Micro Drip

Thanks to Majid Mirza, a summer intern with our investee Micro Drip, we’d like to share some incredible unfiltered footage about what’s happening behind the scenes in Pakistan. Check out all of the videos at his blog here or on his YouTube channel.

The Ripple Effect team heads to Kenya for the second part of their project’s implementation.  The Ripple Effect project delivers hands-on innovation training, business expertise and a sense of urgency to a select group of companies and organizations that are developing solutions for the delivery and storage of clean water in India and East Africa.  Follow their blog to learn more.

Ripple Effect team in Kenya

Acumen Fund is co-sponsoring The Next: 2010 Case Writing Competition along with the William Davidson Institute and the World Resources Institute.  The case writing competition is open to students and faculty members at both the undergraduate and graduate level.  Case submissions must be on a social venture (e.g., VisionSpring) or a relevant base of the pyramid topic (e.g., the role of subsidies in social ventures).  Read more here.

The next series of blog posts will cover innovations from the field. Recently, I conducted some in-depth farmer interviews around Hyderbad and learned about some pretty interesting innovations that are happening on the ground. Keep in mind that these are not college-educated individuals; most have not even finished high school. What I saw was human ingenuity in its purest sense. At the end of the day, I found myself leaving inspired by their innovativeness and creativity.

Zulfiqar Ali, a four-acre farmer in the small village of Dabri, Pakistan, doesn’t travel to his nearest bank branch when he needs some cash. All he has to do is open the door to a room where he stores his wheat crop and travel to the market. Unlike most farmers in Pakistan, Zulfiqar does not sell his wheat crop upon harvest. He realized that harvest season was the worst time to sell his crops due to a glut in supply. Zulfiqar stores his wheat crop and sells it one bag at a time, based upon when he needs cash. With each passing week, the value of his remaining wheat increases. A wheat ATM… that is innovation.

Joel Montgomery

The next series of blog posts will cover innovations from the field. Recently, I conducted some in-depth farmer interviews around Hyderbad and learned about some pretty interesting innovations that are happening on the ground. Keep in mind that these are not college-educated individuals; most have not even finished high school. What I saw was human ingenuity in its purest sense. At the end of the day, I found myself leaving inspired by their innovativeness and creativity.

Agriculture is extremely risky. There are so many things that can go wrong: bad seed, no water, pest attack, fake fertilizer, bad weather, no transportation to market, etc. Price fluctuations are also quite common. This means that a farmer may spend Rs. 25,000 (USD $315) or more on inputs (seed, fertilizer, pesticide, etc.) and land preparation (tractor rental, laborer wages, etc.) just to find out at the end of the season that the price of his crop is so low that he will make a loss. He borrowed money at the beginning of the season from an arti (money lender) at a rate of 120% annual interest and now is even farther in debt.

In Pakistan, most farmers grow two crops: cotton (summer) and wheat (winter). We always wondered why both crops were so prevalent and finally realized upon completing our interviews. Firstly, most farmers grow cotton and wheat because the prices are stable. It takes a lot of the guess work (and risk) from other types of crops that have more volatile prices. Secondly, farmers grow cotton and wheat because they don’t spoil. If you grow vegetables, then you must transport them to the market quickly before they rot. Cotton and wheat, on the other hand, can be stored for a long time and won’t go bad. Probably the most interesting reason for the traditional cotton-wheat rotation is that wheat is a natural life insurance policy. Farmers grow wheat and keep 50-100 munds (1 mund = 40kg) back to ensure that their families have food to eat during the coming year. Usually an average family needs around 50 munds per year, but they keep extra for festivals, weddings, and unforeseen circumstances. No matter what happens in

It is critical that any social enterprise have a deep understanding of the customer it is trying to serve. At Micro Drip, we conduct in-depth farmer interviews using various techniques in order to understand the particular farmer’s circumstances along with how he makes decisions. Many thanks to IDEO for their Human Centered Design Toolkit which served as a guide for our work.

With Pakistan often among the top headlines on The New York Times front page (and usually not in a flattering way) – we are heartened to see the most recent issue [Dec – Jan 2009] of Blue Chip Magazine, a leading business magazine in Pakistan, carry a cover story on our very own Jacqueline Novogratz and the investments Acumen Fund has made in Pakistan.

