>>SEAN ESTERLY: Hello everyone. I’m Sean
Esterly of the National Renewable Energy Laboratory, and welcome to today’s webinar, which is
hosted by the Clean Energy Solutions Center, in partnership with the United Nations Foundations
Energy Access Practitioner Network. And today’s webinar is entitled, “Pay as You Go, a Sunny
Future.” And before we begin, just one important note of mention, is that our presentation,
the Clean Energy Solutions Center does not endorse or recommend specific products or
services, and information provided in this webinar is featured in the Solutions Center
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Now we put the agenda prepared for you today, and it is centered around the presentations
from our guest panelists. Yasemin Erboy Ruff, Mansoor Hamayun, Klara Lindner, Graham Smith
and Paul Needham. Also, Jacob Winiecki will also be joining us following the presentation
to moderate a discussion among the panelists. And to begin, Yasemin from the U.N. Foundation
will be providing an overview of the Energy Access Practitioner Network. And then panelists
will showcase their respective organizations’ approach to pay as you go models, discuss
and contrast specific geographic concepts and share their respective challenges and
successes to provide collective best practices. Now before our speakers begin their presentations,
I just want to provide a short, informative overview of the Clean Energy Solutions Center
initiative, and then following the presentations we’ll have the moderated discussion led
by Jacob, followed by the question and answer session where panelists will address any questions
submitted by the audience, and then finally we’ll wrap up with some closing remarks
and a very brief survey for the audience. So this slide provides a bit of background
in terms of how the Solutions Center came to be formed. And the Solutions Center is
one of thirteen initiatives of the Clean Energy Ministerial that was launched in April of
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To now come to this unique initiative includes support of developing countries and emerging
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expert policy assistance, and peer to peer learning and training tools such as the webinar
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this valuable service. Again, it is provided free of charge. So to find out if the Ask
an Expert service can benefit your work, please contact me directly at [email protected],
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So in summary, we would encourage you to explore and take advantage of the Solutions Center
resources and services, including expert policy assistance, the database of clean energy policy
resources, subscribe to our newsletter, and participate in webinars like this one.
And so now I’d like to provide some brief introductions for today’s speakers. And
our first speaker is Yasemin Erboy, a senior associate with the U.N. Foundation’s Energy
Access team, primarily coordinating efforts to scale up energy access in developing countries.
And then following Yasemin we’ll hear from Mansoor Hamayun, the co-founder and CEO of
BBOXX, a dynamic young company that designs, manufactures, distributes and finances innovative
solar systems to improve access to energy across Africa in the developing world. And
then our third speaker today is Klara Lindner, a Product and Service Manager at Mobisol GmbH.
Klara has been working at the intersection of microfinance in energy since 2009, and
her academic background lies in engineering, business and design thinking. And then our
fourth speaker today is Graham Smith, and Graham is Vice President of Business Development
at Off-Grid Electric, and his work focuses on securing financing, government relations,
building partnerships and developing the company’s expansion strategy. And then our final speaker
today is Paul Needham. And Paul is the President and Co-Founder of Simpa Networks. And Simpa
Networks has a bold mission to make clean energy simple, affordable and investable.
Simpa sells solar as a service to energy poor households and micro-enterprises in rural
India. And then I’d also like to introduce the moderator for the panel discussion following
the presentations, Jacob Winiecki. And Jacob is an Energy Sector Specialist for CGAP, with
over nine years of experience developing innovative approaches to financing modern energy for
low income consumers in Sub-Saharan Africa and Asia. And so with that, I would now like
to welcome Yasemin to the webinar today.>>YASEMIN ERBOY RUFF: Good morning everyone.
Can you hear me OK?>>SEAN: Yes, we can, Yasemin.
>>YASEMIN: Perfect, thank you. Thank you everyone for joining another monthly Energy
Access Practitioner Network and Clean Energy Solutions Center webinar. I don’t want to
take up too much of our time today. I just wanted to introduce the Sustainable Energy
for All Initiative and our Practitioner Network to give some context to the discussions, especially
for those who might be joining us for the first time. Next slide, please.
So the Sustainable Energy for All Initiative was established in 2011 by the U.N. Secretary
General, Ban Ki-moon to call on governments, businesses and civil society, a broad range
of stakeholders, to implement means to action to accomplish three interlinked objectives
by 2030. And these are ensuring universal access to modern energy services, doubling
the global rate of improvement in energy efficiency, and doubling the share of renewable energy
in the global energy mix. The U.N. General Assembly member states have recently declared
2014 through 2024 as the decade of sustainable energy for all. So energy is now on the forefront
of the global development agenda, with the upcoming sustainable development goals, as
well. Next slide, please. So many countries and various stakeholders,
such as businesses and NGO’s have already made commitments to support a wide range of
energy services to deliver universal energy access by 2030, as well as addressing the
Sustainable Energy for All Initiative’s other objectives, as well. Some of these commitments
come from our Energy Access Practitioner Network members, who have been an integral part of
Sustainable Energy for All from the start. Next slide, please.
The Energy Access Practitioner Network was established as the U.N. Foundation’s contribution
to the Sustainable Energy for All goal of universal energy access by 2030. We focus
on off-grid rural electrification, and we just celebrated our third anniversary, seeing
a tremendous growth from about twenty members when we started to over 1,800 members now.
These 1,800 members have been recently surveyed, and we’ve seen that just a quarter of these
members who had responded to the survey have reached over 230 million people in their lifetimes.
So we’re seeing big growth in sector, and if you are not, if any of our attendees today
are not an Energy Access Practitioner Network member and you are interested in joining,
please do reach out to me after the webinar so that we can get you to join. Next slide,
please. So as many of you may know, the International
Energy Agency estimates that micro-grid and decentralized energy solutions will account
for roughly 60 percent of the electricity access needs for those who now lack it. In
the survey that I just mentioned, only one-third of our respondents, responding members, reported
using any kind of financing scheme such as pay as you go. Many are still expecting just
one time cash payments. So we thought that a webinar like this one, where some of our
illustrious practitioner network members will discuss their organization’s approach to
pay as you go models and how to reach scale would be useful to many of our members. This
is going to be a bit different than our previous webinars in terms of context and format, so
we’re very excited and we hope that you will enjoy it. And with that, I’d like to
open up the discussions with the panel, with our first panelist, Mansoor Hamayun from BBOXX.
Thank you.>>MANSOOR HAMAYUN: Hi there. I hope you guys
can hear me.>>SEAN: Yes, we can.
>>MANSOOR: Oh, great, great. Thank you for the invitation first. So the purpose of this
presentation is to outline what BBOXX is, what we’re trying to achieve and how we’re
trying to achieve it. So if someone can help me alternate slides?
We started BBOXX with a very bold statement. We realized that rural electrification and
energy access is a global problem, and we needed to create a company that had a global
impact. And the aim of the company is to be able to electrify at least 20 million people
by 2020. And I would love to tell you guys how we’re planning to do that. So if we
can move on to the next slide. So what I’ve achieved so far. BBOXX is four
years old at the moment. To date, we have installed over a million watts of solar panels
on the roofs in our fourteen countries. We have 41,000 products sold of various sizes.
