Off-Grid Electricity Access and its Impact on Micro-Enterprises: Evidence from Rural Uganda.

Abstract

The history of development shows convincingly that no country has substantially reduced poverty without massively increasing the use of electricity. The development of micro-enterprises in rural areas of Uganda is linked with increased access and use of electricity services. In this study, I combine quantitative and qualitative methods, including informal surveys, intra-business energy allocation studies and historical analysis, to analyze off-grid electricity access among micro-enterprises in rural western Uganda. I explore the linkages between off-grid electricity access and the influence it has on microenterprises. Data is obtained from 56 micro-enterprises located in 11 village-towns within 3 districts in Uganda. In studying the micro-enterprises, the focus is on the services that are provided by electricity from modern energy carriers. The type of equipment used, forms of transportation, technical support, level of understanding and education of the entrepreneur, financing for energy equipment, and the role of donors are discussed in this thesis. Qualitative methods are used to allow for new insights and prioritization of concepts to emerge from the field rather than from theory. Micro-enterprises in rural Uganda create income for the poor; they are resources for poverty reduction. With price adjustments, it becomes possible for those who live below the poverty line, nominally less than $1 a day, to afford the products and services and therefore mitigating the vicious cycle of poverty. Energy consumption among the micro-enterprises is at an average of 0.13kWh/day. The cost of accessing this amount of electricity attributes to about 50% of total revenue. I find that the “practices” used in off-grid electricity access lead to situations where the entrepreneurs have to evaluate pricing and output of products and services to generate higher profits. Such numbers indicate the need for appropriate technologies and profitable policies to be implemented. The data indicates that without subsidies, credit-based sales and better financing options, it is unlikely that access to electricity will increase beyond the levels established in the existing cash market. Concerns about equity and other social issues indicate a need for careful attention to the implications of policy choices and the processes that influence the use of technology.