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POLITECNICO DI MILANO
DEPARTMENT OF MANAGEMENT ENGINEERING
Msc. MANAGEMENT ENGINEERING
Framework for Social Enterprises operating at the BoP:
A Case Study for a Social Enterprise in Indonesia
Academic Year: 2017/2018
Master Thesis of:
Carlos Alberto García García
858653
Tutor:
Irene Bengo
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Abstract
English
The World population has doubled in the last fifty years in a context in which capitalism
prevails as the most extended economic system and in which income is used as the
most recurrent indicator to measure wealth in society. Within this scenario, wealth
distribution is spread uneven, as half of the total Worldwide wealth is in hands of less
than 1% of Worldwide population and over four billion people live under 2 USD per day.
The latest, known as the Base of the Pyramid (BoP), represent a very large and
heterogenous market that has been for long underestimated by the traditional business
world. However, due to globalization and extreme competition in more developed and
mature markets, multinational companies started exploring other alternatives,
recognizing at the BoP tremendous business opportunities. However, as BoP are quite
special markets, companies willing to operate in such contexts successfully must be
ready to challenge traditional business principles.
In recent years, driven by a raising public awareness about environmental problems and
social inequality, a new wave of entrepreneurship known as Social Entrepreneurship has
arisen. This relatively new approach to do business is based on what is known as the
Triple Bottom Line through which companies aim at creating simultaneously economic
profit and positive social and environmental impact.
In line with the fact that Social Enterprises involved in the BoP are growing in numbers
year by year, this study aims at reviewing state-of-the-art literature and propose a new
framework for Social Enterprises willing to operate in BoP markets, contributing at an
academic level by extending the literature on social business and BoP and at a
practitioner level by providing a framework and guidelines for social entrepreneurs willing
to operate at the mentioned context. In addition, it is presented a first attempt to use the
framework proposed with a case study of a Social Enterprise operating in the island of
Bali in Indonesia.
Italiano
Negli ultimi cinquant'anni la popolazione mondiale è raddoppiata in un contesto in cui il
capitalismo prevale come il sistema economico più esteso e in cui il reddito viene
utilizzato come l'indicatore più ricorrente per misurare la ricchezza nella società. In
questo scenario la distribuzione della ricchezza è suddivisa in modo disomogeneo,
poiché metà della ricchezza mondiale totale è nelle mani di meno dell'1% della
popolazione mondiale, mentre oltre quattro miliardi di persone vivono al di sotto di 2 USD
al giorno. Quest'ultima fetta di popolazione, nota come Base della Piramide (BoP),
rappresenta un mercato molto ampio ed eterogeneo che è stato a lungo sottovalutato
dal mondo degli affari tradizionale. Tuttavia, a causa della globalizzazione e della
competizione estrema in mercati più sviluppati e maturi, le multinazionali hanno iniziato
a esplorare altre alternative, riconoscendo nella BoP enormi opportunità di business.
Nonostante ciò, dal momento che le BoP sono mercati piuttosto speciali, le aziende
disposte a operare con successo in tali contesti devono essere pronte a sfidare i
tradizionali principi aziendali.
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Negli ultimi anni, spinto da un aumento nella sensibilizzazione pubblica sui problemi
ambientali e l'ineguaglianza sociale, è sorto un nuovo impulso imprenditoriale noto come
imprenditoria sociale. Questo approccio, relativamente nuovo al business, si basa sulla
cosiddetta “Triple Bottom Line” attraverso la quale le aziende mirano a creare,
contemporaneamente, sia un profitto economico che un impatto sociale e ambientale
positivo.
In linea con il fatto che le imprese sociali legate alla BoP stanno crescendo di anno in
anno, questo studio mira a rivedere la letteratura più avanzata e a proporre un nuovo
quadro per le imprese sociali disposte a operare nei mercati della BoP contribuendo sia
livello accademico, estendendo la letteratura sull'impresa sociale e la BoP, sia a livello
di praticantato fornendo un quadro e linee guida per gli imprenditori sociali disposti a
operare nel contesto menzionato. Infine, viene presentato un primo tentativo d'uso del
quadro proposto con un caso studio di un'impresa sociale operante in la isola di Bali in
Indonesia.
Español
La población mundial se ha doblado en los últimos cincuenta años bajo un contexto en
el que el capitalismo prevalece como el sistema económico más extendido y en el cual
los ingresos económicos son usados como el indicador mas recurrente para medir la
riqueza en la sociedad. Bajo este escenario, la distribución de la riqueza no es equitativa,
ya que la mitad del total de la riqueza mundial está en manos de menos del 1% de la
población mundial y donde cuatro mil millones de personas viven por debajo de 2 USD
al día. Esta parte de la sociedad, conocida como la Base de la Pirámide (BoP),
representa un mercado muy amplio y heterogéneo que ha sido por mucho tiempo
infravalorado por el mundo de los negocios tradicionales. No obstante, debido a la
globalización y la extrema competitividad en mercados mas desarrollados y maduros,
algunas empresas multinacionales empezaron a explorar alternativas, reconociendo en
la BoP enormes oportunidades de mercado. Sin embargo, como los mercados BoP son
bastante particulares, las empresas con intenciones de operar en dichos contextos con
éxito deben estar dispuestas a desafiar los principios empresariales más tradicionales.
En los últimos años ha surgido una nueva ola de emprendimiento conocido como
Emprendimiento Social como resultado de un incremento en la sensibilización sobre
problemas medioambientales y desigualdad social. Este enfoque de hacer negocios
relativamente nuevo está basado en lo que se conoce como Triple Resultado, a través
del cual las empresas aspiran a crear simultáneamente beneficio económico e impacto
social y medioambiental positivo.
En línea con el hecho de que las Empresas Sociales ligadas a la BoP están creciendo
en números año tras año, este estudio apunta a desarrollar una revisión de la bibliografía
más avanzada y proponer un marco para Empresas Sociales con intención de operar
en mercados BoP, contribuyendo, a nivel académico, al extender la literatura en
Empresa Social y BoP y, a nivel práctico, al aportar un marco y unas pautas para
emprendedores sociales dispuestos a operar en el contexto mencionado. Además, se
presenta una primera tentativa de uso del marco propuesto aplicándolo a un caso
práctico de una Empresa Social operando en la isla de Bali en Indonesia.
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Bahasa Indonesia
Jumlah Populasi Dunia telah berlipat ganda dalam lima puluh tahun terakhir dalam
konteks di mana kapitalisme berlaku sebagai sistem ekonomi dan pendapatan
digunakan sebagai indikator yang untuk mengukur kekayaan masyarakat. Dalam
konteks ini, distribusi kekayaan tersebar tidak merata, karena setengah dari total
kekayaan di seluruh dunia berada di tangan kurang dari 1% populasi di seluruh dunia
dan lebih dari empat miliar orang hidup di bawah 2 USD per hari. Hal yang paling baru
dikenal sebagai Base of Pyramid (BoP), merupakan pasar yang sangat besar dan
heterogen yang sejak lama kurang dilirk oleh dunia bisnis tradisional. Namun, karena
globalisasi dan persaingan ekstrim di pasar yang lebih maju dan matang, perusahaan
multinasional mulai mengeksplorasi alternatif lain, mengakui bahwa BoP memiliki
peluang bisnis yang besar. Namun, karena BoP adalah pasar yang sangat khusus,
perusahaan yang ingin sukses beroperasi dalam bisnis ini harus siap untuk menghadapi
prinsip bisnis tradisional.
Dalam beberapa tahun terakhir, terobosan baru kewirausahaan yang dikenal sebagai
Wirausaha Sosial telah muncul yang didorong oleh peningkatan kesadaran publik
tentang masalah lingkungan dan ketidaksetaraan sosial. Pendekatan ini masih relatif
baru dalam dunia bisnis yang didasarkan pada apa yang dikenal sebagai Triple Bottom
Line dimana perusahaan bertujuan menciptakan keuntungan ekonomi, dampak sosial
dan lingkungan yang positif secara bersamaan.
Sejalan dengan bertambahnya jumlah Wirausaha Sosial dari tahun ke tahun, studi ini
bertujuan untuk meninjau literatur, state-of-the-art dan mengusulkan kerangka kerja
baru untuk Wirausaha Sosial yang bersedia untuk beroperasi di pasar BoP, memberikan
kontribusi pada dunia akademisi dengan memperluas literatur tentang wirausaha sosial
dan BoP dan pada tingkat praktisi dengan menyediakan kerangka dan pedoman bagi
wirausaha sosial untuk beroperasi pada konteks yang disebutkan. Selain itu, kerangka
kerja yang diusulkan akan digunakan pertama kalianya menggunakan studi kasus dari
Wirausaha Sosial yang beroperasi di Indonesia.
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Acknowledgements
I would like to thank first of all to my family. Thanks to my parents for the full dedication
and the love provided from the very first moment I step on this World. I do not take for
granted the fact that they have been always unconditionally supportive on each decision
I took in my life, always putting my happiness to any other personal desire. Also to my
brother, growing next to him made me stronger and I could not be more grateful for his
company. It would have been impossible to reach this point without their support.
I would like to thank to all my friends. I am a tremendous lucky person and I am so
grateful of having good friends all over the World. Although I cannot meet them all at the
same time, I always carry them in my heart. Thanks Rony and Sara for the translations
and Yahia and Khaled for the last push.
I would like to thank the island of Bali and its people. Our love story started years ago
and I am sure it is going to last forever. It is indescribable the beauty of its nature, its
people, its unique culture, its perfect waves, its temples… A special mention to all the
people that supported me during the research on my stay at the island: Julien for allowing
me to get involved in the project, Sudana, its lovely family and the village of Batumanak
that opened the door of their houses every time I visited them, Suarta, Keli, Gede, Asep,
Rina, Angelina, Kaka’s family, Pol, Vanesa, Luis, Valerya, Indi, Kiko, Ruben, David,
Luna, Antonio, Gloriana, Gustavo, Jacobo, Ani…and so many others that contributed.
SUKSMA!
Last but not least, I would like to thank my professor Irene Bengo for accepting my crazy
proposal and allowing me to go through this tremendous experience. Also to Politecnico
di Milano and the Career Service for making it possible.
