Promoting solar power in Pakistan

The city of Lahore is renowned as the literary, educational and cultural heart of Pakistan and has a long history of beautiful architecture dating in particular from the Mughal period with buildings such as the Badshahi Masjid and the Shahi Qila or Lahore Fort.

Shakeel and Rehan from Akhuwat on the roof  where the solar panels are located

Although on a much more modest scale the new, purpose built headquarters of Akhuwat, Lendwithcare’s partner in Pakistan, continues this custom of bold, innovative design while respecting historical tradition.  The seven storey offices, completed in 2014, is the first large building in Lahore that can be run exclusively on solar power as up to 48 kilowatts of electricity can be generated from the 160 large solar panels located on the roof of the building. The energy is stored in 136 batteries all housed in a special control room on the top floor. When fully charged the batteries can power the entire building, which houses almost 70 staff, for almost eight hours or the whole of the working day. 

Furthermore, rather than install air conditioning units that are expensive and use lots of electricity, the narrow, open plan design of the building incorporates natural ventilation systems to simultaneously cool and channel fresh air throughout the building. Even during the hot summer months in Lahore when the average daily temperature routinely exceeds 40 degrees centigrade, the temperature inside the building remains much lower at around 25-30 degrees centigrade.

Shakeel  from Akhuwat in the control room

Dr Amjad Saqib, Akhuwat’s Founder and Executive Director, explains that the motivation to install solar power was not only an attempt to reduce carbon emissions and promote the use of renewable energy, but also in fact a response to the daily reality of frequent and often prolonged electricity cuts in Pakistan or ‘load shedding’ as it is referred to locally. Load shedding means that households and businesses alike receive electricity continuously only for a few hours each day, with power outages longer in rural areas. Whereas larger buildings and businesses can afford to rely on generators for power when there is no network electricity, small businesses are often forced to simply down tools and wait for the power to return. The costs to the economy in terms of lost production are staggering; one estimate is that annual gross national product has been reduced by 7%. Arguably nothing causes as much frustration and inconvenience for ordinary Pakistanis as load shedding.

Dr Amjad explains “I am convinced that solar energy can offer a practical and affordable solution to the thousands of microentrepreneurs that Akhuwat supports”. Therefore, to enable them to continue working during the frequent bouts of load shedding, Akhuwat intends in 2015 to start providing loans of between 20,000 and 100,000 rupees (approximately £130-£650) for small businesses to purchase and install solar power systems.  Since monthly electricity bills are often in the range of 2,000 to 3,000 rupees a month, Akhuwat estimates that the investment in solar power for most borrowers will actually pay for itself after a couple of years as their electricity bills will be much lower.

Such loans should soon be featured on the Lendwithcare website.

By Dr Ajaz Ahmed Khan, Microfinance Advisor at CARE International UK

How to increase investment in micro-enterprises (and get your money back)

This blog was orginally posted on CARE Insights.

Today CARE has submitted written evidence to the International Development Committee (IDC) of the House of Commons on our peer-to-peer lending network, Lendwithcare. (For a snappier and more entertaining overview of Lendwithcare, see our new Christmas animation above.) The IDC is currently looking at jobs and livelihoods and is interested to understand more about the role that a relatively new way of funding micro-enterprises can play in generating growth and jobs in developing countries.


Lendwithcare.org has been hugely successful since its launch four years ago, and now supports over 14,000 MSMEs by engaging online with over 18,000 lenders who have each, on average, loaned £35, raising nearly £5 million in the last four years. These really are loans – almost all are repaid within the agreed timescale. To date, only death and major disasters, like Typhoon Haiyan, have prevented our microentrepreneurs from repaying. Of course, our committed lenders very frequently recycle their loans to other entrepreneurs, keeping money in the system and reaching more businesses.

Lenders find Lendwithcare a compelling proposition: they can choose who to lend to, based on detailed information on the individual and their business plans, they get regular feedback on progress, and they know that they are helping resourceful individuals lift themselves and their families out of poverty. And they get all of this within a web experience in their own language, culture and currency. The other compelling aspect is that, when you put money into Lendwithcare, 100% of the money goes to the entrepreneur who is borrowing – CARE does not take a slice off the top. Rather, our modest administration costs are met from other funding within CARE, and until recently, by sponsorship from the Co-operative Group.

The opportunity (and the key issue)

There is a lot of scope for expanding Lendwithcare’s operations – there is certainly no shortage of small enterprises requiring loans. And we believe that there are many more microfinance institutions out there who are likely to meet our (demanding) criteria. We know this because Lendwithcare only lends in nine countries, compared to the 80 countries in total in which CARE International works.

We also believe that there are considerable opportunities for expanding the lender community of the Lendwithcare model. For instance, we believe that it is likely to be successful in other European countries where there already exists a CARE office. As this includes Germany, France, Austria, Norway and Denmark, there is a lot of opportunity. We would also like to explore rapidly developing countries such as India and Brazil. We know that lenders find it important to link with an organisation in their own country, for reasons of language, currency, tax laws and cultural affinity.

