M-KOPA is a Kenyan connected asset financing platform that provides underbanked customers in Africa, lacking access to formal credit for their business needs, with products such as solar lighting, televisions, fridges, smartphones and financial services.
To address some critical gaps in the market, in January 2020 M-KOPA designed a package of products consisting of an IoT-lockable smartphone powered by a solar home system, bundled with business management tools and low-cost internet connectivity for micro, small rural businesses in Kenya.
M-KOPA initially intended to use their PREO funding to support a trial of this bundled product and service offer to grow their business. However, the onset of the COVID pandemic disrupted their original plans to roll out the full package of services, as it would require a significant on-the-ground presence and face-to-face training. Instead, M-KOPA developed a new strategy that the company could implement remotely. They redesigned the product as the ‘Micro-Biz Bundle’, consisting of a solar home system (including a solar-powered TV and lights) and a smartphone coupled with an electronic voucher (e-voucher) to the value of $50.
The bundle was sold on a pay-as-you-go (PAYG) basis to small rural businesses in collaboration with an online e-commerce platform. The aim of this redesigned pilot was to enable small businesses to gain access to affordable business stock through the platform, build competitiveness through the adoption of e-commerce and unlock access to business credit and energy. The pilot targeted 100 small rural businesses and M-KOPA leveraged its existing network of sales agents to reach enterprises such as general stores, grocery shops and agribusinesses, while at the same time ensuring gender balance in ownership of the enterprises.
This was M-KOPA’s first PAYG multi-product bundle. Despite the tough business environment, M-KOPA sold over 40 Micro-Biz Bundles in four locations in Kenya.
PREO has interviewed Rebecca Glas, Project Manager at M-KOPA, to capture the lessons learned from the implementation of the project.
Q: Could you tell us how COVID-19 led to the change in the project’s scope, design and implementation strategy?
A: The project faced initial implementation delays of several months due to the pandemic. We had to pivot away from face-to-face market research towards desk-based research and phone-based customer and provider interviews. Moreover, the original package of business management tools demanded a high level of digital skills from the customer, so the customers would have required sufficient in-person training to use them effectively, which the company was unable to provide under lockdown. We therefore decided to change the focus of our project to an e-commerce solution as this required lower-level digital skills, while also providing businesses with credit through the e-voucher that allowed them to purchase business stock from the online e-commerce platform.
Ongoing COVID-19 restrictions meant the project also faced further difficulties in ongoing implementation. It largely prevented travel by team members and therefore limited in-market activation and engagement. As a result, we had minimal engagement with customers and sales agents which delayed customer uptake and insights gathering. It meant we also had to choose our pilot location based on where we had active team members on the ground, which was not the most suitable location for our e-commerce partner.
The economic hardship faced by Kenyan small rural businesses during COVID also had an impact on uptake, given the relative high cost of the bundle compared to what the customers could afford to pay.
Q: What challenges did the project face during the rollout of your Micro-Biz (e-commerce) Bundle? And how did you overcome these challenges?
A: Apart from the COVID-related challenges mentioned above, the project also needed to tackle further issues:
M-KOPA systems & technical backend: this was M-KOPA’s first multi-product bundle offering on one PAYG payment plan. This meant a significant amount of set-up and troubleshooting on M-KOPA’s backend systems was needed to enable the launch of this product.
Partnership: we faced initial complications with our e-commerce partnership. We had to select Eldoret, a town in the Rift Valley region of Kenya, because we had an active team on the ground there to facilitate the pilot implementation during COVID. However, our partner did not have active operations in this location, though it was on their pipeline. We therefore had to troubleshoot by using M-KOPA’s supply chain for part of the delivery which caused some delivery delays at the start of implementation.
Location: we started the pilot in Eldoret as it’s a market where we have a strong footprint and an active team. However, the demand for solar home systems was low because most of the targeted businesses operating in Eldoret are connected to the national electricity grid. We therefore decided to expand the pilot to three additional locations that were more rural and off-grid. This strategy proved effective and uptake peaked as a result.
Pricing: Even after rolling out to more locations, sales were still slower than we had hoped. After testing the roll-out for a couple of months and conducting more research on the demand and uptake barriers, we decided to lower the upfront deposit paid by customers to enable a higher uptake. This stimulated a higher demand for the bundle across all locations.
