Cash Machines for the Poor

Access to basic banking services for the poor is weak at the best of times. Many are openly discriminated against as a ‘bad risk’ by banks, and denied the sort of banking services middle and higher income people take for granted. Yet it is a myth that the poor do not have money or do not wish to save and invest for their future or for business.

The so-called Bottom of the Pyramid (BOP) – the four billion people around the world who live on less than US $2 a day – are being targeted by a wide range of businesses. Indian business consultant and professor CK Prahalad, the man who coined the term BOP, has gone so far as to claim this is a market potentially worth US $13 trillion, while the World Resources Institute puts it at US $5 trillion in its report, The Next 4 Billion.

And contrary to popular perception, the poor do have buying power, as has been documented by Massachusetts Institute of Technology (MIT) professors Abhijit Banerjee and Esther Duflo in their paper “The Economic Lives of the Poor”. Surveying 13 countries, they found those living on less than a dollar a day, the very poor, actually spent 1/3 of their household income on things other than food, including tobacco, alcohol, weddings, funerals, religious festivals, radios and TVs. The researchers also found that the poor increasingly used their spending power to seek out private sector options when the public sector failed to provide adequate services.

India, where 63 percent of the BoP market is rural and 304.11 million people are illiterate (Human Development Report), makes for a particularly tricky market to reach with bank machines: the average transaction is just 100 rupees (£1.25).

But a Madras-based company has come up with the Gramateller – a low-cost, blue-and-white bank machine custom-designed for the poor and illiterate. Vortex received funding of 2 million rupees (US $48,000) from an investment company, Aavishkar, that specializes in micro-venture capital — small sums for new business ideas. The advantage of micro-venture capital funding is its longer payback time: a young company does not get driven out of business by having to pay back the cash before the idea has been realized. Normally, venture capital helps a business to grow quickly but the venture capitalist wants to see an immediate profit on the investment.

Vortex’s chief executive officer, V.Vijay Babu, said: “The idea was conceived by Prof. Jhunjhunwala of IITM (Indian Institute of Technology Madras) in the course of an exploratory project focused on using ICT to deliver modern banking services to rural India.”

“It was found that branch-based banking is too expensive to be extended to remote rural locations where the volume and size of transactions are small. Using conventional ATMs (automatic teller machines) as a channel posed many difficulties because these ATMs were not built to operate in [illiterate] environments. Hence the need for developing an ATM specific to this context.”

Costing just a 10th as much to build as an ordinary cash machine, Gramateller has a fingerprint scanner for the illiterate, and is able to accept dirty and crumpled bank notes. Vortex came up with an ingenious solution to do this, said Babu: “Vortex developed a beltless dispenser design that in many ways mimics the way a human teller would pick and count notes.”

Vortex hopes to massively expand access to cash machines: at present, India has just 30,000 machines, or one for every 43,000 people (the US has a machine for every 1,000 people). These machines are being piloted with India’s biggest private bank, ICICI, and they have garnered interest from Indonesian banks as well.

“We are running pilots for two leading banks with about 10 ATMs,” said Babu. “Though it is still early, the initial response has been very encouraging – rural users find fingerprint authentication intuitive and simple and the ATM convenient and easy to use. A few users also gave feedback that our ATMs look less intimidating, maybe because it is placed in a non-air conditioned room with easy access and also is different in shape from a typical ATM.”

Furthermore the cash machines have taken a beating to see if they are robust enough for rural India: “The ATMs were tested for extended operating cycles under the harshest of environments that would prevail in the rural context — using soiled currencies, operating in non-air conditioned and dusty environments, subjecting the machine to typical fluctuations in line voltages and power outages. User-acceptance was tested by enlisting the participation of rural and semi-urban people to carry out test transactions.”

As for thieves getting their hands on the cash before the poor, Vortex maintains the machines will not become the victim of thieves: each machine will only carry a fifth of the money of city-dwelling bank machines.

Elsewhere in the South, a South African research and analysis company BMI-TechKnowledge (http://www.bmi-t.co.za/) in its latest report identifies a boom in banking services across Africa. In particular, South Africa, Botswana, Namibia, Angola, Mauritius, Tanzania, Kenya, Ghana, Nigeria, Egypt and Morocco – all have seen surges in profit and services as a result of improving banking regulations and political conditions. Maybe future markets for the Gramateller to reach Africa’s poor lie ahead?

