How Important is Modern Energy for Microenterprises? Evidence from Rural Kenya

How Important is Modern Energy for Microenterprises? Evidence from Rural Kenya
Charles Kirubi, University of California at Berkeley, Master Thesis, May 2006

Abstract
In this study I explore the relationship between modern energy and
economically productive activities in rural Kenya. Research is based on surveys
done in Mpeketoni Village in Summer 2005, complimented by review of the
literature. The findings reveal that access to electricity, in combination with
simultaneous access to markets and other infrastructure (roads, communication,
schools, etc), have contributed to robust growth of microenterprises in clear and
compelling ways. For instance, productivity per worker and gross revenues per
day increased by the order of over 200% for both carpentry and tailoring
microenterprises.

Despite high tariffs [Ksh22.50 (US$0.30)/kWh or nearly 3 times the
national grid tariff], Mpeketoni Electricity Project has demonstrated that there
exists substantial unmet rural demand for electricity. My key policy
recommendation is that small-scale power generation and distribution projects
below a pre-determined capacity (say, 1000 kW) should be permitted to operate
license-free in rural areas under a revised Electricity Power Act as is the case in
India and Nepal. Removal of licensing bureaucracy for such small-scale minigrids
would make it possible for owners of diesel generators in rural areas to
sell power “over-the-fence” to households and enterprises, thus increasing
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