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Summary:

The startup is using M-PESA and a partnership with Kenyan telecom Safaricom to get solar into the hands of rural Kenyans. And it’s about to hit a major growth phase.

M-KOPA
photo: M-KOPA Solar, Georgina Goodwin

Entrepreneur Jesse Moore holds a Coke bottle full of dirty-looking transparent liquid up in front of a crowded room of several hundred people at the Grand Hyatt Hotel, next to Grand Central Station in Manhattan. The stage he stands on is covered with purple carpet and framed with dramatic curtains. “This is what we’re competing against,” Moore, a former mobile phone executive, tells the group, which is mostly wearing dark-colored suits and is made up of a lot of influential, and some very wealthy, people, including investors, policy-makers, analysts and members of the media.

The occasion is Bloomberg’s three-day energy conference, and Moore is one of ten executives whose companies were receiving honors for being “new energy pioneers.” Moore’s young startup is called M-KOPA and it provides the financing and distribution for a pay-as-you-go, mobile phone–enabled home solar panel system for off-grid rural villagers in Kenya and Uganda.

A home in Kenya, lit up by an M-KOPA solar system.

A home in Kenya, lit up by a solar panel system, sold by M-KOPA. All photos courtesy of M-KOPA, Georgia Goodwin.

The bottle Moore holds up is full of kerosene, which is the most common way that rural Kenyans currently light their homes. But by paying about 40 shillings (46 cents) a day, his customers can switch over to using the power of the sun to light their homes and charge their mobile phones, and eliminate the downsides that go along with kerosene lanterns (they’re dirty and can be unsafe, and kerosene is relatively expensive).

The audience in Manhattan is won over. Moore receives the audience choice award and the moderator hands him a huge bottle of champagne wrapped in shiny silver paper. After the conference he’ll head back to Nairobi and continue the hard slog of helping get more solar panels into the hands of rural villagers, many of whom live on less than $2 a day.

An idea

Moore moved to Nairobi four years ago this month to jumpstart the business with co-founder Nick Hughes. Hughes was one of the original creators of mobile payment system M-PESA, developed by telecom giant Vodafone and its partially owned Nairobi-based phone company Safaricom. If you’re not familiar with M-PESA, it’s one of the world’s most successful mobile payment services — 95 percent of Kenyan adults use it and, by some estimates, a third of the Kenya’s GDP flows through it every year.

Moore briefly worked on M-PESA in England, and Hughes approached him with the then out-there proposition that they should leave their cushy jobs and use M-PESA as a backbone for financing assets for Kenyans. Hughes’ idea was that M-PESA is such a well-adopted, easy-to-use payment system that it could be used to offer credit to people who didn’t have bank accounts or full-time employment. The partners could have financed any kind of electronic assets, really, but electronics need one thing that’s lacking in rural Kenya: reliable power.

A child in Kenya holds a light powered by a solar panel sold by M-KOPA.

A child in Kenya holds a light powered by a solar panel sold by M-KOPA.

The solar panels, control system and other appliances like LED lights and radios that M-KOPA sells are provided by partner and fellow startup d.light. D.light’s home solar system is its most recent product — it’s mostly built a business off of making solar lanterns — but also one of its fastest growing offerings. The d.light home solar system uses a 4-watt solar panel and costs about $200. Customers pay for the system with a small up-front sum and then usually daily micro-payments over the course of a year.

Over time the solar systems are cheaper than kerosene, and from the beginning are just, frankly, better. Kerosene lanterns emit fumes that are harmful to breathe in. They also can be dangerous, and if lanterns are tipped over, the spilled hot fuel can cause burns and fires. If every home in rural Kenya switched over to solar panels, it would lead to millions of people living substantially better lives and saving money.

Moore told me in an interview, the day after his talk on stage in New York, that the early days of bootstrapping the company were “harrowing.” He and Hughes hadn’t yet raised any financing and they had to figure out the right model to offer customers credit that could reliably be paid back over a year.

