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Dynamiss' Franchise Model for Last-Mile Distribution Fueled by Spark and PaygOps
Overview
Given the inherent complexities of the Pay-as-you-go (Paygo) value chain, most last-mile distributors (LMDs) in the sector must juggle between a myriad of business aspects that can slow down or even hamper their scaling, unless they have access to the right resources. A robust inventory financing mechanism and specialised IT tools can present LMDs with the opportunity not only to scale, but to do so while pursuing innovative distribution models with the potential to serve disadvantaged communities with cutting-edge technology, financial services and other amenities, while leveraging resources efficiently and sustainably.
Since 2017, Dynamiss has been on a mission to provide households in rural Mozambique with renewable energy solutions through different business models. Initially, the company distributed off-grid solar power devices on a cash basis from companies such as Fosera, Niwa. As they grew, they partnered with smaller distributors, with the goal of supporting a network of franchise operations in areas they could not reach. Dynamiss partnered with renowned manufacturer Spark in 2020 to expand their Paygo operations, unlocking capital and inventory at a competitive price; and with software provider PaygOps in 2021, who introduced new IT tools to streamline their Paygo franchising model.
Challenges
Access to capital to import and repay the required stock of devices flexibly without compromising cash flow
Dynamiss' business model, similar to that of franchising, required a specialised platform to easily register and manage external sales agents in different geographic areas of Mozambique.
The Paygo component of the products required a flexible IT infrastructure tailored to such requirements with broad experience in Paygo product distribution.
Solutions
Spark Invest is an inventory financing program, offered by Spark and supported by the Dutch government. The program offers distributors supplier credit of 85% of the contract value which they can repay over a set duration, i.e. 3 years. The LMD pays 5% at the point of contract signing, and another 10% upon shipment of goods, meaning that they receive Spark products without any impact on their cash flow. The remaining 85% can be paid in equal instalments over a period of up to four years. But Spark also offers additional support in the form of business and finance strategy, initiating mobile money integrations and working on grant applications and investor engagement to help grow Dynamiss as a business. In addition, this financial support from Spark enables Dynamiss to cover the costs of PaygOps, the specialised management platform they have chosen to support their business model and efficiently distribute Spark devices.
“When Spark began working with Dynamiss they acted as sub-distributors and didn’t take on any credit risk themselves. By partnering with Spark, they have accessed PaygOps technology and Spark Invest financing to set up their own Paygo operations. This unlocked new opportunities to expand their business and has helped them scale and develop.”
Shagun Jain, Commercial Director of Spark
Crucially, the Spark Invest mechanism allows distributors like Dynamiss to align their payment for the products to their income from payment collection, thus focusing on their core business activities, without worrying about access to capital.
Their idea is to simplify the inventory financing process as much as possible to give small and medium-sized distributors in the industry access to the capital they need. By doing so, they give access to distributors like Dynamiss that can demonstrate the solvency of their ongoing operations. Spark calculates the payback period based on the performance of the Paygo portfolios, without the need to go through cumbersome due diligence, significantly reducing legal paperwork and building a trustworthy business relationship between Spark and its distributors. Currently, the model does not involve credit scoring mechanisms, but could, for example, leverage management platforms such as PaygOps, which would allow distributors to easily give an in-depth overview of their Paygo loans and payments (e.g., average contract completion time, etc.) to Spark.
“At Spark we know the impact that procuring products can have on distributors’ cash-flow. Collecting loan repayments from customers builds revenues over time, but doesn’t cover the immediate costs of inventory. As a full-service solution for our partners, we remove this barrier by offering access to finance at competitive rates, that suits them and aligns with their customer collections,” Shagun adds.
Spark solar kits are cutting-edge, modular, Paygo-enabled solar home systems (SHS) that allow end-users to upgrade and add appliances as their energy needs and purchasing power grow. The Spark Kit provides solar power capacity from 10Wp to 100Wp and battery capacities between 42Wh and 300Wh. Stackable and scalable, the SHS helps families climb the energy ladder according to their needs at home and at work; if they need more power, they simply add Spark batteries to grow their energy kits over time. This helps families power bigger appliances and small businesses run productive use appliances without taking on large capital costs.
To manage the sales, lease and after sales of the devices, Dynamiss uses PaygOps as their main IT infrastructure, thus being able to have the Paygo controllers synchronised according to the sales and repayment schedules captured on the IT platform at all times. Similarly, field agents are able to manage their various sales and debt collection operations efficiently through the PaygOps Offline mobile application, which allows them to collect data even in remote areas where there is no Internet connection.
“By integrating PaygOps solutions, Dynamiss has shaken up its operational efficiency and customer service. Our agents and franchisees can now use the platform at any time ensuring we can efficiently reach our most remote customers. PaygOps flexibility has been instrumental in our ability to navigate the complex challenges of last-mile distribution, solidifying our commitment to providing accessible and reliable services to every customer regardless of their location.”
Erik Laborda, CEO and Co-Founder of Dynamiss
In order to better serve customers and reach more households throughout Mozambique, Dynamiss works closely with a professional network of certified local distributors, or external agents, whom they manage as franchisees, providing them with the support they need to run operations effectively, including financial, logistics, marketing and in-depth sales training. These agents are responsible for recording sales, doing repayment collections and offering technical service to the end user, all of which they register via PaygOps Mobile App. The organisation expects that by 2027 half of their sales will come from part of the franchise network they’ve established.
