Impact Energies (IE) radically improves the ability of the energy poor to afford and better access clean energy.

Impact Energies (IE) radically improves the ability of the energy poor to afford and better access clean energy.

Ghana
Organization type: 
for profit
Budget: 
$100,000 - $250,000
Project Summary
Elevator Pitch

Concise Summary: Help us pitch this solution! Provide an explanation within 3-4 short sentences.

Impact Energies (IE) goal is to improve the ability of the energy-poor in Africa and Asia to access better and cleaner energy. Today, there are 2.7 billion energy poor people in the world, 10 million in Ghana alone where we have offices. The lack of access to energy has far-reaching consequences. IE’s goal is to provide access to clean and sustainable alternatives, such as solar lanterns and clean cookstoves. Clean energy products are truly life-changing as they radically improve work productivity at night, save people money and prevent families from having to breathe indoor air pollution associated with kerosene and biomass. The clean energy products we provide typically pay for themselves in less than 6 months, and with a 2+ year expected lifetime, have a long-lasting positive effect.
About Project

Problem: What problem is this project trying to address?

As of now, Impact Energies’ operations are concentrated in the Greater Accra and the Volta regions of Ghana. These are poor rural areas which are infrequently connected to the national electricity grid. The few areas that are connected to the grid suffer from frequent and long power blackouts. These two regions are densely populated and show the greatest promise of success.

Solution: What is the proposed solution? Please be specific!

IE’s approach to energy poverty is unique because it markets and finances consumer durables through microfinance. Microfinance institutions (MFI) usually disburse loans to households and small entrepreneurs without participating directly in the expansion plans of their creditors. IE fills this gap: it provides its customers with a product that will reduce expenses and increase future earnings, in addition it connects them to the means to finance it. The creation of a distribution channel for microfinance institutions has never been executed in large scale before. It has the chance to completely change the landscape of microcredit: MFI’s will start partnering with companies specialized in productivity enhancing goods, to offer product-based loans. By providing the highest quality products, MFIs can increase their repayment rates, and as a result will naturally select products that enhance productivity, as opposed to purely consumption loans. This will create an opportunity to offer households a vast array of solutions to improve quality of life and reduce inefficiencies in the existing supply chain. Additionally, our approach to how we disburse product loans to MFI institutions is innovative. IE provides a currency risk mitigation strategy that is unique by partnering with a local banks and contractually agrees upon fixed rates for the currency exchange rates. This allows us to protect MFIs against inflation, and thus provides them with unique stability when receiving loans from international product suppliers which typically do business in USD.
Impact: How does it Work

Example: Walk us through a specific example(s) of how this solution makes a difference; include its primary activities.

-Creation of a modern IT and SMS enabled supply chain of modern energy products to Ghana Ensuring steady supply of high quality products for poor customers is an enormous challenge in many Africa countries. By creating a supply chain from tested and hand-selected suppliers, IE is able to have products always available in the field. Creating this reliability reduces prices, increases certainty and as a result, significantly increases the credibility and uptake of the products we support amongst the rural and peri-urban poor. Allowing stakeholders along the process to ‘plug into our supply chain’ through the use of modern technology like SMS enhances both its success and user buy-in because information is shared to all parties in an extremely efficient manner. -Support the marketing and sales done in the field by local entrepreneurs hired by IE on a part-time or full-time basis Last-mile sales operations are performed by local entrepreneurs. IE hires entrepreneurs, who connect potential customers with our partner MFIs to purchase the solar products or also with cash purchases. The entrepreneurs visit villages, promote clean energy products and perform sales on which they get commission. IE provides these entrepreneurs with an autonomous micro-business opportunity, creating local employment opportunities in rural villages. Entrepreneurs are trained on our product offering and can operate part-time before deciding whether they want to fully dedicate themselves to IE. This allows us to create a powerful network of local salesmen and women in the field, with their unparalleled knowledge of their community. -Supporting the financing of products by partnering up with Micro finance institutions (MFIs) Typically, microfinance institutions must purchase clean energy products directly from a manufacturer with cash, and must sell these products to their customers on credit and wait to be paid back over a period of several months. This is problematic for two reasons: 1) MFIs do not typically have enough cash to make such a large purchase up front, and 2) MFIs will not purchase enough products to get a notable discount from suppliers. IE solves these problems by loaning the products purchase to MFIs as a loan, and gains favourable prices by aggregating the product needs of several MFI into single large purchases.
About You
Organization:
Impact Energies
About You
First Name

Hugh

Last Name

Whalan

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About Your Organization
Organization Name

Impact Energies

Organization Country

, NY, Tompkins County

Country where this project is creating social impact

, VO

How long has your organization been operating?

