Original Source: Nextbillion
While many have come to recognize the potential for PAYGo solar to deliver affordable, reliable energy to off-grid customers, in the past year the industry has begun to move in a direction that cuts this promise short. The true potential of PAYGo lies in providing customers the opportunity to affordably pay for life-enhancing products in installments, and in the end, own them outright. This allows off-grid families to secure access to reliable, clean energy under reasonable financing terms, and helps last-mile distributors reach previously untapped markets. On the surface, this is a clear win-win – but the industry is headed down a questionable path.
With over $500 million in investor financing pouring into off-grid solar in the past year, PAYGo operators have faced heightened pressure to expand their reach and aggressively deliver greater sales. Consequently, many PAYGo solar companies have begun to extend their lending terms up to 36 months, to market a lower daily financing rate and rapidly grow their customer base. But this lower daily financing rate, while appealing to the consumer, masks a troubling reality. Given the limited useful life of a solar home system, and warranty lengths of 2-3 years, by the time a family owns the system outright, it is often on its last legs and will soon need to be replaced. Customers often don’t anticipate the need for system replacement, particularly so quickly after they finally own their first system outright. Clearly, this approach fails to fulfill the promise of PAYGo.
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