Community Solar in Liberia
with Nicholai Lidow (LIB Solar)

In this episode, we speak with Nicholai Lidow from LIB Solar about community solar in Liberia. We discuss the challenges of energy access and doing business in one of the poorest countries in the world, the trade-off between social and environmental impact, and the potential (and challenges) for productive energy use.

Listen to us on Apple Podcast, Red Circle, Spotify, Stitcher or your favourite podcast streaming platform!

Show notes and related resources

LIB Solar Medium page: articles and blogposts on LIB Solar and community solar in off-grid energy

LIB Solar: company webpage

Podcast Summary

We discuss:

  • Nicholai's background and why he entered the solar intdustry

  • LIB Solar's business model and community-driven approach to solar

  • Liberia's energy infrastructure and economic challenges

  • The opportunity in serving hard-to-reach markets and the importance of a community dynamic

  • Their deployment of minigrids and standalone SHSs

  • LIB Solar's approach to productive energy use and the structural challenges that remain

  • The tension between social and environmental impact when serving rural off-grid populations with solar energy solutions

  • Their approach to funding, focusing on debt and grants - rather than an equity, VC funding model

Show notes:

  • (0:35) Nicholai Lidow's background and how he started working in the solar sector (via rebel group research!)

  • (1:25) LIB Solar business and go-to-market approach

  • (2:45) Background on Liberia, the energy infrastructure, and the potential for solar energy

  • (6:30) LIB's business model: focus on particularly rural areas; "an African company using tech to scale"

  • (9:30) The cost of a solar system to a customer, a longer payback period, and the benefit of using the US dollar in Liberia

  • (11:55) LIB Solar's shift from a mini-grid approach to a solar home system approach; the downside of a community-based approach when some customers can't afford to pay

  • (16:30) LIB Solar's payment collection approach

  • (18:40) Productive Energy Use: the benefits of solar and lighting, but the less-discussed limitations of using solar to significantly approve the long-term livelihoods of rural communities

  • (23:50) The tension between environmental impact and social/poverty impact for off-grid solar

  • (27:30) LIB's focus on debt financing rather than equity financing; Why off-grid solar companies are not tech companies

  • (32:30) Their plans for growth in Liberia, growing geographically and across other product lines

  • (37:30) Books on rebel groups, and the lessons from rebel group structures that can be applied to off-grid solar

  • (41:00) Advice for new entrepreneurs: good opportunities for local entrepreneurs and niche markets, amid industry consolidation; why there are so many foreign entrepreneurs in the African solar industry

  • (42:50) Predictions for the sector: Basic solar lighting will grow more quickly than we expect, and the need to shift from pure solar, to financing and distribution of other products

Podcast Transcription

Transcribed by Felipe Rivera-Uribe

Distributing Solar: Welcome to Distributing Solar. We speak with experts and entrepreneurs working in the off-grid solar industry around the world, bringing to life how distributed solar is changing lives in emerging markets. Today we are speaking with Nikolai Lido from LIB Solar, a community based solar provider located in Liberia. We discussed the challenges of working in remote off-grid locations, the tradeoff between environmental and social impact, the challenge of equity fundraising, solar, and even rebel groups. Nicholai begins our conversation by telling us how he got into the solar industry.

Nicholai: I started my career in academia. My PhD work actually focused on measuring rural economies in conflict areas and also understanding the organizational challenges of running a rebel group mostly in African Civil Wars. So, I kind of came to solar in the roundabout way. But when I left academia, I was looking for opportunities on how to use data, especially micro level data, and some of the operations experience I had running research projects in Africa for more commercial purposes. I thought pay-as-you-go kind of off-grid solar was a great opportunity on the continent and I could apply those skills to a business in that sector.

Distributing Solar: Can you tell us more about LIB solar? What is the focus of the company and what is its overall business proposition?

