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Sikubora: Accessible, reliable solar energy for every Tanzanian community

Our goal is to bring sustainable, affordable energy to every region in Tanzania. Community benefit informs every action and decision.

Photo of Erin Burba

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Explain your project idea (2,000 characters)

Sikubora Ltd. was founded in 2013 by a dedicated group of individuals who recognized the need and impact high-quality and accessible solar electricity could have in Tanzania. According to the 2016 Energy Access Situation Report, it is estimated that only 33% of Tanzania’s population has access to electricity, with substantially less electrification in rural areas. Over the past five years, Sikubora’s team has helped meet this need by providing sustainable, affordable, reliable electricity to over 280 Tanzanian families and organizations.

Our success is measured through our customers’ experiences: through our flexible financing options, high-value product offerings, and continued dedication to customer satisfaction, our customers have enjoyed the benefits of in-home electricity that they were unable to access without our service. Sikubora bridges planet and prosperity by designing our business operations to fit within Tanzania's existing infrastructure. Most of our customers previously relied on kerosene for light, so the implementation of solar electricity improves the household's health, safety, and carbon footprint.

As we have worked to improve access to electricity in Tanzanian communities, we have recognized that this is best accomplished in conjunction with improved financial inclusion. We provide financing services for our products, allowing customers to pay for their systems over three years. Most Tanzanians have no financial accounts or history outside of mobile money, so metrics like formal credit scores are hardly applicable. To understand an individual's financial status and gauge their ability to make the installment payments, we developed our own credit application with questions regarding a household's monthly and seasonal incomes and expenses. By designing our system to recognize financial responsibility as it is displayed in the context of Tanzania, we have been able to provide our customers the opportunity for an otherwise inaccessible loan.

Who are the beneficiaries? (1,000 characters)

Our beneficiaries are Tanzanian households and facilities that aren't connected to the electric grid, generally in rural areas. Most of our customers are families with children, and over half are farmers. Our operations are targeted towards Tanzanian families with some form of monthly or seasonal income but not necessarily a formal financial history. In order to service customers without a formal bank account or credit score, we have developed our own credit application with locally-relevant criteria that recognizes our customers' displays of stability and responsibility. Additionally, we accept payments through mobile money for ultimate customer convenience, and payments can be structured to coincide with harvest or other seasonal incomes. In addition to household systems, we have installed larger, customized systems in clinics and schools. We currently only operate within the Arusha region, but we plan to expand into other regions as capital and technology allow.

How is your idea unique? (1,000 characters)

Sikubora is set apart in the quality of our product, approach to accessibility, and method for creating low-risk financial opportunities. We source our components from reputable manufacturers who support their products with a warranty. The systems are installed and serviced by Sikubora's team of skilled technicians, who ensure that the customer will enjoy the full benefit of their solar system - energy at no monthly cost for upwards of 25 years!

In terms of accessibility, we have designed our customer financing process to recognize financial stability and responsibility as they are displayed in Tanzania. By inquiring about a person's various sources of informal and agricultural income, we gain a more fair understanding of their financial standing and can offer otherwise inaccessible loans to our customers. In the future, we plan to offer additional loans to our customers to cover school fees, productive capital, and more, using the solar home system as humane, low-risk collateral

Idea Proposal Stage (choose one)

  • Early Adoption: I have completed a pilot and analyzed the impact of that pilot on the intended users of the idea. I have begun to expand the pilot for early adoption.

Tell us more about your organization/company (1 sentence and website URL)

Sikubora aims to empower Tanzanians with limited resources through a high-value investment in reliable, sustainable, affordable solar energy, creating a safe, stable home environment in which families can thrive and prosper.
http://www.sikubora.com

Expertise in sector

  • 3-5 years

Organization Filing Status

  • Yes, we are a registered social enterprise.

Please explain how your selected topic areas are influenced, in the local context of your project (1,000 characters).

