Kerosene is the primary source of light for over a billion people on the planet. Its fumes can cause health problems for those that use it frequently (sometimes children, studying after dark), and the long-run costs can reach a quarter of a family’s income. To top things off, kerosene’s black carbon byproduct is a far greater threat to climate change than carbon dioxide (see article). Despite all these problems, its incrementally cheap price and ubiquity make it popular.
In light of this, numerous clean-energy organizations have stepped up to tackle this problem, trying to replace kerosene lamps with their safer, and cheaper, products. Several Kiva partners, including Solar Sister, have come up with creative ways to use networks of entrepreneurs in remote areas to distribute their solar powered lights. The main drawback of this model, though, is that repeat business from end-users is minimal, which means the entrepreneur must perpetually seek new clients just to stay in business.
One Kiva partner, however, has built a unique business model far different from the solar lighting distribution network most of its competitors use. Nuru Energy has a creative solution to provide light to people, while also providing a constant stream of income to its entrepreneurs.
Rather than relying on solar power, Nuru’s Village Level Entrepreneurs (VLEs), have a power cycle, designed to charge up to five lights in twenty minutes, and a typical charge can last two to three weeks. As the batteries are drained, the clients return and pay the VLE a few cents to recharge their lights.
There are a few noteworthy points that highlight the sophistication of this business model:
1. The Nuru lights are considerably less expensive than most solar lights, widening the potential client base. Nuru lights cost $5.25 each, whereas their solar equivalent is usually $15 or more. True, solar has no recharging costs, but at only $0.15 per recharge, the difference in up-front cost could light their house for four to six months, and still cost a fraction of what they’d have spent on kerosene.
2. The more lights they sell the more long-term income they have. VLEs earn a little less than $1.00 for each unit sold, which isn’t insignificant for many of them, but their real earnings come after establishing a client base, encouraging them to grow quickly.
3. Nuru’s VLEs are located in the local villages and have social relationships with their client base, enabling their customers to buy on credit and repay over time – something Nuru would find impossible otherwise. Kiva provides the loans to the VLEs to purchase up to $100 worth of lights, freeing Nuru from the risk of inventory loss.
4. Nuru does not sell the power-cycle to the VLEs, instead it is lent to them for free and Nuru handles the maintenance when necessary. Giving away such an expensive piece of equipment might carry some risk, but a code must be entered on the power cycle before it can operate, which can only be obtained when a small mobile payment is made to Nuru. Also, if a VLE fails, Nuru can simply collect the power cycle and give it to another VLE.
5. Mobile payments make it easy for Nuru’s entrepreneurs to repay their loans eliminating the need to meet with a loan officer. VLEs can repay their loan using SMS text messages to Nuru’s dedicated payment phone lines. An automated response is sent to the VLE with their updated loan balance loan, eliminating paperwork. In addition, Nuru’s information system is updated to reflect the borrower’s most recent payment, and staff can view their VLE’s payment history on a computer or on the go with an Android mobile device.
6. Besides income from VLEs distributing lights and activating the power cycles, Nuru also sells the carbon credits it accumulates. The energy Nuru creates with the power cycle is sold to companies that want to offset their pollution in markets elsewhere, providing an additional source of income to fund Nuru's operations.
Nuru also takes care in selecting their Village Level Entrepreneurs. While many governments are derided for getting in the way of business development, Rwanda’s government helps facilitate it. Nuru takes advantage of this to use local district offices to identify and select potential entrepreneurs. Besides being vetted by others in the village, VLEs must demonstrate their commitment by contributing $20 and spending two days learning about Nuru’s products.
After a VLE is ready for business, they get an initial package of twenty lights, a power cycle with manual, a Nuru T-shirt and hat, and a small Nuru sign for their recharge location. All of this is provided for $100 credit through Kiva lenders, and Nuru loans are typically funded within 24 hours.
The profile of a typical VLE is impressive. Most of the VLEs already operate a successful small shop in their local villages, and some even have livestock. Because of their remote locations, very few have nearby banks, and many have succeeded without the help of microfinance.
Given their credentials, many of Nuru's VLEs would likely be successful on their own, but an interest free loan to get them started makes Nuru an attractive business opportunity and enables Nuru to reduce its risk and penetrate new markets more quickly than would otherwise be possible.
More information on Nuru Energy is available through their website: http://nuruenergy.com/
Mario Ariza is a Kiva Fellow working in Rwanda with Kiva partners Nuru Energy, Vision Finance Company, and Amasezerano Community Bank.