Universal access to clean energy solutions is critical for progress towards a range of development outcomes such as climate change mitigation, poverty alleviation, health, education and gender equality, and contributes towards all the Sustainable Development Goals (SDGs). However, clean energy solutions traditionally have a prohibitive initial investment burden that excludes the poor. Energy inclusion therefore needs to be accompanied by financial inclusion, so that people have access to a range of financial services to finance their basic energy needs. Businesses in clean energy have straddled across two value chains, manufacturing and financing, to present a viable business model for underserved communities. Examples of business models include PAYGO via mobile payments and loan financing through a partnering microfinance institution.
The relationship between energy inclusion and financial inclusion is bidirectional – while financial inclusion contributes towards energy inclusion, energy inclusion can also bring households into the formal financial system. For example, the PAYGO system that provides energy to its customers can also be their gateway to using formal financial services (i.e. regular payments in installments), or even digital financial services if payments are made via digital platforms.
Regional Challenge Fund Window Launched
In September 2015, the United Nations Capital Development Fund (UNCDF) Shaping Inclusive Finance Transformations (SHIFT) in ASEAN and CleanStart programs jointly launched the 'Energy Access' Challenge, with support from the Australian Government (DFAT). The challenge, put forth by SHIFT ASEAN to companies, was to lower the affordability barrier for low-income consumers who want to pay for modern clean energy. A total of 113 Expressions of Interest were submitted by companies globally; 18 companies were shortlisted, out of which five companies were awarded performance-based financing to launch new business lines in Cambodia and Myanmar.
SHIFT ASEAN focused on monitoring the implementation and progress of the five winning projects in Cambodia and Myanmar:
- Biolite (Myanmar) manufactured and distributed low-cost, electricity-generating and clean biomass stoves. This was implemented with accessible payment and financing solutions to consumers in rural areas.
- Brighterlite (Myanmar) leased out high-quality solar home systems (SHS) using a fee-for-service business model to off-grid, low-and-middle-income households.
- Greenlight Planet (Myanmar) designs and manufactures safe, affordable and durable solar-powered lamps to help replace kerosene lanterns with a clean energy source through a rent-to-own financing model.
- Hydrologic (Cambodia) manufactured and distributed charcoal cookstoves with low carbon dioxide emissions and efficient combustion for the Cambodian market.
- Kamworks (Cambodia) developed a rent-to-own model, via a financial leasing scheme, of SHS through sales by solar entrepreneurs who were mostly women in rural Cambodia. This approach incorporated mobile PAYGO payment services.
This case study aims to illustrate how two of the winning projects, namely Greenlight Planet and Brighterlite, aimed to bring affordable solar home systems to rural Myanmar through their PAYGO models.
Both case studies illustrate the need for coordination between public and private sectors to discuss goals and market impacts of policy decisions. To directly go to Britherlite’s case study please click here or continue for more information about how Greenlight Planet established itself as a leader in the solar home systems off-grid market in Myanmar.
Overview of Solar Home Systems Market
According to 2018 figures by the World Bank, 66 percent of Myanmar’s population had access to electricity. This marks a progress in Myanmar’s efforts towards universal electrification, where it rose from 52 percent in 2014, the year before the regional challenge fund was launched. An even smaller proportion was connected to the power grid then (i.e. one-third of the population) and only 16 percent of rural households were grid-connected. This meant that more than 45,000 villages and almost 40 million were left without a connection and had to pay high electricity rates to local private operators using unsustainable diesel generators.
Thus, many households did not rely significantly on electricity – a household energy consumption survey in 11 regions across Myanmar showed that firewood was mainly used for cooking (73 percent) and candles and torches for lighting (65 percent), followed by electricity for cooking (13 percent) and battery for lighting (17 percent). For lighting, the majority of households rely on one fuel source while a small proportion of around 15 percent practised fuel stacking, tapping on two or more sources. The MercyCorps Energy Poverty Survey found that rural villagers spent on average 233 hours a year (about 20 hours a month) collecting fuelwood; this lowers household productivity and contributes to deforestation. Furthermore, collecting firewood is associated with additional risks for women as they can be exposing themselves to crime and violence.
