Some concerns about ‘pay as you go’ lighting solutions in rural markets

By | February 9, 2012

Daily chores, rural Kenya 7 February 2012

Having just got back yesterday after immersion in an arid part of rural Kenya, it struck me after coming across yet another solar lighting solution with a pay as you go or prepaid business model that this may become a barrier for many subsistence farmers, most of whom are off the grid and so, are a potential market for such solutions.

Why, when people are already accustomed to small top up amounts for airtime or for regularly charging their phone?

First, because the phone is the asset. Owned in full by the customer. Whereas, I am not yet clear whether the plethora of lights available for use with a mobile payment will eventually belong to the customer or not, and when.

Second, those who live on their land relying on farming to support their families tend to minimize their need for cash money for a variety of reasons. Often they can go without if they must as staples are stored after harvest and barest minimum for survival is usually assured – even if the phone goes uncharged or topped up.

Third, most mobile money transfer systems such as Safaricom’s MPesa, have a fixed percentage of commision on each transfer regardless of amount. This can hurt at the amounts that the majority tend to top up (for example it costs about 20 shillings to charge your mobile phone or your average top up might also be that amount) and I’m sure that the whole benefit of pay as you go business models is the small amount each time. To give context, see the photograph above of the lady of the house walking an hour or two with 20 litres (20 kg) of water in order to save 20 shillings paid to the water seller.

I have felt that this business model was important and critical but now I question it. I have been tracking such models for around 3 years now and can see its value but at the same time, I have begun questioning whether it can be applied in blanket form for any and every thing. Sort of like what happened with sachets – shampoo worked and so did margarine. Next thing you know everything was in a sachet. Not everything worked, there’s research to that effect out there from the Indian Institute of Management, Ahmedabad for those interested.

After this trip, it struck me that people like reaching goals and owning visible assets – be it a cow, a goat or a solar light. Layaway plans are extremely popular – they allow for the same flexibility of putting small bits of cash against a future asset but then, some day, you get to own it. The lack of clarity around when these customers will own all these solar products is disturbing. Why isn’t it being mentioned clearly? Where are the terms and conditions?

Pay as you go may make sense in the context of future ownership but I’m still curious to know how it will all work out in the context of usage, for you can do without your phone but you cannot do without your light at night and early in the morning. Many have said that if they had to choose what to charge first with solar or with available cash, they’d pick light over a phone. Will these products and their programs create such tradeoffs in decision making for their customers?

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