Could the provision of a microcredit induce electricity uptake? Evidence from a randomised controlled trial in rural Tanzania
The recently adopted United Nations Sustainable Development Goals (SDGs) aim at ensuring universal access to electricity by 2030. Consequently, since 2007, the government of Tanzania has devoted significant effort and resources to its rural electrification programme. Under this programme, households need to pay only TZS 27,000 (USD 13) to get connected to grid electricity, as opposed to the normal connection price of TZS 177,000 (USD 82).
Despite such huge subsidies, actual connections by the households have remained low even among those residing under the grid-line, raising fundamental questions on why that would be the case. While previous studies have documented that high start-up costs associated with connection (i.e., connection fees) are one of the key drivers (Lee et al, 2016; Golumbeanu and Barnes 2013), evidence shows that even when connection fees are fully subsidised, the rate of connections remains very low. We argue that the apparent low demand for the connection could also be attributed to the high fixed costs to install in-house wiring, a necessary pre-requisite to getting connected. We thus add to the existing literature by estimating the households’ implied demand for electricity and whether the provision of microcredit to finance in-house electric wiring could induce households’ connection to the main grid electricity in rural Tanzania.
This project uses a randomised controlled trial with two treatment arms, one control arm, and a total sample of 900 eligible households randomly selected from 60 sub-villages in Mpwapwa district, Dodoma region.
Village-level randomisation will be implemented using a pairwise randomisation approach that controls for a key village characteristic in our context, which is the share of grid-connected households. Elicitation of the revealed willingness-to-pay (WTP) will be done using a Becker-DeGroot-Marschak (BDM) real-purchase offer bidding game. The WTP elicited by BDM is widely seen as a very precise approximation of a real-life WTP because of its incentive-compatible features as individuals are eventually either awarded or deprived the good/services in question depending on their bids.