Access to solar electricity in rural Sindh: role of payment schedule and planning - IGC
Almost 70 million people in Pakistan (35% of the population) do not have access to electricity, as they live in areas, mostly rural, not reached by the grid. Over 75 million (38%), while on-grid, receive low quality energy and experience outages for more than 12 hours per day (IFC, 2015). In spite of the significant benefits of access to electricity, the long-run feasibility of grid expansion for the provision of quality electricity to remote areas is often a concern (Greenstone, 2014). The development of market solutions to increase access and energy services in underprovided areas using renewables and alternative energy sources is essential to meet Sustainable Development Goals no.7, reduce poverty and promote growth.
We collaborate with Eco Energy Finance (EEF), a company supplying sustainable and efficient solar energy solutions (e.g. lights, fans, mobile chargers, TV) to small businesses in off-grid areas of rural Pakistan, to evaluate one such market solution. The product is innovative, as it allows the alleviation of credit constraints to adoption and has strong enforcement features: customers access energy through a pay-as-you-go monthly payment scheme and are disconnected when the credit expires.
The research aims to make both research and policy-wise contributions.
First, we investigate key determinants of the sustainability of the business model, by looking at the trade-off between discipline and flexibility in repayment schedule, which is a debated issue in the microfinance literature (Labie et al. 2015 for a review).
Second, we push the frontier of the behavioural and microfinance literatures, looking at individual constraints to repayment. We investigate the role of soft behavioural prompts aiming at stimulating the formulation of intentions and mental plans of action in a novel setting as low-cost solutions to lower default rates.