If you are one of the 73 percent of Ugandans who is not connected to the electric grid, what options do you have? Previously, your only options were highly-polluting kerosene lanterns for light and inefficient wood-burning stoves for cooking. However, clean cookstoves and solar lighting are becoming more accessible alternatives thanks to pay-as-you-go (PAYGo) solar businesses.
The biggest barrier most off-grid Ugandans face in using clean energy options like solar energy and clean cookstoves is the up-front cost. By partnering with BrightLife, a PAYGo clean energy provider, and FINCA Uganda, a microfinance bank, FIBR is exploring how PAYGo companies — particularly ones with highly digitized operations — can help low-income consumers access superior financial services through formal providers.
At FIBR, we see PAYGo solar as one of the most promising ways to expand both access to energy and financial inclusion. Although they are in close contact with consumers, PAYGo providers lack expertise in providing financial services as well as a balance sheet from which to lend. Partnering with an innovative, flexible microfinance institution (MFI) gives them an opportunity to deliver valuable new financial services to PAYGo customers.
BrightLife, a social enterprise founded by FINCA Internationalin 2014, sells and distributes improved cookstoves and solar home systems on credit, paid for through mobile money, on four- to six- month flexible payment plans, known as “FlexiPay.” BrightLife’s close partnership with a large microfinance network like FINCA Impact Finance and its local affiliate, FINCA Uganda, a regulated micro-deposit taking institution, is a unique test-case for demonstrating how the PAYGo sector can unlock financial inclusion in partnership with financial services providers (FSPs). As a member of the FINCA International community, BrightLife can also take advantage of FINCA Uganda’s strengths to expand its core PAYGo solar business, by leveraging FINCA Uganda’s network of existing clients, access to deposits in local currency and expertise in loan collections.
Starting Small: Rapid Learning from our Nanoproject
Before diving into a full partnership with BrightLife, we tested the waters through a nanoproject, using field visits, data exploration sprints and small experiments to replace a theoretical planning process. The BrightLife nanoproject validated the relationship and alignment between BrightLife and FINCA Uganda and helped our team verify that BrightLife had the right data and tools to improve portfolio analytics. We also evaluated how to link PAYGo data with FINCA Uganda’s decision-making, credit scoring engine and broader digitization efforts. This initial work allowed us to gauge and affirm the potential for a subsequent FIBR partnership in a low-cost but high-reward way.
Diving Deeper: Our Current Engagement
In our current engagement with BrightLife as a FIBR partner, we are building on the previous work to develop data analytics to improve customer segmentation and portfolio management in order to scale BrightLife’s FlexiPay product line. We are also working directly with FINCA Uganda to build an analytical framework to enable them to understand the potential risk and return of PAYGo products and customers using available PAYGo data.
This work includes:
- Building advanced data analytics to improve BrightLife’s understanding of customer behavior and repayment risks and designing new portfolio-health dashboards
- Prototyping and deploying robotic process automation (RPA), a form of business process automation using artificial intelligence, to automate key data process flows at BrightLife
- Conducting interviews and focus groups to understand the unmet financial needs of BrightLife PAYGo customers
- Developing new products within FINCA Uganda that help BrightLife customers access additional financial services after they successfully pay for their solar home system or clean cookstove
- Designing a business case for the new PAYGo-to-Financial Service Provider products to be offered at FINCA Uganda, by outlining product features, delivery channel, data and process flows and risk management processes
These tools will help BrightLife’s management and operational teams to improve their interactions with customers at every step of the way, from initial selection to offering post-loan additional financing options.
Can PAYGo Be a Linkage to Financial Services?
FIBR seeks to learn if and how digitizing the operations of local businesses — in this case, the PAYGo operator — can convince FSPs to offer, fund or underwrite financial services to low-income end users. We’re excited about partnering with BrightLife and FINCA Uganda to demonstrate the potential of this model and to contribute insights about how to structure such a partnership.
Through the design, prototyping and pilot testing of new FINCA products tailored to the needs of good-paying BrightLife customers, FIBR is working to:
- Understand the optimal design of the PAYGo-to-FSP customer journey
- Figure out when and how data is required to assist with decision-making on both sides
- Test how the offer of financial services at an FSP upon repayment might impact BrightLife’s initial sales conversion and repayment rates of the PAYGo offering
- Bridge the gap between the payment flexibility inherent in the PAYGo offering and the more predictable installment patterns FSPs are used to
- Use improved BrightLife data analytics and dashboards to improve portfolio visibility on both sides.
Originally published on Medium by BFA. Jacob Winiecki is a consultant on financial inclusion and energy access.
FINCA International’s BrightLife program has partnered with FIBR, an initiative of BFA and Mastercard Foundation, to leverage data analytics to build stronger linkages between BrightLife’s energy customers and FINCA Uganda’s financial services. Read the press release.