An Assessment of Informal Power Distributors in Low Income Urban Areas: The Case of Kibera, Nairobi

A Project Report Submitted to the Chandaria School of Business in Partial Fulfillment of the Requirement for the Degree of Masters of Business Administration (MBA)The purpose of this study was to assess how informal power distributors (IPDs) have been able to provide electricity services in low-income urban areas. The study was guided by three research questions, namely (i) What are the competitive advantages of IPDs over Kenya Power? (ii) What factors enable IPDs to supply power where Kenya Power (KP) has challenges? And (iii) Are IPDs aware of the legal/regulatory challenges in their business of electricity supply to low income urban areas? The study employed inferential research design to assess the informal power distribution business as well as their beneficiaries / tenants and was based on a sample of 100 IPDs and their beneficiaries. Data was captured using an administered questionnaire developed by the researcher. The questionnaire respondents were landlords who supply power as well as beneficiaries of the informal power distribution. Data collected was analyzed using Statistical Package for Social Sciences (SPSS) and Microsoft Excel. The findings of the study show that, indeed, informal power distributors (IPDs) in Kibera use strategies that give them a competitive advantage over Kenya Power (KP) such as tight management of their distribution network through ‘agents’ to maintain and/or collect revenue and provide flexible payment systems. The IPDs also priced their services to make it favorable to them. For instance, they do not charge standing/fixed charges and in some cases provided electricity consumption based charges. On the question of factors have enabled IPDs to be successful, the study findings show that IPDs provide a flexible payment system and are very efficient in connecting new tenants. In some instances, they also provide generator back-up services to business tenants. The IPDs have also improved customer satisfaction by ensuring that they use well insulated standard cables that have reduced fire and electrocution incidences. The findings on legal and regulatory challenges faced by IPDs show that they are aware of the legal ramifications of illegal power connections and the associated penalties. The study found that they were willing to legitimize their services through use of postpaid and/or prepayment meters as well as partnering with Kenya Power (KP) for a commission. The study conclusion is that the success of informal power distributors (IPDs) can be mainly attributed to the simplified connection process and a network of technicians and/or agents who install and maintain the system. The study recommends that Kenya Power (KP) should redesign its strategies to engage the informal power distributors (IPDs) as agents, train the agents on safety standards as well as design flexible payment systems. For further research, it was recommended that studies are carried out on the effects of available power legislation and policies on marginalized groups, specifically the urban poor