SELCO S3IDF

Background

Observations from Operation SELCO’s efforts in creating the conditions to deliver energy services to low income families in rural and urban areas places it in a unique position to understand various gaps in the ecosystem that hinders an energy entrepreneur:

  • Enabling Ecosystem - Lack of favorable physical, legal, regulatory, and political environment cripples entrepreneurs and industry when adopting market driven forces to deliver solutions
  • Lack of perception regarding requirements of poor households - There is big gap between requirements of poor households and what is perceived to be the requirement by the implementers and policy makers: leading to poor policies, inappropriate products and unsustainable business models.
  • Lack of defined products/ services for the poor - There is a tendency to believe that affordability can happen only if there is mass standardization resulting in cheaper value. This assumes societies are homogenous in nature: which is not true. The needs and expectations of different segments are unique and solutions need to be tailor made.
  • Subsidies - There is a belief that subsidies are required to increase affordability for a certain product ignoring that often subsidies may be required to build the eco-system. Subsidies distort the eco-system, which is more harmful than distorting the market.
  • Balancing social-commercial objectives : Conventional approaches force expectations of scale that drive entrepreneurs to pursue goals diluting social mission in the process
  • Capital and custom designed rural credit – Poor can afford higher value quality product if there is appropriate financing. The energy services needs to be viewed as assets that require cash flow based financing, which needs to be longer term at lower interest rates.
  • Business development services - A weak expertise in financial and operational management such as inventory, accounts, marketing etc. poses a significant obstacle to launch and run businesses and more so when there is a need to compete for investments.
  • Training facilities and trained personnel - There is a dearth of skilled personnel in the sector at all levels: technicians, service providers, holistic planners, innovators, policy formulators
  • Investment structuring
    • Social investors lack experience to make appropriate structuring of investments needed for social enterprises to grow. Under appreciation of investors to recognize challenges in setting up a social enterprise and hesitation of entrepreneurs to effectively communicate ground realities implies unrealistic expectations leading to failed ventures.
    • Poor utilization in the ratio of financing instruments such as debt, equity and grants required at different stages of enterprise growth leads to affordable products but with expensive financing or product-oriented organizations that effectively channelize these investments into capital subsidies that create unsustainable business practices.
  • Language – The above barriers puts a person who lacks conventional management and English education at a disadvantage of starting and running an enterprise.

Decentralized approaches like SELCO have been able to overcome some of the barriers or have learnt to work despite them. They reinforce the premise that heterogeneous nature of poverty calls for diverse solutions that are tailored to fit local needs and conditions. Hence the need to tap into latent local human resources and convert them to productive assets for the country that deliver long term solutions. The Way Ahead The SELCO Incubation Centre will be leveraging on all the above observations to cater to catapulting a new league of SELCO's across India. We will seek to utilize SELCO’s shared resources, management expertise, intellectual capital, and learning over the past 17 years to enhance the capacity of potential local energy enterprises to deliver energy solutions to low-income communities by:

  • Replicating decentralized business models and processes
  • Providing mentorship in social enterprise management and business planning support
  • Assisting in developing the enabling conditions to support delivery of energy services
  • Enabling access to seed and later stage capital
  • Establishing a platform for networking, sharing of best practices, common sourcing , etc
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