[Insight] Africa's PayGo Solar Market Faces Repayment Challenges: Insights from GOGLA's Latest Report

In the past decade, Pay-As-You-Go (PayGo) solar systems have illuminated the lives of over 25 million people across Africa, providing clean electricity for the first time and hailed as a revolutionary model for energy equity.

On the vast, power-deprived landscapes of Africa, Pay-As-You-Go (PayGo) solar once shone as a beacon of hope. Through its flexible "use now, pay later" approach, millions of households gained access to lighting, charging, and connectivity. However, as the industry expands into more remote and economically unstable communities, a new report from GOGLA, titled Keeping the Lights On (available in the knowledge base), warns of a growing repayment crisis that threatens the model's commercial viability and its original mission.

Repayment difficulties are emerging as a hidden reef, eroding the sector's foundation, impeding universal energy access, and posing severe risks to business operations and long-term sustainability.

Popularity Does Not Guarantee Sustainability

Between 2015 and 2020, approximately 25-30 million people in sub-Saharan Africa gained their first electricity connection via PayGo systems. Yet, as markets push into poorer, more isolated areas, the industry faces a "dual crisis":

• Rising Financial Risks: From 2020 to 2023, average repayment rates hovered around 65%.

• Increasing Default Rates: Defaults rose from one in five customers in 2020 to one in four by 2023.

• Affordability Barriers: Among the most energy-needy households, only 22% can afford even a basic Tier 1 solar home system (SHS).

To address this urgent issue, GOGLA partnered with the Dutch RVO and EnDev to launch the Keeping the Lights On research project. Its objectives include:

• Identifying and analyzing the root causes of customer defaults;

• Summarizing effective customer management practices within the industry;

• Offering actionable solutions for businesses, investors, and policymakers.

The study focused on Kenya and Uganda, targeting small SHS systems (3–20Wp, excluding solar lanterns and TV systems). Data was gathered through 2,602 phone surveys, 12 in-depth interviews, and analysis from five companies.

Why Customers Struggle to Pay

1. Defaults Escalate Over Time In the first three months, about 20% of customers show repayment issues; by six months, this climbs to 40%, and in Uganda, it exceeds 60% after 12 months. This pattern indicates that failing to build strong repayment habits early often leads to long-term defaults.

2. Financial Hardships at the Core Only 33% of Kenyan and 29% of Ugandan customers have stable incomes. 40% carry other debts, directly competing with PayGo repayments. In the past three months, 75% of Kenyan and 59% of Ugandan customers faced unexpected expenses, such as medical bills, funerals, or school fees.

   "I grow coffee, and sometimes the prices crash, so we just can't pay," shared a Ugandan customer.

3. Alternatives Undermine Motivation In Kenya, 27% of users are connected to the national grid, using SHS mainly as a backup. Others rely on alternative solar lanterns, portable chargers, or shared neighborhood options, reducing SHS usage and willingness to pay.

4. Technical Issues Erode Trust 49% of Ugandan and 28% of Kenyan customers reported system faults, with 65% and 51% unresolved, respectively. Common problems include charging failures, non-functional lights, and unresponsive screens.

5. Education Gaps Despite Initial Satisfaction Over 90% of users were satisfied with initial installation training, yet: More than half of Ugandans and a third of Kenyans don't know their balance or remaining payment period. Many view the system as a one-time purchase, overlooking the daily installment logic.

Strategies for Resolution

What Businesses Should Do:

• Enhance KYC processes to assess both payment capacity and actual energy needs simultaneously.

• Prioritize the first 90 days with SMS/phone reminders to foster early repayment habits.

• Align incentives by linking sales and customer service performance to long-term repayment quality, curbing short-term sales rushes.

How the Industry Can Collaborate:

• Promote the PAYGo PERFORM standard to unify key metrics like repayment rates, default definitions, and customer segmentation.

• Partner with credit bureaus to integrate repayment behavior into national credit systems, allowing customers to "trade light for credit" and improve future financial access.

Roles for Policy and Development Institutions:

• Provide targeted subsidies and tax exemptions, especially for first-time users and the extremely poor.

• Introduce climate risk insurance to cover repayment disruptions from droughts, floods, pandemics, or other events.

• Incorporate off-grid solar (OGS) into climate adaptation financing frameworks to secure more support from the Green Climate Fund (GCF).

Lighting the Way Forward: Access Is Just the Start; Sustainability Is Key

The essence of PayGo is to deliver light to every dark corner. But without enabling customers to "keep affording it" and businesses to "keep collecting," that light risks fading.

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