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8. Pay-Per-Use Business Model
The pay-per-use system is a business model offered by equipment manufacturers and dealers, who want to provide a service rather than sell a product. Manufacturers and dealers transport their equipment from consumer to consumer, perform the service and get paid depending on the time of utilization, or on the output provided. Different from the other chapters of this module, the pay-per-use model is a business model rather than a financial product.
In the SPIS business, the pay-per-use model is growing and it is spreading rapidly among SPIS’s manufactures and dealers. Farmers, who want to irrigate their fields with a solar pump, but lack the capital and the knowledge, can rely on experts, who will irrigate their fields on scheduled dates in return of upfront payments. Farmers will therefore not pay for the SPIS, but for the amount of water pumped, making them more conscious about the water used, and limiting wastefulness.
The main advantage for farmers is that they pay for just what they use without any investment or maintenance cost. The pay-per-use system allows farmers, who normally possess irregular cash flow, to pay for high-quality solar products with a small amount of money over time. Manufacturers and dealers, on their side, use this model to enlarge their business and win more clients. The pay-per-use system will significantly change the business model of many companies and will also influence the value chain of innumerable food-related products.
This system is more suitable for farmers situated nearby dealers or manufactures, who can be reached fast and on a regular basis. Also, farmers, who do not need to irrigate their fields often or can rely on alternative sources of water (i.e. rain), will save money paying for only the service rather than for the entire product.
Examples of companies adopting this model are Claro Energy India and Kickstart International. Claro Energy provides farmers a pay-per-use system with a toll-free line, a pre-paid and scheduled irrigation plan and a remote activation system through credit card which can reach farmers living in the most isolated location. Furthermore, trainings and demonstrations are offered. Kickstart International is also developing with Angaza Design, a pay-as-you-go (PAYGO) technology for solar irrigation called Futurepump. Angaza is a web interface, which helps both manufacturers and distributors to manage pay-per-use operations in the renewable energy sector for off-grid consumers.
Different from all other financial services, the pay-per-use model does not have a lot of requirements. Farmers only need to:
- Own a bank account with a credit card in order to make the upfront payments.
- Possess a water license (if applicable): For environmental reasons water cannot always be extracted from the ground.
- SPIS’s distributors or manufacturers