Prosperity in Tanzania has been hindered by limited national infrastructure. Utilities and public services such as electricity, running water, and paved roads are limited or nonexistent in many communities, leading people to rely on problematic or inconvenient alternatives. This lack of infrastructure makes it complicated and unattractive to conduct business, preventing new capital and opportunities from settling in Tanzania, and lessens the quality of life for families who must either take extra steps to secure basic necessities or face the consequences of living without them.
Planet is impacted by the emissions involved with household energy generation, as well as by the resulting climate change. Without grid electricity, many people rely on kerosene for light, which produces considerable carbon emissions and harms families' eyes and respiratory systems. Climate change has made Tanzania's dry and rainy seasons less regular and predictable, harming the local agricultural community.

Who will work alongside your organization in the project idea? (1,000 characters)

Sikubora has ongoing partnerships with local and global schools, businesses, and communities. Every year, students from the local Arusha Technical College and the American Northeastern University complete internships with Sikubora, gaining valuable experience and contributing to Sikubora's various departments. From these interns, we recruit our full-time solar engineers.
In terms of other businesses, we have partnerships aimed to improve our products and customer experience. We have partnered with Vodacom to collect payments through their mobile money platform for the convenience of rural customers, and we are working with international startups to expand our product offering to include microgrids and solar pumps for agriculture. In relation to our local community, we meet each customer's village leader to ensure that our activities will be beneficial to all involved. We have also completed electrification projects for community-backed institutions, such as schools and clinics.

Please share some of the top strengths identified in the community which your project will serve (500 characters)

Sikubora is largely a 'by us, for us' Tanzanian social enterprise. Unlike many of our competitors, all of Sikubora's operations take place in Tanzania. We hire local talent wherever possible, and partner with Arusha Technical College to recruit interns and full-time employees from their engineering program. Local practices of shopping and communication are conducive to our sales operations, which rely on in-person marketing and mobile money payments to reach consumers.

Geographic Focus

Sikubora is based in Arusha, Tanzania, and we plan to expand to other regions in Tanzania.

How many months are required for the project idea? (500 characters)

Our immediate plan is to expand our operations to two additional regions of Tanzania within 12 months. Within this period, we will continue to perfect our business operations, including improvements in sourcing, product offerings, sales, and software.

After this 12 month project, we will reflect on the successes and lessons learned through this endeavor, and apply our new knowledge to our long-term plans for expansion and development.

Did you submit this idea to our 2017 BridgeBuilder Challenge? (Y/N)

  • No

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32 comments

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Photo of Tyler Goodwin
Team

Hi Erin Burba  — congrats on getting started! I've done some field research for solar products in Tanzania, so would love to share my impressions and hear more of your thoughts on the competitive landscape.

NB: I saw in a comment that you don’t call your financing services PAYG. Based on your user experience map, it seems like your payment plans are similar to other PAYG companies who distribute systems as a managed service and offer payments in micro installments — so I grouped you together for the purposes of my comment. But, let me know if I’m missing something significant about your financing scheme!

One of my concerns with PAYG solar based on my research is how financially impactful PAYG actually is to consumers relative to generic solar with much lower total cost. I haven't done a full analysis, but one of the things that struck me in Tanzania was how many of the lowest income people are sourcing and configuring their own generic systems (compared to a fully managed PAYG system), and getting value (performance for cost) they are happy with through analog channels (i.e. bought in local or regional markets).

With the up front prices of these generic systems at 25% - 30% of what people would spend on a PAYG system, and often relatively high access to the lump sum required to make this smaller outlay without restrictive interest (e.g. from harvest windfalls, remittances, informal savings, and smaller loans with lower total interest), it seems to me the PAYG business model runs the risk of over-engineering itself for micro-payments without a real consumer advantage.

