imply that the off-grid solar industry started
diversifyingitsmarketfrom2010byreachingasmanypeopleaspossibleespeciallyin
ruralKenya.ThiscouldbeduetothefactthatmorecompaniescameintotheKenyan
market hencemore investment wasmade andmore off-grid solar energy products
werebroughtintothecountry.
The year users bought the off-grid solar
systems
Frequency Percentage
2016-2018 88 83.0
2011-2015 13 12.3
2006-2010 3 2.8
2000-2005 2 1.9
Total 106 100.0
Table4.4::Theyearusersboughttheoff-gridsolarsystems
4.5.4UseoftheOff-gridSolarSystemsintheNextFiveYearsLastbutnotleastontheevolutionoftheoff-gridsolarenergy,theresearchersought
to establish the likelihood that the users of the off-grid solar serviceswill use solar
energy systems in the next five years. From the findings in Figure 4.6, slightlymore
thanhalf(52.8%)indicatedthattheywillbe‘verylikely’tousesolarenergysystemsin
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thenextfiveyears, followedby32.1%whosaidtheywillbe ‘likely’usethemforthe
next fiveyears,12.3%werenotsure,whilevery few(2.8%)wereunlikelytouseoff-
gridsolarenergysystemsforthenextfiveyears.
Figure4.6:Likelihoodofusingsolarenergyinthenextfiveyears
Generally, findings inFigure4.6showmajority (84.9%)are likelytouseoff-gridsolar
systemservicesforthenextfiveyearscomparedtoafew(15.1%)whowerenotsure
orunlikelytousethemforthenextfiveyears.Thesefindingsimplythatoff-gridsolar
systemshavepositivelyimpactedonpeople’slifeespeciallythoseinruralareashence
the assurance from them that they are likely to use them for the next five years.
Therefore, reaching asmany people as possible people especially in rural areas and
connectingthemtooff-gridsolarsystemsisatremendousinvestmentcurrentlywitha
promisingfuture.
Therespondents(15.1%)whoindicatedthattheywerenotsureortheywereunlikely
touseoff-gridsolarsystems in thenext fiveyearswereaskedtogive reasons.Their
responses were equally spread among the following reasons: the introduction of
electricity, frequent breakdown of the off-grid solar systems hence unreliable, the
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government’s promise of availing electricity soon, and that off-grid solar energy
services are not trustworthy. Therefore, these reasonsneed to be addressedby the
off-gridsolarenergycompaniesinordertoenhancethelikelihoodofcustomersusing
off-gridsolarservicesforthenextfiveyearsandevenmore.
4.6Thetrendoftheoff-gridsolarindustryinKenyaTheresearchersoughttoestablishthetrendoftheoff-gridsolarindustryinKenya.To
achievethis,theresearcherdesignedfivestatementstoanalysethetrendoftheoff-
gridsolarindustryinKenyaandaskedtherespondentstoindicatetheextenttowhich
theyagreeordisagree.TheirresponseswereasshowninTable4.5.
StatementaboutthetrendoftheOff-grid
solarindustryinKenya
Responses
SA A N D SD Total
Solar Systems are very affordable
compared toother sourcesof energy
forlightinglikeelectricity
N 73 28 4 1 0 106
% 68.9 26.4 3.8 .9 0.0 100.0
Sola Systems is very effective in
lighting and using it for simple
appliances like TV, Radio andMobile
Phones
N 50 45 8 1 2 106
% 47.2 42.5 7.5 .9 1.9 100.0
Manypeople especially in rural areas
are likely to purchase off-grid solar
systemsinthenearfuture
N 64 33 8 1 0 106
% 60.4 31.1 7.5 .9 0.0 100.0
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If Solar Energy Industry move with
speed, it is likely to connect more
people compared toother sourcesof
energylikeelectricity
N 61 35 8 2 0 106
% 57.5 33.0 7.5 1.9 0.0 100.0
Solar energy will soon be the main
sourceofenergyforlightingformany
peopleinruralarea
N 53 28 20 4 1 106
% 50.0 26.4 18.9 3.8 .9 100.0
Table4.5:ThetrendoftheOff-gridsolarindustryinKenya
FromthefindingsinTable4.5,themajority(atleast75%)oftherespondents‘strongly
agreed’and‘agreed’toallthestatementsthatwereprovidedinthetablewithregard
to the trend of the off-grid solar industry in Kenya. The customers generally agreed
and appreciated that off-grid solar systems are very affordable compared to other
sourcesofenergy for lighting likeelectricity.Theyalsogenerallyagreed thatoff-grid
solar systemsareveryeffective in lightingandusing it for simpleappliances likeTV,
radioandmobilephones.Further,theygenerallyagreedthatmanypeopleespecially
inruralareasarelikelytopurchaseoff-gridsolarsystemsinthenearfutureandthatif
solarenergyindustrymoveswithspeed,itislikelytoconnectmorepeoplecompared
toothersourcesofenergylikeelectricity.Thecustomersascertainedthatsolarenergy
willsoonbethemainsourceofenergyforlightingformanypeopleinruralareas.All
these findings show that the off-grid solar industry is penetrating into the energy
market as a source of energy that is affordable, reliable, and efficient especially in
lighting and for householdelectronic appliances such as radios, TVs,mobilephones,
amongothers.Withthistrend,especiallyinacompetitivemarket,therearesignsthat
theoff-gridsolarindustryisadvancingveryfastinKenya.