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Index
Abstract ......................................................................................................................................... 3
English ....................................................................................................................................... 3
Italiano ....................................................................................................................................... 3
Español ...................................................................................................................................... 4
Bahasa Indonesia....................................................................................................................... 5
Acknowledgements ....................................................................................................................... 6
Index .............................................................................................................................................. 8
Index of figures and tables .......................................................................................................... 11
Figures ..................................................................................................................................... 11
Tables ...................................................................................................................................... 12
Executive summary ..................................................................................................................... 13
Context .................................................................................................................................... 13
Research .................................................................................................................................. 14
Case study: Azura Marine Earth .............................................................................................. 16
Chapter 1: State of the art .......................................................................................................... 17
1.1 Social Business ............................................................................................................. 17
1.1.1 Social Entrepreneurship ...................................................................................... 17
1.1.2 The evolution of Social Business ......................................................................... 18
1.1.3 Characteristics of Social Enterprises ................................................................... 21
1.2 BoP markets ................................................................................................................ 22
1.2.1 Definition ............................................................................................................. 22
1.2.2 Business opportunities ........................................................................................ 24
1.2.3 Main barriers at the BoP ..................................................................................... 25
1.2.4 Main strategies at the BoP .................................................................................. 27
1.2.5 BoP principles ...................................................................................................... 32
1.3 Innovation ................................................................................................................... 34
1.3.1 Traditional approach ........................................................................................... 34
1.3.2 The innovation process ....................................................................................... 35
1.3.3 Types of innovation ............................................................................................. 37
1.3.4 Innovation at the BoP .......................................................................................... 39
Chapter 2: Research Objectives and Methodology ..................................................................... 41
2.1 Research Problem and Objectives............................................................................... 41
2.1.1 Research Problem ............................................................................................... 41
2.1.2 Research Objectives ............................................................................................ 41
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2.2 Research Articulation .................................................................................................. 41
2.2.1 Research Steps .................................................................................................... 41
2.2.1.1 Literature Review ............................................................................................ 43
2.2.1.2 Case Setting ..................................................................................................... 43
2.2.1.3 Data Collection ................................................................................................ 43
2.2.1.4 Data Elaboration .............................................................................................. 47
2.2.1.5 Business Model Definition ............................................................................... 47
Chapter 3: Framework for Social Enterprises to operate in BoP markets .................................. 48
Chapter 4: Case Setting ............................................................................................................... 54
4.1 Presentation of the case: Azura Marine Earth ............................................................ 54
4.1.1 Business stage of AME......................................................................................... 54
4.1.2 First AME prototype: Surya Namaskar ................................................................ 55
4.1.2.1 Objectives and findings from Surya Namaskar ............................................... 58
4.1.2.2 After Surya Namaskar ..................................................................................... 58
4.2 Applying Framework for Social Enterprises at BoP market to the case study ............ 59
4.3 New Business Model proposal .................................................................................... 70
4.3.1 Brief description of the model ............................................................................ 70
4.3.2 Stakeholders’ Matrix ........................................................................................... 72
4.3.3 New Social Business Model Canvas ..................................................................... 74
4.3.4 Design of Products and Services ......................................................................... 86
4.3.4.1 Energetic needs: .............................................................................................. 87
4.3.4.2 Design limitations: ........................................................................................... 89
4.3.4.3 Product design considerations: ....................................................................... 90
4.3.4.4 Product designs options: ................................................................................. 91
4.3.4.5 Payment system proposed: ............................................................................. 93
4.3.5 Financial Considerations ..................................................................................... 96
Chapter 5: Conclusions and Future Steps ................................................................................... 99
5.1 The issue ...................................................................................................................... 99
5.2 Research Objectives: ................................................................................................. 100
5.3 Response to Objective 1: Framework proposal ........................................................ 100
5.4 Response to Objective 2: Application of the Framework ......................................... 100
5.5 Response to Objective 3: Business Model proposal ................................................. 101
5.6 Research contribution ............................................................................................... 102
5.7 Limitations and further research ............................................................................... 102
Annexes ..................................................................................................................................... 104
Annex 1: Business Model Canvas for Azura Marine Earth .................................................... 104
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Annex 2: Interviews ............................................................................................................... 105
Interview with Azura Marine Earth Co-Founder ............................................................... 105
Structured Interviews with local fishermen ...................................................................... 108
Interview with PT Surya Sakti Bali founder ....................................................................... 127
Report from Semi-Structured Interviews to diving centres .............................................. 129
Annex 3. Constructed Stakeholder Persona example ........................................................... 132
Annex 4. GPS Boat Tracking Results ...................................................................................... 134
Annex 5. Energy data ............................................................................................................ 146
References ................................................................................................................................. 148
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Index of figures and tables
Figures
Figure 1. The Global Wealth Pyramid 2017 (Credit Suisse Global Wealth Databook,
2017) .......................................................................................................................................... 13
Figure 2. Framework for Social Enterprises operating at BoP markets ........................... 15
Figure 3. Theoretical framework of entrepreneurial competences (Bikse, 2011) ........... 18
Figure 4. Classification of Social Business Classifications (C. Di Benedetto, 2018) ..... 20
Figure 5. Carrolls CSR Pyramid (Carrolls, 1991) ........................................................................... 20
Figure 6. The World Economic Pyramid (U.N. World Development Reports) ............................ 23
Figure 7. BoP market by income (Hammond et al, 2007) ................................................. 24
Figure 8. The 4As (Anderson & Billou, 2007) ...................................................................... 27
Figure 9. Understanding users’ needs .................................................................................. 28
Figure 10. The Base of the Pyramid Model 2.0 (Simanis & Hart, 2008) .......................... 29
Figure 11. From public-private to co-venturing partnership (Hart & Simanis, 2007) ...... 30
Figure 12. The commercial Infrastructure at the Bottom of the Pyramid (Prahalad & Hart, 2002)
..................................................................................................................................................... 31
Figure 13. Scaling strategies for Social Enterprises (Alvord, Brown and Letts 2004;
Dees et al. 2004; Weber et al. 2012) ..................................................................................... 32
Figure 14. Cycle of Innovation and Entrepreneurship (Schumpeter, 1939) .................... 35
Figure 15. Traditional innovation process ................................................................................... 35
Figure 16. Open innovation process ........................................................................................... 36
Figure 17. The process of social innovation (Murray et al, 2010) ..................................... 36
Figure 18. Inclusive Innovation Models (Adapted from Heeks et al., 2014) ................... 40
Figure 19. Framework for Social Enterprises operating at the BoP ................................. 48
Figure 20. Business stage of Azura Marine ......................................................................... 55
Figure 21. Surya Namaskar, first AME prototype ................................................................ 55
Figure 22. Transformation from Yamaha 15 hp two-stroke engine to Manta 3.0 electric engine
..................................................................................................................................................... 56
Figure 23. Surya Namaskar solar panels roof .............................................................................. 57
Figure 24. Navigation Control Panel of Surya Namaskar ............................................................ 57
Figure 25. Indonesia's Economic Pyramid (World Bank) ................................................... 61
Figure 26. Micro Finance Institutions in Indonesia (Sembiring and Purwanti, 2012). ................ 62
Figure 27. Share of the population with formal financial access (World Bank, 2008;
Nnova et al., 2009; Indonesia Access to Finance Survey) ................................................ 63
Figure 28. Fossil-fuel consumption subsidies by country, 2016 (World Energy Outlook,
2017, IEA) .................................................................................................................................. 65
Figure 29. Local fisherman getting paid in cash by middlemen in Tanah Ampo, Bali ... 67
Figure 30. Back yard in Tanah Ampo village ....................................................................... 67
Figure 31. Plastic under water (visit fishermen village “Batumanak” in Karangasem,
Bali) ............................................................................................................................................. 68
Figure 32. Diver at Manta Point, 20 Km from Bali (Business Insider, 2018) .............. 68
Figure 33. Scheme of Business Model proposed for AME ................................................ 71
Figure 34. Jukung with long tail on-board engine in Candidasa, Bali ............................. 76
Figure 35. Jukung navigating with sail in Karangasem, Bali ............................................ 76
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Figure 36. Jukung with outboard engine in Tanah Ampo, Bali ......................................... 77
Figure 37. Surya Namaskar (example of boat conversion) .............................................. 87
Figure 38. Local fisherman using phone in Karangasem, Bali .......................................... 87
Figure 39. Solar roof (www.venergetike.sk) ........................................................................ 87
Figure 40. Example of GPS tracking data ............................................................................ 87
Figure 41. Manta 3.0 engine experimental consumption ................................................... 88
Figure 42. Manta 3.0 engine experimental consumption corrected .......................................... 88
Figure 43. Top view of traditional fishing boat, Tanah Ampo, Bali Figure 44. Detail of
hulk size ..................................................................................................................................... 89
Figure 45. Traditional fishing boat with fishing nets on top ................................................ 90
Figure 46. Solar system design option 2 ..................................................................................... 93
Figure 47. PLN electricity meter ............................................................................................. 94
Figure 48. Validation process for electricity top up ............................................................. 94
Figure 49. Periodical payments to the Local cooperative .................................................. 95
Figure 50. Number of conversions per year ......................................................................... 98
Figure 51. Cumulative number of conversions per year ............................................................. 98
Figure 52. Cumulative yearly growth of beneficiaries ....................................................... 101
Figure 53. GPS tracks fisherman #2 ................................................................................... 138
Figure 54. GPS track fisherman #3 ............................................................................................ 142
Tables
Table 1. Common Assumptions of BoP markets (Prahalad, 2006) .................................. 23
Table 2. Innovation and MNC Implications in Tier 4 (Prahalad & Hart, 2002) ................ 25
Table 3. Main BoP characteristics (Hammond et al, 2007; Benedetto C., 2018;
Prahalad and Hart, 2002) ........................................................................................................ 26
Table 4. Next Generation BoP Strategy (Simanis & Hart, 2008) ...................................... 28
Table 5. New strategies at the Bottom of the Pyramid (Prahalad & Hart, 2002) ....................... 31
Table 6. Data to be collected by each stakeholder ............................................................. 44
Table 7. Data collection technique by stakeholder .............................................................. 46
Table 8. Stakeholders' Matrix proposed for AME ................................................................ 74
Table 9. Social Business Model Canvas proposed for AME (extended version in Annex
1) ................................................................................................................................................. 74
Table 10. Market segmentation by product .......................................................................... 76
Table 11. Market segmentation by customer ....................................................................... 78
Table 12. Targeted customers for boat conversions ........................................................... 80
Table 13. Targeted customers for on-shore solar installations ......................................... 80
Table 14. Energetic daily requirements by customer segment ......................................... 88
Table 15. Activities performed by fisherman #1................................................................. 137
Table 16.Activities performed by fisherman #2 .................................................................. 141
Table 17. Activities performed by fisherman #3................................................................. 145
Table 18. Monthly Solar radiation from 30. Indonesian cities (Rumbayan et al., 2012)
................................................................................................................................................... 146
Table 19. PV panels and batteries (commercial quotations) ........................................... 147
13
Executive summary
Context
In the last two decades business world have been more and more growing their attention
for different reasons into a very vast and for long unexploited market known as the Base1
of the Pyramid. It represents an extremely heterogeneous market characterized by over
four billion people from different cultures, religions, levels of literacy and education,
geographic location, motivations, needs, capabilities, etc. However, there is something
that makes all be lumped under the same group, they live on less than 2 USD2 daily.
Their annual individual per capita income is very low and so it is their unitary purchasing
power. Yet they signify by many experts a multimillionaire potential market worth to invest
in as they jointly represent a significantly unsaturated market of 5 trillion USD in
purchasing power (Hammond et al., 2008). This fact made companies started to shift
their perception and started considering them as addressable markets and potential
consumers instead of only beneficiaries of charitable programs.
