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| − | = Off-grid energy Companies and Financial Institutions - Need for Collaboration = | + | {| style="border-bottom:solid 1px; border-left:solid 1px; border-right:solid 1px; font-size:13.63px; width:100%" cellspacing="0" cellpadding="0" |
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| − | = Introduction =
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| − | Off-grid energy companies (OCEs) in this article refers to those companies in Africa that sell solar energy systems based on [[Fee-For-Service or Pay-As-You-Go Concepts for Photovoltaic Systems|PAYG model]]. These are the fastest growing companies with an average of 500 customers per day.
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| − | == Natural Progression from Energy Provider to Consumer Finance ==
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| − | To increase their revenue and to keep ahead of competitiors, there is a natural tendeny for OECs to also provide secondary loans to existing customers, for activities such as buying a motobike or other appliances. For the secondary loans, the energy system will be switched off in case of failure to pay on time and the secondary assessts might also be repossesed.
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| − | Along with added revenue, the other benefits of providing consumer finanance are:
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| − | *For many customers in rural areas, buying energy services from OECs might be the '''first time they had access to financial services'''
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| − | *PAYG also '''promote mobile transactions''' reducing tthe transaction cost.
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| − | However, OCEs companies are not financial institutions and in many countries they are not allowed to offer secondary loans. Therefore, there is a need as well as opportunity for successfull collaboration between OECs and Financial institutions.
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| − | = Financial Institutions = | + | |
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| − | Financial institution in sub-saharan africa are classified by '''large loan size, high margin and low business volume''' which is the opposite of financial services to the base of the pyramid (BoP). They have not able to establish a commercially viable channel to reach out to the bulk of the african markets mainly due to:
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| − | *Entry-level accounts for low-income clients are likely to have low balances, make few transactions and use of fixed physical infrastructure such as bank branches and automated teller machines (ATMS) which in end might result in loss for the bank rather than profit.
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| − | *Due to issues like high-collateral requirement, time-consuming applications and inefficient cash management and inefficient cash management, financial institutions mostly focus on the salaried, relatively better-off segments of their markets.
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| − | therefore, the OECs present an opportunity for financial institutions to reach the low-income population in a viable manner.
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| − | == Resources of Off-grid Energy Companies and Financial Institutions ==
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| − | The table below shows the simplified analysis of the resources of off-grid energy companies and financial institutions.
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| + | | style="width: 250px; background-color: rgb(72,177,69)" colspan="2" | '''<font color="#ffffff"><span style="font-size: 16px"></span></font>'''<p style="text-align: center">'''<font color="#ffffff"><span style="font-size: 16px">SOFTWARE UPDATE ANNOUNCEMENT: 30 AUG - 10 SEP</span></font>'''<font color="#ffffff"><span style="font-size: 16px"></span></font><br/></p> |
| − | | style="background-color: rgb(79, 129, 189);" | <span style="color: rgb(255,255,255)">'''Off-grid Energy Companies'''</span> | + | |
| − | | style="text-align: center; background-color: rgb(79, 129, 189);" | <span style="color: rgb(255,255,255)">'''Financial Institution'''</span>
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| − | | rowspan="6" style="background-color: rgb(219,229,241)" | '''Assets''' | + | | [[File:Icon Announcement.png|right|120px|alt=SPWS- capacity building.jpg|link=]]<br/> |
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| − | | rowspan="1" colspan="2" style="text-align: center; width: 530px;" | IT system for account management<br/>
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| − | | rowspan="1" colspan="2" style="text-align: center; width: 530px;" | customer relationship<br/>
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| − | | style="width: 324px;" | Cloud-based customer relation management (CRM) systems
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| − | | style="width: 200px; text-align: center;" | banking expertise
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| − | | style="width: 324px;" | Leverage over customers
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| − | | style="width: 200px; text-align: center;" | credit assessment
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| − | | style="width: 324px;" | <br/>
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| − | | style="width: 200px; text-align: center;" | banking license
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| − | | rowspan="3" style="background-color: rgb(219,229,241)" | '''Financial products'''
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| − | | style="text-align: center;" rowspan="1" colspan="2" | Loans<br/>
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| − | | style="text-align: center;" | Saving accounts
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| − | | style="text-align: center;" | Money transfer services
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| − | | style="background-color: rgb(219,229,241)" | '''key strengths'''
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| − | | Ability to reach lower-income populations at scale, profitably with financial services
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| − | | style="text-align: center;" | Banking license and know -how
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| − | | style="background-color: rgb(219,229,241)" | '''key weakness'''
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| − | | banking license and know-how
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| − | | style="text-align: center;" | Ability to reach lower-income populations at scale, profitably, with financial services
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| − | == Reasons for working together ==
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| − | == Large Portfolio of loans ==
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| − | Most of the OECs started out as energy system retailers but with progress, have amassed a large portfolio of loans. Managing these large portfolio of loans is outside their core competence and requires skilled financial capabilities. The loan also has to be refinanced. For example, if an installed system cost on average USD 150, then to reach 1 million consumers, the sector will have to raise around USD 150 million in consumer loans. As the secotr expands the consumer loan will also increase. Because of the possiblity to remotely switch off the energy devices in cases of no payments, oecs, loan have higher repayment rate than their borrower's profile will suggest.<br/>
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| − | = Foreign exchange Risk =
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| − | Most of the consumer loan are in the local currency while the capital to finance OECs is raised in hard currency such as USD or Euro:> greater risk in the system
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| − | = Lack of expertise to handle consumer loan portfolios =
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| − | Potential of merging between oecs and financial institutions.
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| − | Oecs have ideal small loan delivery channel with highly automated, cashless accounting and significant leverage over the borrower. In a nutshell, they have the infrastructure in place to effectively manage small loans offered to a relatively remote and unknown customers.these factors also contribute to their high repayment rates as opposed to what the borrower's profile might suggest.
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| − | On the other hand they lack large scale funding at a reasonable cost and the abilities to manage a portfolio of loans.
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| − | They offer to increase the Bank's customer base but it will depend on the bank's ability to profitable serve those customers or not.
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| − | = Reference =
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| − | This article is based on the following publications
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