1‐5 years

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Innovation
What stage is your project in?

Operating for 1‐5 years

Share the story of the founder and what inspired the founder to start this project

Hugh Whalan worked in management consulting and the carbon markets, before getting interested in energy and poverty. Hugh quickly realized that energy was fundamental to almost all development outcomes, but was a problem with too little international attention. This inspired him to co-found and lead a non-profit called Energy in Common in August 2009 with the aim to alleviate poverty and address climate change by making small scale green energy affordable and accessible to the poor. EIC achieved this by partnering with MFIs to provide financing for energy loan programs. The flagship product of EIC is a person-to-person web platform (www.energyincommon.org) which was beta-tested in December 2009.

While the energy lending program was a success, Energy in Common and its partner MFIs faced supply and distribution challenges related to clean energy products. After struggling with a few different approaches for more than a year, Hugh decided to create a new organization, Impact Energies, which could solve this crucial problem that was preventing millions of rural energy poor from receiving products that would make their lives better.

Social Impact
Please describe how your project has been successful and how that success is measured

Impact Energies has been successful in launching clean energy programs with MFI partners, and we currently have nearly 5000 units of solar products being distributed through our partners to the rural poor at prices that are lower than any comparable products on the market.

Impact Energies aims to not only be profitable, but also to be a social business with an equal focus on social impact as well as profitability. We aim to measure our success on three social metrics:

Number of poor customers reached:
IE expects to bring clean energy products to well over 1 million people by 2015.

Greenhouse Gas Mitigated:
Along with an increase in health, the environment also benefits from these less emissive and emissions-free technologies. These benefits are more easily quantified. Greenhouse gases are reduced by the employment of green energy technologies and are measured in metric tonnes of CO2 equivalents during the loan period. We anticipate reducing over 20,000 tons of greenhouse gases per year by 2015.

Educational Services:
One of the key service offerings of Impact Energies is to educate people that are unaware of the benefits of clean energy through educational and marketing programs. This lack of awareness has been a key barrier to successful energy loan programs in the past. Through Microfinance partners and its own activities, IE estimates that it will educate 4 million on the benefits of energy products.

How many people have been impacted by your project?

1,001- 10,000

How many people could be impacted by your project in the next three years?

More than 10,000

How will your project evolve over the next three years?

IE expects to have sophisticated supply chain operations in at least 4 countries by 2014. Our operations will then be based around more than fifteen MFIs and a network of over 1,000 entrepreneurs in Africa. Additionally, we forecast becoming self-sufficient in the next few years. In 2014, we will be generating positive cash flows and profit from product margin. This new reliance on earned income will allow us to scale up operations autonomously.

With this size of operations, we will be generating over $13 million USD in productivity savings in 2014. A large customer base will allow us to effectively gauge the reception of new products and to diversify risk.

Sustainability
What barriers might hinder the success of your project and how do you plan to overcome them?

Partnering with a large number of MFIs is crucial to our success. Ideally, we aim to have four or more MFI partners per country, which allows for an extensive market for our products. Creating this network of MFIs is going to be a challenge for the organization, as each MFI operates its finances, inventory and operations differently. IE intends to manage the financial tracking, inventory and supply process on behalf of MFIs. To accomplish this, IE is currently developing a cloud based IT infrastructure that will automate these business functions for MFIs.

Insuring quality after-sale service is one of our most important concerns in the field. We see it as an integral part of our mission to make sure that the product will be working for its warranty period. To ensure this and future customer loyalty, all of our entrepreneurs are accompanied by electricians who provide customers with training on how to operate the lanterns and their batteries. If unfixable, the product is readily substituted for a new one as we have agreements with our suppliers to guarantee all products. Maintaining this efficient after-sales service is key for us to maintain credibility in the field.

Effectively implementing cross-border finance risk and currency risk mitigation strategies is important for us to be able to support our MFI partners with acceptable rates and risk on their loans. As a result of our partnerships and experience in hedging currency, we are able to offer this unique advantage to our MFI partners. Therefore, they are not faced with the risk of paying back international suppliers in US Dollars.

Tell us about your partnerships

Our product chain is created in partnership with our product suppliers. Our suppliers must have products that can be easily operated and that have proven durability and effectiveness. It is also necessary for them to show an ability to scale-up operations. Knowing that our suppliers are on board with geographical expansions is important for our long-term growth projections.