Of course, generic solar has it’s own downsides (e.g. environmental impact of the shorter life-cycle of an unmanaged system is a big one) — but for me, this raises the question of whether the PAYG model as it’s being widely implemented for the 80 - 200W systems you describe (adding metering tech to quality components, building intense sales and distribution operations in rural areas, remotely monitoring and managing accounts, and financing costs over 2-3 years) is the most impactful model for improving access and deploying working capital in service of this goal?

I see value to exploring PAYG models and the market certainly doesn't need to be served by only one or the other — but I wonder if we might be able scale access to more low income consumers by thinking harder about ways to overcome the limitations of both of these “1st generation” solar access models in off-grid markets (i.e. bringing the system cost more in line with generics while avoiding the environmental impact of generics' shorter lifespan).

This seems particularly important in TZ, where rural electrification efforts are rapidly expanding on pace with government promises and solar will increasingly be used as a backup or alternative to grid electricity.

What do you think?

Photo of Erin Burba
Team

Hi Tyler, thanks for your comment!

The difference between our system and the PAYG services is that our customers own their systems after three years. Where PAYG systems are owned by the solar company with customers only paying for the energy they use, our customers complete regular monthly payments for three years regardless of their energy use. After they have paid for their system, they own it and have no regular costs for the rest of the system's lifespan.

Our products and financing services were designed to approach each of these issues that you mentioned. The three-year finance-to-own model makes ownership accessible for customers and gives them the benefit of no monthly payments after this time. Since the systems are comprised of high-quality components, we can expect the solar systems to last upwards of 25 years, meaning 22 years of electricity at no monthly cost. (This is excluding the battery, which will have to be replaced every few years or so - just due to the current state of battery technology.) Good for the customer's health and finances, and far less electronic waste than the low-quality products in local markets :)

We've been thinking a bit about what it would take for our product/service to compete with alternative light sources (kerosene, flashlights, etc) in terms of cost and consumer benefit, including costs like maintenance and health problems that emerge as a result of using the light source. I'll also take your consideration into account and explore how a higher-quality system would compare to the cheap systems locally available. This could be important for fully understanding our impact, competition, and customers. Thanks for this idea!

I'm not sure I've heard much about Tanzania's recent progress in grid electrification - most people I've talked to have said it's been too slow to be practically treated as competition to solar or keep up with population growth. I'd be interested to hear more about this if you can direct me to some articles or anything. Either way, I definitely agree that consumer advantage needs to drive the decisions made by businesses in this industry.

Photo of Tyler Goodwin
Team

Erin Burba thanks for clarifying! And great to hear we agree on some of the issues to address with next generation solar :-)

It sounds like we define PAYG a bit differently, and I think I understand the reason you make the distinction (i.e. customers are not paying as they consume or based on consumption, but rather financing a set amount known up front). I call these PAYG only because they employ micro-payments over a significant period of time, and owning the system seems to be fairly industry-standard at this point for home systems. Do you know any examples of players who are still using a long-term PAYG financing structure?

If you haven't already, I would definitely encourage you to challenge the assumption that this payment structure is 'good for customer's finances' only because of the long period of 'free' consumption after the initial 3 year purchase period. For example, is this assumption still true from a low-income customer's perspective if they can purchase 3 inferior systems over 25 years at equivalent total cost (with affordable cash outlays coming every ~ 8 years) -- rather than committing to an intense 3 year period of consistent expenditure for a superior system? Of course there's not a single 'right' answer -- financial health is situational and you don't have to serve all segments -- but this is the kind of rationale some customers are currently using in choosing generic systems.

I agree the rationale of maximizing the useful life without payments (22 years) is potentially a good one for some customers and for the environment -- but the total expense of these systems (partially fueled by the intensive distribution model required for them) still seems to be a limiting factor in reaching the lowest income customers (as evidenced by the prevalence of decisions to buy generics in markets where both options exist). From the customer's perspective, 25 years is a huge time horizon and greater optionality might be both financially and physically healthier for a large number of people.

