Solar kit financing sees third month of stability

From the newsletter

Rates on loans for solar home systems in Kenya, South Africa, Nigeria and Egypt remained flat in September, marking the third month of consistent stability this year. Meanwhile, the off-grid solar market is drawing funding in local currency that is expected to keep consumer financing rates low and stable and make solar more attractive. 

• Off-grid solar companies that received new funding this year include d.light, which secured $300 million to expand solar home systems financing across Africa. Others are Sun King, Candi Solar, Bboxx and Wetility.

• Renewables Rising tracks financing costs for solar home systems in four key economies: Kenya, South Africa, Egypt and Nigeria. Data is updated monthly.

More details

• Whereas investments have increased in African renewables, the off-grid solar sector has not been the recipient of significant funding. This presents an opportunity for investors to tap into an underserved market with high growth potential, where early involvement could yield substantial returns as demand for decentralised energy solutions rises.

• This lack of capital has constrained the sector to only a handful of dominant players, effectively creating a market monopoly. Such limited competition enables these companies to raise or fluctuate PAYG loan rates at will, placing undue pressure on consumers who lack alternative providers, thereby inhibiting affordability and wider adoption.

• Sun King stands out as a key player in the industry. Beyond the $80 million funding they received earlier this year, the company also secured a $156 million loan through a securitisation deal to expand its off-grid solar and pay-as-you-go (PAYG) solutions in Kenya. Our job boards also reveal a trend in their hiring, with last week’s listings signalling expansion plans beyond current developments in Madagascar. They were recruiting for 12 out of 16 positions in the country.

• Off-grid companies are also focusing on battery energy storage, which has taken up over the past couple of months. MOPO, a Democratic Republic of Congo company, offers a pay-per-use battery rental business through local solar-powered hubs. It recently got funding from the British International Investment for accelerating its expansion in the DRC. Battery storage is crucial for solar kits to store power and counteract solar's intermittency.

• Our job boards over the past couple of weeks also show that off-grid solar companies are primarily hiring for sales and debt collection positions. This trend suggests either rapid market expansion across multiple African countries or possibly reflects challenges with existing customer bases falling behind on payments for their solar home systems.

• Ultimately, the stability of this market depends heavily on national electricity prices. With countries like South Africa and Egypt planning electricity price increases, effective October in Egypt and next year in South Africa, the solar market stands to benefit as consumers seek affordable and reliable alternatives to costly tariffs.

Our take

• The current stability in solar home system loan rates signals growing maturity in consumer financing markets. Sustaining it, however, will require addressing systemic risks such as currency volatility and regulatory uncertainties that vary widely across African countries.

• The next frontier for the sector lies in fostering a more diversified ecosystem. This includes channelling capital towards emerging startups and localised ventures, particularly those innovating business models around battery leasing or community energy hubs.

• As electricity tariffs in countries like Egypt and South Africa move higher, off-grid solar systems stand on the cusp of becoming mainstream alternatives rather than niche solutions. This shift will require scalable financing options that accommodate different consumer risk profiles and payment capabilities.