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4.6.1ProbabilityofPurchasingOtherAppliances/ServicesThis study sought to establish whether the users of the off-grid solar systems are
willing tobuyother appliances in addition to their off-grid solar systems. Therefore,
respondentswereaskedtoindicatewhethertheyneed,orhavepurchased,ordonot
need some appliances and services like TVs, Health Insurances, cash loans, water
pumps, water tanks, fridges, jikos (charcoal-burning stove used for cooking) and
mobilephones.Theresearcherwasparticularlyinterestedinestablishingtheproducts
thattheusersofoff-gridsolarproductswouldliketobuy.Thefindingsarepresented
inTable4.6.
Product Iwouldbuy
thisproduct
Ihavethis
productalready
Idon'tneedthis
product
Total
TVupgrade N 68 31 7 106
% 64.2 29.2 6.6 100.0
Health
Insurance
N 64 21 21 106
% 60.4 19.8 19.8 100.0
Cashloan N 67 14 25 106
% 63.2 13.2 23.6 100.0
Waterpump N 40 10 56 106
% 37.7 9.4 52.8 100.0
Watertanks N 69 32 5 106
75
% 65.1 30.2 4.7 100.0
Fridge N 43 11 52 106
% 40.6 10.4 49.1 100.0
Jiko N 60 32 14 106
% 56.6 30.2 13.2 100.0
Mobilephone N 36 61 9 106
% 34.0 57.5 8.5 100.0
Table4.6:Productsusersofoff-gridsolarenergyhave,orwouldliketobuy,ordonotneed.
Table 4.6 above shows thatmost of the users of the off-grid solar systems (at least
55%)wouldliketobuyTVupgradepackage,healthinsurance,cashloan,watertanks,
and jikos. Also, 37.7% of the users of the off-grid solar systems would like to buy
fridges,37.7%would liketobuywaterpumps,while34.0%would liketobuymobile
phones.Generally, these findings imply thatmost users arewilling to upgrade their
systems to TV packages and also buy other appliances. As a result it can be further
interpretedthatthebusinessmodelofupsellingandprovidingfutureproductsusedby
off-gridsolarcompaniesisratified.
4.7FacilitationofMobileMoneyPlatformintheEvolutionandtrendoftheOff-GridSolarIndustryinRuralKenyaM-pesahashighlycontributed toeasydeliveryofvariousservicesboth in thepublic
and private sectors. One of the sectors that M-pesa has worked effectively is the
financial sector. Through mobile money platforms, payment for products has been
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madeeasierwith improved securityon loss and theftofmoney.On this regard, the
researchersoughttoexaminehowM-pesahasfacilitatedintheevolutionandtrendof
theOff-grid solar industry in rural Kenya and its socio-economic impact on people’s
life.
4.7.1HowOftenM-pesaisusedtoPayforOff-gridSolarSystemsTheusersoftheoff-gridsolarsystemswereaskedtoindicatehowoftentheyuseM-
pesatopayfortheirOff-gridsolarsystems.FindingsshowninTable4.7indicatethat
53.8%oftheusersofoff-gridsolarsystemsuseM-pesaonceamonthtopayfortheir
products, 14.2%use it once aweek, 14.2%use it several times aweek, 9.4%use it
daily,4.7%useiteverytwoweeks,while3.8%neveruseM-pesatopay.Thesefindings
indicate that M-pesa is highly used by users of off-grid solar systems to make
payments, an indication that M-pesa is highly contributing to connectivity of many
peopleinruralKenya.TheuserswhoindicatedthattheyneveruseM-pesainpaying
for the off-grid solar systems could be those who bought the system one-off and
thereforedonottakepartintherepaymentscheme.