We have 140 employees in the company. We have 28 wholly owned distribution points in Kenya,
Uganda and Rwanda. Overall, as a company we estimate that we have impacted over 200,000
people’s lives to date. Next one, please. So what does BBOXX actually do and how do
we do it? So we can divide our business into four key categories and we try to develop
solutions around that. First, the category for us is product. We have a wide range of
products to be able to cater to a wide range of needs in the marketplace. Our systems go
from 15 watt systems all the way to 1.5 kilowatt systems. So basically from small based phone
charging all the way to solutions that can empower a small clinic or a small micro-finance
bank, etc. We also have our own retail network to be able to reach and customize, mostly
from a service perspective, and I will tell you a bit more about why we are doing that,
as well. Financial access is a key by which we’ll be able to reach and customize as
well, so developing technology and solutions around both the technical framework and legal
framework is a key part of our activities, as well. And finally, the last part of our
story is really about information access. And that’s really about educating wealth
customers, the sales network, and the technical base of the company to be able to cater for
the growth of the pay as you go solar market. Next one, please.
The way we do this is smart solar as a service. We have a wholly owned way of installing our
products. So through our own network of shops in Kenya, Uganda, and Rwanda, after the credit
check, etc., we actually install the kits. Our boxes are pretty smart. They have remote
monitoring and two remote control capabilities so we actually can monitor where people are
using the products, and more importantly, be able to service the products remotely in
case we detect a problem with them. We can also locate where the products are and what
they are up to, if there is any movement, anything unusual happening. All in all, we
try to learn as much as possible from our customers and end users and be able to offer
a good service to our customers. So the three key challenges for us to be able
to reach a mass market is the physical access. The physical access, by that we mean our ability
to reach end customers in rural areas. One of the key realizations, as I’m sure many
people on this call know, there is no Wal-Mart, no tests for its inspiration in large parts
of our operating regions. And in partnering with local distributors, etc. can be tricky
at times. The sales part tends to work, but the service part doesn’t typically work
too well. That’s why we have taken an approach of being able to create our own retail network
in East Africa, in Kenya, Uganda and Rwanda, and we have enabled that by a series of technologies,
from hand held devices and phones to be able to see our own systems, we log customers to
do credit check, to ERP systems and shops and accounting software to be able to link
everything together. And more importantly, also being able to take advantage of our modern
technology such as mobile money, and being able to create that vertically integrated
service provision that customers actually need for us to be above the scale in our regions.
Yes, the financing. So the next big challenge for a company is always the access of financing.
And I’m sure a lot of people have tried to partner with local MFI’s, etc. and banks.
Although we enjoyed localized success many times with micro-financing institutes, etc.,
we were nowhere really about to scale it up nationally, let alone pan-Africa. And that’s
the reason we decided to do financing in house. And ultimately, the value proposition for
customers of moving from an out front cost sale product to energy in a service or payment
plan product is a game changer. And the way we did that, to be able to support that, is
having the right legal infrastructure in place and operational infrastructure in place to
be able to attract the right sort of investors, to be able to give companies of all sorts
debts that we need to be able to extend now to end customers and draw the payment plan
business. So that’s been our key challenge that we’ve been trying to overcome.
And training. Essentially, what many of us are trying to do is give people electricity
for the first time since the dawn of mankind. And as we go up in energy ladder, especially
from people wanting to use radios, more functionality, the customer needs to be educated, the sales
agent needs to be educated, the technical services need to be educated. So as a company,
we have a huge focus on training. We have training centers wherever we operate completely
ourselves, in Kenya, Uganda and Rwanda in specific. We educate both our employees in
a regular fashion with new systems and when new products come into place, but also the
customer training side. And this is where the smart technology kind of comes into play,
as well. Because we are able to learn how our customers are using the product and if
the original thought of what they were supposed to do with the product was actually what they
do. It’s something that can help understand better in training the customer, as well,
about how to use the product better in the future. That’s basically it for my side.
Thank you very much.>>SEAN: OK, thank you Mansoor. We’ll turn
it over to Klara now.>>KLARA LINDER: Hello everyone. Can you hear
me?>>SEAN: Yes we can, Klara. Thank you.
>>KLARA: OK, cool. OK, yes. I’m very honored about the invitation to present Mobiso’s
approach, and I chose to split it up into three parts. So firstly I’ll run you through
what Mobiso actually offers, and then who our customers are, and then I’ve picked
a few challenges that we faced in our scale up and I want to share how we dealt with them.
So this is a picture of the actual hardware product that Mobiso has, so it’s our PD
system, actually complete with cabling and lights, and some other appliances to make
use of the electricity that is generated. And the key difference to regular solar systems
is that orange box in the middle. It’s our Mobiso controller, but I’ll come back to
that a bit later. So we offer four different setups of this technology, and make them affordable
through spreading the total cost over a period of three years. And included in that total
price are system installation, customer education and also the after sales service, which we
provide to our customers free of charge throughout the entire credit period. And currently we’re
also working on a post-warranty service so that customers that have a system that truly
belongs to them are still able to make use of our existing maintenance infrastructure.
So now that’s a picture of one of our families, our customers, they are part of the VOP and
they live off the grid. That doesn’t mean that they are undemanding, and so with our
systems, they get to use more than just lights and phones. They can run radios and TVs, they
can run business appliances like this one, it’s their professional phone charger where
you can charge several phones at the same time and make a lot of money in rural areas,
and you can run your own DC fridge. So the enabling factor behind is the orange
box. On the left hand side you see our Mobiso controller. We put it in each system, and
it tracks usage and payment remotely. And the customer pays through Empresa and then
automatically the system unlocks for another month. Also, the system shuts off in case
of payment default, and it’s impossible to say that without breaking. With the data
that is sent from the Mobiso controller, our local offices deal with the after state, so
it’s in a more effective way. So here you see some screen shots of our powerful
back end that enables us to offer this after-sales service under commercial circumstances. Also,
we’re able to target customers based on known preferences and we maintain a long term
relationship with all the data that we’ve collected from them. And this data is accessible
to all our staff in real time, and we have, just like Mansoor said, also the mobile technology
in place so that you can access this data from wherever you are on a smart phone. And
on the second screen shot you see a picture of our map where we locate all the systems
in the field, and which makes it easy for us to find customers who maybe forgot to pay
and their systems are off, and we get to talk to them.
Alright, so a bit more about these customers. Currently, Mobiso is available in Tanzania
and Rwanda. And there, the process of becoming a Mobiso customer I outline here. So we have
a very decentralized network of so-called market huts, which are located in different
areas close to markets, and there customers can approach us and first have to pass either
a credit check, where we assess their willingness and also their ability to pay. We have stock
right there next to the market hut, and the customer is bridging the last mile on his
own. So in the middle you see one of our customers on a motorcycle driver bringing home the system.
When they’re at home, a local technician that we’ve certified before is waiting and
is installing the system in his home, because it’s quite advanced technology. They are
big systems with 40 kilo batteries, so it’s not really viable to let the customers do
this installation completely. And once done, we have a follow up call to find out if everything’s
fine and that the customer has had a happy experience.
What Mobiso also does is we try to offer productive appliances. And we foster productive use through
our business out of the box. Here you see an example of Siti in Rwanda, who is running
a barber shop that is powered by Mobiso. We also have appliances in place for that.