A key innovation in off-grid solar for expanding access is PAYGO financing. This financing model allows low-income households to pay for energy in smaller increments, as well as finance the initial investment for the units, through agents or via mobile payments. With an 80 percent smartphone penetration rate in Myanmar, the potential for PAYGO technology and financing is high, although unequal between rural and urban areas. Nevertheless, for rural households, this technology presents an opportunity for significant monthly savings as they spend approximately US$ 15 per month on candles and to recharge batteries for light. Furthermore, this technology can facilitate financial inclusion amongst the unbanked, as only 48 percent of the population in Myanmar are formally served by financial services (i.e. have/use commercial bank products and/or other formal nonbank products) and only 12 percent of adults have a savings account (FinScope dashboard 2018).
Learnings from Greenlight Planet Challenge Fund Investment: Investing in clean energy access in rural Myanmar
Thuzar runs a snack shop selling fritters and fruits in Aye Thar Yar (Shan State).
I first learnt about Sun King through a radio advertisement and decided to buy it through the EasyBuy scheme.
The EasyBuy scheme gives Thuzar the flexibility to pay in installments and she finds it convenient when the Energy Officers drop by to collect payments. She uses her solar home system to power electrical appliances like lamps, a television and fan.
Thanks to Sun King, I can cook and open my shop later into the evening, and I don’t have to run over to my parents’ home to charge my electrical lamp!
For her business, switching to solar products has allowed her to cook into the evening, thus increasing her sales. At home, switching away from candles has saved her energy costs and the inconvenience of charging the electrical lamp.
In rural Myanmar, many households lack connection to the national grid, and rely on candles, chargeable batteries and firewood as sources of energy. However, as experienced by Thuzar, the reliance on such sources brings about several inconveniences and safety considerations, and also hinders the operations of small businesses as soon as night falls. Greenlight Planet therefore provides affordable Sun King SHS and lamps with a flexible payment solution to off-grid households. Their unique EasyBuy technology gives customers the ability to pay for products in small regular instalments over time, allowing low income families to own and use solar products in line with their typical cash flow. Founded in 2009, the Chicago-based company has lighted nearly 13 million homes across 40 countries including India and Kenya, becoming a leader in the entry-level, off-grid solar lighting industry.
Greenlight Planet applied for a matching grant from UNCDF under the ‘Energy Access’ Challenge Fund Window in September 2015. After a competitive selection process, the project was approved by SHIFT ASEAN's Investment Committee and initiated in December 2015 with a committed investment of US$ 564,262 from Greenlight Planet matched with a US$ 150,000 grant from UNCDF.
With SHIFT ASEAN's support, Greenlight Planet was able to launch its PAYGO solar home systems in Myanmar, but has faced challenges in trying to convert clients from cash-based to mobile-based payments.
Overview of Greenlight Planet’s PAYGO Solar Lighting Systems
Greenlight Planet aimed to reach off-grid homes in Myanmar with an innovative financial solution to make good quality solar lighting truly affordable to its most important demographic: families that live in rural Myanmar with little or no electricity access. With the help of SHIFT ASEAN's Challenge Fund, it introduced PAYGO EasyBuy payment plans for solar lamps and home systems in Myanmar, allowing poor households to access quality lighting system with low up-front costs and to save energy costs each month even before the system is fully owned.
The unit gets switched on by the Sun King Energy Officer (i.e. sales agent) as soon as the customer makes the initial down payment of approximately 15-20 percent of the total cost. The PAYGO mechanism is embedded within the SHS, whereby the lamp is switched off and system remotely deactivated if the customer does not pay. After the required number of instalments, the solar products are permanently enabled and owned by the customer. A wide range of products were offered to meet the customers’ needs – from small lamps, mid-level solar home systems with multiple lights and phone charging capabilities, to larger-scale systems capable of powering a small entertainment system for the entire family. More recently, Greenlight Planet introduced bundled products like a television with their solar home systems, which has since become their most popular product. All solar products are accompanied by a two-year warranty.
Greenlight Planet started its operations near Yangon before scaling up to different regions including Bago and Ayeyarwady. The company designs and manufactures the Sun King systems and sells them directly through their Energy Officers or indirectly through partnering distributors. Energy Officers are based at the local level and are remunerated on a commission basis. Besides selling the solar products, Energy Officers are also in-charge of collecting payments from their clients. While the initial project idea was to have clients pay digitally through mobile money, Greenlight Planet eventually engaged its Energy Officers to collect cash payments due to the low uptake of digital financial services. The Energy Officers then use the Wave Money app (i.e. mobile money app) to deposit the cash and transfer it to Greenlight Planet. Alternatively, customers with a Wave Money account can make payments through Wave Money agents in the vicinity.