Nicholai: LIB solar provides solar energy and solar lighting to rural communities in Liberia, and we take a community-based approach. Instead of selling to individual households one by one we focus on selling to communities. We will host a series of community meetings and community as a whole decides whether to purchase our products. If they agree they have to appoint a payment collector from among their own people who's in charge of maintenance, payment collection, and some basic customer service and is our point person in that area.

Working in this way allows us to achieve in economies of scale. So, we reduce our operating costs. By working with communities like this we also really increase our on-time payments because it creates kind of a social pressure to pay on time so that you have lights. You don't want to be dark when all your neighbors are lit up. It boosts our revenue and lowers our costs and we have been able to operate fairly successful in that model.

Distributing Solar: You've been working and focused on Liberia, which is not a particularly well-known country in sub-Saharan Africa. Why did you decide to start working there? Can you tell us more about Liberia both from a social-political-economic standpoint and the state of its current energy infrastructure?

Nicholai: Liberia is an extremely poor country. It had a war particularly nasty war that ended about 16 years ago that devastated the economy. There is no grid in Liberia at the moment. After 16 years of peace, I think about three or five percent of the capital city is connected to some type of publicly provided electricity. Everyone else is either in the dark or if you are wealthy enough you have some generators or something like that. Everything is privately provided in Liberia.

So, there is a huge opportunity for solar but also big challenges. It has some of the worst road networks in the world, people have very limited spending power, and the population density is very low, so it takes a long time to reach people and it's not even a lot of people. After the capital city I think the second largest city in the country has only 30 or 40 thousand people. So, they are spread out in a lot of small villages separated by rough roads. That has scared away a lot of companies, you know, it's a small market of only four and a half million people. But there is also a lot of opportunity there. For one thing, they use the US dollar, and everybody wants light.

I have been working in Liberia for about 15 years and I could understand the challenges, I could see why they competitors wouldn't want to come in there. But then I also saw that it is a market that you can really dominate and really make an impact if you can put up with some of the difficulties.

Distributing Solar: Could you tell us more about the current solar industry in Liberia? You mentioned that there is not much of a grid infrastructure in Liberia the moment.

Nicholai: Liberians have some of the lowest rates of energy access in the world. I mean not only do they not have grid electricity, but hardly any of them have access to a generator. Until recently they are really just burning candles. They do not even have kerosene really because they can't afford it. it is either candles or some battery powered lanterns. In the past couple of years they've been purchasing these d.light Pico lanterns that are distributed through the total filling stations in the country.

So, you see very limited access to light. And no businesses at all serving the consumer market. We are the only pay-as-you-go solar company in the country. You do see four or five other solar businesses that are geared towards contracts. The government, the World Bank, and Mercy Corps and other actors have issued contracts for providing solar for schools, police stations, and some government offices in rural areas an effort to try to provide some basic lighting. But that's really the state of the solar sector and unfortunately a lot of even those limited projects have faced challenges with maintenance. A lot of the solar systems in schools have gone offline because there weren't any provisions for maintaining them and households have lacked light entirely until recently.

Distributing Solar: How do you does your business model work? You've spoken a bit about the community-based approach to distributing solar energy systems and appliances. Who are your customer targets and what are the key challenges you're facing?

Nicholai: In many ways LIB Solar is built backwards. We're kind of structured in the opposite way of many pay-as-you-go solar companies. Whereas many of the big players are tech companies that can scale in Africa, we are very much an African company that uses tech to scale. Instead of a product and recruiting a whole bunch of commission-based agents to sell that product we have the full time staff that go out in the communities and we build up this structure from the communities back to our business.

The limitations of a traditional pay-as-you-go solar model is if you're dealing with commission-based agents, they're going to go where they can make the most money. That is typically urban areas where they can knock on a lot of doors and sell a lot of devices and they earn their commission on sales mostly. That has led to a situation where most pay-as-you-go solar companies are confined largely to urban areas. And that is also reinforced by their dependence on mobile money as the technology of pay-as-you-go have depends on mobile money and the need for scale of a technology company depends on recruiting hundreds of commission-based agents.