Here is another example, which I thought was quite exciting for the World Cup. One of our
customers, he, when the children wanted to watch this game, he had the village cinema
where you see how many people were watching the World Cup, and it was a great experience
for them to take part in the World Cup, but also for him it was really interesting to
have that business up and running. Alright. In the third part, let me come to
some of the challenges that we’ve faced. And so one challenge that we faced at the
beginning of our scale up was we had those good quality German solar systems and we want
to assure proper installation, even though we install maybe hundreds or thousands of
systems in a week. And in the end, what we came up with is the pluck and play version
where we only need one technician who goes through a week-long training, and then he’s
able to put up the system within one hour and all that he needs is a hammer and maybe
a ladder that the customer already has at his home.
Another challenge that we faced at a later point was how to actually find trained staff
that helps us in our growth. And I don’t know if you know about the school system in
many of those East African countries, but it’s very tough, and so in the end we came
up with our own Mobiso Academy. And it’s basically a place where we train people in
different staff positions, from marketing through installation or maintenance, and even
provide them with a job guarantee once they’ve passed their courses. And we’re also made
a 3-minute video explaining more about our Mobiso Academy, and it’s on the website
if you want to have a look at it later. And then our third challenge was how to actually
get into those rural areas, because that’s where the off-grid population lives, right?
And similar to BBOXX, we also set up our own distribution network, because nothing was
in place that we could feed back on. And we created that market hut structure in which
small, decentralized sales spots are everywhere where our customers are, and we make sure
that they have enough stock all the time and we provide them with the right technology,
smart phone apps, for example, that they are able to do the business in those rural areas.
Also, not only our customers pay us over Empresa, mobile banking, but also all our staff is
paid with mobile banking, which makes corruption much less pronounced than in other businesses
where people, where the money has to go through several hands. And also we worked a lot on
the packaging so that it allows our customers to cover the last mile on their own, and we
set up a network of maintenance technicians that enable us to repair any kind of system
fault within 48 hours. OK. That was it from my side. I think it was
quite a quick summary, and I’m sure you have a lot of open questions, so feel free
to use that little chat on the bottom or look at our website or write me later on. Thank
you.>>SEAN: Great, thank you Klara. And we’ll
move along now to Graham Smith.>>GRAHAM SMITH: Hi everyone, hope you can
hear me.>>SEAN: Yes, we can.
>>GRAHAM: Great. This is Graham Smith from Off Grid Electric. Just a quick thank you
to the team for organizing the call and for everyone for joining today. I know that we
have a lot to cover, and so in the interests of time, I think I’m going to be clear that
I won’t be able to go into too much detail, but I welcome and questions or follow up that
people may have. So broadly speaking, when we think of energy access, we’re thinking
of the one in five or one in six people around the world who lack access to light and electricity.
Most of these people are using kerosene. Some use solar lanterns, but the vast majority
are using kerosene. And in our opinion, that’s an incredibly expensive, inefficient form
of energy consumption, along with one that carries some extreme negative environmental
and health impacts. So similar to the others on the call here today, our view is that distributed
household solar is the way to address this challenge. And more than that, we feel that
it also presents an opportunity to leapfrog some outdated approaches to delivering energy
access and making a really large scale difference. So if I can advance to the next slide?
So what we strive to do is to provide affordable, reliable energy services to individuals and
communities that lack access. Simply put, we aim to make an aspirational, modern energy
lifestyle accessible and affordable to everyone. And this essentially boils down to getting
the right product or service to the right people in the right place at the right time
for the right price. May I ask for the next slide, please?
So I think everyone, or at least to date the people who have spoken on the call, refer
to the idea of solar as a service. For our customers, they refer to this as M-POWER.
What we deliver is a complete technical, operational and financial model that makes high quality
renewable energy services available to anyone, anywhere. So similar to the other groups,
we’re using a pay as you go approach. And customers pre-pay for energy services through
their mobile phone, and in return receive secure unlock codes via SMS. They customers
enter these codes into small scale solar PV systems installed in their homes by a local
entrepreneur, who we refer to as an M-POWER agent. And they use the energy generated from
their solar panel installed in the battery of their M-POWER system. So from our perspective,
this eliminates a lot of the costs and the risk involved with retail markups and cash
held products. It also removes a lot of the challenges that customers face or have to
bear with more traditional ownership models. If we could move to the next slide please?
Just taking a quick step back, what we’ve seen are four main barriers to the widespread
adoption of household solar in Africa, in particular. The first is up-front costs. The
second is risk aversion. The third is service, and the fourth is distribution. So without
draining through these slides, I think probably everyone who is working in this space is very
familiar with each of these. If we can move on to the next slide, please?
So what we’ve done is designed our model to address each of these barriers. We reduced
the up-front entry costs. We try our best to eliminate the risk. We provide the service,
and we reach beyond the last mile. So again, this goes to the idea of getting the right
product or service to the right people in the right place for the right price. We leverage
economies of scale in the production, shipping and financing, which combined with the pay
as you go approach dramatically reduces the up-front cost to the customer. We give the
customer the flexibility to make payments on schedules that reflect their cash flows.
We’re also allowing them to adjust their system configuration and accessories. As part
of their payment for services customers receive ongoing support from a network of agents,
as well as our centralized support services. Households are charged a simple daily fee
and we provide the customer with the services to make sure their system remains active.
So should the system require repair, we fix it, and should the system need to be replaced,
we swap it out for a new one. Should a customer elect to move from one level to another and
increase the system size, we offer that as well. We also utilize our custom built software
and mobile applications to enable an e-commerce or m-commerce like supply chain, which means
that we’re meeting the customer where they are, rather than having them engage in a fixed
location. We also align the incentives throughout the chain to minimize the investment costs
on our end, but also to ensure rapid delivery to the customer’s home.
So not here on the slide today, but I think just building on what some of the others have
spoken of, we sort of see a convergence of five factors that have made this model possible
today. The first, that’s already been highlighted, is the growth of mobile money, making cashless
electronic payments possible for an unbanked mass market. So Empresa and several of the
other mobile operators’ platforms, we also see the proliferation of smart phones and
the ubiquitous nature of data has enabled mass distribution for our service network.
The decline in cost of lithium batteries, as well as the decline in cost of LED lighting
and the decline in cost of solar panels have all helped to push the cost curve down on
household solar and make it a truly appropriate solution and a cost effective one.
So just moving to the next slide. For us, the entry point for our level 1 system, which
is our standard offering, is priced below the cost of kerosene, so this ensures mass
market affordability. And as I said, we really view kerosene as the competition here in terms
of what the incumbent solution is. Each of our service levels are then designed to allow
customers to progress to higher levels as their ability to pay grows, and also as their
needs increase. So customers typically would start with basic needs, which are effectively
lighting for their home, phone charging, and increasingly we see radios being sort of an
entry point. From there, they move up towards more aspirational goals like televisions,
satellite decoders, possibly tablets, and looking for other productive uses for small
businesses. So with the pay as you go approach, again so much is we aim to provide customers
with flexibility and mobility. They only pay when they use the system. So rather than locking
into a long term agreement and having them be in a position where they’re obligated
to payments, they’re paying simply as they use the system. Should they move or travel
and no longer need the system, we can redistribute the hardware to another home to insure that
it’s being used. In our view, it’s combining the mechanics of this pay as you go approach
with the core elements of the service model that we think make it highly scalable. And
there’s just a few other points on that slide, speaking to the idea of service and
also the technology. But maybe we can move forward to the next slide.
