projecteverest

[Work Update] : Malawi Solar: Payment plan amendments - Solar testing phase

by
Kurt Michl
Kurt Michl | 2 months ago | in Solar Consulting

Over the course of the past 9 months, we have been observing the results of the testing phase for the solar project and also the individual loan repayments.

https://docs.google.com/spreadsheets/d/1xkM4r...t#gid=783994311

The payment plan we have seen in use has also changed over the past months. 

NOTE: There is a margin of error in our payment tracking, with 4.5% of current payments coming from mobile money numbers that are not registered in our CRM to any customers. As such, these statistics are not entirely accurate, but if they are not correct, they will be slightly different. 

July 2018: Upfront payment was MK 20 000 and Payment plan total cost was MK 31200 with a MK 1200 Deposit. 

Effective Interest rate (over 26 weeks) : approx 60%

Breakeven repayment point: approx 44%

Repayment at february end on this plan: approx 43%. 

 

December 2018:

The new price point of MK 28000 upfront and MK 43200 on the payment plan with an MK 1800 deposit. 

Effective interest rate (over 24 weeks) : approx 58%

Breakeven repayment point: approx 32%

Repayment at february end on this plan: approx 30%

 

January/February 2019:

Effective interest rate (20 weeks) : approx 73% 

Breakeven repayment point: approx 32%

Repayment at february end on this plan: approx 85% (swayed by deposits of february sales on monthly plan, and only 1 sale on payment plan in january). 

 

https://docs.google.com/spreadsheets/d/1xkM4r...#gid=1914984097

 

This link is to a spreadsheet that is still to be updated, it will be a dashboard of current payments of customers by month and plan. 

 

Future Actions

This needs to be monitored continuously, especially as more changes are brought onto the payment plan. 

The new price point and the strategy around it should also be reconsidered. Raising the price of the product on the premise that we are losing money is not a valid reason. We were in fact breaking even. However, if the price change is to test a new price point of around MK 40 000 (approx 80 AUD) this may need to be re-evaluated. 

We know that our customers on the original payment plan (MK 4800 a month or MK 1200 per week with a total of MK 31 200) have a very low rate of total repayment of approx 44% with only 1/44 customers from July totally paying off their product. On the back of this statistic, we have raised the price but more importantly we have raised the instalment amount to MK 1800 weekly or MK 7200 monthly. Unsurprisingly there are 0/29 customers from December are up to date with their payments. 

Conclusion:

This is such an exciting prospect and an exiting project, especially with solar/microfinance. However, It is not going well. Making sales is important but getting paid is more important in the long term. It is really time to dress the issues that are recurrently coming up. 

 

Going Forward:

It has been suggested that we should develop our baseline payment plan flexibility as well as making amendments or proposing alternate payment arrangements. 

The structure would be compounding interest between payment dates to have an up-to-date remaining balance. Working off a basis of interest rate and letting variable be the time is much easier to track balances accurately. I have attached a document with my thoughts on how it could function. We would likely need to build/adapt a CRM around it.  

This flexibility could be implemented on the structure of our current payment plan, it would just add incentive/consequence. 

 

 

 

edited on 10th April 2019, 06:04 by Andrew Vild

Rose Martin 1 month ago

Did you interview or look into reasons for low repayments from the July sales and if so can you link that doc here? Would be interesting to see the reasons you've found for this!

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Andrew Vild 1 month ago

Off the back of Rose's comment, it would be good to understand why the full repayments are so bad and what you suggest is done to rectify them.

At the end of the day, the people best placed to address the issues that are recurring at the teams on the ground.

This is absolutely something we need to work out before re-commencing sales in July.

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Kurt Michl 1 month ago

This document outlines a summary of the results of our survey and our interpretations of what needs to be addressed in a payment plan with allowance for flexibility. Most of the sample of customers we interviewed were customers from July.
https://docs.google.com/document/d/19WL9dysLG...YXsUYAIZkQ/edit

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Kurt Michl 1 month ago

I have added to this post, please have a look and consider.

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