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| | + | <div class="header-banner header-banner-country-portal"> |
| | + | <div class="grid grid-collapse stretch-items vertical-middle"> |
| | + | <div class="width-1-3 header-banner-image"> |
| | + | <center>[[File:Header_Portal_Mozambique.svg|800px|link=]]</center> |
| | + | </div> |
| | + | <div class="width-1-3 header-text-large"> |
| | + | <div class=""> |
| | + | = '''Mozambique''' = |
| | + | = Off grid Knowledge Hub = |
| | + | </div> |
| | + | </div> |
| | + | <div class="width-1-3"> |
| | + | <svgmap width="100%" color="#79d248" mark="mz" mark-color="#ffc714" flag="true" flag-size=""></svgmap> |
| | + | </div> |
| | + | </div> |
| | + | </div> |
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| − | = Title - Off-grid energy Companies and Financial Institutions - Need for Collaboration = | + | <div class="grid"> |
| | + | <div class="width-3-4"> |
| | + | == Country Information - Mozambique == |
| | + | The '''Republic of Mozambique''' is located on the south-eastern coast of Africa and has a surface area of 801,590 square kilometres. It is bordered by South Africa, Swaziland, Zimbabwe, Zambia, Malawi, Tanzania, and separated by the Indian Ocean from Madagascar. The country is divided into ten provinces, and a provincial capital city. It is one of the poorest countries in the world, and the 7th poorest in Africa with a GDP per capita of USD 1281 (2019), a total GDP of USD 14.96 billion (2019), and an annual GDP growth of 3.11% (2018). [[Mozambique- Country Information|Read more...]] |
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| − | = Overview = | + | <div class="grid stretch-items"> |
| − | Off-grid energy companies are characterised by '''small loan delivery channels with highly automated cashless payment processes, agent distribution network, cloud-based monitoring and significant leverage over the borrower'''. These companies have enjoyed a rapid growth due to their ability to tap into the low-income communities in a profitable manner using PAYG method. However, despite their proven benefits and profitability, the scale up and diversification of these companies are constrained by the lack of access to commercial debt. Therefore, there is a huge potential to collaborate with financial institutions to diversify their product range and get commercial funding (from consumer deposits in financial institutions).
| + | <div class="width-1-3 box box-green">'''Background''' |
| | + | * [[Mozambique- Country Information|Country Profile]] |
| | + | * [[Mozambique Electricity Situation|Electricity Situation]] |
| | + | *[[Mozambique Renewable Energy Potential|Renewable Energy (RE) Potential]] |
| | + | * Energy Access Situation |
| | + | </div> |
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| | + | <div class="width-1-3 box box-green">'''Institutional Set-up''' |
| | + | * [[Institutional Framework in Mozambique|Institutional Framework]] |
| | + | * [[Policy Framework and Energy Access Strategies in Mozambique|Policy Framework & Energy Access Strategies]] |
| | + | * Energy Access Programmes |
| | + | * Development Actors |
| | + | </div> |
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| − | = Off-grid Energy Companies (OECs) = | + | <div class="width-1-3 box box-green">'''Cross-Cutting Issues''' |
| | + | * [[Doing Business in Mozambique]] |
| | + | * Humanitarian Energy-Nexus |
| | + | * Impact of COVID-19 |
| | + | </div> |
| | + | </div> |
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| − | Off-grid energy companies (OCEs) in this article refers to those companies in Africa that sell solar energy systems based on [[Fee-For-Service or Pay-As-You-Go Concepts for Photovoltaic Systems|PAYG model]] (i.e the total cost for the energy system is broken down into weekly and monthly payments. The customers usually make a small down payment in the beginning and then make small weekly and monthly payment for using the system and finally own the system. In case of failure to pay, the OECs remotely switch off the energy systems or in cases repossess them). <br/>
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| − | These are the fastest growing companies with an average of 500 customers per day.
