July 2017 – SOCIAL BUSINESS

Access to quality sanitation in kenyan slums: ...

12 July 2017/in Water and Sanitation /by quai13

Sanergy strives to leverage the entire sanitation value chain to create vibrant micro-businesses in informal settlements and by-products that can be marketed to Kenyan farmers. Hazardous waste is removed from local communities and converted into organic fertilizer and animal feed, for which there is high demand.
However, experience has shown that all stakeholders need to derive benefit from each component of the business model to secure the community buy-in that is essential to the success of any local business.

This article is an excerpt from Issue 23 – Social business

The idea for Sanergy originated at Massachusetts Institute of Technology (MIT) when stu- dents were asked to develop a business solution to a poverty challenge that affects at least one billion people around the globe. Ani Vallabhaneni, Lindsay Stradley and I decided to leverage our previous experiences to develop a systems-based solution to the urban sanitation crisis. 4.1 billion people lack access to basic sanitation facilities (Baum et al., 2013), resulting in one million deaths and USD 260 billion in lost productivity (World Bank, 2013) annually. Over one billion people currently live in urban slums, and this number is expected to double by 2030 (UN-Habitat, 2003). In Nairobi, 2.5 million slum dwellers rely on unsanitary practices such as “flying toilets”1 and pit latrines.

Sanergy’s initial focus was on developing a dense network of payper-use toilets throughout Nai- robi’s informal settlements and collecting and converting the waste into organic fertilizer and biogas. However, our focus gradually shifted in two significant ways. First, we developed two additional distribution channels to reach a more diverse group of potential customers and to serve more customers based on their demands. In 2014 we began marketing toilets to landlords, who provide the facilities as a value-add service to tenants, and to schools. Second, we began expe- rimenting with other ways of processing waste, and we developed a high-protein, pathogen-free, insect-based animal feed.

More infos on “Secteur Privé & Développement” blog, animated by Proparco.

A few lessons from the DFID impact fund exper ...

12 July 2017/in Blog, Impact measurement /by quai13

While poor people in developing countries are more than willing to pay for basic goods and services, the existing private sector solutions in place so far do not allow them to meet such needs effectively. They often have to pay higher prices for similar goods and services, or settle for inferior quality.

We believe that development finance institutions have an important role to play in boosting private initiatives as social and profitable businesses. DFID decided to enter the impact investment market to tackle some of the significant challenges it faces (including market fragmentation, information mismatch and limited fund manager ability to measure the social and environmental performance of impact investments). It is in this way that the DFID Impact Programme was created in 2012. As a key part of this Programme, the USD75m DFID Impact fund was established to invest in businesses that generate benefits for the poor while also achieving profitability. This facility, which is managed by CDC, the UK’s development finance institution, uses a ‘fund-of-fund’ approach – CDC selects and partners fund managers. The USD40m DFID Impact Accelerator Facility, also managed by CDC, invests directly in transformative enterprises. In the short term, these funds will use the capital raised to boost co-investor confidence through robust due diligence of investees’ financial returns and development impact, and by offering limited potential subordination to private investors where necessary to catalyse their participation. In the longer term, they aim to raise additional capital by demonstrating the financial viability and positive impact of pro-poor business models.

Frugal Innovation, a revolution pioneered in ...

12 July 2017/in Innovation and technology /by quai13

Entrepreneurs from emerging economies are pioneering a new model of “frugal innovation”. This approach aims at creating greater social value while minimizing the use of scarce financial and natural resources.

India, China, Brazil and some developing and emerging African countries are pioneering a new model of “frugal” innovation, one diametrically opposed to the costly, rigid and elitist research and development-driven approach prévalent in industrialized countries. Unlike yhe structured and resource-intensive Western innovation model which strives to do more with more, frugal innovation boasts the ability to do better with less – to create significantly greater social value while minimizing the use of scarce Financial and natural resources. The frugal innovation model – enabled by an ingenious jugaad mindset – pioneered in African, Latin American and developing Asian countries debunks “the North invents, the South copies”.

INNOVATIVE SOLUTIONS BORN FROM INGENUITY AND COMMON SENSE

Thousands of ingenious entrepreneurs and companies in emerging economies, such as Kenya, India, Peru and the Philippines, use the frugal innovation approach to develop affordable and sustainable solutions with limited resources. These frugal innovators view harsh constraints, such as a lack of electricity or water less as restraining factors than creative opportunities to innovate and generate more value for local communities.

A social enterprise to improve access to elec ...

12 July 2017/in Energy /by quai13

Le Young Belgian engineer Ruben Bäumer leads the Sénérgie initiative, a social enterprise that aims at improving access to electricity in Senegal by selling solar kits. He présents this project and analyses its potential and challenges.

