The impact of solar mini-grids on Kenya's rural enterprises

Off-grid, renewable based electricity systems are becoming increasingly competitive for remote rural communities. When the electricity supplied is used productively by micro and small enterprises (MSE), it has the potential to contribute to income generation and poverty reduction. MSE are prevalent in rural Kenya to complement agricultural activities. However, most of them struggle to survive and they provide insufficient income to escape poverty. This paper investigates if the provision of electricity through solar mini-grids could contribute to improving business performance in rural Kenya. We use a difference-in-differences approach to compare business outcomes before and after electrification in regions with and without mini-grids. Outcomes include opening hours, number of enterprises, profits, sales, and expenses. Our results show that nearly two years after the implementation of mini-grids, these have not had the intended effect of improving business performance. Electricity consumption has remained low and demand for the products and services sold by local businesses has not picked up after the arrival of mini-grids. We recommend adjusting the size of the systems to the actual demand and implementing complementary measures to improve agricultural productivity and access to external markets.