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| − | == OECS - Shift from Energy Providers to Consumer Finance == | + | == Information on RE Technologies for Mozambique == |
| | + | <div class="grid grid-collapse portals-wrapper"> |
| | + | <div class="width-1-1"> |
| | + | <div class="portals cross-cutting-issues"> |
| | + | <div class="portal">[[file:icon-solar.svg|150px|link=Portal:Solar|]]<br />[[Mozambique Solar Hub|Solar Home Systems]]</div> |
| | + | <div class="portal">[[file:icon-cooking.svg|150px|link=Portal:Cooking|]]<br />[[Mozambique Cooking Energy Hub|Improved Cookstoves]]</div> |
| | + | <div class="portal">[[file:icon-mini-grid.svg|100px|link=Portal:Mini-grid|]]<br />[[Mozambique Mini-grid Hub|Mini/Nano grid]]</div> |
| | + | <div class="portal">[[file:icon-productive-use.svg|100px|link=Portal:Productive Use|]]<br />Productive Uses of Energy</div> |
| | + | </div> |
| | + | </div> |
| | + | </div> |
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| − | To increase their revenue and to keep ahead of competitors, there is a natural tendency for OECs to also provide secondary loans along with the PAYG model for the energy systems, to existing customers, for activities such as buying a motorbike or other appliances. For the secondary loans also, the energy system will act as a control point for loan repayment. In case of failure to pay on time, the energy system is switched off and the secondary assets might also be repossessed.
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| − | Along with added revenue, the other benefits of providing consumer finance are:
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| − | *For many customers in rural areas, buying energy services from OECs might be the '''first time they had access to financial services. Therefore the PAYG model sets the background for more financial activities.'''
| + | <div class="specials"> |
| − | *OECs '''promote mobile transactions''' for loan repayment reducing the transaction cost.
| + | == Highlights == |
| | + | <div class="grid stretch-items"> |
| | + | <div class="width-1-2 width-m-1-2 card">[[file:Webinar icon3.svg|50px]] [https://register.gotowebinar.com/register/1648663127925031180 State of Play: Solar home system (SHS) Market in Mozambiques]</div> |
| | + | <div class="width-1-2 width-m-1-2 card">[[file:Sample-2.jpg]] [[Portal:Mozambique|Help Manual on how to contribute to the hub]]</div> |
| | + | </div> |
| | + | </div> |
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| − | <br/>
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| − | However, OCEs companies are not financial institutions and in many countries they are not allowed to offer secondary loans (except for energy systems). Therefore, there is a need as well as opportunity for successful collaboration between OECs and Financial institutions to further one another's interest.
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| − | = Financial Institutions = | + | == Mozambique Off-grid Practitioners Group == |
| | + | <div class="grid grid-collapse"> |
| | + | <div class="width-1-2">{{Mozambique Group}}</div> |
| | + | <div class="width-1-2">[[File:Ask_a_question.svg|link=|alt=|center|150x150px]]<div class="button-link" style="display: inline-block">[[Group talk:Mozambique Off-grid Practitioners Group|Ask a question]]</div>[[File:Moz_Group.svg|link=|alt=|center|150x150px]]<br/> |
| | + | <div class="button-link" style="display: inline-block">[[Group:Mozambique Off-grid Practitioners Group|Join the Mozambique Off-grid Practitioners Group]]</div> |
| | + | </div> |
| | + | </div> |
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| − | Financial institutions in sub-saharan africa are classified by '''large loan size, high margin and low business volume''' which is the opposite of financial services to the base of the pyramid (BoP). BoP are '''assets-led, low balance, high-volume''' business.Therefore, financial institutions have not been able to establish a commercially viable channel to reach out to the bulk of the african markets mainly due to:
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| − | *Entry-level accounts for low-income clients are likely to have low balances, make few transactions and use of fixed physical infrastructure such as bank branches and automated teller machines (ATMS) which in end might result in loss rather than profit, for the bank.
