We clar­i­fy the mech­a­nisms through which rur­al elec­tri­fi­ca­tion can con­tribute to rur­al devel­op­ment. Through a detailed case study analy­sis of a com­mu­ni­ty-based elec­tric micro-grid in rur­al Kenya, we demon­strate that access to elec­tric­i­ty enables the use of elec­tric equip­ment and tools by small and micro enter­pris­es, result­ing in sig­nif­i­cant improve­ment in pro­duc­tiv­i­ty per work­er (100–200% depend­ing on the task at hand) and in a cor­re­spond­ing growth in income lev­els in the order of 20–70%, depend­ing on the prod­uct made. Access to elec­tric­i­ty simul­ta­ne­ous­ly enables and improves the deliv­ery of social and busi­ness ser­vices from a wide range of vil­lage-lev­el infra­struc­ture (e.g., schools, mar­kets, and water pumps) while improv­ing the pro­duc­tiv­i­ty of agri­cul­tur­al activ­i­ties. We find that increased pro­duc­tiv­i­ty and growth in rev­enues with­in the con­text of bet­ter deliv­ery of social and busi­ness sup­port ser­vices con­tribute to achiev­ing high­er social and eco­nom­ic ben­e­fits for rur­al com­mu­ni­ties. We also demon­strate that when local elec­tric­i­ty users have an abil­i­ty to charge and enforce cost-reflec­tive tar­iffs and when elec­tric­i­ty con­sump­tion is close­ly linked to pro­duc­tive uses that gen­er­ate incomes, cost recov­ery is feasible.