East African company moving from selling only solar energy to ‘everything’

M-KOPA sold its solar energy system to over 300,000 low-income households through innovative payment and distribution tactics. Picture: Georgina Goodwin / M-KOPA

M-KOPA has sold its solar energy system to over 300,000 low-income households through innovative payment and distribution tactics. Picture: Georgina Goodwin / M-KOPA

For the last four years Kenya-based consumer finance company M-KOPA has enabled 300,000 low-income earners in East Africa to acquire home solar energy systems using its pay-as-you-go model.

The home solar systems feature a battery, light bulb, phone-charging facility and a chargeable radio. Customers make a US$34 deposit, and pay off the balance over a 12-month period in daily usage credits of about $0.50. Payments are made via mobile money. After one year, customers own the system outright and no longer have to make daily payments. GSM sensors in the equipment allow M-KOPA to regulate usage based on payments received. If a customer stops paying and runs out of credit, the system ceases to function.

[box type=”download”]M-KOPA 100x120Learn more about M-KOPA’s innovative business model. In this case study, titled ‘Finding success in Africa’s rural, low-income market’ we take a closer look at M-KOPA’s business, with a specific focus on technology, payments, product design, distribution, marketing and customer care. The information is aimed at those interested in serving rural and low-income consumers in Africa. [/box]

A combination of innovative technology, an effective rural distribution system, a compelling value proposition, and a strong focus on customer care has made M-KOPA a success.

A greater variety of products

Now the company is taking a new direction to offer its customers a wider array of products such as bicycles, smartphones, water tanks and cooking stoves. M-KOPA managing director, Jesse Moore, says selling additional products is “the next phase of M-KOPA’s business”.

The company has been piloting its new business line for the last six months during which 40,000 add-on products were purchased by its existing customers. The biggest seller so far is a Kenyan manufactured energy-saving cooking stove brand that promises between 50-70% reduction in charcoal consumption and significant cuts in indoor air pollution.

M-KOPA has also sold over 9,000 Huawei and Samsung smartphones in the $50 to $100 price range. It is now shifting over 1,000 smartphones per month.

“For the first time many of our customers are able to get internet through a [smartphone] device which otherwise would be difficult for them to afford,” says Moore.

The new collection of products is only available for households who have successfully completed the payment plan on their solar systems. They then continue to make daily payments – as if their solar was still on credit – until the new product has been paid off.

“We are not asking people to spend more money than they have. We are just asking them to take the money that they used to spend on kerosene and now spend it on another product,” says Moore. “[That is why] it is important you get the solar system first so you stop wasting your money on kerosene… and once that is freed up then you can afford to buy these add-on products.”

‘Infinite’ possibilities

M-KOPA hopes to introduce more products as it seeks to expand its offering beyond solar energy.

“Our intention is to figure out what the demand is. If people within our customer base say they are struggling to afford X product, it is in our interest to make that product available in our credit facility.”

Moore says the new business line has almost “infinite” possibilities.

“What is exciting is we can sell pretty much everything and it doesn’t even need to be a physical product. It could be a service. We have piloted providing agricultural services to people. We have also done pilots around school fees, issuing people cash at the right time so they can pay school fees and then pay it back conveniently…” says Moore.

“What I have heard in the field is a lot of people are focused on home improvement. I have heard a lot of requests for things like roofing sheets and windows.”

By mid-2016, Moore says M-KOPA customers will be able to buy TV sets, although it is unclear whether these will be designed and manufactured in-house, or sourced from other manufacturers. At the moment M-KOPA designs its own solar systems, which are then made in China. The add-on products it has so far introduced are produced by independent manufacturers.

But even with the diversification, Moore notes M-KOPA is not turning away from solar energy. After all, customers can only access the additional products after fully paying for their home solar system.

“It is our ambition to continue to connect homes to [solar], but the reason why it is critical to have launched this new business line now – is our customers are asking for the opportunity to take that old kerosene money and turn it into more products and upgrade their lives.

“It seems like the obvious next step for us, and it makes [people] even more interested in buying our [solar] product in the first place.”

M-KOPA plans to reach over one million homes by the end of 2017. The company is currently connecting solar to 600 new homes each day across Kenya, Tanzania and Uganda.