Gateway Guide to Pay-As-You-Go Financing for Basic Services

Around the world, 800 million people still lack access to electricity. Close to 3 billion still rely on inefficient and polluting cooking systems. And 785 million lack even a basic drinking water service. The Sustainable Development Goals for clean water and sanitation and affordable and clean energy aim to address these problems, setting targets and indicators for each of these basic services. 

A key piece of the puzzle to making progress on these targets is figuring out how to finance these services - both for infrastructure installation and ongoing service payments. Pay-as-you-go (PAYGo) financing is a growing business model that shows great potential to help more low-income people access basic services. The model varies depending on the service and the equipment needed for a household to access that service, but essentially it offers customers a way to set up a utility such as solar power, a water connection or a clean cookstove, and pay for the equipment and their ongoing usage as they go, instead of having to pay a large up-front cost. Since customers don't put up collateral, companies incentivize repayment by using technology that can automatically turn off the service if customers don't make their payments.

So far, most progress with PAYGo financing has been made with off-grid solar power, and in fact FinDev Gateway now hosts a community of practice, PAYGo PERFORM, dedicated to developing a reporting framework and key performance indicators for the PAYGo solar industry. However, other sectors, including water and cooking fuel, are starting to explore this model as well. 

In this Gateway Guide, we share with you our latest FinDev Gateway resources on PAYGo financing for basic services. You can learn more about this business model through recent webinars and blog posts by professionals working in the field, as well as several publications which explore the challenges and opportunities experienced thus far.