In my last article, you heard about SunWater, a project to build a radically affordable solar water pump for $2-a-day farmers that will transform small plot agriculture, create new water markets, and significantly increase incomes that will raise bottom-of-the-pyramid families out of poverty. Our target customers are small-plot farmers in India and Africa.
These farmers need a reliable, low-cost water pumping system so that they can grow cash crops to increase their incomes. They also need electric power to add value to their crops (grinding, processing, etc.) and for household use. Current pumping systems cost too much or are unreliable.
Solar pumping systems have been available for years, and they show great promise. But they haven’t been adopted at scale for a very simple reason. They cost too much!
The purchase price of solar PV systems is much too high to be competitive with diesel pumps, even though the fuel and repair costs of diesel pumps are astronomical.
If we could cut the cost of solar pumping systems by 80%, we could transform small farmer incomes, create tens of thousands of new jobs, and significantly lower carbon emissions.
How It Can Be Done
So, how can we radically reduce the purchase price of solar PV powered pumping systems along with technologies that efficiently transport irrigation water from the source to the plant? Here’s a deep dive into the different parts of SunWater!
The good news is that affordable small farm systems are already available through the work of IDE. Through the work of IDE, the market price of drip irrigation has been drastically reduced by using comparatively thin walled lay-flat hose to convey irrigation water from sources like tube-wells to rows of plants. The cost of drip irrigation systems were reduced by designing affordable filters to remove dirt from the water, reducing system pressure to reduce the wall thickness of supply and lateral tubing bringing water to each plant, and simplifying the design of the emitters, or drip points, along each lateral. This reduced the cost of drip irrigation systems from about $1,200, or more to less than $600 per acre.
So what about the greater challenge of cutting the cost of a solar PV system and a pump motor combination from $7,000 to $2,500?
Here’s how I think it can be done:
1 Zero Based Design
In my new book with Mal Warwick, The Business Solution to Poverty: Designing Products and Services for 3 Billion New Customers we provide a detailed description of zero based design. Like zero based budgeting, it starts from scratch, making no assumptions about the technology and strategy that can best be used or created to address a specific problem. In this case, we’ve defined the problem as cutting the cost of an installed 2-kilowatt solar PV powered pumping system to $2,500. We have broken this down further to set a price target for the installed solar PV system of 70 cents a watt ($1,400 for a 2-kilowatt system), and the price of controller, pump and motor at less than $1,100, for a total retail price of $2,500. If we can achieve these targets, we believe solar PV powered pumping systems would be economically competitive with diesel-powered pumps, which would create transformative new energy markets in developing countries.
2 A Systems Approach to Design
To pull it off, we’ll need to work on solar pumping, irrigation, and livelihood enhancing high-value crop production and marketing as a total system, with each system component influencing the design of each other component, and of the total system. Figure 1 is a diagram of what this system looks like. Integrated financing also needs to be part of the system solution.
3 Mirrors are Cheaper Than Solar Panels
In spite of the fact that the price of photovoltaic (PV) solar systems have dropped significantly over the past ten years, the capital cost of an installed PV system used to pump irrigation water is still far too expensive to be competitive with diesel powered pump sets. But there are many options for further lowering the capital cost.
For example, a simple glass mirror is much cheaper than a solar panel. If we reflect the sunlight hitting ten glass mirrors that are a little bit bigger than the surface area of a 250 or 300 watt solar panel, we should be able to generate 2,000 watts from it. Since we’re pumping water, we can pump a small amount of water through a simple heat exchanger on the back of the PV panel to keep it from overheating. The mirror system would need to be incorporated into a simple frame that could be rotated to track the sun. This is just one out of the out-of-the-box solution that could lower the cost. A simple initial prototype we built in collaboration with Ball Aerospace engineers worked pretty well. See Figure 2.
4 Improving Water Conveyance and Application Efficiency
Most diesel powered pumps convey water from the pump to the crop in unlined channels, and deliver it to plants by flooding the field, with the end result that 60 to 70 percent of the water pumped out of the ground is lost to seepage before it ever gets to the plants that need it. Using thin-walled lay-flat tubing to carry the water from the pump to the field, and low-cost drip irrigation to deliver water to the plants would double the overall efficiency of traditional water conveyance and application methods. This would either double the water available for irrigation or cut the size of the pumping system in half, either of which have the same functional impact as cutting the cost of the solar powered pumping system in half.
