Almost 70 million people in Pakistan (35% of the population) do not have access to electricity, as they live in mostly rural areas not reached by the grid. Over 75 million (38%) on the grid receive low quality energy and experience outages for more than 12 hours per day. In spite of the significant benefits of access to electricity, the long-run feasibility of grid expansion for the provision of quality electricity to remote areas is often a concern. The development of market solutions to increase access and energy services in under-provided areas using renewables and alternative energy sources is essential to meet Sustainable Development Goal 7, reduce poverty and promote growth.
We are collaborating with a for-profit company supplying sustainable and efficient solar energy solutions (e.g. lights, fans, mobile chargers, TV) to small businesses in off-grid areas of rural Pakistan, to evaluate one such market solution. The product is innovative, as it alleviates credit constraints to adoption and has strong enforcement features: customers access energy through a pay-as-you-go monthly payment scheme and are disconnected when the credit expires.
The research provides contributions both research and policy-wise. First, we evaluate the impact of solar systems on small business outcomes in off-grid areas, which very few studies have tackled rigorously. Second, we investigate key determinants of the sustainability of the business model and of product take-up, by looking at the trade-off between discipline and flexibility in repayment schedule. We explore the behavioral underpinnings of two repayment schemes, by testing soft ways to increase the salience of repayment.