Solar panels charging a light system outside a house in a rural area around Kisumu. Photographer: Sven Torfinn for Bloomberg Businessweek The Solar Company Making a Profit on Poor Africans M-Kopa plans to be a $1 billion company by selling solar panels to rural residents—and providing them with credit.

Tom Opiyo is the best-performing salesperson at M-Kopa Solar, a Kenyan company selling solar power systems to the very poor. Watching him work, it’s not hard to see why. Opiyo is a pastor who used to be a musician and concert promoter, and when he’s closing a sale he never stops talking. “The electric company can sometimes leave you in the dark. With M-Kopa, the light cannot go out,” he tells a group of 15 potential customers gathered under a tree in a rural area in western Kenya on a sunny October afternoon. “If you get power from the power company, you will always be paying. But when you buy M-Kopa, it’s yours forever.”

Opiyo is tall and thin, with a closely shaved head he keeps shaded under an M-Kopa baseball cap. He infuses his pitch with quotes from the Bible and brings in an actor to break the ice with impersonations of famous Kenyan politicians. But his underlying argument is financial. Before demonstrating his product, Opiyo walks the group through a calculation, asking how much each person spends a week on kerosene. He works out what that adds up to over the course of a year and then totals a sum for the entire group. “I show them the cost of what they are using compared to what I’m going to give them,” Opiyo says. “If you bring this to their minds, they can see how they are foolish, and then you know they are going to buy.”

A food vendor in Kisumu cooking by solar-powered light. Photographer: Sven Torfinn for Bloomberg Businessweek

M-Kopa estimates that 80 percent of its customers live on less than $2 a day. Three-quarters of them rely on small-scale farming as their primary or secondary source of income; the rest run small businesses. Energy accounts for a significant amount of their spending. The company’s power system costs $200: It includes a solar panel, two LED bulbs, an LED flashlight, a rechargeable radio, and adaptors for charging a phone. The kit comes with a two-year warranty, and its battery is designed to last at least four years.

“If you boil it down, what we are is a finance company”

The company’s core innovation has less to do with its physical product than the method it has developed to make it affordable. Kopa means “to borrow” in Swahili, and each system the company sells is in effect a loan of about $165. Clients pay $35 upfront and agree to make a daily payment of 45¢ for a year, after which the system is theirs. The kits come with a control box containing the battery and a SIM card that can communicate with M-Kopa headquarters in Nairobi. When a customer has made a payment via mobile phone, the SIM card sends a signal to activate the battery, which is powered by the panels. “If you boil it down, what we are is a finance company,” says Nick Hughes, M-Kopa’s strategy director and one of its founders. “What we’ve done is to give the customers some collateral and a line of credit.”

Moore with Opiyo, right, and other staff in M-Kopa’s Kisumu office. Photographer: Sven Torfinn for Bloomberg Businessweek

Hughes, an Englishman, and his Canadian co-founder, Jesse Moore, first discussed working together in 2009. Hughes is a former executive at Vodafone, the British telecommunications company, and Moore was working for the GSMA Development Fund, a mobile telecommunications industry group, where he was in charge of identifying opportunities to make mobile services available to people in developing countries.

Hughes and Moore had three criteria for the company they wanted to build: It had to involve mobile technology, an area in which they both had experience; it had to solve what they called “a massive pain point” for the very poor; and they had to believe it would one day become a billion-dollar business. “The point is, if you’re going to start something, make sure it can be huge,” says Moore, now the company’s managing director. The duo ran three pilot projects, including mobile phone savings-and-loan accounts in Kenya and a health-care hotline in India, before settling on solar power and founding M-Kopa in 2011.

The company says that, just as mobile phones reached areas landlines couldn’t and electronic money introduced banking services into what had been a predominantly cash economy, M-Kopa’s solar systems eventually can provide clean, renewable power to millions of customers for whom affordable electricity has remained out of reach. “We think it’s possible to build a business with no trade-offs,” Moore says. “We can benefit the environment. Our customers will be better off. And we’ll get richer. We all can win.”

