An agreement between Nuru Energy and Bank of America-Merrill Lynch —which was signed in February—gave the bank an option to buy several million carbon credits during a 10-year period, which it can then resell on the market. What it gave Nuru was a future —and a bright one.
“This deal will provide us with the capital to scale up in five countries in east Africa: Rwanda, Kenya, Tanzania, Uganda and Burundi,” says Sameer Hajee, Nuru’s founder. “The potential exists for tens of thousands of entrepreneurs in east Africa who could sell hundreds of thousands of light cubes. The result: We are certainly expecting to be profitable within three years, and not five.”
Nuru Energy is also hoping to scale up in India, having tweaked its business model for this market, and is talking to potential partners in other African countries, notably Ghana and Nigeria.
The Bank of America deal marks a big leap forward, considering that Hajee officially launched his venture in Rwanda only in 2009, aiming to bring affordable lighting to nearly 10 million of the world’s poorest people. Now, with long-term revenue potential in the form of payments for carbon credits, he has ambitions for the social enterprise to help alleviate poverty among two billion people in East Africa, India and the developing world.
In 2008 Hajee spent time in Rwanda as an MBA student and observed that 95 per cent of the population had no access to grid electricity, relying instead on kerosene for their lighting needs.
Kerosene is not only expensive, consuming 40 per cent of the average income for most people in the region, but also unsafe, environmentally damaging and inefficient as a source of lighting.
Hajee saw both the need to provide an alternative, accessible product to this rural market, and the challenges involved in doing so.
“Ninety percent of consumers continued to purchase kerosene because of a few key factors,” he says.
‘`First, kerosene is portable.
Second, it’s reliable: You don’t have to rely on the wind or the sun — you light it and it lights. And, lastly, it can be purchased in increments. “An observation that we made in 2008, and that we continue to make, is that the majority of lighting needs are for task-based activities.”
Hence he conceived the Nuru Pod Light, a battery-operated, hand-sized, portable light “cube” that lasts for as long as 40 hours and can be used individually for reading or connected to other Nuru Pod lights to light a larger space.
The product’s success would depend, however, upon its affordability.
FMCG (fast-moving consumer goods) companies have been doing successfully for a number of years,” Hajee says.
“They took the packaging of a shampoo soap, for example, and made it into bite-size chunks. We’ve done the exact same thing.”
Nuru Pod lights have enough capacity to provide 10 days’ worth of light. Recharging the lights is done by pedaling a patented bike, the PowerCycle TM, which is capable of fully recharging five Pod lights after only 20 minutes of pedaling.
By setting up a network of rural entrepreneurs who take out loans through microfinance institutions to purchase the PowerCycle TM and then earn money through recharging the Pod lights for customers, Nuru Energy helped to create a sustainable livelihood for people in rural areas. Daily incomes have risen from 50 cents to as much as $13.50 a day through a combination of selling or renting Nuru Pod lights and then offering a recharging service for the lights, roughly equivalent to the cost of recharging a mobile telephone.
There have been a few changes to the business model since its inception.“We realised that, as we expanded, we could approach a far greater number of entrepreneurs if we removed the power-cycle generator from part of the loan package,” Hajee says.
Today the cycle generators are still supplied to the entrepreneurs, but Hajee is in discussions with a number of multinational companies about corporate-sponsorship deals to encourage them to bear the cost of the generators in return for brand awareness in rural areas.
Nuru Energy initially had two revenue streams: Short-term revenues comprised the product margins on each sale of the lights and charger, and midterm revenues comprised the microfinance fees charged to the entrepreneurs each time they purchased more recharging credits. Now a third revenue stream has come on board with the carbon-credits deal providing Nuru Energy’s long-term revenue stream.
With Nuru’s finances now secure for years to come, and as other inward investment takes hold in the developing world, the Nuru niche is increasing.
“Now is when the hard work really begins,” Hajee says. “For the last three years, we been refining the business model and, specifically, for the last year we’ve been working on raising this funding. So today is when we get to roll up our sleeves and take what we’ve done to the next level.”
— New York Times Syndicate