News & Insights
What’s the Challenge in Getting Solar Technology to Poor Families?
by Danny Stokley, Green Technology Fund Program Officer, Global Partnerships
“I’m sorry,” offers Alicia, the co-founder and president of Buen Power, a social enterprise that sells solar products in off-grid communities surrounding Cusco, Peru, “We don’t have any more of that model in stock.” Francisco, a farmer from Acchauata, has hiked for two hours, and then taken a two hour bus to reach the Buen Power office in Cusco, essentially dedicating a full day just to buy two d.light products. Unfortunately, due to the challenges of a global supply chain, Buen Power has just sold out of the model Francisco is requesting. This is not just bad for business; it’s heartbreaking for Francisco and the families who would benefit from this technology.
Francisco is part of a network of entrepreneurs who buy small solar lights from Buen Power and resell them in their home communities. Buen Power is a small, entrepreneurial, mission-oriented social enterprise. They spend a great deal of time working in off-grid communities and finding creative ways to reach the most remote villages with solar energy. Buen Power is connected with many of the industry leading manufacturers of affordable off-grid solar products, and have developed an innovative last-mile distribution network (i.e. distribution to those who live in the most remote, rural regions). Still, they struggle to find the working capital to keep up with demand.
THE CHALLENGE: LACK OF WORKING CAPITAL
One of the main challenges for social enterprises, like Buen Power, who are trying to reach the most remote populations with solar lamps, is the lack of working capital available to purchase products. It’s really that simple. The smaller, more affordable solar products are usually manufactured in China, and importers often have to pay in full before they ship. In addition, the largest manufacturers prefer to work with importers that can place orders for a full container (typically $100k and up). This means distributors have to invest large amounts of capital 3-4 months before they even have a product to sell which presents a major challenge for startup social enterprises, particularly those who work with more remote populations.
DEMAND IS THERE; THE INVENTORY IS NOT
The most troubling part of this is that the demand, typically the biggest obstacle when selling products to poor customers, is strong. Replacing kerosene with solar light is an obvious improvement that most off-grid families immediately recognize. At the end of the day these products are practical for families – helping them lift themselves out of poverty by extending their work day and study time while also saving them money. One thing is for sure – if someone is willing to travel for an entire day to buy a product with such enormous social impact, we must find a way to keep up with inventory.
CAPITAL CONSTRAINTS ACROSS THE VALUE CHAIN
Our research has shown that capital constraints hinder all levels of the solar light value chain, and I got a chance to witness this first hand in Peru last month. From manufacturers that are reluctant to offer credit to importers to last-mile resellers like Francisco who could sell many more lights with access to a small loan, lack of working capital sector-wide is a recurring theme. To address this challenge, we are currently in discussions with manufacturers, distributors, and microfinance institutions involved in the supply chain, and are committed to leveraging GP funds to increase access to solar lighting products that have the potential to change lives.