| + | == Latest Articles on Mozambique == |
| − | *Due to issues like high-collateral requirement, time-consuming applications and inefficient cash management and inefficient cash management, financial institutions mostly focus on the salaried, relatively better-off segments of their markets.<br/>
| + | <div class="grid stretch-items"> |
| | + | <div class="width-1-3 box">[[Mozambique_Energy_Situation|Lorem ipsum dolor sit amet, consetetur sadipscing elitr, sed diam nonumy eirmod tempor ]]</div> |
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| − | <br/> | + | <div class="width-1-3 box">[[Mozambique_Energy_Situation|Lorem ipsum dolor sit amet, consetetur sadipscing elitr]]</div> |
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| − | Therefore, the OECs present a unique opportunity for financial institutions to reach the low-income population in a viable and cost-effective manner.
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| − | == Resources of Off-grid Energy Companies and Financial Institutions ==
| + | </div> |
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| − | The table below shows the simplified analysis of the resources of off-grid energy companies and financial institutions:
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| − | {| border="0" cellspacing="1" cellpadding="5" style="width: 100%;"
| + | == Funding == |
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| + | <div class="grid"> |
| − | | <br/>
| + | <div class="width-1-2 box" style="background: none; ">[[file:logo-giz.png|280px|link=https://giz.de/en]] </div> |
| − | | style="background-color: rgb(79, 129, 189);" | '''Off-grid Energy Companies'''
| + | <div class="width-1-2 box" style="background: none; ">[[File:EnDev-Logo NEW.PNG|240px|link=https://endev.info]]</div> |
| − | | style="text-align: center; background-color: rgb(79, 129, 189);" | '''Financial Institution'''
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| − | |-
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| − | | rowspan="6" style="background-color: rgb(219,229,241)" | '''Assets'''
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| − | | style="width: 106px;" | Agent network
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| − | | style="width: 324px; text-align: center;" | Branch network
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| − | |-
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| − | | rowspan="1" colspan="2" style="text-align: center; width: 530px;" | IT system for account management<br/>
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| − | |-
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| − | | rowspan="1" colspan="2" style="text-align: center; width: 530px;" | customer relationship<br/>
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| − | |-
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| − | | style="width: 324px;" | Cloud-based customer relation management (CRM) systems
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| − | | style="width: 200px; text-align: center;" | banking expertise
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| − | |- | |
| − | | style="width: 324px;" | Leverage over customers
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| − | | style="width: 200px; text-align: center;" | credit assessment
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| − | |-
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| − | | style="width: 324px;" | <br/>
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| − | | style="width: 200px; text-align: center;" | banking license
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| − | |-
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| − | | rowspan="3" style="background-color: rgb(219,229,241)" | '''Financial products'''
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| − | | style="text-align: center;" rowspan="1" colspan="2" | Loans<br/>
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| − | |-
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| − | | style="text-align: center;" | Saving accounts
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| − | |-
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| − | | | |
| − | | style="text-align: center;" | Money transfer services | |
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| − | | style="background-color: rgb(219,229,241)" | '''key strengths'''
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| − | | Ability to reach lower-income populations at scale, profitably with financial services
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| − | | style="text-align: center;" | Banking license and know -how
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| − | |-
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| − | | style="background-color: rgb(219,229,241)" | '''key weakness'''
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| − | | banking license and know-how
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| − | | style="text-align: center;" | Ability to reach lower-income populations at scale, profitably, with financial services
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| − | |}
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| − | <br/> | + | This portal is funded and developed in collaboration with the GIZ programmes Green People’s Energy for Africa and Energising Development Mozambique to enhance knowledge exchange and sharing among the Mozambican energy practitioners. |
| | + | </div> |
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| − | = Reasons for Working Together =
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| − | == Large Portfolio of loans ==
| + | </div><!-- End .width-3-4 --> |
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| − | Most of the OECs started out as energy system retailers but with progress, have amassed a large portfolio of loans. Managing these large portfolio of loans is outside their core competence and requires skilled financial capabilities. The loan also has to be refinanced. For example, if an installed system cost on average USD 150, then to reach 1 million consumers, OECs will have to raise around USD 150 million in consumer loans. As the sector expands the consumer loan will also increase.<br/>
| + | <div class="width-1-4"> |
| − | | + | <div class="hidden-element"> |
| − | Because of the possibility to remotely switch off the energy devices in cases of no payments, OECs loan have higher repayment rate than their borrower's profile will suggest. Therefore, OECs have the infrastructure to manage small loans offered to a relatively unknown customers.
