Enabling Private Sector–Led Scale-Up of Solar Home Systems in Sub-Saharan Africa

In Sub-Saharan Africa, about 600 million people, roughly half the population, still lack access to electricity. Solar Home Systems (SHS), enabled by Pay-As-You-Go (PAYGo) models, have emerged as one of the most scalable solutions for expanding energy access to rural populations. However, despite rapid growth in recent years and strong World Bank support under Mission 300, which aims to connect 300 million people by 2030, SHS deployment remains insufficient to meet universal electrification targets, particularly in low-income and remote areas. At the core of this challenge is a structural market constraint: commercially operated SHS companies are serving rural customers with limited ability to pay while operating in a high-cost, high-risk environment.

This report proposes a dual-track strategy: accelerating short-term SHS scale-up while building the enabling environment for a sustainable SHS ecosystem in Sub-Saharan Africa over the medium and long term. It draws on a mixed-methods approach, combining econometric analysis of a dataset covering 31 Sub-Saharan African countries, stakeholder interviews and fieldwork in Kenya and Malawi, and financial modelling of SHS companies’ economics. Altogether, the analysis identifies key drivers and binding constraints to sector growth and evaluates the effectiveness of existing interventions and relevant policy and financing levers.

The findings show that SHS scale-up is constrained by interconnected barriers across demand, supply, and the enabling environment. On the demand side, affordability gaps, income volatility, limited product durability, and low customer capability weaken both adoption and repayment performance. On the supply side, while the PAYGo model helps ease structural working capital constraints, high costs of capital, limited access to financing, and macroeconomic risks remain major challenges, further compounded by policy uncertainty and weak regulatory environments.

Financial modeling shows that SHS companies are not financially viable under baseline conditions, with repayment risk and operational inefficiencies as the main drivers. Firms become investable only under significantly improved operating conditions, indicating that well-designed interventions can help pave the way toward eventual market sustainability and a World Bank exit. Among the financing levers analyzed, RBF is highly effective in improving affordability and unlocking investment, but requires sustained public funding flows. Blended finance reduces the cost of capital and mobilizes private investment, but has a more limited effect on end-user affordability. Receivables financing offers a more scalable and efficient solution by addressing liquidity constraints and enabling firms to monetize future cash flows, while carbon credits currently play a limited role but may become more promising as markets mature.