So in the interests of time, I don’t want to drain this too much, but I just wanted
to highlight a few of the impacts that we’ve seen. Although we are a for profit organization,
similar to the others, the impact of our work is very important to us. And also we hope
to see this grow as we grow the company. So currently we focus on Tanzania, but are planning
to expand throughout East Africa. And much like the others, we have ambitious goals of
ultimately lighting Africa within the decade. I think maybe we can move to the next slide.
So again, I know we’ve only really had a chance to scratch the surface here, so if
there are any questions or follow up, please be in touch. Again, I’m happy to speak with
anyone after the panel today, but with that I’ll pass it over to Paul.
>>PAUL NEEDHAM: There’s my microphone. Can you hear me now?
>>SEAN: Yes, we can, Paul. Thank you.>>PAUL: OK, good. Thank you, Graham. And
thanks for the invitation. My name is Paul Needham, and I’m the President and Co-Founder
of Simpa Networks. Here in India we operate as Simpa Energy, and we sell solar as a service
to energy-poor households and micro-enterprises in rural India. Some people call it pay as
you go. We call it solar as a service. And like the other companies here, we’ve developed
a for-profit business model that is mobilizing investment capital to put an end to energy
poverty. And I’m a firm believer that the only way to end energy poverty is to unlock
private capital at scale. We have to make clean, distributed energy investable. And
like the other companies here, I’m convinced that solar as a service or pay as you go is
the right way to mobilize that capital. So here’s how our model works. First, the
customer makes a small initial payment to have a Simpa-powered solar energy system installed.
There’s a credit check process, as well, of course. But the system doesn’t work unless
you top it up by purchasing energy credits. So customers make their payments to a local
agent, who runs the transaction using his mobile phone. Again, there’s a small initial
down payment for the device, and then pay as you go for the service. Each of these payments
for the energy service also add up towards the total purchase price, and once the customer
has completed the contract, the whole system unlocks permanently, generating electricity
free and clear. We offer a range of products, but our most
popular product looks like this. There’s a 40-watt panel, a 26-amphere battery, two
or three energy efficient LED lights, and an energy efficient DC fan. The fan is actually
a big selling point in western Uttar Pradesh, where we’re operating, in Northern India.
Summer temperatures can climb to 48 degrees Celsius, nearly 118 degrees Fahrenheit. So
fans provide relief from the heat and mosquito control at night. But the fan uses five times
as much energy as an LED light. So the system has to be large enough and powerful enough
to meet the customer’s demands. And that, of course, increases the costs. Our customers
cannot afford the up-front costs of a system this powerful, which is why we believe a solar
as a service model is so important to unlock market demand. Consumers pay for the energy
services that they value. We developed our own proprietary prepaid metering
and mobile payments technology. When customers make a payment, they receive a code via SMS
to their phone. The customer then goes home and enters that code into their Simpa home
energy system, and that unlocks the system for the prepaid amount of time. Our customers
live in off grid villages and in bad grid villages. There are 400 million people in
India who have no access to electricity at all. That’s about 72 million households
without a grid connection. And there are probably just as many families that have an extremely
unreliable connection. Power cuts are rampant, and we focus on bad grid villages that get
less than 12 hours of power per day. But the Indian market is notoriously difficult,
but there are three reasons why we are really excited about the opportunity here. First,
because education is highly valued. People readily invest in their children’s future.
Our customers often highlight the educational benefit of having lighting and cooling for
their children’s studies. Secondly, because rural India is highly aspirational. The ancient
divisions of caste and class are everywhere being challenged. People are pursuing new
livelihoods and new opportunities. Many people in rural villages have relatives in urban
towns. They’ve seen the urban life, and they aspire for city comforts. And third,
because it’s really a very large market with great solar resources.
We sell through local village level entrepreneurs, our Simpa Urga Mitra, your energy friends.
Over the past twelve months, we’ve recruited and trained over 2,000 sales agents. We recruit
ambitious, local entrepreneurs and we provide them opportunities to develop new skills and
increase their incomes. As you might expect, they appreciate the extra income, but what
I find exciting is that many of these solar entrepreneurs also say that they really like
being on the cutting edge, selling solar and improving people’s lives. One of these entrepreneurs
put it to me this way. He said, “When we give a family an extra four hours of light
every night, we extend their day. We give them more time to be together, more time to
work, more time to study, more time to talk. We not only give them four more hours of light,
we give them four more hours of life every day.”
We support our sales agents with training and branding, such as these large scale wall
paintings, a common strategy in rural India. We also have marketing vans that travel through
the villages and we distribute posters, banners, flyers. We host village level marketing events
that attract big crowds. We also recruit people from the rural areas to become our solar technicians.
They go through an initial 7-day training program before becoming certified to work
with Simpa. Then we provide ongoing skills development training in everything from system
installation, maintenance, repair, workplace safety, proper customer communication etiquette,
and more. And this is typical, I think, of many solar as a service business models. Because
companies like us only get paid if our customers’ systems are well maintained and properly serviced.
It’s in our interest to invest in training. So rural skills development is an added social
benefit of this growth in solar as a service business models.
I want to now return to this question. With all this business model innovation going on,
is there finally a sunny future for the billion plus people who today lack access to electricity?
Can these solar as a service business models really scale up to meet the need, to meet
the massive market opportunity? All of these models require capital to invest in the up-front
costs of the solar equipment. How much capital is going to be needed? Where is it going to
come from? To answer these questions, I’ll reflect
on what we see here in India. In India, a typical energy-poor household has on average
five family members, and their basic electricity needs can be met by a small solar home system
that costs about $200 up front. We can disagree about whether that is $100 or $300, but for
the sake of argument, let’s go with $200, which means that to meet the basic electricity
needs of a single person requires an up-front capital investment of about $40. The math
is pretty simple. This is a large, large scale, there’s a billion people, ten to the nine,
there’s a billion people, $40 per head, that’s $40 million. And you might think
it’s a little more, a little less, but that really depends on how much power and energy
we’re talking about providing. So I’ll stick with this simple assumption just to
illustrate the point. The point is that real scale needs to be financed by real money.
And that’s only going to come from mainstream commercial investors. Private capital that
is seeking market rates of return at scale. But there are two other categories of investors
that have critical roles to play to scale up the sector. First, impact investors. They
typically come in early, when the company is focused on their proof of concept phase.
And at this phase, early stage companies are developing their market, their customer value
proposition, and they need enough capital to get out into market, to iterate their model,
and to reach some initial scale. Perhaps 10,000 end users, 2,000 customers. For an individual
company, this could require anywhere from $100,000 to $400,000 in capital, it really
depends on the model. And most companies in our sector have been backed by innovative
and pioneering impact investors. The second phase of development in our sector
is happening now, as many companies graduate from this proof of concept stage and start
to focus on proving commercial viability at some meaningful scale. As a sector, in this
phase we’re growing from reaching 10,000 people to 10 million people. And the capital
requirements become significant. As with my assumptions here, that’s looking like $400
million just to fund the up-front capital costs of the solar equipment for 10 million
people. In this phase, we’re starting to outgrow the early stage impact investors.