What was your initial objective when you launched Sénérgie ?

I wanted to work in solidarity and development, by doing something concrete in the field in my sector, engineering. We started with a social enterprise in Senegal, selling small solar panels designed in Germany by Fosera and manufactured in Thailand. These high-quality kits, which we sell at around EUR 250, are equipped with four LED lamps, a mobile phone charger and a radio. We have established a partnership with Caurie, a local microfinance institution, to allow the purchase of the product to be spread out over 18 months, with a 3-year guarantee for the solar kit, including the lithium battery.

How did you start ?

In 2014, we conducted a feasibility study in the field with 30 solar kits. We financed this pilot project with a crowdfunding campaign and thanks to support from Academics for Development, a student organization which started in Louvain and has expanded to other universities in Belgium. It aims to give students, young students like me, the opportunity of going to developing countries to get involved in social entrepreneurship and put their knowledge into practice with local entrepreneurs.

Why did you choose Senegal ?

In West Africa, the solar energy market is not as developed as in Eastern or Southern Africa. This is one of the reasons why we started in Senegal.

Social Business “Build a strong sector by i ...

12 July 2017/in Social Business Model /by quai13

CERISE and its various partners (AFD, AIDR, CIDR, Entrepreneurs du Monde, Grameen Crédit Agricole Foundation, GRET, I&P, IRAM, PROPARCO) have developed a “Social Business” analysis grid. What purpose does it serve? An interview with Jon Sallé, Program Manager at CERISE.

Social Business is subject to a great deal of enthusiasm on the part of a number of actors (public and private donors, NGOs, companies…). Why is there so much enthusiasm ?

Firstly, it must be said that the underlying idea of this new sector, which is to combine entrepreneurship and social impact, is particularly attractive ! Social business covers a complex range of organizations, which differ in terms of their legal status, their relations towards capital and profit, innovations, etc. All these structures do, however, have one thing in common : the social or environmental issue they tackle must be set out in their social mission.

Social business fits in with the emerging global trend for responsible initiatives.

More informations on “Idées Pour Le Développement” blog, animated by AFD.

Good Enough Innovation : reconciling social i ...

12 July 2017/in Challenge and Definition /by quai13

Companies are showing a growing interest in the 3 to 4 billion people who live on less than USD 6 a day. Conquering this market requires breakthrough innovations, and Good Enough Innovation enables social business players to create products that combine economic viability and social impact. An interview with David Menascé, Professor, HEC Social Business/Enterprise and Poverty Chair.

Social business, Bottom of the Pyramid, Good Enough Innovation… are we talking about the same thing ?

While the ultimate objective is the same – reconcile economic sustainability and social impact – these terms do, however, refer to different practices.

The Bottom of the Pyramid (BoP) concept invented by CK Prahalad schematically refers to both a population segment – the 4 billion people living on less than a few dollars a day – and a strategic approach which aims to invent both economically profitable and socially positive business models.

The notion of social business is a bit different. The ambition of social business, which was popularized by Professor Muhammad Yunus, is to invent economically sustainable models with the express aim of achieving a social objective. As state aid falls short of needs, it involves inventing economically sustainable mechanisms to solve social problems – access to water, energy and sanitation – with a distribution of added value that is different from the one made in traditional strategies. Indeed, Muhammad Yunus based social business on the “no loss, no dividend” principle, whereby any profits generated are to be reinvested in the social business.

More informations on “Idées Pour Le Développement” blog, animated by AFD.

When the CAC 40 embarks into social business

12 July 2017/in Blog, Social Business Model /by quai13

There is growing consensus over the principle by which private sector companies have a responsibility and interest in promoting more sustainable and inclusive economic models. But how is the situation in the field? CAC 40 companies are effectively investing the resources to deliver on their commitments to sustainable development and the fight against poverty and exclusion via social business initiatives.

Going beyond Corporate Social Responsibility

The COP21 “Lima-Paris Action Agenda”, which lists, among other initiatives, the climate projects led by companies, and the importance given to the private sector when the new Sustainable Development Goals (SDGs) were adopted by the UN last September, are both signs that Corporate Social Responsibility (CSR) is now well established. One of the approaches to this responsibility has taken the form of the implementation of social business initiatives, i.e. economic activities whose objective is not to maximize profits, but to provide a response to a societal need. Beyond CSR policies, it involves developing innovative economic models which contribute to changing companies from the inside, their modus operandi, and the very way of doing business.

