Low-income households benefit from affordable energy in Kenya

The high cost of power and the fact that 80 per cent of the population is not connected to the national grid has pushed enterprising Kenyans to innovate lighting solutions. One such firm is Mibawa Suppliers
Ltd, a Kenyan incorporated company. Mibawa has for the last three years distributed affordable solar lighting kits in rural areas in Kenya.

The firm has mainly concentrated its solar distribution activities in Busia, Bungoma, Kisumu and Trans Nzoia, Makueni, Meru, Narok, Homa Bay, Migori, Kakamega and Bomet.

Mibawa currently has two branches in Kitale and Bungoma and is now penetrating central and eastern regions of Kenya. Their ingenious Pay As You Go home model has enabled poor Kenyans to access affordable renewable energy.

The Indigo Pay As You Go (PAYG) solar lighting kit with a solar panel, two high intensity LED bulbs, battery and phone charging ports retails at Sh13,000.

“This is a cost that majority of poor Kenyans cannot raise upfront, and hence the idea of a staggered purchase programme,” explains Mibawa Chief Executive Officer Michael Wanyonyi.

The approach opens up access to solar lighting systems to households that cannot otherwise afford the upfront purchase price of a solar home lighting system.

To install the PAYG Indigo unit, Mibawa charges Sh1,500, followed by weekly top ups of at Sh140 through a recharge voucher (Sh20 per day).

This takes nearly 80 weeks, after which the customer is able to either purchase an Unlock card which will remove the time-based restriction, freeing up the unit, or to upgrade their unit to a more powerful system on a similar PAYG scheme.

This provides the opportunity for customers to increase the level of power in their houses.

The PAYG home solar solution offers an alternative cleaner and cheaper way of lighting compared to kerosene which is used by most of the rural population who are out of reach of the main grid, states Mr. Wanyonyi
during a visit at one of the kit’s users in Tawa, Makueni county.

Rose Mumbua, a second-clothes dealer in Tawa market and a resident of Kithuiya village explains that before the installation of the Indigo Solar Kit in July, she used to spend about Sh550 on kerosene.

She can now charge her phone from the comfort of her house, unlike before when she had to charge at the market twice per week for Sh40. “Getting enough lighting with Sh140 per week is quite affordable,” Rose shares. Each of the two bulbs can light for up to nine hours per day.

Besides, the light is clear and has got no fumes; it's clean energy, she offers. “The fumes from the kerosene lamp were not conducive for home work in the evenings, as my children would have their eyes itching and
some cough,” adds the single mother of two.

With the kit, Rose can see improved health and grades for her children who can now study for longer hours at night.

She further explains that with the Sh370 savings per week, she will expand her business. “Indigo has given my business a head-start, and no doubt, my children will reap more in terms of improved grades in school
and good health,” Rose says.

Clearly, Mibawa’s business model requires units to be deployed into customers’ houses, with the payment spread out over a period of time. This requires working capital to be deployed with a deferred revenue scheme, leading to a working capital cash flow gap.

With a sufficiently large installed base of PAYG solar lighting systems, the future growth of the business can be funded directly from the available liquidity in the business giving a long-term sustainable business.

However, before they get there, Mibawa requires finances to ensure smooth operations. In regard to this Mibawa recently won the Power Africa Off Grid Competition. General Electric (GE) hometeamed
up with the US Africa Development Foundation (USADF) to launch this competition in 2013 in order to address the energy needs of marginalised communities in Africa.

Mr. Wanyonyi is one of the competition winners and his project is the recipient of $100,000 (Sh8.8million) grant from USADF. These funds, Mr. Wanyonyi says, have helped Mibawa to deploy more units and give access to power through distributed energy to the un-served populations.

The grant has seen Mibawa widen its distributorship from 70 to 95 and deploy about 12,000 units from an initial 7,000. The firm has been able to scale up its operations with their newest entry in Makueni, Embu and
Meru regions.

The distribution network has also created 300 jobs, for both distributors and installers. “The product has been received very well in the market as it has facilitated people from a more harmful product to clean energy,” explains Mr. Wanyonyi.

The firm is targeting to connect solar power to 20,000 customers by next year and to double that number every year. “We want to distribute power to over 100,000 customers in five years,” he says.