From PAYGO 1.0 to PAYGO 2.0

© Zolak Zolak|

Recent industry data show that pay-as-you-go (PAYGO) companies are collecting an average of only 62 percent of payment amounts owed to them each month. This undermines the financial sustainability of the business model, and places PAYGO customers at risk of losing their purchases. As the industry and its financing partners push to finance larger systems alongside productive-use appliances, enhanced creditmanagement becomes crucial.

Fortunately, proven approaches are available that can solve payment-collection shortfalls and other creditmanagement challenges that the industry is facing. This learning paper shows how SHS providers can create structures and operations that balance growth and risk. The lessons this learning paper shares are based on the work completed with three SHS providers, all of them at a different stage of operations and growth. What these companies had in common are the competitive prices and fast pace of their market. In this competitive environment, companies are consolidating their operations, defining effective business strategies, and discovering ways to grow while managing risk.

Our learning paper covers two operational models. The PAYGO 1.0 model focuses on the quantity of sales, whereas PAYGO 2.0 focuses on the quality of sales. In practice, many companies are somewhere on the scale between 1.0 and 2.0. This paper focuses on the two ends of the scale so companies reading this document can self-assess and determine which model reflects its operations:

  • PAYGO 1.0: The operating model prioritizes revenue growth. Many SHS companies are operating according to this model. Many also fall short in protecting their customers, collecting payments, and achieving sustainable businesses.
  • PAYGO 2.0: The model takes a customer-centric approach. PAYGO 2.0 companies aim to ensure that instalments are affordable, consider customers’ financial stability, and monitor payments in detail. This model results in higher customer satisfaction, customer loyalty, better repayment behavior, fewer cashflow constraints and—as discussed below—more profitability


Off-grid industry associations are seeing investors shying away from PAYGO 1.0 companies because of the risks that inhere in this business model. PAYGO 2.0 promises a way forward for the industry. Companies that are optimizing their creditmanagement practices are better positioned to attract funding from investors that are tightening their duediligence procedures and prioritizing companies that manage their credit risk proactively.

The core of PAYGO 2.0 is a culture of customer care that involves all the company’s staff and agents. This culture is fostered by procedures that prioritize the customer as the company collects data, analyzes information, and manages risks.

Because changing a company’s culture and policies is a process, businesses should assess what their operations involve and understand the criteria of PAYGO 2.0.

The benefits of the PAYGO 2.0 are not only limited to growth and sales, but also helps to make the business more sustainable in the long term. The benefits of a PAYGO 2.0 business model are:

  • Happy, loyal clients that pay on time
  • Highly motivated staff, easier to manage
  • A learning company that is self-improving
  • Operational efficiency
  • Cash and profitability


Excerpt of: Helping Off-grid Companies Enhance Credit-risk Management Practices: From PAYGO 1.0 to PAYGO 2.0 (USAID 2023)


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