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M-Kopa lights up East Africa

M-Kopa lights up East Africa

M-Kopa

Jesse Moore was among a group of people working on Safaricom and Vodacom’s mobile money solution called M-Pesa in 2010. They spotted an extended application of their offering; the use of mobile money and the Pay-As-You-Go model (PAYGO) in solving a major problem existing in the same market: access to energy.

“I was involved with M-Pesa, so I and my team had mobile money background. When we realised how much it could change things, especially for low-income households, it became clear we could successfully provide off-grid power using [a similar] model,” says Moore. “Then we quit our jobs and started M-Kopa five years ago.”

While many see poor energy access in sub-Saharan Africa as a daunting challenge, Jesse Moore, Nick Hughes and Chad Larson founded M-Kopa in 2010 to confront it. Moore is now CEO of M-Kopa, one of the fastest growing power providers in Africa. He and his team saw a big business opportunity in the triangle of poor energy access, the growth of mobile money and the possibility of solar power.

“From inception to date M-Kopa has sold its products to about 400,000 households in Africa,” says Moore. “We are present in three African markets – Kenya, Tanzania and Uganda – with a franchise in Ghana. We have moved from zero to 400,000 customers and we plan to go into many more African countries in the next five years.”

Innovatory model

The M-Kopa 4 is available to customers for a deposit of $30 followed by 365 daily payments of 50 cents – all paid by mobile money – after which it is theirs. Each 8W solar panel comes with two light bulbs, a torch, a mobile phone charger and a radio.

One huge innovative approach to M-Kopa’s services is the bundling of power provision with the sales of electronic appliances – another plan includes a digital TV. This enables low-income customers to conveniently acquire household devices using the same rent-to-buy model.

After completing the initial one-year payment plan, customers can also get more cost-effective financing for a range of products. These include more lights, solar TVs, energy-efficient cooking stoves, internet-enabled smartphones, and water storage tanks.

M-Kopa is now connecting solar power to 550 new homes each day and generating 10m mobile payment transactions per year. With huge success in the East African markets, they are looking to conquer the rest of the continent.

“M-Kopa aims to be present in 10 African countries in five years and ultimately to be found in millions of household in Africa in a decade,” says Moore. “We are bullish about the future of Africa. We believe the future is good but there is a lot to be done and there are lots of gaps also.”

True to the excitement that Moore exudes, the strides of the company have not gone unnoticed. In 2015, M-Kopa was recognised by Fortune magazine as one of the Top 50 Companies Changing the World and won the Zayed Future Energy Prize. A year earlier, M-Kopa won the 2014 Bloomberg New Energy Pioneer Award and in 2013 the Financial Times/International Finance Corporation Excellence in Sustainable Finance Award. 

The GSMA, which represents the interests of mobile operators worldwide, reports that mobile money is witnessing some good growth in Africa, driven by the now high mobile penetration – which is 80% according to a 2015 report. According to the GSMA, sub-Saharan Africa continues to account for the majority of live mobile money services (52%). However, mobile money hasn’t taken off everywhere. 

Since M-Kopa’s success story is closely interwoven with it, do markets without mobile money constitute a no-go area for M-Kopa? “Our model is not necessarily tied to mobile money. There are several other ways to collect revenues from customers,” says Moore. “In Nigeria for example, one company is using credit to receive payments, they have a partnership with MTN Nigeria and it works.

We can definitely take our solution and our business into other markets if mobile money is available. If it’s not, we do not consider it a barrier.” While mobile money is not absolutely necessary it is essential for the effective and convenient use of PAYGO models and for delivering power and financial services to the unbanked population.

In this fact lies the unique relationship between companies like M-Kopa and traditional financial institutions. Moore believes that mobile money is a simpler and quicker means of payment and therefore compares better with traditional banking solutions in this very context.

“It’s not a replacement but a channel for banks to reach customers in a different way. M-Kopa is an energy company not a financial organisation but we help to open up new markets for financial institutions. So we are not competitors but enablers,” says Moore.

Everyone’s a winner

Innovative business models such as M-Kopa’s are rare but they could prove to be the solution to numerous economic problems facing Africa. Through easy payment solutions that bring financial services to the poor, such as mobile money, improved energy access is simultaneously achieved and with it, conveniently financed access to consumer goods such as TVs, cooking stoves and smartphones. For some, this is a win-win situation.

Chijioke Mama

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Written by African Business Magazine

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