HowoftenrespondentsuseM-pesatopay
fortheirOff-gridsolarsystem
Frequency Percentage(%)
Never 4 3.8
Daily 10 9.4
Severaltimesaweek 15 14.2
Onceaweek 15 14.2
Everytwoweeks 5 4.7
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Onceamonth 57 53.8
Total 106 100.0
Table4.7:HowoftenrespondentsuseM-pesatopayfortheirOff-gridsolarsystem
4.7.2AccessibilityofM-pesaAgentsTheresearcherwantedtounderstandhowfarusersoftheoff-gridsolarsystemstravel
toaccessanearestbankbranchorM-pesaagent.Findings inTable4.8 indicate that
majority (90.6%)of theusersof theoff-grid solar systemsare5kmor less fromthe
nearestbankbranchorM-pesaagent.Inparticular,45.3%oftheusersindicatedthat
theyarelessthan1kmawayfromthenearestbankbranchorM-pesaagent,another
45.3%arebetween1–5kmaway,7.5%are6–10kmaway,whileveryfew(1.9%)are
morethan10kmawayfromthenearestbankbranchorM-pesaagent.Thesefindings
clearlyshowthatM-pesaserviceshavebeenmadeeasilyaccessibleeventoruralareas
in Kenyahence theeffective facilitationof theevolution, trendanddevelopmentof
theoff-gridsolarindustry.
Distance to the nearest bank branch or M-pesa
agent
Frequency Percentage
(%)
Lessthan1km 48 45.3
Between1-5km 48 45.3
Between6-10km 8 7.5
Between11-20km 1 .9
78
Between21-50km 1 .9
Total 106 100.0
Table4.8:DistancetothenearestbankbranchorM-pesaagent
Tomeasure the effectiveness ofM-pesa services in the evolution, development and
trendoftheoff-gridsolarindustry,theusersoftheoff-gridsolarsystemswereasked
to indicatehoweffective isM-pesa inpaying foroff-grid solarenergysystems.Their
responseswereaspresentedinFigure4.7.
Figure4.7:EffectivenessofM-pesaservicesinpayingfortheoff-gridsolarsystems
Findings shown in Figure 4.7 indicate that the majority (67.0%) of the respondents
agreed thatM-pesa serviceshavebeenveryeffective inpaying for theoff-grid solar
systems,23.6%saidtheyhavebeeneffective,4.7%saidtheyhavebeenjusteffective,
2.8%saidtheyhavenotbeeneffective,whileveryfew(1.9%)saidtheyhavebeennot
effective at all. Cumulatively, 90.6% of the respondents ascertained that M-pesa
serviceshavebeengenerallyeffective.ThisimpliesthatmostKenyansregardM-pesa
asanappropriatetooltopayfortheirSHSsandvaluethepossibilityofpayingbackin
instalments.Kenyanswhovoted foreither ‘non-effective’or ‘noteffectiveatall’ are
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mostlikelylocatedinareaswithpoornetworkconnection,wheretheyhavetotravel
toanofficialM-pesaagentoralocationwithnetworkcoverageeverytimetheymake
apayment.
4.7.3TheFutureoftheOff-gridSolarIndustryandM-pesaForfuturepurposes,theresearchersoughttofindoutwhetherusersofoff-gridsolar
systems thoughtM-pesawillmakemanypeople in rural areasget connected tooff-
grid solar systems. From their responses, 54% agreed that that through accessibility
anduseofmobilemoneyplatforms(M-pesa),manypeopleinruralKenyaaregoingto
beconnected to theoff-grid solarenergy.However,44%of theusersof theoff-grid
solarsystemswerenotsurewhetherthroughM-pesa,manypeople inruralareaare
goingtobeconnectedtooff-gridsolarsystemsornot,while2%ofthemdisagreedas
showninFigure4.8.ThesefindingsimplythatM-pesaisamajordrivingforcebehind
connectingmanypeopletooff-gridsolarsystemsespeciallyinruralareas.Competition
from othermobilemoney platforms in Kenya like AirtelMoney and introduction of
bankagents in rural areas couldbe the reasonwhy44%of theusersof theoff-grid
solarsystemswerenotsurethatmanypeopleinruralareaaregoingtobeconnected
tooff-gridsolarsystemsthroughM-pesa.
Figure4.8:WhetherthroughM-pesamanypeopleinruralareaaregoingtobeconnectedto
off-gridsolarsystems
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The researcher went further and asked the respondents to give reasons why they
acceptedthatthroughM-pesamanypeopleinruralareaaregoingtobeconnectedto
off-grid solar systems. The reasons given can be summarizedwith themajor reason
being that use ofM-pesa in paying for the off-grid solar systems is convenient, i.e.
easy,affordable,andsecure.
4.8Socio-economicImpactofM-pesainOff-gridSolarIndustryinKenyaThe researcher sought to establish the socio-economic impact of mobile money
platform (M-pesa) in facilitating evolution and trend of the off-grid solar industry in
ruralKenya.InaLikertscaleof1–5where1=stronglydisagreeand5=stronglyagree,
theusersoftheoff-gridsolarsystemwereaskedtoindicatetheextenttowhichthey
agreedordisagreedtothelistedstatementswithregardtosocio-economicimpactof
themobilemoneyplatform(M-pesa)infacilitatingtheevolutionandtrendoftheoff-
gridsolarindustry.ThefindingsareshowninTable4.9.
