Editor’s Note: This post originally appeared on the Villgro Fellows Blog, on March 7.
“There is no ‘one size fits all’ strategy.”
Another Villgro Fellow Nilima recently referred me to this post
from the Acumen Fund Blog by Sean Moore, which discussed the fact that it is so difficult to find an improved cook stove that is universally accepted and effective. I think Sean Moore’s words above are so appropriate, not only for the improved cook stove market but also for the entire social sector.
At Sustaintech, we work in the niche area of the improved cook stove market. We are addressing the needs of a customer base that is not adequately addressed by the improved cook stove sector, namely the low-
However, I’ve found that many MFIs do not always customize their offerings to fill gaps in the market. For instance, many MFIs focus only on women, banking on their increased reliability and their tendency to focus on their families. And there have been notable successes using this model. But what do you do in areas where the men in the family manage a business and they need business loans? This is the case with Sustaintech customers. Very often, it seems, these families are turned away by both commercial banks and MFIs and the women of the house are required to take on income generating activities to sustain the household or to receive the loan.
Sustaintech is trying to ensure that consumer finance linkages are available to those customers who need loans to purchase our product. But the gender bias among financial institutions makes it difficult to ensure financing for our target customer base. This hurts our customers by limiting their ability to purchase our stoves, curbing the growth of their businesses.
The tendency in the social sector has been for new organizations to jump on the current bandwagon. So when Muhammad Yunus found success with his microfinance model lending to women in self-help groups, other MFIs followed suit. The problem is that the Grameen Bank’s women-centric model will never be able to address the financial needs of all potential customers at the Bottom of the Pyramid, and when the majority of MFIs follow the same model, many potential beneficiaries are denied access to important services.
So, inadvertently, what happens is that many social organizations and MFIs end up imposing their views on their intended beneficiaries, requiring them to change in order to be able to receive the benefits. Wives of the men looking for loans will begin businesses simply to take out a loan for their husbands, and the men themselves sometimes have to revise their business and personal financing strategies to do without loans. Neither is this sustainable nor is it appropriate. It is not a social actor’s place to dictate how a household interacts or how a business is run; rather, the social organization must adjust itself to provide the most appropriate services to the beneficiaries.
Therefore, I think it’s necessary that MFIs and other social organizations engage in healthy competition and keep their beneficiaries in mind, so that customers may dictate the products and services they need and encourage organizations to diversify their activities.
In NextBillion’s response to the Acumen Fund post, author Scott Anderson quotes co-founder of Envirofit Bryan Willson “‘What we’re trying to do is bridge the gap between some very good stoves that are too expensive and some very low-end stoves that don’t perform.’” Also, according to the NextBillion post, the international improved cook stove industry is looking to ensure that appropriate standards are in place to define what truly is a “clean” cook stove (in terms of efficiency, emissions, and more). While it is important to hold cook stoves to a certain standard of efficiency, I think it is integral to find the balance between the high-end and low-end models, as Willson mentions. The improved cook stove industry, and even the entire social enterprise sector as a whole, needs to decide whether an improved cook stove with 80% efficiency and 100 stoves in the market is better than an improved cook stove with 40% efficiency and 1000 stoves in the market.
The customer is going to give us the most important information. So if the 40% efficiency cook stove has sold more units, it might be the model to study. The immediate impact on end consumers is more significant than efficiency, and there is no reason the cook stove company cannot continue improving efficiency and assessing customer receptiveness while continuing to sell. The customer and the environment will benefit if a company achieves more sales, r ather than if a company invests time and capital into an extremely efficient stove with low volumes due to difficulties in usability.
After his discussion with Akos, the owner of the small roadside eatery near his office, Sean remarked that “low-income consumers are extremely knowledgeable about the products they use and generally make rational purchasing decisions.” Knowing that, if we pay closer attention to the financing needs of our customers and to the cook stove models that are really generating sales, then we will be well-placed to tap into our target markets. We know that coming up with a few proposed solutions, telling the poor what to do, and giving them what we thought they needed has not led to much success. Let’s let them tell us what they need from us and see where that takes us.
Swetha Krishnakumar is a 2011 Villgro Fellow working in business development and operations at Sustaintech, a social enterprise startup selling fuel-efficient cook stoves to the low income roadside eatery market. She recently graduated with degrees in Industrial & Systems Engineering and International Affairs from Georgia Tech, where she had her first exposure to issues of human rights, international development, and social entrepreneurship.