There is an interesting trend in emerging markets:  families are moving from rural areas to urban areas, but bringing their rural energy habits with them. This article looks at user-centered design (UCD) to understand the needs, desires, and limitations of those at the base of the pyramid (BoP). NextBillion conducted three case studies to see if those at the BoP living in urban areas but practicing rural habits could determine “design insights for consumer energy products targeted to rural BoP markets.” During the studies, the researchers visited participants for six to seven weeks to interview and observe their usage habits for energy products for both cooking and lighting. The case studies revealed “insights for improved product design, marketing and user education.” The results are useful for innovators with technological ideas and will help them serve those at the BoP desperately need affordable and safe energy.

Our portfolio company EGG-energy got their first new customer at their new station in Mbagala. Mr. Saidi Benju purchased “a 2-light system under a 6-month subscription for his bar for a total cost of Tsh 164,00 (USD $109).” EGG electricians installed the system at Mr. Benju’s bar. This is the most cost-effective lighting system for his business. Now he can power a radio to attract new customers and enhance his service. EGG is helping small business owners at the BoP become sustainable and more profitable to truly lift them out of poverty. Also, a big congratulations to EGG-energy – they pitched at Wipro Technologies & Knowledge@Wharton’s Global Innovation Tournament 2011 and won the grand prize!

“BrightSource Energy Readies $250 Million IPO to Expand Solar Thermal” by Michael Graham Richard

This article evidences the growth of alternative and clean energy industry. BrightSource energy is going public and expecting to raise $250 million from their initial public offering. BrightSource focuses on solar-thermal energy because it can be stored. Storing solar thermal power and smart grids are a solution for consistent energy services. Based in the Southwest, we’d like to see this technology applied affordably for those at the BoP.

“Top Up the World” by Abby Callard

For those at the BoP, services that allow customers to only pay what they can afford are the models that succeed. We first saw this with pre-paid mobile phones, and now with mobile payments. She features our portfolio company, Simpa Networks, as an example of using these payment models for other services.  In Simpa’s case, they use “progressive purchase technology” to make solar energy affordable for those at the BoP. Simpa allows customers to make a partial payment up front for a solar energy system for their home, similar to the initial investment of purchasing a mobile phone. From there, Simpa allows customer to make payments on the remaining balance of the system, just like mobile customers pay for their airtime. By allowing the user to pay for the energy from the system overtime, Simpa is able to recoup the system costs. We search for companies like Simpa who are that forefront of making technology highly affordable and easily accessible for those who need it most.

Finally, do you have a technological innovation in energy for the underserved at the BoP? We’re now seeking BETA Residents.

"In developing economies, equity beats microfinance" by Alan Patricof via Fortune Magazine    

The US State Department has launched the Global Entrepreneurship Program, a new, professional effort to advance entrepreneurship in emerging markets through investments.  Although “an estimated $300 million has been invested” in microfinance institutions in the past three years, investment in small and medium sized for-profit businesses produces longer, sustainable economic change and development. For-profit social enterprises (like the ones in our portfolio) create jobs and provide affordable goods and services, which ultimately sustains economic development in emerging market. In turn, sustainable development improves life for those at the base of the pyramid. However, for-profit social enterprises need angel investors and venture capitalists. Funds such as the Grassroots Business Fund, SONG Advisors, and the Small Enterprise Assistance Fund (SEAF) seek to invest patient capital in emerging market enterprises to create wealth that “lifts people sustainably out of poverty.” Add the BSP Fund to the list, because here at ID, we’re also committed to providing equity capital to seed-stages businesses that work in emerging markets. Microfinance works, but equity works better.  

Ron Cordes started the Cordes Family Foundation in 2006. Mr. Cordes’ fund is different than most typical family funds as it seeks to invest 20% of its assets into for-profit social enterprises rather than making grants. Americans donate $300 billion to charity a year, but invest $41 trillion in the stock market in one year. To encourage impact investment, Mr. Cordes is working to create “Impact Assets.” Traditionally, businesses exist to maximize shareholder profits, but Mr. Cordes agrees that this should be re evaluated. It’s likely that benefit corporations, which incorporate social goals into shareholder bylaws, will help businesses fulfill all of their responsibilities to their shareholders.

Principal partner of Alitheia Capital, Mrs. Tokunboh Ishmael reports that impact investing may “exceed $500 billion over the next decade.” Impact investors working in emerging markets, like those throughout Africa, have the power to create sustainable economic development and ultimately eradicate extreme poverty for those at the BoP. The money is there and the ideas are there, the missing piece is connecting impact investors and social entrepreneurs to reach the real potential that exists in emerging markets. 

There has been a lot of talk recently about what makes a “social” entrepreneur or an “impact” investor. It’s an appropriate conversation at this stage of the game. Neither term is well defined. Unfortunately, ID has neither the resources nor the clout to move the needle on the bigger debate, but we can (and do) define both for ourselves.  More importantly, we put our money where our mouth is. 

We invest in businesses that have to make money to sustain themselves and eventually provide a return on capital to investors. That latter part is the point of controversy for many involved in the field (and related development fields).

For us, the controversy is misplaced. Profits aren’t bad if the company is good. In fact, when a company is good, profits amplify the benefit in two essential ways:

1. Profits reward investors and managers who take on additional risk. The more they are rewarded, the more risk they are willing to take. That’s important because starting a business in inherently risky. The risk is even higher in less proven markets, like the BoP market.
2. Profits create local wealth. Good companies (we will get to that definition next) keep management local and compensate them fairly. That creates wealth locally, which in-turn impacts the local economy. It also creates role models who provide inspiration, mentorship and capital for the next generation of entrepreneurs and managers.   

