4.1.6. PAYGo Systems
DESCRIPTION
Pay-as-you-go, or PAYGo, systems allow small and medium-sized enterprise (SME) owners, as well as consumers, to only purchase the amount of a product they need, as they use it.This allows individuals with limited means to take advantage of available capital, e.g. electricity, up to whatever their imposed limit may be. A PAYGo system does not require consumers to purchase significant capital prior to its use.
CONSTRAINTS ADDRESSED
- Cash flow uncertainty
- Off-take risks associated with target sector/region
- Production costs associated with target sector/region
- Appropriate capital to meet borrower needs
ADVANTAGES
Flexible pay-as-you-go financing enables access to products and/or services for cash-strapped customers who would not otherwise not be able to afford large, upfront payments, but are able to pay monthly installments.
DISADVANTAGES
Difficult to implement where mobile banking is rare or non-existent
MUST HAVE’S, CRITICAL POINTS, OR QUESTIONS TO CONSIDER
Because PAYGo systems are often integrated with mobile money (MM), sufficient MM infrastructure may be considered a critical “must-have.”
VIGNETTE: PAY-AS-YOU-GO SOLAR IN NIGERIA
SITUATION
75 million Nigerians currently have no access to reliable electricity, limiting business growth and access to basic household services.The existing electrical grid is unstable and largely unavailable beyond urban city limits, forcing reliance on small-scale generators. Currently, the country spends more than USD $9.2 billion annually on inefficient electricity generation, whereas a transition to renewable power, such as solar home systems, could save households and businesses over USD $4.4 billion per year.
STRUCTURE
The institution of pay-as-you-go financing is in the process of being implemented in mobile money markets. Many Nigerians with access to mobile banking are now able to purchase solar energy as they use it, as opposed to paying for a full-time electricity bill.
IMPACT
Urban Nigerians have greater access to electricity due to pay-as-you-go systems through mobile banking. However, because mobile banking is limited in rural Nigeria due to the regulatory framework, impact in these areas has not been as substantial.