Invested Development: Base of the Pyramid

Showing posts with label Base of the Pyramid. Show all posts

Thursday, December 1, 2011

Poverty-Fighting Mobile Transaction Systems (Part 4): Social Capital

This is the fourth post in our series, “Leveraging Mobile Penetration at the BoP for Poverty-Fighting Mobile Transaction Systems.” Click the links below to catch up on anything you might have missed.

Social Capital - Networking and Participation

As we introduced in the first post, the key to a successful mobile technology applications to alleviate poverty is the exchange. In the case of networking and participation, an exchange is the receiving and sending of ideas and opinions and the power to organize or participate in the community.

Mobile phones create powerful social networking opportunities. Mobile applications can offer users the opportunity to leverage their networks for referrals and create opportunities for peer lending. Social networking tools, everything from SMS to Facebook, facilitate organization and participation, as we witnessed during Egypt’s Arab Spring Revolution. Leveraging mobile ubiquity to expand on social capital reaps many benefits for users in a community where communication tools are limited.

The mobile phone with its most basic feature, SMS, promotes impact by creating an exchange. NGOs and governments around the world have used SMS texts to inform and alert populations to serious alerts. For example, FrontlineSMS and Jana (both discussed in this Weekly Review) allow businesses and NGOs alike to communicate with their target market in developing countries. FrontlineSMS prompts consumers to participate and engage through a platform that allows NGOs and businesses to send group texts, asking questions and opinions to a large mobile user base. Similarly, Jana (formerly Txteagle) collects market research data with mobile phones by allowing businesses and NGOs to distribute surveys via SMS with promotional incentives.

Tying It All Together - Mobile Ubiquity and Reducing Poverty

It is clear that mobile phones provide many benefits to users at the base of the pyramid. In the United States we have access to such benefits and resources not only through mobile phones, but by many other mediums. We can network on LinkedIn, search for jobs on Monster, read reviews of local service providers on Yelp!, take surveys to get coupons, borrow from a bank, use and build credit, and transfer money in seconds on our online banking applications. While some may argue that these seem to be simply promoting consumerism, the key point to highlight once more is the exchange. To reiterate Dr. Harish Hande’s philosophy, we must allow the poor to create their own wealth by giving them the tools to do so. With a mobile phone at the fingertips of over 70% of the world and a growing community of social innovators, we can create mobile technologies for sustainable global development.

What other ways can we leverage mobile ubiquity to create poverty-fighting technology?

Friday, November 4, 2011

Weekly Review October 30 – November 5

This week, we’re stepping back and looking at the explosive developments in the ICT industry and their effects in emerging markets. In case you missed it, check out our ongoing series on how mobile transactions systems can fight poverty, Part 1 and Part 2.

Image Courtesy of SlimTrader

“Ethio Telecom launches credit transfer service” Press Release from Ethio Telecom

Ethiopia is infamous for its lagging mobile penetration rates. The Government-led telecom released ambitious goals for mobile penetration last year. So far, it seems that the country is on target to meet them. Last week, Ethio Telecom announced that it would now allow prepaid users to transfer airtime to one another, an early version of mobile money. Airtime is like a currency in emerging markets, and we’re excited to see this type of development continue in Ethiopia.

“M-Pesa transactions surpass Western Union moves across the globe” on Daily Nation Kenya

With over 14 million customers signed up since its March 2007 launch, Safaricom’s M-Pesa is processing more transactions in Kenya than Western Union is in the entire world. M-Pesa provides mobile money services to more than 70 percent of Kenya’s adult population, according to the International Monetary Fund. M-Pesa has revolutionized the way Kenyans transfer their money, moving about 17% of the country’s GDP each year.

“84 million mobile devices are Internet enabled” on IT News Africa

In Zimbabwe, mobile phone penetration has begun to significantly contribute to levels of entrepreneurship in the country. A report from the United Nations Conference on Trade and Development revealed,“59% of Zimbabweans have access to mobile phones compared with only about 5% in 2005.” The UNCTAD pointed out that Zimbabwean SMEs are using mobile phones regularly to conduct business and m-commerce. The Government of Zimbabwe indicated that m-commerce has been a significant economic driver. In addition to mobile penetration, phones with mobile Internet are always increasing; in Arica, “7 out of 10 are expected to be Internet-enabled by 2014.”

“UN Team Approves ICT Goals As EA’s Speed Lags” by Esmond Shahonya on All Africa

The UN’s Broadband Commission for Digital Development has endorsed new targets that aim to provide global broadband access. The first target requires all countries to have national strategies for implementing universal broadband access. Furthermore, broadband access must be affordable. The final target aims to provide broadband access to 40% of households in developing countries by 2015. The goals were developed at the International Telecommunication Union (ITU) Telecom World 2011 summit, which considers “broadband as a vital ingredient for development.”

