Improving Sustainability in Uganda’s Solar Market by linking to the Credit Reference System
27 August 2020
EnDev is happy to share a newly published paper on “Linking Off-Grid Solar Energy Companies to a Credit Reference System”.
EnDev is well aware that the Pay-As-You-Go (PAYG) business model has played a significant part in the growth of the Off-Grid Solar (OGS) sector over the past years. However, until now, most OGS companies operate entirely independent from the financial sector regulation. Thus, they must rely on the customer data they have at their disposal for making consumer financing decisions, leading to high portfolio risks. Reversely, customer credit data produced by the OGS companies is currently not available to other stakeholders, let alone the whole sector, as no structured way of sharing is in place.
Energising Development (EnDev) and the GIZ Sector Project ‘Financial Systems Development’ (SV-FSE) have come together to shed light on both the opportunities and risks that could arise for customers, energy firms and others from linking energy companies to a formal Credit Reference System (CRS). The analysis shows that an improved level of credit information sharing represents a so far largely untapped opportunity with the potential to increase portfolio quality of PAYG companies, improve the financial inclusion of customers and foster sustainable growth in the OGS sector. At the same time, linking OGS companies to a CRS is a rather new topic that entails several risks, which need to be managed well.
In addition to exploring the opportunities and risks, the paper zooms into the specific situation in Uganda, which has one of the most promising OGS sectors in Africa. Publishing this paper is a starting point for EnDev Uganda in setting up concrete actions for linking Off-Grid Solar companies to the credit reference system.
EnDev together with SV-FSE is looking forward to further developing this interesting topic together with international stakeholders and the expert community.