Statementaboutthethesocio-economicimpactof
mobilemoneyplatform(M-pesa)
Responses
SA A N D Total
Through use of M-pesa in paying for Solar
Energy Systems, I have saved a lot of
transportationcosts.
N 86 15 3 2 106
% 81.1 14.2 2.8 1.9 100.0
Use of M-pesa is very secure when making
payments compared to paying cash due to
theftormoneylost
N 68 34 4 0 106
% 64.2 32.1 3.8 0.0 100.0
81
ThroughM-pesa, am or Iwas able to pay for
Solar Energy systems in instalments hence
makingitaffordablethanwhenpayingcashat
once
N 74 22 9 2 106
% 69.8 19.7 8.5 0.9 100.0
Duetomobilemoneybanking(M-pesa),there
issocialandfinancial inclusionofallpeoplein
paying for various services especially in rural
areas e.g. paying solar energy systems is now
cheapandaffordabletoallpeople.
N 62 35 9 0 106
% 58.5 33.0 8.5 0.0 100.0
Table4.9:Socio-economicimpactofmobilemoneyplatform(M-pesa)infacilitatingevolutionandtrendoftheoff-gridsolarindustry.
FromTable4.9,themajorityoftherespondents(at least84%)‘agreed’and‘strongly
agreed’that:theyhadsavedalotoftransportationcostsbecauseoftheuseofM-pesa
in paying for solar energy systems; use of M-pesa is very secure when making
paymentscomparedtopayingcashduetotheftorlossofmoney;M-pesahasenabled
themtopayforsolarenergysystems in instalmentshencemaking itaffordablethan
when paying cash at once and that there use of M-pesa has enhanced social and
financial inclusionofallpeopleinpayingforvariousservicesespeciallyinruralareas.
These findingsascertain thatuseofM-pesahasahighlypositive impactonpeople’s
life.Most(44.3%)oftheusersoftheoff-gridsolarsystemsconfirmedthattheysavean
averageofKshs100–500permonth,24.5%saveKshs501–1000permonth, 4.7%
saveKshs1001–5000permonth,8.5%savelessthanKshs100permonth,while0.9%
saveaboveKshs5000permonthduetouseM-pesa inmakingtransactions fortheir
off-gridsolarsystems(asshowninTable4.10).Thisshowshowthepositiveeconomic
impact of M-pesa on people’s life and assures that customers of the off-grid solar
82
industry effectively save money compared to their previous incurred expenditures
(mobilecharging,alternativelightingsources,transportationcosts).
Average monthly savings
(Kshs)
Frequency Percentage(%)
Nosavings 18 17.0
Lessthan100 9 8.5
100-500 47 44.3
501-1000 26 24.5
1001-5000 5 4.7
Above5000 1 .9
Total 106 100.0
Table4.10:Averagemonthlysavings(Kshs)
According to this study’s findings, money saved due to use of M-pesa in making
transactionsfortheiroff-gridsolarsystemsisutilizedinotheractivitieslikeinvestingin
businesses, buying food for their families, off-setting other bills like rent andwater,
paying school fees for children, investing in agricultural activities, paying the
instalments of theoff-grid solar systems, amongothers. This showshow sociallyM-
pesahaspositivelyimpactedonpeople’slifeespeciallyinruralareas.
83
4.9Socio-EconomicImpactoftheOff-gridSolarIndustryinRuralKenyaLastbutnotleast,theresearchersoughttoestablishthesocio-economicimpactofthe
off-grid solar industry in rural Kenya. Users of Off-grid Solar System were asked to
indicate the extent towhich they agreed or disagreed to the statements thatwere
listed with regard to socio-economic impact of the off-grid solar industry in rural
Kenya.FindingswereasshowninTable4.11.
Statementaboutthethesocio-economicimpact
ofoff-gridsolarsysteminruralKenya
Responses
SA A N D Total
Through solar energy home system, am
connectedtotheworldthroughwatchingTV
andlisteningtoRadio
N 70 28 3 5 106
% 66.0 26.4 2.8 4.7 100.0
Solar energy systems have reduced air
pollution since I no longer use sources of
energy thatemita lotof smoke thatpollute
air.
N 65 30 10 1 106
% 61.3 28.3 9.4 0.9 100.0
By using Solar Energy systems, I no longer
inhale toxic gases emitted from energy
generatedfromfossilfuels.
N 69 26 7 4 106
% 65.1 24.5 6.6 3.8 100.0
Solar energyhas enhanced security in home
compoundduetosufficientlightingincluding
securitylights.
N 44 44 15 3 106
% 41.5 41.5 14.2 2.8 100.0
84
I feelmyhouseholdhasexperienceda good
developmentsinceIownthesolarsystem
N 63 29 11 3 106
% 59.4 27.4 10.4 2.8 100.0
Evolution of solar energy has created
employment opportunities because there
many people employed in companies in the
SolarEnergyIndustry
N 76 22 7 1 106
% 71.7 20.8 6.6 .9 100.0
Manufacturingandgeneratingsolarenergyis
less expensive than manufacturing and
generating other sources of energy like
electricity
N 59 33 13 1 106
% 55.7 31.1 12.3 .9 100.0
Use solar energy systems saves a lot of
money homes or buildings compared to
electric bills incurred when using energy
generated from fossil fuels like geothermal
power.
