PAYGo, which stands for pay-as-you-go, sounds like a self-explanatory term. However, PAYGo is a system that helps thousands of individuals and families across Africa and the world gain access to necessary and life-changing services. FINCA supports PAYGo financing through several initiatives, such as BrightLife and our microfinance banks.
Read on to learn more about PAYGo, and how it is impacting our clients and communities.
To understand how this service works, it is important to differentiate between the various uses and meanings of PAYGo. According to the Tax Policy Center, the term PAYGO in the US refers to a budget rule requiring certain tax increases and cuts.
However, PAYGo is also an emerging solution used throughout Africa to provide solar energy systems to low-income households. Under this PAYGo solar model, households can purchase a high-quality solar home system by paying it off through smaller installments. Typically, the model includes paying a deposit—usually 10-20 percent of the total cost—then committing to a certain number of ongoing payments. The customer makes payments either daily, weekly or monthly through a mobile money account with a PAYGo operator. Technology within the solar device regulates usage, disabling the energy services if a customer defaults on their payments. Under most PAYGo models, the device then permanently unlocks at the end of the payment period and ownership is transferred to the customer.
FINCA’s BrightLife program has led to significant advances in the distribution and improvement of PAYGo services. BrightLife distributes solar home systems and other amenities, such as cookstoves and clean energy appliances. This social enterprise is based in Uganda, and by working with FINCA Uganda, BrightLife has helped its clients through both clean energy and microfinance services.
For many individuals, using a PAYGo provider is their first time using advanced financial services. Most have never before received financing and many don’t even have their own bank account. This leaves them without a credit history and no way to access formal banking services for loans or financing. Using a PAYGo operator is an easy solution to this, as they provide the financing needed to purchase a solar home system they could not otherwise afford.
This bridge between solutions led to the creation of BrightLife and FINCA Uganda’s Prosper initiative, combining the goals of each organization. Prosper helps Ugandans gain access to clean solar energy and appliances while building their credit history. Through BrightLife’s partnership with FINCA Uganda, customers are able to use the repayment of their solar home system as a form of credit history with FINCA Uganda. After successfully completing all of their payments, customers have the option to open a savings account with FINCA Uganda and then have access to many of their financial services. This opens the door for more financial services to populations that otherwise wouldn’t have those opportunities.
BrightLife continues to reevaluate its PAYGo solar model and is committed to protecting its clients. To better improve its services, BrightLife outlined and took action on several best practices focused on helping clients. These include increasing transparency in pricing, investing in customer education, maximizing connections with customers and establishing clear investor expectations. This is just one example of how BrightLife is continuously looking inward on how they can improve their customers’ experience.
PAYGo may be a new term for many learning about microfinance and development, but its impact has been majorly beneficial. Partnerships between initiatives are crucial to further spread this service to those who need it. Through BrightLife, its Prosper initiative, and FINCA Uganda, energy and innovation continue to grow. This is an important step in furthering FINCA’s overall mission to alleviate poverty through lasting solutions.