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Thursday, November 3, 2011

Poverty-Fighting Mobile Transaction Systems (Part 2): Mobile Money Transactions

Last week we introduced this series that will highlight the different ways mobile phones can combat poverty. This week, we will discuss the first example of a poverty-fighting mobile transaction system. Mobile money transfer services provide financial inclusion benefits for the unbanked, and are the most heralded impact of mobile penetration.

Mobile Money Transactions

Perhaps the most well-known mobile transaction systems that engage the base of the pyramid are mobile money transactions. The various flavors of mobile money transactions (mobile payments, m-wallets, mobile banking, etc.) have revolutionized the way users send and receive money throughout emerging markets, bringing millions of previously unbanked users closer to full financial inclusion.

Safaricom’s M-PESA, the golden beacon of the mobile money industry, set a standard in Kenya that others are trying to follow. The telecommunications company released its mobile money service in March 2007 and currently has 14 million users in Kenya alone. Today, nearly 17% of Kenya’s GDP flows through M-PESA, even though many of these users do not have bank accounts. The resounding success of M-PESA has sent a message across the globe. There is tremendous demand from the unbanked for financial efficiency and cashless transactions.

Inspired by the success of M-PESA, others are quickly joining the movement. Competing telecommunications companies from Manila to Mexico have created similar models and even banks are deploying mobile payments with branchless banking models to serve the rural poor. Whatever the approach, mobile money transactions give the unbanked the opportunity for financial inclusion, including secure, cashless financial transactions. In most cases, users can transfer money, and pay bills with a simple and secure text message, or deposit/withdraw cash at any participating agent.

There are also less obvious benefits that come from the growth of mobile money transactions. Agents, who are usually small shopkeepers, enjoy increased revenue streams and increased customer presence in their stores. Because the money is “e-float” and not cash, the risk of funds being lost or stolen decreases significantly as well.

Image Courtesy of Simpa Networks

However, for real financial inclusion, mobile transaction systems are going to have to expand their services beyond simple cashless transactions. Some of this is happening already. For example, Safaricom recently partnered with Equity Bank to develop M-KESHO in Kenya, a product that provides M-PESA users with interest bearing mobile savings accounts. Another example comes from Simpa Networks, an ID portfolio company that leverages mobile technology to finance the costs of solar home systems. The Simpa Regulator allows users to make payments with their mobile phone to pay off the cost of the system over time. In this way, mobile transactions can expand one of the most important aspects of financial inclusion, credit.

Check back next week for examples of information exchanges made possible with mobile phones.

Friday, October 28, 2011

Weekly Review October 23-29

Several exciting headlines this week point to the adoption of clean tech as a affordable and scalable solution to the world’s energy problems.

“New Technology Could Double Solar Cell Efficiency” by RP Siegel on Triple Pundit

Although installed costs of solar photovoltaics have declined by over 43 percent since 1998, many who rely on fossil fuels are still reluctant to make the change to solar. Now, through advancement in the research and development of using so called “quantum dots”, several scientists at UT Austin have demonstrated how to increase solar panel efficiency from 31 percent to 66 percent, harnessing the previously illusive “hot energy” from the sun’s rays. These advanced developments and efficiency increases will likely drive down the costs, making solar energy more affordable for all.

“World Bank opens up $60m climate finance scheme to developing nations” on Business Green

A newly developed $60m fund by the International Finance Corporation will promote innovation in clean technology for emerging markets. Individual investments are expected to be in the range of $3 and $4 million. The fund will also support startups’ endeavors to reduce greenhouse gas emissions.

“Developing world ups ante in cleantech ‘arms race’” by Fiona Havey on The Guardian

Not surprisingly, the developing countries of the world are investing more and installing more clean technology than their counterparts in the developed countries. Specifically, China added 19GW of wind generating capacity, while India met targets of about 10GW. The Global Wind Energy Council wrote in its annual report that the demonstrated growth in wind capacity “puts an end to the assertion that wind power is a premium technology only for rich countries which cannot be deployed at scale in other markets.”

“Massachusetts Celebrates Green Technology with 2011 Clean Energy Week”

The Seventh Annual Conference on Clean Energy is happening in Boston on November 1. The Massachusetts Technology Transfer Center and The Massachusetts Hydrogen Coalition host the event as part of Massachusetts Clean Energy Week. Our own Miguel Granier is a panelist on “Energy Solutions for Developing Countries,” alongside Sam White, Co-Founder of our portfolio company, Promethean Power. Check out the agenda for all the details, including pitch sessions and lots of exciting panels.