For example, to paraphrase 3 of the broad concerns I heard as they would apply to your systems:

- Can I commit to 25 years of energy access when I'm worried about whether my next 3 years of harvests will be good enough to make payments?
- Why not purchase the system I can afford in cash from this harvest alone, and maybe by the time it stops working I can even afford a better one?
- Will my family even have the same energy needs in 15 - 25 years?

Regarding REA's rural electrification plans, my understanding is as follows (as of August 2017):

- REA plan is split into 4 phases running from 2012 - 2022, named as Turnkey I-IV.
- Plan is to electrify all 'Development Centers' (villages identified to have the highest commercial potential) and all villages within 10km of Development Centers.
- Plan excludes any settlements with less than 500 people (which are primarily located in the less populous Southwest).
- Of 12,268 total villages mapped, 11,000 of them are slated for electrification by REA (which includes some by contracting mini-grid projects in areas where grid extension isn't feasible).
- As of 2017, Turnkey II (2012-2015) was slightly behind schedule, and Turnkey III had been initiated (2016-2019).
- As of Turnkey III initiation, about 700 Development Centers and 2,700 villages were electrified (which the government claims was a 94% success rate and represents 25% electrification of the rural population).

The various reports of course have a variety of dubious numbers, but I remember the general consensus being that things were going about as good as could be expected, and good enough to continue being partially financed by the World Bank (USD 209m commitment in late 2016).

The main government resources on this are at http://www.rea.go.tz/ and https://www.rea-remp.org/, and I'm sure you can find a range of fun reads by searching related terms. I don't know how much impact it will have on consumer decision sets, but I definitely think it's worth tracking in areas you plan to operate!

Photo of Erin Burba
Team

Hi Tyler, I think these are definitely important considerations, thank you for taking the time to write all this out!

I think you're right in that there's definitely a portion of the market in Tanzania who are better suited for the less expensive, lower-quality systems. Many people are either more comfortable or able to make this up-front cash payment than they would be paying a greater amount in monthly installments. While these people without as steady of an income may be better suited for cash payments and replacing every few years, there's a growing 'middle-class' population in Tanzania. We've found that there are many people who have the steady income and financial stability that enables them to buy land outside of the cities and beyond the reach of the grid.

Our products and services are designed to suit this type of customer - not exactly last mile or bottom of the pyramid, but households that have already established a level of financial stability. In Tanzania, many people who work through informal employment or self-employment don't have the formal employment or bank history to qualify for a loan from a traditional lender - even if they're doing well in all practical matters. Customers of this profile can benefit from our services, which will enable them to finance a high-quality energy system. We've found that many people are willing to take on the loan to access a higher quality product than they would get if they had to pay up-front. By the customer taking on this loan and entrusting us with their business, we're able to provide dedicated service and maintenance that doesn't typically come with the lower-quality systems.

To address our customers' changing energy needs and desires, we invest a lot of time in talking to our customers and ensuring that they're satisfied with their energy system. We're able to perform professional services in case anything isn't working properly, and we prioritize our existing customers' requests for upgrades. For example, if a customer starts with an 80 watt DC system, later on, we can upgrade their panel, battery, and TV or add an inverter to suit their needs. This allows for affordable upgrades with less electronic waste than complete system replacements.

Later on, we hope to create a whole new aspect of our business in which we offer additional loans to our customers using the solar home system as collateral. We see a great potential for further empowering our customers to make investments in their families and futures, and the system of using the solar energy system as collateral is more humane than asking them to risk losing the house. This is also an aspect that will only be possible with a high-quality system - the collateral has to have enough value to support a worthwhile loan. :)

TL;DR Our products and services aren't for everyone, but there's a middle-class market that it serves very well by recognizing informal financial stability and giving them the option of using a loan to access a better product.

Photo of Tyler Goodwin
Team

Erin Burba , great to hear your thoughts on your core customer segment and the way you serve them -- thanks for sharing and good luck with your expansion!

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