Our MFI partners are also crucial for our operation, since they provide our entrepreneurs with start-up capital to purchase solar products. Moreover, we also market our products in the MFI’s own distribution network, with low-income households being able to buy our products using microcredit.

IE also has a partnership with a top 100 law firm that provides us with pro bono legal services.

Finally, IE works with one of the world’s leading currency risk mitigation firms. This firm performs the hedging services necessary for us to be able to eliminate currency risks. This allows for our entrepreneurs to take loans at extremely low risk, enabling MFIs to access financing provided in foreign debt markets. Despite this ability to provide below-market financial costs, we are also able to maintain substantial profit margins on our product sales.

Explain your selections

Impact Energies has received support from numerous sources. Cash and loans have been provided by friends and family in order to finance the products that are sourced to MFI partners.

In addition, we work with several experienced professionals that serve as mentors to our organization, offering years in the development, finance and microfinance fields.

Several of our product suppliers provide services such as training and logistics support in tracking the product delivery to the country.

In addition, we have received invaluable legal support through a Top 100 law firm that is providing services pro bono.

How do you plan to strengthen your project in the next three years?

Impact Energies has an ambitious expansion plan for the near future. In 2014, we plan on having operations in 3 additional countries: Uganda, Tanzania and Kenya. These countries have similar characteristics to Ghana, with low electrification rates, strong MFI networks and economic stability. Geographic expansion is extremely important to strengthen the company because it increases our potential markets, drives up purchasing power, but also to diversify risk.

IE also plans on expanding the array of products it offers. IE plans on adding clean institutional cookstoves and water filters to its inventory. Those products have various benefits, as they allow for better health, cost savings and reduction in pollution. We are currently discussing opening a small factory of institutional cook stoves in Ghana, which would reduce costs and allow for a more swift distribution in the country, along with providing us with in-field support from our suppliers.

We are also developing a web portal that will allow our MFI partners and their branches to view their inventory, make purchases and track product repayments. MFI management information systems are not built to handle product inventory or purchases. Therefore, such an IT solution will allow MFI’s to significantly reduce the time it spends on program reporting and management.

Challenges
Which barriers to employment does your innovation address?
Please select up to three in order of relevancy to your project.

PRIMARY

Restricted access to new markets

SECONDARY

Lack of efficiency

TERTIARY

Lack of skills/training

Please describe how your innovation specifically tackles the barriers listed above.

Starting a micro-business in Ghana is difficult for local entrepreneurs, despite their knowledge of the native market. High interest rates, and a lack of a modern supply chain make it nearly impossible for anyone to venture into business alone. IE’s offers entrepreneurs the opportunity to become autonomous businessmen and women. With the support of IE, they are able to overcome Ghana’s huge capital costs, along with marketing cheap and efficient products. Since most of our entrepreneurs’ comes from commissions, IE spends a lot of time with entrepreneurs devising more efficient solutions for sales and promotion. In addition to that, IE also organizes training sessions on technical skills and salesmanship.

Are you trying to scale your organization or initiative?
If yes, please check up to three potential pathways in order of relevancy to you.

PRIMARY

Grown geographic reach: Multi-country

SECONDARY

TERTIARY

Enhanced existing impact through addition of complementary services

Please describe which of your growth activities are current or planned for the immediate future.

Our business model is easily replicable in large scale, and our short term goal as of now is to expand it to East Africa. We are already in negotiations with a few potential MFI partners in additional countries..

We are also searching for new entrepreneurs to hire in Ghana, in order to increase our sales and market presence. In the next twelve months, we will hire at least 50 additional entrepreneurs, creating a very powerful sales network in the country.

Finally, we are also already negotiating to bring new products to our entrepreneurs, including solar water filters and cook stoves, increasing possibilities for them.

Do you collaborate with any of the following: (Check all that apply)

Technology providers, NGOs/Nonprofits, For profit companies, Academia/universities.

If yes, how have these collaborations helped your innovation to succeed?

Our technology providers offer innovative products that can have a large effect in impoverished communities. We are discussing setting up factories in the countries of operation in partnership with our providers, making for even more swift distribution networks.

We have partnerships with both non-profit and for-profit MFIs. Our project is strengthened by these MFIs because they offer product loans directly to their clients, but also for the financing they offer our entrepreneurs.

Finally, we have collaborated with Cornell University and Yale University. Cornell faculty members are on our board of advisers. We are also sponsoring a master’s thesis by a Yale student on energy loans, which will allow us to better judge the effect our loans have on the communities we work with.