“Selling Home Solar Like a Cell Phone Plan” by Brian Merchant on TreeHugger

It’s no secret that the two biggest obstacles to scaling clean technologies are cost and access. TreeHugger points out that it’s important to invest in renewable energy sources but also to experiment with pricing models that will allow people at all income levels to afford and access sustainable energy. Our portfolio company, Simpa Networks, tries to combat the financial barrier by allowing users to pay for energy just as they would with a mobile phone. Watch Brian Merchant’s interview with Paul Needham, Simpa Networks founder and a new PopTech Social Innovation Fellow.

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Monday, October 17, 2011

EGG-Energy Development Innoventures Salon

A few months ago, we highlighted EGG-energy's innovative pricing and distribution strategy for the Base of the Pyramid. If you like EGG-energy's business model or discussing BoP strategies in general, then we recommend attending EGG-energy's upcoming brainstorm session in Cambridge, MA, hosted by the Development Innoventures Salon. The session will open the conversation around three main topics:

Pricing Strategy
Marketing and Sales Strategy
Growth and Distribution Strategy

It's important for EGG-energy to grow sustainably and scale its model in order to create maximum impact in the vastly unelectrified Tanzania. Less than 10% of the Tanzanian population has access to reliable energy. EGG-energy's business has the capacity to change that with a "portable grid." The key is being able to offer scalable and affordable solutions with a low upfront cost.

If you're interested in the for-profit social enterprise space, the BoP, innovation for development, and a "Netflix for batteries" business model, then please attend the brainstorm session on Thursday, October 20th at 6:30 pm. Details are registration information are available here.

About Development Innoventures Salon:

"DEVELOPMENT INNOVENTURES SALON is a new forum bringing together Boston's Innovation-for-Development community. We brainstorm with emerging impact entrepreneurs attempting novel market- or technology-based solutions to intractable problems in the developing world. Salon participants problem-solve around key challenges these innovators face in launching and scaling their enterprises. The SALON aims to convene a multidisciplinary group of entrepreneurs, visionaries, business professionals, development professionals, investors, practitioners, technologists, academics, students, and polymaths."

Friday, October 14, 2011

Weekly Review October 10-14

A cornerstone of Invested Development’s strategy is that mobile phones facilitate information, participation, and transactions in emerging markets. This week’s articles demonstrate examples of how mobile phones can do so.

“Mobiles: The Hub of a Global Information Society” by Melissa Ulbricht on Mobile Active

Like us, Mobile Active is a proponent of the basic feature phone’s potential for impact by distributing information. A new report, “News on the Go: How Mobile Device Are Changing the World’s Information Ecosystem” by the Center for International Media Assistance (CIMA) discusses and examines how the implications that mobile penetration has for politics, education, economies, society, and most importantly, the global disbursement of news and information. The report focuses on smartphones, but Mobile Active smartly lists a collection of case studies focused on more basic phones. Both smartphones and more basic phones create opportunities as Mobile Active and CMIA demonstrate in their publications. Check out the Mobile Media Toolkit for case studies focused on basic phones and download the CIMA report to get a sense of the impact, no matter what kind of phone.

“Reach the Next Billion Through Mobile” by Grant Tudor on Next Billion

Nathan Eagle, a local MIT professor and co-founder and CEO of Jana, was profiled in The Economist in January and more recently in Next Billion as a “radical innovator capitalizing on the rapid and broad-based distribution of mobile technology.” Jana, formerly Txteagle, is a mobile-phone-based platform that allows global organizations to reach and engage consumers in emerging markets. Jana has Research and Marketing arms across 80 developing countries, allowing consumers to actively participate and leverage their own influence over the market. Jana allows businesses to collect data on the wants and needs of their target markets at the BoP by distributing surveys on mobile phones and offering a promotional incentive for doing so. In the case of Jana, mobile phones change the way we look at and do business with BoP markets.

“The African Laptop Killer: Android and the Developing World” Claire Hunsaker’s presentation at Android Open 2011

Claire Hunsaker, Director of Marketing and Client Services at Samasource!, presented at the Android Open 2011 on mobile ubiquity’s impact in Kenya. Claire discusses how the ubiquitous presence of mobile phones contributes to the lifestyle of everyday Kenyans. Notably, cheap Android phones called “Kenya phones” are slowly rising in popularity in the market. Most importantly, she points out that 99% of new-paying Internet users access the web on their mobile phones. Hunsaker and Samasource!’s work focuses on the use of mobile phones for information, payments, and networking. This is a philosophy we share at ID. For example, the Mobile Media Toolkit and the Open Data Kit, accessible on a mobile phone, promote citizen journalism. For more examples on how information distribution is made possible through mobile phones in addition to payment and networking opportunities, watch her whole presentation and follow Samasource! on Twitter.

