ADB invests in Simpa Networks to Provide Rural India with Energy

By 2015, Simpa Networks’ pay-as-you-go solar energy solution is bound to provide more than 60,000 household in rural India with better access to electricity. Supported by a $2 million equity investment by the Asian Development Bank (ADB), the company will offer an affordable clean energy solution to the underserved and underprivileged consumers in India.

Simpa Networks

The company’s mission is “to make modern energy simple, affordable, and accessible for everyone.” In order to achieve this goal, the company introduced a business model that will make sustainable energy choices affordable to the poor.

How it Works

Simpa’s pricing model is highly innovative and called Progressive Purchase. Customers make a small initial down payment for the solar system and then pre-pay for their future energy service. They can conveniently top up their systems in small user-defined increments via a m obile phone. Each of these payments also adds towards their final purchase price. Once the purchase price has fully been paid, the system unlocks permanently and continues to produce electricity without the need of any further payments.

The Importance of Energy Access

Today, there are approximately 1.6 billion people with no access to electricity and another 1 billion with only very unreliable access. Without this access, the poor depend on battery powered flashlights or kerosene lanterns for light and are unable to break the cycle of poverty as they are unable to take advantage of the numerous productive uses of energy. In addition, kerosene light comes with high operating costs, poor light quality and dangers to health and home.

Access to energy is therefore essential for every family’s economic livelihood, safety, health, educational achievement, and overall quality of life.

ADB’s Motivation to Invest

ADB hopes that the success of Simpa Networks could lead to increased venture capital funding for sustainable business models that deliver goods and services to those at the bottom of the economic pyramid.

Bring it on: Increasing Social Focus in Asia

Asia is booming! The area’s rapid rise is considered by many the most successful story of economic development in recent history. It has seen economies expand at a completely unprecedented pace and human conditions dramatically improve.

The area is also years ahead of the Millennium Development Goals deadline of 2015. It has already achieved its targets for preventing a rise in HIV prevalence, for reducing gender disparities in education enrolment, for halting the spread of tuberculosis and for halving the proportion of people without access to safe drinking water. Pretty impressive I would say!

 

Social Entrepreneurship as Solution for New Challenges in Asia

However, Asia’s growth does not come without a new set of challenges. These include food insecurity, growing urban slums and rising inequality. In addition, rapid growth has led to natural resource depletion and environmental degradation which poses high risk to a region already vulnerable to natural disasters.

In order to fight these challenges, public sector response alone is not enough, especially since aid funding is decreasing as traditional donor countries tighten their belts. This is where social entrepreneurship comes into the picture.

 

Case Studies: Frontier Markets, Ecolink and Waste Concern

Look at the Indian social enterprise Frontier Markets for example. The company seeks out innovative ways to bring quality, low cost renewable energy, clean water, and health and hygiene products to poor households. Frontier Markets is getting closer and closer to their goal of reaching three million households focusing on women and children living in rural and peri-urban areas.

Another example is Ecolink in Vietnam, a for-profit company. It provides a network of 800 ethnic minority farmers with a marketing channel for their organic, fair trade agricultural products. It exports products to Western Europe and North America but also develops a local market and aims at opening 20 stores across Vietnam.

A third interesting social enterprise is Dhaka-based Waste Concern. It collects organic waste from cities, recycles it into organic fertiliser and generates revenue through carbon credits it earns by eliminating greenhouse gases emitted by rotting garbage. In addition, Waste Concern successfully saves cities and taxpayers the cost of waste collection, helps improve the environmental hygiene conditions of Dhaka, provides jobs and contributes to Bangladesh’s food security by helping farmers in achieving higher yields.

 

Challenges Social Enterprises are Facing

While the number of social enterprises throughout Asia is increasing, most of them remain small-scale initiatives. A major obstacle for them is the access to finance to scale up their operations and increase their coverage. Further to this, regulatory and policy environments need to change in many areas.

In order to address this, the Asian Development Bank (ADB) supports access to financing through various financing initiatives, and advises governments on the basics of building and maintaining business-friendly environments.  The ADB also supports social enterprise development by collaborating with Shujog, an arm of the Impact Investment Exchange Asia (IIX) initiative, and other partners to prepare social enterprise landscape reports and studies on impact investors and market intermediaries. Findings are made publicly available to inform, inspire and catalyse social entrepreneurship and impact investment.

As finding funding to support social enterprises is still one of the sector’s main challenges, the creation of incentives for private investors to invest in socially or environmentally beneficial purposes is crucial to the sector’s growth. A promising innovation are Social Impact Bonds and Development Impact Bonds, which provide a vehicle to invest in the delivery of services that produce social or developmental results with the promise of near-commercial returns. The concept of Social Bonds is currently tested in Australia, Japan, the UK and the US.

 

With a continued commitment to harnessing the power of the market for social and environmental objectives, the Asian region definitely has potential to become a leading social enterprise incubator in the future.