Every week at ID, we read about what we do and what we like. This week we read a lot about bringing alternative energy solutions to those who need them the most.  

Entrepreneurs are working to bring products and services to the Base of the Pyramid (BoP). Social entrepreneurs aim to make real social change there and to eradicate poverty. Beyond Profit looks at five models for reaching the rural poor that work: 1) Hub and Spoke, 2) Piggyback, 3) Local Entrepreneurs, 4) Market Linkage, and 5) Local Centers. Local centers are most effective for those looking to bring energy to off-grid markets. Onergy, for example, has renewable energy centers in rural India to make different types of technology and energy accessible. The local centers model is what EGG-Energy is doing, as you’ll see in the next article.

Our portfolio company  EGG-energy is based in Dar es Salaam, Tanzania, an East African country. The “Netflix of batteries,” EGG-energy is working to extend the grid by providing costumers with affordable, portable energy. After their pilot operation in Chanika, Tanzania, they’re getting ready to open their second battery charging station in Mbagala. CEO Jamie Yang and his crew have also modified their subscription options to better meet their customers’ needs. Customers can either get a 6- or 12-month subscription, entitling them to “free and unlimited [battery] swaps at the charging station.” 

The ongoing nuclear crisis in the wake of the earthquake and tsunami that devastated areas of northeastern Japan is forcing many people to reconsider nuclear energy. Construction of a new nuclear plant on Iwaishima Island in Japan has been ordered to stop since the disaster. This is a tragic example of how important it is to consider the externalities. Nuclear energy might be cheaper p/Watt then many other forms of energy harvesting, but that doesn’t take into account the tremendous costs associated with waste storage or disasters like what happened in Japan.

Throughout the globe, the poorest people often live off-grid and do not have access to energy. The alternative is often harmful kerosene lamps or automobile batteries. Cambodia is one of the many countries with this problem where “about 11 million people live beyond the reach of electric grids.” As we’ve said before, the BoP has huge potential, and entrepreneurs are working to bring alternative, sustainable energy solutions to the people who need them most. Solar energy, for example, is safer and cheaper in the long run. While purchasing a $25 solar lamp is a big investment BoP consumers, microfinancing or renting opportunities make solar energy adoption possible. In Cambodia, Kamworks is renting solar lanterns for 8 cents a day, which is an ideal model for consumers who do not have savings.

Next Billion features Burning in the Sun, a full-length documentary tracking the story of Daniel Dembélé, an entrepreneur in Africa. The documentary shares Daniel’s journey to “electrify the households of rural communities, 99 percent of which live without power. Addressing issues like climate change, poverty, and African self-sufficiency, the documentary places the connection between the three issues in the foreground. Innovative energy solutions have the potential to eradicate poverty in emerging markets. If more entrepreneurs like Daniel find success in Africa, the continent will develop and ultimately gain self-sufficiency thanks to market-based solutions. 

Via NextBillion

Every week at ID, we read about what we do and what we like. This week we read a lot about mobile technology.

In the Philippines, Global Telecom runs the GCASH mobile money service and is starting a program to support the government’s poverty alleviation programs. The platform, GCASH REMIT, supports the Conditional Cash Transfer (CCT) program, a government initiative that enables the country’s poorest families “to pay for health care, nutrition and education, provided they comply with certain conditions such as keeping children in school, attending regular health check-ups and vaccinating their children.” GCASH REMIT allows for the widespread, efficient distribution of the CCT grants.

Africans are depending on mobile technology now for banking, travel, shopping, and more. It’s changing their way of life and finally allowing for development. The “information and communications technology (ICT) sector” has seen unparalleled growth in Africa, “with annual revenues now estimated at around $50 billion.” The unparalleled growth, outside investments, and regulatory reform are the three major contributing factors to the success in the ICT sector. Today, almost 400 million Africans have mobile phones and 100 million have Internet access. Outside investors, from big companies like Vodafone and smaller ones like Invested Development, are attracted to the high growth and high returns in the industry. Many institutions and policies have been implemented throughout Africa.

Besides the quick, efficient transfer of funds for individuals, mobile applications can also be used by small and medium sized businesses (just like FrogTek in South America). Small- and medium- sized businesses need to take and make frequent payments, and mobile money applications are a convenient, cheap, and quick way to do so. For a small business, mobile applications allow for increased efficiency as cash moves quickly and inventory moves smoothly. Research shows that nearly 33% of mobile money transactions were to purchase or sell goods or services in Uganda. Another research study in Tanzania reports on the benefits of mobile applications for entrepreneurs.

Mercy Corps is working to rebuild Haitian communities by offering easy access to financial services and unconditional grants. However, in order for mobile money to be effective, the mobile ecosystem needs to be complete with local vendors who are “willing and able to support small-cash out needs.” It was difficult to find such vendors, but finally Mercy Corps found a man with an entrepreneurial sprirt named Jean Phillip Janvier, who enabled cash-outs in Saut D’Eau. Seeing Jean Philip’s success encouraged more vendors and continued to increase the effectiveness of Mercy Corps’ mobile noney program in Haiti.

Western Union is one of the world’s most trusted companies for money transfers. With over 80,000 participating agencies, people in 45 countries can now send money to the mobile wallets of 13.5 million M-PESA subscribers in Kenya. This new partnership will “benefit thousands of Kenyans working abroad” allowing them to send money home.  With the growth of the mobile money industry, companies are attracted to financial and strategic benefits that come hand in hand with social enterprise. Western Union will continue to create agreements with other mobile operators throughout the world.