By David South, Development Challenges, South-South Solutions

Published: August 2008

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

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Carbon Markets Need to Help the Poor

 

The global carbon credit trading schemes emanating from the Kyoto Protocol have created a multi-billion dollar market – the global carbon market was worth US $30 billion in 2007 (World Bank) – and represents one of the fastest growing business opportunities in the world. The bulk of this trading is with the European Union’s emissions trading scheme, some US $25 billion. But the big problem to date has been most of this investment is enriching stock brokers, and not the poor.

And this is a huge opportunity missed, as some point out: “These numbers are relevant because they demonstrate that the carbon market has become a valuable catalyst for leveraging substantial financial flows for clean energy in developing countries,” according to Warren Evans, the World Bank’s director of environment.

And the way to do this is through the Clean Development Mechanism (CDM) – where wealthy countries can meet their greenhouse gas targets by investing in clean energy projects in the South. But so far, it has been criticised for spending 4.6 billion Euros on projects that would have cost just 100 million Euros if implemented by development agencies.

But if done right, the CDM could become directly beneficial to the so-called Bottom of the Pyramid (BOP) – the four billion who live on less than US $2 a day. The CDM allows developed countries to offset their greenhouse gas emissions by paying projects targeting the poor to develop clean energy, or to create what are called carbon sinks (planting trees for example), to cut global emissions.

One mechanism to make all of this work is the CDM Bazaar: officially launched in September 2007, it is about linking together buyers and sellers. This is a place where people with business ideas or projects can go for start-up funding. It is also a place to share information, contacts and learn about how to tap the market.

And two Southern innovators are showing what can be achieved by tapping the power of the sun to help the poor.

One such initiative In India, owned by Mr. Deepak Gadhia and Dr Mrs. Shirin Gadhia, is targeting the 63 per cent of the BOP market that is with rural populations. All of these people need affordable and clean energy if their lives are to improve: most currently use firewood and kerosene for cooking and heating. The company Gadhia Solar is building and selling solar steam cook stoves in rural villages. The giant solar dishes which resemble satellite TV dishes, can fry and roast using the sun and come in Do-it-Yourself kits. The enormous silver dishes beam concentrated sunlight on to a black plate on the oven, reaching temperatures of over 450 Celsius.

In Morocco, the company Tenesol, an electric supply co-operative society, is using solar power to bring electricity to 60,000 poor households in 29 provinces. And it is making Morocco a world leader in the use of solar for rural electricity.

Each house is equipped with a solar home system comprising a solar panel, battery and controller. It is powerful enough to light four to eight lamps, and support a television, radio or mobile phone charger.

Customers pay a connection fee of US $80, and then a monthly service fee of between US $7.50 and US $17.50. The fee competes well with what rural households were spending on candles and batteries.

The initial outlay for equipment is mostly paid for by investors, with the hope that the money will be made back on the service fees.

Tenesol hopes to bring electricity to 101,500 households, and also wire them up and provide light bulbs.

By David South, Development Challenges, South-South Solutions

Published: March 2008

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

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Flurry of Anti-poverty Innovations

Innovation is key to transforming the lives of the world’s four billion poor. And it is at the core of much of the new thinking these days. While the world’s poor can’t rely on political developments, or wider macro-economic events to go their way, they can harness the power of invention, innovation and self-reliance to make big changes in the quality of their lives and increase income – and so can those who want to help them. New York Times journalist and author Thomas Friedman put it like this: “Africa needs many things, but most of all it needs capitalists who can start and run legal companies. More Bill Gateses, fewer foundations. People grow out of poverty when they create small businesses that employ their neighbours. Nothing else lasts.”

In the 1940s, Austrian economist Joseph Schumpeter wrote that “the function of entrepreneurs is to reform or revolutionise the pattern of production.” Schumpeter’s definition remains at the core of an entrepreneurial approach that focuses on innovation and enterprise as a means of addressing social needs. “Social innovators” are pragmatic and embrace innovation to tackle social problems through both for-profit and non-profit models.

International Development Enterprises India (IDEI) is a non-profit that uses product invention to transform the lives of the poor and tackle hunger and malnutrition. Its approach is to take existing technologies and adapt them, reducing costs and improving effectiveness. By constantly evolving the design, they can focus in on making it cheap and relevant.

