Special Research Topic
Poverty and Development

Project: Increasing electricity uptake through micro-credit provision: Evidence from a randomized controlled trial in rural Tanzania

Project Duration

06/2017 - 12/2019 (current)

Commissioned by

Environment for Development (EfD)

Project Team (RWI)

Dr. Gunther Bensch, Prof. Dr. Jörg Peters

Cooperation

University of Dar es Salaam

Summary

The government of Tanzania has devoted significant effort and resources to rural electrification. Despite heavy subsidies accompanying the rural electrification program, connection rates among households and enterprises have remained low even for those located in direct vicinity of the distribution lines. Also electricity consumption of those who are connected is extremely low. These patterns are very typical in most African countries. Against this background, this research project sets out to analyse how electricity uptake and usage intensity in grid-covered rural areas can be encouraged by providing access to micro-loans. While the most obvious reason for low connection rates are high upfront fees, detailed mechanisms have barely been studied rigorously hitherto. Using a randomized controlled trial, our study tests the role of liquidity constraints in the connection decision and analyses whether complementary access to targeted micro-loans for households and micro-enterprises can increase connection rates and electricity consumption in rural areas. The loans will be designed in cooperation with the Tanzanian utility TANESCO and a micro-finance institution. The study’s findings will help to design measures to increase connection rates and electricity consumption also for productive purposes and thereby to increase the effectiveness of electrification interventions.

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