An M-Pesa agent in Kisumu helping a customer. Photographer: Sven Torfinn for Bloomberg Businessweek

In Kenya having a telephone was once a privilege of the elite. In 2002 just 1 adult in 10 owned a mobile, according to the Pew Research Center. In 2007 the Kenyan mobile operator Safaricom launched a service called M-Pesa, allowing customers to use a phone to send cash. Originally intended as a way to help microfinance borrowers make and repay loans, M-Pesa was rapidly adopted for everything from salaries to taxi rides, bringing banking to people who were miles from physical bank branches. Today about a third of the Kenyan economy flits across Safaricom’s airwaves, and 82 percent of Kenyan adults have a mobile phone. Signs of the mobile revolution are everywhere in Kisumu, the city in western Kenya from which Opiyo, the salesperson, operates. Roadside stands selling snacks and sodas flank tin-roofed kiosks offering SIM cards, airtime, or the possibility of loading cash onto a mobile account. Slogans hand-painted on concrete buildings hawk the power of the Internet in the service of selling smartphones: “Take Google With You” and “You Are Not on Facebook?”

A customer, Susan Atieno, in her house with solar lights. Photographer: Sven Torfinn for Bloomberg Businessweek

M-Kopa’s executives hope to accomplish a similar technological leapfrogging with their solar power kits. It was Hughes, when he was an executive at Vodafone—which owns 40 percent of Safaricom—who first came up with the idea that would become M-Pesa. M-Kopa’s director of operations, Pauline Vaughan, was in charge of the mobile-money service during its early years. African economies, they say, have the potential to turn their underdevelopment into an advantage by adopting technologies that would have to displace entrenched incumbents in richer parts of the world. “One of the defining characteristics of leapfrogging is rapid uptake,” Vaughan says. “In the best cases, leapfrogging has the potential to advance you, as well as help you catch up.”

The technology M-Kopa wants to replace is ancient: kerosene. Many of the lamps used in Kenya would be recognizable to the Romans—small flames flickering in the wind, emitting an acrid smoke that burns the eyes, irritates the throat, and slowly turns walls and ceilings black. It’s also expensive. According to a 2014 survey, an average off-grid household in Kenya spends about 75¢ a day on energy, or $272 a year—$164 on kerosene, $36 on charging their mobile phone, and $72 on batteries. M-Kopa estimates a customer saves about $750 over the first four years by switching to its basic solar kit.

The interest M-Kopa charges is high by U.S. or European standards. The cash price of one of its products is about 20 percent less than the installment price. But in the markets where the company’s working—so far, Kenya, Tanzania, and Uganda—the rates are competitive. Traditional microfinance companies typically charge about 20 percent interest on their loans, and in October the Kenyan government issued treasury bills that offered investors a 23 percent annual return.

“Our loan officer is that SIM card in the device that can shut it off remotely”

Once M-Kopa has a customer, it works hard to sell him more products on installment. “Your anchor product is clean energy, and then you build a finance relationship,” Hughes says. A couple of weeks before the solar system is paid off, an M-Kopa representative calls to offer another product, in exchange for reopening the account and making payments for another few months. Ideally, these too will save the customer money over time: fuel-efficient stoves that spare charcoal, a bicycle that cuts transportation costs, a tank that stores rainwater. M-Kopa also sells Samsung smartphones and offers loans to pay for school fees. About a quarter of those who pay off their first purchase move on to others, the company says.

Before using solar lights, Atieno was using this kerosene lamp. Photographer: Sven Torfinn for Bloomberg Businessweek

Felix Omondi Ogutu, 36, bought his solar kit in 2012 after hearing about it on the radio on a bus ride from a rural area into Kisumu, where he was studying information technology. After paying off his system, he extended his payment period in exchange for a smartphone. “This phone was like a dream to me,” Ogutu says. “I longed to get an opportunity to get an Android OS. It would have been difficult for me to buy, but because it was in installments, I could pay bit by bit without feeling the economic heat.”

Ogutu, who finished his exams in April, works at a charity that helps the elderly. He uses his smartphone to run a sort of mobile Internet cafe, helping local businesses fill out their taxes online and offering his neighbors a chance to read and write e-mail. He estimates that in an average month, he makes $40 from the service—more than the $15 he pays M-Kopa. “My work has been made very easy, because at the click of a button I have information,” he says. “People gather around me. They want to see what’s new.”