Early on, they figured out that mobile phone technology provided the financial infrastructure. It’s not just that they use M-PESA, but their mobile solar system also provides customers mobile alerts and payment reminders, and they also partnered with the mobile carrier Safaricom to help with branding, marketing and distribution.

Studying by the light powered by a solar system sold by M-KOPA

Studying by the light powered by a solar system sold by M-KOPA

Distribution is the key to the bulk of M-KOPA’s success. The reason the business has started to take off isn’t about technology, Moore says:

“Technology is just step one of ten. The other nine steps are about getting the product to market, having stock and availability and having customer care….It’s not sexy stuff that makes it happen, it’s rolling up your sleeves and hiring people.”

Today M-KOPA, after two and a half years in business, has 300 employees, and works with another 700 people — independent entrepreneurs and shop owners — who sell its solar products across Kenya. The solar panels can’t be sold off the back of a truck, says Moore — they need to be sold locally by someone who can explain them and show why they’re important and how they work. M-KOPA also has a 24-hour customer call center staffed by 100 employees.

To date M-KOPA has sold 65,000 solar systems over 18 months, at a rate of about a thousand per week or 5,000 per month. But that’s about to change. Moore says M-KOPA is trying to hit a rate of selling more on par with a thousand solar systems per day.

A shop owner lights up his shop with a solar system sold by M-KOPA

A shop owner lights up his shop with a solar system sold by M-KOPA

Growing up

M-KOPA hit a major milestone in February: it closed a $10 million loan from the Commercial Bank of Africa to fund growth of its solar systems, as well as another $10 million in a combination of equity and grants from the United Kingdom’s Department for International Development (DFID), the Bill & Melinda Gates Foundation and the Shell Foundation. M-KOPA’s lead and original equity investor is the Atlanta, GA–based GrayGhost Ventures.

Moore tells me he expects the number of employees to grow to 500 by the end of the year, and potentially close to 1,000 within two years. The number of independent retailers could grow to 2,000 over that time period.

One of the side effects of this growth will be the emergence of the data associated with having such a substantial customer footprint. M-KOPA already collects 200,000 mobile payments per month from customers who don’t have formal banking and credit history. Combine that with data from solar panel and battery readings and weather data from the solar capacity, and M-KOPA is “swimming in data,” says Moore. The next thing to figure out is just what to do with it.

Data is just a byproduct of the solar systems, though. Growth is the key thing on the co-founders’ minds now.

A M-KOPA retailer hands out flyers about the solar product.

An M-KOPA retailer hands out flyers about the solar product.

And the major way to achieve that growth is the “unsexy” distribution system that enables M-KOPA to achieve a 95 percent repayment rate. The bank loan, from the Commercial Bank of Africa, is based on M-KOPA’s proven ability to collect the funds. “It’s one thing to get the customer to use the solar system; it’s another thing entirely to collect the micropayments over a year,” says Moore. But customers are “highly motivated” to pay back the loan because the solar panels are less expensive than kerosene over time.

Moore’s findings about the unsexy engine of the business echo d.light CEO Donn Tince’s thoughts closely: local distribution is the biggest challenge in areas that often lack roads, banking, shipping and legal systems. The difficulty of growing this type of distribution is the main thing that other startups, who are trying to sell similar off-grid solar products, struggle with. M-KOPA is one of the more successful, as is d.light.

Cell phone charging via a solar system sold by M-KOPA.

Cell phone charging via a solar system sold by M-KOPA.

One day when M-KOPA is able to sign up millions and then tens of millions of Kenyans, it will start to show the world that off-grid solar for rural customers is, indeed, bankable and can be profitable. Right now most North American and European banks and traditional solar financiers deem the sector too small, too risky and too experimental. But eventually, that will change.

And as as result, millions of people who were relying on dirty and expensive kerosene lanterns to light their homes will have their lives changed substantially for the better, through the power of the sun.

