How many champions does it take leverage government funding with local financing for solar powering 1497 households in one village?
The Amasbail village in South Karnataka is well on its way to become a 100% solar powered village with the first step of having all street lights running on solar energy and individual homes installing solar powered lighting systems. Amasbail is in Kundapura Taluk in Udupi District of Karnataka State and consists of 1497 households. The visionary leadership of Mr. Kodagi, President of local charitable trust, along with the local panchayat led to the ideation of a solar village: a self-sustaining one. In 2008, SELCO INDIA the social enterprise, had installed solar systems in few of the households. Doorstep service and presence of a local technician led to end users trusting the enterprise. However, this was not sufficient for every households to avail of such systems. The village is a mix of households who belong to all categories of income strata from rich to very poor families. Many households, especially the poor ones, could not afford the system because of lack of access to an affordable financial product. SELCO India along with Shri Kshetra Dharmastala Rural Development Program (SKDRDP) an MFI and a local cooperative bank stepped forward to finance 100% of the cost of the system. The first step of the project, of providing sustainable energy to all households, was to initiate a common vision among all the stakeholders: village panchayat, individual households and a local village trust. The partnership of SELCO, the Village panchayat and the local trust (Amasbail Trust) was the most critical alliance for the implementation of the project: all having equal stakes in the success of the project. Under the leadership of the partnership meetings, discussions and informal gatherings were held on financial aspects of the project and potential contributions respectively from Government and individual households. For better implementation of the project a “Solar Implementation Committee” was created that had members from the community, the panchayat and the trust. The committee became the advisory body that was responsible for the complete planning and execution of the project. A proposal, to convert the village into a self-sustainable village, was written in 2012 by the committee in consultation with SELCO. The proposal described the energy savings, carbon impact, savings per month etc. It also dived into negatives of energy poverty, need for reliability and role of solar energy in employment creation, education etc. The proposal for powering the village of Amasbail with solar lighting systems was submitted to MNRE and KREDL in 2012. Repeated follow up by the alliance helped the project to come to fruition in 2016. To avoid the long waiting period, many households (over 300) came forward and purchased solar by availing financing from local financial institutions (Phase 0 of the implementation). Availability of door-step finance enabled these families to afford a solar lighting system for their households. In addition, more than 20 institutions, like temples and schools, in the village also installed solar for their utilization. Once the Government funds were allocated the Phase 1, and consequently the other phases, of the project began. This was for households who first come forward with their contribution to get their respective loans processed. The local financial institutions provided 50% of the cost of the system in the form of financing while the remaining 50 % was contributed via MNRE and KREDL funding. The final phase of the project focused on the most vulnerable households and institutions. Most share of the government allocation was earmarked for them. In Amasbail currently 1497 houses have solar power – every single household installed with 4 light and mobile charging system. Hence the Answer to How many champions does it take to leverage government funding for solar powering 1497 households in one village, is – Five: A village panchayat committed to making sustainability as the topmost priority A local village trust that works in the interest for the local community A committed enterprise with a strong after sales service network A rural bank and a micro-finance institution that has the risk appetite to finance remote systems. End Users who believed in long term sustainable solutions for their power needs.
Our business is doing business with the poor – we believe that the ‘value’ of a product or a service is built only when the consumer pays for it. Payment of course could be in the form of services, money or goods. But one needs to understand that for most communities, the value is purely monetary to begin with. For example, when we try to approach a slum community that is rebuilding its houses and talk to them about Airlite sheets or about cleaner energy through solar power, the community members calculate the interventions thus – what is the cheapest solution – metal sheets for the house with kerosene lamps, metal sheets with solar lamps or Airlite sheets with solar lamps? More often than not, making them feel the monetary value in the transaction is what makes the difference. And if our solution is not the cheapest, we have a hard time convincing them.
Similarly, working with micro entrepreneurs and designing solutions based on existing business models is not the easiest process. Understanding the economics of a ‘poor’ household is a case story in assumptions. A micro entrepreneur can only give us assumed figures – how much she/ he sells, spends and makes. Markets work on trust and word of mouth and calculations work on comparisons to household items. So it is perfectly acceptable for a micro-entrepreneur to add her family’s food expenses to her food business. Or for a micro-entrepreneur to provide business services to pay off an older loan. Or for an entrepreneur to calculate the weight of a raw material in comparison to another common household item. Accounting for all such informal practices in a business plan makes that extra difference in bringing an element of reality to it.