The size of the franchisees varies according to the profile and size of each distributor, but the assumption is, that if a distributor sells 100 products per month on average, then it will need 5 staff (1 director, 1 sales manager, 2 technical offices, 1 administrative) and 21 commission-based agents (18 sales agents and 3 team leaders). This results in a total of 20 direct jobs and 84 indirect ones. These assumptions are based on Dynamiss’ experience as a distributor. As explained by their CEO, “Dynamiss continuously monitors performance to ensure that the intended processes are functioning and provide improvement solutions to our franchisees. Key Performance Indicators include the number of agents recruited, the sales and portfolio quality, the turnover, etc. It’s also important to support franchisees in aligning the interests of the agents with those of the company by defining clear roles and responsibilities, providing effective tools, and promoting fair compensation and incentives.”
Based on this distinctive distribution model, Dynamiss needs to manage and regularly track such franchisees, particularly in terms of customer acquisition and management, Paygo device distribution, and overall external sales performance in the different regions of the country. They do this effectively by leveraging PaygOps’ Lead Generator, an intuitive feature that allows Dynamiss to easily register, monitor and manage as many external people acting as sales agents. The lead generator is usually the person who initiates sales with a customer. Dynamiss’ management team monitors the sales that the different lead generators have completed for the company on any given period and can also visualise, among others, the seniority of the agent, area of activity, hierarchy level, drop rate, among others, allowing for the reward of their best-performing agents or the assessment of those who could further improve.
The diagram below illustrates how a last-mile distributor can use PaygOps to organise their agent workforce as franchisees through PaygOps’ Lead Generator feature:
Thanks to PaygOps’ customising possibilities, Dynamiss is able to control the level of access they wish to give managers and field agents, in order to distribute roles among their teams and oversee the hierarchy of geographical levels within the whole operational structure (i.e., state, region, county, etc…). Likewise, Dynamiss can assign different roles and rights on PaygOps to users for each hierarchical level of the account, meaning that they can give one of their agents full administrator access to a certain village or district they are managing, but limited access as an agent to the Regional or National levels. They can even create new roles customising specific permissions for each of them.
“We developed the Lead Generator feature to enable LMDs to add as many field agents as their scale requires, allowing them to easily create and monitor agent networks across their operational entities. We are impressed by how Dynamiss is leveraging PaygOps to bring Spark's cutting-edge technology to more households in Mozambique. The PaygOps team is proud to play an important role in this successful synergy and will continue to provide flexible IT tools for access to clean energy and essential services for underserved communities.”
Thibault Lesueur, CCO and Co-Founder of Solaris Offgrid
Results and Projections
Spark Invest and Dynamiss have closed three deals in three years, with loans of up to €1 million. Thanks to their consistent growth and in line with the financing plan agreements, Dynamiss is successfully paying off the first loan in 2024.
Since Spark Invest's inception, the financing model has channelled a total of €25 million to 12 last-mile distribution partners in sub-Saharan Africa.
Dynamiss is currently working closely with 2 franchises composed of 21 commission-based external agents each, as well as Dynamiss' own 60 internal agents, for at least 100 agents who are being empowered by the PaygOps Mobile App, thus becoming more efficient and autonomous in their daily sales and after-sales operations. The LMD plans to appoint 7 new franchises between 2024 and 2025, focusing on provinces where larger distributors don’t operate, for added value.
In 2024 and 2025, Dynamiss’ franchise model objectives will be: supporting the creation and growth of 7 locally-driven distributors of solar home systems, as well as providing adequate support to these companies with training, recruitment of key staff, initial set-up costs, logistics, transportation, communication, and marketing.
The business impact of this three-way synergy can be seen in Dynamiss' sales growth over the past four years. Supported by the flexible financing scheme from Spark and the comprehensive last-mile management infrastructure from PaygOps, as well as the merits of their own distribution model, the LMD has experienced a rapid scale, managing seven times as many active contracts as they did in 2021 (8500 active contracts managed through PaygOps so far in 2024), with no signs of slowing down.
The LMD estimates that 6.000 additional households will be reached by 2025 only through franchisees.
Having started as a sole-ownership company, with very limited funds (10,000 EUR grant), distributing solar lamps sourced from other local distributors, Dynamiss has evolved into a thriving private enterprise, effectively implementing the Paygo model in Mozambique.
Their success story stands as a remarkable example of how distributors can not only successfully provide underserved communities with essential technology, but also accomplish this through innovative distribution models that engage and benefit other stakeholders in the supply chain. This symbiotic relationship not only enhances the efficiency of LMD operations, but also extends their reach to more households, more rapidly. Additionally, their cooperation with franchisees results in direct job creation for women and youth. By fostering the creation and development of franchisees, Dynamiss fosters entrepreneurship opportunities for new business owners, employment for the franchisees’ staff, and income-generation opportunities for the commission-based agents.
Our esteemed client’s experience may serve as an inspiring model for early-stage distributors grappling with the prevalent challenges in the sector. It underscores the significance of forging strategic partnerships to access the needed resources, such as asset financing and a specialised IT infrastructure. Dynamiss demonstrates that, with the right collaborative approach and resource allocation, scaling operations is highly feasible.
About PaygOps:
Solaris Offgrid’s flagship fintech software, PaygOps, enables credit to be provided to the bottom of the pyramid for essential products like solar home systems, agri-inputs, water pumps. The end customers pay incrementally via mobile money under a PAYGO model. PaygOps provides the software infrastructure to manage the contracts, payments and related communication for the local retailers of such products. Our affordable modular and interoperable solution connects energy and payment methods (Pay-as-you-go, mobile money) to a suite of enterprise applications that allows the smooth management of lease financing and field operations, while providing key financial data and metrics to investors.