Fifteen years ago, I and my colleagues at IDE started designing and field testing a low-cost drip system for small farms that is about one half the price of conventional drip systems. Such a low-cost drip system costs about $1,400 for 2.5-acres, including the lay flat hose to carry water from the pump to the field, and IDE field tests in a variety of countries have demonstrated that typical farmers can earn net income after expenses of 45 cents/square meter, or $4,500 from a 2.5-acre plot of diversified high-value cash crops like off-season vegetables by putting the low-cost drip system to work.
5 Improving Farmer Income
You can’t pay for a low-cost drip system and a solar PV powered pumping system, and make a profit by using the water these systems produce to grow low value crops like rice, wheat, corn, and pulses. To earn a reasonable livelihood, small farmers need to learn to irrigate in the dry season when vegetable prices are two or three times as high as they are during rainy season when everybody can grow vegetables. Savvy farmers plant four or five high-value crops, because it’s impossible to predict what the market price for any one crop will be. Also diversified cropping both lowers risk and increases probability that at least one of the crops will generate lucrative profit. So, it’s just as important to help farmers optimize income as it is to lower the cost of pumping and improve the efficiency of conveying and applying water from the source to the crop.
6 Creating a Scalable Profitable Business Model
The best way to reach scale is to release market forces, creating opportunities for every participant in the marketplace to earn a reasonable profit. This includes the manufacturers of both the solar PV powered pumping systems and the irrigation systems, the dealers who sell them, the technicians who install them, and the farmers who buy them to improve their livelihoods.
The first barrier to profitability is the capital cost of $3,900 for the total system. Even though it can earn attractive returns on investment, the upfront cost is too high for most small farmers. For this reason, an important player in the system needs to be a business that offers the solar PV powered pumping and irrigation system on a lease basis or on credit, with the lease/credit business also earning an attractive profit.
SunWater is a project run by my company, Paul Polak Enterprises. We are partnering with a group of volunteer engineers from Ball Aerospace, the company that built the instruments on the Hubble space telescope, to build the proof of concept prototype of the $2,500 solar PV powered pumping system. Jack Keller, a world authority on drip and sprinkle irrigation, and Bob Yoder, an irrigation engineer I worked with at IDE, are working on the design of the total system and its beta testing and pilot commercial rollout in Gujarat, India. There we will be working with an Indian subsidiary of Paul Polak Enterprises, and they will play the local leadership role.
From Gujarat, SunWater India will initiate a full scale rollout of the affordable solar PV powered pumping and irrigation system in India’s Eastern states, where the majority of India’s existing 19 million diesel pumps are located. My dream is that after we create a new market for solar PV powered pressurized irrigation in India and other countries in Asia, we will repeat the process with a global commercial initiative to provide affordable village electricity to a significant percentage of the billion or more people in the world who lack a connection to the electric grid.
How You Can Help
Each dream starts with a first step, and our first step is to raise $50,000 in an Indiegogo campaign to fund the completion of the proof of concept prototype by volunteer engineers at Ball Aerospace. Ball Aerospace is providing their workshop facilities and their technicians are donating their time and talents as a contribution to this initiative. We are asking for help from the public to cover the estimated $50,000 cost of materials needed to develop, build, and bench-test the transformative proof of concept prototype. If you like this idea, I would very much appreciate your help — you can contribute to the Indiegogo here.
What if we could harness the limitless power of the sun to carry water to the crops of millions of small poor farmers around the world?
If I want to water my petunias, I turn on the tap outside my house, hold my thumb over the end of a battered green hose, and water away.
If a small farmer in Ghana or China wants to water a small patch of vegetables he’s growing to sell in the local market, he breaks his back hauling water in two buckets or sprinkling cans from a nearby stream. It takes six hours a day every other day for three months to water a tenth of an acre of vegetables that he hopes to sell for $100.
The billion rural poor people in the world today want out of poverty, but to do that they need to grow more cash crops to increase their income. The only way to grow more cash crops is to pump water. However, the current ways of doing it don’t work.
