Strategy

Pay-As-You-Go: Unlocking Access to Energy Services in Sub-Saharan Africa

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Liquefied Petroleum Gas (LPG) for cooking and home solar systems for electricity are not exactly new technologies in sub-Saharan Africa. However, their usage remains a privilege for just a few, since their cost is prohibitive for a huge part of the low-income population. With this challenge in mind, many companies see a great opportunity to change the energy landscape. By harnessing the extended use of mobile phones and mobile money, they offer clean cooking systems, small off-grid solar panels or water service systems in a Pay-As-You-Go scheme, where customers make small daily or weekly prepayments for usage of the system. Designed to serve the lowest income populations in the world, this model seems to be on its way to becoming one of the most successful in generating business at the base of the pyramid as companies are proving that it is possible to alleviate poverty by providing goods and services for poor communities in an affordable way. In the past five years, the PAYG model has grown impressively in the sub-Saharan African energy sector and attracted huge investments, as an increasingly large community of foreign investors has become interested in it. What are the drivers of this growth? Is PAYG the game changer that will finally push Africa to climb up the energy ladder? What are the hidden pitfalls for the players and what is awaiting this promising sector? Industry experts help us answer these questions by sharing their views in this paper.
Bibliographic citation: Paola Giordano; Leticia Pelizan; Rahnema Alavi, Ahmad, "Pay-As-You-Go: Unlocking Access to Energy Services in Sub-Saharan Africa : A Disruptive Business Model Leveraging Mobile Technology to Finance Energy Services for the Bottom of the Pyramid", IESE, OP-303-E, 07/2018
Date: 04/07/2018
Author(s): Paola Giordano; Leticia Pelizan; Rahnema Alavi, Ahmad
Document type: Occasional Paper
Editor(s): Cátedra Fuel Freedom de Energía y Desarrollo Social
Department: Strategic Management
Languages: English