Global Lessons and Local Recommendations for Effective Post-Electrification Outcomes in East African Rural Electrification Projects

Is there a viable business case for connecting East African farmers to a grid based on the financial returns arising from post-electrification productivity gains? The purpose of this Capstone project is to determine if such case exists and provide examples of successful financing models that enable farmers to develop it.

The study has three phases. First, the study considers the electrification outcomes for various economic sectors in different parts of the world. From there, the Capstone team analyzed rural income and the cost of electric appliances for farming in Kenya.

Second, it dives into Virunga Power’s potential clients by determining its income and ability to pay for the new equipment. A survey was conducted in two villages, one electrified and other un-electrified, to identify and quantify key variables associated with income and productivity. In addition, the Capstone team traveled to Kenya to meet with relevant actors that will provide important inputs for the study: cost of equipment, status of farming communities, and prevailing financing conditions.

Third, the Capstone team constructed a cash flow model that accounts for productivity gains and quantify financial gaps. The model is a valuable analytical tool, allowing Virunga Power to understand how electricity enhances farmers’ productivity. The model also provides a basic cost framework to advance relations with financial institutions, and machinery suppliers in Kenya to mitigate its demand risk.