Tesla-Backed Startup Made Cheap Power a Debt Burden for the World’s Poorest

As a solar panel was raised onto the roof of their ­mud-brick home in a Tanzanian village in sight of Mount Kilimanjaro, Akida Saidi and his wife felt giddy at the prospect of entering a new era. In a place where most residents make do with pit latrines instead of ­toilets and till their fields of maize and pigeon peas with hoes, suddenly having electricity would catapult them into the 21st century. With the flick of a switch they’d light their kitchen without fear of kerosene fires and charge their phones without trekking to town.

The couple’s unexpected journey to solar power began one day in 2015, when a fleet of motorbikes buzzed into the village of Gedamar, carrying salesmen from Zola Electric, which counts Tesla Inc. as one of its biggest backers. The agents offered Saidi and other residents a way to improve their life while saving money. For a small down payment, followed by a monthly fee less than the cost of fuel, they could have three lightbulbs, a phone-charging port, and a solar panel. In two years the kit would be theirs to keep, the salesmen promised, with free electricity coursing through their home in perpetuity.

“When we got the solar power equipment, we thought our lives would change and we would live a modern life, just like those in the big cities,” says Saidi’s wife, Mwasiti Waziri, who recalls that her neighbors were so dazzled by the lights that many of them signed up, too.

Pay-as-You-Go Solar

Since solar pay-as-you-go, or paygo, was introduced almost a decade ago, it has been hailed as the answer to the elusive challenge of bringing electricity to hundreds of millions of people currently off the grid in Africa, Asia, and Latin America. It began in the spirit of the microcredit model that Nobel Peace Prize-winning economist Muhammad Yunus popularized in the 1980s. But instead of offering small loans to poor people in the developing world, paygo solar would leverage their utility bills to give them a path to ownership and, ultimately, energy independence.

The new solar solution became a darling of ­development banks and socially minded investors after U.S. President Barack Obama unveiled his Power Africa initiative on a tour of the continent in 2013. He called on the public and private sectors to work together to electrify 20 million homes and small businesses. The concept was seductive from every angle: Governments embraced the idea because it shifted infrastructure costs to consumers, and charitable organizations loved it because it promised to empower the poor. At a moment when the world was waking up to the threat of climate change, everyone was eager to embrace ­paygo’s potential.