Foot Pumps, Diesel Pumps, and Solar Pumps
A foot-operated treadle pump that costs $25 will irrigate as much as half an acre with about four hours/day of work to earn a transformative $100 or more in new income after expenses. But this is very hard work, and anybody in his right mind would prefer to use a mechanized pump if he could afford it. A five horse power diesel pump irrigates two and a half acres of vegetables, but it costs $350, and $450 a year for diesel, and another $150 a year for repairs – $2100 over three years, not counting the damage to the crop when the diesel pump is down waiting to be repaired. It is too expensive for poor farmers.
What if the same farmer could use a 2-kilowatt electric pump powered by solar photovoltaic panels instead? The fuel costs and operating costs would be pretty close to zero. But, there’s a big catch. It would cost about $7,000! Most small farmers in Asia and Africa could never afford to buy one of these either.
A Way Out of Poverty for Rural Farmers
But there is a way out! What if we could find a way to cut the cost of a 2-kilowatt solar pump system from $7,000 to $2500? What if we added a $1400, 2.5-acre low-cost drip system, and used the solar pump/drip system to grow 2.5 acres of diversified off-season fruits, vegetables and spices? Doing this, farmers can clear at least $4500, enough to make payments on a 3-year loan or lease and put some real money in his pocket. That’s the way out of poverty!
SunWater – the Project
The SunWater project aims to achieve breakthrough affordability for photovoltaic pumping and irrigation, enabling small farmers all over the world to move out of poverty. Farmers using these pumps will also provide jobs for their neighbors to plant, weed, harvest and market the crops they grow.
Today, 19 million diesel engines are being used to pump irrigation water from shallow wells in India alone, spewing millions of tons of carbon into the atmosphere. If marketplace forces could replace a quarter of them with radically affordable solar photovoltaic powered pump systems, we could transform small farmers’ livelihoods and radically reduce rural carbon emissions.
We are launching an Indiegogo campaign to develop a 2kw solar-powered pumping system that can do the same job as a 5 hp diesel pump, the most commonly used size. We’re taking a whole-systems approach – we use mirrors to concentrate the sun, which brings down the cost of the solar cell. Since we’re pumping water, we use the water to cool the solar cells, increasing their efficiency. We hook up an inverter so we can use an AC pump motor, which are widely available and cheap. Then we tune the mirrors, solar cells, cooling system, and pump so that it gives the right output for the right cost.
These pumps can only pump during the day, but they don’t use diesel fuel, they rarely break down, and when they do, they can be repaired easily. This system has very low operating costs compared to a diesel pump.
The system will cost $2,500 instead of $7,000, and when paired with a low-cost efficient drip irrigation system, a farmer can pay it off in two years. This quick payback time makes all the difference. At that price, with access to leasing to overcome the purchase price barrier the solar pumping systems should fly off the shelf . And after the payback, there’s no fuel to buy. The Indian government has a 20% subsidy on these systems, so the cost to the farmer will be close to $2,000.
How You Can Help
If you too want to help transform the lives of poor rural farmers so they can raise themselves out of poverty, you can contribute to this Indiegogo campaign at:
This project will open the door to transforming water pumping for farmers in developing nations, and start them on the path to bringing electricity to a billion people who will never connect to the grid. The best way to predict the future is to invent it. Will you help us invent a future of abundance for the people who need it most, rural farmers in India and Africa, by contributing to this Indiegogo?
If you want to hear more about the project, the team, and the technology, stay tuned for my next blog post!
Question: If you build a better mousetrap will the world beat a path to your door?
Answer: Without superb marketing and distribution nobody beats a path to your door.
In my work with a multitude of affordable technologies over the past 30 years, one key feature has become abundantly clear: If you have met the challenge of designing a transformative, radically affordable technology, you’ve successfully solved no more than 10-20% of the problem. The critical other 80% of the solution lies in designing an effective marketing, distribution, and profitable business strategy that can be brought to scale. Of these, perhaps the most important is designing an effective scale strategy.
Some technologies are simply not scalable. They solve a problem that exists only in a village or two but is not applicable to a thousand villages. The first step in designing an effective scaling strategy is therefore to put first priority on technologies that, if successful, can be applied to address parallel problems in at least a thousand villages.
For example, an Engineers Without Borders team successfully fixed a broken motorized pump that supplied drinking water to several hundred families in a village in Rwanda. This mechanized piped water system was too expensive to be implemented in many other villages, but fixing it addressed an important problem in one village. Designing a robust, affordable hand pump, on the other hand, could have addressed a drinking water problem for many of the other families in the village and in thousands of other villages as well.