We work very differently. Liberia is a small Market. It is very rural Market. There is basically no mobile money penetration. It has very limited urban areas. So, we do not really have the luxury of just going after the wealthier urban market. We have to systematically go through the population. But because we have structured our business differently that works to our advantage. We can go to any village of 20 houses or 30 houses and pretty much sell to everybody there. We kind of go through the map space by space, village by village, and we can sign up pretty much everyone. They all want light and with our prices we make it affordable where even very poor households can pay for it. More than half of our customers live on less than two dollars a day. They can still afford solar lighting.

We have built a very centralized organization in a sector that is kind of decentralized, but that has allowed us to operate very efficiently and become cash flow positive very quickly and profitable very quickly. Nowadays for newly formed pay-as-you-go solar companies you do not have the luxury of big pots of money and lots of investors sort of lined up. You have to pull yourself up on your bootstraps and get your financials in order from day one. The structure of our business has allowed us to do that even in a very small Market.

Distributing Solar: Perhaps we could speak a bit about structure of the financial approach that you are taking. What is the typical cost for solar for some of your customers? How much does it cost to install the system? And how does it work for an end consumer?

Nicholai: One of the advantages of Liberia is that they use the US dollar so we can price our products in US Dollars. We do not need to worry about foreign exchange risk- at least not directly. So, in order to make the products more affordable, we have increased the payback period beyond what a typical pay-as-you-go solar company would do. Our customers typically pay off their goods in about two-and-a-half years instead of the standard 12 to 18 months that most businesses rely on which means that we push our costs down for the consumer to about six to eight dollars a month.

That is now affordable for even poor households who would typically spend up to four dollars a month just charging their phone and then another two dollars a month at least on candles or batteries. So even during the payment period they are spending about the equivalent amount of money to get a much higher level of service in terms of lighting and phone charging capabilities. We have seen that once we hit those magic numbers of six to eight dollars a month the demand is unlimited. Everybody wants it. It is just a question of how much inventory we can keep in stock and how much money we can raise.

We are able to install it at a fairly low cost and fairly efficiently because we work at scale with these installation teams. A team of five people can do about 45 installations in a day -45 households connected to light- and again we can do that because the entire village or at least many people in the community have agreed to purchase our product. Because of this we can schedule an installation and go install all at once rather than making a three-hour trip through rough roads to do two or three installations and then coming back the next week for more.

We do the whole area in one go which keeps our cost quite low and we can maintain pretty healthy margins as a result.

Distributing Solar: I believe LIB Solar started off working in the mini grid space, but recently you have started to explore the solar home landscape. Can you tell us more about the differences between the two systems and what are the benefits and the challenges of each of them?

Nicholai: We started with mini grids for two reasons. When I say mini-grid, that is when we go to a village and install panels, batteries, and the shutoff mechanism in a central location. Then we run copper wires through the village. We then connect all the houses to the wires and inside each house they now have their lights and their phone-charging and whatever they want. The first of the two reasons why we started with that approach about 18 months ago was that at the time we could do it for about 10% cheaper in terms of hardware costs than the standalone systems that were available back then. The second reason, which was more important, was that in many ways this business model was based on some research I did in grad school on how villages raise money for public goods.

It turns out that Villages are very effective at pressuring people to pay when they view it in their common interest. If they need to fix a bridge or fix a road or purchase a new hand pump for their well, they can really lay on the pressure and get people to pay. Installing a mini grid was a very visible reminder that they are in it together and that the community is responsible for collecting payment. In that mini grid system, they either made their payment and they had their lights on or they did not make their payment, and everyone was shut off. So, it was a collective punishment and it worked extremely well aside from the ethical concerns. We did not see that people were being unduly pressured or anything like that for about the first 13 or 14 months of our operations it worked quite well.