All of which would take some more investment – but we know that we can raise loans to the value of seven times the marketing and administration investment. This is a powerful win-win-win between CARE’s mission to end poverty, an individual’s desire to use some of their own hard-earned cash to help others, and entrepreneurs’ drive to build strong businesses to lift themselves and others out of poverty.

So now all we have to do is find the cash to pay for some administration and marketing…

By Gerry Boyle
CARE International UK's Senior Policy Adviser on Private Sector Engagement

Download our written evidence in full here.

Is peer-to-peer (P2P) lending an efficient way to support microfinance?

The Lendwithcare.org Homepage

Peer-to-peer (P2P) micro-lending platforms, such as lendwithcare, have become a popular method of supporting small businesses in developing countries. Local microfinance institutions (MFIs) select borrowers and appraise their loan applications, which if approved, are financed by the P2P platform. Lendwithcare was established in 2010 and to date some 17,000 individual lenders have financed loans to more than 8,000 borrowers across ten countries.  Our experience over the past four years is that as their loans are repaid, lenders invariably re-lend; rather than withdraw their money. While lendwithcare has proven to be very popular with supporters, is it an efficient way for MFIs to access funding?

The obvious attraction for MFIs is that they do not have to pay any interest whatsoever on the capital they receive from lendwithcare. Although some MFIs are permitted to accept savings, most of our partners are legally prohibited from accepting deposits. Therefore, in common with many other MFIs, they must rely on external loans to finance their lending. Typically, they access capital from Microfinance Investment Vehicles (MIVs); these are specialist microfinance investment investors such as Blue Orchard, Oikocredit, Triodos and responsAbility, and from local commercial banks. Both these categories of lenders charge interest on their loans, although the MIVs typically charge lower rates than commercial banks and some also provide technical assistance and expertise.

Although lendwithcare does not charge any interest, the funding we provide is not cost free for our MFI partners. This is because they have to visit borrowers, collect details regarding their businesses, take photographs, upload all this information onto the lendwithcare website and then provide further updates on borrowers’ businesses. If the MFI’s clients are living in isolated villages spread over a large area then the administrative obligations associated with participating in lendwithcare could be considerable. This could mean that any benefits arising from interest free capital might be negated by an increase in operational costs. This raises the question, might it actually be cheaper for MFIs to simply access capital from the MIVs and other commercial lenders, even though they have to pay interest, than from lendwithcare?

During a recent visit to Cambodia, this is a question I posed to the Cambodian Community Savings Federation (CCSF) who have been working with lendwithcare for the past three years. CCSF works with rural clients, mainly rice farmers, in the provinces of Battambang and Banteay Meanchey in North West Cambodia. Pisey Phal, CCSF’s CEO, confessed that while they do access loans from several MIVs they prefer funding from lendwithcare because it is much cheaper for them.

Lendwithcare Entrepreneur with CCSF loan officer © CARE/Nancy Thomas

Pisey mentioned that during 2013 lendwithcare provided CCSF with US$416,000 to fund loans to more than 500 individual borrowers as well as a small grant to help with administrative costs. CCSF used the donation to cover the salary paid to one employee who was contracted specifically to work on lendwithcare – the grant just about covered all of his annual salary, although it did not cover his expenditure on fuel and the small amount of time that other staff, particularly the finance manager, spent on lendwithcare related duties. To access an equivalent amount of funding from an MIV or commercial lender, CCSF would have had to pay at least US$32,800 in interest charges, possibly more. Pisey added that lendwithcare funding would still be cheaper for them even had it not received the administrative grant. She added that the greatest advantage of lendwithcare funding is that it provided CCSF with a secure source of funding over a longer period of time, loans from MIVs in contrast are generally for shorter periods of 1-2 years. Furthermore, since loans from lendwithcare are repaid monthly and transfers simply offset against new loans being financed, Pisey mentioned that the exposure to possible currency fluctuations is greatly reduced.

From discussions with lendwithcare’s other MFI partners, they make an effort to ensure that any extra administrative costs are kept to a minimum by integrating lendwithcare duties with other routine operational tasks. For example, our partner in Ecuador, Fundacion de Apoyo Comunitario y Social del Ecuador, requests several loan officers from three branch offices to each collect four borrower profiles every month. The loan officers estimate that lendwithcare adds on average just an extra 1-2 hours to their monthly work burdens – they already visit borrowers to assess the feasibility of their loan application, the only extra work associated with lendwithcare is taking photographs and preparing a narrative for the website.  By dividing extra responsibilities related to lendwithcare between several staff, there is actually only a marginal increase in administrative work.

By Dr Ajaz Ahmed Khan, Microfinance Advisor at CARE International UK

Finalists for Lendwithcare Grassroots Entrepreneur Awards announced!

Public voting has closed for the 2014 Lendwithcare Grassroots Entrepreneur Awards and the ten most popular entrepreneurs, featured below, have been passed to our expert judging panel to pick an overall winner.

