Female microenterprise creation and business models for private sector distribution of low-cost off-grid LED lighting: Multiple Randomized Experiments

27 March 2019

Martine Visser, Rowan Philip Clarke, Manuel Barron, Rebecca A. Klege, Phillip Okull, Bhavani Shanker Uppari

Over 1.3bn people worldwide lack access to modern energy. In Africa alone 600m remain off-grid, 400m live in extreme poverty, and both numbers are expected to grow since grid expansion and economic growth are not predicted to keep pace with population growth. In addition, almost 6 million children under 5 die each year from preventable diseases, preliminary research suggesting that the primary causes are respiratory infections, and smoke from traditional lighting.

Furthermore, the US and UK alone, via Power Africa's Beyond the Grid, have committed to invest over $1 billion into off-grid and small-scale solutions in Sub-Saharan Africa, and this is just a fraction of the amount spent on off-grid solar energy. Yet the impacts of such programs have seldom been rigorously evaluated, their adoption rates remain low, and the question of how to increase use is still to be answered.

In Rwanda where our research is conducted, the government as a way of rebuilding the nation after the 1994 genocide, launched “Vision 2020”. The objective was to transform Rwanda’s economy from a low income to a middle-income economy by the year 2020. The expansion of the energy sector became very important to the realization of this vision. In 2009, the government of Rwanda embarked on its Electricity Access Roll-out Program (EARP) to accelerate national electrification rates (MININFRA, 2016). It has made tremendous strides in the energy sector and the current phase of the program is targeting a 100 per cent access to electricity by 2024.

Despite the efforts by government to increase electricity access, the current connectivity rate stands at only 42 per cent which is far below the 70 per cent target for the year 2018 (ESS,2015). Of the 42 per cent of population connected, 31 per cent are sourced on-grid and 11 per cent from off-grid (EDCL, 2018). The hilly terrain and sparse settlement of households, coupled with affordability issues, have made expansion of electricity to rural areas a challenge. Off -grid solutions, such as home solar systems, have rapidly gained ground in recent years. However, the upfront cost of purchasing these off-grid home solutions poses another challenge.

Gender issues add a further dimension to the electrification problem. Women and girls continue to face significant levels of discrimination. Interventions to empower women economically by providing off grid energy are urgently needed. In Rwanda, the National Gender Policy (2010) states that, at a national level, women’s participation in the workforce is about 56% (of the total female working age population), of which 55.8% have occupations and 87.6% participate in informal agricultural activities. Participation by women is higher (66.3%) in rural areas and in urban areas 53.5% women participate in the workforce. In urban areas, most women perform in supporting roles and are not hired at top-level positions. Only 18% of formal companies are run by women, many which are in the informal sector, generally comprising small businesses. Concerning access to employment, most women are employed as unskilled labourers, traders or craftsmen. Of these, 14.8% women earn cash incomes, 15.7% earn incomes in cash or kind and 57% earn very little.

To address these challenges, we partner with a large social enterprise, Nuru Energy, which has distributed low-cost solar lighting to over 1500 villages, containing 750,000 people, in rural Rwanda including the creation of 1500 microenterprises in charge of distribution and recharge. We carry out a number of intervention studies using multiple large-scale randomized control trials as well as lab-in-the-field experiments and qualitative interviews. These use new automated data collection technologies to combine big data with extensive household surveys.

This research, which forms part of a greater research project, merges the above themes of energy, gender, and poverty. It studies how such inequalities can be overcome by bringing women to the forefront in the establishment of village level enterprises that distribute and recharge LED lights to rural poor households that are not on Rwanda’s national electricity grid. We specifically consider the role of gender quota assignment in Village-Level Enterprises to ensure access for potential female entrepreneurs and study the impacts this has on business level outcomes as well as household outcomes such as income, expenditure and girls’ aspirations. These empowerment interventions are evaluated through a large-scale RCT. Economic experiments with village level entrepreneurs (VLEs) are also conducted to assess how competitiveness and risk behaviour differ across gender groups, and the impacts of such differences on the successfulness of VLE groups.

The viability of enterprises offering clean, renewable energy products may be limited by the pricing of such products and the financing mechanisms available to end users. Through the village level enterprises that we will be studying, we will also investigate the optimisation of different business models through a number of carefully designed financial and behavioural interventions.

Lastly, we look at the gender and welfare impact of tier 1 energy access (as defined by SEA4All, 2013) on poor rural households in off-grid areas, focusing on the implications of improved lighting to men and boys versus women and girls.

Using large-scale randomised control trials in 272 villages that blend both qualitative and quantitative methods, this research designs, tests, and evaluates strategies to increase the adoption and sustained use of household renewable energy technologies. Using strategically designed business models specifically aimed at empowering local female entrepreneurs in both their communities, and in the energy industry, it also tests the impacts of different gender quotas amongst entrepreneur groups on performance and profitability, and what other lasting impacts such empowerment programs could have in their communities.

Sustainable Development Goals
Publication reference
University of Cape Town, IPA (2019) Female microenterprise creation and business models for private sector distribution of low-cost off-grid LED lighting: Multiple Randomized Experiments, ENERGIA 2019
Publication | 17 March 2021