Counterintuitively, the company has found that its poorest customers—those who rely on the system as their only source of electricity—make the best credit risks. “Our loan officer is that SIM card in the device that can shut it off remotely,” says Chad Larson, M-Kopa’s finance director and its third co-founder. “We know that it’s important for them to keep their lights on at night, so they can be counted on to keep paying.” The repayment rate is 93 percent for the solar system and 98 percent for secondary products.

A Nairobi schoolgirl studying at night. Photographer: Sven Torfinn for Bloomberg Businessweek

Since its commercial launch in October 2012, M-Kopa’s Nairobi headquarters has been an active construction site, as builders race to keep up with its growth. Last year the company spilled over from the stone building housing its offices to the lot behind, where it erected two long barnlike buildings for its customer-care and engineering operations. Other departments work out of trailers on what was once the front lawn, and in October carpenters were busy building a nursing area and a prayer room for the increasingly large and diverse staff. M-Kopa directly employs about 700 people in the three countries in which it operates, along with about 1,500 sales agents such as Opiyo working on commission. It’s been adding about 50 workers a month.

Featured in Bloomberg Businessweek, Dec. 7, 2015. Subscribe now. Illustration: Nejc Prah

Revenue has risen rapidly, from about $15 million in 2014 to an estimated $30 million this year, and the company says it will double in 2016. In September, M-Kopa announced it had sold a total of 250,000 systems; it aims to break the million-unit mark by the end of 2017. Every day about 600 new customers are plugging in their solar panels, meaning the company is extending loans of almost $100,000 a day to people who might otherwise not have access to credit. “We’re really taking a bet on anyone who is willing to give us their phone number, their ID number, and a down payment,” Moore says.

The company sees three paths for growth: broadening its customer base in East Africa, expanding into other countries, and selling more products to its existing clients. “There are all sorts of places with massive populations where it’s completely black at night,” Vaughan says. Next year, M-Kopa will introduce a kit that includes an extra battery and a small television. It also hopes to roll out a small refrigerator.

The management team is exploring the potential for collecting data from its devices. Workers at its call center can already pull up graphs showing how a customer’s battery is charging and discharging, allowing them to spot duds to either fix or to swap. They can also look at the performance of the solar panels over time, detecting when a panel has been mounted on the wrong side of a roof or if it’s gathered dust and needs to be wiped clean.

M-Kopa’s current customer contract stipulates that the data the company amasses can be used only to improve customer experience, but the company has plans to collect listener and viewership data from its radios and televisions. “There’s data we can gather that practically no one else can,” Larson says. The company has received a grant from the reinsurer Swiss Re to explore the possibility of using its system to collect weather data from its devices. Solar panels can already tell the company when the sun is shining, and it’s experimenting with adding instruments that measure barometric pressure, humidity, temperature, and perhaps even rainfall.

Customers, small-scale businesses, food vendors, and mobile phone scratch card and money-transfer agents are benefiting from solar lights to conduct economic activities after sunset. Photographer: Sven Torfinn for Bloomberg Businessweek

M-Kopa’s challenge will be to manage its rapid growth while maintaining its founders’ vision of building a business with no trade-offs. While the company takes care to explain the terms of its loans, it’s not always clear that its customers understand they are entering into a financial—rather than a traditional retail—relationship. And as M-Kopa grows larger, the temptation for competitors to hack or copy their devices will rise.

In November, M-Kopa received a clear vote of confidence when it completed a $19 million investment round, including $10 million from Generation Investment Management, a fund co-founded by former U.S. Vice President Al Gore that’s also invested in SolarCity, the biggest U.S. rooftop solar installer, and digital thermostat maker Nest Labs. “We think they have the potential of being a multibillion-dollar African success story,” says Colin le Duc, GIM’s head of research. Other investors in the round included Virgin’s Richard Branson and AOL co-founder Steve Case.

“If you take the long-term view and if you treat low-income people as customers, not charity cases, you can change the world,” Moore says. “Our customers’ lives are improved as our lives are improved.”