NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

There is no shortage of ideas, and some would even say no shortage of products, that would help the rural poor to improve their social and economic situation. But distribution remains a key challenge. At the oikos swiss Practitioner Day 2011 at the IIM Bangalore, young scholars, local experts and practitioners from SELCO, IDEI and Digital Green discussed how to tackle the issue.

As a part of the one-week oikos UNDP Young Scholars Development Academy, the Practitioner Day brought together selected young scholars and local experts with representatives from three best practice cases – to explore lessons learned, and work on their current challenges.

Rich Media Works, But Will Farmers Pay For It?

The first case, Digital Green, improves farmers’ livelihoods through participatory video training. Farmers are involved directly in the production and distribution of videos on good agricultural practices. The videos are shot by villages themselves, in their respective local language or dialect, and shown on a regular basis in selected villages. As there are village coordinators that help with the implementation and follow-up, Digital Green actually knows which practices are implemented successfully by local farmers.

(Below: A Ttaining video from Digital Green. The key message: Feeding limewater to cows can dramatically improve milk yield and, in consequence, farmer income).

While the model is currently funded by grant money, Digital Green wants to get, at least partly, independent from “easy” (but sometimes fickle) money and explore different revenue models. As implementing the best practices is highly profitable for farmers, an obvious solution would be that these should pay for access to the videos. However, when Digital Green tried this, farmers were extremely hesitant to pay for knowledge, which they expected to get for free. After an open debate whether one actually should subject services like agricultural training to the logic of revenue and business models, participants explored different options – like a subscription model for farmers, the placement of ads in videos, or selling a “knowledge bank” of local best practices to other organisations reaching out to smallholder farmers.

Farmers Want to Pay For Technology, But Can They?

Different from knowledge, farmers actually are willing to pay for appropriate technology. That was the finding of the International Development Enterprises India (IDE-I), an organization that distributes affordable and income-raising technologies, like micro-irrigation systems and treadle pumps. But IDE-I ran into another challenge: Can they? While most investments pay back in under a year, few farmers have savings or leftover money to invest in the first place.

Microcredits could be a solution, but mostly not in their current form. Most micro-finance institutions (MFIs) require clients to start paying back in the first week after they receive the credit. This hardly works for agricultural activities, where investment yield first results after weeks or months, depending on the crop cycle. Rural banks and so-called non-banking finance companies (NBFCs) are more accustomed to longer loan cycles, but struggle to make the low loans required for the micro-irrigation systems provided by IDE-I. Participants explored several solutions together with the IDE-I – partnering with financial service providers, setting up leasing or rental schemes, and building an own financial branch that provides this additional, but crucial, service.

Scale or Replicate?

The last company, Selco India, has successfully solved both challenges: Households are willing to pay for the solar solutions distributed by the award-winning social enterprise, and rural banks provide the financing so they actually can pay for it. But while Selco currently targets low-income households mainly in the state of Karnataka, its home base, the company’s ambition goes beyond that: In other states of India, large rural energy-markets lie untapped, and customers are underserved.

The company is now exploring how to provide access to sustainable energy solutions in these markets. One difficulty lies in the differences within the vast country of India: While Karnataka is relatively advanced, other states, like Bihar, are further behind in their socio-economic development. One scenario that Selco thus dismissed early on was that of a “Big Selco” – growing the current company into a large corporation that would provide services all over the country (or, even, globally).

It then explored a franchise system, with limited success, and now aims to build “many small Selcos” all over India. Participants explored how they can best find and train the entrepreneurs needed to build these local Selcos – again, first experiments have yielded mixed results. But Selco still believes that it is possible to replicate the model through building new organisations in other states.

Market or Not?

As a roundup, participants discussed which of these challenges could actually be addressed by market-forces – and which require other support, like soft loans or grants. Anand Chandani, from responsAbility Social Investments, provided his perspective on the difference between social investments as done by responsAbility, which checks for a social contribution, but then mainly look at financial performance as a key decision criteria, and foundations and other social investors that are backed by grants and donations themselves. And, last but not least, participants pointed to the state – arguing that certain services should be provided by public bodies, funded by taxes, and without charging end-users.

Rounding up, I personally feel that this discussion is most fruitful if it combines the perspective of responsibility and rights –should the state provide a basic service, or should farmers pay – with the perspective of pragmatic feasibility – who can provide a basic service (and has an incentive to do so), and how can pay for it. All three organisations that were present at the Practitioner have taken up the challenge to expand the frontier of what can be done – looking much forward to seeing their next steps!

Note: This blog post was written at the oikos UNDP Young Scholars Development Academy 2011, that took place Aug. 21-26 at IIM Bangalore. Thanks to IIM Bangalore for hosting us, and to swissnex India for supporting the Practitioner Day!

Please like NextBillion on Facebook, follow us on Twitter and/or join our LinkedIn group.