And now development finance institutions have a critical role to play. I’m talking about
groups like IFC, ADB, FMO, DFID, Proparco, etc. They are beginning to lead investments
to provide long term, patient debt, and to help companies in the sector scale up and
prove the commercial viability of their models at some meaningful scale. And this is really
a precondition of the next phase. Let’s remember the goal. We want universal
access to clean, reliable electricity. We’re not satisfied if we reach only 10 million
people. We need to reach a hundred times that many people. We need to reach a billion people.
To achieve universal energy access, our sector needs to unlock private capital. And to do
that, we need to deliver market rates of return at scale. Private capital doesn’t care about
the social impact. It cares about earning financial returns. That’s where we need
to go. And as a sector, that’s where we are going.
Solar as a service is the right way to expand access to clean, reliable electricity. It
requires up-front capital investments for the solar equipment. But that capital can
be recycled over and over again as customers pay for the energy services that they value.
It’s a business model that creates new skills and new jobs for people in rural areas. And
most importantly, new opportunities for the families that gain access to clean energy
for the very first time. And when we finally reach a billion people with clean, reliable
electricity, I think the sector will really just be getting started. Most people will
not be satisfied with only basic levels of energy. Most people will want more power.
More power to run TVs, more power to run refrigerators, coolers, water pumps, computers, power tools
and other machines. Energy is opportunity, and opportunity cannot be denied. I’ll turn
it over to Jacob.>>JACOB WINIECKI: Thanks, Paul. Can you guys
hear me?>>SEAN: Yes, we can, Jacob.
>>JACOB: Great. So my name’s Jacob Winiecki. I’m an energy sector specialist for CGAP.
CGAP is an acronym for the Consultative Group to Assist the Poor. The website is cgap.org.
CGAP is an independent policy and research institution that’s housed at the World Bank,
focusing on financial inclusion. So we develop innovative financial solutions for the poor
through active research partnerships and engagement with the private sector, financial service
providers, policy makers and funders. We recently launched an initiative called Digital Finance
Plus, which focuses on the use of mobile money and branchless banking to expand access to
essential services and utilities like clean water, energy, health and education. I’m
coordinating CGAP’s work in digital finance in energy, which is primarily focused on the
emerging pay as you go solar sector. So I’ll be moderating a short discussion with our
panelists. And I’ll start off with a question to Graham.
So Graham, in your presentation you described Off Grid Electric as delivering energy as
a service, so rather than being a pay to own or leasing arrangement. Can you tell us a
little bit about where you see the advantages to this model, and if you anticipate having
to modify this as you expand to new markets, or if there are regulatory changes in the
markets you operate in?>>GRAHAM: Sure, thanks Jacob. And I think,
from the others, I would certainly invite them to comment on this as well, because it
sounds as if there’s been certainly a movement towards the service structure over the last
few months or years for many actors in the space. So I think we’ve probably collectively
covered the main points in terms of up-front costs, risk reduction, maintenance and repair,
and then also distribution. I think for the customer, what the service really comes down
to is that it allows for a lower daily price, flexibility and mobility, support and maintenance,
and then the ability to adjust their level on the accessories or start and stop as needed,
rather than worrying about taking ownership of a particular unit. For the company, I think
our having a relationship with the customer is probably the thing that we value the most
there. We can achieve economies of scale by centralizing the production, distribution,
training, support. And when it comes to the economics of an individual unit, we can reclaim
or redistribute our assets as needed based on what sort of the market’s telling us
the customers, we’re not tied into the idea of a particular customer will need a particular
unit and how that works as they mature and as their needs change. And we also think that
this gives us the opportunity to scale quickly as we enter into new geographies.
So to the idea of whether we we’ll have to modify as we expand to those new markets,
I think the majority of what we do will probably remain the same. Certainly there are aspects
that we need to adapt as we look at the context of a local environment. Some are probably
more obvious, say the language we use for the software, the currency we price and things
like that. But there’s probably others that are a bit more nuanced. So what happens when
we enter a region and it’s different dynamics with respect to demographics, purchasing patterns,
distribution channels, one example would be looking at data like population density and
how that affects our ability to provide service, or how we set customer expectations in terms
of response time or system performance, things like that.
But I think what’s interesting, and probably more broadly applicable to not just the group
speaking today but probably a lot of the listeners, is regulatory changes. And again, I think
most of what we do will probably hold as we expand, but it’s something that I think
we collectively have to think about as something that certainly warrants a broader discussion.
Obviously, regulatory changes impact more than just our work. And maintaining supporting
policies or advocating for new policies is something that I think will probably take
a joint effort. The issue of that on solar products in Kenya, a market that we aren’t
in today, but that’s an example where a regulatory change could have a major impact
on everyone in the space, not just the individual company. So whether or not that market grows,
whether or not others enter into the space, what existing actors in that space have to
deal with, I think regulatory hurdles either supporting or protective policies are probably
going to be things that collectively, as the market matures and, as Paul suggested, if
we’re discussing the idea of trying to reach a billion people, those are sort of the hurdles
that are kind of unknown right now, and certainly will take more than just any one individual
actor to address.>>JACOB: Good, thanks Graham. Our next question
is for Paul. So the payment enforcement technology used in a lot of pay to go solar products
requires businesses to make sure your customers have convenient ways to make ongoing payments,
and sometimes that they have reliable cellular coverage to process the payments or communicate
with the solar product itself. So how has mobile money availability and cellular connectivity
influenced Simpa’s technology and business model choices?
>>PAUL: Good question. Yeah, when we looked at where to take this and decided to come
to India, we saw this was going to be a major challenge. Mobile money does not have mass
adoption in India. Empresa is here, Airtel money is here, they’ve launched, but they
have very little adoption. So we simply cannot rely on mobile money as a channel either to
pay our people, which I think is very innovative, I love that, or to receive payments from our
customers. We can’t do it. We had to build our own channels to sell the Simpa recharge,
and of course that does add cost to the model. But we try to always look for ways to combine
roles for added efficiency. So for example, many of our Urga Mitra, the village level
entrepreneurs, they’re also not only generating leads and signing up customers for us, but
they’re also collecting payments from customers. And as they sign up more and more customers
around them in their villages, the income opportunity from selling Simpa recharge becomes
just as significant as selling another system or signing up another customer. So I think
there are some synergies there, but that was absolutely a challenge when we entered the
market. I think it’s going to look different in five years, and we’ll be ready, and we’re
certainly tracking that. Cellular connectivity can certainly be a problem.
Again, when we looked at the market we were, when we started selling here we selling in
the south of India in the state of Karnataka, and we were selling in mountainous areas,
and many times customers just don’t have a reliable cell connection inside their house.
