Small enterprises are important to socioeconomic development, but they lack the capital to establish themselves and grow. Moreover, the poor and underprivileged need to be connected to actors in the mainstream economy like financial institutions, product/technology suppliers, implementing organizations, and others in order to create and grow their businesses. The Ground_Up Project had the opportunity to hear from the Small-Scale Sustainable Infrastructure Development Fund (S3IDF) about how it addresses these barriers to integrate poor and underserved populations into the mainstream economy.
S3IDF uses the Social Merchant Bank Approach® (SMBA), which shares similarities with other market-based approaches, but it is unique in several ways. Firstly, it bundles financing, technology access & knowledge, and advisory services support together into one combined service for poor entrepreneurs to help construct their enterprises. Secondly, the SMBA promotes impact through replication of enterprise concepts, rather than achieving impact through the growth of a single business. This means that business models are replicated in new places, making only minor modifications to fit the needs of specific geographies and cultures.
Through replication, businesses can be developed in multiple areas simultaneously. In addition, each business has standalone operations, which means that total impact is determined by the community that it benefits, and not undermined when one of them does not succeed. Two examples that demonstrate the impact of replication for small projects include solid waste management in urban environments and renewable energy access.
Solid Waste Management – Dry Waste Collection Centres
Bangalore, India faced a problem concerning how to effectively process and separate their solid waste. The city would transport the waste to landfills outside the city, which proved unsuccessful and unsustainable. Together with other organizations (Hasirudala, Waste Wide Trust, and Rang De), S3IDF formed a partnership with the city to allocate dry waste collection centres (DWCC) in each of Bangalore’s 198 wards to people working as informal waste pickers. These people already understood the industry as a whole and would benefit from the added income and support.
S3IDF provided business training and working capital through Rang De to support these entrepreneurs. The impact of their work was amplified by replicating the business concept and turning informal waste workers into entrepreneurs all over the city. This provided a decentralized solution to an ever-growing problem, while giving its entrepreneurs and their employees stable jobs and income-generation opportunities in a field that they know well.
Affordable Renewable Energy – Hawker Light Points
India’s urban landscapes are covered with open air markets, where vendors and hawkers sell all kinds of different products to customers. Their livelihoods depend on their businesses, however, and their evenings are hampered by the lack of affordable solar energy as they spend their money on fuel for kerosene lamps to provide light for their businesses. Kerosene is expensive, harmful to one’s health, and damaging to merchandise.
One couple, Ramesh and Manjula, worked with S3IDF to establish and manage a business that met the needs of street hawkers by providing cheap and powerful solar lamps in order to extend business hours without resorting to kerosene. S3IDF connected the couple to a technology supplier to provide the lamps and a local financial institution to provide them with additional working capital and integrate them into the formal economy. S3IDF has applied this business model throughout urban and peri-urban environments in India, providing a sustainable solution that increases income for entrepreneurs and access to products for customers.
Replication of small enterprises can stimulate economic activity at an exponential rate in many locations, while scaling one enterprise would only have an impact in one. The Social Merchant Bank Approach® places importance on letting enterprises grow organically within the local economy. This way entrepreneurs are always in control of their business and the goals they have for it. Greater inclusion in economic prosperity can only occur when all players are involved in the process. S3IDF takes this literally as it conducts its work to create access to basic services through the enterprises it fosters with poor entrepreneurs.
Nakul Kadaba is a Project Associate at S3IDF, where he manages its portfolio of projects in India and assists with expanding its SMBA to other countries – notably Cambodia, Myanmar, and Nepal. He was selected as a Fellow with RSF Social Finance, a nonprofit financial services firm changing the way the world works with money. He worked with the lending team to vet social enterprises and further their social enterprise lending program. Before that, Nakul worked at The SEEP Network, providing support for the Minimum Economic Recovery Standards Program. Nakul holds a Masters in Public Administration from George Mason University, and a Bachelors degree in Economics and History from The College of William and Mary. He speaks English, French, Hindi, Kannada, and Tamil.