This article was edited on July 19th, 2017 in collaboration with PowerMundo, a social enterprise that distributes solar energy products for off-grid families in Peru and Latin America.
This highly disconnected region is also one of the most sparsely populated areas in the country, and its capital, Iquitos, with almost half a million people is the largest city in the world that is not accessible by road. Despite efforts by various institutions over the past decade an estimated 25% of households in the districts of Iquitos and Belén (the 2 major urban areas in the zone) remain off-grid. As a result, these households can spend up to 30% of their income on expensive energy sources such as: generator fuel, candles, diesel lanterns, and charging of batteries and cell phones.
Since 2015, I-DEV has been working in Loreto to develop the entrepreneurial ecosystem and support micro and small entrepreneurs by connecting them to market opportunities. This continuous engagement with local communities brought us to consider how business could improve access to energy in the Amazon.
The team formed and trained a network of community-based sales agents to sell and install solar home systems, collect payments, and ensure high quality customer care. Sales agents were given a starter package — including a suite of small, portable solar products, e.g. solar lamps and radios–and worked as independent PowerMundo entrepreneurs, earning a commission for every sale and payment recovered. To do this work, the sales agents often traveled to remote communities by public riverboats and motorcycle taxis. This local sales and distribution model allowed PowerMundo to effectively reach river communities while maintaining an efficient cost structure.
A critical aspect of the market trial was establishing a customer service and payment plan. After considering different options, the team opted for a lease-to-own model where customers were able to pay for the solar home systems in monthly installments over the course of up to two years. This made the product more affordable than paying upfront and allowed customers to become owners of the solar system, giving them access to an unlimited supply of free energy after paying off the system.
Carried out over a period of 9 months from June 2016 to March 2017, the market trial reached 825 beneficiaries, enabled 3–4 hours of additional lighting per day to customers, and proved an average monthly household savings of $41 on energy spending almost 15% of the average household income in Loreto. The initiative also generated new jobs and income opportunities for communities by training sales agents.
Among several factors, building strong relationships was central to the success of the market trial. Trust and personal recommendations are of primary importance when doing business in Peru. As such, we prioritized establishing close relationships with community leaders prior to beginning any sales efforts. Similarly, having trusted community members as independent distributors who could rapidly respond to customer needs was key to generating buy-in from households.
While customer payment plans were also critical to the success of the model, we also rapidly understood that asking for an initial down-payment on the systems would ensure customer commitment and buy-in.
Going forward, PowerMundo has an opportunity to use Peru’s new mobile money wallet, “Bim”, which would allow customers to make their payments via mobile phone, without the need to handle cash in any part of the value chain, while also enabling PowerMundo to streamline its last mile sales and after-sales processes and collect incredibly valuable consumer and product data.
With the opportunities unlocked by PAYG technology and new significant financial support from USAID Development Innovation Ventures Program, PowerMundo will continue rolling out a range of clean technologies throughout its international distribution network from the Andes to the Amazon.