Bearing in mind the growing global economic inequality and demographic constant
expansion - specially in the poor regions of the world - the mentioned market, which is
already big in number in terms of population, has been growing year by year, thus,
representing a huge business opportunity and, at the same time, a tremendous social
and environmental challenge.
Figure 1. The Global Wealth Pyramid 2017 (Credit Suisse Global Wealth Databook, 2017)
1 As suggested by Jim Johnson, Ted London and the members of the BoP Learning Laboratory, it is considered in this report that the term BoP stands for Base of the Pyramid instead of Bottom of the Pyramid, as found in other literature, as the term “bottom” has negative connotations. 2 USD: United States Dollars
14
Due to the particularities of this specific market, traditional business strategies typically
found in more developed environments, cannot apply. Most of the people in BoP3
markets do not meet basic needs (bank account, access to modern financial services,
phone, proper housing or access to water and sanitation services). Most depend on
informal sector or subsistence livelihoods limiting their economic opportunities acting like
poverty traps and are commonly impacted by BoP penalties that results in higher prices
for basic goods and services (Hammond et al, 2007; Hammond, A. et al, 2008; Prahalad
and Hart, 2002; London & Hart, 2010). Therefore, when designing a business model for
such context, there are certain principles completely divergent from traditional business
that need to be applied. Concepts such as co-creation, patient innovation or social
embeddedness, are of vital importance if the organization aims to succeed.
It is absolutely relevant to consider social business as a feasible way to operate in BoP
markets. History is full of examples towards this idea and some are not precisely new. A
good example is found more than 100 years ago with the release of the Model T form
the automobile manufacturer Ford Motor Company. With over 15 Million units
manufactured, it became the first mass produced low cost car, targeted for middle class
audience. Henry Ford, founder of the company, decided that he was going to build “motor
car[s] for the great multitude” so “about everybody will have one” at an affordable price.
Back in that time, car manufacturing industry was not mature enough and full of
inefficiencies. Ford took that opportunity to create the first automated assembly line
setting the bases of mass production turning into an incredibly disruptive innovator in
those days. He created a business model that would drive the company to obtain high
economic profits while creating a tremendous positive social impact. The company
created thousands of new job positions and, by improving the manufacturing process
and reducing costs, its products were more affordable for the majority of people.
Other more recent examples propose names such as Bill Drayton, Prof. Muhammad
Yunus or Larry Larson, just to mention a few. The former by helping and promoting social
entrepreneurship worldwide through Ashoka organization; the second by pioneering the
concepts of microcredit and microfinance and founding Grameen Bank, which took him
to be awarded with the Nobel Peace Prize; and the later by creating Larry’s Beans, a
Certified B Corporation4 responsible of producing fair trade, shade grown and organic
coffee using eco-friendly facilities and transportation methods.
It is well proven that social entrepreneurship is not just a trend but a consistent and
profitable way to do business able to create substantial economic profits while being
useful for society and the environment.
Research
After reviewing relevant existing literature, the following framework is presented (Figure
2). Companies willing to operate in BoP markets can use this framework to have a clearer
picture and take better decisions as it allows identifying which are the different
3 BoP: Base of the Pyramid 4 Certified B Corporation: for-profit companies certified by the non-profit B Lab to meet rigorous standards of social and environmental performance, accountability, and transparency. http://bcorporation.eu/what-are-b-corps
15
characteristics a Social Enterprise should possess, determining if the market can be
considered as BoP, recognizing its main opportunities, its main barriers, basic principles
to be taken into account and which are the most relevant strategies to be applied if willing
to operate successfully. The framework also identifies a link between BoP and more
wealthy markets (mainstream markets) and proposes strategies to create profitable
synergies between them.
As a result, the framework enables companies to ease the definition of the right set of
strategies to run their businesses in BoP markets and define potentially more fruitful
business models.
Figure 2. Framework for Social Enterprises operating at BoP markets
The framework proposed can be applied for any social enterprise in a similar context.
There could be differences related to the specific environment, but the process would
remain the same.
16
Case study: Azura Marine Earth
As an attempt to exemplify and proof the functionality of the framework proposed, a
single case study was chosen as a real arena to better represent which are the conditions
and atmosphere under which a social enterprise typically works in a BoP context.
Relevant data on site have been collected to understand from first hand which are the
barriers faced by the organization. It has been explored which are the stakeholders
involved and which are their needs, interest, expectations, capabilities and motivations.
Several data collection techniques were used, later well explained on the “Methodology”
section, to collect the data required.
The case study is represented by Azura Marine Earth (AME), a social enterprise who
was born as a spin-off from another commercial company called Azura Marine. AME,
operating in the Indonesian island of Bali, “strives to provide pragmatic, affordable,
reliable and simple alternatives to conventional fossil fuel-based boat propulsion and
shore-based power generation” - Julien Mélot, Co-founder and CEO of Azura Marine
Earth. So far, the social enterprise has designed, build and test its first prototype. The
prototype named Surya Namaskar consists on the transformation of the propulsion
system of a traditional Balinese fishing boat (called jukung in its local language) from a
petrol fuelled engine to a solar system feeding an electric engine. After the
transformation, the boat uses solar energy instead of fossil fuel to sail.
The results from the first testing phase are encouraging and public response has been
very positive. The boat has sailed for more than 2,000 Km without any technical failure
which proves that technology is feasible. However, there is still a big challenge to face if
willing to start commercializing the boats in such a market. Indonesia has been classified
as one of the top five BoP markets. It is estimated that 56.8 million adults, a third of the
adult population, belonged to the BoP in the country in 2015. Although this figure is
expected to fall to less than half, representing then roughly a 11% of the adult population,
income inequality is set to increase considerably (Euromonitor International, 2017). A
deep in field study and a proper planning is required to take the organization to the next
stage and create a sustainable and scalable social business.
This study intends to use the proposed framework with the social enterprise selected
and suggest a first version of a sustainable and potentially scalable business model for
the social enterprise to reinforce social business to generate value.
17
Chapter 1: State of the art
1.1 Social Business
1.1.1 Social Entrepreneurship
Entrepreneurship is defined as the “skill in starting new businesses, especially when
this involves seeing new opportunities” (Cambridge Dictionary). Any entrepreneurial
process comprises four important components: ‘opportunity recognition’, ‘development
of the solution concept’, ‘actualisation of the solution’ and ‘harvesting’ (Davidsson, 2012).
From a traditional business perspective, business entrepreneurs aim at starting up for-
profit ventures by recognizing market opportunities with the intention of growing the
business in the future and generating substantial profits only directed to the owners of
the company. They are individuals who initiate change after recognising and embracing
such opportunities while taking the necessary risk which most of the times are implicit to
early adoptions.
Non the less, in recent years, terms such as Social Entrepreneurship and Social
Entrepreneur has appeared which are related to alternative ways of running business
that differ from the most traditional. Many researchers have focussed their attention into
these concepts and a whole body of literature has been built surrounding this specific
topic (e.g. Chell, 2007; Chell et al., 2010; Dees & Anderson, 2006; Nicholls, 2010; Shaw
& de Bruin, 2013). Social entrepreneurship recognizes the business opportunity by
identifying a social problem instead of only seeking the opportunity to make economic
profit (Ramani S. V. et al, 2016). The focus is not anymore in satisfying customers’ needs
as a way to create wealth for the company shareholders. Economic profits switch from
being the main objective to being the mean or the tool to create positive social impact. It
is still compatible with the economic profit creation but it is not anymore the only and
main objective.
There are three terms commonly used in this stream of literature that are commonly
confused and wrongly used: “social enterprise”, “social entrepreneurship” and “social
entrepreneur”. The right way of understanding the differences between these terms can
be found on a phrase used by Defourny and Nyssen (2008): a “social entrepreneur”
through a process of “social entrepreneurship” creates a “social enterprise”.
Brouard and Larivet (2010) proposed a definition for Social Entrepreneur after
analysing and summarizing 33 different definitions from different authors from 1991 until
2008. Their proposal is: “social entrepreneurs are any individuals who, with their
entrepreneurial spirit and personality, will act as change agents and leaders to tackle
social problems by recognizing new opportunities and finding innovative solutions, and
are more concerned with creating social value than financial value” (Brouard & Larivet,
2010).
“The concept of social entrepreneur should be seen in the context of the development of
social and entrepreneurial competences, and in accordance with the new role and
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changes in function of the entrepreneur from a historical perspective to the present day”
(Bikse & Riemere, 2013).
An entrepreneurial competences framework was developed by Bikse et al (2015) after
analysing other previous frameworks in which there is an attempt to describe which are
the set of knowledge and skills that an entrepreneur should have to be considered as
such.
Figure 3. Theoretical framework of entrepreneurial competences (Bikse, 2011)
Nonetheless, and while some of these characteristics apply for both social and traditional
entrepreneurs, the differences between traditional business entrepreneurship and social
entrepreneurship are still notable. First of all, and the most evident, the motivation of a
social entrepreneur for doing business is not anymore related to the maximization of
economic profits but to the engagement into an economic activity as a way to get involved
with social issues, trying to find solutions and creating positive social impact. “Social
entrepreneurs design their revenue-generating strategies to directly serve their mission
to deliver social value.” (Abu-Saifan, 2012)”. On the other hand, the traits of a social
entrepreneur referred to personal and social competences also differ. “A social
entrepreneur should be much more socially and ethically motivated, with a broad horizon,
endowed with good imagination, determination, enthusiasm, strong confidence and trust
in an idea to implement it for the benefit of others, despite the size and nature of
problems; he / she should also be an idealist, tolerant and compassionate.” (Bikse et al,
2015).
1.1.2 The evolution of Social Business
Traditionally, for-profit corporations have been pursuing the maximization of
shareholders’ economic value without giving a core importance to social or
19
environmental consequences while public institutions and non-profit organizations have
been the ones dealing on finding solutions to such problems. (Doh & Yaziji, 2009).
Nonetheless, for-profit companies have been for long also voluntarily conducting
corporate activities to tackle social and environmental aspects (Weber, 2008) in different
ways and for different motivations, such as “perceived moral or religious obligations,
philanthropic considerations, or economic self-interest as health and education services”
(Yildirim and Urper, 2013). This business action is known as Corporate Social
Responsibility which has been defined and broadly studied, especially in the last 70
years, and adopted progressively by more and more organizations. Basically, the idea
behind is that managers of for-profit organizations must consider the interest of a wide
range of stakeholders that can affect or be affected by the activities of the organization,
instead of considering only the owners’ interests. (Mitchell, Agle & Wood, 1997). There
is extensive literature that even suggest a direct relation between CSR and profitability
by exposing that for-profit enterprises undergoing CSR activities increase their
performance (Waddock & Graves, 1997; Margolis & Walsh, 2003; Schmidt & Rynes,
2003; Bayoud, Kavannagh & Slaughter, 2012; Orlitzky, Weshah, Dahiyat, Awwad &
Hajjat, 2012; Hillenbrand, Money & Ghobadian, 2013; Michelon, Boesso & Kumar, 2013).