“A powerful combination: Radio and SMS promote open dialogue in Chad and Niger” by Prairie Summer and Lucy Lyon posted by Ken Banks of National Geographic Emerging Explorer on National Geographic News Watch

Prairie Summer and Lucy Lyon of Equal Access International (EA) leverage the technology developed by FrontlineSMS to educate and empower the BoP through media and community mobilization. That is to say, with mobile technology, they facilitate participation and information transactions. FrontlineSMS is a valuable tool for NGOs that allows group texting and two-way communication on a large scale. EA hosts six radio programs in Chad and Niger and communicates with its listeners using the FrontlineSMS technology. This allows the listeners to participate, share their views, and get their questions answered using a tool that is readily available. Check out the article to read first-hand accounts of user participation.

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Friday, October 7, 2011

Weekly Review October 3-7

Last week we spoke to the impact that mobile technology can have for development. For the same reasons, our other investment focus is alternative energy. While alternative energy is traditionally expensive, many social entrepreneurs are creating clever financing models that deliver clean energy at an affordable price. The following articles detail why and how alternative energy can create such a significant impact at the BoP in emerging markets.

Source: Simpa Networks

“Could a Pay-as-You-Go Model Convince People to Go Solar?” by Sarah Laskow on GOOD Magazine

GOOD Magazine spotlights Paul Needham, co-founder of Simpa Networks, our portfolio company, and a member of the Class of 2011 PopTech Social Innovation Fellows. Paul understands that solar energy incurs an upfront cost that is too high for most users. So he and the team Simpa created the Simpa Regulator, which allows users to pay for the cost of a solar home system over time. Simpa smartly pegs its prices to be the same as kerosene, which most people at the BoP use for energy. This way, the Simpa Regulator not only delivers energy affordably, but it also delivers clean energy that isn’t damaging to personal health or the environment. Even better, Simpa’s light from SELCO-India’s solar panels is brighter than a kerosene lamp. Consumers get a safer and longer-lasting energy source for the same up-front price and ultimately spend less money over time.

“Pay-As-You-Go Makes Solar Accessible in Emerging Markets” by Sami Grover on TreeHugger

Simpa is not the only company offering pay-as-you-go models. A company called Eight19 creates solar film – or printable solar panels. In partnership with Solar Aid, the pair has developed IndiGo, a charging technology that is specifically designed to be affordable for the BoP. Users can add credit to their IndiGo box by using the codes sent to their mobile phones after purchase. Like Simpa’s Regulator, this model allows users to pay for their energy over time without the initial upfront cost.

“Impact Investing in Energy Enterprises: A Three-Act Play” by Christine Eibs Singer, Executive Summary on the E+Co Blog

Christine Eibs Singer, the co-founder and CEO of E+Co, recently published a case study for the MIT Innovations Journal’s latest edition - SOCAP11: Impact Investing Special Edition. An executive summary is available on the E+Co blog. In the Case Study, Singer looks at the different stages that E+Co has gone through, and how the organization got to where it is now. E+CO started before “impact investing” was a buzz word. Despite the merge of impact-focused funding vehicles, the goal has always been to help energy enterprises grow and prove their worth, and ultimately create impact for the BoP. The full journal is available on Amazon and contains articles from many other industry experts including Kevin Doyle Jones, Phillip Auerswald, Antony Bugg-Levine, Mario Morino, and Ross Baird.

“Nepal on track to achieve MDGs: PM” on The Himalayan Times

The UN’s Millennium Development Goals seek to halve poverty by 2015. The Prime Minister of Nepal, Dr. Baburam Bhattari, noted that his country’s achievement of the MDGs is largely hindered by energy poverty, and in a broader sense, a lack of technology and innovation. Energy poverty occurs when there is limited or no access to electricity for cooking, heating, cooling, and/or lighting. Many people at the BoP in Nepal use unsustainable and harmful energy sources like kerosene. The Prime Minister addressed the “Sustainable Energy for All: Water, Food, and Energy Security” session at a UN Roundtable, where he suggested that the Nepalese government is accelerating efforts to scale sustainable energy solutions to fight against poverty.

