Haiti is the poorest country in the Western hemisphere and has some of the lowest levels of electrification in the world. To address this massive shortfall in access to quality and reliable energy, Haitian Money Transfer company Sogexpress, has made a commitment to radically increase access to clean energy products.
The vehicle Sogexpress has chosen to achieve this goal is through its agent network, especially its street agents. To test the initial viability of this approach Sogexpress introduced a pilot to encourage 340 of its 1,000 street agents to sell solar lanterns. Sales were strong, but the test demonstrated a need for a source of supplier credit to finance the inventory the agents planned to sell.
Market research conducted by Arc Finance in 2014 indicated that the consignment model was the best financial mechanism for this pilot: as it lowers risk for the agents and Sogexpress as compared to a more formal loan product. Sogexpress was not prepared to bear the risk of handing over large amounts of inventory without some sort of guarantee, and the agents were uncomfortable borrowing money to purchase inventory for new, unfamiliar products and carry the risk until those products were sold.
So Sogexpress, with the assistance of Arc Finance, the IDB’s Multilateral Investment Fund and United States Agency for International Development (USAID), spent several months developing the consignment mechanisms, structure and policies. It also upgraded and adapted the Sogexpress IT and Management Information Systems to ensure they were fit for the purpose of tracking the credit and status of agents.
Towards the end of 2015, Sogexpress started implementation of its retail consignment program. The agents or shop retailers don’t have to purchase the products they sell. Instead, the company lends them its products on “consignment”, which allows Sogexpress to increase the working capital of its street retailers, diversify its portfolio, and expand its business and increase revenues.
A background check and selection process involving several steps mitigates the risk of lending. Firstly, Sogexpress’ démarcheurs (trusted senior agents) identify prospective street agents and recruit them. Next, store managers create and evaluate files on each potential agent. The store manager interviews selected candidates. The store manager registers the approved agents, and sends their files to the selection Committee. Once the Committee approves an agent’s application, the street agent signs a consent form. This form describes the agent’s commitment, duties and responsibilities in detail.
The new agent pays a 300 HTG (approximately US$5) deposit to a Sogexpress store manager to be enrolled in the consignment “Loyalty Program” and receives a special “loyalty card” as identification of membership. This program has various objectives, including: to track sales data and agents’ performance; to allow agents to accumulate loyalty points; and to track consignment portfolio quality, with an alert system in place to flag delinquencies or other problems.
After agents are registered, they are given a credit limit of 3,000 HTG (US$50), with which they can borrow energy products from the company (the value of approximately three solar products). Later, once the agent has demonstrated creditworthiness, he or she may receive a limit of up to 50,000 HTG (about US$900). Each new agent is given a kit that includes different models of solar lamps with a maximum value of 3,000 HTG (US$50), a branded backpack in which to carry the lamps, and flyers with descriptions of the products.
In order to support its new agents, Sogexpress provides marketing support through sound trucks and advertising. Training sessions based around product details and selling tactics further bolster the agents’ capacity to effectively engage with prospective customers.
As of August 31st 2016, Sogexpress has enrolled 561 agents in this program. In the summer of 2016, Sogexpress and Arc Finance conducted a first review of the pilot, collecting feedback and data to make the consignment process faster and easier. As the company moves forward, it is aiming to increase its efforts to retain active agents. Arc is helping Sogexpress to grow this program, and to reach its target of enrolling 1,000 agents by the end of the year – especially outside Port-au-Prince where the competition among energy companies is less intense. It is also in these rural areas where people are in the most need of reliable and safe lighting solutions, such as the solar lights for which this model is so well suited.
Dominique Policard, Executive Commercial Director at Sogexpress, foresees that:“This program has not only the advantage of facilitating access to clean energy but also of helping the street agents access financial services. Sogexpress is very proud of this new program and hopes to scale it in the future.”