Remote rural areas, especially in the Global South, face significant challenges in accessing clean, reliable, and renewable energy. Locally-owned businesses, with their deep understanding of regional challenges and opportunities, are crucial in providing effective off-grid energy solutions. Many of these companies, uniquely equipped to meet the specific energy needs of their communities, are already making a difference.
To better understand and support these companies, 60 Decibels – with funding from UK aid through the UK Government’s Ayrton Fund, via the Transforming Energy Access (TEA) platform, Good Energies, and the DOEN Foundation – launched the Inclusive Energy Opportunity. This initiative conducted impact measurement surveys of early-stage, locally-owned, women-led companies in key emerging markets and target technology categories.
Locally-Owned Organizations Outperform their Peers
The results of the survey revealed a range of new findings documented in 60 Decibels’ recent report, Why Off-Grid Energy Matters 2024. Of particular note, companies owned and operated by individuals close to the communities they serve, generally outperformed non-local organisations in the following key metrics:
- Higher poverty reach: Data reveals that locally-owned enterprises serve 5% more customers living in poverty, on average, than non-locally-owned companies. They also reach a disproportionately higher number of women customers.
- Larger significant increases in quality of life: Locally-owned companies often perform best in terms of impact, with 66% of their customers reporting a significant improvement in quality of life due to their products or services, compared to 53% for non-locally owned companies.
- Increased customer satisfaction: Locally-owned companies achieved a 5% higher customer satisfaction rate compared to others.
Reasons for top performance as described by locally-owned companies
As part of the Inclusive Energy Opportunity initiative, leading locally-owned companies were asked to share insights on these significant data points, on topics ranging from serving rural customers to achieving high satisfaction with few challenges.
Grean World Energy Savings attributes its success to a unique marketing model known as the "village-level entrepreneurs distribution model," according to founder and manager Sileshi Alemayehu. "An individual selected from the village acts as a liaison between Grean World and its customers," Alemayehu explains, adding that these entrepreneurs" use their direct knowledge of their communities'' to deliver tailored services.
Based in India, Oorja Development Solutions employs human-centred design to develop its customer-first solar water pump. Senior manager Ankur Singh explains their approach: “We stay in close touch with the community, [who] is involved in identifying the problems they face, developing the solution, and customising based on different groups' needs.” Oorja applies this community mentality to building its service team: “Many of our team members have first-hand experience of farming and are local, so they understand the challenges customers face. We listen carefully to farmers' feedback and suggestions and frequently act on it.”
For some organizations, having community representatives who reflect their customer base is crucial. Agriput, for example, primarily hires women as community agents because most of their customers are women. Lovemore Manyere, Director of Strategy Business Development, explains, "the lower customer challenge rate is normally a result of relationships between seller (agent) and customer coming from the same level, and understanding each other very well. Thus, challenges are discussed and addressed amicably. Both want to maintain their relationship.”
Data from 60 Decibels’ reveals that women-led companies are more effective in serving their customers, with lower rates of over-indebtedness and fewer challenges with energy access products or services. Additionally, these companies reach a higher proportion of female customers. Impressively, nine out of the top ten companies in 60 Decibels' Consumer Protection Score Benchmark are women-owned.
Overall, the data shows that strategies of locally-owned companies, rooted in community engagement and understanding, leverage local knowledge and networks to create more value.
Funders can build on this momentum
The data from this initiative should serve as an opportunity for investors, policymakers, and stakeholders to consider increasing resources for supporting locally-owned organizations. The evidence is clear: these entities profoundly understand their communities' needs, enabling them to make significant impact.
However, these enterprises often face funding challenges due to operating in niche markets, using unproven business models, navigating uncertain regulatory environments, language barriers, and lacking specialized fundraising teams. Mariama Kamara, founder and director of Smiling Through Light, said, “Even though locally-led businesses play such a critical role in the sector, we constantly face fundraising challenges which puts a ceiling on our ability to scale. As we move toward more equitable and sustainable energy access models… we should collectively address issues of inequality and actively incorporate local entrepreneurs in the transition.”
The off-grid energy sector, with a reputation of being male-dominated and internationally -led, has historically underinvested in locally-owned companies. In 2022, only about 5% of investments in off-grid solar went to local firms. Investors have a critical role in supporting these enterprises to overcome challenges and achieve significant impact.
Investors are waking up to this opportunity and are looking at different strategies to leverage the successes of locally-owned and women-led businesses. Such as technical assistance funds to help these companies prepare for investment. First-loss funding and additional due diligence support could encourage more capital being lent to smaller firms. Grants and blended or impact-linked finance could provide these businesses with a boost and position them to attract more financing. Efforts can be made to increase participation of women and local entrepreneurs in business accelerator programs, enhancing their visibility. The bottom line – financial and organizational support are essential to channel resources towards local and women-led businesses, shifting the power dynamic for greater returns.
This article is supported by data from 60 Decibels' Why Off Grid Energy Matters 2024 report. This report builds a strong data and evidence based case for a shift in funding patterns to further support those companies generating outsized impact.