Q: Which of the planned objectives and targets did the project achieve for M-KOPA, the small business owners and their communities?
A: We’re proud to say that despite the challenges we managed to achieve many impressive results:
Use of solar home system: the businesses primarily used the solar home system (solar TV and lights) in their own homes and not at their business premises as originally intended. However, customers found the solar TV and lights to be highly beneficial products for their whole family, providing access to information and education for them and their children, which was particularly important as schools had closed during the pandemic.
Productive use of the smartphone: The bundled smartphone was used daily for business and personal use. The main benefits are communicating with suppliers and customers, making mobile money transactions, sharing photos of products alongside the ability to access e-commerce platforms.
Access to credit via the e-voucher: The e-voucher was used to purchase household items from the e-commerce platform rather than business stock (which was the original objective). However, the e-voucher provided households with approximately 2 months of savings that could be injected back into the business, providing businesses with critical cash flow for business operations. Despite the low digital literacy levels, 88% of customers on this project used an e-commerce platform for the first time, showing the transformational impact that the e-voucher had for their businesses and households, and the potential that recurring e-vouchers could have for e-commerce serving MSMEs or households.
Q: How did PREO accelerate the success of M-KOPA in commercialising its first bundle?
A: Through PREO, M-KOPA was able to design and roll-out its first e-commerce product bundle, an innovation which wasn’t on our initial commercial feasibility pipeline due to other business priorities and constraints. It would not have been possible without PREO funding which helped us test and roll this out much sooner by de-risking the cost and allowing for more in-depth market research and testing, which was critical to designing a bundle tailored to the needs of small businesses.
Q: What is it that you were unable to achieve and why?
A: We were unable to hit our original target of 100 business customers served. This is primarily due to the project delays and complications faced caused by COVID which shortened our product launch and roll-out timeline, and meant we were not able to engage with sales agents and customers in the market as comprehensively as we would have liked.
A secondary reason is the narrow customer segment the project was targeting due to the product specificity and high cost of the bundle, which was driven by the inclusion of the solar home system. This meant our sales agents had to identify businesses that had a need for all three products in the bundle along with the available capital to afford it. This led to a slower uptake, particularly before we branched out into more areas. The affordability barrier was compounded by the financial hardship faced by small businesses in Kenya due to COVID.
Q: Which valuable lessons has M-KOPA learned from the project implementation? Which lessons have you learned that would help you and your peers to scale the bundling of products in the sector?
A: Findings from the Micro-Biz Bundle pilot would indicate a low demand amongst small rural businesses for solar lighting as a productive use product i.e. to extend business operational hours. However, I’m not convinced this is an accurate picture as these findings were skewed by the fact that some of the customers in the main pilot location of Eldoret already had a grid connection. In addition, all the surveyed businesses experienced COVID curfews which limited the possibility of extending business operational hours anyway. However, a PAYG bundle of smartphone plus digital financial services and e-commerce showed a stronger potential to unlock access to capital, markets and services for income generation and business growth, as long as customer digital literacy levels are improved through training.
We also found that the value customers receive from a PAYG e-commerce voucher is significant. However, many business owners will not have used e-commerce before and will need additional support and digital skills training to use it effectively and repeatedly. This upskilling should be worked into the implementation plan so that customers can unlock the full benefits of e-commerce and digital financial services.
To effectively deliver an e-commerce solution, the partnership is critical. The e-commerce partner needs to have a strong operational footprint in the active markets to enable the efficient processing and delivery of goods to the customer, and so provide the highest value and create the most impact.
We know that customers appreciate multi-product bundles because they can receive more products and benefits at once, and so feel they are receiving better value for money. However, the multi-product bundles also come with a higher overall price, as compared to other MKOPA single products, even when providing it on a PAYG model which makes it more accessible. So the product selection and price point should be carefully considered and tailored to the customer segment. A less-is-more approach would be wise, starting with bundling only two products to lower the bundle cost which is the main access barrier for first-time customers.
Q: What is the project’s potential to open e-commerce opportunities for rural retailers and suppliers?
A: The insights gained from the PREO project have been instrumental in forming M-KOPA’s approach to the future roll-out of e-commerce products. This is a particular area of interest for us since the demand for our PAYG smartphone continues to grow across our markets, and M-KOPA is exploring additional digital financial service offerings for smartphone customers.
For more information visit m-kopa.com
