The United Nations Capital Development Fund (UNCDF), in partnership with the Uganda Solar Energy Association (USEA), the Dalberg Data Insights (DDI), and the Schatz Energy Research Center (SERC), conducted a Big Data action research. With DDI, we developed a digital energy finance dashboard for more than 672,000 off-grid customers in Uganda. We also supplemented the big data insights with a structured survey conducted by the SERC on 424 off grid customers tracked over the same period 2016 to 2018.
Innovations in data technology create new opportunities for development. Undoubtedly, data will help development practitioners and government make efficient and evidence-based decisions and track progress of the Sustainable Development Goals (SDGs).
Standing at the forefront of “Big Data for Development” trend, the United Nations Capital Development Fund (UNCDF) CleanStart programme has applied big data analytics to track the development of digital energy finance for off-grid solar energy markets in Uganda. In this blog series, we will present some of our findings and show how big data applies to development.
Fast growing solar PayGo market in Uganda
Our first blog shows the off-grid solar energy is a viable energy solution to serve Ugandans without reliable grid electricity. To finance such decentralized energy solutions, Pay-As-You-Go (PayGo) financing emerged. As Figure 1 shows, from October 2016 to December 2018, the number of monthly active PayGo customers almost quadrupled. Mobile money markets and the lack of reliable access to grid electricity are spurring this growth.
Monthly growth of solar PayGo home systems in Uganda, 2016-2018
Understanding Geographical Markets of PayGo
To explore drivers of PayGo development, we overlay mobile money adoption with energy access maps and field surveys. Mobile money data shows correlation among PayGo penetration, mobile money penetration, and accessibility to grid.
By comparing mobile money penetration and household solar PayGo penetration rates, we find that the digital energy finance market grows fast. This growth is especially happening in areas with high mobile money penetration and lack of access to reliable grid. Several districts, such as Gulu, Lira, and Busia, have more than 60 percent mobile money adoption but less than 20 percent of households have electricity access. These districts could be target areas for energy providers to accelerate off-grid solar usage.
Districts such as Yumbe, Bukomansimbi, Bududa, Kotida have low levels of mobile money penetration (10-20 percent). They will need agent-led delivery and micro-financing to expand solar home system markets. Only 12 percent of households use PayGo actively. There is room for market expansion. This PayGo penetration rate is higher in regions with widespread mobile money adoption.
Mobile Money Tax impacts Uganda’s energy goals
We can leverage big data to track the effect of policies on sustainable development outcomes. We applied the digital energy finance transaction data to measure the impact of mobile money taxes in Uganda.
The Ugandan government introduced a one percent tax on mobile money transfers and payments on July 1st 2018. The below image shows a timeline of the introduction of mobile money taxes. Discussion around these taxes started in March and April 2018 and approved by parliament in late May.
To check the impact of the mobile money tax on digital energy finance and financial inclusion, we calculated the PayGo activation rate. This is the percentage of new PayGo customers who activated mobile money for the first time 45 days before their first solar PayGo adoption. On average, around 17 percent of the people use PayGo to activate a new system.
The PayGo activation rate decreased significantly from March 2018. This coincides with the beginning of government discussions introducing mobile money taxes.
The activation rate fell to 10 percent in May 2018 when the Excise Duty Act was amended for mobile money taxes and put forward for Parliament’s approval. Once news on the revision of the tax to exclude bill payments emerged*, uptake on new PayGo solar products and mobile money activation recovered. Changes in the PayGo activation rate during this time show the influence of the mobile money tax. This had an effect on both financial inclusion and the off-grid solar energy sector.
Solar PayGo activation rate during the mobile money tax implementation and cancelation.
Mobile money taxes had a nationwide impact on the uptake of solar PayGo. The activation rate decreased in 100 districts and remained neutral in only six other districts in Uganda . This shows the demotivating influence that a mobile money tax can have. The Uganda mobile money tax experience illustrates that if countries aim to expand PayGo renewable energy, it is better to avoid mobile money taxation on bill payments as it can have rapid effects on the market, with consumers switching back to cash options.
Digital Energy Finance Accelerates SDGs
We also conducted analysis on a survey of 424 solar customers to see how they view solar energy's impact on quality of life**. Solar systems affected household’s quality of life by reducing traditional fuels (57 percent). This is often in combination with saving money (25 percent) and improving health (24 percent) and safety (20 percent).
Survey respondents stated that solar home systems help save money by reducing spending on phone charging and traditional lighting (candles, kerosene) as well as other energy sources (dry battery cells, utility grid). Some customers highlighted that they can divert these savings to other basic needs of the family (e.g. “taking the children to good schools”).
On health benefits, several solar users no longer fear the possibility of fire outbreaks or accidents caused by traditional fuels. They also no longer experience breathing problems caused by fumes ("smoke is also no longer affecting the household’s health, and there is bright light in the house”).
A related benefit is the feeling of safety. One client reported “reduced cases of theft because of the security lights”. Solar systems also had basic education benefits especially with regard to increased study hours for children at night. Watching TV was yet another benefit cited.
Quality of Life Improvements (% respondents, energy ladder survey 2018)
Big Data for Development
Big data along with field surveys can support evidence-based product and policy decision-making. Our Digital Energy Finance Dashboard in Uganda shows that the mobile money tax affected more than financial inclusion. It also had an initial negative impact on energy access expansion in the country. Big data, especially when supplemented by field interviews, can track such policy implementations in real time.
In a possible next stage of this project, off-grid energy penetration can be overlaid with grid planning to optimize electrification planning in Uganda. Other data sources such as lean data impact surveys, national financial inclusion surveys, and annual sales data collection from energy service providers could further supplement the existing dashboard. By addressing these information gaps, the Uganda Solar Energy Association (USEA) and the Ugandan government can support the acceleration of the off-grid energy market.
In our next blog, we will dive into the impact of household solar and digital energy finance on the micro level, showcased by our 3-year customer survey.
*The tax was later revised to 0.5% on withdrawals only
**Survey was conducted by SERC
About UNCDF work on Energy
The UNCDF programme focused on energy contributes to achieving SDG 7 on affordable and clean energy for all, and SDG 8 focusing on decent inclusive work, economic growth and, more specifically, financial inclusion. The Programme aims to improve access to clean energy finance for poor and low-income people. By partnering with energy and financial service providers and offering capital, data analytics, capacity building, and policy advocacy services in the off-grid energy finance markets, UNCDF CleanStart has scaled energy business models for cleaner, efficient and more effective sources of energy for poor people. As of 2019, UNCDF digital energy finance activities have enabled over 375,766 low-income families and small-scale businesses to access renewable energy technologies (RETs) through micro and PayGo financing.
UNCDF Energy Access work is supported by: