Transitioning from a nonprofit to social enterprise

Transcription

1 Transitioning from a nonprofit to social enterprise IRIS, October 18th, 2016 Light Up The World (LUTW) Christoph Schultz, Executive Director

2 1. The rationale behind nonprofits and social enterprises 2. Off-grid lighting sector 3. How the sector has evolved 4. How LUTW is responding to the changes: the transition 5. Conclusions Presentation overview

3 Non-profits and social enterprise: some clarifications By non-profit I am referring to: NGO, INGO, NPO, Charity, Humanitarian organization, Aid organization, Development organization etc By social enterprise I mean: Social business, cause-driven business, private company with a social purpose etc

4 Non-profits and social enterprise: why do they exist? Address gaps in product and/or service provision Gaps can be a result of market or public sector failure

5 Establishing LUTW LUTW was founded to address gaps in rural electrification globally Origin is tied to LED technology advancement Focus was on system deployment through partnership with other nonprofits

6 The off-grid lighting sector: what is it? Serve the electricity needs of lowincome families living off-the-grid Objective is the elimination of fuel based lighting through the adoption of modern energy systems Consists of companies and organizations focused on expanding access to modern energy services

7 The off-grid lighting sector in 1997 Globally, it was estimated there were more than 2 billion people living without access to electricity Rural electrification costs were high, kerosene in small quantities was affordable Limited off-grid product availability and a handful of service companies 7

8 The changing landscape: the off-grid lighting sector in 2016 The following key market drivers are changing the off-grid lighting landscape: 1. Dropping solar PV module prices 2. Energy efficient lighting advancements 3. Innovative finance tools 4. Continued growth of cellular phone use 5. Pay as you go (PAYG) 8

9 Widely adopted for cell phone usage (pre-paid cards) Enables solar to be purchased through incremental pricing, the same way kerosene is purchased PAYG: what is it? 9

10 PAYG: how does it work? 10

11 PAYG as a disruptive technology PAYG mitigates some of the longstanding access to finance barriers Provides the incentive to pay De-risks finance 11

12 MKOPA s PAYG model 8W solar panel, two LED bulbs, an LED flashlight, a rechargeable radio, and adaptors for charging a phone Cost: $200 USD, paid with a $35 up-front cost and $0.45 per day for one year A 2014 survey found the average off-grid household in Kenya spends about $0.75 a day on energy 12

13 The implications of the changing landscape The off-grid solar sector has seen impressive growth in the past five years Financing is getting larger 13

14 The implications of the changing landscape continued Pico solar is becoming mainstream Off-grid solar is advancing rapidly beyond just lighting and phone charging 14

15 The decision making process to pursue a shift to a social enterprise approach Staff led and purpose driven reach more people, more sustainably while improving longterm operational viability Initiated a process with LUTW s Board of Directors that built consensus around an appropriate approach to pilot

16 LUTW s social enterprise approach 1. Installations: Offer a wider range of off-grid solar systems, including PAYG Operate under new pricing principles Opening an office in Ancash, Peru to serve a region with an estimated 50,000+ off-grid households 2. Training: Offer trainings services more broadly

17 LUTW s PAYG Payment term System capacity in watts Initial deposit (PEN) Initial deposit (~$CAD) Monthly Payment (PEN) Monthly Payment (~$CAD) Total Price (PEN) Total Price (~$CAD) One year term 10W 200 $80 49 $ $316 Two year term 10W 200 $80 28 $ $352 One year term 20W 350 $ $ $518 Two year term 20W 350 $ $ $554 17

18 LUTW s experience of the transition process and challenges thus far Resources to develop the business plan Legal constraints Perceptions about operations Uncertainty of how operating environment will change further Delays Organizational culture and HR

19 Conclusions Lessons for non-profits considering a shift to social enterprise: Be aware of what is happening in your sector broadly and specifically where you work Pilot before you commit Understand your stakeholders, their interests and the implications Lessons for individuals that support non-profits: Be supportive of pilot projects Focus on results and sustainability, not expense ratios