Principal Investigator for EEG project Micro-finance for electricity in Rwanda

What drew you to carry out research in rural Rwanda?

Rwanda is an extremely interesting country with an impressive economic development and a vibrant energy sector, but also persistent poverty, a high population density, and heavy dependence on agriculture. The country’s Electricity Access Roll-Out Program (EARP) is probably one of the largest of its kind. EARP increased the national electrification rate from 6 percent in 2009 to 41 percent in 2017. We also build on our previous work in the country, on EARP’s impacts, but also off-grid solar.

Who are your partners in Rwanda and what role will they play in the project?

We are teaming up with IB&C Rwanda, a Kigali based NGO that is focused on the energy sector and the implementation of surveys. University of Rwanda will be our academic partner. Our main policy partners are REG, the governmental energy agency, as well as UOB, one of the country’s largest micro-finance institutions.

What impact would you like the project to have?

For the Rwandan case, we hope to contribute to the government’s efforts to develop an inclusive energy access policy that fosters economic and social development. Also, beyond Rwanda, high hopes are pinned on the complementary role of financial products to increase the social and economic impacts of electrification. There is however no rigorous evidence out there. We hope to fill this gap. More specifically, we will work closely with our partners in policy to make sure our findings are used to shape future strategies. If our intervention proofs to be successful, we hope that the government and UOB as well as other banks use our evidence to scale it to the entire country.

What do microfinance loans have to do with electricity access?

Previous research in newly grid connected areas in Rwanda, but also elsewhere, has shown that both connection rates and usage intensity among those who do connect remain very low. It is often argued that investing into the connection and appliances would be profitable for families and enterprises but is hampered by the lack of available finance products to smooth cash flows over time. This we try to address.

What types of appliances might the loans help families and small businesses purchase?

We will work on the specific design of the loans with our partners in the country, also based on field inspections. In principle, the loans can be used for any kind of appliance. Families might take a loan to buy a TV, but that would of course not increase their incomes so paying back the loan could be difficult. From today’s perspective, we actually deem loans for productive appliances both in home businesses and micro-enterprises to be most promising. Mills, welding machines, and circular saws are the type of machinery that is frequently used in rural Rwanda.

What challenges do you think you'll face?

Designing a randomized intervention and implementing a large survey is always full of challenges – which are inherently unknown beforehand (otherwise they wouldn’t be challenging). A specific challenge of our study is that we pilot financial products in new areas. Adapting them to the needs and capabilities of the rural target group will be a non-trivial task. Not least, even well-adapted products might still not be enough for the rural poor to overcome their various constraints. We will measure both of these challenges and include them as research outcomes so that policy makers and other researchers can learn about them.

What stage is the project at, and what’s next?

We are currently getting started. The next step is a preparatory mission in January 2019, based on which we will design the intervention in cooperation with our partners. We intend to do a light baseline survey in March and April, roll out the intervention after this and do the follow-up evaluation in 2020.