GEF SE Lighting the Bottom of the Pyramid (formerly LED Off-Grid Lighting Initiative)

completed

The project “Lighting the Bottom of the Pyramid” will engage local and international lighting-related companies to offer the non-electrified population in Kenya and Ghana greater access to modern and affordable off-grid lighting products that can commercially displace fuel-based lighting products (e.g. kerosene lamps, candles). The project is an innovative and large-scale initiative to engage the private sector in the effort to increase access to modern energy services and reduce poverty. The focus on fuel-based lighting is due to its very harmful, yet often underrated, impact on development by reducing households’ disposable income and living standards, and hurting small business operational costs and productivity. IFC’s research found that fuel-based lighting can account for up to 50% of all energy expenses and up to 33% of total household income. In the case of small business, fuel-based light costs from $50/year per lantern (e.g. street vendors) to $1,000/year (e.g. fishermen). Yet, the low quality of the lighting provided by fuel-based devices impairs any productive activity or social development. Greater access to modern off-grid lighting products can reverse this scenario and contribute to poverty reduction. The project’s insight is the realization that current consumption of fuel-based lighting represents a large, global market mostly untapped by lighting companies. Independent estimates indicate that worldwide spending on fuel-based lighting in developing countries is $38 billion/year. In Kenya and Ghana alone, IFC estimates the total spending on fuel-based, off-grid lighting to be $1.4 billion/year. This large market to date has been served by fuel-related companies and has been untapped by lighting companies. Hence, IFC believes there is an opportunity to attract lighting companies to enter and compete in the fuel-based, off-grid lighting market, transforming the private sector profit-seeking motivation and ability to innovate into a force to increase access to modern and affordable lighting services and reduce poverty.The seize this opportunity, the project will facilitate the market entry of African and foreign companies in this market by helping firms:- understand the market, including consumer behavior and preferences concerning lighting, acceptable pricing points and distribution channels, and - mitigate the perceive risks of entering into a new market in a region that for most private companies is very challenging. The entry of several companies in this market and their competition for market share will bring to non-electrified citizens a variety of modern off-grid lighting products that are designed, and priced to be better and more affordable than fuel-based lighting. IFC will not pick “winners” choosing companies or products, but merely facilitate the market entry of as many companies as possible and foster a competitive environment amongst them. To that end, this 4-year project has 5 core sub-actions or phases, namely:- forming the private sector consortium, - performing market research on consumer behavior, including product field testing, - mapping and engaging with the distribution channels reaching the targeted population, - after sharing market findings from previous sub-actions ii and iii with participating firms, IFC will support individual companies in entering this market (e.g. IFC may provide funding to a local assembly plant, trade-finance product to facilitate import of components or products, mobilize micro-financing, etc), and - support the development of institutions to support the market, such as consumer awareness campaign, or establishing systems for product quality controls of modern off-grid lighting products being offered to the unelectrified population in Kenya and Ghana. The project to date has attracted the interest of over 350 organizations from over 40 countries, and will also be the pilot for a larger World Bank Group lighting initiative called Lighting Africa.