The recent NextBillion piece, “Ending the Vicious Circle in PAYGo Solar: How Companies and Investors Can Move the Sector Toward ‘PAYGo 2.0’,” by Dan Murphy and Willem Nolens at PAYGo Lab, hit a nerve in the best possible way. It brings much-needed clarity to the persistent challenges facing the PAYGo solar sector, and calls for the deep reflection and realignment our industry now demands.
At Ignite Energy Access, we’ve spent the last decade navigating the balance between commercial sustainability and deep rural impact. We believe that serving the bottom of the pyramid — families living on $0.5 – 3 a day, often beyond the reach of any infrastructure — is not just a moral imperative; it’s an economic opportunity that has been poorly understood and poorly pursued for too long.
Our work in these communities has shown us that the transition to “PAYGo 2.0” — an approach aimed at boosting repayment rates and profitability through improved customer selection, education and support — isn’t a branding exercise. It’s a pathway to scale, and it’s the only way forward.
In implementing this approach, Ignite has learned a lot about how PAYGo solar companies and their investors can work together to build sustainable business models that profitably reach underserved communities. I’ll share some of those key learnings below.
Why PAYGO Solar Needs to Evolve
PAYGo solar was built on a powerful idea that low-income households could leapfrog into the energy future through small, flexible payments for solar home systems. But as Murphy and Nolens’ article rightly points out, that vision has too often collided with misaligned incentives, over-ambition and short-term thinking, leading companies to prioritize greater volume of sales regardless of customers’ ability to repay. The result is a model where higher prices and shorter loan tenors push default rates up, leading to tighter margins, greater risk and a perverse “sell more, lose more” cycle.
This isn’t just bad for business. It’s bad for the communities we claim to serve. When a customer defaults and loses access to electricity, it’s not just a line item in a company’s financial statements. It’s a child doing homework by candlelight again, a clinic losing refrigeration for vaccines, or a farmer falling further behind on their productivity, yields, income, and future ability to purchase better equipment and make their fields more profitable.
Four Key Lessons for Implementing PAYGo 2.0
In our work providing solar home systems, productive use of energy appliances and other solar products through the PAYGo model, we’ve learned four key lessons:
Extreme affordability drives reliable repayment: We’ve seen firsthand that affordability unlocks reliability. When pricing and payment collection reflects actual income patterns — e.g., structuring payments from farmer clients to correspond to the harvest season — collection rates improve and customer satisfaction follows. The challenge is not to squeeze more from the customer, but to operate efficiently and effectively in collecting their payments. We need to stop thinking of affordability as a risk — a perception that has become common among companies that have managed to navigate the downturn in the sector in recent years: It’s actually the most reliable driver of repayment.
Longer loan tenors are better: We’ve extended loan tenors up to 60 months for many of our customers, especially in agricultural communities, and the results are clear: lower default rates, better customer retention and a stronger trust relationship. Many companies in the sector try to make the credit period as short as possible, on the assumption that it will lower the risk of customer defaults. But with smart technology and disciplined follow-up, long-term credit does not mean lax repayment; it means more resilient households and healthier portfolios.
Customer onboarding is not a luxury, it’s a system: PAYGo solar companies often fail to dedicate sufficient resources to the onboarding process, but investing in the first 30 days of the customer journey can make or break the financial success of that customer. Making sure that trained installers handle the installation, while providing sales agents with simple check-ins, digital tools and training around expectation-setting and payment literacy, is essential — and these measures are part of Ignite’s standard process for onboarding new customers. These are not overhead costs; they are part of the product.
Don’t oversell and don’t over-promise: One of the hardest lessons PAYGo companies must learn is about restraint. When agents are paid for units sold rather than value delivered, defaults skyrocket. That’s why we’ve tied Ignite’s incentives to 90-day repayment histories: Agents receive these incentives only if the product is properly installed and their customers successfully make payments for the first three months after the sale. Similarly, we’ve built “upgrade ladders” — the process through which high-performing agents are promoted to agent managers, or given larger territories to cover — based only on whether those agents are reaching proven, high-performing customers. It’s a slower pathway to growth, but it’s sustainable.
Each of these lessons is underpinned by a key insight: The most important focus of innovation in PAYGo is not about developing a new app or battery. It’s about finding more effective ways to build customer trust.
What PAYGo Companies and Investors Can Do
To build a sector based on customer trust, sustainable growth and local impact, there are some key changes PAYGo companies and their investors must make.
For companies: It’s essential to embrace simplicity and moderation. Recenter your metrics around net collections, long-term impact and customer retention, not just sales volume or installed capacity.
For investors: It’s time to stop chasing the storied “hockey-stick growth,” and to start rewarding consistent, proven scale. Support carbon-financed models, backed by real-time impact data from the field, to help de-risk operations. Back results-based financing platforms, which play a critical role in scaling up off-grid solar solutions across the sector, and making them affordable to underserved customers. Reward firms that demonstrate real customer value and disciplined growth.
PAYGo 2.0 is not a return to basics: It’s a refinement of what made the model powerful in the first place. It’s about learning from the ample repayment data inherent to the PAYGo model to build loan products that respond to customers’ needs and income streams, listening to and supporting them when they encounter challenges, and resisting the temptation to prioritize expansion over effectiveness.
I believe this transition is already underway. But it requires courage, coordination and a shared commitment to the people we serve.
The more companies and their investors adopt this renewed focus, the more effective we’ll be in building a sector that isn’t just bigger, but better.
Yariv Cohen is the co-founder and CEO of Ignite Energy Access.
Photo credit: UNESCO-UNEVOC/Oluwatobi Oyebanji
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