| + | == Offers == <!-- Keep this for screenreaders --> |
| − | | + | </div> |
| − | On the other hand, financial institutions have the competence and infrastructure to mange consumer credit risk and to provide loans. The OECs offer to increase the Bank's customer base but it will depend on the bank's ability to profitable serve those customers or not.
| + | <div class="box offers">{{MozBoxnews}}</div> |
| − | | + | <div class="box offers">{{Boxpublications}}</div> |
| − | == Access to Low cost Capital == | + | <div class="box offers">{{Boxcompanies}}</div> |
| − | | + | {{Connect_with_us}} |
| − | Financial Institutions can also fund a portfolio at a lower cost than that of OECs using long term deposits as compared to commercial debt.<br/>
| + | </div> |
| − | | + | </div> |
| − | A study among MFI account in sub-saharan africa showed that the MFI accounts are mostly used for saving rather than borrowing. In 2015, the aggregate amount of MFI deposits in sub-saharan africa was USD 5 billion. Should this amount be available to OECs, then this amount would be enough to finance consumer loans for'''33 million TIER 2 solar home systems with a value of USD 150 each'''.
| + | __NOTOC__ __NOEDITSECTION__ __NOTITLE__ |
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| − | For financial institutions, the energy portfolio has a good rate of return.
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| − | | |
| − | == Foreign Exchange Risk ==
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| − | Most of the capital for OECs is raised in hard currency such as USD or Euro from international equity investors while the consumer loans are given out in the local currency. This exposes OECs to risks associated with currency exchange and in cases, the local currency is devalued, it will impose additional cost on the OECs which is unrelated to its business and operations.<br/>
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| − | A collaboration between OECs and the financial institutions will allow it to tap into the consumer deposits which is in local currency. This will mitigate the risks associated with currency exchange as both the consumer loans and the capital will be in local currency.
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| − | <br/> | |
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| − | <br/> | |
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| − | = How to Work together? = | |
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| − | <u>Through a close partnerships:</u> OECs and financial institutions can forge a close partnership where both the parties focus on their close competencies ie. the OECs focuses on retail sale of energy services and the financial institutions take care of consumer finance. Considering both the parties are ready to form a partnership, the following points will have to consider:
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| − | *Who underwrites the loan and which regulations are followed?
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| − | *Criteria for identifying the consumers as well as opening an account for them
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| − | *Integrating the payment technologies of OECs and financial systems
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| − | *Criteria for managing customer relation eg what brand to promote and how to communicate
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| − | <br/> | |
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| − | <u>OECs obtain a Banking License: </u>OECs could apply for a banking license and build the banking business from the base.
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| − | Pro: Eventually, this will give OECs access to the stable and cheap source of funding (via their customers' saving deposits) and to capture the entire value chain and resulting higher profits.
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| − | Cons: Having a financial arm would mean more management time and resources in developing this arm and could result in less focus on the retail arm selling energy systems. Also to become a deposit-taking institutions would take longer to operationalize
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| − | <u>Financial Institutions obtain/set-up a OEC business</u>: Financial institution can obtain/set-up an OEC business in two ways: | |
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| − | *Financial institutions could buy PAYGO-enabled SHS
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| − | = Reference =
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| − | This article is based on the following publication:Muench, D. Waldron, D.(2016).Access to Energy and Finance: An Integrated Approach to Capture High-Growth Opportunity in Africa.[http://www.cgap.org/publications/access-energy-and-finance-integrated-approach http://www.cgap.org/publications/access-energy-and-finance-integrated-approach]
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