Credit and demand for solar: Evidence from Ghana
This project studies how credit design shapes small firms’ adoption of solar technologies in Ghana. Using an experiment that varies the timing of subsidies and the degree of protection against product-performance uncertainty, the authors examine how liquidity constraints and/or uncertainty about product usefulness affect small firms’ solar adoption.
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Credit-and-demand-for-solar-ghana-GHA-24084.pdf
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- Reducing upfront payments substantially increases small firms’ adoption of solar technologies, by both alleviating liquidity constraints and reducing perceived cost in product usefulness uncertainty.
- However, repayment patterns suggest adverse selection when reducing upfront cost where adopters are more liquidity constrained and more likely to default as measured by repayment delays. We do not find increased payment delays when reducing product usefulness uncertainty.
- Small firm investment decisions are strongly influenced by household constraints. A larger share of purchases under down payment are for household usage only.