Lighting Up Rural India
Harish Hande's vision of bringing electricity to the countryside is rallying banks, helping low-income workers, and inspiring entrepreneurs.
(Business 2.0 Magazine) -- The rose pickers of one village outside Bangalore, India, typically got up before the sun, grabbed a basket with one hand and a lamp with the other, and hurried to the fields so they could bring their wares to market in time for the dawn crowds.
These were not the most obvious customers for Harish Hande, a 37-year-old engineer with a dream of selling solar power, not least because they seemed unable to pay for it. But Hande and his solar energy company, Selco India, realized that the rose pickers were prime candidates for solar-powered headlamps and partnered with local banks to help the workers get loans to buy them. Wearing the charged lamps in the predawn darkness, the pickers can work with both hands; they've doubled their productivity and boosted their take-home pay and now have enough income to start paying down the headlamp loans.
A new dawn
That's just one of the opportunities Selco has brought to the southern state of Karnataka. Though foreign institutional investment in India has increased 385 percent to $9.7 billion during the past five years, according to the Confederation of Indian Industry, many workers are still struggling - and Hande, who was inspired to form Selco in 1995 while studying energy engineering at the University of Massachusetts at Lowell, believed solar power could help.
The Bangalore company has installed 65,000 solar lighting systems since its launch and had sales of $3 million in its latest fiscal year, even though two-thirds of its customers survive on less than $4 a day.
Selco's customers range from poor daily-wage laborers to institutions like schools and seminaries. All buy solar panels at the same rate: about $450 for a 40-watt system that can light several 7-watt bulbs for four hours between charges.
To make it work, Selco had to persuade rural banks to lend hundreds of dollars to people, like the rose pickers, who have almost no money - a tough sell. "Rural people don't pay, I was told," Hande recalls. Now fewer than 10 percent of his customers default, and Indian lenders have about $10 million available to rural customers for solar financing.
Tapping an undesirable market
Despite recent spikes in the price of solar gear that have threatened the company's business model, Selco India continues to make ambitious moves to reach poor communities. Last year it became the exclusive technology partner of Sewa Bank, which caters to low-income female entrepreneurs. It plans to become a one-stop energy shop providing services such as solar heating and cooking options to bank members.
Here are some lessons from the company's experience in tapping a market that many believed to be untappable.
1. Teach customers. Company employees went door-to-door listening to the needs of potential customers and explaining how a few hours of extra light after sundown could lead to more earnings, fewer fumes from gas lamps, and better study time for kids.
Selco also toiled for three years to convince banks that solar electricity would empower borrowers economically and help them repay their loans. Hande estimates that the company spent close to $350,000 on such outreach to customers and banks. Among the things Selco India learned in the process: Some people could promise to put away 10 rupees a day (about 22 cents) to repay their loans, but not 300 rupees a month. "We were forced to innovate on financial transactions," Hande says.
2. Create a win-win. Those flexible financial structures ignited the entrepreneurial spirit in people like R. Vijaya Kumar, who drives a motorized three-wheel auto rickshaw. He uses the solar panel above his 15-foot-square house on the outskirts of Bangalore to charge 30 small batteries that he lends to street vendors for 15 rupees per battery per night.
Kumar's battery rental business has boosted his monthly income from 4,500 rupees to 13,000, leaving him with an extra 4,500 rupees after his loan payment. Selco India has given birth to 16 such entrepreneurs, who work with about 750 street hawkers, and the resulting excitement has driven demand for its products.
3. Sell experiences. Hande was determined not to simply sell the promise of solar energy - he wanted Selco India to communicate with customers and make sure the equipment worked. Company co-founder Neville Williams, who is now chairman of Maryland-based Standard Solar, says the process taught him the value of selling a branded experience, including product, installation, and follow-up services. "We are bringing back the knowledge we gained in India to the United States," he says.
The problem-solving spirit that Hande built into Selco India could be key: High European demand for solar equipment has boosted the cost of modules in India by nearly 37 percent during the past 12 months and dragged the company to a $67,000 loss in its latest fiscal year. Still, Hande remains optimistic that if the company can keep serving customers in unique ways, Selco will manage to keep the lights on.To send a letter to the editor about this story, click here.