Using solar-powered light from a pay-as-you-go kit, Mali. Photo by Communication for Development Ltd.
Just as mobile phones leapfrogged landlines to bring connectivity to even the most remote corners of the globe, pay-as-you-go (PAYGo) solar has been hailed as a breakthrough solution — bringing clean, reliable electricity to an estimated 280 million people while expanding access to financial services. This innovative approach to off-grid electrification is helping low-income customers around the globe to save money, earn more income and enjoy improved health, safety and overall life quality.
Now, a decade after the first PAYGo customers had their lights turned on, explosive growth and an incredible influx of capital have transformed what was once a handful of scrappy start-ups into a crowded and rapidly maturing global industry. But this expansion has also raised important questions about the ability of the PAYGo industry to balance growth with sustainability, as companies must manage growing portfolios of customers in ever more challenging markets. As the PAYGo solar sector continues its transition from start-up to maturity, new tools and approaches are needed to help companies and investors understand, manage and grow these businesses.
A New Set of Metrics for a Maturing Industry
In the coming weeks, CGAP, GOGLA and IFC Lighting Global will launch the PAYGo Performance, Reporting and Measurement (PERFORM) key performance indicators (KPIs), representing a key step toward addressing concerns about the long-term viability of the industry. The KPIs are designed to bring consistency and transparency to an industry characterized by complex business models that defy the traditional metrics used in the retail and financial services sectors. These new indicators address the immediate need for the industry to adopt common financial and operational reporting standards that promote transparency, benchmark and improve performance, and enable a more accessible profile for investors.
For the past three years, the PAYGo PERFORM partners have collaborated with 600 colleagues from companies, investors and the broader PAYGo sector to design and pilot this new set of KPIs. The indicators include 36 standard metrics covering portfolio quality, unit and firm-level economics, and company operational indicators.
Armed with these KPIs, the PAYGo industry will be well-positioned to usher in the next phase of growth. The KPIs provide a common structure that can be used internally by companies, externally by funders, and in general to make the PAYGo sector more transparent and understandable to other interested parties like governments, researchers and journalists.
From the PAYGo solar company’s perspective, having a standard language for comparison and analysis will help companies measure and benchmark their performance and find areas for improvement. From the investor’s perspective, standardized periodic reporting and benchmarking will make it easier to assess industry risks and understand the potential for growth and return. The standardization and transparency provided by the KPIs will help further the industry’s already substantial impact, ensuring that off-grid energy providers have the capital they need to scale and reach the millions of households around the globe who still lack access to energy and financial services.
“The development of standardized KPIs is a key development for the PAYGo sector. We believe it will improve transparency and understanding, leading to improved company performance and increased capital flows.”
– Geoffrey Manley, Head of Energy Access & Efficiency, CDC
A Call to Action
The KPIs represent an industry-wide, collective effort, coordinated through CGAP, GOGLA and IFC Lighting Global. As PERFORM launches this version of the KPIs, there is still plenty to do to ensure that they are a success. Companies, investors and other stakeholders are encouraged to start using the reporting framework and urging others to do so. Every stakeholder who adopts the framework brings us one step closer to making these KPIs the industry standard and enabling the industry as a whole to help solve development challenges at greater scale.
The work of bringing PAYGo ever more into the investing mainstream continues. Even as we launch these KPIs, the PERFORM partners are moving forward with additional work, including (1) a soon-to-be-released Technical Guide for the KPIs, (2) an Accounting Guide to review differing approaches employed within the PAYGo sector and start an industry-wide conversation to agree on common accounting practices, (3) continuing data collection to demonstrate the usefulness of the metrics and provide benchmarks that can be used by the industry, and, (4) perhaps most importantly, widespread outreach to encourage uptake and use of the KPIs.
For now, we invite you to join us for a webinar on 29 June 2021 to learn more about the PAYGo PERFORM KPIs, the value they can bring to your organization and the learnings the PAYGo PERFORM team has taken from piloting these KPIs over the past year.
In a world still gripped by the COVID-19 pandemic, adopting a standardized set of KPIs is more urgent than ever. In January 2020, PAYGo was charging ahead as a breakthrough business model combining connectivity, mobile money and credit to achieve real energy access gains in rural communities. Eighteen months later, the COVID crisis, with its months of lockdowns and global economic slowdown, has taken its toll. As companies seek a return to robust pre-pandemic growth, keeping tabs on portfolio quality and attracting the capital needed to scale will become increasingly important. And as investors try to sort out how the pandemic has reshaped the energy access landscape, the transparency offered by the PERFORM KPIs will help to accelerate the influx of capital that the PAYGo solar industry so desperately needs.
Roan Borst is a project manager within the Performance and Investment team at GOGLA. Bill Gallery is an Operations Officer at the International Financial Corporation and part of the World Bank Group’s Lighting Global Initiative. Kevin Kennedy is a Consultant for the International Finance Corporation and the World Bank Group’s Lighting Global Initiative. Nicky Khaki is a Senior Financial Sector Specialist at CGAP, where he leads CGAP’s work with PAYGo solar providers and investors. Max Mattern is a Financial Sector Specialist at CGAP and Team Lead for CGAP’s Financial Innovation for Development (FI4D) project.