However, even considering the growing involvement of companies in CSR activities,
those activities still remain for most separated from the company’s core strategy, being
mostly peripheral to the business activity (Austin and Reficco, 2009).
Even though there is extensive research about the term CSR, there is not an agreed
definition yet, thus being still confusing and “a potential problem for companies in terms
of making socially conscious investing decisions that provide sustainability” (Yildirim and
Urper, 2013). Nevertheless, as stated by Dahlsrud (2008), who analysed in deep 37
different definitions of the term, “the challenge for business is not so much to define CSR,
as it is to understand how CSR is socially constructed in a specific context and how to
take this into account when business strategies are developed.”
A possible way to classify the whole spectrum of social business configurations could be
considered as proposed by Benedetto (2018) according to its level of engagement
(Figure 4). His study proposes "a model that classifies the whole spectrum of social
business configurations […] according to the level of engagement of the company in the
development of the SB in order to provide a complete picture of the different social
business configurations companies may adopt to develop SB at BOP". This classification
is composed by three main categories (Philanthropic Approach, Forms of Collaborations
and Internal Development) which at the same time are divided in seven subcategories
(Traditional Grant Based Funding, Social Venture Competition, Employees Philanthropic
Approach, Financial Investment Model, Corporate Investment Model, Partnership and
In-House Development). It represents the evolution of existing literature which classifies
the business configurations in only four macro social groups: Corporate Philanthropy,
Investment Model, Partnership and Internal Development (Husted 2003, 2008, Power
and Wilson 2012).
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Figure 4. Classification of Social Business Classifications (C. Di Benedetto, 2018)
This model is to be understood as a continuum, so companies basically can adopt
different level of engagement gradually with slight differences between each kind of
classification, not setting very clear diving points between them. It could be and usually
happens that a company starts experimenting with social business with a less engaging
behaviour and increases its level of engagement with time as it is gaining experience. It
could also happen that companies act with different type of business configurations
simultaneously.
The initiatives showing a lowest level of engagement are represented by pure
philanthropic actions. It refers to the most passive form of CSR, alien to the company’s
core strategy, in forms of financial donations to charitable organizations or sponsoring of
social events.
As presented by Carroll (1991) on its Carroll’s CSR
Pyramid, there are four levels of responsibilities for
CSRs. His proposal still presents a hierarchical
model that gives precedence to economic
responsibilities over the rest. According to this
model. for a company to survive and be beneficial
for society in the long run, it needs to be profitable
first. On the next level of importance, the business
fulfils its responsibilities by obeying the law and
other regulations. After having established the
economic and legal responsibilities, the next step is
to be ethically responsible. That means to do the
right thing over only what the law adjure. And finally,
on the upper part of the pyramid and representing
the last level of responsibility, it is found the
philanthropic responsibilities. After complying with economic, legal and ethical duties, the
company can go beyond and start giving back to society in a more direct way.
On the next level of engagement it is found companies conducting collaborations in
different ways between the company and other stakeholders involved. This interaction is
seen as voluntary compliance with high business standards or long-term investment in
local communities in which the company operates. It is worth noting that within this
category, there are three sub-categories: two types of social business configurations
referring to investment model and one to partnership. Investment model can be done
through financial or corporate investment, depending on if the company provides capital
Figure 5. Carrolls CSR Pyramid (Carrolls, 1991)
21
in form of funds (financial investment) or the company provides critical resources and
skills (corporate investment). On the other hand, partnerships represent the most
common way in which companies engage in social business. CSR programs are often
developed through collaborations between businesses and mission-driven organizations
(MdOs), such as non-profits, NGOs, social enterprises or public bodies and such
collaborations can assume different forms (Austin 2012). Such collaborations seem to
be interesting for all institutions involved in the partnership as they possess
complementary resources
Finally, as the highest form of corporate engagement, can be found those organizations
that integrate CSR activities as part of its core business strategy. This way of CSR is
also known as Advanced CSR or Corporate Shared Value (CSV) and it no longer
represents a reactive way of creating social and/or environmental impact but it is
embedded within the company’s mission and objectives. It signifies a shift from
philanthropic initiatives which mostly represent isolated activities with a low level of social
engagement to the inclusion of this activities within the corporate strategy with the
objective of creating a competitive advantage within the company and be used as part
of the company’s strategy.
In the last 20 years, the term Social Enterprise (SE) has gain interest among many
scholars who have been systematically trying to find a widely accepted definition (Dees,
1998; Mulgan, 2007; Dees and Anderson, 2006; Defourny and Nyssens, 2010).
However, as it happens with the term CSR, it has not been found yet a definition that
would satisfy and bring consensus for the majority of practitioners and academics. As
presented by Defourny and Nyssens later in 2016, it seems to be more productive
“linking conceptualization efforts to the huge diversity of social enterprises and forms of
social entrepreneurship than from an additional and ambitious attempt at providing an
encompassing definition” by “feeding with more contributions starting from solid empirical
works”. This matches with the idea previously exposed in which Dahlsrud (2008) who
also concluded that the efforts of researchers should be put on observing and studying
the behaviours of companies embracing CSR activities in different contexts rather than
trying to find exact definitions.
Although it is accepted the fact that there is not a recognised definition due to the huge
diversity of SE typologies and the blurry boundaries between them, it is possible to
recognise SEs as a middle way between two extremes that combine the pursue of
economic profit while pursuing also social value, known as the double-bottom-line, or
triple-bottom-line if also considering environmental sustainability:
1.1.3 Characteristics of Social Enterprises
According to Ramani et al. (2016), Sharir and Lerner (2006) or Austin et al (2006), just
to name a few, there are certain conditions that should be fulfilled for a company to be
classified as a social enterprise:
“(1) the market or non-market offering must address a social need
22
(2) the organization must be financially viable, either through their direct offerings (either
through market or nonmarket routes) or via third party financiers like foundations and
public agencies that support their activities and offerings to the community
(3) the organization must apply business management principles in its internal
governance, marketing and delivery of goods/services
1.2 BoP markets
1.2.1 Definition
The BOP concept firstly introduced by C. K. Prahalad stands for The Base5 of the
Pyramid and it refers to the “largest but poorest socio-economic groups in the global
income pyramid working in predominantly informal markets and living on a few dollars a
day” (Prahalad and Hart, 2002). More specifically, it represents a very heterogenic
market composed by “over four billion people who live on less than $2/day” representing
“multiple cultures, ethnicity, literacy, capabilities, and needs” which “can be segmented
in multiple ways” (Prahalad, 2011). From those in this segment, more than a billion
people – roughly one-sixth of the world’s population – per capita income is less than $1
per day (Anderson and Billou, 2007). And the market continues growing. According to
projections from the World Bank, the population at the BoP could reach over the 6 billion
people by 2040.
It can be said that, individually, people belonging to this segment of population live in
relative poverty. Nonetheless, according to a detailed studied carried out by the World
Resources Institute and the International Finance Corporation (IFC), the BoP market
accounts for a remarkable $5 trillion in PPP6 (World Resources Institute, 2007). This
information is not neglectable if compared to the automatically wealthier market segment,
the so called mid-market population represented by tiers 2 and 3. This market accounts
for $12.5 trillion and includes between 1.5 and 1.75 billion people with per capita incomes
between $1,500 and $20,000.
Tiers 2 and 3 represent economically a larger market, mostly urban, relatively well
served, and extremely competitive. In contrast, BoP markets are often rural - especially
in rapidly growing Asia - very poorly served, dominated by the informal economy, and,
as a result, relatively inefficient and uncompetitive. (Hammond et al., 2007). This means
that although there exist evident barriers still “there is a large, untapped market […]
currently served by the unorganized sector that is often inefficient and controlled by local
monopolies, such as money lenders and middlemen.” (Prahalad. 2011).
5 As suggested by Jim Johnson, Ted London and the members of the BoP Learning Laboratory, it is considered in this report that the term BoP stands for Base of the Pyramid instead of Bottom of the Pyramid, as found in other literature, as the term “bottom” has negative connotations. 6 PPP is a measure that equates the price of a basket of identically traded goods and services across countries, providing a standardized comparison of real prices. (London & Hart, 2010)
23
Historically, MNCs have underestimated the potential of BoP markets because their
business deals mostly with Tier 1 consumers and do not appreciate substantial benefits
in addressing other less developed markets. For this reason, MNCs have built up a series
of core assumptions and practices widely shared among most of them. The following
assumptions and its automatic implications are as follow:
Assumption Implication
(1) The poor are not our target customers;
They cannot afford our products or
services
Our cost structure is a given; with our cost
structure we cannot serve to the BoP market
(2) The poor do not have use for products
sold in developing countries
We are committed to a form over functionality.
The poor might need sanitation but can’t
afford detergents in formats we offer.
Therefore, there is no market in the BoP.
(3) Only developed countries appreciate and
pay for technological innovations.
The BoP does not need advanced technology
solutions; they will not pay for them.
Therefore, the BoP cannot be a source of
innovation.
(4) The BoP market is not critical for long-
term growth and vitality of MNCs.
BoP markets are at best an attractive
distraction.
(5) Intellectual excitement is in developed
markets; it is very hard to recruit
managers for BoP
We cannot assign our best people to work on
market development in BoP markets.
Table 1. Common Assumptions of BoP markets (Prahalad, 2006)
As the world is changing fast, these assumptions, which have been for long accepted
and taken for granted, need to be rethought too. It is true that the “rules of the game” in
BoP markets are different and probably require a high level of creativity and rethinking
many of the rooted traditional business strategies if willing to address them with success.
Yet, it does not mean that the business opportunity for creating profitable growth does
Figure 6. The World Economic Pyramid (U.N. World Development Reports)
*Based on PPP in U.S.$
24
not exist. “Products and services currently offered to Tier 1 consumers are not
appropriate for Tier 4 and accessing this latter market will require approaches
fundamentally different from those even in Tiers 2 and 3. Changes in technology, credit,
cost, and distribution are critical prerequisites.” (Prahalad & Hart, 2002).
1.2.2 Business opportunities
Efforts to promote development in less
favoured parts of society have tend to
mainly focus on the poorest of the poorest,
those 1 billion people at the very base of the
pyramid who live with less than $1/day in
PPP. However, it is worth to consider also
the larger BoP entire segment which counts
with over 4 billion people and still their
income is far below any Western poverty
line. Only considering nine countries -
China, India, Brazil, Mexico, Russia, Indonesia, Turkey, South Africa, and Thailand – all
together represent 70% of the developing World population with more than 3 billion
people. They jointly represent a GDP of $12.5 trillion in PPP terms, higher than the GDP
of Japan, France, The United Kingdom and Italy combined. Although not everyone in the
mentioned countries live in BoP conditions, proportion is high. According to Hammond
et al (2007), out of 5,575 million people recorded by available national household
surveys, 72% belong to BoP with a great majority found in the developing countries of
Africa, Asia, Eastern Europe, Latina America and the Caribbean. “Much like an iceberg
with only its tip in plain view, this massive segment of the global population - along with
its massive market opportunities - has remained largely invisible to the corporate sector.”