Liberia however is in the midst of an economic crisis and it is also one of the wettest places on Earth. So, during the heavy rains which happens June through August or early September economic activity really slows down. What we saw was that these communities that would always pay on time, got to a point where 10 to 20% of their people all of a sudden struggled to make payments. And instead of ruining the good reputation of the community or instead of having their light switched off they would basically have us disconnect these people. Essentially, they would exile them from the grid or exile them from lighting because you know, we can't compel people to buy our product so if somebody does not want it anymore, they are free to leave the grid. So instead of the customer wanting to leave the grid, we would see the community come to us and say, “Those people can’t pay. Disconnect them”. And ultimately, we would have to comply with that. So, during the rainy season we saw that we were losing a lot of the most vulnerable customers, but that they would still be good customers. Maybe they needed to skip a month’s payment or something like that or maybe instead of paying $8 a month they could pay six dollars a month. Mini grids really did not let us reach those people.

The mini grids are also quite limited. We could only do villages of the certain number of houses, and the houses had to be pretty close together. Fortunately, we forecasted some of these issues a couple months before the rains hit and we decided to switch over to standalone systems, which were now even cheaper than the grid. And so, for the past few months we have been doing standalone systems with excellent results. Instead of having the fairly intense social pressure of everyone has to pay or we all lose our lights, we realized that the more subtle social pressure of “If I don't pay and everybody else pays, I'm going to be the only dark house in this community” that loss of status has been just as effective at getting people to pay.

We actually share our payment rates have gone up with the standalone systems compared to the mini grids when we expected them to actually be significantly lower. But again, the only reason why we can maintain that is because of this community sales model where essentially everyone in an area has the system at the same time if they were individual houses or people were living in a city, they would not feel that pressure I think our payments would drop significantly -at least that's what I've seen among other pay-as-you-go companies in other countries.

Distributing Solar: You mentioned the challenge of not having mobile access to mobile money within Liberia. How does your payment collection system work? Do you have individual members within the committee who are responsible for payment collection?

Nicholai: One of our requirements is that every community has to appoint a payment collector from among their own people. They can appoint whoever they want. This is somebody who really knows everybody's business and in some cases can even loan people money to make their payments if they need it. So, they pick someone, and this person collects all the funds and meets our staff who come once a month to the community and collects the funds from them. We collect an average of 250 dollars at a time from the payment collector the moment. We collect almost all of our payments in cash as mobile money becomes more common, we can shift to more of a mobile money based approach.

This community-based payment collector has been very effective in most cases and they receive a commission off the top for their efforts. Now these payment collectors also help us with maintenance and customer service and more importantly they identify the highest value customers for additional products. We recently introduced a business product that has a commercial refrigerator, much larger solar panels, lights, a fan, and everything you'd need to run a restaurant or small shop. And these community payment collectors are the ones that help us find the most reliable businesses who are the best partners for us and for these products. At the end of the day this network of payment collectors we have is kind of our secret weapon for growing the business beyond basic lighting.

Distributing Solar: That's a great point for us to start discussing such productive energy use. There is a lot of discussion within the off-grid solar sector about productive energy use and a great deal of interest in hope that this could be one of the things that really unlocks the potential for off-grid solar to move towards greater profitability. Can you tell us a bit about your approach to productive energy use?

Nicholai: There is a tendency in the sector right now to view solar lighting as a panacea. I think there's still a lot of excitement and optimism in certain ways. There's a lot of studies that have been done saying, “Solar lighting boosts income” or “People do more productive activities” or “Kids study after dark”and I think a lot of those studies are problematic. The methodology is lacking and I think the claims are misleading and can lead to some disillusionment. This is not to say lighting is not important. Lighting is a huge improvement to quality of life. It does not need to boost their income. It does not need to make the kids do better at school. But the challenge is if people are paying for lighting, that means they do not have money to pay for something else and at the end of the day, we cannot grow as a business and the customers cannot continue to improve their lives unless they somehow generate more money and there are a lot of barriers to that that are that are hard and that lighting doesn't solve.

