How is a social enterprise born? Is it born out of a recognition that some thing needs to change or is it much more complex than that?
For Sameer Hajee, the decision to give up a lucrative career as a micro-process engineer in Silicon Valley was a simple one. “After working for four years, I needed a change in geography,” he tells me over a recent Skype call. A few months later, he was working for a telecom operator in Afghanistan.
From Silicon Valley to Afghanistan
Six months in the war-torn country offered Hajee a unique perspective on the impact of energy in one of the most impoverished regions of the world. “Afghanistan opened my eyes to how impactful appropriate energy use can be. I decided right then that this is what I would focus on after business school,” he recalls.
Nuru Light: A Winning Solution
Hajee is the founder and CEO of Nuru Light, one of five winners of this year’s Powering Economic Opportunity: Create a World That Works competition co-hosted by the eBay Foundation and Ashoka Changemakers. Nuru Light is a social enterprise based in East Africa, built on the simple premise of hyper-local economic communities.
But Hajee’s story isn’t as intuitive or linear as it might seem in hindsight. After completing his MBA at INSEAD, Hajee went to work in Kenya as a member of the United Nations Develop Programme (UNDP). Then, in 2005, the social enterprise trend was growing and market-based solutions were becoming the latest tactic for the socially conscious.
In Kenya, my role was of a convener. A small group based out of the United Nations was trying to work with multinational companies to create pro-poor for-profit businesses and it was my job to see where the opportunities were and to connect the folks.
This not only meant a lot of nuts and bolts groundwork in one of the world’s poorest nations but also skillfully lobbying for regulations, increasing capacity, ensuring quality of local products and much more. “These private public partnerships exposed me to a lot of different business models and industries. I was able to see firsthand what was working and what wasn’t.”
Africa: A Broken Value Chain
Next stop: Free Play Energy. “I was starting to get frustrated with the bureaucracy within the UN. When Free Play approached me to help them market crank radios and other products to the camping market in rural Africa, I decided to jump ship,” he says. Hajee worked for Free Play Energy for two memorable years.
The experience was incredible.
We found out, for example, that these off grid products would be very valuable to the poor but the delivery model was completely ineffective. It was taking $20 to produce something and by the time you got to the consumer, the price had jumped to $50. The value chain is so convoluted in Africa that the end customer is always given a very expensive product.
His team’s solution: A donor model with help from the UNDP. “Free Play became a viable business but we didn’t have control of our products now,” he says.
And he was itching for something new. Again. So in 2008, along with two colleagues, Hajee left Free Play to start Nuru Light.
The Big Idea: Using Energy to Solve Social Problems
“Human power as a hand crank wasn’t going to work for very long. We knew that then, it gets old very quickly. But the immense power of human energy has been untapped and compared to solar or other alternatives is much more appropriate,” he says.
With initial funding from the World Bank, Hajee spent two months living in Rwanda to understand specifically what “they need energy for what they were currently using.” “Remember that these are the poorest of the poor populations. Their needs are basic. My research identified four specific needs: Cooking, lighting, mobile phone charging and radio,” he says.
Essentially, what Hajee realized then was that most of us use energy for specific tasks, especially those that don’t have a continual power source. We learn to adapt and make the most of our resources.
“The fact is that the power required to power these things wasn’t a lot. It all came down to tasks: the entire room did not need to be lit up. They just needed enough task light, as long as it was multi-use and multifunctional,” he emphasizes.
What also emerged was a need to pool resources and share. “Some of them said they would like to have room lighting for visitors. So why not have multi-use lights that can be connected for such occasions?”
The Economy of A Sachet
The hyper-local model Hajee discovered has been successful for a long time in India. With a significant percentage of the Indian population still living well below the poverty line, these sachets have gone a long way in helping those with limited disposable income afford basic necessities.
For the African poor, Nuru Light, a basic, rechargeable light, has similar potential and meaning.
But how do you take it to market?
