Repayment performance for pay-as-you-go solar lamps
José Guajardo
Abstract
This paper provides a descriptive analysis of repayment performance for pay-as-you-go solar lamps, based on pilots conducted in six countries in sub-Saharan Africa and Asia during 2014 and 2015. In our sample, 95% of accounts were eventually paid off by the end of the observation period, and the median time to ownership was one week less than the nominal repayment term. Default rates of 11% and 7% were observed with a grace period of 50% and 100% of the repayment term, respectively. We document differences between weekly and monthly accounts (e.g., although time to ownership and on-time performance were better in weekly accounts, longer-term default rates were lower for monthly accounts). The observed payment patterns demonstrate that customers make extensive use of the flexibility allowed in rent-to-own models (e.g., fewer than 30% of customers followed a regular schedule of fixed installments). The analysis identified repayment frequency as one key factor associated with this behavior, as flexible payment patterns were much more likely to occur in weekly accounts than in monthly accounts. This paper highlights the importance of business model design in the diffusion of off-grid energy products in developing countries, outlining opportunities for future research in this domain.