Electricity access through village grids in rural Senegal – The role of micro-finance

The lack of access to electricity hampers economic development and for many years countries in Sub-Saharan Africa pursued an agenda of increasing electricity access in rural areas. However, the evidence on impacts of electrification is partly disappointing. Studies have recently shown that electrification does not automatically lead to economic development in the form of employment and enterprise creation. It is often argued that it is the absence of complementary services such as access to formal micro-credits that impedes higher and especially productive consumption. In cooperation with a Senegalese MFI we randomly promoted micro-finance products in villages that were electrified under the village grid program called Electrification Rurale au Sénégal (ERSEN). Hence, we investigate the role of micro-finance as an important complementary factor in already electrified communities.

Additionally, we investigate whether a hands-off microfinance intervention can increase financial inclusion in rural areas. In 2016 we agreed with the MFI on a procedure on how to approach treatment villages. Afterwards we purposely backed off from the intervention and let the MFI handle the implementation without monitoring their actions or intervening at any point. This approach significantly reduces the costs of the intervention and it could easily be replicated or scaled-up.