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Pay-as-you-go contracts for electricity access: Bridging the “last mile” gap? A case study in Benin

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  • Barry, Mamadou Saliou
  • Creti, Anna

Abstract

We analyze pay-as-you-go (PAYG) contracts subscribed by 10,120 consumers living in Benin (Sub-Saharan Africa) to purchase solar kits or panels for lighting and charging services. PAYG are flexible loans that allow fees payment through mobile banking. Most of the PAYG consumers live in well electrified areas (Cotonou, Porto Novo, Abomey Calavi, in the coastal zone). By estimating a very simple multinomial logit model, we find that these customers have a high probability to enroll in PAYG contracts. Living in urban and peri-urban areas, they use solar devices to substitute expensive and often unreliable grid electricity services. Consumers located in more periferic and less electrified areas (Savalou) have a low probability to default, as the substitution effect is weaker. Overall, in our case study, PAYG targets credit worthy consumers, in order to decrease the investment risk of the company providing solar devices. These results cast some doubts as to whether PAYG bridges the “last mile” electrification gap.

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  • Barry, Mamadou Saliou & Creti, Anna, 2020. "Pay-as-you-go contracts for electricity access: Bridging the “last mile” gap? A case study in Benin," Energy Economics, Elsevier, vol. 90(C).
    • Handle: RePEc:eee:eneeco:v:90:y:2020:i:c:s0140988320301833
    DOI: 10.1016/j.eneco.2020.104843
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    More about this item

    Keywords

    Electricity access; Africa; Household saving;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • N47 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Africa; Oceania
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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