Social Enterprise: SELCO
Social Entrepreneur(s): Harish Hande
Sector(s): Rural Development, Energy, Environment
To develop effective disruptive technologies through appropriate financing, market linkages and after-sales service.
The Innovation Explained
SELCO designs solar energy products customized for households and small businesses located in off-grid rural areas. These units, priced from US$ 160-300, deliver better lighting, additional income for small businesses, and create jobs for rural entrepreneurs engaged in installations and maintenance.
Providing affordable, long-term financing and developing a reputation for excellent after-sales services are core components of SELCO’s model. “Our solar units are not consumer products,” explains Harish Hande. “They are assets – often the most expensive asset after the house itself – and require long-term financing at affordable interest rates.” Therefore, SELCO persuaded local banks to tailor loans for potential customers, whose income fluctuated due to seasonal labour. SELCO further explained the long-term cost savings of solar units, and the economic returns realized through improved educational outcomes, as children gain the ability to study at night. SELCO induced banks to provide terms that allowed poor customers to pay a 10-25% cost down payment, and the balance in instalments over three to five years at a 5-14% interest rate.
Historically, potential SELCO clients have been victimized by unethical people selling faulty products and then disappearing, so SELCO developed a network of 35 after-sales centres to foment trust. These centres train and hire technicians from the community who speak the local language, and this fosters trust in the SELCO brand while demonstrating a commitment to the community. Since a technician can travel two hours on a motorbike, explains Hande, “That becomes our sales radius. We do not sell beyond that area because we promise service within 24 hours.”
To date, SELCO has provided customized solar energy solutions and affordable long-term financing to over 600,000 people and small businesses in rural areas in India.
Why This Matters
Energy access is one of the keys to development and poverty alleviation, as it enhances health, education, livelihood opportunities and agricultural productivity. More than 1.4 billion people worldwide have no access to electricity, and a billion more have only intermittent access. Solar energy is a renewable source of energy that can significantly and effectively address the needs of the off-grid population.
Beyond solar technology, SELCO’s lessons for applying its model are highly relevant for any social enterprise. “You have to look at your technology product, match it with the appropriate financial product, create the right market linkages and customize it for different customer segmentations,” says Hande. “Packaging those pieces correctly is essential, and highly replicable beyond energy.”
Treat the poor as asset creators. Do not think of the poor as merely consumers, but as asset creators. Learn by partnering with them to co-create solutions, and recognize the importance of the one-to-one connection with your customer. “Social entrepreneurs cannot develop a real solution just using a business plan and doing some rural tourism,” adds Hande. “Nothing replaces the rigour of being out in the field and actually implementing and refining a solution in partnership with the poor.”
Invest in personal relationships. Hande explains: “I keep telling young social entrepreneurs to develop friendships. I became friends with local bank managers and their assistants. I would call them and pop by for a cup of tea. The first breakthrough I got was when one of them got sick of me coming over and said, ‘Here’s the financing, go and do it.’ And now … many of those local managers have become [the] chairman of their bank, and many of those local bureaucrats are now in national ministries in Delhi.”