My SELCO Experience: Kalyan Kumar Banerjee, Senior Vice President, MindTree

You don’t need to go more than 20 kilometres outside the Silicon City of Bangalore to enter the world not reached by our electricity grid. While rich like us get electricity delivered at our doorsteps at a marginal cost of five rupees a kilowatt-hour, the poor need to pay money (at 5000 rupees an electricity pole) if they desire electricity at their homes. And if they cannot shell out this down payment, they are doomed to remain in the middle ages even as we plan our leadership in the knowledge millennium.

This story is not about them, but about my discovery of a wonderful organization called Selco. Selco is in the business of providing solar solutions to rural India. They are based in Karnataka, and have their presence in every district. What does “solution” mean? It means they provide you with something that works for you and it makes sense for you to invest in it. They don’t create the technology; that comes from different vendors.

When we think solar, what’s the first idea that comes to your mind? My God, it’s too expensive, I don’t need it. This is a legitimate feeling if electricity is seamlessly delivered at your doorstep at an artificially low cost. If we had to invest in “green” electricity, without disrupting the poor of their land and homes, and paid an honest price for it, the solar equation might suddenly look different. However, that’s not the central point. What I realized is, if solar is expensive for us, it’s expensive for the poor as well. Only, they don’t have an alternative. Thus solar becomes a feasible option, simply because it’s the only available option.

This is where Selco comes in. I see them as innovators in three distinct ways. One, they understand your specific need and provide you a custom solution. What does this mean? Imagine the midwife in a village needing light by night to perform her “operation”. Light at a fixed source does not help her, as it is still dark where she needs it the most. What if she wore something like a miner’s safety lamp, so the light moved with her, wherever she went? Now, that’s innovation, and that’s what Selco provides. This is not the only kind of customizing out here. You could choose a solution where the lights are on just for four hours every evening (you don’t need the light after eleven at night, maybe). Or a solution that switches on once dusk sets in and switches off at the first light of dawn. Such solutions become very useful where it is inconvenient to switch on or off manually.

The second innovation is financial. They know the cost of one-time acquisition of your solar solution is high, and unaffordable for the rural poor. So they have tied up with financial institutions to design loan schemes which are customized based on the customer’s repayment capacity (daily, weekly, monthly, bi-monthly and so on) - Much like Mohammad Yunus and his micro finance revolution.

The third innovation is subtle. It’s about honesty. They tell you the right cost of acquiring solar solutions – how long the battery will last, and how long the panel will last. And they tell before they sell. And ready with supporting you through the life of the product, after they sell. So when you do business with Selco, you know the real cost of ownership, and you know you will utilize the full potential of the solution you are investing in. How is honesty an innovation? Well, as we mature as an economy, I believe there will be more and more business based on relationships and on trust. Honest solution providers will win more often than the sell and scoot vendors.

What was I doing with Selco in rural villages consuming solar solutions? We had created “India Immersion” internships for students from SMU (Singapore Management University), and as part of this program, we wanted them to be exposed to “India”, not just MindTree. Leveraging on Selco was a fortunate choice, as the students got their right exposure to social entrepreneurship, spirit of service, role of values in business, and of course, diverse flavours of the India outside Bangalore. Needless to say, their learning from the exposure to rural India topped anything we could have provided inside a classroom.

Field excerpts from door-step financing

The pulse of SELCO is its dedicated field staff that is closely linked with local partners and customers. Our field experiences have encountered several barriers of which financial ones are the biggest. SELCO took the opportunity to tap into the well established local rural financial networks and establishing strong relationships with local bank staff at a very personal level. However there are numerous roadblocks and listed below are field excerpts from 15 years of experience of working with financial institutions to finance solar systems.

· Relationship between the poor and banks: In rural areas there is a hesitation to venture into the banks because of cumbersome paperwork. Documentation is crucial for banks but the numerous processes deters the poor. Distances, bad roads and poor public transportation also prevent frequent visits to banks leading people to save in their homes thereby increasing the likelihood of instant expenditure.

· Exclusive Solar Portfolio: Since there isn’t an exclusive loan portfolio for solar systems, sometimes the financial institutions do not prioritize existing money towards sustainable energy. Preference goes towards agriculture which has clear cut deliverables for the managers. Hence renewable energy products, although income generating, are not deemed as priority for disbursing loans. More so funds are not pumped into these banks thus lowering priority of allocating money towards these requests.

· Small quantum loans: Many believe that solar products are highly expensive and hence affordability for the customers is low. On the contrary since the quantum of the loan is small in comparison to other loan portfolios bank staff are dissuaded from encouraging solar loans as the transaction costs are higher than the loan itself.

· Staff: The most important component of a partnership is the people representing both parties. There are very few visionary bank managers who encourage its customers to avail solar loans despite the high cost and lack of an exclusive fund. There is also a shortage of staff who can execute these transactions efficiently as limited resources are allocated to more lucrative portfolios.

· Poor infrastructure: Remote locations of banks and poor availability of appropriate technology (within banks and during field visits) increases frustration levels of bank staff which leads them to not focus too much time on low income needs especially since the latter is time consuming.

Despite some these barriers, SELCO has established sustainable long standing relationships with banks by working in tandem with the staff like assistance in identifying and subsequently educating customers of solar loan terms, persistence through routine visits in convincing banks to finance systems, conducting demonstrations and awareness programs as the technical partner thereby allowing the bank to focus on financing, offering innovative financing models keeping in mind the current loan portfolios, and tapping into SHGs and other similar groups or individuals to create access channels for customers in remote areas among others.

In 1996, SELCO was able to convince the Malabhraba Grameena Bank, a subsidiary of the state-owned Syndicate Bank, to offer India’s first solar consumer-loan program. Initially, SELCO began providing PV systems for the Bank’s over 200 branch offices. SELCO then arranged for the training of bank employees regarding SELCO’s products, and soon the financing by bank branches of PV systems for rural households commenced. Today SELCO shares a solar loan portfolio with all the

• · major public sector banks in Karnataka-Syndicate Bank, Canara Bank, State Bank of Mysore, Corporation Bank
• · Regional rural banks like Karnataka Vikas Grameen Bank, Cauvery Kalpathiru Grameen Bank, Pragathi Grameen Bank and so on
• · The largest women's cooperative bank in India, SEWA Bank

SELCO regularly organizes regional workshops with financial institutions and most recently through the REEEP workshop in Manipal (refer blog dated March 28, 2009). SELCO is persistent in discussions on a policy level with RBI representatives and regional head offices of its financial partners to encourage dialogues on improving the financial access to sustainable energy services for the underserved.