“Can Microgrids Eliminate Energy Poverty?” by Christine Hertzog on The Energy Collective

A staggering 2.4 billion people in the world live in energy poverty - a way of life that is very unfamiliar to us in the United States. Almost a third of the world’s population lives with very limited or no access to electricity. This means that the time they can spend working or studying is limited, and it affects everything from cooking to communication to refrigeration. In other articles this week we discussed pay-as-you-go solar as a solution. Another solution to help bring energy access to the BoP is microgrids. General MicroGrids, Inc. is a company founded by Terry Mohn who is also the Co-Chair of the UN Foundation’s MicroGrid Work Group. He hopes that the company can deliver affordable and renewable energy to eliminate energy poverty and contribute to the goals outlined by the UN Campaign of Sustainable Energy For All. The three main goals that the UN is promoting to achieve by 2030 are: “1) Achieve universal access to modern energy serves; 2) improve global energy intensity by 40 percent; and 3) Produce at least 30 percent of the world’s energy from renewable sources.” Microgrids , according to Mohn, are a technological answer and solution that can meet the UN’s goals for energy.

Friday, August 12, 2011

Weekly Review August 8-12

Solar panels at a tent village in India

This week we read a lot of articles on the global efforts to eliminate energy poverty. At Invested Development, we’re interested in electrifying the poorest countries to promote development using clean and sustainable energy. In addition to development, energy access can also prevent humanitarian crisis like the one we’re currently seeing in the Horn of Africa. Businesses, agencies, and governments need to work together to research and develop clean technology to eliminate energy poverty in its many forms.

“U.S., India Collaborate on Scientific Research” via Voice of America Editorials

The U.S. and India are working together to research and develop clean technology. Specifically, The Partnership to Advance Clean Energy (PACE) exists to research and deploy clean technology innovations. Both the U.S. and India are aiming to better understand the production of clean energy in their countries, but the lasting effect for India particularly would be profound. Access to clean energy technology in India would allow poor people to work and study longer, stay healthier and save money in comparison to costly kerosene. This partnership to electrify India contributes to the country’s efforts to advance economic growth and reduce poverty by 50%, the first Millennium Development Goal.

“Rwanda: Govt to Meet 16 Percent Power Access Target Next Year” by Frank Kanyesigye via All Africa

In 2009, 7% of Rwandans had access to electricity. Currently, in 2010, 14% of the Rwandan population has access to electricity. The government is aiming to increase electrification to 16% by the end of 2012. Coletha Ruhamya, the State Minister of Energy and Water, believes that increasing access to power will “contribute to economic growth, social development, and poverty alleviation.” Currently, the main energy source in Rwanda is wood fuel, which is damaging to the population and to the environment. Globally, indoor smoke from biomass fuels like wood has contributed to 1.6 million premature deaths each year, especially amongst women and children in developing countries (WHO, 2005). The Rwandan government will find that promoting and investing in not just electricity, but clean energy, will lead to sustainable and safe economic growth, social development, and poverty alleviation for its people.

“Angola: Government to Facilitate Rural People’s Access to Electricity“ via All Africa

Angola’s State Secretary for Energy, Joao Borges, announced a new plan to electrify rural parts of the country in an effort to avoid over-crowding in cities. This announcement also comes as part of an effort to promote development in the country. Borges hopes to implement clean energy solutions like solar power.

“Preventing the Next Somalia: Energy + Water = Food” by Robert A. Freling via Huffington Post

Famine in the horn of Africa has left humanitarian organizations scrambling to provide aid. Already 30,000 children have starved to death with another 500,000+ at risk. However, sending $700 million in humanitarian aid is only a temporary fix. Long-term solutions are required to make a lasting change in the region. Energy plays a key role in maintaining food security. In many parts of the world, like Somalia, irrigation systems save crops in times of drought or dry seasons. Without reliable energy systems in place, irrigation can be impossible and crops will perish, as is the case in the Horn of Africa. For example, the Solar Electric Light Fund facilitates solar electrification by offering solar pumping technology to agricultural villages, enabling reliable irrigation to water and fertilize crops. While the short-term need in Somalia is desperate, long-term solutions such as solar-powered drip irrigation will prevent the same from happening again.

