Power Africa helps Nigerian micro-finance banks start selling solar
In rural Nigeria, access to reliable and affordable energy services is an increasingly critical need. With a population of over 186 million, and a grid electrification rate of less than 60%, Nigeria has the largest off-grid population in Africa, and one of the highest in the world. These figures point to a huge opportunity for off-grid energy companies, such as Azuri, Greenlight Planet, d.light, Barefoot and Emel, to introduce solar home systems (SHS) and other products into the Nigerian market. Power Africa’s Beyond the Grid (BTG) team in Nigeria is working directly with these companies to catalyze the market and ensure that off-grid products and services are within easier reach for consumers. Chiefly, the BTG team is helping companies find innovative ways to reduce the upfront costs of their products, which has been a key barrier to sector growth, while also helping consumers access loans through existing micro-finance banks (MFBs).
Most of Nigeria’s low-income households spend a significant portion of their limited income on low-quality energy sources, such as kerosene, candles, and batteries, and are therefore not able to pay the relatively high upfront costs for a solar home system. However, Nigeria’s strong micro-finance sector — with nearly 1,000 registered micro-finance banks (MFBs) at the national, state, and local levels — is emerging as an attractive and viable option for off-grid companies to offer financing options to consumers who wish to invest in SHS. The Power Africa BTG team is supporting this trend by striking partnerships between high-potential off-grid companies and MFBs, and training sales agents in the off-grid products.
Thus far, the BTG team has established new partnerships with at least three MFBs at the national level, ten at the state level, and several others at the local level. The most important partnership to date is with the largest MFB in Nigeria, LAPO micro-finance bank, which has over 400 branches across 35 states in Nigeria. BTG’s support to the SHS companies working with LAPO since November 2016 has resulted in increased sales of solar lanterns and SHS, from an initial point of 500 systems per month to now over 8,000 new solar systems sold per month.
BTG works hand-in-hand with the sales and loan officers of both the SHS companies and the MFBs to effectively couple off-grid power products with MFB loan products. SHS sales agents engage the MFB’s customers’ groups, called unions, which comprise between 10 and 50 members, the majority of which are women. Typically, the SHS company’s sales agents demonstrate their systems to the group, after which the group members indicate their choice of products ranging from 1-watt solar lanterns to 4-watt SHS products, and the loan officer begins the loan process. This includes due diligence on the recipient of the loan to ensure proper documentation and credibility of the client. The SHS company will be paid once the loan is issued, while the repayment on the loan is spread over a period of 15–26 weeks.
The SHS companies provide systems that typically have warranties of 1–2 years. If the solar product has any faults within this period, the company will repair or replace it as required. The BTG team provides on-the-ground training to the MFBs’ loan officers to help them market the solar solutions in tandem with their loans to their last-mile customers. The BTG team also monitors and assesses the distribution strategies of the off-grid sales agents working with each MFB to ensure that customers are happy and that sales of the solar systems can grow sustainably.
Partnership between MFBs and off-grid solar companies is a highly replicable approach to overcoming the consumer finance barrier in Nigeria. In addition to supporting LAPO, the BTG team has also been supporting several other leading MFBs, including Grooming People MFB, Accion MFB, Fortis MFB and Mutual Benefits MFB, to help them partner with the SHS companies. It is expected that these partnerships will eventually yield similar levels of success as with LAPO, and will play a significant role in extending energy access to Nigeria’s rural households.
Source: Power Africa