N 71 30 5 0 106
% 67.0 28.3 4.7 0.0 100.0
Use of solar energy saves transportation
costs incurred when acquiring and using
energy generated from fossil fuels like
geothermal power e.g. paying for mobile
phone charging in city/town centres,
transport involved to and from
city/town/market centres, kerosene costs or
payingforotherlightingsourcesliketorches
N 66 24 13 3 106
% 62.3 22.6 12.3 2.8 100.0
Table4.11:Socio-economicimpactofoff-gridsolarsysteminruralKenya
85
FromTable4.11,themajorityoftheusersoftheoff-gridsolarenergysystemsagreed
thattheproductshaveatremendoussocio-economicimpactonpeople’slifeespecially
inruralKenya.Forinstance,majority(92.4%)oftherespondents‘agreed’and‘strongly
agreed’ that off-grid solar systems enable many people get connected to what
happensallover theworld throughmainstreammedia like radiosandwatchingTVs.
Forexample,inKenya’s2017generalelection,mostruralpeoplereliedonradiosand
TVs in receiving information on the election progress before and after results were
released. Also, the electoral body and the government relied on radios and TVs in
informingruralpeopleabouttheelectoralprocessbeforeandafterelection.
Furthermore,fromthestudy’sfindings,89.6%oftheusersoftheoff-gridsolarsystems
‘agreed’and‘stronglyagreed’thatbyusingsolarenergysystems,theynolongerinhale
toxicgasesemittedfromenergygeneratedfromfossilfuelslikekerosene.Also,89.6%
of the users of the off-grid solar agreed’ and ‘strongly agreed’ that solar energy
systems have reduced air pollution since they no longer use sources of energy that
emita lotofsmokethatpolluteair.Gases likecarbonmonoxidethatareemittedby
other sourcesofenergy like keroseneand charcoal areunhealthywhen inhaledand
causedeath.Therefore,solarenergyeliminatestheriskof inhalingsuchgaseshence
improvingpeople’shealth.
Off-gridsolarenergyindustryhasalsoempoweredmanypeopleeconomicallythrough
savingsmadeoutofitsaffordabilitycomparedtobeingconnectedtothepowergrid.
Thisisbecausetherearenoelectricbillstobepaidmonthly.Fromthestudyfindings,
95.3%oftheusersoftheoff-gridsolarsystemsindicatedthatusesolarhomesystems
save a lot ofmoney in homes or buildings compared to electric bills incurredwhen
usingenergygeneratedfromfossilfuelslikegeothermalpower.Thesesavingscouldbe
usedforothertopayforotherbillslikerent,water,schoolfeesforchildren,buyfood
stuffsforthefamilyamongothers.
86
Also, off-grid solar energy industry has created employment opportunities to many
peoplewhoareworkingintheindustryassalesagent,technicians,salesmanagersor
shop and kiosk managers. These people’s living standards have improved by
generatingasourceofincomeforthem.
Thefindingsintable4.11alsoindicatethatsecurityinruralareashasbeenenhanced
throughsecuritylightingsinpeople’shomes.Intrudersthatcouldbetargetinghomes
aredeterredbythepresenceofsecurity lights intheruraloff-gridhomes.Therefore
safety isenhancedthroughminimizinghidingspotsand increasingphysicaldetection
of the intruders. In addition,membersof the family, especially children andwomen
feelsaferwithsecuritylightsintheirhomes.
87
5.ChapterFive:CONCLUSION
Thispaperfocussedonanalysingthesocio-economic impactofoff-gridsolarsystems
onpeople’s life especially through the facilitationof themobilemoneyplatformM-
pesa.ParticularconcentrationwasontheruralpopulationofKenyaandtheuseofM-
pesa in facilitating connectivityof people tooff-grid solar systems. Pawame Ltdwas
thecasestudy.Thestudy’sobjectivesweretoanalysehowtheoff-gridsolarindustry
hasevolvedover time,howM-pesahas facilitatedtheevolutionof theoff-gridsolar
industryanditssocio-economicimpact,thetrendoftheoff-gridsolarindustryandthe
socio-economicimpactoftheoff-gridsolarindustryinruralKenya.
Themotivationof this studywas from the fact thatmanypeople, especially in Sub-
Saharan Africa, live without access to electricity yet there is existence of modern
technology that provides accessible and affordable solutions. Themajority of these
people live in rural areas where the electrification rate is low due to poor
infrastructure, inadequategovernmentsupportandfinancial instabilityofmanyrural
people to cover capital and operating costs for generation, transmission and
distribution. Kenya is among the countries in Sub-Saharan Africa facing energy
dilemmas. Limited access to electricity for households, particularly in rural areas as
well as frequent power blackouts has led to a shift tomodern alternatives. One of
them are so called off-grid solar systems that are easily accessible and affordable
becauseofoftheadoptionofthePAGOtechnology.