Savings is the most ephemeral concept for the ‘poor’. Ten years ago, a slum demolition mandated that all those wads of notes saved under beds, inside pillows and within roof sheets got destroyed. Savings were often also calculated in the form of loans to others, typically friends and relatives who would then loan back during an emergency. Today with the large number of bank accounts, this may be less of an issue, though from experience, we still know that most poor function with loans from their own families.
Then come the business decisions. Understanding local contexts and practices is critical to making successful business plans. In many cases, even if an investment makes perfect business sense, an entrepreneur can reject or put something on standby simply because a ‘well-wisher’, older brother, father, husband etc said no to the idea. Often, as has been noticed in the case of the Roti rolling machine installation, the entrepreneur waits for over a month for an auspicious day to actually start using the machine – how that impacts her first instalment of the loan to the bank is critical.
The fact, as was evident in the first example with the Airlite sheet, that a better quality sheet and smokeless lights mean that your construction lasts longer and therefore you save money is a conversation that is difficult to have with the poor. It is far more difficult when it is a migrant community that clearly says that it is here for a short while – albeit the fact that the short while could be well over 10 years! How does one convince a community that the water they use for drinking needs purification, even if the health impacts are not immediate? Unless children get diarrhea every now and then, no community will suddenly invest in purified water. Would someone pay for clean water just because consuming un-treated water for ten years would lead to swollen and mis-shapened joints in old age? How do we explain expenses on water as compared to expenses at the doctor’s?
Explaining asset expenses and intangible returns to a poor family – that is the essence of doing business with the poor.
In the last 5 years, in India, there has been a blind rush to implement mini-grids: for providing immediate energy access to 300 million Indians who still do not have access to electricity. Unfortunately, the rush does not consider learnings from other types of installed mini-grids which need to address long term ownership and sustainability, user perspective, alternative financial and business models. While the intentions are in the right place, many of the methods and thought process are still extremely immature – which would have unintended large scale failures in the sector of distributed renewable energy (DRE). One needs to understand that technology is just one aspect for providing reliable energy access to the poor. The other ones are of understanding the needs of the poor, segment specific financial models and related eco-system. Many, if not all, of the mini-grid solar based models faced the same issues that were plaguing the large utilities but were masked because of enormous amount of soft money that got deployed into the sector in the name of creating the market. It became quite apparent that philanthropic monies were used without a long-term strategy in place thus leading to large scale failures. The failures have triggered numerous alarms for the sector. There needs to be an urgency in rectifying this sector, from a development perspective, else should not be another case where the poor are subject to incomplete thought processes and in-comprehensive short-term strategies, just as was seen and learnt from the micro-finance sector years ago. Lack of attention to details of eco-system and lots of soft money led to derailing of the micro-finance movement in India and that seems to be headed the same way for micro-grids. Though it is still not too late. Learning’s from micro-finance and other similar sectors can be brought in and good models could still be implemented and scaled. For that to happen help and learning must be taken for various financial institutions across the country. Villages that have a mix of household loads and large income generating loads (like rice mills etc.) are ideal candidates for micro-grids: the larger loads give financial stability to the system. One needs to understand the existing and perceived future needs of the selected areas, prevailing social structures, cash flow dynamics, income streams etc. to determine if micro-grids make economic sense or individual systems. The stakeholders must rely on personal with numerous years of ground experience and the design of micro-grids should be done with a multi-disciplinary approach: keeping the end-user at the center of it. As like any other sector, ‘one size’ or type will not fit the needs of the poor.
Rajasthan is poised to be declared as a “power surplus” state, which means that it would be able to produce more electricity than it consumes. And yet, large swaths of poor tribal households remain unconnected to the grid. In the popular tourist destination of Udaipur alone, 80 percent of the district is rural, and close to half of them still use kerosene for home lighting. There is a growing recognition that last mile grid connectivity to remote, scattered households is a costly affair, but it is a gap that decentralized generation can bridge. Based on our learnings from electricity mapping and multi-stakeholder engagement in Karnataka, Uttar Pradesh and Orissa, a district level energy planning is being undertaken in Udaipur. While expanding reliable energy access is the primary goal, processes through which the district administration can leverage existing schemes in low income housing, financial inclusion and rural livelihoods to incorporate decentralized generation, are also being explored. For this we are partnering with World Resources Institute (WRI), along with active grassroot support from Boond, one of SELCO’s incubatees.