Mar 25, 2009

Boldness and Social Return

by Laura Starita

Last Friday’s Financial Times landed on doorsteps a bit heavier than usual, the weight brought by a supplement dedicated to the paper’s inaugural ‘Boldness in Business’ awards. The awards were given in five categories: Drivers of Change, Corporate Responsibility, Environment, Entrepreneurship and Emerging Markets. Perhaps owing to the troubled times in which we live, two of the five were expressly ‘double bottom line’ in nature.

The Environment award was given to the already well-advertised Masdar Initiative, a project of the United Arab Emirates to create a futuristic city in the desert that will run primarily on solar and wind energy, house 40,000 residents, and, perhaps most importantly in terms of long-term impact, provide the headquarters for a research institute co-funded by MIT. Less well known, however, is Selco India, winner of the ‘Corporate Responsibility’ award. Selco sells solar lights to Indian villages that are not connected to the country’s power grid. The poor in these areas typically rely for light on kerosene lamps or fires, which, in addition to being dangerous, cause a lot of lung disease. Solar light is cleaner and brighter—but its upfront cost is also higher. How Selco addresses the cost issue is just as valuable as the product they sell. As the company’s founder said in the FT piece:

“The best financial lesson I learned is from a street vendor, who told me Rs300 a month is expensive, but Rs10 a day is fine.“

In short, the poor have cash flows and financing needs, and any business interested in netting profit by selling products to the poor may need to consider timing and quantity of payments as much as anything else. Selco addressed this issue by working with loan officers in state banks to convince them to finance the light purchase and develop repayment terms that reflect income flows. Whether Selco remains competitive, its lessons shed…ahem…light on the ways in which flexible financial products can address the needs of the poor.