Various recent empirical studies have revealed that rural electrification, from solar
power inparticular,hashelped insocio-economicdevelopmentofmanycountries in
several ways. A study by Harun (2015) on ‘the role of solar home systems (SHS) in
socio-economicdevelopmentofruralBangladesh’formedtheempiricalcontextofthis
88
study.Similar tothisstudy,Harun(2015) focussedthesocio-economic impactofoff-
grid solar systems in rural set-ups. They include improved household conditions for
education, health, household work, access to information, communication,
entertainmentandperceptiononsafetybringaboutradicalchangesinthetraditional
social life and quality of live of rural people. At the same time, a large number of
people not owning an off-grid solar system benefited indirectly from visiting
households with SHS to watch TVs, listen to radio, charge their mobile phone and
laptops,andgetstudyingfacilities.Therefore,Harun’sstudypointedoutvarioussocio-
economic developments that have taken place in rural areas as a result of the
introductionoftheoff-gridsolartechnology.Inaddition,itwaslearntthatsolarenergy
iswidelyperceivedasapromisingtechnologyforelectricitygeneration inruralareas
especiallyindevelopingcountries.
A descriptive research design was adopted in collecting primary data. The target
populationwasusersoftheoff-gridsolarsystemsinthreeregionsofKenya(Nyanza,
Western, and North Rift Valley) where Pawame Ltd has created market networks.
Questionnaires were primarily used to collect data from the field and statistical
analysiswasconductedusingtheSPSSsoftwareversion23.0.
Theresearcherhasexperiencedthesocio-economicimpactofoff-gridsolarsystemsas
wellasM-pesathroughouthisemploymenttimeatPawameLtdKenya.AstheDeputy
SalesDirectortheresearcher’smaintasksincludethedevelopmentofsalesstrategies
as well as processes and to drive sales growth for the company. Furthermore,
recruitmentofahighlyeffectivesalesforceontheground,trainingactivitiesaswellas
performance measurement to maximise talent effectiveness were among the main
dutiesoftheresearcher.Mostoftheseactivitiesrequiredtheresearchertotravelona
regular basis to Pawame’s customer base in rural Kenya. During those visits the
89
researcherexperiencedon first-handhow impactfuloff-grid solar systemsaswell as
mobilemoneypaymentplatformscanbeanddecidedtomakeittopicofhisthesis.
Thestudyfoundthatbeforetheintroductionoftheoff-gridsolarsystems,mostpeople
in rural Kenya used tin kerosene lamps, while some used lanterns, firewood and
torches. The number of people who first heard about off-grid solar home systems
increased gradually over time and quite a number of people in rural Kenya have
boughtoff-gridsolarsystemsfrom2010onwards.
The study also concludes that M-pesa was found to be the driving force behind
successfulconnectivityofmanyruralpeople inKenyatooff-gridsolarsystems.Most
users of off-grid solar systems in Kenya use M-pesa either daily, weekly or once a
month in making instalment payments for their products. Further, M-pesa has
minimized transportation costs due to the possibility of transferringmoney through
textmessagesandbeingabletochargemobilephonesathome.Subsequently,theuse
ofM-pesahasledtosocialandeconomicbenefitsaswellasfinancial inclusionwhen
payingforvariousservicesespeciallyinruralareas.
One of the social benefits among the study under research found that solar home
systems have enabled rural people to be connected to what is happening locally,
nationally,regionallyandinternationallythroughwatchingTVandlisteningtoradio.It
further found that solar energy systems have helped in reducing air pollution since
people no longer use sources of energy that emit pollutants like smoke and toxic
gases.Furthermore,havingsolarenergysystems in thehouse isconsideredbysome
peopleassocialdevelopmentsincetheyhelp insocialevents likeentertainmentand
otherleisureactivities.Economically,theevolutionofsolarenergyhasledtocreation
90
ofemploymentopportunitiesbecause theremanypeopleemployed inoff-grid solar
companies.
Inadditiontoconnectingruralpeopletooff-gridsolarsystems,thestudyfoundthat
usersoftheoff-gridsolarsystemsarewillingtobuyotherproductssuchasupgrading
TVs,water tanks,water pumps, fridges, jikos,mobile phones, health insurances and
cashloans.Thisisvalueadditionespeciallytotheoff-gridsolarenergycompaniesand
ratifies also their businessmodels with the aim to establish long-term relationships
withcustomers.