The standard of entrants has been extremely high. Every one of the 33 nominees is inspiring and has demonstrated an incredible level of enterprise and entrepreneurialism, often in the most challenging circumstances. The Lendwithcare Grassroots Awards recognises the most innovative and determined small businesspeople in poor communities in the developing world. The Awards celebrate creativity, enterprise and innovation, and prioritises social values and poverty alleviation.

It’s now down to our able panel of high profile names from across the business world to come to a final decision. Alastair Stewart, Deborah Meaden, Levi Roots, Nick Hewer, Richard Reed, Sir Stuart Rose, have a difficult decision on their hands! 

 Leonida Bironga Makori

 

Leonida, from Kenya, is a 32 year old entrepreneur. She has been involved in the franchise business for CARE’s Group Savings and Loan (GS&L) project. So far, Leonida has trained over 50,000 individuals on CARE Kenya’s GS&L project. She also supplies carbon-free cook stoves and micro solar lamps to GS&L members on credit, which has improved the individuals’ lives as they have been able to pay for these appliances in installments. She has distributed over 644 carbon-free cook stoves and 636 micro solar lamps to her community through the GS&L programme. Through her work with the GS&L programme, she has employed 30 community-based trainers, whom she pays from her own income, creating long-lasting community change.

La Morm

La Morm, from Cambodia, is a seamstress with a difference. She is incredibly committed to investing in her community and decided to take out a small loan to purchase sewing machines to train local apprentices. Apprentices pay $12 to be trained by La Morm over two months and once they have completed their training can take the machines home to start their own businesses. The machines cost £150 each and apprentices take on this loan if they choose to take the sewing machines home. This entrepreneurial education education has transformed her community forever.


Bora Mau

Bora, from Cambodia, is a truly dynamic entrepreneur. She used a small loan to invest in both her husband’s welding business and her fish and chicken farms, increasing her profit margins to between 20-30%. Bora Mau believes education is crucial in the fight against poverty, and in addition to investing in her businesses, the entrepreneur set-up a school where she teaches over 100 local children in the morning and evenings.

 Anwar Bibi

Anwar, from Pakistan, is an embroiderer. She went through critical illness and her son died in a fire accident, inducing heavy medical expenses. She started embroidering with her daughter, earning little. After a loan, she expanded to six employees, and now plans on sending her children back to school. She turned her fortunes around, even becoming an earning source for others. Anwar has proved that if you are determined, you can turn things around for the better. Apart from providing a better lifestyle to her family, she has also become a source of income for four families.


Bertha Nkhata

Bertha, from Malawi, runs a bicycle taxi business alongside her smallholding farm. This taxi business enables her to pay the school fees for her two children as well as buying a solar light to enable the family to be productive in the evenings and use basic kitchen equipment. Bertha also employs casual labourers for her farm, thus creating much needed local employment.
She is happy to know that she is a self-sufficient woman, giving her independence rather than having to always rely on her husband.


Teresa

Teresa, from Egypt, first took a loan of just £17 and purchased ducklings. She was able to repay the loan and earn some money. The whole family work in poultry and expanded their business with further small loans. She encouraged her friends and neighbors to form Village Savings and Loans groups and she trained them on how to raise ducks. Moreover, her group members elected her to be the chairwoman. Being the group chairwoman affected Theresa’s character, and the leadership and decision making skills she has  learned have changed her community.


Appoline Ahossi 

Appoline, from Benin, produces cassava flour and tapioca. She only employs young women and girls, paying them fairly and allowing weekends off, as she believes in women’s potential to be an economic driving force in Benin. She has employed up to ten women simultaneously. Aware of environment protection, Appoline uses clean, fuel-efficient stoves in her production.



 

Elisabeth Houessou

Elisabeth, from Benin, is an example of achievement and innovation in her village. She has overcome a variety of problems related to her production and has managed to become a quality producer of gari (cassava flour), also innovating and developing new products like a snack from coconut milk and sugar. Also, Elisabeth employs staff permanently, always recruiting women in difficulties showing solidarity with other women and a desire to help her community. Finally Elisabeth has been training women in the production of quality gari for 10 years, passing on her knowledge to other people.


Amake Albiro Ogoudele

Amake, from Benin, produces cassava flour, employing eight full-time staff, and exporting her produce across the Nigerian border. During the busy December month, she hires more staff. Aware of environment protection, Amake uses fuel-efficient stoves to reduce firewood consumption, and participates in reforestation campaigns. She is a role model for her community.




Victorine Fianyo

Victorine, from Togo, is a fantastic example of how microfinance can give people living in poverty the opportunity to transform their lives. 18 years ago, she accessed her first loan of just £25 to buy basic ingredients for her ‘Kom’ (a corn meal very popular in parts of West Africa) stall which she set-up outside her home. Today she produces Kom wholesale, has built her own shop where she sells a diverse range of goods, employs seven people, and can afford to send all her children to school. Indeed, much to the entrepreneur’s great pride, her fourth daughter has just gone to Germany to complete higher education – something quite rare indeed.

Have your chance to invest in next year's Grassroots Entrepreneur of the Year and visit www.lendwithcare.org today!