In many instances, the design of a scaling strategy is not very complicated. What development practitioners usually miss is the importance of building design for scale into a project from the very beginning of the design process. For example, if you need to sharpen ten pencils, the way to do it is simple. If you need to sharpen a thousand pencils, you need to use a different strategy, but it can be done. If you need to sharpen 100,000 pencils, you need a still different strategy. Each of these problems is eminently solvable, but each one requires a different series of logical steps; it’s very difficult to efficiently change from a ten-pencil strategy to a hundred-thousand-pencil strategy if you’ve already committed your resources and your time to the former.
25 years ago iDE (International Development Enterprises) recognized the transformative potential of a simple, $25 treadle pump installed on a tube well. The design of that technology incorporated affordability, easy reparability, and applicability to millions of small farms.
Yet the key challenge was to design the mass marketing and distribution strategy that would make it available to several million farmers. In Bangladesh 25 years ago, there was no pre-existing system of mass distribution in rural villages, and many of the one-acre farmers who needed a treadle pump had never heard of the technology; didn’t know how to read and write; and had no access to mass media.
To address the problem of distribution, we recruited 75 small private sector workshops who manufactured the treadle pumps; 3,000 village dealers who sold them at a 12% margin; and we trained 3,000 well drillers through a three-day course with a diploma, who then installed the treadle pump in the field for a fee. This set up the treadle pump market infrastructure, but that alone wasn’t enough.
The next step was to create market demand, so that each of these small enterprises could sell enough volume to make a decent living. For an illiterate population unreached by mass media, flyers, brochures, or radio campaigns wouldn’t work. So we recruited several village troubadour and theatre groups to write songs about the treadle pumps, and had them perform at markets and larger celebrations, incorporating demonstrations of working treadle pumps into their performances. Finally, we created a Bangladesh-style 90-minute Bollywood movie featuring the treadle pump that played off of a truck-mounted projector to an audience of a million people every year, in village open-air settings. Our film was often the first movie that our customers had ever seen.
Without the design of a scalable manufacturing, distribution, and installation network involving thousands of small entrepreneurs, we never could have sold the first million treadle pumps in Bangladesh. Without a large-scale marketing program incorporating activities like the Bollywood movie, neither the 75 manufacturers, the 3,000 village dealers, nor the 3,000 well drillers could have earned a reasonable living by making, marketing, and installing the treadle pump. The design of the mass distribution and mass marketing strategy turned out to be much more important to the success of the treadle pump program than the design of the treadle pump itself. Design of a transformative affordable technology was a necessary, but far-from-sufficient, condition for its success.
The design of an effective for-profit business strategy, of course, pulls all of this together. Every key player in the distribution chain has to make an attractive profit. The most important person in this chain is the end customer. A basic principle I’ve learned over the past 25 years is that for $2-a-day customers, income generation is the single most important feature of a successful technology. I don’t work with any technologies for dollar-a-day customers unless the customer can get three times his money back in the first year by using the technology. A treadle pump installed on a tube well costs $25, including a profit for the manufacturer, the dealer, and the well driller. The average farmer who buys it earns $100 net income in the first year, and could potentially earn $500 a year – 1/5 of purchasers of treadle pumps earn $500 in net income right away.
While it’s the most important, for the ultimate purchaser alone to earn a profit is not enough. The manufacturer has to make an attractive enough profit that he is likely to continue making the treadle pumps. Each dealer has to sell at least 20 treadle pumps in a season to earn enough income so that it is in his interest to continue to market treadle pumps to customers, year after year. And finally, the well driller must install enough treadle pumps in a season to make it worth his while to continue installing them. All of these active participants in the supply chain need to earn attractive profits before the technology can be successful.