The survey “CAC 40 Companies and Social Business”, published by Convergences in 2015, focuses on 14 companies which are developing this type of initiative. The results of this first assessment highlight the wide diversity of social business projects led by CAC 40 companies. The study points out the development potential that can be exploited in both the companies which have already taken this path and those which have not yet ventured into the ecosystem of social business.

More informations on “Idées Pour Le Développement” blog, animated by AFD.

Palmis Enèji: from NGO to enterprise – the ...

12 July 2017/in Energy /by quai13

In 2012, the French NGO EDM launched a programme to distribute Palmis Enèji cooking and lighting appliances to meet energy demand among the poorest sections of the Haitian population. Two years ago, that social business became a public limited company. This change in status and a partnership with Total Haiti and the microfinance institution PMS has enabled it to expand its activities and will help to underpin its sustainability.

Haiti, one of the poorest countries in the world1, has very high levels of energy poverty (72% of households have no electricity). Haitian families use candles and kerosene lanterns for lighting and 95% of households use very basic stoves and wood or charcoal for cooking, thereby exa- cerbating the problem of deforestation. These cooking arrangements are often inefficient and the fumes cause respiratory diseases.

However, more suitable equipment which is less damaging to human health and the environment does exist. Solar lanterns provide better quality lighting and are cheaper in the long term. Improved stoves and table-top cookers powered by liquefied petroleum gas (LPG)2 use less energy for cooking. But such appliances are hard to obtain in Haiti and very few financial service companies are prepared to finance their purchase. Palmis Enèji was set up – initially as a programme designed and managed by the French NGO Entrepreneurs du Monde (EDM) – to boost their distribution.

Changing status for sustainable action

EDM applies a social entrepreneurship model to support the distribution of appliances that have a very positive impact on health, the economy and the environment among the poorest populations in developing countries. In Haiti, Entrepre- neurs du Monde set about distributing gas- fired table-top cookers and improved wood/ charcoal-burning stoves and solar lanterns. The Palmis Enèji project was launched in 2012 as an Entrepreneurs du Monde programme. Because it was an NGO-sponsored programme, Palmis Enèji was able to take the time to carry out a market survey and test its model (recruit a management and sales team, set up the first franchise outlets, develop a range of products, etc.). It was primarily during this phase that it embarked on social marketing nationwide.

The diversity of social business: the case of ...

12 July 2017/in Social Business Model /by quai13

Despite a troubled macroeconomic and political environment, Madagascar possesses a fairly diversified, dynamic economic fabric in comparison to other countries with a similar level of development. This national particularity undoubtedly explains the country’s thriving social business sector. A study undertaken by AFD lists close to 90 projects2 that meet the broad definition of a social business, i.e., organisations (of all types) whose priority is to address a social problem and who aim to be financially self-sustainable.

What is the key driver of social business in Madagascar?

In a country with over two thirds of the population living in poverty and with little in the way of essential government services (due to serial political crises), non-state actors attempt to come up with alternatives in the hope of offering the population better living conditions.

We are referring here to organisations that are part of civil society – not only NGOs, but social business projects as well, which have a long history in Madagascar. Many of these existed before Muhammad Yunus coined the term “social business”.

The projects covered are on average 10 years old and over a third have existed for more than 15 years.

Nearly half of all such projects (46%) were initiated by NGOs that wished to generate their own revenue to finance their development rather than being entirely dependent on public funding.
What are the key feactures of social business projects in Madagascar?

Read the full article on the blog Privat Sector & Development, animated by Proparco.

Can social business rescue development ?

12 July 2017/in Challenge and Definition /by quai13

Donors are currently showing a very keen interest in social business and are adopting specific strategies and tools (Asian Development Bank, USAID, DFID, KFW and, just recently, AFD). Indeed, social business could be seen as a miracle solution in this context of fiscal austerity. But let there be no mistake: public financial support continues to be one of the conditions for its success.

Reconciling the social objective and the need for profitability

The aim of social business is, as with social policies, to address social problems, but at the same time by generating incomes that are essential to the sustainability of the project, based on an entrepreneurial economic model. It involves organizations with different statuses (associations, NGOs, cooperatives, enterprises…) which have a priority social (and/or environmental) objective and are seeking to achieve financial equilibrium in order not to be dependent on public financing.

While profit is not the primary objective, it is the way to ensure the autonomy of the project, as well as its growth if reinvestments are made in it. The beneficiaries of these projects can be clients (who are sold essential products at a low price), or employees (who are offered more than just a job : improved working conditions, return to work…), suppliers (who are offered stable outlets at a fair price, by helping them to structure their sectors), and external persons (who are offered products and services, or a share of the profits).

See the full article on the blog ideas4development, animated by AFD