Bridging the Last Mile(s) – Building Value Chains for Energy Access
It’s a common refrain in BoP markets – the technologies have matured, but the distribution and retail networks don’t exist. Products like solar lanterns have been around for several years, with companies like d.Light, THRIVE and Cosmos innovating on design and construction for BoP markets around the world. But how do you take these products across the so-called “last mile” (which can often be several hundred miles in reality) and to the rural consumers that need them the most?
Many companies, programs and foundations have spent considerable resources on the technology side of the problem, perfecting new designs and innovative models of products for the BoP. Recently, however, many have started tackling the other side of this challenge – taking the products to market. A recent paper by the Centre for Development Finance at the Institute for Financial Management and Research (CDF-IFMR) highlighted the product distribution choices available to companies entering BoP markets in India, and presented an analytical framework to help companies identify the most viable options.
Similarly, a new initiative by the Tallberg Foundation focuses on this continuing challenge by taking an innovative collaborative strategy as part of its ’Rework the World’ project. Tallberg is partnering with SEWA, a women’s self-help group, to build a large scale distribution network for clean energy products like solar lanterns and energy efficient cookstoves in India.
Tallberg and SEWA’s initiative is unique in many respects – besides being focused on the distribution challenge, it also leverages the strengths of the various stakeholders involved, and aims to test an innovative combination of commercial and philanthropic capital. Instead of providing grant funding directly to SEWA, Tallberg will help the NGO create an enterprise that will take on a long term loan (of over $20m) at commercial rates, backed by risk-sharing agreements with a number of bilateral donors and international financing agencies. Women entrepreneurs that are members of SEWA will be able to borrow small amounts of startup capital from this fund, to set up micro-enterprises in rural areas to sell these products. These women will then sell clean energy products in their communities, taking on many of the retail and marketing responsibilities.
This model leverages SEWA’s immense rural network of women micro-entrepreneurs and enables a strong market based mechanism to overcome the distribution challenge for companies in India’s rural BoP market. Representing another innovative aspect of this program, SEWA’s women entrepreneurs will be trained to sell these products based on their economic and health benefits (such as reduced indoor smoke, fire hazards), instead of the environmental benefits that are often not understood or valued by BoP consumers.
Tallberg has released a Request for Proposals from solar lantern and cookstove manufacturers in India that are interested in participating in this program. More details can be found here.