Introducing Pay-as-you-go solar products to Benin

September 2016

Blog

In Benin most people in rural areas are not connected to the electricity grid and depend on lanterns which run on dirty and costly kerosene or short-lasting battery powered lanterns for lighting. They also spend a significant amount of money on charging their phones at local kiosks (FCFA 550 – or around USD 1 – per week, according to our research). Solar lanterns with phone charging capabilities could be an ideal replacement for these energy needs. We discovered this from speaking with many rural households in Benin during a previous solar project and finding that demand for such products is high. Greenlight Planet’s Sun King products were especially popular, but potential customers did not have the cash available to pay for these products up front and said they would prefer paying in instalments.

Introducing Pay-as-you-go solar products

Through the Bright Lights for Benin project, we are introducing Pay-as-you-go (PAYG) solar lanterns to the Beninese market for the first time. PAYG allows customers to buy the lantern for a small down-payment and pay it off in regular instalments. If the customer does not pay, the system is automatically switched off by the manufacturer. For this project, we brought together one of the leading producers of solar lighting products, Greenlight Planet, and a Beninese solar import-supplier, ARESS, to introduce these products to the market. Greenlight Planet’s Sun King Pro is equipped with Easy Buy, a payment platform tool developed by Angaza, a firm that specialises in developing PAYG capabilities. Through Easy Buy, customers could pay off the system in weekly cash payments to a sales agent.

The next step was to integrate this payment platform with the mobile network operator – MTN Benin, so customers could pay installments with their mobile phones. This took time, but is now in place and will allow customers to pay for the lanterns using mobile money, without having to physically visit the agent after the initial purchase. Once all payments are made over a 24 week period, the lantern is unlocked indefinitely. So far, customers are enthusiastic about the PAYG mechanism, because it helps them to pay progressively for their solar lanterns. One customer remarked: ‘I pay for my solar lantern as I buy credit for my mobile phone.’

Using an existing distribution channel

SNV is in partnership with MTN for the project implementation, following a previous successful joint collaboration in the solar sector in Benin. MTN already has a well-established distribution network of agents, to sell phone credit and banking services, that penetrates deep into the rural areas. We provided selection, sensitisation and training of the MTN agents for the sale of solar and the use of the pay-as-you-go mechanism, with the contribution of ARESS.

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Infographic of the project's distribution chain

In the infographic, the distribution model is visualised schematically. Solar manufacturer – Greenlight Planet – ships the solar products to solar import-supplier – ARESS – in Benin and ARESS distributes the products to local MTN agents. The MTN agents then sell the solar products to local customers enabling them to spread out their payment over a 24-week period.

MTN agents receive FCFA 2,500 (USD 4.30) in commission from ARESS for each lantern sold. One of the agents said: ‘ARESS does not have to worry about the collection of payments; with pay-as-you-go and mobile money payment, the payment channel is secure.’ MTN and ARESS also implement marketing campaigns to make customers aware of the benefits of these products; a formal launch with a press release will occur later in the year.

Pilot phase

For the pilot phase of the project which ran from April to June this year, 16 MTN agents were selected in two off-grid municipalities in the south of Benin. To date, 170 lanterns have been sold by these agents. The slow start to the pilot taught us an important lesson, namely that the cost of the solar lantern is a key factor for customer engagement in the PAYG mechanism. At first, the price difference between a cash and PAYG purchase was too high and the repayment period too short. During the evaluation meeting it was decided to double the repayment time (to 24 weeks) and reduce the total cost of the PAYG payments. Customers now pay FCFA 900 per week (USD 1.50), similar to average weekly household spending on kerosene and phone charging. A new shipment of 2,280 brand new lanterns to Benin is currently underway. More than 200 MTN agents have already been selected for the next part of the project and they are eager to start selling once the solar lanterns arrive.

A unique and solid partnership matrix has been created – in which mobile technology plays a central role – that will provide many rural Beninese with clean and affordable energy, continuing after the project is over.

Climate change mitigation

Climate change mitigation benefits of solar systems in a development context are twofold. In most parts of sub-Saharan Africa, the baseline technology for lighting up households is still the kerosene lantern. Combustion of kerosene (a fossil fuel) for lighting leads to CO2 emissions as well as soot (black carbon), which has strong local climate impact. Solar lanterns will stop these emissions. At the same time, off-grid solar systems give households an alternative to getting connected to diesel generators or the electricity grid. Power generation for the national grid usually relies on fossil fuels (coal and gas), which also produces CO2 emissions. Most parts of the developing world are located closer to the equator. These areas are especially well suited to solar technologies, as irradiation from the sun per area – and solar system output - is much higher on average than for higher latitudes.

This blog was originally written for the GSMA Mobile for Development Utilities blog series.

Expert

Edouard Fagnon

Energy Advisor