Access to tailored micro-finance for electricity: a way to foster adoption at the extensive and the intensive margin? A cluster randomised trial in rural Rwanda   

Background, challenges and context

Rwanda’s Ministry of Infrastructure (MININFRA) is striving to provide access to sustainable, modern energy services in 100 per cent of both urban and rural areas by 2024. The state-owned electricity utility Rwanda Energy Group (REG) and the international community have made an enormous effort to reach this goal by bringing the electricity grid to rural areas.

Existing research suggests that electrification programmes often have more modest economic impact than predicted at the outset due to low levels of adoption. As electricity access rates increase, new customers are often associated with low levels of consumption (with ever-poorer areas being targeted), and, as networks expand, investment needs for generation and maintenance grow. Fostering electricity consumption and thereby improving revenue collection will be key for policy makers to ensure long-term sustainability of their grid access policies.

In Rwanda, connecting rural areas within a very short time period is a considerable achievement – but low consumption levels challenge the profitability of the investment. REG is actively considering and developing measures to increase consumption.

Research overview and objectives

This project aims to produce reliable results on the effectiveness of post-connection grants earmarked for machinery and appliance investments and training in increasing electricity consumption and productive uses of electricity.

The team will evaluate the impact of one component of the government’s Scaling-Up Energy Access Project (SEAP), a pilot programme funded by the African Development Bank and implemented by the Energy Development Corporation Limited (EDCL) – the department within REG responsible for the development of new energy generation projects, transmission infrastructure, and energy access.

The aim of SEAP is to increase electricity consumption – and especially business development – in communities connected to the grid by providing bundled Business Development Services (BDS), comprising grants (on average USD 1,800 per village) for machinery and appliance investments, combined with training. The programme is expected to lead to improved productivity and increases in employment and income, contributing to economic development. This will be directly tested through this proof-of-concept research project.

The team is implementing a clustered randomised controlled trial within communities that have been connected to the electricity grid and that have been identified by the SEAP program as being eligible for inclusion in the program. The team will work in recently connected villages and villages that were connected to the grid between 2011-2014. Half of these villages will be randomly allocated to a village-level treatment of receiving tailored grants for productive electric appliances.

The research design, research questions, and locations were developed in close collaboration with REG/EDCL. The general research question is: Can the effects of on-grid electrification on economic development and productive uses be enhanced by bundled BDS? This will be answered by asking three more specific questions:

• Do bundled BDS for micro-enterprise, and subsequent investments into appliances, increase electricity usage intensity?

• Do bundled BDS for micro-enterprise, and subsequent investments into appliances, lead to higher productivity?

• Do bundled BDS for micro-enterprise, and subsequent investments into appliances, lead to higher employment and incomes?

The main impact indicators are appliance uptake and electricity consumption levels of micro-enterprises as well as productivity (output, sales, profits), employment and income. Approximately 12 months after the treatment, the team will conduct a follow-up survey on a micro-enterprise sample in order to obtain the relevant data.

The team will produce an academic paper, a policy brief, and a policy dissemination workshop for stakeholders, organised in cooperation with REG. Moreover, the team will utilise the baseline survey to provide descriptive evidence on long-term connection rates and utilisation of electricity. The research will inform the Government of Rwanda and the global energy access community on whether providing bundled BDS can increase electricity consumption in electrified rural areas and foster productive use that will eventually lead to economic development.

Local partners 

Rwanda Energy Group (REG) – national utility

Inclusive Business and Consultancy (IB&C), Rwanda