“Targeted financing needed to expand energy access in developing world”
by Daniel Kammen via The UC Berkeley Blog

The UN Secretary General has designated 2012 the “International Year of Sustainable Energy for All” in an effort to keep pace with the UN’s Millennium Development Goals and eliminate energy poverty. The World Bank also considers energy access a key strategy to eliminating global poverty. A variety of tools are employed to meet these goals, like battery subscriptions, progressively purchased solar home systems, or solar-powered energy storage systems. No matter what tool is used to electrify the electrified, funding is required to research and develop these innovations. A new paper, “Informing the Financing of Universal Energy Access: An Assessment of Current Flow ” delivers an assessment of appropriate and effective policies to reduce energy poverty. The solution to eliminating energy poverty, thereby serving basic human needs and contributing to global economic health requires targeted financing in impacting and affordable innovations.

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Friday, July 15, 2011

Weekly Review July 11-15

At ID, we often discuss the benefits of mobile phones for those at the Base-of-the-Pyramid. Access to mobile phones is proven to increase financial inclusion and accessibility to basic goods and service. This Weekly Review examines the benefits of mobile phones specifically for migrant workers.

“Editorial: Access to financial services” via The Jakarta Post

Forty million Indonesians do not have access to formal financial services. This lack of financial inclusion stunts growth and development in the region. The government is working to create solutions for its people. Mobile money services have been successful elsewhere, and would be welcomed by the estimated 70% of the population with mobile phones. If the government were to “expand the regulatory framework for service providers to use mobile and electronic banking… banks and non-banks [could] provide a wider range of services through low-cost mobile banking solutions such as short message service (SMS).” Importantly, the article notes, this would enable Indonesian migrant workers to send money home easily and safely. In fact, this idea has been proven successful for Filipino migrant workers, who sent “remittances worth millions of US dollars home every month.”

“Indonesia To Give Migrant Workers Free Mobile Phones” by Steven Millward via Penn Olson, The Asian Tech Catalog

Last year, 4,000 Indonesians worked temporarily in South Korea. So far this year, 3,000 Indonesians have migrated to South Korea to work temporarily. As a result of the rising numbers, the Indonesian government and the National Agency for the Placement and Protection of Indonesian Migrant Workers announced a plan to provide 8,000 to 10,000 mobile phones each year to migrant workers. This deal is “in cooperation with the local manufacturer PT Nurkumala Abadi, a subsidiary of South Korea-based LG.” The goal of the plan is to encourage migrant workers to communicate consistently with their families and related government authorities at home to enhance their safety and comfort while working abroad. The government hopes this plan will prevent tragedies like the recent beheading of an Indonesian maid working in Saudi Arabia.

“Creation Investments Social Ventures Fund 1 leads a $5.5 million USD investment into Eko India Financial Services Private Limited” Press Release by Patrick Fisher via Creation Investments

Creation Investment Social Ventures Fund will invest $5.5 million in Eko India Financial Services, a “mobile banking technology provider in India.” Eko India provides financial services India’s unbanked, particularly to accommodate migrant workers. To date, Eko India “has served 912,455 customers through its 1,300 customer service outlets and employs 100 people.” Creation Investments CEO Patrick Fisher states: “We believe that Eko has best-in-class technology which gives easy, secure, inexpensive and convenient last-mile connectivity to the unbanked, migrant workers and the poor.”

“Staying in text” by Tammy Grubb via Chapel Hill News

For Hispanic migrant workers and immigrants living in the United States, learning English can be an overwhelming obstacle to communication. To ease the transition for Hispanics in the US, there is a new SMS messaging service called ReK2 (pronounced reh-CAH-dos). ReK2 helps users learn English by sending daily vocabulary. ReK2 also “sends out weather reports and lets users post and read classified ads” to find work. More than 450 users in North Carolina and Virginia use the service.

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Wednesday, June 15, 2011

Innovation for BoP: EGG-energy's Pricing and Distribution Model

In a recent post, we discussed an innovative pricing model for the Base of the Pyramid with the example of Simpa Networks. This post introduces another innovative pricing model that demonstrates affordability a little differently, along with an innovative distribution model. EGG-energy, Simpa Networks, and the other companies in our portfolio understand that the customers they serve need basic affordability and accessibility.

EGG-energy has a growing number of charging stations and distribution centers in Tanzania, a country where the majority of the population within five kilometers of a transmission line but only 10% has access to electricity.¹ At the charging stations, EGG employees package grid power into portable batteries to extend the reach of the grid. Customers who pay an initial deposit receive a fully charged battery, and EGG sends a trained technician to their home or business to install the required wiring. Along with batteries, EGG also offers applications like lights, radios, and phone chargers. A great product combined with innovative distribution, promotion, and pricing techniques, EGG-energy makes its products and services highly accessible for its customers.

via EGG-energy

EGG-energy deserves a lot of credit for its innovative distribution model. As a small start-up, EGG-energy takes advantage of the distribution channel that already exists throughout rural Tanzania to reach its target customer. Partnering with local dukas, “the Tanzanian version of convenience stores” to provide convenient pick-up and drop-off services for the batteries reduces capital expenses and allows the company to make another valuable revenue source available to small business owners. In this way, EGG benefits the local economy by providing energy access, jobs, and a sense of community.

