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PAYGO in Madagascar, Baobab+'s experience

PDF, French. 1 document.

Baobab+ is a subsidiary of Baobab specialised in energy and digital access, active in 4 African countries. Supported by funding from the European Union and the Indian Ocean Commission, Baobab+ opened an office in Madagascar in 2016. Based on an ambitious Pay-As-you-Go (PAYGO) product distribution program, the company has quickly established itself as a major player in the country’s solar sector, with 62,000 units/households equipped. This white paper, written by Baobab+ and Enea Consulting, aims to illustrate the principles and main issues associated with PAYGO solar energy based on Baobab+’s experience in Madagascar.

In many developing countries, access to electricity is still a major socio-economic issue. Madagascar, where the electrification rate in rural areas barely reaches 6%, is a perfect illustration of this. The expansion of electricity networks often requires a large and risky investment.

As a result of these issues, combined with the effect of significant reductions in the cost of photovoltaic solar energy, decentralised solar solutions have seen strong growth since 2010. With around 35 million units sold in 2019, and sales growth stabilised at around 10% per year since 2017, off-grid solar products are now an integral part of the energy landscape in many developing countries. While solar systems present a real opportunity for rural households without access to electricity, the investment required to acquire such products can be a barrier for smaller households. The PAYGO model, which first appeared in East Africa around 2012, has made solar products considerably more accessible by offering an alternative to the cash model.

PAYGO is based on the use of mobile money to allow payment over a predefined period of time, after which the customer becomes the owner of the system. The development of this model has revolutionised the off-grid solar product sector and is now a major contributor enabling its growth. In 2019, nearly a quarter of global solar kit sales were made through PAYGO, with an annual increase of 38%, compared to a 10% increase in solar kit sales in general. Although this model has now reached a certain maturity, its implementation is nonetheless subject to many challenges, faced by all players in the sector.

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