4R Digital is a company dedicated to introducing digital connectivity and finance solutions to emerging markets. In 2021, the company formed a partnership with Davis & Shirtliff, one of the leading suppliers of energy and water solutions in the East African region. Their joint objective was to address the pressing need for affordable solar water pumps and irrigation kits amongst small-scale farmers in Kenya.
Kenyan smallholder farmers are essential to national food production, but their reliance on rainfall leaves them vulnerable to climate change, directly affecting their livelihoods and agricultural productivity. Those who can afford mechanised irrigation often resort to engine water pumps fuelled by diesel or petrol, despite the significant operational and environmental costs involved. Whilst solar pumps offer a cleaner and more cost-effective solution in the long run, their initial price tag remains a barrier for many. Additionally, the reluctance of formal finance providers to extend credit to smallholders, citing high-risk factors, further delays the widespread adoption of solar irrigation systems, which have the potential to significantly improve farmers’ daily income and food availability.
Aiming to spur the transition of thousands of Kenyan farmers to innovative climate-smart solar water pumping systems, 4R Digital and Davis & Shirtliff are working together to improve upon their existing technologies and business models.
In December 2021, the partners secured funding from PREO to develop and trial a digital Pay-As-You-Go (PAYGO) platform specifically tailored for solar water pumps and irrigation equipment. The grant also enabled the launch of a financing solution aimed at accelerating access to this transformative technology.
To gain deeper insights into this project, PREO interviewed Nora Bergen, 4R Digital’s Senior Project Manager and Philip Holi, Technical Director at Davis & Shirtliff.
Q: Could you tell us more about your goals for this PREO-funded project?
Nora Bergen, 4R Digital: The 4R Digital team has gained extensive expertise in developing large-scale digital platforms, designing and delivering digital financial services, and successfully introducing PAYGO products to market at scale. We identified David & Shirtliff as partners in this project for their solar pumping kits which are suitable to smallholder farmers. Through this collaboration we were able to secure PREO funding to develop PAYGO solar water pump solutions tailored for the Kenyan market. With the end goal of jointly launching a financing solution, we integrated the digital payment and monitoring platform designed by 4R Digital into the pump controller. The PREO funding allowed us to test the necessary hardware and software configurations, as well as the methodology for marketing and sales of the solar water pumps. The resulting digital platform – DayLipa Finance – was launched in April 2023.
Q: How does DayLipa Finance operate and what roles do Davis & Shirtliff and 4R Digital play?
Nora Bergen: DayLipa Finance provides cost-effective “pay as you pump” plans for various solar water pumping equipment through Davis & Shirtliff’s distribution network. Customers initiate the purchase with a small deposit and repay the remaining amount through regular payments. The platform gives customers full visibility of their financial data through the account management system, while allowing for the remote monitoring and locking of the equipment, in case of default. Davis and Shirtliff’s extensive Kenyan presence of over 50 branches and 700 stockists significantly improves accessibility for local farmers.
Though still an early-stage business, DayLipa Finance will ultimately operate independently from Davis & Shirtliff and 4R Digital with its own premises, infrastructure and staff. The entity will be responsible for all aspects of the PAYGO platform management including credit assessment, customer relationship management and payment tracking. A well-resourced customer centre will also be set up for marketing and sales development, operational advice and payment follow up. Davis & Shirtliff’s role will be to market the solar water pump models through its branch network and provide equipment installation and technical support. 4R Digital will provide PAYGO platform support and maintenance as well as strategic advice.
Q: Solar water pumps are already offered on a PAYGO-enabled basis by several manufacturers and distributors in sub-Saharan Africa. How does your solution differ from the existing ones?
Nora Bergen: Many PAYGO operators have struggled to manage the complexities of this product value-chain whilst at the same time developing viable PAYGO platforms and financing sales to micro and small business customers. By contrast, DayLipa Finance has benefitted from building on the existing product expertise and market reach of Davis & Shirtliff, as such resources and infrastructure are difficult and costly to replicate. By integrating the PAYGO platform developed by 4R Digital, DayLipa Finance can offer PAYGO financing options at point-of-purchase across their extensive sales network.
Our market research suggests that the solar water pumps currently on sale rarely meet farmers’ growing water demands as they are often designed for multiple uses. This has unwelcome implications for factors such as the depth and rate of water extraction, as well as the acreage a solar water pump can effectively irrigate. Our pumps are specifically designed to deliver sufficient water to smallholder farmers, so giving them greater value for their money. Beyond solar water pumps, DayLipa Finance is developing additional “pipeline” products that can be sold to customers via PAYGO soon, and which also have the potential to improve livelihoods, incomes and living conditions.
Q: Davis & Shirtliff has an entrenched position in selling conventional engine pumps for agriculture. What motivated you to start selling solar water pumping equipment on credit, and why now?
Philip Holi, Davis & Shirtliff: Over the years, there has been a significant demand for engine pumps due to their ability to deliver large amounts of water in a short span of time. These pumps are commonly used by farmers who employ furrow irrigation methods. However, such pumps come with drawbacks for farmers, such as high fuel costs and expensive maintenance.
To address these issues, Davis & Shirtliff stocked specially designed solar water pump kits that could enable smallholder farmers to harness the power of the sun to pump water. Our research enabled us to achieve performance levels that closely matched traditional engine pumps.
Despite these efforts, sales did not significantly increase, as customers were still inclined to opt for engine pumps due to their lower initial acquisition costs, even if they ended up spending more on fuel during each pumping session. So, Davis & Shirtliff decided to diversify payment options, allowing farmers easier access to solar water pumps and enabling them to reap additional benefits, such as environmental protection, cost savings, and increased farming profits. This decision led to the creation of DayLipa Finance and its flexible PAYGO financing products.
Our current objective is to scale this solution by extending it to other product segments offered by Davis & Shirtliff, so bringing our transformative financing options to a broader range of customers.
Q: How does Davis & Shirtliff’s existing business framework support the PAYGO solar water pump venture, and are you concerned that it may cannibalise your traditional sales?
Philip Holi: As one of sub-Saharan Africa’s largest and most respected energy and water solutions suppliers, Davis & Shirtliff recognises the potential of PAYGO to increase the accessibility and affordability of our products. It allows us to reach customers who cannot afford to make a single cash payment, do not have access to a suitable loan account, or prefer to spread the cost of purchase over time for convenience.
We are not worried that this business stream will cannibalise our traditional sales approach. On the contrary, DayLipa Finance has the potential to drive our expansion by reaching a new customer base, enabling us to create greater positive impact in Kenya and other active markets.
Q: What are the scale-up plans for DayLipa Finance
Nora Bergen: Financing products developed and sold by Davis & Shirtliff, Daylipa Finance aims to leverage their cost-effective sales and distribution network to reach more mass-market customers across Kenya, Uganda, Tanzania, Zambia and elsewhere in sub-Saharan Africa. DayLipa Finance is currently seeking to raise a mix of equity and debt investments to achieve its target of ~112,000 sales by 2029.