Our most recent intra-office debates revolve around the question of how to support and encourage social entrepreneurship - let alone find the solid business ideas that are providing services at the BoP - so we at Acumen Fund are excited to see positive news of on-the-ground initiatives and social businesses that often operate in the most challenging environments and landscapes. The story really is around social entrepreneurs like Roshaneh Zafar, Tasneem Siddiqui, and Dr. Sono Khangharani who “have seen possibilities where other people see hopelessness.”

Also featured in the same issue of Blue Chip is Roshaneh Zafar , President of Kashf Foundation, who recently launched Kashf Microfinance Bank Limited (KMBL) in October 2008. KMBL is an investment of Kashf Holdings Private Limited, the parent holding company in which Acumen Fund has also invested.

In the five months since operations were launched, Kashf Microfinance Bank has set up 18 branches and is serving 20,000 microfinance clients. But with the microfinance industry facing a challenging period in Pakistan due to the macroeconomic environment and political instability, the innovation of the original group lending methodology is now facing a setback. There is a need to innovate in microfinance services beyond the group lending methodology commonly used by microfinance institutions in Pakistan.

With the launch of the new Kashf Microfinance Bank, Kashf has begun individual lending and savings mobilization and now provides savings products to women from low-income communities. Roshaneh discusses the pioneering work Kashf has been doing at the BoP and Acumen is proud to support Kashf and the microfinance sector in Pakistan.

Micro Drip is a company that is committed to demonstrating the highest level of ethical behavior. Unfortunately in Pakistan, that makes our job even more difficult than it already is.

Besides the obvious benefit of helping farmers earn more with less, Micro Drip’s work has the added benefit of helping Pakistan address its impending water crisis. Currently, Pakistan is under a severe threat of water scarcity, according to the current level of per capita water availability, which hovers just above 1,000 cubic meters of water per person. The World Health Organization has set 1,000 cubic meters of water as the minimum amount of water necessary to satisfy basic needs for food, drinking water, and hygiene. At the current rate of decline, Pakistan is projected to reach 886 cubic meters of water availability per person in the year 2020, well below the minimum threshold. In light of these issues, the Pakistani government has enacted a number of programs designed to increase water efficiency, including a US$ 1.3 billion program for subsidizing drip irrigation. On the surface, this seems like it would ideally suite Micro Drip, but the proposal was written primarily with the highest quality orchard drip irrigation systems in mind. Micro Drip’s innovation is being able to reduce the price of drip irrigation so that it is more accessible to poor farmers, but this same innovation is making it much more difficult for us to qualify for the subsidy.

Recently, we had a discussion with a government representative who asked us why we had flagged our products in the beginning as not meeting certain government specifications. He questioned why we did not simply forge certification documents and place fake labels on our material in order to qualify for the subsidy. This same representative also alluded to the fact that other drip irrigation companies are doing just that. By doing what is right, we have made the path before us even more complex, but we wouldn’t have it any other way.

Anyone who has worked at the Base of the Pyramid can tell you that human resources is a major challenge. Recruiting and retaining good talent can be a nightmare and has major implications for how fast (or slow) a social business can scale. I am faced with these issues every day in my work as an Acumen Fund Fellow with Micro Drip, an irrigation solutions company that focuses on poor farmers in Pakistan.

Micro Drip has been searching for over a year for a competent Operations Manager. Most candidates are either extremely over or under-qualified. As a social business, we simply cannot compete with large multi-national corporations in terms of salary and benefits. Our plight provides further evidence to the gap at middle management that is often present in developing countries.

Recently, I helped develop a start-of-year workshop that was designed to rally the company around a new Vision & Mission and build a feeling of belonging & teamwork (video: www.youtube.com/watch?v=GH4gv2tm_UU). As part of the three-day event, we introduced a strategic task list to help strengthen the company’s foundation in preparation for further expansion. Each employee was assigned at least one strategic task with which they were supposed to outline a logical sequence of steps to complete the task, along with an estimate for how much time each step would take. Yesterday, I reviewed the tasks in detail with several key managers and requested that they jointly create a sequence of steps necessary to complete one of the tasks. I was amazed when they were unable to do it unassisted. After about an hour of coaching the managers through the process, we arrived at a logical plan. It is not that these gentlemen aren’t intelligent, quite the contrary. I attribute their inability to complete the task at hand to two main factors: (1) Traditional Pakistani education system, and (2) A “Yes Boss” culture.

