Driving the grassroots green economy

Kathmandu at night

By GGGI
Sep 18 2019 (IPS-Partners)

Sonika Manandhar, Aeloi Technologies’ co-founder, knows the Kathmandu public transportation system inside out. Her family has been running micros (vans that operate as buses) as a business for over twenty years. She also insists on taking public transportation every day, although most of her peers in the technology industry rather save up and buy a motorbike. “Buses are just safer and more environmentally friendly,” says Sonika. “Unfortunately, all the buses, micros, and tempos stop after 8 pm. Then taxis or motorcycle hailing apps are the only options. I don’t feel safe with either, so I often miss out on networking opportunities or professional meetings over dinner,” she adds.

Sonika trying to negotiate with a taxi driver

Sonika’s frustrations inspired our team to dig deeper into the public transportation industry. We found out that Kathmandu is actually a green city pioneer, with over 700 electric minibuses, locally called safa tempos, that have been steadily servicing the city for 20 years. This industry is uniquely suited to Nepal because of Nepal’s immense hydropower potential, which is predicted to be sufficient for all electricity and fossil fuel use in the country by 2020. In particular, safa tempos are majority owned and operated by women, even though the rest of the public transportation sector is dominated by men. Aeloi’s team thought: what a perfect industry for us to start in!

A typical safa tempo which is an electric minibus that seats 11

Sachita is the owner and driver of her safa tempo

Aeloi Technologies – token powered finance

Aeloi is a fintech social enterprise in Nepal. We are making micro-impact investments accountable and accessible for green microentrepreneurs using digital tokens. Digital tokens are a flexible form of shop credit only usable at pre-vetted vendors. Our SMS platform doesn’t require smart phones or mobile data and is specifically designed for first time digital financial services users. We digitally link impact investors, local microfinance institutions, entrepreneurs, and vendors in real time, ensuring each dollar of investment is used productively.

Investments with an impact focus – such as subsidized loans, social impact bonds, or carbon offsets – are usually not “user-friendly” for microenterprises in emerging markets. Stringent reporting requirements means layers of management and high administration costs, rendering small investments unfeasible. Therefore entrepreneurs in the grassroots green economy are left behind in the move towards a sustainable future, as indicated by the US$2 trillion credit gap for 65 million emerging market microenterprises.

A problem of trust between lenders and borrowers, we believe, is the fundamental reason for the continued lack of affordable financing at the grassroots level. Aeloi’s digital token platform helps increase trust between lenders, borrowers, impact investors, vendors, and other stakeholders.

For example, an impact investor invests US$1 million into a microfinance cooperative in Nepal as a fixed deposit. The deposit generally earns about 12% interest per annum at such microfinance institutions. Then, 4% is returned to the investor, 4% is used to subsidize loans for microentrepreneurs, and 4% is Aeloi’s operations fee. The subsidized loan is issued in digital tokens, therefore ensuring the investment is spent on business expenses. A transparent record is automatically generated in real-time.

Green Energy Mobility (GEM)

Initial online research showed us that the number of safa tempos had not increased since the mid-2000s. Curious about the reason, we started interviewing a lot of safa tempo drivers and owners to understand their challenges. We found out that actually there are an estimated 100 safa tempos just sitting and slowly rusting in garages. It was a sad sight to behold.

Some garages had many safa tempos that sat rusting because of a lack of financing to buy batteries

The reason behind this is that one of the main challenges for safa tempo owners and drivers is to upgrade their battery and engine technology. For example, the owners often buy a pair of lead acid batteries that last only 1 to 1.5 years. This costs about US$4500. Lithium ion batteries that last 5-8 years are available and the technology is quite mature, but they cost almost US$10,000, which is completely out of reach for most women employed in the informal sector. So if an owner cannot afford a new set of batteries, they tend to leave the safa tempo at a garage because it is not worth the loan amount and interest rates. The interest rates can go as high as 26% p.a., depending on if the borrower has any collateral or credit history. If the owners have to take credit from loan sharks, then the interest rates are unpredictable and can go as high as 120% p.a. Often, they can’t access any loan, even with very high interest rates.

We believe our technology platform can help safa tempo owners and drivers. We envision a way to directly connect impact investors and customers to safa tempo owners and drivers through digital tokens. Not only will we help them access more affordable loans, we’ll also be able to help with the savings and repayment process. In addition, we’ll be able to use these digital footprints to create alternative credit scores for access to future loans if they want to expand their business.

With all of this information brewing in our minds, we reached out to the Electric Vehicle Association of Nepal and a safa tempo union to learn more about potential for partnership. We also started doing more customer market research, seeking companies that wanted to provide daily commute support for their employees, events that wanted to provide pooled transportation options for their attendees after 8 pm, and gated communities that wanted to provide transportation options to their elderly and children. We are continuing our customer interviewing process to make sure we can discover and target specific segments that will become our early adopters.

We are also engaging microfinance institutions and banks to see who would be interested in piloting digital token loans for safa tempo owners and drivers. The loans will be small at first to help with daily operations costs, which provides us data to construct an alternative credit score to ultimately access a loan for lithium ion batteries.

As a startup, we are continuously iterating to make sure our product truly addresses our stakeholders’ pain points. The Greenpreneurs program has been tremendously helpful in helping us carve out time to look at each part of our business from a holistic point of view. We also iterated on our business model to make our value proposition for each stakeholder stronger. We will continue to use the knowledge and skills we learnt from Greenpreneurs to move forward with our pilots.

Our vision is for detailed behavioural data from thousands of microfinance products to feed into our big data platform. In fact, we launched our agriculture product pilot, named ReGrow, two months ago and we are receiving very encouraging data. We will be launching our GEM pilot in October this year.

We are actively seeking impact investors who are interested in our model for partnership. Please reach us at hello@aeloi.com.

The global impact investing market was US$502 billion in 2018. Join us in helping grassroots green entrepreneurs directly access such financing!

 

Biography

Tiffany Tong (CEO) and Sonika Manandhar (CTO) are co-founders of Aeloi Technologies. They bring a combined 20 years of experience in fintech, international development, and computer engineering. While working with the World Bank and the Microsoft Innovation Center, they both graduated from the Singularity University based in Silicon Valley. Passion for using exponential technologies to improve livelihoods fuels their partnership. Aeloi’s mentors include advisors and staff from the Greenpreneurs program, Civil Society Academy (Welthungerhilfe), the UN Capital Development Fund, and the UN Economic and Social Commission for Asia and the Pacific.

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