(Prahalad & Hart, 2002).
This market has been seen for a long time as unreachable or very hard to reach. They
have been for long detached from global supply chain and global marketing channels,
subject to weak marketing infrastructure and distribution channels. Thus, not being very
profitable its market penetration (Omar M. & Porter M., 2009). However, “there is now
enough information about these markets, and enough experience with viable business
strategies, to justify far closer business attention to the opportunities they represent”
(Hammond et al, 2007).
Furthermore, facts such as the ones exposed in the following table, support the idea that
BoP markets are changing and the preconcived assumptions are not valid anymore.
Drivers of Innovation Implications for MNCs
Increased access among the poor to TV and
information
Tier 4 is becoming aware of many products
and services
and is aspiring to share the benefits
Figure 7. BoP market by income (Hammond et al, 2007)
25
Deregulation and the diminishing role of
governments and international aid
More hospitable investment climate for
MNCs entering developing countries and
more cooperation from nongovernmental
organizations
Global overcapacity combined with intense
competition in Tiers 1, 2, and 3
Tier 4 represents a huge untapped market for
profitable growth
The need to discourage migration to
overcrowded urban centers
MNCs must create products and services for
rural populations
Table 2. Innovation and MNC Implications in Tier 4 (Prahalad & Hart, 2002)
To supply the market and the low income “MNCs must recognize that this market poses
a major new challenge: how to combine low cost, good quality, sustainability, and
profitability.” (Prahalad & Hart, 2002). Nonetheless, it is a good chance for those
companies to innovate without repeating the same environmental mistakes of developed
countries over the last 60 years (Prahalad & Hart, 2002).
Indeed, potential business opportunities may appear as the result of the mere exposal
of companies to BoP markets. As previously mentioned, BoP markets are characterized
by unmet needs, high level of informality, BoP penalties and a weak legal framework.
These barriers appear mainly because of market monopolies and lack of attention and
investment. When facing these barriers new business opportunities may arise.
(Hammond et al, 2007).
To conclude, Hammond et al (2007) identifies eight main sectors in which opportunities
can be found in BoP markets (food, energy, housing, transportation, health, ICT, water
and financial services), all of them worth for companies to explore given its great
business potential.
1.2.3 Main barriers at the BoP
If BoP markets offer such good opportunities for companies to be profitable, why the vast
majority of the business world have not chased them? The reason is that such markets
are commonly related to “corruption, poor infrastructure, non-existent distribution
channels, illiteracy, lack of robust and enforceable legal frameworks, religious or racial
conflict, and sometimes even war or violent insurgencies” that defy traditional business
standards and “stifle the enthusiasm of companies in serving people living in poverty”
(Anderson & Billou, 2007).
The clearest characteristic of BoP markets has to do with the fact that its population
counts with a very low per capita income. Nevertheless, there are other aspects
frequently found that also generate inequality and poverty and are worth a review.
Mostly, these characteristics, which automatically turn into barriers for those living in
such context, relate to the fact that BoP population segments are partly or completely
excluded from the global market economy and do not profit from its advantages.
26
(Hammond et al, 2007). Due to this disconnection, people in BoP face barriers such as:
significant unmet needs, dependence on substantial or subsistence livelihoods, being
impacted by BoP or poverty penalty and the presence of a very weak legal scheme
(Hammond et al, 2007; London & Hart, 2010).
Barrier Definition
Significant unmet needs
• Most have no access to bank account and financial
services
Have little or no formal education
• Most do not own a phone
• Many live in informal settlements without formal title for
their dwelling
• Lack access to water
• Lack access to sanitation services
• Lack access to electricity
• Lack access to basic health care
Dependence on substantial or
subsistence livelihoods
• Lack good access to markets to sell their labor,
handicrafts or crops
• Frequently exploited by employers and middlemen
• Affected by poverty traps as subsistence and informality
• Vulnerable to destruction of the natural resources they
depend on (i.e. small-scale farmers and fishermen)
Impacted by bop penalty • Most pay higher prices for basic goods and services
• Often receive lower quality products and services
Ruled under a very weak legal
scheme • Micro-small entrepreneurs are often excluded from the
formal market economy
Table 3. Main BoP characteristics (Hammond et al, 2007; Benedetto C., 2018; Prahalad and Hart, 2002)
Anderson & Billou (2007) propose a framework known as the “4As” (Figure 8) intending
to define four main challenges in which companies should focus their attention and its
strategic efforts for profitably addressing BoP consumers in developing countries.
27
Availability: as distribution channels in BoP are very deficient and sometimes even
inexistent, in order to improve the access of consumers to products or services,
companies should explore different ways to deliver them to reach all its customers, even
to the most isolated BoP communities.
Affordability: people in BoP tend to live on daily wages meaning that their salary is paid
daily instead of weekly or monthly. Cash-flow represents a significant problem for this
population and the prize of products and services served in such BoP markets should be
thought accordingly.
Acceptability: the products and services offered in BoP markets need to be adapted to
the specific needs of both customers and distributors. The company needs to get very
precise and deep understanding of which are the real needs and design products and
services consequently.
Awareness: traditional advertising media access is in many cases very reduced or even
inexistent at BoP so companies needs to exploit alternative communication channels if
willing to be heard by potential customers and get brand awareness.
1.2.4 Main strategies at the BoP
As BoP is quite a special market, it requires also a special way to operate for companies
to be successful. Traditional strategies that are widely used and proven to work on
wealthier markets are not applicable on this context. Mainly, traditional corporate strategy
focusses on identifying which are the products or services that the company can propose
to the market in order to satisfy the target customers’ needs with the objective of
generating economic profits for the company. Companies willing to target BoP
consumers, also need to propose products and services according to customer needs,
but, customer needs and aspirations are more complex and more difficult to identify by
companies using traditional methods (Simanis & Hart, 2008; London & Hart 2004;
Landrum, 2014). Moreover, the company objective does not reside only on generating
economic profits but also in providing a way for customers to enhance their livelihood or
quality of life (Bhan N., 2009).
Figure 8. The 4As (Anderson & Billou, 2007)
28
Figure 9. Understanding users’ needs
It is not the same what people say and what people really want or dream. It is interesting
to explore all levels of customers interaction by exploring what people say and do but
especially what they make. That is the key for companies to really understand which the
intrinsic customers’ needs are (latent needs).
When adopting the right methodology and considering that the company can recognize
and understand customer needs, there is some other considerations that are worth
noting. When companies consider entering existing BoP markets, they can do it quite
similarly as if they were extending a product into a new country, thus representing more
or less the same business challenge and the same project management structure.
However, opportunities seem to be quite limited when using this procedure. Alternatively,
if companies try to create new markets instead of just entering existing markets, the
advantages are very remarkable and opportunities multiply. (Simanis, 2010).
BoP 1.0 BoP 2.0
▪ BoP as consumer/producer
▪ Deep listening
▪ Reduce price points
▪ Redesign packaging, extend
distribution
▪ Arm’s length relationships mediated by
NGOs
▪ BoP as business partner
▪ Deep dialogue
▪ Expand imagination
▪ Marry capabilities, build shared
commitment
▪ Direct, personal relationships facilitated by
NGOs
“Selling to the Poor” “Business Co-Venturing”
Table 4. Next Generation BoP Strategy (Simanis & Hart, 2008)
29
Simanis & Hart (2008) identify a first and second generation of corporate strategies
referring as the second as an evolution of the first. First generation BoP strategies, also
known as BoP 1.0 strategies, focus their efforts in reshaping and repacking its products
as a mean to enter new markets quickly to “sell to the poor”. However, its disconnection
with the market and the lack of the community’s knowledge, often drives them to fail in
their attempt. An evolution of this approach is known as the second-generation BoP
strategy or BoP 2.0 strategy. Instead of just targeting the customers, the BoP 2.0
represents a more inclusive strategy which aims at co-inventing and co-creating the
business between the company and the BoP community involved. This synergic process
enables new business ideas and models that are far from what the company could even
imagine if trying to design it by its own and that are much closer to the actual needs of
the final consumers.
Simanis & Hart (2008) propose in their “Base of the Pyramid Protocol” (Figure 10), a
three phases process to create new businesses which overlap between them, with strong
ties between the company and the local community and potentially scalable and
replicable, based on the co-creation concept and following BoP 2.0 strategies.
It is important to consider that, due to its higher level of complexity, market co-creation
implies a higher management effort, higher investment costs and longer payback
periods.
It is indispensable a full compromise from corporate-level top management,
understanding that market creation is different from product development or product
expansion. Therefore, management decisions, outputs and milestones should be
different too (Simanis, 2010).
It is notable that, as seen for example on “The Base of the Pyramid Protocol”, in order to
build a suitable and potentially successful business model for BoP markets, operations
should start at a small scale and quite customized to the specific context requiring a high
level of engagement with local communities and with sufficient time to generate
synergies and understanding between both company and community (Landrum, 2014).
Figure 10. The Base of the Pyramid Model 2.0 (Simanis & Hart, 2008)
30
As important as considering market co-creation as a very recommendable business
strategy, companies willing to operate in BoP markets need to build strong partnership
networks with different stakeholders involved as it seems to be of crucial importance to
enable co-creation and increase the chances to properly find the best market solution
and business model (London & Hart, 2004; Landrum, 2014; Kamp L.M. et al, 2015).
“Without viable local partnerships, ventures will have difficulty generating sustainable
competitive advantage and are unlikely to achieve financial viability.” (London, 2008)
While partnerships can be done in many ways, the one presented by Hart & Simanis
(2007) and described as “co-venturing”, is the most appropriate to be aligned with the
rest of strategies related to “co-inventing” and “co-creating”.
Creating a standard partnership between public and private sector while leaving BoP
community only as the target consumer, is relatively more amenable to planning,
managing and monitoring as it is a more familiar type of partnership structure. Business
scalability is perceived as being easier when adopting such approach. However, by
excluding BoP communities in the partnership and the business development process,
community capability development remains very limited, reducing significantly the
competitive advantage and thus, allowing the model to be easily replicable. Through
incremental innovation, the company basically applies some improvements of its
products or services and adapts its already existing business model as an attempt to
satisfy BoP market’s needs. However, as previously discussed, this strategy seems to
fail often as it is far from understanding properly which the real needs and capabilities of
consumers are.
On the other hand, when addressing the market with a co-venturing approach, the
company partners directly with the BoP community, building up a connection and sharing
unique resources and capabilities from both sides. In this way, the company can create
deep community capability development and a higher degree of competitive advantage
when proposing the business to the market. It is true that such approach implies higher
levels of uncertainty due to its complexity and unpredictability, so it is worth noting that
companies following it should be ready to be flexible and patient while keeping constant
and clear dialogue between the company and the community.