Updated at 8:02 AM pst on April 10 to reflect that the solar panel is 4 watts, not 40 watts.

  1. Thanks Katie for this great piece on M-Kopa. It’s so exciting to see their tremendous success in such a short amount of time. And I think M-Kopa’s story is representative of the off-grid solar market as a whole, teeming with real opportunities for profit and impact.

    We shouldn’t have to wait for companies like M-Kopa to sign up tens of millions of Kenyans to prove that solar for off-grid customers is bankable. That Commercial Bank of Africa provided a $10mil loan to M-Kopa and Barclays provided a £1mil working capital loan to Azuri, another pay-as-you-go solar company, should already be proof that it is.

    But it’s true, 2 solar companies securing working capital loans isn’t enough to change the attitudes banks and traditional solar financiers have for off-grid solar market. So to help grow this budding sector when it matters most (right now), we as global citizens can help startup solar companies like M-Kopa scale their businesses by crowdfunding working capital loans that are then augmented by private investment from accredited investors. Check out sunfunder.com (where I work) to do just that and make sure we prove that off-grid solar is bankable.

    Cindy Nawilis
    Community & Operations Lead, SunFunder

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  2. This seems like a great idea, but I wonder if the people of Kenya can even afford the initial costs of the system. However, I think it will be important in the future for companies like M-KOPA to take a strategic risk to inform and educate consumers on the importance of renewable energy and sustainability.

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  3. Thank you Katie. A nice write-up this..
    A friend of mine is involved in big way at Selco (http://www.selco-india.com/) and they are doing a great job in India.

    -Madhu

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  4. Stewart Craine Friday, April 11, 2014

    Just a small correction – it’s a 4W solar panel, not 40W.

    The last sentences are important – what does it take to move investment, and whose doors open to make these things happen? Not the “big boys” until it is much later – it’s smaller off-radar investors that kick start these things. If we can get that early-stage finance more efficient, we’ll see more such successes in many countries. By co-investing next to small investors early, large investors can speed things up if they accept the due diligence processes of the smaller investors – what’s called a “side-car” investment pool in the angel investing world. Let’s step things up a gear….! And also try to move the model beyond just lights and phones – that’s not enough energy to get out of poverty….

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  5. @Stewart Craine. thanks! fixed that.

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  6. Thanks for this article. Distributed technology is the future and the what used to be termed the third world will rapidly become the freed world using them. Freed from the need to rely on central power generation and wired communications systems, they will grow at very low cost.

    Several things are curious to me, but not really. The timidity of the first world financial system to engage this future stems from their heartfelt desire to maintain their status quo. How can you call a market with billions of unserved customer small? How can you believe that a family paying 50¢ a day for kerosene won’t pay 40¢ a day for better and safer light? How can you be so cowardly? Lights, to enable work and study after the sun sets, are no small thing. The ability to charge your cell phone to connect to all of the information and people in the world is even greater, since information is power.

    These are exciting times and offer a bright future. Thanks for keeping us in touch with the real world.

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  7. M-Kopa needs competitors right now. They are charging $200 over time for their system?
    Amazon is selling d.light LED Solar Rechargeable #S300 Lantern and Cell Phone Charger for $50 right now. That means the system wholesale price is about $25. Add in the mobile phone chip for another $5, so M-Kopa pays $30 and sells it for $200. I have to wonder if M-Kopa is profiting excessively. But others are doing same, and they need to compete with M-Kopa to prevent price gouging.

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  8. Fehrenbacher, you write such interesting stories. I’m amazed by all this energy going into innovative businesses in the developing countries. I’m surprised they can earn a profit, but if they can, that’s awesome. I read something similar recently about a private school company that has a bunch of schools in Kenya, serving rural and poor families. I think the tuition was $4 a month or something.

    What can someone do with a 4 watt panel? Are they stringing a bunch together? Even a CFL bulb requires a lot more than that., and LEDs would be way too expensive.

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