They just couldn’t rely on there being a good cell connection inside the home, just
like in San Francisco sometimes. So we designed a model where we’re not actually dependent
on that availability of the cellular network in the home itself. As long as the customer
has access to mobile phone, they can receive our codes via SMS, and then they manually
enter those codes into the Simpa energy system.>>JACOB: Great, thanks Paul. So I have a
question for Mansoor. So two of the big risks that I often hear associated with pay to go
business models is that first, somehow your customers will figure out a way to use the
product without paying, either through things like tampering with the hardware or hacking
into your software, and second, that customers will just decide to stop paying once the product
is actually at their home. So I’m curious from BBOXX’s perspective, how real are these
risks, and how are you as a company structuring your product and your business model to mitigate
these risks?>>MANSOOR: Sure thing. I guess the high level
answer to that is we’re trying to demonstrate value for money. The moment that perception
drops among customers then problems of this sort can become very real. And there are obviously
technical ways to be able to overcome the tinkering problem and making alerts in the
system, etc., etc. that allow us to see if someone is doing something they’re not supposed
to do with the systems. But more overarching than that is it’s an important thing to
be able to demonstrate the value of the money they’re paying to BBOXX, but also to be
able to incentivize good behavior. Like a good paying customer, at BBOXX we’re trying
to implement a bonus program effectively. People who are paying on time, etc., they
get rewarded for their good behavior. And it’s very important for us to make sure
that each payment that people are paying us also looks a bit like an investment for them.
And that’s really part of our broader strategy, we concentrate on a long term relationship
with the customer. And that largely is working well. I mean, to date, we haven’t had many
people complaining about or trying to tamper with our products to overcome the whole payment
issue. But the other interesting thing that should
be noted as well in any of these morals that are trying to get implemented, is that one
needs to really differentiate the question of ownership versus service. Because in our
model, the ownership is transferred to our customers, which we think is an important
incentive for people to pay off and actually to unlock, that you own something like that.
And people take the different affairs, and as we’ve seen in this conversation, have
different approaches to that. And the service is an element on top of that. So as many of
us have spoken today, unless we are unable to design to provide service to the customers
and make them realize and see the value that continues to support is required to maintain
a healthy product, but more importantly also to help the customers upgrade the energy ladder,
I think if that story is sold well throughout the network, many of these risks are mitigated.
>>JACOB: Thanks, Mansoor. So our next question is for Klara. It seems like a lot of energy
enterprises are taking on the financing in customers themselves, oftentimes out of necessity
because perhaps there might not be a local partner that could finance the customer. Do
you see opportunities for Mobiso to work with banks, or local banks, I should say, and micro-financing
institutions in the future, or do you think that this kind of technology enabled finances
is best suited for energy companies to directly serve customers without partnering with local
financial institutions?>>KLARA: Yeah, Jacob. So I think a solar
company partnering with a micro-finance institution on paper looks almost like a non-brainer,
so you think, ah, yeah, they have a lot of VOP customers and we have the technology and
we don’t know anything about their customers, so let’s collaborate. But I think the reality
is that at least in Sub-Saharan Africa, in contrast to Bangladesh where one model similar
to that is really successful, those micro-finance institutions, they’re not in rural areas.
They have outlets in urban centers and they use a few guys who are driving around on motorcycles
to those rural areas, but they’re not there yet. So at times we couldn’t really find
anyone to collaborate. And also, I think in addition to that, just like many bankers we
know from, I don’t know, European or North American context, those bankers are quite
risk adverse and don’t really want to go into any new ventures that they haven’t
studied thoroughly enough. So at the moment, I think our way of doing the financing on
our own just works best with the pace that we are having. However, we are talking to
some quite visionary leaders in the FIRE sectors, and let’s see what comes out of that in
the future.>>JACOB: Great, thanks Klara. My next question
is for Paul. One of the questions that I often here is how are these pay to go solar companies
measuring portfolio health? And a number of companies are using language, I think borrowed
from the micro-finance sector to describe things like portfolio at risk and your repayment
rates. So how do you approach the challenge of monitoring Simpa’s customer portfolio,
and what metrics have you found to be the most effective?
>>PAUL: Well, we also take our cues from the micro-finance sector. But of course, our
models are different. So we take it a bit further to pick up on some early warning signs.
For example, we measure something called “in the dark.” When a customer runs out of credits
and we know their system is shut off, we say that that customer is in the dark. And it’s
actually normal for customers to wait until their system’s shut off before going out
to make another payment. Perhaps this is just normal consumer behavior, right? Even for
essential things. How many times have I run out of toothpaste or milk, for example, and
only then come to the shop for it? So I think this is normal behavior, but we want to track
it very closely, because even if it’s normal for people to fall into the dark, we expect
them to pull themselves out of the dark within the next four to five days. So we track a
metric called “percent in the dark,” and we track it at the branch level. We try to
keep that around 10 percent, which we’re finding is turning out to be normal. I love
the ideas that were mentioned earlier about incentivizing your customers to do the right
behavior, like Mansoor was talking about. And we’re starting to do a bit more of that,
to incentivize people to top up before they go into the dark.
We also track portfolio at risk. If a customer is 15 days behind on their expected payments
to us, then we say they are par 15, they’re in the par 15 bracket. And we track, we track
par 7, par 15, par 30, etc. And you know, as I mentioned before, it’s very important
for our sector to really speak the language of investors. So we consciously adopted the
language that’s used by micro-finance companies, who in India have been very successful at
raising private capital, as well. And because we’re going to be talking to many of the
same investors that are investing in micro-finance, and we want to think about our portfolio and
use some of the very same metrics. We also obviously track true defaults, and we work
very closely with customers to take back their systems if they really don’t want to use
the thing, that customer value proposition is lost.
And one way in which our model is different than banking models is that customers can
prepay for any number of days or weeks or months in advance. So while some customers
pay late, others are paying far in advance. So we track the actual payments received,
relative to the payments we expected to receive by a particular date. And it’s probably
the experience of many other companies here, but we always have about 120 percent more
revenue, more cash, than we would expect on a particular date, because many customers
are buying many days in advance, sometimes months in advance.
>>JACOB: Great, thanks Paul. I’ll actually ask the same question of Graham, so we’ll
move from India to East Africa. So how does Off Grid Electric think about measuring and
reporting your portfolio health in Tanzania?>>PAUL: Sure, and I think what I’m taking
away is that I certainly need to sit down with the rest of the panelists here and we
need to compare notes at some point, because I think a lot of the things we’re doing
are similar but with subtle differences, or we’ve learned things from the market. So
our modern activities are driven by the data we collect through our software and our mobile
application, our agent network, and then the interaction that we have with our customers
through our customer support and call center. So we collect a lot of data. But as I mentioned
earlier, I think we view our relationship with the customer as ultimately being the
most important part of our model. So although we aren’t a micro-finance organization or
a lending group, we do have to make some considerations for our overall portfolio. We look at indicators
that are familiar to both micro-finance but then I think also ones that are very similar
to the mobile phone industry, so metrics like our crew, customer churn, the frequency and
size of payments are sort of similar to as Paul described there. We also look at metrics
like the number of days that a customer utilizes their system. We don’t refer to it as days
in the dark, but I think effectively we’re trying to accomplish the same thing, which
is say how many days is the customer using the system over the number of days that they
could be using the system. Where we’ve probably found the most value
and learned the most, though, is through the customer service component. And since we provide
that support, we frequently hear from our customers. And the most effective thing for
us to do, to keep our customers happy, the most effective thing is really for us just
to listen to them. This allows us to be making adjustments to our offering, to refine aspects
like customer education, how we set expectations with them, and also to proactively deliver
messaging and sort of design and deliver interventions that hopefully will allow us to meet customer
needs before they’re even explicit. So following on some of the comments that Paul made, we
also track the days where a customer is not actively using the system. What we’ve learned,
though, is that sometimes this isn’t as simple as just the ability to pay. Sometimes
what we’re seeing is that it’s related to other factors. For example, further education
that’s needed in terms of how to make a payment, confusion around the entering of
a code into a system, the ability for a customer to understand when they actually need to top
up, and one is perhaps an environmental consideration like rain or cloud cover versus something
that’s actually a system performance related issue. I mean, those are all things that if
we didn’t have our customers telling us about, we wouldn’t necessarily be able to
intervene, and we wouldn’t see the progression in terms of customer use. So I don’t think
it’s necessarily just a matter of risk that we view in terms of payments on the portfolio,
but it’s also a matter of what are the contributing factors, or what are the underlying causes
for some of those things that might cause fluctuations.