Figure 11. From public-private to co-venturing partnership (Hart & Simanis, 2007)
31
Prahalad & Hart (2002) suggest
some areas in which business
should reconsider their perspective
for creating profitable markets
(Table 5) and which strategies
should be followed if willing to
succeed at BoP markets (Figure
12).
Hammond et al (2007) also
identifies four main strategies, in
line with the ideas previously
exposed, that successful
enterprises operating in BoP
markets use. He points out that
companies may use a combination
of several of the following
strategies:
• “Focusing on the BoP with unique
products, services, or technologies
that are appropriate to BOP needs
and that require completely
reimagining the business, often
through significant investment of
money and management talent.
• Localizing value creation through
franchising, through agent
strategies that involve building local
ecosystems of vendors or suppliers,
or by treating the community as the
customer, all of which usually
involve substantial investment in
capacity building and training.
• Enabling access to goods or
services—financially or physically.
• Unconventional partnering with
governments, NGOs, or groups of
multiple stakeholders to bring the
necessary capabilities to the table.”
It is interesting to mention that, once the business is running and sustained, there are a
set of different strategies contemplated in literature that can drive the company to scale
up the business. These strategies are divided in four main clusters: capacity building,
strategic expansion, contractual partnerships and knowledge dissemination (Alvord,
Brown and Letts, 2004; Dees et al., 2004; Weber et al., 2012).
Table 5. New strategies at the Bottom of the Pyramid (Prahalad & Hart, 2002)
Figure 12. The commercial Infrastructure at the Bottom of the Pyramid (Prahalad & Hart, 2002)
32
Figure 13. Scaling strategies for Social Enterprises
(Alvord, Brown and Letts 2004; Dees et al. 2004; Weber et al. 2012)
1.2.5 BoP principles
Some scholars have tried to define a list of main considerations that companies should
follow when addressing the BoP. The most relevant are listed below.
BOP Protocol Business Principles (Simanis & Hart, 2008)
“Operating Guidelines:
• Suspend Disbelief – be willing to admit ignorance
• Put the Last First – seek out the voices seldom heard
• Show Respect and Humility – all parties have something important to contribute
• Accept and Respect Divergent Views – there is no one best way
• Recognize the Positive – people that live on $1 per day must be doing something
right
• Co-Develop Solutions – creating a new business takes mutual learning by all
partners
• Create Mutual Value – all parties must benefit in terms important to them
• Start Small – begin with small pilot tests and scale out in modular fashion
• Be Patient – it takes time to grow the ecosystem and win trust before the business
takes off
• Embrace Ambiguity – the greatest opportunities often arise from unplanned
events and circumstances
Code of Conduct:
• Design businesses that increase earning power, remove constraints, and build
potential in the BoP
• Ensure that wealth generated by the business is shared equitably with the local
community
• Use only the most appropriate – and sustainable – technologies
33
• Promote the development of affected communities as broadly as possibly in ways
defined by the local people themselves
• Track the “triple bottom line” impacts associated with the entire BoP business
system
• Monitor and address any unintended negative impacts associated with the
business model
• Share best practices with local partners to the extent possible
• Report transparently and involve key stakeholders in an on-going dialogue
• Commit to increase community value regardless of the business outcome”
Six Principles for Poverty Alleviation (London, 2008)
• “External participation
• Co-creation
• Connecting Local with Non-Local
• Patient Innovation
• Self-Financed Growth”
5D’s of BoP Marketing – a framework for best practice (Bhan N. 2009)
• Development: solutions that allow the poor to increase their incomes or raise
the quality of life for themselves and their families.
• Design: not only consider price on the equation but look for the product or
service features that better adapt to BoP consumers’ needs
• Distribution: find out alternative distribution networks to reach all consumers
• Demand: marketing messages, advertising and communications need to
emphasize benefits or value that are relevant to the BoP customer's life if willing
to attract their attention.
• Dignity: finds ways to respect BoP consumers’ needs and respond with
sensitive design solutions.
Considering the literature reviewed and blending a wide range of observations and
recommendations from different authors, a series of what it is recognized to be the main
points to be considered by companies willing to operate in BoP markets successfully is
exposed.
MAIN PRINCIPLES FOR COMPANIES TO OPERATE AT THE BOP
❖ Create innovative inclusive business models co-inventing and co-creating
with BoP communities enabling deeper and more precise market understanding
❖ Construct partnerships through co-venturing between the company and the
community to build deep community capability development and higher degree
of competitive advantage
34
❖ Perform small-scale, decentralized operations based on clear and active
communication with local communities
❖ Design products and services through a bottom-up approach, co-creating with
BoP community at an affordable price, being scalable, using hybrid and modern
technologies while meeting world standards of safety, quality and sustainability
❖ Assure accessibility and distribution, reaching all customers, even the most
isolated, through alternative distribution and communication channels
1.3 Innovation
1.3.1 Traditional approach
Innovation is a term defined as “the implementation of a new or significantly improved
product (good or service), or process, a new marketing method, or a new organisational
method in business practices, workplace organisation or external relations” (Oslo
Manual, 2005). It represents the evolution of an invention. While invention refers to the
generation of a new idea, sketch or model, innovation deals with the realization of such
idea, sketch or model, accomplished when a first commercial transaction takes place
(Freeman, 1974). One of the first scholars to attach particular attention to the term was
Schumpeter (1939), one the leading economic theoretician of the past century, who
studied about the role that innovation plays in economic and social change. He presented
a cyclical model (Figure 15) which is initially in equilibrium or “circular flow” of economic
activity until an innovation is introduced by an entrepreneur, creating short-run
fluctuations that can provoke changes that can disturb the whole economic and social
system equilibrium and eventually create completely new branches of industry.
The model is described as a cyclical process that starts with a sort of chain reaction
initiated by the innovation that creates a “primary wave” of economic activity expansion,
followed by a “secondary wave” of expansion created by the response of competitors to
the innovation. The reaction follows with its propagation to other industries, as potential
profits in the initial industry increase, representing an economic stage of prosperity.
However, when new products finally replace the old ones, prosperity slows down giving
way to a period of recession. Low profitability of old products in the market may force
companies to deal with liquidation, price fall and even bankruptcy. This, in combination
with the fact that innovators need to start repaying its bank loans, will leave lower
quantities of money in circulation, creating a state of uncertainty and high-risk perception
that hastens economic depression. The cycle closes by a period of improvement, where
remaining firms that survived the previous stage grow by feeding from the rests of those
who collapsed and new entrepreneurial actions make innovations flourish again.
35
Figure 14. Cycle of Innovation and Entrepreneurship (Schumpeter, 1939)
It is worth noting that entrepreneurs play a role of remarkable importance in the
innovation process. They are defined as individuals acting in different ways as the
majority of people, perceiving and creating new opportunities, taking risks, operating
under uncertainty and being competitive in the market (Braunerhjelm & Svensson, 2010;
Michaelides et al., 2010; Schumpeter, 1939).
1.3.2 The innovation process
Based on the article published by Narasimhan and Narayanan (2013), an innovation
process counts with five main recognizable steps which are: the initiation or discovery of
the invention; the launching of the innovation initiative; the process of embedding the
initiative in the organization; the focus on the innovation effort; and the successful
commercialization of the innovation.
Traditionally, the innovation process
has remained quite inside the walls
of the organization, going from
generating the idea, sketch or model
to creating a marketable product.
Such process can be seen as a
funnel (Figure 15) where the
development process initiates with
an unlimited range of inputs to
maximize creativity and
progressively converge towards a
defined output.
Figure 15. Traditional innovation process
36
However, more modern ways to
innovate, commonly known as
“open innovation”, are applied
by more and more companies.
While being aligned with the
idea of innovation development
through funnelling, the concept
of open innovation (Figure 16)
represents a more flexible
system that enables a higher
source of knowledge,
interaction with other markets
and even the creation of new
markets.
An alternative way of innovation process is the one represented by social innovation.
As the purpose of such innovations are not driven only by economic reasons but also by
the creation of social and environmental positive impact, the way to innovate is
sensitively different.
Bates S. M. (2012) proposes a model counting with three stages: investigation,
innovation and implementation. Later, and based on this model, a new model (Figure 17)
is proposed by The Young Foundation (2012). The new model adds three more stages
to the previous one, thus defining the following innovation stages:
1- Prompts: identify the need of social innovation
2- Proposals: ideas are developed
3- Prototyping: ideas get tested in place
4- Sustaining: the idea proposed becomes everyday practice
5- Scaling: growing and spreading social innovations
6- Systemic change: involves re-designing and introducing entire systems and will
usually involve all sectors over time
Figure 17. The process of social innovation (Murray et al, 2010)
Figure 16. Open innovation process
37
1.3.3 Types of innovation
Schumpeter (1939), as one of the precursors of innovation research, defined five types
of innovations: new products, new methods of production, new sources of supply, the
exploitation of new markets, and new ways to organize business. However, a more
modern classification is presented by the Oslo Manual (2005) which identifies four main
types of innovations: product, process, marketing and organizational innovation.
• Product innovation defined as “the introduction of a good or service that is new or
significantly improved with respect to its characteristics or intended uses. This
includes significant improvements in technical specifications, components and
materials, incorporated software, user friendliness or other functional characteristics.
Product innovations can utilize new knowledge or technologies or can be based on
new uses or combinations of existing knowledge or technologies” (Oslo Manual,
2005).
• Process innovation defined as “the implementation of a new or significantly improved
production or delivery method. This includes significant changes in techniques,
equipment and/or software. Process innovations can be intended to decrease unit
costs of production or delivery, to increase quality, or to produce or deliver new or
significantly improved products” (ibid).
• Marketing innovation defined as “a new marketing method involving significant
changes in product design or packaging, product placement, product promotion or
pricing. Marketing innovations are aimed at better addressing customer needs,
opening up new markets, or newly positioning a firm’s product on the market, with
the objective of increasing the firm’s sales” (ibid).
• Organizational innovation defined as “the implementation of a new organizational
method in the firm’s business practices, workplace organization or external relations.
Organizational innovations can be intended to increase a firm’s performance by
reducing administrative costs or transaction costs, improving workplace satisfaction
(and thus labour productivity), gaining access to non-tradable assets (such as non-
codified external knowledge) or reducing costs of supplies” (ibid).
Another way to classify innovations is according to its degree of change. It is worth noting
the difference between the following ones: incremental vs radical, architecture vs
component and competence enhancing vs competence destroying.
• Incremental vs Radical innovation: while incremental innovations refers to such
innovation that enhance or significantly improves a product, process,
organization or method that already exists in the market, radical or disruptive
innovation deals with new products, processes, organizations or methods that
are totally new to the market. Consequently, radical or disruptive innovation can
change the structure of a market by creating substantial impact on the market
and the economy as a whole, being able to even create new whole markets.