First, you need seed investment. For Nuru Light, this meant a complete initial dependence on grant money to get through the first two-and-a-half years of research and testing. “We were completely funded by grants. It took every penny of the $500,000 we raised to make this work in Africa.”
Africa’s “Green Jobs”
“One of the ways to eradicate poverty is to offer economic opportunity. So we thought, why not put this into the hands of micro entrepreneurs who could set up recharging stations for these single, handheld lights?”
So, a lot like the successful domestic business models like Netflix and Zip Car, the Nuru Light micro entrepreneurship model was born. What made the idea instantly sellable were two factors: Setting up the business required minimal funds and the profits would be significantly steep than what the community was making.
The following months began to show concrete results with most of the micro entrepreneurs paying off their initial setup loans within six months. “They were making $1.50 for 20 minutes of charging. That’s what they made earlier by working the whole day,” he explains.
As for customers, the value proposition presented by Nuru Light was equally attractive. According to Hajee, a recharge costs 30 cents, which typically provides for with about 10 days of lighting.
A whole month’s supply? No more than one dollar for most.
Dissecting a Social Enterprise’s Business Model
While the product was an instant success with customers who really felt that their needs had been understood and the solution affordable, things were not as smooth running internally.
Our revenue model really evolved through those initial months. From low margin and a high volume approach we went to carbon credits. In fact, we are the third registered carbon credit company in Africa.
They also needed to figure out how to ensure that Nuru Light was sustainable for and with their team of micro entrepreneurs. “The fee from the recharging stations was a significant third stream of revenue that we had anticipated early on. But turned out, we were spending much more on fielders doing the rounds to collect the money than was worth it,” he says.
Next challenge: Automating the process. The answer, Hajee realized lay in mobile money. A lot like the rechargeable pay-as-you-go mobile phone system, the micro entrepreneurs were set up with prepaid energy credits that could be refilled, by purchasing 20-digit pin numbers. Now, the flow was corrected, in place, much more easily manageable and yet simple.
Scaling a Social Enterprise
The social inequities and empowerment that Nuru Light has been able to demonstrably address aren’t lost on Hajee.
In fact, what caught my eye on the Nuru Light website is the “Impact” section. I asked Hajee to discuss how he believes Nuru Light is helping the African community besides fixing a basic need for light.
Our product helps reduce the use of kerosene, a significant cause for respiratory diseases. We’re helping the local environment by removing the fumes and toxicity of kerosene from the air. We are creating job opportunities for the community. Plus, for the first time the kids in the community now have the ability to complete schoolwork at their leisure, freeing up for time for play and extracurricular!
As a technology, Nuru Light, of course, presents a win for Hajee who recognized a severe need coupled with crippling factors of few resources and economic underdevelopment.
Next Stop: India
Now with new support – financially and otherwise – from the eBay Foundation, Hajee is ready to work on his next venture: The rural population in India.
In fact, Nuru Light has had ground troops in Mumbai and Delhi doing initial research since 200, he told me.
“It took all of the $500,000 we raised for Nuru Light to work in Africa. We now have the same amount to invest in our model in India. And eBay has shown a real commitment to help us scale our business by offering us their resources way beyond the financial support. Their approach has been starkly different from other donors and we’re lucky to have that,” he says.
If Africa took a few months, why was the Indian market proving such a hard nut to crack? “The reason it is taking us so much longer is that no one is working on provided microfinance opportunities in India. So off grid products like ours end up remaining largely, off grid,” he admits.
But the roadblocks in India are more convoluted and will require a whole new round of rethinking and perhaps, even a regurgitating of Nuru Light.
We have learned a lot in the last two years and now know what can work.
The research is complete and the funding is in. That success story is yet to be written for Hajee and Nuru Light, but his recent accomplishments leave me with little doubt.
Passion, a clear sense of business responsibility and market-based solutions drive Sameer Hajee. What will it take to motivate you?
Connect with me @AmanSinghCSR or leave a comment.