Improvement of portfolio quality of PEG Ghana
2016-11-30 - 2018-05-31
PEG operates in Ghana, where it is the largest off-grid solar company. Specifically, PEG has partnered with M-Kopa, which positions PEG to learn from one of the most successful distributed energy service company (DESCO) in Africa, while providing its customers the most robust product in the market. M-Kopa provides their entire business platform to PEG, including software systems, the solar product and extensive management support and training. The system has 8 Wp and entails 2 lamps, a flash light, a radio and a phone charger. Customers pay for the system within 12 months under a “Pay As You Go” scheme. Recently, the portfolio quality of PEG Ghana has suffered, and became an issue for the company and risk for any potential investor. The Technical Assistance Facility of the responsAbility Energy Access Fund, managed by responsAbility, is supporting PEG Ghana in addressing this issue.
In order to allow PEG Ghana to improve its portfolio quality, the following objectives need to be achieved:
Gain a deeper understanding of the drivers of the portfolio quality and identify key indicators which allow PEG to understand and monitor the portfolio quality and PEG’s clients
Develop and recommend implementation strategies to improve the portfolio quality, including changes to the organization structure, re-designing incentives and products, as well as the development of credit and recovery scorecards.
The work was divided in two missions onsite of each two weeks of duration and several weeks of offsite support in between the two missions.
The following tasks were carried out during the first mission in December 2016:
Discussion and determination of relevant measures of portfolio quality
Qualitative research to understand the reasons for defaults through 19 in-depth interviews with PEG’s
Identification and establishment relevant KPIs to define arrears
Definition of key data points for the qualitative analysis and development of an application and behavioural scorecard.
After the onsite mission, the team supported PEG staff in the development of the scorecards and the qualitative analysis to patterns of different client groups with regards to repayment rates and probability of defaults.
In March 2017, the second onsite mission was conducted to define improvement measures. The services provided were the following:
Measures for new clients: Process fine-tuning, New incentive schemes, Job descriptions, Recovery policy with actionable steps,
Measures for existing clients: Damage control measures, recovery policy
Development of recommendations regarding responsAbility's covenants
Discussing cornerstones of scorecards with PEG's scientist
The implementation of the measures will be conducted through a pilot project to be started in June 2017.