Author: Osman Shamet, Research Analyst at Terra Energy
Off-grid solar, powered by mobile money innovations, has emerged as a transformative force for energy access in Africa. Over 600 million Africans still lack electricity as of 2024 (IEA 2024), but affordable solar systems and pay-as-you-go (PAYG) models are changing the landscape. Mobile money allows rural families to pay in small increments, making solar energy accessible even to those with irregular incomes. Africa now processes 65% of global mobile money transaction value, totaling $1.1 trillion in 2024, and handles nearly 82 billion transactions annually (GSMA 2025). This digital payment revolution reaches even the most remote communities, enabling the rapid spread of solar home systems.
PAYG solar, first popularized by services like M-Pesa in Kenya, now empowers millions across the continent. For example, a rural family can activate a solar kit with a small deposit and keep it running through micro-payments, aligning perfectly with their cash flow. Millions of people use M-Pesa and similar services, providing a scalable platform for solar adoption. The results are tangible: students study under clean, bright light, families save on fuel, and communities move away from polluting kerosene lamps.
Scale of Adoption and Benefits
The impact is significant.
Sales of solar home systems jumped 54% in 2022 and continued to grow in 2023 (IEA 2024). By 2024, an estimated 43 million people in sub-Saharan Africa have basic electricity access via off-grid solar (IEA 2024). This shift delivers not just light, but also improved education, health, and economic opportunities. Solar water pumps increase farm yields, clinics keep vaccines cold, and entrepreneurs power small businesses. Environmental benefits are clear: replacing kerosene lamps cuts indoor air pollution and reduces greenhouse gas emissions, with over 190 million tonnes of CO₂e avoided since large-scale adoption began (World Bank 2022).
Investment, Sustainability & Outlook
Annual investment in off-grid solar in emerging markets was about $300 million in 2024 (GOGLA 2025). However, to connect the 398 million people who could most efficiently be reached via off-grid solar by 2030, an estimated $21 billion in public funding is needed each year (World Bank 2023). Bridging this gap requires more concessional finance (low-interest loans, grants) and patient capital. The sector is also focusing on sustainability, with programs promoting high-quality equipment and battery recycling to prevent e-waste.
Looking ahead, off-grid solar is projected to be the most cost-effective solution for 41% of those still lacking energy access by 2030 (GOGLA 2024). Yet, without accelerated action, 660 million people may still be without electricity by 2030, mostly in Africa (World Bank 2024). Achieving universal access will demand subsidies for the poorest, robust local financial markets, and continued cost reductions.
Policy & Finance Levers: Progress, Challenges, and the Way Forward
So, what’s working now?
- Tax Exemptions: Removing VAT and import duties has made solar products 15–25% cheaper for consumers. For instance, Rwanda’s zero percent VAT on solar equipment, implemented in 2019, significantly improved affordability for rural households (Rwanda Min. Finance 2019).
- Results-Based Financing (RBF): RBF grants reward solar companies for reaching underserved populations, reducing consumer costs and accelerating last-mile rollout, as seen in Mozambique and Ethiopia.
- Local-Currency Funds: Development banks are establishing local-currency credit facilities to address currency risk, enabling longer payment plans and expanding access in countries like Kenya and Nigeria.
- Public-Private Partnerships: Blending concessional funding with private capital and climate finance facilities, such as the Mission 300 and other programs, are de-risking investments and coordinating donor efforts.
Yet, there are still challenges to overcome:
- Financing Gaps: Despite progress, the annual investment required far exceeds current flows. Mobilizing more investments and capital is critical.
- Currency Risk: Many solar devices are imported, but customers pay in local currency, exposing providers to forex volatility. While local-currency funds help, scaling these solutions remains a challenge.
- Sustainability: Ensuring product quality and managing e-waste are emerging concerns. Battery recycling and standards for equipment durability need to be scaled up.
- Affordability for the Poorest: Even with PAYG models, the very poorest households may still be unable to afford solar kits. While it’s important to avoid distorting the market, carefully designed direct subsidies or support mechanisms may be necessary to bridge this affordability gap without undermining private sector incentives.
Innovative funding mechanisms are essential:
- Impact Investment Funds: International impact investors are increasingly channeling patient capital into off-grid solar, seeking both financial and social returns.
- Climate Finance: Global climate funds (e.g., the Green Climate Fund) are supporting solar programs, especially where projects deliver measurable emissions reductions.
- Microfinance Institutions: Local microfinance providers are starting to offer loans for solar products, often bundled with financial literacy programs.
- Islamic Finance: Though still limited in Africa—can be used to fund solar projects through models like Ijarah or output-sharing Sukuk, offering investors stable returns while addressing affordability and reducing government subsidy burdens.
What More Can Be Done?
While the off-grid solar revolution is remarkable, progress is not fast enough to meet 2030 targets. To accelerate the transformation, several actions are needed:
- Deepen Local Engagement: Community involvement in design and deployment increases uptake and ensures solutions meet real needs. Programs should invest more in local partnerships and training.
- Strengthen After-Sales Support: Long-term impact depends on reliable service and maintenance. Expanding local repair networks and warranty programs will build trust and ensure sustainability.
- Innovate Financial Models: Beyond PAYG, models such as cooperative ownership, energy-as-a-service, or integrating solar with productive uses (e.g., irrigation, refrigeration) can unlock new markets and drive deeper impact.
- Expand Digital Inclusion: Mobile money is the backbone of PAYG solar. Efforts to close the digital divide—expanding mobile coverage and digital literacy—will further accelerate access.
- Policy Consistency: Governments should ensure stable, long-term policies on tax, tariffs, and subsidies to attract investment and avoid market disruptions.
- Data & Impact Measurement: Better data on household energy needs and usage can help tailor products and target subsidies more effectively.
Off-grid solar and mobile payments are transforming Africa’s energy landscape, but closing the access gap by 2030 will require much greater ambition, innovation, and investment. By scaling what works, addressing market uptake challenges, and embracing new funding models, universal energy access is within reach.