According to Schumpeter (1942), incremental innovations continuously advance
the process of change while radical innovations create major disruptive changes.
• Architecture vs Component innovation: products, processes, organizations or
methods can be considered as a whole entity (architecture) or by the
conformation of different components. When innovating, the focus can be on the
38
whole entity or on its components separately. It is possible to change certain parts
of a product, for instance, representing a component innovation but without
changing any aspect of the whole composition, thus not signifying any innovation
at an architectural level.
• Competence enhancing vs Competence destroying innovation: this kind of
innovation is closely related to incremental / radical innovations. Competence
enhancing innovations represent such innovations that by appearing, create
significant changes within the market by “exploiting existing skills and knowledge
within the community. These innovations serve to consolidate industry leadership
in the larger organizations and hinder the development of new organizational
forms” (Tushman & Hederson, 1986). On the contrary, competence destroying
innovations “spur the creation of new organizational forms that can quickly
acquire and utilize the new technologies. Large, well-established organizations
with too much inertia to adopt the new innovations suffer and lose their
dominance” (ibid). Competence destroying innovations are commonly introduced
by new firms which are more prone to assume higher risks.
Innovations can also be classified by the type of strategy used, leading to three main
types: technology-push, market-pull and design-push (Dosi, 1982; Verganti, 2003).
• Technology-push is a process driven by scientific or technological
competencies It represents a product or process innovation that typically revolve
around the physical attributes of the product.
• Market-pull refer to innovations that typically involve the way in which the product
is commercialized in terms of organization, distribution and/or advertising:
product presentation, distribution channel innovations, incremental product
performance innovations, sales process innovations, etc.
• Design-push is a process driven by socio-cultural and semantic competencies.
It represents a product or process innovation that typically revolve around
intangible attributes of the product.
Innovation can also be classified according the level of openness the company shows
when dealing with external stakeholders. It is worth clarifying the distinction between
open and close innovation. As mentioned before, traditional way of innovating (close
innovation) keep the innovation process in house while more open ways of innovating
turn to external actors that can actively contribute to the innovation process. “Open
innovation is a paradigm that assumes that firms can and should use external ideas as
well as internal ideas, and internal and external paths to market, as the firms look to
advance their technology” (Chesbrough, 2003). Although it seems a better solution than
more traditional approaches as it lowers the time and costs to generate innovation,
lowers the risks, increases the revenues by increasing the market chances and creates
more profitable solutions, enhancing internal growth, yet, it requires a greater
organizational and managerial effort.
It is widely shared in literature that the term innovation allows hundreds of different
definitions and classifications. In the previous paragraphs it has been described some of
the most significant types, still, representing just a small portion of a very longer list.
Nevertheless, there is another type known as Social Innovation which its review is
indispensable for the accomplishment of this study and which covers a whole stream of
39
literature. Social Innovation is defined as “new ideas (products, services and models)
that simultaneously meet social needs more effectively than alternatives and create new
social relationships or collaborations. In other words, they are innovations that are both
good for society and enhance society’s capacity” (Murray et al, 2010). It is connected
with the concept of the “triple bottom line”, firstly introduced by Elkington J. (1994), and
being of core importance for social business. It describes three dimensions of
sustainable development (economic, social and environmental) that must be in
equilibrium. The Young Foundation published a book in 2010 named “The open book for
Social Innovation” (Murray et al, 2010) attempting to map the hundreds of methods for
social innovation with the intention to collect most and support all those involved in social
innovation and demonstrating at the same time, the vast scope of the concept.
1.3.4 Innovation at the BoP
It is extensively documented in literature the need of innovation in technology, business
models, and management processes when addressing BoP markets (Christensen, Craig
& Hart, 2001; Hart & Christensen, 2002; Prahalad, 2006; Brouard & Larivet, 2010). Like
in any other market, companies need to propose products and services according to
customer needs. However, needs at the BoP are harder to identify hence requiring
different ways to innovate as well. “Doing business with the world’s 4 billion poorest
people will require radical innovations in technology and business models” (Prahalad
& Hart, 2002). Products and services designed for wealthier markets, are not appropriate
for BoP markets which require more specific solutions (Landrum, 2014). At BoP,
innovations require significant larger amount of time to create and develop the business.
Market co-creation implies a higher management effort with higher investment costs and
longer payback periods so leveraging on patient innovation allows the company to find
better and more suitable solutions to BoP problems (Simanis, 2010; Landrum, 2014;
London, 2008). Market co-creation requires inclusive innovation which is defined as
“the means by which new goods and services are developed for and/or by those who
have been excluded from the development mainstream; particularly the billions living on
lowest incomes” (Heeks et al, 2013). Groups targeted with this kind of innovation are
formed by people who are marginalized from society for different reasons, from poor,
women, youth, disabled, ethnic minorities to informal sector entrepreneurs.
In the publication done by Heeks et al., (2014) it is defined different levels of inclusive
innovation and how they relate to new models. It is possible to define an innovation as
inclusive “if the intention of that innovation is to address the needs or wants or problems
of the excluded group” (level 1), “if it is adopted and used by the excluded group” (level
2), if it has a positive impact on the livelihoods of the excluded group (level 3), if the
excluded group is involved in the development of the innovation (level 4), if it is created
within a structure that is itself inclusive (level 5) or if it is created within a frame of
knowledge and discourse that is itself inclusive (level 6). At the same time, a series of
new models are identified as relevant to inclusive innovation and linked with the different
levels of inclusion:
40
• Frugal innovation (levels 1 and 2):
it seeks to minimize resource
usage, cost and complexity in the
production, constitution, and
operation of new goods and
services.
• Grassroots innovation (level 4): it
is an innovation ‘from below’,
generally associated with
innovation emerging from low-
income communities.
• User–producer interaction (levels
4 and 5): focuses on the learning
and innovation which occurs in the
connection between producers and
consumers.
• Cluster innovation (levels 4 and
5): it takes place within a collocated
group, in which the innovation
cannot be attributed to any
individual but to a process of group
learning. Typically – as in this case
– this is a group of micro-/small
enterprise owners.
• Innovation platforms (level 5): are mechanisms to bring together a group of
stakeholders with a focus on innovating to address a particular issue of common
interest.
When innovating in BoP markets, apart from considering the innovation process referred
to social innovation previously defined (Figure 17), there is another methodology worth
mentioning, known as the Innovation Sandbox, as it seem to be very useful when dealing
in such specific and special type of market.
Proposed by Prahalad (2006), the Innovation Sandbox represents a way to create
innovation by experimenting, like a kid plays with sand in a sandbox. It represents an
environment in which “fairy complex, free-form exploration” happens (represented by the
sand) “within extremely fixed specified constraints” (represented by the walls of the
sandbox). The sandbox is delimited by four walls, each of them representing a boundary
that cannot be overpassed:
1. The innovation must result in a product or service of world-class quality.
2. The innovation must achieve a significant price reduction.
3. The innovation must be scalable: It must be able to be produced, marketed, and
used in many locales and circumstances.
4. The innovation must be affordable at the BoP, reaching people with the lowest
levels of income in any given society.
Figure 18. Inclusive Innovation Models (Adapted from Heeks et al., 2014)
41
Chapter 2: Research Objectives and Methodology
2.1 Research Problem and Objectives
2.1.1 Research Problem
It has been studied extensively the relevance of Social Enterprises carrying out their
business activities in BOP contexts. It has also been discussed different ways of
innovation processes that favour such development. It is demonstrated that there are
substantial factors that motivate companies to explore BOP markets and discussed
which are the considerations and strategies that companies should ponder if willing to
be successful when operating in such a context. However, there is a need of more
studies that put all these concepts together and propose a framework that enables
companies to generate a sustainable and innovative business model in a BOP context
to exploit the triple-bottom-line concept while leveraging on different ways of innovation.
2.1.2 Research Objectives
Relevant considerations from existing literature has been compiled with the intention of
proposing a framework that can be used by SEs as a guideline to take better decisions
when operating at BOP markets and can be practical for the development of innovative
and potentially scalable sustainable and social business models. More precisely, this
research pursues the following objectives:
Objective 1: Create a new Framework that can be used by Social Enterprises wiling
to operate at BoP markets as a guideline to take better strategic decisions and
create sustainable and potentially scalable social business models.
Objective 2: Apply the Framework on a case study represented by a Social
Enterprise selected
Objective 3: Propose an innovative, sustainable and potentially scalable social
business model for the Social Enterprise selected as a case study
2.2 Research Articulation
2.2.1 Research Steps
1- Literature Review to:
a. Identify the characteristics of a SE
b. Recognize the features of a BOP context
c. Define under which conditions a SE works in a BOP context
42
d. Explore which are the common barriers found by SEs in BOP contexts
and which are the main strategies pursued to overcome them
e. Analyse which are the types of innovation typically found in BOP contexts
and their links with mainstream commercial markets
f. Propose a Framework to be used as a guide for SEs operating in BOP
contexts leveraging on innovation as a core competence
2- Case setting by:
a. Selecting a suitable Case Study represented by a SE operating in the
specific mentioned context
b. Determining the characteristics, context and business development stage
of the SE selected
c. Reviewing the SE’s Business Model:
i. Related to key stakeholders involved
ii. Related to the innovation process and the technological
development
3- Data Collection to:
a. Define the current state of the SE through:
i. Documents revision
ii. Interview
b. Review the SE’s business model through:
i. Documents revision
ii. Interview
c. Identify stakeholders involved and recognise its interests, needs,
expectations, capacities and motivations through:
i. Interviews
ii. Active participant observation
iii. Records
iv. Workshop
d. Explore which are the main opportunities, barriers and challenges related
to the context through:
i. Interviews
ii. Passive participation and observation
4- Application of the Framework to the Case Study selected to:
a. Identify the company as a Social Enterprise
b. List social and environmental problems identified by the company
c. Determine its level of social engagement
d. Identify the market as BoP
e. Recognize business opportunities and barriers in the market
f. Define main BoP principles
43
5- Data Elaboration to:
a. Identify potential target consumers
b. Diagnose the technological needs by the different potential target
consumers
c. Estimate the financial requirements
6- Business Model definition compliant with the Research Framework
2.2.1.1 Literature Review
By performing a systematic review, all literature related to the topics relevant to the
accomplishment of the objectives of this study was revised. Particularly, the literature
review helped to understand: under which conditions social enterprises conduct social
business in BOP contexts; which is the most favourable behaviour for social business to
succeed in such context; which kind of innovation is frequently found in BOP contexts
and which is its relationship with sustainable business development. The understanding
of the concepts described created the bases for the creation of the framework proposed
and for a later selection of a suitable candidate for the case study.
2.2.1.2 Case Setting
Once the literature was reviewed, a clear image of the current panorama defined, and a
new framework proposed, a case study was selected. The case study had to comply with
the conditions proposed by the framework to be eligible as a plausible case. The case
would later follow the steps described in the framework and be used as an example to
proof its validity. The case selected is represented by a SE called Azura Marine Earth
operating in the island of Bali, in the Republic of Indonesia.