Fromthestudyfindings,itiscrystalclearthatoff-gridsolarsystemsareacceptableas
thebestenergyalternativethatareaccessibleandaffordablecomparedtopowergrid
systemshencetheneedtoconnectmoreruralpeopletooff-gridsolarsystems.Thisis
similar to most of the literature which points out that off-grid solar energy is
affordable and easily accessible. The socio-economic impact of the off-grid solar
systemsonpeople’slifeespeciallyinruralareasismassive.Thispositivelycontributes
tothedevelopmentamongruralpeoplewhichinturnbenefitseconomicgrowthofthe
country.AsnotedbyGlobalNetworkonEnergyforSustainableDevelopment(GNESD,
2007),withoutadequatesuppliesofaffordableenergy,itisdifficulttoimprovehealth,
educationandreductionofpoverty.Renewableenergysources liketheoff-gridsolar
industry is helping in that regard and positively contributes to the development of
ruralcommunities.
91
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Appendix: Questionnaire for Users of the Off-grid Solar Systems SUBJECT:Socio-EconomicImpactUsingOff-gridSolarSystemsthroughtheUse
ofMobileMoney(M-pesa)
DearSir/Madam,
MynameisHANNESECKMAYR,aMastersStudentattheUniversityofLuissGuidoCarli
in Rome (Italy). Am currently undertaking a Research Project that focuses on “The
Socio-EconomicImpactofUsingOff-gridSolarSystemsbyUseofM-pesainPayingfor
the Services.” Therefore, this questionnaire seeks information on your personal
background and the socio-economic impact you are experiencing in your lives as a
resultofusingOff-gridSolarSystems.Ikindlyrequestyoutotakeafewminutestofill
out thisquestionnaire.Pleasebeashonestand truthfulaspossible.Beassured that
your responses will be treated confidentially and will be used purely for academic
purpose.IfyouhaveanyquestionsaboutthisResearchProjectorwanttoknowabout
the results, please feel free to contact me on 0741439434 or email to
Instructions
In somequestions, choicesareprovided sopleaseputa tick in theappropriatebox.
Where choices are not provided, answer using your own words in the most
appropriateandcomprehensiveway.
99
SECTIONA:DEMOGRAPHICDATA
1.Name(Optional):………………………………………………………………
2.Contacts(Optional):………………………………………………………..........
3.CountyofResidence:
Kakamega[]Bungoma[]Kisumu[]Siaya[]Turkana[]UasinGishu[]
4.Gender:Male [] Female []
5. Yourage:Below20years[]21–30years[] 31–40years[]
41–50years[] 51–60years[] above60years[]
6.MaritalStatus:Single[]Married [] Divorced []
Separated[] Widowed[]
7.HighestLevelofEducation:
None[]Primary [] Secondary [] Certificate [ ]
Diploma[]Bachelors [] Masters []
PhD []
Others(specify)…………………………………………………………..
8.Occupation(Youcantickmorethanone):
Farmer[]CivilServant[]Employed(private)[]Self-employed[]
Anyother(specify):…………………………………………………………
SectionB:EvolutionofOff-GridSolarSystem
9.WhichyeardidyoufirsthearofOff-gridSolarSystems? ..……………………..
10.WhichyeardidyoubuyyourOff-GridSolarSystem? ………………………...
100
11.ForhowlonghaveyouusedyourOff-GridSolarSystem?
Lessthan3months[]Between3-6months[]Between6-12months[]
Between1-2years[]Morethan2years[]
12.Whatsource/sourcesofenergydidyouuseforlightingbeforetheintroduction
ofOff-GridSolarSystemsinKenya?(Youcantickmorethanone)
Firewood[]Lanterns[]TinLamps[]Torch[] Electricity[]
Anyother(specify):………………………………………………………………..
13.(a)Beingacustomerofanoff-gridsolarcompany,howlikelythatyouaregoingto
usesolarenergyinthenextfiveyears?
Verylikely[]Likely[]Notsure[] Unlikely[] Veryunlikely[]
(b) Ifyouranswerabove isNotsure/Unlikely/Veryunlikely,kindlygivereason(s)for
youranswer:
i.
……………………………………………………………………………………………………………………………………
ii.
……………………………………………………………………………………………………………………………………
SectionC:HowMobileMoneyPlatform(M-pesa)hasfacilitatedtheEvolutionofthe
Off-GridSolarIndustryinRuralKenya
14.HowoftendoyouuseM-pesatopayforyourOff-gridsolarsystem?
Never[]Daily[]severaltimesaweek[]Onceaweek[] Every two
weeks[]Onceamonth[]
101
15.HowfarisyournearestbankbranchorM-pesaagent?
Lessthan1000m1–5km[] 6–10km[]
11–20km[] 21–50km[]Morethan50km[]
16.HoweffectiveisM-pesainpayingforOff-gridSolarSystems?