It is a challenge to try to come up with what kind of productive use appliances can increase the size of the pie. Our first product is commercial refrigeration plus lighting for businesses. Customers so far mostly use it to sell cold water, soft drinks, and beer plus maybe ice cream and a few things like that and then they use the light to stay open after dark. We estimate that that product can increase the profits of a business by somewhere between a hundred and five hundred dollars a month depending on how they use it. And we finance that product for $90 a month so for the entrepreneur that product should be cash flow positive or profitable from day one and that is really what we are looking for. We need products that boost their income so much that even during the financing period the customers are better off.

But if you think about it, that is still fairly limited. If someone is using commercial refrigeration to sell cold water or soft drinks, they are selling it to other members of the community, so the money is just being circulated within the community. The real challenge is to figure out productive assets that can increase the size of the pie for everyone. One sector we have been really trying to get into is fishing. Fish traders and fishermen in Liberia lose 30% of their catch to spoilage because there is no refrigeration, the roads are rough, it is hard to reach the market, and even the catch they do not lose they smoke it which is lower value. So, it kind of seemed like a no-brainer. Okay, you give them refrigeration and they should immediately boost their income. That might still be the case, but demand and uptake from fishermen and fish traders has actually been much more limited than we expected and surprised us. Even if you have all of a sudden a place to freeze fish, there are still three hours of dirt road and no reliable transportation system to take you to a market that's not necessarily set up for your catch. So, we are running into these other factors, that is more structural factors, that are that are making the opportunities kind of a bit harder to find, but we spend a lot of time collecting data among our customers a lot of time trying to identify opportunities in the economy.

And again, that is where our kind of network of community-based payment collectors come in. We constantly ask them for feedback and “What would improve people's businesses in your community?” “What would improve their lives?” “What would help them make more money?” and we try to act on those.

Liberia being one of the wettest places on Earth also has almost entirely subsistence agriculture. There is no use of irrigation. There is no use of fertilizer. There is no use of improved seeds. You can see that as a big opportunity on the one hand. You could also see it as a big barrier because it does not really make sense to finance a solar irrigation system if they are getting 20 feet of rain a year and nobody has any experience with irrigation. So, it is really hard to find these opportunities to finance but we know the opportunities are out there and we are interested in opportunities that are not necessarily solar. I think financing boat engines could be really useful for fishermen and things like that. We are trying to keep an open mind and create systems in place to systematically identify these micro level opportunities that we can finance and scale.

Distributing Solar: You spoke a bit about the social and environmental impacts that are often claimed for solar systems and how some of those may be exaggerated to some degree. Can you speak a bit about what your approach to impact has been? How do you think about impact as it relates to the off-grid solar sector and LIB Solar?

Nicholai: There's a tension between environmental impact, climate impact, and the poverty impact in the solar space that is not typically talked about. For example, if you serve customers in urban Lagos, for example, you are selling them solar powered TVs and satellite dishes and things like that. You are making a huge environmental impact because those customers are spending a lot on diesel fuel every month for their generators to supplement an unreliable dirty grid. So, your carbon impact is greatest when you are serving rich urban customers in African cities with unreliable grids, that are typically reliant on generators. But those people are not in poverty. If you reach poor people like in our case, our customers have very limited spending power, but we are not really substituting much in terms of carbon only 15% of our customers have any access to a generator and it is typically a shared generator that they may have couple hours a day of electricity and that's only 15 percent of our customers. The other 85% are just using candles or batteries or something and have a very low carbon footprint. Meanwhile we are taking solar systems from China and sending them in a ship halfway around the world, putting them on pickup trucks driving hours through the jungle, and that is a lot of carbon that we are emitting.