A successful social enterprise serving $2-a-day customers begins with the design of a radically affordable, scalable, transformative technology. But this is only the beginning. It will fail to make a meaningful impact unless 80% of the designer’s energy is successfully turned towards designing a profitable business capable of reaching a million customers through an effective branding, marketing and distribution system.This post was taken and adapted from Acumen Fund’s blog series on lessons in social entrepreneurship
Five years ago, at the Aspen design summit, I said that 90% of the world’s designers spent all of their time addressing the needs of the richest 10% of the world’s customers. I also said that before I die I want to see that silly ratio turned on its head. What followed was an amazing sequence of events that included the creation of the traveling exhibit Design for the Other 90% at the Smithsonian Cooper-Hewitt Design Museum; the formation of D-Rev: Design Revolution, a Palo Alto based non-profit incubator for the design and mass market of radically affordable technologies; and earlier this year the launch of DR100, an initiative to create courses providing hands on experience with the ruthless pursuit of affordability in one hundred universities in the West and in developing countries. Last week, the Health section of the New York Times published a special issue called “Small Fixes” which described a rapidly growing movement applying the principles of Design for the Other 90% to biomedical technology.
All in all, the New York Times issue is very exciting for the Design Revolution movement, though it barely scratches the surface of what is needed. It exposes about 20 or so low-cost technologies to solve problems of global health in the developing world, some of which have the potential to make a big impact. But to push this further, we need a revolution in affordable on site testing for the basic major diseases.
In many cases of malaria in rural area clinics, if they are treated at all, the clinicians make a guess at which kind of malaria they are dealing with. The stage is set for better treatment with low cost testing for diseases like malaria and tuberculosis that can be done at clinics on site. Beyond testing, we must not forget the need for techniques to ensure patient follow-through and completion of treatment. One exceptional example of this is an organization in India called Operation ASHA: a non-profit with a 97% completion rate in treating patients with tuberculosis. The Operation ASHA model uses a method called eDOTs to keep track of each patient with an electronic fingerprint tracking system that allows them to ensure no dose is missed.
Stanford’s Design for Extreme Affordability class has produced other good examples of biomedical technologies for poor customers, such as a 20-cent inhaler used by people in developing countries as an alternative to the expensive inhalers used in the West.
There has also been an increasing amount of work on creating a low cost computer. India recently announced the production of a $35 tablet computer for students (which costs $50 pre-subsidy); their goal is to get it down to $10. With the same energy, a $50 microscope could be invented, which would have a sizable impact on global health.
Biomedical technology is around a $10 billion industry, with the potential to be even more profitable. In the same way, radical affordability is a big business for developing countries. Just as we need a revolution in simple fixes for health issues, we need simple fixes for education, water, and energy. With the design revolution underway these are in the process of coming to fruition.
Viva la Revolución!
Paul In The News – New York Times Article: An Entrepreneur Creating Chances at a Better Life by Donald G. McNeil, Jr.
by Kali Friedmann and Danny Growald
The Smithsonian Cooper-Hewitt “Design for the Other 90%” exhibit has arrived at RedLine Gallery in downtown Denver, showcasing products designed explicitly to fit the needs and circumstances of the world’s poorest customers – the “other 90%” who are bypassed by current design processes.
The exhibit, organized in part by International Development Enterprises (iDE), showcases products from an array of designers, engineers, and organizations focused on development, including Design Revolution (D-REV), the non-profit technology incubator co-founded by Paul Polak. D-REV is an outgrowth of Dr. Polak’s vision of fomenting a revolution in how companies design, price, market, and distribute their products, to produce radically affordable income-generating technologies for customers living on less than $4 a day.
Products like D-REV’s Jaipur Knee (a simple prosthetic knee that costs $25 to make and retails for $80) and low-cost ceramic water filters from IDE and other organizations, help illustrate the types of technologies that – at the right price and combined with appropriate mechanisms for marketing and distribution – have the potential to leverage the power of the market to reach large-scale impact.
True to RedLine’s mission of merging art, education, and community, these low cost technologies are displayed throughout the gallery along with the creative responses of seven local artists to poverty, waste, and the challenges of design for development. One such work, created by RedLine resident artist Viviane Le Courtois, emphasizes the disparity between the bottom 90% of the world’s citizens in dire need of practical design solutions, and the top 10% who are served by the majority of designers and live surrounded by excess. The product of several weeks of work, many gallons of Elmer’s glue, and the waste from a covey of Le Courtois’ friends, it is a round thatched-roof hut made entirely of shredded junk mail.
On the exhibit’s opening day, reporter Ryan Warner from the Colorado Public Radio program Colorado Matters met Dr. Polak at the gallery for a walk-through interview (listen to it here). True to form, Dr. Polak provided both a clear description of the design process required to create meaningful and effective tools for development, and an honest critique of the difficulties inherent in doing so.