But ultimately, I think we are trying to do something, so maybe what the rest of the groups
have highlighted, and that is that we’re trying to really demonstrate that off grid
households are an investable asset class. We’re trying to grow the sector. We’re
trying to bring people from darkness into light, and ultimately give them opportunity.
And so do to that, we want to show that there are commercial returns in this market and
that we have the ability to put capital to work effectively and efficiently. And I think
that that means sort of speaking that language of micro-finance or other organizations like
the mobile industry that have seen tremendous growth in some of these markets. And I think
that that’s not to discount the idea of the impacts indicators or the metrics that
people look at from more of a development side of things. But I think to really crowd
others in and to bring some large scale capital to the sector, what we’re going to need
to show are things like what the return on the investment is, what your default rates
are, other factors that ultimately are more financially oriented than they are development
driven.>>JACOB: Great, thanks Graham. So jumping
now to some of the questions we’ve been receiving from the participants, so this particular
question is for Mansoor. So the question is, what is the advantage of having your own retail
outlets as opposed to having sort of a franchise network or appointed distributors?
>>MANSOOR: Yeah, sure thing. Thanks for your question. There’s a few things really. It’s
really about service provision. One thing we realized is that outsourcing your sales
network is a relatively easy thing. You have the right incentives, you can treat the right
incentives and you can find people or networks that can sell your products to earn customers.
But the idea of being about to service those customers once installed, and especially as
Paul mentioned, we only get paid if our products are actually working, we have found that outsourcing
the technical service, the support side is a lot harder. And that’s why we, as a business,
have decided to keep that part of the story in house, and that’s the real purpose of
the retail networks. And the retail networks also work as an additional tool, as well,
as Paul mentioned as well and many other people mentioned as well, they are also educational
centers for sales agents to get trained and to be able to leverage the network. We are
effectively micro-franchising moving shops, so there are people who want to distribute
it. In many ways, it’s about really creating a presence, a presence for solar in the rural
area. And I think that, in any other way, is really tricky and not scalable. And there
is the scalability issue that has driven us to the model that we have today.
>>JACOB: Great, thanks. So I’ll jump to another question. I guess I’ll pose this
to Klara. So you talked a little bit about Mobido’s own distribution network and that
model, and you’ve already gone through expansion to other countries. So this question is about,
if you were to expand to other countries, perhaps other countries in East Africa or
another region, what is Mobiso’s approach? Do you feel like it’s the kind of thing
you need to build from scratch again, and sort of own the distribution network in each
of the countries you operate in? Or are there opportunities to partner out on distribution?
What has Mobiso’s approach been in the past and what do you imagine doing in the future
for expanding into new countries?>>KLARA: Cool, sure, yeah. OK, great, can
you hear me now? So yes, Mobiso has set up its own distribution network, and when we
first moved to another country, which was Rwanda this year, we also there set up our
own distribution network. And we figured that it actually could happen quite quickly, because
we had so many learnings from our scale in Tanzania that within three months we were
operational in Rwanda, and are now opening up regional huts and market huts much quicker
than our first market huts that we had in Tanzania. So we think that in the end, setting
up our own distribution network, even though it sounds like a whole lot of effort, it is,
but finding distribution partners also is not that simple. And we are trialing partnerships
with partners that do the distribution for us, and we’re learning a lot from these
trials, so whoever posed that question, feel free to get in touch with me so we can discuss
further about opportunities.>>JACOB: Great, thank you Klara. So this
question is coming from a participant and I guess is directed to Paul. You described
in India having to build out your own sort of payment collection or payment agent distribution,
essentially, to sell the recharge or top ups because of the sort of immature nature of
the mobile money market in India. The question is, has Simpa looked at partnering with a
mobile network operator and think about how you might be able to build on top of their
network of existing prepaid mobile air time agents or some of their other authorized agents
infrastructure?>>PAUL: We have, we certainly consider that.
There’s a couple challenges. One is that the mobile operators very often don’t have
direct relationships or even very indirect relationships with the agents that are selling
air time. So what that means is as a consumer, you can go to an agent and you can buy air
time from any mobile operator. That agent does not belong to only one mobile operator.
So the mobile operators don’t actually have their own proprietary distribution channels
for their air time. Some do, and Vodafone has got a stronger proprietary network than
others, but there’s a tremendous amount of overlap. They’re all using the same agents.
And there are aggregators of these agents. And for example, there’s a group here called
Oxygen, and they have thousands of agents that they then make their network available
to mobile operators. Satellite TV systems here called direct to home, or DTH, also have
this pricing model where you get the box installed in your home, but then you have to recharge
it every month to continue to get service. Those companies also leverage these existing
networks, these aggregators of agents. So that’s where we’ll go, actually, not directly
to the mobile operator, but to these aggregators of agents. We’ve not done it yet because
our geographic footprint is pretty small. We’re in eight districts of western Uttar
Pradesh, and we found that when we leverage our own sales agents to also sell the recharge,
it sweetens the deal for those guys, as well, so they can make more money.
>>JACOB: Great, thanks. And I guess I’ll pose this question to Klara. So Klara, pay
to go solar products require additional hardware and software, and you walked us through Mobiso’s
proprietary hardware and software. Does this mean that for an end customer it ends up becoming
ultimately more expensive than similar products that they could buy on a cash basis? So if
a customer was to pay in full, would it be better for them to purchase sort of a more
traditional cash retail product? And how do you see pay as you go making products more
potentially more affordable or more expensive for the VOP, so it potentially lowers the
up-front costs, but what’s the impact on the overall price that a base of the pyramid
customer ends up paying?>>KLARA: Oh, yeah, sure, thanks. So really,
I’m not going to go into the details of how much our systems cost. Just to let you
know that the additional hardware cost for the Mobiso controller is not, I wouldn’t
say it’s a detector that makes the system too expensive for a customer to buy it. It’s
actually the necessity to buy it up front which is the barrier to many of the customers
to purchase their solar system. And if we can just with a small fraction of money allow
our customers to pay for the system over three years’ time, which makes it easier for them
because they are able to substitute what they’ve already been paying for kerosene or [inaudible
1:16:41.4] or running a generator, so it makes it much easier for them. And then our Mobiso
controller is also there to build up a whole maintenance infrastructure, and so for the
first time, actually, for many of our customers in Tanzania and Rwanda there is a company
who is taking care of the technology that they are selling, even after the point of
sale. And we can lift the worry of non-functioning systems from them, and this is actually our
unique selling proposition to many of the customers, besides the ability to pay off
over time. And we’re only able to do that on a commercial scale because of the hardware
technology that we include in the system. So not including it in the system would not
make so much sense from our point of view.>>JACOB: Great, thanks. So this question
I’ll pose to any of the panelists who would like to respond. I’m curious if you could
discuss any of the challenges that you’ve had in working with mobile network operators
and what you would consider your wish list of support that you could receive from the
telecom industry to help catalyze pay as you go.