So, like our green credentials for a solar company are questionable. Not to say we should not do it. Ideally the customers we serve will one day have more spending power and it is much better that they get their current electricity through solar than through small-scale generators, which they would all aspire to buy if solar were not available. By serving these customers with limited spending power, we do make a big improvement in quality of life. They went from literally sitting in the dark -if you get stuck out on the roads in Liberia at night you pass through villages and you can see groups of people sitting in pitch blackness talking at 8 P.M. because there is no light- and then all of a sudden, they have light for their town hall and they have light for their houses. It is an unbelievable transformation in their quality of life.

But that is not necessarily improving their income or saving the planet. I think those contradictions are totally fine I think the risk is when you try to over sell things then eventually there is a reckoning in the industry. Right now, I think solar pitches itself as all things to all people “We're saving the planet”, “We are alleviating poverty”, “We are kind of offering everything at once” and we need a much more sophisticated view on the trade-off to really develop the sector further.

Distributing Solar: That's great. And. It would be helpful also to you to think about and understand how your approach to fundraising has been different from other types of impact oriented or solar oriented companies. We are conducting this interview in in San Francisco, in the heart of Silicon Valley where there is a lot of money raised all the time by VC's and primarily through Equity fundraising, but you have taken the decision to focus primarily on debt fundraising and grant financing. What has been behind your decision with this respect and how important is it then that you do have impact focused sources of funding?

Nicholai: Financing for solar seems to be in a real period of transition right now. In the early days, I think you saw a lot of companies that that looked or at least acted a lot more like tech companies. They created this pay-as-you-go technology. They are fully vertically integrated like M-Kopa. There was a lot of excitement there and a lot of impact VCS and equity investors were sort of lining up for a piece of that. And with that, the impact world always has this strange balance between this kind of Silicon Valley mentality of phenomenal scale combined with this kind of nonprofit mentality of saving poor people in Africa or something that was certainly instrumental in growing the sector.

I think there has been a bit of a realization that solar companies are not tech companies really or at least they are not software companies. The marginal cost of serving an additional customer is not 0, you know exactly how much it costs to provide a solar system to a household. You also know exactly how much revenue you can hope to get from that household or at least the maximum revenue. You know if they are making 18 monthly payments of $10 a month, you know, your maximum revenue is $180 and it might cost $120 to serve that customer. So that makes equity a difficult proposition I think and honestly if I had the money to invest as an equity investor, there is no way I would invest in a solar business that there was not my own I guess because you can’t hope for a 10x return from solar and it is inherently debt-fueled. If you are not attracting as much debt as you can you are kind of not doing it right but what that means is that you are always pushing the boundaries of your debt-to-equity ratio. And any little misstep at all, any little foreign exchange fluctuation, any macroeconomic change, any bad harvest is going to wipe out your equity investors. So, the downside of equity is very real, and the upside is very limited. Now, it is great that some impact people have been willing to take that and essentially take the losses. They are much less willing to do it now, kind of in this pay-as-you-go 2.0 world that we are in. Investors are much less likely to take bets on new companies that are not even the big players.

So, where that has left us is kind of cobbling together a grant funding which has been great. I think it is also more limited, but it still provides a lifeline, and then also debt funding. It forces us to be extremely efficient with our operations. We get the most mileage possible from debt and can even fund the business almost entirely through debt. So, in the case of LIB Solar, I have some equity in the business that comes out of a home loan, backed by my house, that is our equity, and the remainder has been debt financing and we have had to be extremely disciplined and make the most of everything we have so that we can make those debt payments. But fortunately, we can and by using grants of get us to the next level we should be able to keep growing that way, but it is a very different approach than the extremely rapid scale of, you know, “we're going to go from 0 to 20 thousand households a month” that M-Kopa and some of the big players took which ended up in a lot of cases, putting them in a difficult financial position. You see the insolvency of Mobisol and you see the restructuring and M-Kopa and that sort of scale first and deal with your portfolio health later is a luxury that I do not think companies can take any more. But fortunately, we have been able to learn from those lessons and those are valuable lessons.

