What is the PAYGo System?
The PAYGo system is a business model that emerged to address challenges to energy access. With more than 789 million people globally still living without electricity, the PAYGo system is a crucial innovation, which helps renewable energy providers reach last mile customers at affordable prices. By efficiently spreading the cost of energy systems over time, and so reducing the economic burden of solar devices, the PAYGo model will support three of ‘Smiling Through Light’s’ central missions: to provide sustainable energy systems; to nurture economic growth; and to raise environmental awareness in Sierra Leone and Africa more widely.
How does it work?
The model works using a simple process:
Customers have to go through a credit assessment process to find out if they are eligible to take the product on loan.
The solar home system is installed.
Customer payment for the device is made on a monthly basis (current contract is 6 months after the initial deposit).
Customers make payments using mobile money.
Solaris PaygOps sends 30 days activation codes through SMS once the payment is received.
Customers enter the code into the PAYGo solar home system.
The system is unlocked and the electricity supply is kept on for the prepaid number of days.
Electricity supply is cut off once the payment expires, and an SMS reminder is sent
Once the final payment is made based on the monthly contract, a final code is sent which unlocks the system forever.
Why is PAYGo useful?
Economic Growth
Rural low-income communities in Sierra Leone have faced several challenges toward energy access. These obstacles include high recurring costs, the use of energy systems that are detrimental to the environment, and systems that are dangerous for households, such as diesel generators and kerosene lanterns. Using digital technology, which allows customers to provide small regular payments, the PAYGo system removes the burden of large loans and debt obligations from customers at the bottom of the pyramid. As a result, PAYGo companies have made safe, reliable, and clean energy far more accessible for rural families.
Since its creation in 1990, the model has had a transformative impact, supplying affordable energy products to 25-30 million users with limited cash flow and savings. Due to digital billing, via mobile phone or mobile money, payment flexibility is greatly increased and the risks associated with carrying cash are reduced. The PAYGo system also provides the opportunity to build creditworthiness. Through making consistent punctual payments, ‘Smiling Through Light’s’ customers will have the chance to demonstrate their financial reliability. Creating a positive credit history can have a knock-on effect by improving future access to loans and financial products, meaning customers will be economically empowered in all areas of their lives.
Community Impact
The impact of safe, clean, and reliable energy access on rural families reaches far beyond economic factors. Studies show a clear correlation between the use of cleaner energy sources and children’s educational outcomes. The use of solar devices tackles the risks associated with indoor air pollution from traditional fuels, which reduces school absences, and improves both domestic study spaces and educational infrastructures.
“My status in my neighbourhood has improved. Children in my neighbourhood come to my home to study every night. My neighbours like and respect me because their children are performing well at school.” – STL PAYGo customer.
As this customer notes, access to a well-lit space for children to study, parents to work, and communities to come together has had a hugely positive impact on their life. For busy families, the flexible and efficient PAYGo system will free up time and provides efficient access to ‘Smiling Through Light’s’ products.
Access to modern, sustainable energy, especially for women
PAYGo financing for off-grid solar devices can be a conduit for achieving the twin goals of last mile energy access and financial inclusion of women in low-income households, which ultimately improves their quality of life and livelihoods. The appliances can reduce women’s workloads at home, provide greater flexibility in how and when women can perform domestic chores, and free up more time for income-generating activities. PAYGo financing can expand households’ access to financial services that many prove useful to women. We know that formal credit is often beyond women’s reach because they lack the credit history or assets to collateralise loans. Asset-based financing models like PAYGo solar offer a way around this challenge. They enable women customers to build transaction histories that financial providers can use to underwrite loans and increase women’s access to finance. It also offers flexible payment options that are better suited to women’s needs than traditional loans. Once a device is paid off, it can be collateralised for subsequent loans to meet other household needs, such as paying for children’s school fees.
When women and community members have access to PAYGo financing it enables them to access off-grid energy devices, establishing credit and repayment data trials.
Business Owner in Lunsar using the SPARK 20W Solar Home System.