In the traditional Pakistani schooling system, there is often a stronger affinity for rote learning, discipline and respect for authority. In most classrooms in the country, critical thinking skills and problem solving skills are new concepts. This can lead to dependency on superiors in the work environment. Some of the more prestigious schools do embrace independent thinking as a critical concept to teach students, but these schools primarily cater to the elite.

Pakistan is a very hierarchical society. Many bosses in hierarchical cultures simply want to give orders and have their direct reports follow their plans to the letter. They encourage a “Yes Boss” culture in which employees never voice a dissenting opinion. This poses particular problems in Micro Drip, as we are a small company with limited resources. We need capable employees who can think for themselves without having to be guided every step of the way. Ultimately, our company will be stronger if different points of view are better represented, irrespective of where they come from in the organization.

At Micro Drip, we are committed to helping develop our employees to better themselves, but the verdict is still out on how long it will take to introduce a culture of problem solving. We must begin now to think on how we will retain our talent, because once our employees reach a higher level of professionalism, they will be a scarce commodity in an underserved human resources market.

Last week, I helped conduct a start-of-year workshop to help Micro Drip clarify its Vision, Mission, & Values. This video has some footage from the experience. 

Starting a business is hard enough, but starting a business that has a social focus is even harder.  For Micro Drip, we are still very much working to refine our business model so that we can successfully sell to the Base of the Pyramid (BOP) here in Pakistan, those who live on less than $4/day.  For Micro Drip, one of the most difficult challenges is that we can have the greatest low cost, high quality drip irrigation system in the world, but ultimately success for a farmer depends on much more than our system: microfinancing, stable water source, good seed, fertilizer, storage, know-how, distribution to markets, etc.  As a result, we cannot simply sell our system off the shelf; we have to think about ways to directly and indirectly (through partnerships) address the problems that come before and after our product. 

A second difficulty that we face is the seasonality of our product.  There are two growing seasons in Pakistan each year with most farmers growing cotton during the summer season and wheat during the fall season.  Unfortunately, drip irrigation cannot be used with wheat given the density of the plants/acre.  Vegetables can be grown during both seasons and offer much higher prices, but the lack of storage and access to markets forces many farmers into cotton and wheat, which are more stable with much less risk of going bad. 

A third difficulty that we are tackling is how to motivate local sales reps in the communities that we serve.  CEMEX, a Mexican cement company, has successfully mobilized a large network of local promoters in its program Patrimonio Hoy, which helps clients who make between $5-$15/day to save money for do-it-yourself home improvements.  While there are some successful models out there, many social businesses are struggling with this issue, as it is often difficult for local sales people to make sufficient income selling a single product.  Where sales channels to the BOP already exist, it is much easier for existing sales people to add additional products to their offerings.  Unfortunately, we are not aware of any other sales channels that reach our target market that would be willing to add our systems to their existing portfolio.

In spite of the challenges, we are committed to bringing irrigation solutions to the poor farmers of Pakistan.  Drip irrigation increases crop yields by 30-100% all the while decreasing water usage by 50-70%.  This translates into more money for poor farmers and ultimately has the potential to free farmers who are imprisoned in debt and a subsistence life. 

Over the past three weeks, I have been traveling to each of Acumen Fund’s offices to recruit the 2010 class of Acumen Fund Fellows. It’s been an amazing opportunity to spend time with our teams and also meet with some of the companies Acumen Fund has invested in - and the people they serve (pictured, left).

Two weeks ago, I joined a group that included Aun Rahman, Acumen Fund Pakistan Country Director, Dr. Sono Khangarani and Saqib Khan, respectively the CEO and COO of Acumen Fund investee Micro Drip to visit Hyderabad in the Sindh region of Pakistan. Micro Drip sells drip irrigation systems to smallholder farmers in Pakistan (check out the company’s web site as well). My colleague Sasha Dichter took a similar trip earlier this year to a different part of Pakistan (Thar), and reflected on What It Means to be Patient: Drip Irrigation in Pakistan’s Thar Desert.

It was the Sunday before a 3-day Eid celebration, and the traffic leaving Karachi was noticeable, even to me (a Karachi novice). Then again, I couldn’t complain. Even the traffic in Pakistan is colorful, what with intricate designs adorning all manner of transport from the smallest rickshaws to buses and large-haul trucks.