Distributing Solar: It would be great to hear more about LIB Solar. What has been your progress over the last two or so years? What are your plans for the next three to five years and hopes for the company?

Nicholai: we have been operating for 18 months and the first six months of that was piloting. We currently serve 3500 households, and we are adding 5 to 600 a month. Our plan is that we are really trying to dominate the Liberian Market first and then potentially grow beyond that. But we see a lot of opportunity in different parts of Liberia and then a lot of opportunity to constantly deepen our customer relationship.

Instead of just trying to get light to as many people as possible we are trying to diversify pretty early on into different product lines. I always take a lot of inspiration from the entrepreneurs I see on the ground in Liberia and in other African countries where I have worked where it is probably better to call them multipreneurs rather than entrepreneurs. In volatile economic and political climate it is not good to put all your eggs in one basket. You want to be diversified from the start so that if one part of the country or one product line or even one country entirely starts to go south you have something else to fall back on. We take that to heart. We are from the start. We try to systematically test new product lines and launch them even as we scale our existing product lines, so we certainly scale much slower than most companies, but we have really tried to emphasize making sure our repayment rates stay high and taking a data-driven approach to deepening our relationship with our existing customers.

Our approach works well in dysfunctional, mostly rural countries that are kind of overlooked in the global markets. I do not think we would do well in Nigeria, but we could do well in parts of Congo or Central African Republic or some border regions of Liberia. I tend to think of our expansion strategy more in terms of regions within a country rather than a country on its own. We have a fairly modular organization. Right now, we have got one main office with a certain organizational chart and we can kind of cookie cutter that office into other regions. The team we have now is the most efficient team for servicing in about a four-hour radius around the office so we can drop in other offices and they will be operating at full capacity serving a four-hour radius around that office, which means we could go into a fairly competitive market like Cote d’Ivoire, which is right next door to Liberia.

It is the fastest growing economy in Africa. It is attracting a lot of big players and a lot of investment. We see some gaps in where they are operating. You see the big players tend to operate where you would expect like in the highly populated wealthier parts of the south and east of the country. So, when we look at it, we are like, “Hey, well the north and the west” -kind of what they used to call the wild west of Cote d’Ivoire- “is still a blank spot on the map” so we could potentially drop an office there and be perfectly happy operating at full capacity and even stay off the radar of these other big companies that are doing 10,000 households a month in Abidjan or wherever.

Our growth plan is that we are always intrigued by these blank spots on the map that are overlooked by the multinationals because they are just too hard. The local dynamics are too difficult, or the logistics are too difficult. That is where we excel. Most of our people operate on motorbike so we can cover large distances and rough ground and a lot of our operations are automated in a way that would allow us to open offices easily. That is how we think about growth. But again, we prioritize the health of our portfolio above growth. We would rather grow a little bit slower and maintain a high repayment rate than take a bunch of chances at the same time and risk the health of our portfolio. We are trying to grow systemically. We are in the process of opening our second location in Liberia right now to double our installation capacity.

Distributing Solar: We like to end with some questions to get to know you a bit better, it is what we call our quickfire round. So, to begin with very simply, where did your company's name come from?

Nicholai: LIB is an affectionate nickname for Liberia that a lot of Liberians refer to their country as LIB but in all honesty, it came from domain search. LIB dot solar was kind of the shortest most succinct website we could find so that sort of sealed the deal for us.

Distributing Solar: Are there any books that you recommend to our listeners or books that have changed the way you think or influenced your thinking on the development of the off-grid solar sector?

Nicholai: My background is in Academia and actually I wrote a book mostly about Liberia, but also about how rebel groups kind of operate in the challenges they face. So, this may come across really badly, but weirdly enough a lot of the challenges that rebel groups face has really guided the way that I think about the business because when you are operating across large distances in a country where the legal structure is not very strong you have to think a lot about how to incentivize your staff. I mean, you literally do not want them looting your business, from you, and we deal in cash. So how do you get people to handle tens of thousand dollars of cash without them just pocketing it because you would have no real recourse? There is a huge body of very theoretical academic literature on principal-agent problems and incentives that I think has been weirdly helpful for this business just in terms of how we structure lines of command and verify the actions that people are doing that has been helpful. Not to say that we are anything like a rebel group.

