PayGo solar is reaching Africa's poor, but for how long?
- May 28
- 4 min read
The PayGo solar model is at a crossroads. As investments pour in, the people it was built to serve risk being left behind.
Across sub-Saharan Africa, nearly half a billion people lack reliable access to electricity. For many of them, small solar systems and monthly payment plans offered through a model known as Pay-As-You-Go (PayGo) solar have been a lifeline. The idea is simple: instead of paying hundreds of dollars upfront for a solar home system, customers lease one and pay it off in small installments over a period of one to three years. It's electricity on layaway, designed specifically to make solar affordable for low-income households. Between 2015 and 2020 alone, 25 to 30 million people in Africa gained access to electricity for the first time in this way. However, the PayGo solar sector is changing, and not necessarily in ways that benefit the people it was initially built to serve.
From grants to loans
Many PayGo companies started as social enterprises, with early companies funded by development grants and impact investors willing to accept modest returns in exchange for social impact. The products were cheap and the mission clear – bring affordable clean energy to the poorest communities. That mission hasn't completely disappeared, but the money has changed. Over the last decade, the off-grid solar sector has attracted consistent investments, growing from USD 19 million in 2012 to USD 429 million in 2023. However, the share coming from commercial debt and equity now dwarfs grant funding (Figure 1) and over 70% of the USD 3.6 billion invested in the sector since 2012 has gone to just seven companies. Commercial investors including private equity firms, corporate lenders, multinational conglomerates have increasingly invested in the sector. On one hand, this is a desirable outcome. Commercial investment signals that PayGo solar is inching towards maturity, that it's a real market that can stand on its own feet. But it also creates a problem; with commercial capital comes commercial expectations. In our recent paper published in Communications Sustainability, we argue that these trends risk excluding low-income households, weakening smaller PayGo companies, and pushing companies towards the higher end of the market. The paper makes a compelling case for keeping equity at the center of the PayGo sector's growth.
The affordability squeeze
When a company borrows money at market rates, it needs to pay it back with interest and on schedule. That pressure ultimately determines who it's willing to sell to. For PayGo companies with commercial capital invested, low-income households become riskier customers since their incomes are low and irregular. Shocks like drought or illness can make paying monthly installments impossible causing solar systems to become increasingly disabled or repossessed – as is common in relatively established PayGo markets like Rwanda. These situations are costly and undesirable especially for companies with loan or equity payment obligations. Meanwhile, they may also be grappling with macro-economic stresses. In 2023 and 2024, currency shocks and devaluations in Nigeria and Kenya caused the price of solar lanterns to spike by over 200 - 300%. For households already stretched thin, that's the difference between access and exclusion. The stark reality then is that the customers who need PayGo solar the most are the ones commercial logic pushes companies to avoid.
Movement towards the higher end of the market
As PayGo solar becomes less affordable for low-income customers, companies change who they target and which products and services they offer. Serving remote rural households is already expensive because distribution costs to these areas can add 50% or more to the price of a solar system. On the other hand, urban customers are cheaper to reach, have steadier incomes, and can afford bigger solar systems with higher profit margins. So companies may pivot towards low-hanging fruit like urban customers and businesses, offering them higher-tier solar products. While this is a rational move, it also means that the rural poor, for whom PayGo was originally designed, may get left behind.
Smaller domestic companies weakened
At the same time, smaller, younger companies and local operators are being squeezed out. Most of the funding going to the sector now goes to just seven large companies – “the big 7” – considered to have reached scale-up while the hundreds of early-stage companies get a shrinking share of a shrinking pool of flexible finance. These small early stage companies usually reach the hardest-to-serve and remote communities fill the gap left by the larger mature companies which are pivoting towards new markets. But if these small companies are struggling to attract suitable financing and grow their operations, the gap left in serving poor remote communities will remain vacant.
What needs to change?
None of this is inevitable, better-targeted policy and financing can keep PayGo on mission:
Targeted subsidies. Results-based financing programs (where companies get paid when they deliver solar systems) can be redesigned to reward reaching the poorest customers, not just any customers. Uganda's World Bank-funded electricity access program already does this, offering higher incentives for products sold in refugee settlements and remote areas.
Blended finance. Early-stage companies serving remote communities need low-cost, flexible capital like grants and concessional loans, not commercial debt. Larger, mature companies can handle commercial financing. The two shouldn't be competing for the same pool of financing.
Demand-side support. Subsidies that lower the upfront cost of a solar system help, but for the very poor, the recurring monthly payments are the real barrier. Flexible payment schemes that match irregular income patterns could keep more households connected.
Alternative models where PayGo can't reach. For communities where even the cheapest PayGo system is out of reach, other approaches like communal charging stations, mobile battery kiosks, solar-powered community buildings deserve funding and policy support.
The bottom line
PayGo solar is still a viable option for bringing electricity to the world's poorest people. Its growth is real, but growth and inclusion aren't the same thing. As commercial capital reshapes the sector, there's a genuine risk that the communities PayGo was built to serve get priced out, underserved, or simply forgotten. Ensuring that doesn't happen will require deliberate choices from investors, companies, and policymakers to keep the most vulnerable people at the center of the sector's evolution. The technology and model works. Now the financing needs to catch up.
This piece is based on Yaguma et al. (2026), "The Pay-As-You-Go solar power sector evolution should not leave Africa's most vulnerable behind".
