Lending to rural households for renewable energy access
Rafode have been creating value by delivering high quality solar systems since 2013. They offer Global Lighting certified equipment exclusively via short term credit lines, typically 24-36 weekly instalments. The credit plan is affordable as it substitutes the traditional monthly energy spending (kerosene lamps, dry cells).
Risk is reduced through the group guarantee mechanism in which members guarantee each other. The loan is received on nonplussed basis, effectively reaching the bottom of the pyramid market; customers are required to save Ksh 200 per week as shares to be contributed to Rafode during their membership (the repayment period). The micro-loan contract is signed by the local chief and by all borrowers (the group Members must be minimum 10 persons) including one guarantor (pledges security, and mobile payments to Rafode), and one co-guarantor.
This contract, prescribing one weekly group meeting on a fixed week-day, allows for very limited defaults, historically only 2%, is appreciated by customers who cannot meet daily payments, cannot access mobile money, or cannot bear the extra costs of pay-as-you-go components. Rafode is the sole Western Kenya MFI targeting the low income households excluded from other lending options currently offering small solar-pv systems. The company serves clients in Homabay, Kisumu, Kakamega, Migori and Kisii Counties.
To ensure Rafode’s growth plan in the next two years they hope to satisfy the growing demand and maintain a competitive advantage in the market. This will be done by the expansion of Rafode’s infrastructure, targeting of lead customers and multiplier entities, building partnerships with suppliers, staff training and management strengthening, community engagement and capacity building.
CEO Anthony Mayodi says, “Rafode shall give out about 18,000 to 20,000 number of loans/solar kits in the coming three to four years. Rafode’s projected rapid portfolio growth rests on the proven demand for loans for solar lighting equipment. Indeed, clients have been able to concretely measure the advantages of investing in Rafode’s products by moving away from the traditional energy expenses such as kerosene, dry cells, candles and using the savings to service the loans.”
Some of the milestones achieved since 2013 are having distributed more than 4,123 solar lamps on credit, benefiting the low income households as well as small and micro entrepreneurs from diverse sectors, with the majority being women. This led to the creation of at least 200 jobs.
Rafode have received business advisory services at the Kenya Climate Innovation Center.
By Michelle Mung’ata