January 2008 Edition
Vidya Viswanathan
New Delhi
Fontana, the Taj Palace
hotel’s coffee shop, has
an array of frosted
lamp shades on its celing
lit by filament bulbs.
Harish Hande looks at the
ceiling with irritation. He’s
just been declared ‘social
entrepreneur of the year’
by the Schwab Foundation
for spreading solar energy
to villages in India. His
company, Selco Solar Light
Pvt Ltd, is worth some $ 4
million. “Why produce filament
lamps? Why produce cars
for one lakh? You have to
be serious when you talk
about climate change. If
one of the most respected
groups in the country does
not get it how will anyone
else?” he frets.
Fortunately, all of Hande’s 85,000 customers in rural Karnataka ‘get it’. They have installed solar lighting systems. His clients include rural households, vegetable
vendors, babas in caves, silkworm rearers,road- ide restaurants, churches,
temples, mosques, a residential school, the SOS village and a Tibetan settlement. “We promise service and finance at your doorstep,” he says. No matter the
terrain, his technicians go on a motorbike, examine the house and install a
solar solution. Selco has 27 offices in rural Karnataka, each manned by technicians
and people who collect payments. They are hired locally and trained.
They offer a guarantee on panels and the battery. A four light system (with 7 watt CFL bulbs) costs Rs 14,000, while a system with three lights costs Rs 12,000. A single light costs Rs 5,000. About 48 per cent of his customers have a one-light system. “We look at ahouse and see what they want. In one case a villager wanted bulbs installed in three rooms. We removed some bricks from the ceiling and installed a one-light system. We also asked him to white-wash his walls,” explains Hande. When Hande, a PhD from the Univerity of Masachussets, started Selco in 1994 with Neville Williams who ran a Washington DC-based non-profit organisation, he installed the first 200-250 systems himself with some help from a TV technician who still works for him. “That gains respect and no technician can tell me this can’t be done,” says Hande. Hande spent three years convincing a banker that solar systems could generate income. He realised that regional rural banks like the Karnataka Vikas Bank and the Pragati Grameen Bank were rich, and that bankers were a powerhouse of knowledge.
To take a loan from the bank, a person has to show a 10 to 15 per cent margin.
So Selco provides the guarantee on the loan seeker’s behalf. If the person
takes Rs 10,000, the monthly instalment works out to Rs 150. So Selco would
put in Rs 1000 and in the first few instalments Selco would take its money out. “This is income-generating. If a basket weaver makes five to eight baskets a
day, he could make an extra three”. But we had to find a market linkage for the
other three. The banks put them in touch with the wholesalerwho had taken
a loan from them,” points out Hande, who decided to expand along the banking
network.
Selco soon figured out the financing technique. “You have to match the consumer’s
income cycle. A paddy farmer gets paid once, a peanut farmer twice, a sugarcane farmer thrice, and a teacher, monthly,” Hande explains. “A street
vendor cannot pay Rs 300 a month but she can pay Rs 10 a day. Our financial
mechanisms don’t match her cash flow, so the idea is to piggybank a mechanism
like the Sewa bank or an SHG that can.” Selco is now partnering Sewa in
Gujarat. An SHG can finance a lamp to a basket weaver who pays back Rs 3
everyday.
The poor pay more for lighting. Hande points out that a pani puri vendor
uses kerosene lamps which costs him Rs 15 to 20 a day. A middle class family
doesn’t pay Rs 600 for one light point at home. Solar lamps could reduce that
to Rs 8. To address this need, Selco has created entrepreneurs who lease out
battery-operated solar lamps to street vendors.
Selco installs solar panels on the ceiling of the entrepreneur’s house or shop to charge the solar lamps during the day. These are lent to vendors in the evening. There are 25 entrepreneurs in Mangalore with 3,000 solar lamps. To ensure that Selco keeps coming up with new solutions the 150-employee company has an innovations department which Hande heads. This group met a bunch of midwives who deliver babies in the darkest corner of the room. The midwives would cut a hole in the wall and use candles and kerosene. Selco designed a solar cap for them. These same caps could be used by rose pluckers who usually pluck roses between 1am to 3am. So how does he hire employees who can think inno-vatively? “We certainly don’t hire from the IITs or IRMA. We hire anyone who can think differently and then they have a lot of unlearning to do,” says Hande. His target is to expand to an additional 200,000 customers in the next four years. Selco also wants to expand their range of products. “We want to market three stove cookers. But we have to create a supply chain,” he says. Hande is a shrewd businessman with a neat understanding of what works at the grassroots. He grew up in Rourkela and took up energy engineering in IITKharagpur. His seniors often tried to persuade him to change his subject.
He would retort that if he did not get a job, he would start his own company. “IITKharagpur closed down their energy division last year. Ironical isn’t it? Now is the time when renewable energy expertise is needed most,” he quips. From IIT Kharagpur he went overseas to study. He was pursuing his PhD, and the topic was related to generating electricity from solar thermal, an extremely high-tech area; an idea which has now been revived and is getting funding from mainstream Silicon Valley VCs like Kleiner Perkins. In 1990, during his PhD he visited a solar project in the Dominican Republic where the poor paid for solar panels. That opened his eyes to the potential of solar energy and financing. He realised that it was time to stop looking at equations and changed his PhD topic from a cutting-edge technical subject to a social theme. “My mentor was very amenable but I was in a technical school and it drew flak from a lot of quarters” he says. He ended up finishing his PhD much later. To understand how the poor actually lived, he stayed with a family in Sri Lanka where a friend had started a solar project. “I even questioned myself on whether electricity was really necessary for sustainable living,” explains Hande.
He had to leave Sri Lanka because of the LTTE trouble in 1993. He spent the next 15 to 18 months in Indian villages. “I had a bet going with a friend on who could live with the least money,” Hande says. In 1996, two years after the company was founded, Selco got a conditional loan of Rs 50 lakh from Winrock and succeeded in paying it back. They raised a $1million loan from IFC and paid that back, too. “We have had ethical investors invest in us. This includes a $200,000 investment by Philip LaRacco who started E+Co,” he says. Selco’s destiny looks sunny and bright.
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