One innovation is the Treadle Pump: a foot operated, water pump for small plots of land. It enables crops to be grown in winter and summer – no need to rely on rain. And since women are key to farm life, it is physically easy for women to use. So far more than 350,000 small farms are using it. It has been calculated the pump increases household incomes by a minimum of US $100/year.

Another of their innovations is the Affordable Drip Irrigation Technology Intervention. While drip irrigation systems have been for sale in India for the past 15 years, they were not relevant or affordable for small and marginal farms. IDEI adapted these technologies during trials from 1997 to 2000. Existing technologies suffer from two drawbacks: they are complicated to maintain and they are expensive to buy. A big challenge was demystifying the idea that crop irrigation methods were for only the big orchards. The irrigation systems are sold as kits and are scalable so that farmers can expand their systems if they want. IDEI has sold over 85,000 of the various irrigation kits.

Both inventions are designed to mimic traditional technologies and are inexpensive, thus maximising take-up by small farmers, who can recover the cost within one season of crops.

They not only do the research and development and product design and manufacturing, but also set up the vertically integrated marketing and sales network and make it viable for the private sector to step up and sell the kits.

Paul Polak, the founder of the global International Development Enterprises, believes progress is only possible if products are sold at a fair market price. “When you give things away, you lack discipline in how you design them because you don’t have to get feedback from the customer,” he said.

In the village of Otse, Botswana in southern Africa, the Godisa Technologies Trust has brought affordable solar-powered hearing aids to the poor. Most of the employees are deaf, and as a non-profit social enterprise, its battery chargers – and its branded Solar Aid digital behind-the-ear (BTE) hearing aid – are all for use in developing countries. It is estimated over 600 million people suffer from some form of hearing impairment. According to the World Health Organization, 278 million people in the world are affected by moderate hearing loss. Yet the global production of hearing aids does not come anywhere close to meeting the need.

The Solar Aid needs only six to eight hours of sunlight to recharge for a full week. And it is fully compliant with WHO guidelines. Conventional hearing aids and batteries are very expensive and often not locally available. Solar Aid batteries can take 400 charges before being replaced.

The Solar Aid hearing aid was developed through field testing, funds were raised for further design improvements, and it went on to win several awards. But it initially failed to earn back its production costs and so the Godisa Technologies Trust was established to sweat the details on making it sustainable. It was developed in partnership with the Botswana Technology Centre,

“I want to help other deaf people to have access to education training and employment. I would like to use my skills and opportunities to help other deaf people achieve their goals,” said one of Godisa’s technicians, Sarah Phiri. So successful are these hearing aids, there is interest around the world, including in Canada.

Adequate street lighting has been proven to cut down muggings and improve public safety, reduce traffic accidents, and boost business confidence in neighbourhoods because people feel safe going there. StarSight’s street lamps combine solar-powered street lighting and internet access in a wireless configuration, freeing up the lighting poles from needing to access the main power and telephone grids. Each one contains VoIP, wi-fi broadband, CCTV and are being rolled out in Istanbul.

StarSight street lamp poles, designed in Turkey, are also being rolled out in Martinique, Republic of Congo, Cameroon, and Cote d-Ivoire. StarSight’s goal is to install 70,000 street lamps by 2011. Malaysia and Indonesia are next.

d.light design is a social enterprise targeting the 1.6 billion people who rely on kerosene oil to light their lanterns, or use candles. There is an ambitious goal behind this business: they want to replace all the kerosene lanterns in the world with their lights within the next ten years. They use light emitting diode (LED) technology and are about commercializing light and power solutions for families living without electricity in emerging markets.

Better lighting has many benefits, including helping children and adults to study and learn during dark hours. Importantly, it will make the air inside dwellings cleaner and the environment safer without the risk of fire. Indoor air pollution is one of the biggest killers of children under five in India. UNDP has found that families with improved lighting see a 30 per cent increase in their income because they can keep doing things at night.

On high beam, the lights last five hours; on low beam, they last for 200 hours without a charge. It can be re-charged by solar panels or by normal electric outlet. They promise consumers can expect to save $150 over five years. They have received additional support from the Acumen Fund to enter the peri-urban and, later, the rural market in India.

By David South, Development Challenges, South-South Solutions

Published: December 2007

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

Follow @SouthSouth1

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