Lesley-Ann Vaughan was one of the team of consultants who delivered the M-PESA platform, which is now Kenya’s largest mobile money service. She’s now part of MFX, a team of consultants that advises on business start-ups in Africa. The mentality that “cash is king” remains a major obstacle to providing new services, Vaughan says. “We’re 1% done.”
To a household without electricity, the benefits of solar power are more immediate and visible than those of insurance. Vaughan gives the example of M-KOPA’s solar services, which have provided access to power for the first time and got people used to using mobile money. Vaughan has worked as a consultant with M-KOPA in Kenya and in Ghana, and believes there is a lot of scope for future projects of this kind.
“People have lots of needs” and “solar power is a good way” to start to address them, she says. M-KOPA uses mobile money to provide energy on credit, made possible because the company had the M-PESA rail. Kenya-based M-KOPA provides solar power to over 600,000 East African homes.
- According to the GSMA, about 730,000 pay as you go solar systems had been sold in east Africa by 2017, by far the largest total in the world and compared with just 30,000 in West Africa.
Mobile money is more often associated with financial services than with solar power. Insurance is a big part of the equation, Vaughan says, but there is often no viable way to collect cash premiums. Slow take-up of mobile money, she says, leads to the risk of insurers reverting to traditional collection methods.
Offering mobile money involves changing people’s paradigm of what money is, says Dylan Lennox, global executive at MFX. “The last mile” to the customer, Lennox says, is the hardest one. He sees mobile money as having the potential to cover it. But some insurance providers think they can go from nothing to a full micro-insurance product in one leap. They need to do “the hard yards’, Lennox says.
- In rural parts of Africa, Lennox says, potential customers in rural areas are typically already self-insured. Everyone in a village will contribute towards the cost of a funeral.
- The key is “fear management”, which means going out on the ground and understanding what people are afraid of, he says.
In the case of M-KOPA, Vaughan says, fear centred on solar panels imported from China which people thought might be unreliable. The key, she says, was in making the deposit paid for the panel refundable at any time. Lennox points to the Lumos solar power offer in Nigeria – if they can find a way to use mobile money as a payment method, he says, costs would come down.
GSMA, which represents mobile operators globally, says that access to capital is the key constraint to African solar adoption. Capital is needed to scale operations within a country and also roll out operations to new markets without mature mobile-money ecosystems. M-KOPA, for example, had to cut headcount by 18% in late 2017 after slower than expected growth.
That suggests that solar funding is not high enough up the agenda. According to the environmental watchdog Urgewald, World Bank fossil fuel funding continues to outstrip investments in renewable energy.
- Between 2014 and 2018, the World Bank approved over $12 billion for fossil fuel projects compared with a little over $5 billion for renewable energy, according to an Urgewald report in March.
Bottom Line: Solar power does not just help the environment but can provide an entry point for rural Africans to mobile money-based services.
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