PHASE ONE: Lighting a pathway for solar in rural Uganda

PHASE ONE: Lighting a pathway for solar in rural Uganda

Pader District is part of Uganda's northern region, where farming is the main livelihood and source of income. Photo: Thatcher Cook/Mercy Corps.
Pader District is part of Uganda's northern region, where farming is the main livelihood and source of income. Photo: Thatcher Cook/Mercy Corps.

Phase One: The critical first step involves information, information, information.
This article is the first in a three-part series exploring the role Mercy Corps played in bringing solar to rural Uganda.

For a commercial business, bringing any product to a new market is risky and expensive. One international nonprofit decided to help companies cross that gap--by doing some of the legwork work itself.

In order to convince successful, respected solar companies in urban Kampala that it would be profitable to sell their products in rural Uganda, hundreds of dusty miles away, Mercy Corps (our parent organization) set out to do what any business would when considering expansion: a comprehensive market analysis.

Here's how they did it:

Mercy Corps dispatched experienced surveyors to ask a series of questions to a sample population representing typical families. The team wanted to know whether residents of Pader District, a war-ravaged agricultural region, could afford to purchase solar-powered lanterns at retail prices (they could!), if they were interested in solar (yes, please!), how many would likely buy a solar-powered product (many!), and who could distribute (local stores!).

The survey team turned hundreds of interviews with families into data, painting a picture of strong solar demand in rural Uganda. Let’s take a step back to see how the market analysis came together:

Families often buy a little bit of paraffin to fuel their low-light kerosene lamps when they have extra cash after the harvest season. Photo: Thatcher Cook/Mercy Corps.
Families often buy a little bit of paraffin to fuel their low-light kerosene lamps when they have extra cash after the harvest season. Photo: Thatcher Cook/Mercy Corps.

To find out whether residents could afford solar lanterns at retail prices, the team had to figure out an approximate measurement of household wealth and whether people had a source of regular income. Because most families rely on informal farming, this was easier said than done.

• Household wealth was determined using an "asset index comprised of contextually appropriate proxy measurements to compare wealth.” To put that into concrete terms, household wealth was determined by whether or not a family owned any of the following: a motorcycle, a bicycle, a television, a radio or a telephone. About 57 percent did not and were categorized as comparatively “asset poor.”

• The team also found that the majority of residents do have a small amount of cash savings, but only after semi-annual harvests.

• On the upside, savings and loan groups are prevalent in the District, and almost half of survey respondents noted they participate in one.

These findings indicated that Pader District residents have rigid spending cycles and little flexibility for unplanned or nonessential purchases, which didn’t bode well for a product that requires more upfront cost than purchasing small amounts of kerosene each week. But they also suggested a solution.

Lesson 1: Find out when cash will be available. To be successful, solar companies need to sell their lanterns when farmers could afford them. Specifically, the solar companies could create payment plans and adapt them to reflect how and when consumers typically spend money to buy lantern fuel and recharge their phones. They can also tailor sales pushes to reflect harvest seasons. Incremental payment schemes and rent-to-own models could also help. And tapping into group credit and savings cycles could help balance families’ spending rigidity.

Now, given that a sizable portion of the population could buy a solar product, how many actually would? The team compared the potential adoption of this new product to mobile phones, which 88 percent of northern Ugandans now use. The adoption of cell phones is easy to explain: they allow people to reduce other costs, like traveling to communicate or do business. Minutes are pre-paid, so families can purchase a few when they have some extra cash. Almost all cell phone users pay to recharge at a shop in town, since virtually no families are connected to the barely existing electrical grid. About 70 percent of families charge up twice a week.

Lesson 2: Identify a specific situation where the product will immediately pay off. Cutting the smoke kerosene produces is a great long-term health benefit of solar-powered lanterns. But this benefit is too far off to convince people to spend extra cash now. Based on the region’s mobile use, the team decided solar-powered products that can also charge a phone would be popular, since lowering the cost of charging a mobile phone would be an immediate, noticeable benefit.

Ok, but who is going to sell the products? It would cost way too much for a solar company to open its own store that far from the capital, but it’s also too expensive for families to travel to even a mid-sized trading town. Mercy Corps’ research team surveyed the willing and able--all of the local shopkeepers in the region that could add a solar product to their shelves, and those that would.

Lesson 3: Use local shopkeepers as market detectives and product ambassadors. Local shop owners have intimate knowledge of their community’s savings, lending and harvest schedules, key to understanding consumer spending habits. This local sales presence helps solar companies accurately and intelligently target their marketing and sales plans to mirror influxes in consumer income and demand. Plus, trained shopkeepers can help dispel myths about solar products, particularly if consumers have had negative experiences in the past because of faulty products.

Finally, the survey team found that about 96 percent of households frequently purchase small amounts of paraffin for their kerosene lanterns, but discovered that families didn’t always know what those costs add up to over a year.

Lesson 4: Arm people with information. The majority of Pader District households are not only unaware of their high annual fuel and mobile recharging costs, but they are unaware of an energy source alternative that will save them money. Armed with sufficient price comparisons and information about product quality, families are more likely to adopt affordable solar power products. And this is where the second phase of the pilot comes in to play.

Stay tuned for our next article in this series. In Phase Two, we’ll explore how the information Mercy Corps gathered about solar’s potential to brighten rural Uganda was used to draw the interest of two respected solar companies to seize this opportunity.

Editor’s note: Read the PDF of the full market assessment report by Mercy Corps here. (PDF via Google Docs)

Mini solar panels can light up a home more efficiently than kerosene lamps, and those with a mobile phone charging component are especially popular. Photo: Kim Beevers/Mercy Corps.
Mini solar panels can light up a home more efficiently than kerosene lamps, and those with a mobile phone charging component are especially popular. Photo: Kim Beevers/Mercy Corps.

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