Dr. Polak highlighted the importance of talking to customers and building not only radical affordability into design – a primary and thoroughly non-negotiable requirement – but also taking into account the much less obvious cultural and lifestyle factors of the communities being served. Failure to take into account details about social structure, cultural preferences, and the subtleties of life at the local level often results in the failure of the project as a whole. As an outsider, this requires a deep cultural understanding that can only be attained by spending time on the ground listening to the needs of users early on in the design process. A full explanation of Dr. Polak’s 12 Steps for Practical Problem Solving this can be found in his book, Out of Poverty, but the first three are crucial, and, while they seem obvious, are often overlooked:
1. Go to where the action is.
2. Talk to the people who have the problem and listen to what they say.
3. Learn everything you can about the problem’s specific context.
Cases where these steps were not followed abound. For example, there’s the Q Drum – a doughnut-shaped water transportation vessel that can be rolled to and from a water source with a rope tied through the center. Sounds great, looks cool, but, 1) at more than $70 per unit it’s too expensive for poor customers, and there’s no way for it to pay for itself, 2) the ropes tend to wear out quickly, and it’s unusable without a way to pull it, and, 3) the opening in the container is too large, making the water vulnerable to contamination from hands reaching inside or dirt finding its way in (80% of the contamination of bad water occurs during transportation between source and end-user). These sorts of problems can only be understood and solved by designing for affordability, spending time on the ground with users, doing a lot of listening, and continually iterating in response to feedback.
Developing countries are littered with well-intentioned but eventually useless products ostensibly designed with poor people in mind, but without their consultation or true knowledge of their needs. A classic example in this category is the PlayPump, a product that is not part of the Cooper Hewitt exhibit. Designed like a manual merry-go-round, as children run and spin on it the device pumps water into a storage tank for later use. Harnessing the power of children at play to pump water for the village conjures up a lovely image of a type that often appeals to Western donors. As a result the project (run by PlayPumps International) received tremendous press coverage and raised over $60 million dollars to build 4,000 pumps in villages in Southern Africa.
Yet in just a few months it became clear that the project was an abject failure. In the absence of expertise or funding for maintenance of the devices, technical malfunctions were never resolved, and water ceased to flow.
After a period of initial excitement, children for the most part lost interest and stopped using the toy, leaving women to spin the PlayPump themselves. Imagine a seventy-year-old woman, after a full day’s work, having to single-handedly spin this large toy that replaced her simple hand-pump just to get the water she and her family need. It’s this type of problem, rooted in the failure to connect with the customer, which designers working for the bottom 90% must avoid by beginning the design process on the ground, listening to the people for whom the product is being created.
By contrast, the treadle pump created by IDE has proven to have a higher output of water than the work put into it. As a result of that efficiency, of its low cost (around $25), and an effective marketing and distribution system involving troubadours singing its praises and local artisans making and selling them, over 3 million units have been sold throughout the developing world, helping many millions of people increase their incomes by cultivating higher-value, off-season fruits and vegetables. It’s affordable, reliable, leads directly to increased income (and pays for itself several times in the first year), and it’s so efficient it allows men, women, and children alike to pump water without breaking a sweat.
Which brings me to my one and only point of contention with Mr. Warner: I was witness to the fact that at age seventy seven, Dr. Polak was able to consistently and almost effortlessly operate the treadle pump and simultaneously talk about it without skipping a beat, much less “appearing out of breath.”
The Cooper-Hewitt Design for the Other 90% exhibit will be at RedLine through Sunday, September 25th, 2011. RedLine is located at 2350 Arapahoe Street in downtown Denver.
Click here for the full interview with Paul Polak that aired on Colorado Matters Wednesday, July 13, 2011.
If you have read this far why not Follow Us on Twitter @OutofPoverty?
Developing new practical and profitable ways to cross the last 500 feet to the remote rural places where poor families now live and work is the first step towards creating vibrant new markets that serve poor customers.
In rural Orissa, India, the women are not permitted to walk more than 150 feet from their homes to fetch water. So how can they transport water to their homes from the closest safe water source, located 300 feet away?