In addition to a clever, market-ready concept and integration with existing distributors, EGG’s pricing model is also innovatively designed for customers at the Base of the Pyramid. There are three basic subscription plans, available on a 3-month (USD$23), 6-month (USD$40) or a 12-month (USD$65) basis. All require a USD$4 deposit. The plans allow subscribers to exchange their battery for free at the charging station each time the power supply depletes. The typical household gets about five days energy usage from a battery for lighting, radio usage, and mobile phone charging. If they exchange the battery at the distribution centers, rather than charging centers, they do need to pay a small fee to cover the extra travel costs.

Not only is EGG-energy’s model affordable, it actually improves customers' livelihood. EGG-energy recently hosted a consultant from ENEA consulting, a firm specializing in energy and sustainability development. Some major findings in the report include:

· “EGG-energy customers typically reduce their kerosene usage by 83%²”

· “EGG-energy customers spend at least 20% less on their annual energy expenditures²”

· “70% of customers surveyed reported that they now feel safer both that they no longer have to worry about the hazards of using kerosene and have a much improved way of identifying nightly visitors to their homes.²”

EGG-energy is another example of an innovative energy solution with an accompanying affordable pricing model. In addition to short-term affordability, EGG-energy’s model is less harmful in the long run than traditional energy sources. By minimizing their carbon footprint and providing truly affordable and safe energy in rural Tanzania, EGG-energy is contributing to the well-being of the environment and improving the lives of the world’s poorest citizens.

¹http://egg-energy.com/wp-content/uploads/2010/12/EGG-energy_1pager.pdf

²http://egg-energy.com/2011/05/impact-assessment-putting-together-a-rigorous-evaluation-framework

by Christina Tamer

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Friday, May 27, 2011

Weekly Review May 23-27

In honor of the upcoming SOCAP/Europe conference, this Weekly Review focuses on social entrepreneurs and the challenges they face in the industry, most prominently the task of finding a balance between financial and social returns.

SOCAP Social Entrepreneur Spotlight Series from Social Capital Markets

SOCAP/Europe (at the intersection of money and meaning) is in on in Amsterdam next week: May 30, May 31, and June 1. Our own Femi Akinde of SlimTrader and Sam White of Promethean Power Systems are both attending. Track Sam’s SOCAP adventure on his blog, Sam at SOCAP. SOCAP spotlighted Femi earlier this month. In the Spotlight Series, SOCAP asks the interviewees what they are working on and what problem it solves. Many entries also feature commentary on roles in the Social Capital Marketplace and reasons for attending SOCAP conferences. Other great spotlights have included COO Dennis Dijkstra from Movirtu and founder and CEO Christine Eibs Singer from E+Co. SOCAP focuses on both mobile technology and alternative energy innovations in developing countries, falling in line with our laser sharp focus. In fact, we first discovered our most recent portfolio company, SlimTrader, at SOCAP last year. Check out the Spotlight Series to learn more about who’s attending this year.

“Reflections on Sankalp 2011: The Curious Case of Economic vs. Social Value” by Tilak Mishra from Next Billion

In the wake of Sankalp Forum earlier this month, there have been many articles about the “ecosystem” and reflections on social entrepreneurship, impact investing, best practices, and the structure of the industry overall. Sankalp 2011 brought together entrepreneurs and investors alike, all with the common goal of providing affordable good and services to those at the Base of the Pyramid. It’s obvious that the flow of money at the BoP is not what it is at the significantly smaller ToP. Add this to the list of challenges including high costs, lack of infrastructure, risky and unstable markets. These are all normal challenges that any entrepreneur would face, but a social entrepreneur must consider their social returns as well as their financial. However, by finding innovative ways to meet the needs of the world’s poorest citizens and realize the potential opportunities for change and impact, social entrepreneurship can create value for all involved.

