This document outlines Baobab+’s ongoing efforts to build a transparent and
reliable credit risk model that aligns with the specific needs of the PAYGO industry,
ensuring the company has a clear path to profitability while expanding energy access.

Building clarity and trust in the path to profitability

The pay-as-you-go industry (PAYGO) is at a critical juncture, facing challenges on
the path to profitability. As the industry gains in maturity, it is crucial to gain
confidence and trust on the profitability model to continue attracting investments
and delivering energy access for underserved populations. As of today, many
stakeholders still lack clarity in future collection streams necessary to offset the
high costs of last-mile distribution.

Unlike a typical retail business, PAYGO companies are distributing a financial
product alongside their physical product. This financial product enables customers
with limited cash flow to repay over time, increasing affordability and accessibility
for millions of people. At the same time, PAYGO companies bear the costs of
financing and servicing these financial products alongside the cost of credit losses,
with both market conditions and operational performance informing the cost of
this business model. PAYGO companies, in their path to profitability, need to
consider both the quantity of sales and the quality of their customer selection and
servicing to secure timely collections.