Veryeffective [] Effective [] Just effective [ ]
Noteffective [] Noteffectiveatall []
17.DoyouthinkthroughM-pesamanypeopleinruralareaaregoingtobeconnected
toOff-gridSolarSystems?Yes[] No[]Notsure []
Ifyes,givereasons:
(i)
……………………………………………………………………………………………………
(ii)
……………………………………………………………………………………………………
(iii)
…………………………………………………………………………………………………..
SectionD:TheTrendoftheOff-gridSolarIndustryinRuralKenya?
18. AsauserorcustomerofOff-gridSolarSystem,kindlyindicatetheextenttowhich
youagreeordisagreetothefollowingstatements.
102
NB:1=StronglyDisagree,2=Disagree,3=Neutral,4=Agreeand5=SA.
Statement
5
SA
4
A
3
N
2
D
1
SD
Solar Systems are very affordable compared to other sources of
energyforlightinglikeelectricity
Solar Systems is very effective in lighting and using it for simple
applianceslikeTV,RadioandMobilePhones
Manypeopleespecially inruralareasare likelytopurchaseoff-grid
solarsystemsinthenearfuture
IfSolarEnergyIndustrymovewithspeed,itislikelytoconnectmore
peoplecomparedtoothersourcesofenergylikeelectricity
Solarenergywillsoonbethemainsourceofenergyfor lightingfor
manypeopleinruralarea
19. Among the listedproducts in the tablebelow,whichone(s)would you consider
buyingandwhichwouldyounotconsiderbuying?(Answerforeachitem)
I would buy
thisproduct
I have this
productalready
I don't need
thisproduct
TVupgrade
HealthInsurance
Cashloan
Waterpump
103
Watertanks
Fridge
Jiko
Mobilephone
SectionE:Socio-EconomicImpactoftheOff-gridSolarIndustryinRuralKenya
20. Asauseror customerofOff-grid Solar System, kindly indicate theextent towhich you
agreeordisagree to the following statements with regard to Socio-Economic Impact of the
Off-gridSolarIndustry.
NB:1=StronglyDisagree,2=Disagree,3=Neutral,4=Agreeand5=SA.
Statement
5
SA
4
A
3
N
2
D
1
SD
Through my solar home system, am connected to the world
throughwatchingTVandlisteningtoRadio
Solar systems have reduced air pollution since I no longer use
sourcesofenergythatemitalotofsmokethatpolluteair.
By using Solar systems, I no longer inhale toxic gases emitted
fromenergygeneratedfromfossilfuels.
Solar energy has enhanced security in home compound due to
sufficientlightingincludingsecuritylights.
IfeelmyhouseholdhasexperiencedagooddevelopmentsinceI
ownthesolarsystem
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Evolutionofsolarenergyhascreatedemploymentopportunities
becausetheremanypeopleemployedincompaniesintheSolar
EnergyIndustry
Manufacturingandgeneratingsolarenergyislessexpensivethan
manufacturing and generating other sources of energy like
electricity
Use solar systems saves a lot of money homes or buildings
comparedtoelectricbillsincurredwhenusingenergygenerated
fromfossilfuelslikegeothermalpower.
Use of solar energy saves transportation costs incurred when
acquiring and using energy generated from fossil fuels like
geothermal power e.g. paying for mobile phone charging in
city/town centers, transport involved to and from
city/town/market centres, kerosene costs or paying for other
lightingsourcesliketorches.
21.Iftherearesavingsyoumakeinusingsolarsystemscomparedtoothersourcesof
energy,kindlyindicateaveragemonthlysavingsinKhs?
Lessthan100[]100–500 [ ] 501–1000 [ ] 1001–5,000 [ ]
5,001–10,000[]Nosavings[]
22.Whatarethemonthlysavingsusedfor?
i.………………………………………………………………………………………………………….
ii.…………………………………………………………………………………………………………..
105
SectionE:socio-economicimpactofmobilemoneyplatform(M-pesa) infacilitating
evolutionandtrendoftheoff-gridsolarindustryinruralKenya.
23.AsauserorcustomerofOff-gridSolarSystem,kindlyindicatetheextenttowhich
you agree or disagree to the following statements with regard to Socio-Economic
Impactofmobilemoneyplatform (M-pesa) in facilitatingevolutionand trendof the
off-gridsolarindustry
NB:1=StronglyDisagree,2=Disagree,3=Neutral,4=Agreeand5=SA.
Statement
5
SA
4
A
3
N
2
D
1
SD
ThroughuseofM-pesainpayingforSolarSystems,Ihavesaveda
lotoftransportationcosts.
UseofM-pesa is very securewhenmakingpaymentscompared
topayingcashduetotheftormoneylost
ThroughM-pesa, am or I was able to pay for Solar systems in
installmentshencemakingitaffordablethanwhenpayingcashat
once
Due to mobile money banking (M-pesa), there is social and
financial inclusion of all people in paying for various services
especiallyinruralarease.g.payingsolarsystemsisnowcheap
andaffordabletoallpeople.
END