“Beyond Start Up” by Tony Sheldon from Beyond Profit

SELCO Solar Panels in India

As the social enterprise industry matures, we are seeing more articles discussing industry challenges and ways to overcome them. Tony Sheldon first shares his thoughts on financing, a topic that very much affects and is influenced by Invested Development. It’s difficult to match impact investors with the right social entrepreneurs and vice versa. The investor and entrepreneur must have a clear direction of the future of the business both financially and socially. Another challenge, rooted in required level of scale in order to maximum social impact, is managing human resources in emerging markets. Acquiring talent and paying fairly while meeting financial and social returns is a time and resource consuming challenge. Sheldon uses SELCO India as an example of a social enterprise that is handling their human resource challenges effectively and innovatively. SELCO seeks to “maintain a 50/50 balance among its staff between those who work there because of the social mission with those simply seeking a good job with fair pay and have the skills needed to do their jobs well.” The overall goal is to strike a balance between the financial goals and the social goals. Sheldon suggests that scale is “the link between profitability and impact.” Once again, however, striking a scaling pace that doesn’t compromise the mission or model is crucial.

“Off grid-PV is more than poverty mitigation – it’s sound business sense” by Simon Rolland from ARE via PV Magazine

Yesterday, I had the pleasure of speaking with Simon Rolland, the Secretary General of the Alliance for Rural Electrification. We discussed the alignment of values that Invested Development shares with ARE. We share the mindset that renewable energy technologies can reduce poverty and are a profitable business practice both in developed and developing countries. In this article, Rolland discusses challenges that social entrepreneurs face – they must meet rural customers’ needs and tailor the products and services accordingly. For energy solutions, business models and pricing models must fit the consumers’ needs and ability to pay, not the other way around. The article is rich with facts, data, examples of success stories, and ways to overcome challenges in electrifying rural areas in developing countries.

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Thursday, May 19, 2011

BoP Pricing Models

Social entrepreneurs face many challenges: finding the right impact investor, working with government regulations in emerging markets (or lack thereof), meeting the needs of citizens at the Base of the Pyramid, designing products and services that are profitable and scalable. Most importantly, social entrepreneurs must make their products and services affordable. The world’s poorest citizens have no savings and little access to formal credit, but that is not to say that they do not have purchasing power. Their individual spending may be small, but combined it is largely powerful. However, the problem for individuals is the large, up-front commitment to a purchase is close to impossible for those who earn an irregular and inadequate income. Even if the purchase will pay for itself after a period of time, it’s simply not feasible for the world’s poorest citizens. This post looks at pricing models that work and serve the BoP in ways that directly meet their needs. It’s not enough to simply have a well-designed product with good intentions. Social entrepreneurs need to create innovative pricing models.

In a report from Monitor, “Emerging Markets, Emerging Models,” Karamchandani et al. introduce the example of an Indian company, Servals. Servals designed a kerosene lamp that was more efficient, safer, and would “pay for itself after about two months.” However, to everyone’s surprise, sales were way below forecasted estimates. Customers at the BoP don’t have disposable income to “invest,” even if it will save them money in the long run. After a redesign of the product that allowed for a lower retail price, sales increased significantly to over one million units by 2008 (p. 11). This is one option for social entrepreneurs: simply redesign the product so it is more affordable. In the Monitor report, the authors outline seven different pricing models that “have the best chances of success,” (p. 7) determined after a multi-year extensive research project in emerging markets.

Serval lowered the price of their product with a cheaper design. But what if the product’s price can’t be lowered any further? The price of solar power, for example, deters many middle-class consumers even here in the US, so how can citizens at the BoP afford it? Simpa Networks developed an innovative pricing model to resolve that exact problem. Simpa designed its pricing model to be the same price as what many would spend on kerosene lamps. Instead of inefficient kerosene lamps, Simpa offers modern, small-scale solar home systems made affordable by allowing consumers to pay-as-they-go. The systems include “a solar panel, battery, charge control, at least 3-4 lighting points, a mobile charging port and power for charging or powering small DC devices.”

A "top up" card

The orange box is Simpa's "Regulator"
Photo from Miguel's Site visit in India

Simpa has designed a built-in “Regulator” that turns off the power until a consumer makes the required payment. Modeling the payments after the ubiquitous “top-ups” offered by mobile phone networks ensures that users are familiar with the process. Once the cost of the solar home system has been fully paid (at the customers’ own pace), the system will deliver electricity at no further cost for “the expected 10-year life of the product” and becomes a true asset.

Simpa's "Radical Affordability" Model

This pricing model is based on “radical affordability,” which Simpa defines across three axes: “the initial purchase price, the total cost of ownership, and the flexibility of expenditures over time.” Simpa’s model of radical affordability is one solution to the pricing model problem that entrepreneurs in emerging markets face. This post is the first of many that will highlight examples of companies that are practicing effective and innovative pricing models that best serve the BoP. For even more examples, check out “Emerging Markets, Emerging Models.”

by: Christina Tamer
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