Micro-entrepreneurs and business model innovation in Madagascar

Interview with Rik Stamhuis

Co-Founder and Managing Director, Jiro-Ve

Location: Antananarivo, Madagascar

“It is the business model, and not the product, which needs innovation in solar”

How do you change people’s behaviour forever? Rik Stamhuis says you need to ensure that there is a solution which won’t force people to have to go back to their old habits. Last summer, the Dutch entrepreneur was with a group of villagers in Madagascar, where he has lived for six years. He was talking about how kerosene lamps should not be used inside the house. That’s easier said than done: almost 85% of the population use kerosene and candles as a source of cheap energy. Just then, a kerosene-related fire started, and the house of the villagers he was speaking to literally started to burn down. “I was just helping them put out the fire!” he remembers, incredulous.

The Dutchman, who is from Zwolle (“an hour away from Amsterdam, like everywhere in the Netherlands”) worked in Kenya before moving to Madagascar. It was 2011, and he was based at a company selling solar products. He decided he could do more for a field which was still little known. “There is often talk in the solar field about ‘the base of a pyramid’, and making solar available to a group,” he says. “I am passionate about how price-wise, solar products are often out of reach of the poorest.” Madagascar is a beautiful country, he says, “but one of the poorest in the world.” The former French colony gained independence in 1960, and has suffered from a long period of political stability. 75% of people live on less than a $1 a day, and 92% live on less than $2 a day.

Within a year, Stamhuis found himself with 3,000 lights in a warehouse and no business model. One franchisee opened for business in 2012, and was given 90 lights to sell. Three months later, the micro-entrepreneur was renting out 180 lights. A charged light costs 0.06 cents (200 Ariary) a day – kerosene costs 0.03 cents a day. “The difficulty is to reach out to people who tend to buy the smallest bit of kerosene possible,” says Stamhuis.

Kerosene lamps that cause fires and respiratory illnesses can be replaced with safer solar lamps. Courtesy of Jiro-ve

One of the struggles is getting funding for solar for the world’s fourth largest island, based in the Indian Ocean. “A lot of people don’t know where Madagascar is, and I usually have to explain that it’s not a movie… it’s alien to most people.” But as Stamhuis often says locally, “tsisy problème”. ~”It’s one of my favourite things to say, ‘no problem’, because there are usually always problems,” he laughs. Tropical Madagascar can be divided in two areas, explains Stamhuis, one of which gets more sun, but which is affected by the rainy season.

Jiro-Ve, which means “you got light” in Malagasy, employs six locals. It has reached over 9,000 people across six of its 22 regions, including the capital, the second largest city Antsirabe, and the Sagay region. It is working in urban areas but is also making “smart villages” by encouraging more people to run their own businesses. In a country of 22 million people, over 80% live in rural areas, and less than 5% have access to the grid.

“There is so much more that we can do,” says Stamhuis. “It is the model, and not the product that needs innovation. We want to bring entrepreneurship to towns, so we’re helping people create business in a franchise model.” Everywhere you look in Africa, says Stamhuis you’ll see an entrepreneur, from vegetables traders to those working in repairs. “But these small businesses often usually remain small because of a lack of capital and knowledge to grow their companies.”

The franchise model that Stamhuis is championing provides what he calls a “middle way” to provide the best of both worlds and help people to be successful. “We rent out the lights with a solar system that we provide, which people can charge during the night, and so the cycle goes on.” For Jiro-Ve to work, you need a first port of call, of someone who can be relied on, which Stamhuis says can be an erratic process at times. “Sometimes entrepreneurs can leave the business and we are forced to stop. So, we only work with franchisees who have found enough customers and can prove that there is a market that they will sell to. People are key.” Some of the Malagasy (i.e., people who live in Madagascar) who Stamhuis has seen receive a very stable income have used the extra money to care for someone with health problems in the family, or there was a farmer who could invest in agriculture.

Courtesy of Jiro-ve
A pleased Jiro-ve customer in Madagascar. Courtesy of Jiro-ve

The next step for Jiro-ve is to scale up: they have doubled since last year and plan to double again. “Every new micro-entrepreneur sells a minimum of 90 lights, which is how we measure growth.” The goal for 2018 is to reach 66,000 beneficiaries via 308 franchises. Reflecting on the main challenges Jiro-ve faced, Stamhuis says that perfecting the business model took some time, and the eternal problem: getting financing.  “Just today there was a UNICEF proposal to provide school kids with solar lights, which is amazing,” says Stamhuis, although he acknowledges that Jiro-ve would not survive as a business. He is slightly sceptical of how investment works – “sometimes funding is given when something sounds great, or has an amazing story, rather than its having been started from the bottom-up. The gap is often also formed because foundations prefer to spend big money with one single partner and cut overheads, than smaller amounts.” The good news is that there is currently a funding round for Jiro-ve from the Whole Planet Foundation, and in 2017, the plan is to raise a million. “It’s been a long, difficult journey,’ he says, “but once you get the model right, you can scale quite quickly.”

Madagascar is still a bit far away from the rest of world, Stamhuis says. It is 400km away from East Africa, where solar is booming, and solar lanterns are common. He believes it is a good thing that solar is better known now and does not need to be explained any more. Despite the flourishing, cheaper Chinese lights on the market, which could damage the “image of solar” because of their varying quality, it’s still great, because it helps increase awareness. As for Stamhuis himself, who lives in Antananarivo, he misses the longer days of Europe. In Madagascar, the days run from 6am to 6pm. “But at least we are helping to change people’s lives by providing light.”

—Nabeelah Shabbir, @lahnabee

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