Fortunately, it’s not that difficult to transport 100 kitchen drip kits from Kathmandu to Pokhara on the roof of a bus. The challenge is in getting those kitchen drip kits to the hundred scattered farms in hill villages that are a day’s walk from the nearest road!
From anything including drip irrigation kits, oral rehydration salts, penicillin, and disaster relief food, moving goods and services over the last 500 feet is especially difficult. And the reverse is equally daunting. Moving marketable goods produced by the hands of poor people in remote villages to the town and city markets where they will fetch the best prices is just as difficult.
Moving goods and services across the last 500 feet of the last mile in and out of scattered rural villages is a challenge crying out for practical solutions.
The Last Mile
I was surprised to learn that the “last mile” concept comes from telecommunications industry, which has learned that it’s much cheaper to lay a fat cable carrying television and phone signals almost all of the way to the end customer rather than it is to split it up into a multitude of smaller wires that extend directly to individual homes. As it turns out, wireless communication has helped telecommunications industry address the last mile challenge, but the movement to end rural poverty has found few solutions to the even bigger challenge of crossing the last 500 feet.
Practical Steps for Crossing the Last 500 Feet
1. Create hundreds of thousands of sales and distribution points in small rural villages that can profitably sell a range of affordable income producing tools and products to poor customers.
Several organizations have developed models that train villagers to market key goods and services to their neighbors.
Here are some examples of this approach:
Living Goods. Following the Avon lady model, Chuck Slaughter founded Living Goods, which trains women in Uganda to sell 3 or 4 basic medicines to treat poverty related illnesses like malaria, diarrhea, worms, and tuberculosis. “We retail a child’s dose of malaria medicine for 75 cents,” Slaughter says. According to Fast Company, Living Goods has trained more than 600 women in Uganda, and some of them are making more than $100 a week. (Fast Company Article) . Hiring and training villagers to go door to door to sell important products is a rapidly growing strategy for covering the last 500 feet.
- Brac, a large non-profit organization, has mobilized 1,880 village women in Uganda to act as community health volunteers who distribute products like oral rehydration salts, iodized salts and antibiotics for a small fee to villagers. (Brac article ) .
- Green Light Planet, a for profit company in India, which recruits village entrepreneurs to sell $18 solar lanterns to replace kerosene lamps in villages. (The Hindu Business, Lighting a billion lives)
A promising way of moving goods and services across the last 500 feet is to take advantage of the hundreds of thousands of village mom and pop shops that are already selling consumer items in every developing country. I’ll come back to this later.
2. Create hundreds of thousands of village based aggregation centers. It costs much more for a volume buyer to collect spices, coffee or vegetables from a thousand scattered one-acre farms than to deal with a single 1,000-acre farm. Families that produce cloth for sale from one or two hand looms face the same problem. One solution is to create practical cost-effective aggregation strategies to centralize quality control and collect goods made by the hands of villagers in sufficient volume to attract traders and and/or rent a pickup truck to carry them to the town market offering the most attractive price.
IDE Nepal’s Vegetable Collection Centers. Using remote village dealers and exemplary farmers as distribution agents, IDE Nepal sold thousands of low cost drip irrigation systems that enabled small farmers in remote hill areas to grow off-season vegetables. Then they organized 150 village collection centers which could rent storage space and hire a commissioned sales agent with a cell phone. A farmer who produced five kilos of cucumbers a day could team up with 50 others to accumulate 250 kilos of cucumbers a day, is enough to attract traders to the collection center or pay for a pickup truck to carry them to the most attractive market identified by the sales agent through his phone calls.
3. Stimulate the emergence of profitable transport enterprises. The fact is just about all the elements of efficient and profitable transport systems for poor villages are already available in different countries. For example, India has an abundance of bicycles equipped with racks and trailers, rickshaws, motorcycle rickshaws, and three wheelers that can operate as miniaturized delivery trucks. Cambodia has motorcycles with transport racks and motorcycle pulled trailers. Kathmandu uses Chinese rototillers to pull trailers that can carry one ton loads. Somalia has donkey carts. What is missing is a global network of village-based enterprises capable of harnessing available and affordable transport devices to profitably move goods and in and out of remote rural villages.
Donkey Carts in Somalia In the 1980s, IDE helped blacksmiths in refugee camps in Somalia build and sell 500 donkey carts. The refugees who bought them on credit for $450 immediately began earning net income of $200 a month. They did this by hauling everything from water to firewood, repackaged disaster relief food to construction materials. They became instant millionaires in the context of Somalia’s economy.