>>MANSOOR: I’m happy to start, if that’s OK.
>>JACOB: Please go ahead.>>MANSOOR: Yeah, I think there’s quite
a few challenges with mobile operators. I mean, there’s a few ways to think about
this. If you look from a lot of our systems are now going into place, like Mobiso, etc.
need data connectivity to be able to manage. And managing contracts that automatically
top up and global level and things like that is quite difficult to get by and administer.
So there’s definite support that’s required on that side. Mobile money integration with
your system, especially in marketplaces where several different mobile money platforms exist,
and integrating that into your own in-house IT system is often not the easiest thing in
the world, and could be made easier by telecoms and is really in their advantage. I guess
a lot of, a few companies have tried to access the massive distribution network assess that
the telecom companies have. Again, I think as Paul mentioned as well, a lot of the telecom
operators are using the same agents to be able to distribute their services and products
to end customers. I think leveraging, more better understanding from the telecos of the
energy market would definitely help in the efficiency of any such partnership. I guess
that’s what we might be main concerns with the telecos with me, so far.
>>JACOB: OK. Anyone else interested in providing something?
>>KLARA: I think I can add to that. Jacob: Sure.
>>KLARA: Yeah, I would be available. So yes, I mean we already have quite good relationships
with telecom companies and we received some [inaudible1:20:08.5] in April our process
[inaudible 1:20:10.9] in Rwanda, which was very fortunate. But one idea I had is Empresa
is kind of really programmed into the syntax of each photocom client or [inaudible 1:20:23.3]
and that allows customers with any phone that they have to make Empresa transactions. And
if that technology could also be extended to pay as you go companies like we are, then
we could just piggyback on the technology that is already there to make it even easier
for our customers to pay off. So that was just my spontaneous idea to put on the table.
>>JACOB: Great, thanks. So I’ll just move on to other questions. And maybe I’ll pose
this to Graham. So what sort of interactions have you had with governments? So either national,
sub-national, local, and how have these groups responded to Off Grid Electric’s private-sector
driven approach?>>GRAHAM: Sure. So we’ve interacted with
government I think on a fairly steady, regular basis, at least in Tanzania. We’ve been
able to certainly engage them at the early stage to make it clear sort of what we’re
hoping to accomplish. I think if I were to characterize it in terms of the relationship,
we’re able to find a mutually beneficial sort of relationship with them. We can offer
them things that are obviously high on their list, as far as providing energy access and
a lot of the benefits that come from that, whether they be education-driven, health-driven,
economic-driven, and what we’ve tried to characterize it for them as is that we think
we can accomplish a lot of the goals that they’re setting out in a public forum, just
in a private sector approach. So if they are thinking of expanding the grid, we would challenge
that to say could we get there quicker, could we reach more people in a more timely fashion?
I would say that overall everything we’ve done with government has been positive. I
think also that the difference between a public sector and a private sector approach typically
comes down to the speed at which they move. So I think that there’s some inherent challenges
in trying to work through the public sector, and hopefully those are things that we can
minimize or remove when we take a private sector approach. So encouraging is probably
the best way to put things in terms of our relationships with government.
>>JACOB: OK, great. Thanks, Graham. So now I’ll pose this question to Paul. So without
access to things like a formal credit score for energy-poor consumers in India, what have
you seen to be some of the best ways to assess credit risk of your potential customers?
>>PAUL: Good question. I think we’re learning. We collect, we ask about thirty questions
on our customer application form, all the usual things that a bank would ask about income
and wealth, and we try to ask it in ways where we can hopefully elicit good information.
We ask how many cattle do you have, how many acres, what are your crops? We want to know
about the household size, the composition, number of members of the family. But I can’t
say that yet we have established that any of those things are really good predictors
of ultimate payment behavior. We also look at things such as the area. We talk to micro-finance
companies that have worked in the areas, and we stay away from villages and areas where
other companies have really had a hard time. I’ll tell you what does seem to predict
or what does drive bad payment behavior. And it’s not the questions you ask up front.
It’s whether or not we do a good job of servicing that customer. Everyone else here
has kind of said the same thing in a different way, that the most important thing is that
customer relationship. And I hear different companies investing in that customer relationship
in different ways. Face to face visits, phone calls, SMS reminders, bonuses, rewards. That’s
what really drives good payment behavior. When we do a deep dive into those customers
who are really falling behind or who are even angry with us and not payment, it’s always
because we have failed them. Maybe they had a technical issue with the product and we
said we’d be there in three days and it took us ten. Maybe they wanted to make a payment
but we didn’t have a local payment agent that was actually convenient for them. Those
are the things that are really driving good and bad payment behavior.
Having said that, we will continue to collect all of that information up front on each customer,
and we hope to better understand those patterns. I think, you know, once we get to 20,000,
30,000 customers and over time, we’ll start to see those patterns emerge. But I think
the encouraging thing to hear and for us to learn was that we’re actually in control
of this. We can control payment behavior. We just have to do our job and keep those
systems running and keep communicating with customers.
>>JACOB: Thanks, Paul. So this last question I’ll just pose to Mansoor. The question
is, do you see any opportunity to raise and channel domestic private capital within Africa,
as an example? Or do you imagine the end user financing to be primarily mobilized outside
of that region?>>MANSOOR: That’s a great question. I want
to comment on Paul’s great slide, as well. Paul, I think you’re missing one layer in
between there, which is local debt and local capital in between, which I think is the next
step for a lot of companies. There’s definitely a lot of interest among local investors and
local financing institutions to get involved. And I think it’s about selling the story
a lot better. I think one thing in this industry we have to do in the local market, we definitely
have much more limelight on our sector than we have outside our markets, is to highlight
the performance numbers, the [inaudible 1:27:20.2] their experiencing. The numbers in the sectors
are encouraging, and as Paul said, largely we are in control of those numbers as well,
then it’s a definite pull marketplace. And it’s about selling the value proposition
to existing financial institutions better, that we actually are an industry which can
overcome your distribution costs of capital, your collection costs of capital, your marketing.
We can be a channel for that. We can track where your money actually is. We can also
result in the impact that electrification can have. So I think there will be a lot,
at least in East Africa, I know a bit less about other places, but at least in East Africa
we are experiencing interest both in equity from institutions and debt as well, so I think
that’s going to be an interesting time in the next one to two years, especially as we
build up more history of the local companies, and the local entities start becoming profitable.
I think that will open up a lot of doors for the local capital.
>>JACOB: Great, thanks Mansoor. Thank you, everyone, for this excellent discussion. I
think we’ll have to cut it off there. Thank you very much for the opportunity to be part
of this discussion. I think, as Graham mentioned, I think there’s a lot of things that we
could continue discussing. We’ll have to think about ways in which we can continue
this discussion. But I’ll hand it off now to Sean. Thank you very much.
>>SEAN: Great, thank you Jacob, and thank you everyone else. That was a great discussion.
And thank you to the audience for all the questions. Unfortunately, sorry if we didn’t
get to address your question in particular, but we are running out of time, as Jacob said.
So we’re going to move on and just wrap up the webinar real quick. And before we do
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