Mobisol – the answer or just another question mark?

AN EXAMPLE TOWARDS SDG GOAL:

AFFORDABLE AND CLEAN ENERGY

Energy is central to nearly every major challenge and opportunity the world faces today. Be it for jobs, security, climate change, food production or increasing incomes, access to energy for all is essential. Working towards this goal is especially important as it interlinks with other Sustainable Development Goals. Focusing on universal access to energy, increased energy efficiency and the increased use of renewable energy through new economic and job opportunities is crucial to creating more sustainable and inclusive communities and resilience to environmental issues like climate change.

Progress has been made towards the SDG goal in the past decade regarding the use of renewable electricity from water, solar and wind power and the ratio of energy used per unit of GDP is also declining. However, the challenge remains big for our society. At the current time, there are approximately 3 billion people who lack access to clean-cooking solutions and are exposed to dangerous levels of air pollution. Additionally, slightly less than 1 billion people are functioning without electricity and 50% of them are found in Sub-Saharan Africa alone.

Facts and Figures:

  • 13% of the global population still lacks access to modern electricity.
  • 3 billion people rely on wood, coal, charcoal or animal waste for cooking and heating
  • Energy is the dominant contributor to climate change, accounting for around 60 per cent of total global greenhouse gas emissions.
  • Indoor air pollution from using combustible fuels for household energy caused 4.3 million deaths in 2012, with women and girls accounting for 6 out of every 10 of these.

The Energy industry is moving toward renewable as the positive trend of renewable energy investment and the increasing weight of renewable sources in the world energy mix shows in the past years. However, there needs to be more access to clean fuel and technology and more progress needs to be made regarding integrating renewable energy into end-use applications in buildings, transport and industry, especially for the people, who recently have no access to modern electricity and heating/cooling supply. Public and private investments in energy also need to be increased and there needs to be more focus on regulatory frameworks and innovative business models to transform the world’s energy systems and to allow more people share the benefit of renewable energy usage.

 

Mobisol and its new business model

In just seven years, the company has grown from a two-man startup to a global company with over 750 employees and customers in 12 countries. The vision of Mobisol is to help alleviate poverty by providing sustainable and affordable energy solutions to 20 million people by 2023. They aim to identify and develop creative and affordable alternatives to unhealthy, environmentally harmful and expensive fossil fuels.

 

Mobisol’s business model is based on the combination of lease-to-own and pay-as-you-go (“PAYG”) models. It is a financing innovation through mobile payment technology, compliment by the off-grid solar power technology. The innovative off-grid solar solutions are for both home and business. Plug and play products and services are integrated with affordable mobile payment plans to reduce upfront investment for end-users so that they could afford having decentralized electricity system at home.

Solar Home Systems; Home & Productive Use Appliances; PAYGEE Software

 

 Mobisol distributes its off-grid solar panel products through service hubs located near customer’s region. A customer walks in a service hub and fills up a due diligence form. The due diligence form or questionnaire will be sent to the Finance department within a few minutes. An automatic SMS will be sent to the prospect customers to inform them whether they have been qualified to lease the product they wish to purchase. The qualified customers will query the salesperson in the service hub whether the product is available and choose the payment mode.

 

Two modes of financing are accepted. The customer can either purchase the equipment with upfront full cash payment or choose to pay-as-you-go(“PAYG”) over 36 months. If the customer chooses PAYG mode, 10% to 20% deposits will be paid when they receive the product and the balance will be paid over 36 months. Typically, the monthly payment is approximately $20 to 25 dollars.

 

Customers pays regularly with mobile money using Paygee Software Suite. Paygee software suite is hardware agnostic which makes the software compatible with all kinds or brands of mobile phones. This is important as customers of Mobisol purchases low-end phones that may only equip with bare bone features. Mobisol headquarters in each country will monitor customers payments and track their payment history.

 

A toll-free hotline, working from 7am to 10pm Monday to Sunday, and after-sale customer services at the service hubs address the technical issues of the product after the purchase.

In addition, Mobicharger, a solar powered phone charger system, enable nearly one third of Mobisol’s end-users to generate incremental income by providing phone charging services to their neighbours and friends.

 

Advantages of the new business model

 

Traditionally, Energy suppliers and energy system manufacturers focus on the technology development and product, but neglect the real needs end-customers and fail to access a vast number of customers because of too high system installation cost. Compare to other renewable energy product providers, Mobisol developed a business model that focuses also on the end-customer needs and solves the difficulty of end-users to finance the renewable energy supply system for their small business or home. The system developed fulfils the household using requirements as well as provides a possibility for users to establish phone charging services to earn incremental income. This business innovation enables clean electricity usage of low income households in Africa and helps the people to move away from poverty.  As a results:

 

 

Risks, challenges and mitigations

Loan default risks – Since Mobisol provides 3 to 4-year loans for the payment of the solar system, the key risk is customers defaulting on their loans. This risk is quite easily mitigated as the solar system is an asset or collateral that Mobisol can take back, in the event customers fail to service their loans. Mobisol also positions this as rent-to-own. Customers only own the solar system after paying off the loan. Mobisol also conducts some form of credit due diligence such as verifying that the customers possess a land certificate. Nonetheless, it probably remains challenging to verify whether a customer has a steady income to pay the loan.

 

Referral model conflicts entrepreneurship empowerment – Mobisol offers a referral scheme in which existing customers obtain a commission for successfully referring new customers. Referrals enable Mobisol to scale with a limited sales team. However, Mobisol also positions the solar system as a means for entrepreneurship (mobile phone charging service). As a result, an entrepreneurial customer with a longer-term view may forgo the referral, limiting Mobisol’s ability to scale without a salesforce.

 

Last-mile logistics, after-sales servicing– Mobisol has set up a network of MobiShops to serve as centers of distribution and warranty services. This is costly and challenging to scale. While the system is under warranty, a technician will travel to the customer’s home to take care of necessary repairs. Mobisol has managed to reduce the cost of servicing by providing free phone support and claims that 98% of issues encountered have been resolved over the phone.

 

Supply of qualified technicians – There could also be the added challenge of hiring and training qualified technicians to both handle calls and on-site repairs. As a result, the supply of qualified technicians could become a key factor limiting Mobisol’s ability to scale in a particular region. Mobisol may have to develop a robust training programme that is replicable or to establish a more centralized training center. It is critical to ensure that the installation is done well so as to prevent surges in after-sales servicing.

 

Support post-warranty period – It is unclear what level of support Mobisol is providing after the 3-year warranty period. In addition, if customers require parts to be replaced, would they be affordable and would Mobisol provide financing support if required. Otherwise, the solar system would become a “white elephant”.

 

Negative impact of business model

 

One potential negative impact is the disposal of solar panels in the future. Solar panels often contain lead, cadmium, and other toxic chemicals that cannot be removed without breaking apart the entire panel. Solar panels are recommended not to be disposed in regular landfills as toxic materials can leach into the soil. It is unlikely that rural areas in developing countries have the infrastructure to handle recycling and disposal of solar panels.

 

Next steps

 

In view of the negative impact of this business model, it may be worthwhile exploring full servicization, in which the solar system asset is owned and maintained by the company, but consumers pay a fixed monthly fee to access to electricity or pay-as-you-consume.

 

A video interview with Mobisol employee in Tanzania

Mobisol Solar Business Model: https://www.youtube.com/watch?v=17k5T0xfwJM

 

 

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