A Failed Attempt to Address The Rural Transport Deficit in Zambia.
Ten years ago, I was struck by the fact that farmers in Zambia who grew vegetables irrigated by treadle pumps regularly had to pay out one third of the money they got when they sold their vegetables, just to cover the cost of transporting them from their farm to the nearest highway, where they could be put on a passing truck at a reasonable cost and carried to the nearest city market.
Several things contributed to this outrageous short haul transport cost. Rural roads were non-existent or terrible. The government had decided to make rural transport free, which put a large number of rural transport enterprises out of business. Then the free government rural transport system went broke, an epidemic of ridge disease wiped out a lot of cattle, decimating access to bullock carts.
To help address the short-haul rural transport barrier, I proposed a small grant that could help establish five rural entrepreneurs in different rural locations to launch a donkey cart transport businesses, five more to launch bicycle trailer based enterprises, five more using motorcycle trailers, and yet another five harnessing Chinese rototiller trailers (the ones profitably operating in Kathmandu).
This would pilot test 20 small transport enterprises in different rural locations in Zambia, and we could learn by experience which approach would work best in which situation.
I failed to find a single donor willing to back this initiative.
A Cornucopia of Enterprises Capable of Crossing the Last 500 Feet
The World’s 10 Million Mom and Pop Shops in Rural Village.
According to the 2001 census, there are 638,365 villages in India. Since each of these villages has two or three small shops and the bigger villages have more than five, it’s reasonable to assume that there are more than two million small rural village shops in India. But as far as I know, nobody has ever counted them. My guess is that there are at least 10 million small shops in small rural villages in developing countries all over the world. There are also small vegetable carts, milk carts, and other kinds of peddlers’ carts bringing goods and services directly to rural homes. Many of these shops are little 10 x 10 foot cubicles, with shutters that swing open when the shop opens and can be padlocked when it’s closed. These shops sell items like cookies, candies, soap, cigarettes, spices, bulk cooking oil, bananas, sometimes chilled soda pop, small flashlights, and a variety of small consumer goods.
Since they are already patronized by most poor rural customers in small villages, and can have easy access to bicycle home delivery and pick-up, these small shops are a priceless resource already in place and capable of carrying goods and services across the last 500 feet. But only a tiny percentage of their potential is being utilized.
Some Interesting Features of Small Village Shops
For the last two years, my partners and I have been interviewing small shopkeepers in rural villages in eastern India and the customers that patronize them, and I was surprised by some of the things they told me:
1. Most of them only sell 150 – 400 Rupees (US$3.30-$9) worth of goods a day, on which they average a margin of bout 15%, or US 50 cents – $1.30/ day. Typically this is just one of the ways the family earns its livelihood.
2. Only a quarter or less of the products on their shelves is delivered by distributors. The owner takes the bus into the nearest town and buys most of what he stocks on the shelves at the town market. One shopkeeper told us he made twenty trips to town in a single month.
3. Shopkeepers often barter with villagers for products like bananas and rice.
4. Items sold in small shops include laundry soap in small packages, upscale bars of soap like Camay and Lux, small packets of Chile and many different herbs and spices, chewing tobacco, cigarettes, cooking oil in bulk, and chilled Pepsi, Coca-Cola, and local soft drinks, all delivered by a single distributor.
5. Shopkeepers are extremely brand conscious, but big business has little or no brand identity in the small villages in developing countries where some 40% or so of the world’s population lives.
Creating Vibrant New Markets Serving Poor Rural Customer by Activating Networks of Small Village Shops
There is a huge unmet demand for affordable distribution of a wide variety of branded consumer products to small village shops all over the world. Since these small shops are within 500 feet of many of the world’s poor customers, small village shops could also provide natural collection and aggregation points for goods produced by the hands of villagers. Because daily sales volume at each shop is low, and the shops are widely scattered, most attempts so far to commercially distribute to small shops have failed to be profitable.
Ten million small shops in villages all over the world are waiting for viable business models for distributing a cornucopia of branded income generating products and tools for village shops to sell to poor customers, and collecting income generating goods produced by the hands of villagers and transporting them to markets in cities and towns where they can be sold profitably.