The Gap Between Energy & Appliance Access
Before my [electric] sewing machine, I could sew two shirts an hour, but now I can sew four, my sewing is faster and neater, and now I can teach students with my other [manual] sewing machine
By Angus Marjoribanks, COO of EnerGrow, and Siena Hacker, Clean Energy Access Coordinator at CLASP, Co-Secretariat to the Efficiency for Access Coalition
Before my [electric] sewing machine, I could sew two shirts an hour, but now I can sew four, my sewing is faster and neater, and now I can teach students with my other [manual] sewing machine.
— Barbara Musiimenta, EnerGrow customer
The Gap Between Energy & Appliance Access
In rural Sub-Saharan Africa, conversations around energy access have largely focused on electricity connection, often leaving customers with recent access out of the discussion. Without financing options, many newly connected customers cannot afford efficient, high-quality appliances to productively use and benefit from their connection. Members of the Efficiency for Access Coalition team recently traveled to Uganda to meet with a company bridging the gap between access to energy and appliances for productivity.
Why are Ugandan Customers Consuming So Little Electricity?
In Uganda, the major energy utility, UMEME, serves about 25% of the population. Over half of their customers are rural, and UMEME has ambitious goals to increase rural connections in an effort to achieve universal energy access by 2040. Despite growth in access, the average new customer only consumes 16kWh of power per month, enough to power two small incandescent lights every night. For comparison, the average U.S. customer consumes the same amount of energy per month as 57 new UMEME customers.
For many rural customers, electricity bills represent an unwanted extra expense but often replaces other fuel costs, such as kerosene. Data from solar home system providers in Uganda demonstrate customer willingness to pay more than the national grid charges per kWh for energy. The challenge is often not the affordability of energy, it’s the affordability of the appliances. Without accessible financing, newly connected grid customers can’t afford assets that could transform their lives.
EnerGrow, a Uganda-based asset financing company, is working to close the gap between access to energy and appliances. To better understand this challenge, EnerGrow surveyed grid-connected businesses and found that only 55% use an electrical appliance outside of lighting, but 84% desire one or more appliances. This demand is not being met in part due to very limited availability of affordable credit for small businesses. Fewer than 10% of businesses have accessed a loan in the past five years.
Creating Financial Models for Newly Connected Customers
With funding from the Efficiency for Access Coalition, EnerGrow is providing small businesses with low-interest loans that enable them to benefit from productive energy appliances — such as electric sewing machines and fridges — without having to meet the upfront cost of these items. When selecting products to finance, EnerGrow prioritized locally manufactured products with high energy efficiency.
Through their model, EnerGrow customers purchase appliances and participate in trainings on safety, business management and bookkeeping. The additional skill building support equips business owners with the tools and knowledge to grow their businesses and plan for long-term success — which often means saving for an additional appliance.
Before I had 50 customers a day, but with a second [juice] machine I have 80 customers a day and I can sell more varieties.
— Brian Nkunda, EnerGrow customer
Brian Nkunda, EnerGrow’s first customer, runs a small snack shop and juice dispensary at Uganda Christina University Mukono, outside Kampala. With access to a juice dispenser valued at less than $500, Brian has increased his daily revenues by more than $30. On top of business growth, his energy consumption has more than doubled and is now 8 times greater than the average new customer.
Brian’s increase in electricity consumption after purchasing the juice dispenser demonstrates that with appropriate financial support, newly-connected electricity customers can use and benefit from their connection. He also paid back his loan early and has already taken out another loan for a large fridge.
Financial Models for Appliance Access
Appliance financing has the potential to address financial exclusion and drive local economic growth. With financial model interventions, all stakeholders have the potential to benefit. Customers gain access to appliances and support to grow their businesses, while appliance and electricity companies benefit from product and service usage. Despite delays due to COVID-19, EnerGrow plans to reach more customers and continue to close the gap between energy and appliance access in Uganda.
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