But today, the color came not just from trucks, but from our non-human counterparts sitting in traffic. As part of the Eid celebration, families sacrifice an animal to share; as such, many vehicles were transporting goats and cows bound for slaughter; even camels played their part, pulling families along the highway. Later that evening, on our way home, I saw one guy in a rickshaw, his knees up to his chin as his feet rested on two goats, stacked atop one another on the floor of the rickshaw, much like one might stack up suitcases for a long family road trip.

I was eager for the road trip. It was a chance to get out of Karachi, where the inability to simply walk around freely must surely become stifling; it was also a chance to see more of Pakistan’s countryside. The day was facilitated very effectively by National Rural Support Program (NRSP). NRSP is (in Aun’s words) the ‘big brother’ of TharDeep Rural Development Program – the parent organization of Micro Drip – and has been providing agri-specific support to farmers for over 20 years.

In the past few years, NRSP has been offering micro-lending options in addition to agri-services, and the villages we met - like these farmers, pictured at left - with have organized around these micro-loans. The farmers that we met were not users of drip irrigation; in fact, the difficult task of selling drip systems to farmers was a key outcome of the meetings for me.

Many of these farmers have taken on loans between Rs10,000 and Rs30,000, and what we heard from them is that while these loans help them to operate without total dependence on a middle man – ‘Arti’ in Urdu – they barely cover the cost of inputs, let alone any of the other household costs the farmers incur on a daily basis.

Our objective for the day was simple: to listen to farmers. We wanted to hear directly their key concerns, constraints and cost burdens in order to gain a deeper understanding of where drip irrigation might play a role in increasing farm productivity. From a broader perspective, we were also interested in what we should be thinking about as Acumen Fund moves forward with our new agriculture portfolio. I can’t help thinking that my modest report is going to be complimented by a deeper and more colorful analysis in Jacqueline’s journal, so I’ll stick to facts and basics and attempt to relay the key insights we heard from these farmers.

The farmers are incredibly wise. Any solution that Micro Drip – or any other enterprise looking to solve the problems of smallholder ‘productivity’ – puts forward must be designed via an ongoing process of endless discussion with farmers. They know that drip irrigation needs a constant water supply; today, they are lucky to have access to flood irrigation from the canals once a week. Naturally, farmers are skeptical of drip’s impact.

They know that they are lucky to get 3 hours of electricity a day with which to pump the water from their wells, and even that they pay the landlord for – and it’s still cheaper than diesel. ‘Loadshedding’ has become such a common phenomenon throughout the rural areas that, despite the fact that they were speaking to us in their local Sindhi, the English word was common to all.

These farmers are keenly aware that, in 2008 alone, the price of inputs such as fertilizer has risen from Rs500 to Rs1300 on the black market despite the standard rate being Rs600. Their market access is limited to the back market through their historical relationships with Artis (middle men) leading them to hoard fertilizer, which in turn drives the price up more.

They know that even if their yields do increase, it’s often difficult to find a market for their product. This was confirmed in one village where we saw vast piles of cotton (pictured at left), brown and wasting because there was no one to buy, no where to sell. And finally, they know that the loans allow them to cover the costs of these inputs, but do not allow them to break the cycle of debt that the landlords and the Artis further entrench. If only the loans were larger, and the definition on ‘productivity’ broadened even a little, then they might be able to diversify their income sources, break their dependence on a crop that might easily be devastated by a flood or other natural disaster. A larger loan would allow them to buy new clothes, educate their children, pay for healthcare and truly improve their standard of living.

Dr. Sono knows the right questions to ask. He is in his element and it’s an honor to see him in action; he’s the only one of us who can speak directly to the farmers in Sindhi. The questions he asks all three villages get the same unanimous replies: 1) Do you think the cost of inputs is going to come down any time soon, if at all? No is the clear answer. 2) Do you think water will get any easier to get a hold of? Again, no is the immediate consensus. 3) What do you think is the best way to deal with these issues and allow you to become more productive? That, the farmers say, is the billion rupee question!

Dr. Sono discusses drip as an option, although he admits that without solving the bigger infrastructure question that would provide a more reliable water supply, it may not be the best solution for these farmers just yet.

