No compromises: profitable business model, while serving the poor?

As part of the Economics of Mutuality, we are very interested in business models that do well by doing good. In a recent article in Bloomberg Business, M-Kopa Solar's founders outline their "no trade-offs" approach to social business and profitability.

M-Kopa sells solar lighting and battery charging systems to rural African customers, most of whom rely on ancient, expensive, and "dirty" sources for their light and power. The company’s power system includes a solar panel, two LED bulbs, an LED flashlight, a rechargeable radio, and adaptors for charging a phone. In addition to the environmental benefits, M-Kopa estimates that it's customers can save about $750 over four years by switching to solar.

Company founders Nick Hughes and Jesse Moore envisioned building a company based on three conditions:

  • It had to involve mobile technology, an area in which they both had experience;
  • It had to solve a significant pain point for the very poor; and
  • It had to have the potential to become a billion-dollar business.

We think it’s possible to build a business with no trade-offs. We can benefit the environment. Our customers will be better off. And we’ll get richer. We all can win.” -- Jesse Moore

Because the company only requires a small down payment on their systems, collecting a $0.45 daily payment for one year to make up the difference, M-Kopa operates much like a finance business. Counterintuitively, the company has found that its poorest customers—those who rely on the system as their only source of electricity—make the best credit risks. “If you take the long-term view and if you treat low-income people as customers, not charity cases, you can change the world,” Moore says.

-- Yan Toh

Gates on communication, technology and the future of smallholder farming

Move over, big data?