Distributing Solar: So which books would you recommend and how do you stop people from looting from your company?

Nicholai: Well hardcore kind of organizations literature, you have got like Acalaf, Crampton, and David Crepes. They wrote about how corporate culture and monitoring works inside of an organization you how to motivate people both with monetary incentives and with this sort of shared mission. That is very important for us. One of the more fascinating books is called Stealing the State by Solnick, which is about the collapse of the Soviet Union, but it looked at how organizations that that are not very good at getting information from the bottom up end up collapsing under their own weight. So, in the Soviet Union, they would set targets, “You must produce this many nails” and so everybody would report, “Yes. We produce this many nails” despite what the reality is. In an organization like ours, we do not want to set a target like you must sell this many units or you must go to this many villages and contact people because they are always going to say they did it.

You have to put structures in place where you are always getting feedback from the customers. You are always getting feedback from the staff and decisions always have to be made based on good information from the bottom, which I think may be an obvious thing to say but in practice it is a little bit harder to implement especially since you know, I'm back and forth between San Francisco and Liberia and I can't be everywhere at once. The only way I can know what is going on is by really having good channels of communication and systematic reporting. Everything every one of our staff does all the time gets reported so that everybody who needs to know what is going on knows what is going on.

Distributing Solar: If someone is looking to get started and in the off-grid solar space either as an investor or as an entrepreneur, what advice would you give them?

Nicholai: It is an interesting time in solar in that I think there are greater opportunities for local entrepreneurs to be successful. The industry is entering a period of consolidation where you have some big players that will be successful, you have some big acquisitions and I think a lot of the mid-size players will get wiped out but that leaves some niche markets that can be very profitable.

Whether you would become a franchise of you know, something like and M-Kopa or D.light or whether you just carve out your own sort of distribution market the way that that we have there is an opportunity for an entrepreneur to make a very good living and have a very good, healthy business in all of these parts of the map that the big players are just not going to go into.

So, in that case, it is an exciting time. The challenges are as always, financing. I mean one of the reasons why there are so many white guys like me working in Africa is that I can call people in San Francisco and raise money and most entrepreneurs on the ground in Africa do not have that luxury, even if they would be better placed to execute than I am. So, really solving that financing puzzle for local entrepreneurs is the key. I think that is starting to happen. You do see more and more country focused smaller players emerging, again like us, but led by people who have a deeper understanding of the market.

Distributing Solar: What are your predictions for the off-grid solar sector in sub-Saharan Africa for the next five years?

Nicholai: One of the core assumptions of our business is that basic solar lighting is going to spread much faster than even the optimistic predictions that are out there. Every day I operate on the assumption that three to four years from now everyone is going to have solar lighting even in Liberia. So, the question is: What do you do next? What is the next step after solar lighting? And that is really an existential question for the business. Because if you build a whole business around selling solar lighting then you are going to be out of business in three to four years.

So, we view ourselves as a financing and distribution company where we know our customers better than everyone else so we can identify what products are going to change their lives and what products they can afford to pay for, and we can get it to them efficiently. I would be totally happy three years from now if we are not selling solar lights anymore and we are financing some kind of cool thing that makes people's lives better.

And I think the industry is really going to be shocked and disrupted by that because you have this incredible scale, which is what got us here, but you have companies like M-Kopa and D.light producing basic solar lighting at an incredible scale. And what happens after that, you know, where are they going to go from there?

And I'm in touch with D.light and I see them also thinking of these challenges and also thinking of what is next but it is going to be exciting to see that and I think SDG 7, you know, access to lighting, I think that goal is going to be going to be met faster and easier than people expect and the exciting question is what comes next.