One can’t help but be struck by the deepening and systemic tragedies Pakistan has fought throughout 2008: the continued lack of true leadership and the IMF intervention whose impact raises many more questions on the horizon. There are undoubtedly equally tough times are ahead here. But taking the time to listen to these farmers, to see Dr. Sono’s quiet manner of marketing with truth, and the deep seated commitment of the Acumen Fund Pakistan team (who are all complete rock stars) as well as the commitment I’ve witnessed this week from Jacqueline, Aun, Hunter Boll and Stuart Davidson, I feel a warming sense of hope that by partnering with and learning from local entrepreneurs like Dr. Sono, we might just gain the insights and the humility to give more farmers what they really need: the ability to determine their own definition of productivity and the dignity of providing for themselves.

This past Friday, we were fortunate to have Pratyush Pandey, Managing Director of Global Easy Water Products (GEWP) join us for breakfast at our offices in New York. Joining Pratyush for breakfast were a number of Acumen Fund Partners and staff. GEWP is a for-profit company that manufactures, distributes and sells drip irrigation systems to smallholder farmers in seven states across India; Pratyush was in town following the final presentation for the Legatum Prize (GEWP was among the five finalists; unfortunately, they did not win the USD $1 million award).

In any case, back to the breakfast. Pratyush’s talk – and the subsequent discussion – left me with three key takeaways and an important reminder:

Takeaway 1: Building a successful business serving the low-income market requires listening to the poor and building a product or service based on the specific needs and constraints of those living at the base of the pyramid.

GEWP – and its parent company, International Development Enterprises - India (IDE-I) – sell four types of irrigation systems. The systems vary in cost and depend on the specific preferences of the farmer. Not only does this enhance affordability, but the modular system design allows the farmer to add acreage incrementally as they generate profits from increased production. For example, a typical GEWP customer starts by irrigating one crop; after a successful season, he’ll add acreage and drip-irrigate another two or three.

Takeaway 2: In order to scale, GEWP must recognize market opportunity while strengthening its in-house capabilities.

While the need for drip irrigation in India is acute, GEWP’s business there is relatively seasonal (in the monsoon season, sales drop significantly). Understanding this aspect of his business and global demand for drip irrigation, Pratyush developed an international distribution strategy that sells drip irrigation in nine countries in Africa and seven additional countries in Asia. GEWP has also ramped up its in-house manufacturing capabilities in order to lower the costs associated with purchasing the irrigation systems externally.

Takeaway 3: Successfully marketing to low-income farmers is about tapping into the current infrastructure of local non-governmental organizations and other embedded actors who have earned the farmers’ trust.

GEWP’s success is largely due to the 20-year track record and network built by IDE-India. These lessons can be applied globally. For instance, Acumen Fund recently invested in a new, for-profit company in Sindh, Pakistan called Micro Drip. Much as GEWP is associated with IDE-I, Micro Drip is tied up with the Thardeep Rural Development Program (TRDP), a 16-year old agricultural services non-profit with a long-established network of smallholder farmers for whom drip irrigation technology can have enormous benefits.

Three key takeaways: listen, understand the market and leverage trusted partners. In addition to these three key lessons – which, if you look at them, seem to be relevant to all sectors, not just drip irrigation – there was an important closing aside.

As the breakfast came to a close, Acumen Fund’s India Business Manager, Biju Mohandas, gave us an important reminder. Biju, on his last day in the New York office prior to returning to India, asked us to remember that while most Americans think a typical Indian is the man working at a call center or at an IT firm, almost 70% of the country’s population are farmers. And at the end of the day, India’s sustained growth is dependent of the success of its farmers – and those farmers’ success might depend on the growth of innovative enterprises like GEWP.

Dr. Sono Khangarani, CEO of Acumen Fund investee Micro Drip and CEO of Thardeep Rural Development Program (RDP), was profiled recently in an article entitled “Breaking the Glass Ceiling” in the Dawn Review, a Pakistani newspaper. Dr. Sono has dedicated the past twelve years of his life improving the lives of the poor in the rural areas of Tharparkar, Mirpurkhas, Dadu and Khairpur districts of Sindh, Pakistan.

With the support from Acumen Fund, Dr. Sono and Thardeep recently set up a for-profit drip irrigation company – Micro Drip – that procures drip systems from India. Micro Drip then markets the systems to poor farmers in Thardeep’s network of 3,000 villages, with plans to expand to other water scarce regions in Pakistan. He has also led managerial, technical and social capacity-building efforts, including livestock management training, cooperative development and micro-credit initiatives.

Read the full article here.