2.2.1.3 Data Collection
The third step involved the data collection process which firstly permitted to confirm the
legitimacy of the case study selection and later allowed deepening the study on the
characteristics and particularities of the case and applying the framework proposed.
Firstly, in favour of getting deep insight about the company, its business model, the
context in which operates, and all the information required to determine if the case study
was suitable to use with the framework, a communication line with one of the co-founders
of the company was initiated. This communication would be later kept during the whole
length of the study in the form of structured interviews or through other informal and less
structured ways of communication. Additional data was collected through the revision of
documents such as internal company’s documents, official website and other media
publications (articles in magazines and newspapers or interviews on the TV).
44
Next step referred to the definition and understanding of stakeholders involved in the
social business. During the time frame of eight months, from October 2017 until June
2018, several stakeholders were approached on-site and online in different ways with
the purpose to better define which are the main stakeholders involved in the project and
which are their interests, needs, expectations, capabilities and motivations.
Before approaching the stakeholders, it was defined which kind of information was
needed from each of them (Table 6).
Actors
involved
Business
Model
BOP
context &
Principles
Innovation Barriers Strategy Finance
Entrepreneur X X X X
Cu
sto
mers
/
Be
ne
ficia
ries
Fishermen X X X X X
Families X X X X
Diving
centres X X X X X
Fu
nd
ers
Banks X X
Sponsors X X
Donors X
Pa
rtn
ers
/
Co
llab
ora
t
ors
Technician X X X X
NGOs X X X
Local Orgs. X X X X
Suppliers X X X
Table 6. Data to be collected by each stakeholder
Numerous expeditions to fishermen villages, following day to day activities for days,
sailing with them, creating workshops, living with their families and joining in daily
activities and in special community events, undoubtedly contributed to gain market
knowledge and understanding from the inside. In addition, other stakeholders were also
approached during the same time frame as they were being identified.
Different stakeholders were approached in different ways and using different data
collection techniques:
• Documents revision:
Especially relevant when studying the company for creating the bases of the case
setting.
45
• Active participant observation:
Participating on day-to-day activities with local communities contributed to the
understanding of many aspects of the society under study. Especially from a
social perspective, this kind of technique allowed to understand some details
about their lives that can hardly be appreciated with other techniques. It is true
that sometimes the presence of the researcher could influence their way of
behaving, possibly distorting their real normal interaction. However, this fact is
also present when using other data collecting techniques. Moreover, directly
proportional to the trust that is progressively built among the community, this
feeling of having an outsider inside their group also progressively vanishes and
the people under study accept the researcher as part of their society, not
representing a notable barrier for the veracity of the observations.
• Interviews (structured, semi-structured and informal):
Structured interviews were conducted with a variety of stakeholders considered
in the study: with the co-founder of AME, with an expert on solar installations and
with small-scale local fishermen.
Semi-structured interviews also were used as a data collection technique when
approaching different diving centres in different occasions.
Additionally, a vast number of informal interviews were also followed, especially
with local fishermen and their families, while implementing the participant
observation data collection technique. Many of these interviews were captured
on audio or video recordings.
• Records (audio, video and GPS tracking):
These data collection techniques were used in combination with the active
participant observation approach. While being part of their daily activities,
informal interviews were many times recorded in form of audio and video
recordings. Video recordings were also used simultaneously with GPS tracking
recordings with a smart phone using an app that saved geolocation data
periodically from the whole fishing trip. By matching both videos and GPS tracking
recordings, it was possible to observe different fishing patterns and energetic
requirements (speed, distance, hours sailing with and without sun, etc.) from
different fishermen. This latest part was especially useful to understand more
technological needs relevant for the part of product design.
• Workshops:
One workshop was carried out with the collaboration of the founder of PT Surya
Sakti Bali, a local Balinese expert in solar installations in one of the villages by
creating a workshop with the local fishermen community to show them the
possibilities of solar energy and raise awareness among the community.
46
Stakeholders Approach Data collection
techniques In numbers
Entrepreneur
Direct
communication on-
site and online with
one of AME co-
founders
Fluent
communication
Interviews
(constructed and
informal)
Documents revision
C
usto
mers
/ B
en
eficia
ries
Fis
herm
en
and
fa
mili
es
Carrying out several
expeditions to
different fishermen
villages
Active participant
observation
Interviews
(structured and
informal)
Records (audio,
video, GPS
tracking)
Workshops
Villages visited: 7
Interviewees:
constructed: 8
informal: +40
Div
ing
ce
ntr
es Visiting several
diving centres and
talking to them on-
site
Interview (semi-
structured) Interviewees: 7
Pa
rtn
ers
Exp
ert
on
so
lar
insta
llatio
ns Direct
communication on-
site with one
company developing
solar installations.
Joining together to
one of the villages to
assess a small solar
installation and meet
the local community
Fluent
communication
Interviews
(structured and
informal)
Suppliers
Online
communication to
get quotations
Documents revision
Table 7. Data collection technique by stakeholder
47
2.2.1.4 Data Elaboration
The fourth step embodied the interpretation of the data collected as way to accomplish
the objectives of this study. The objectives have been fulfilled by the combination of
literature review and data collection and interpretation. The later gaining more relevance
for the first objective of the study, related to the business model proposition for the SE,
and the former for the second objective, related to the framework.
While interpreting data collected to understand stakeholders’ interests, needs,
expectations, capacities and motivations, main opportunities, barriers and challenges
related to the context were also identified.
As a result of defining the main stakeholders and interacting with them a stakeholders’
matrix was created. This matrix aims at listing main stakeholders involved in the project
and summarizing their interests, needs and expectations, their capabilities and
motivation in development and the possible actions that the company could perform to
address their interests, needs and expectations.
Moreover, with the intention to provide a management tool to the social enterprise and
to present some of the stakeholders involved in the project in a more visual way, a
methodology proposed by Ortbal et al (2016) known as Constructed Stakeholder
Personas (CSP) is also introduced (Annex 3). Such methodology represents a
management instrument that allows the SE to better identify all stakeholder’s groups with
who it may interact. It is presented as an alternative to more expensive methods
(economically and time-wise) to identify the stakeholders involved and their needs and
motivations, specially designed for companies as AME in early stages of its business
development. Moreover, the proposed methodology favours replicability and ease the
transfer of information from, for instance, one team to another or between similar
contexts.
The CSP methodology is composed by four main steps:
1. Determine Identities of the Venture’s Stakeholders Groups
2. Research Geographies, Demographics, and Psychographics
3. Define Stakeholder Groups
4. Build the Constructed Stakeholder Persona Visual
2.2.1.5 Business Model Definition
The fifth and last research step concludes with the proposal of a sustainable and
potentially scalable business model for the SE presented in the case study by complying
with and following the steps of the research framework proposed. However, it is worth
noting that the business model proposed only represents a starting point towards what it
should become a co-development participatory process between the company, the local
community and partners involved.
48
Chapter 3: Framework for Social Enterprises to operate in
BoP markets
The following framework is based on the compilation of most relevant concepts found on
existing literature related to social business and SEs’ interaction with BoP markets.
Basically, the model is structured in a form of five questions to be answered by the SE
exposed to classify and identify in detail aspects related to the market and the company
itself. Then, a sixth question provides a list of recommendations and strategies to follow.
The structure selected follows the logical path SEs may face when approaching such
markets and attempts to describe which are the most appropriate ways to overcome the
possible barriers encountered.
Figure 19. Framework for Social Enterprises operating at the BoP
In particular, the framework eases the identification of the characteristics a company
should possess to be considered as a social enterprise, the level of social engagement
49
shown and the conditions that are normally found in a BoP market. Furthermore, the
framework exposes a series of opportunities normally present in BoP markets (divided
by industry sectors) and the main challenges for companies to embrace such
opportunities. Lastly, it provides a list of strategies that companies should follow if willing
to generate potentially successful business models to operate at the BoP.
Moreover, the framework recognises links between BoP markets and wealthier and more
commercial markets, identified as “Mainstream markets”, as business opportunities for
SEs to increase its revenue generation and its financial stability.
FRAMEWORK QUESTIONS:
1. Is the company qualified to be considered a Social Enterprise?
The company needs to gather all three of the following characteristics to be
considered as a Social Enterprise.
a) The market or non-market offering address a social need
b) The organization is financially viable, either through direct offerings or via third
party financiers
c) The organization applies business management principles in its internal
governance, marketing and delivery of goods/services
2. Which is the Social and/or Environmental problem identified by the
company?
3. Which is the level of social engagement shown by the company?
Approach (level of engagement) Definition
Philanthropic approach
(low)
(1) Tradition Grant Based Funding
(2) Social Venture Competition
(3) Employees Philanthropic Approach
Social Environmental
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Form of Collaboration
(Medium)
(4) Financial Investment Model
(5) Corporate Investment Model
(6) Partnership
Internal Development
(High) (7) In-House Development
4. Can the market addressed be considered as a BoP market?
There is a basic characteristic that defines any BoP market. Potential consumers
are characterized by having a low annual per capital income (under 1.500 USD in
PPP).
Besides the purely economic feature, a fair amount of the next indicators should be
present in the target market to be considered as BoP:
BoP markets
characteristics Description
Significant unmet
needs
Low access to bank account and financial services
Poor or inexistent formal education
Low phone usage
Informal housing (without dwelling)
Lack access to clean water
Lack access to sanitation services
Lack access to electricity
Lack access to basic health care
Dependence on
substantial or
subsistence
livelihoods
Lack access to markets to sell labour, handicrafts or crops
High level of exploitation by employers and middlemen
Presence of poverty traps as subsistence and informality
High level of vulnerability to destruction of the natural resources
they depend on (i.e. small-scale farmers and fishermen)
Impacted by BoP
penalty
Higher prices for basic goods and services (capital or time)
Low quality of products and services
Ruled under a
very weak legal
scheme
Low level of inclusion to the formal market economy
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5. Which are the business opportunities and barriers found in the market that are
relevant to the activities performed by the company?
A BoP market is characterized by being a fast-growing untapped market with
unsatisfied needs and high demand for products and services.
The follow table compiles a list of opportunities often found at BoP markets. The
company can use this classification to identify in which sector the company is
operating or willing to operate and compile the information according to the particular
case so it can ease the recognition of a challenges worth to focus its attention.
Sector Challenges /
Opportunities Barriers Examples of solutions
Food
Spending patterns do
not vary significantly
between BoP and
wealthier consumers
Agriculture is an
important source of
income in BoP
Weak
distribution
Inclusive business
models focusing on
BoP producers and
distributors, not only
consumers
Lack access
Low quality
Low
affordability
Energy
Use of electric energy
is limited in BoP
because lack of
accessibility
(especially in rural
areas)
Lack access
New off-grid solutions
based on renewable
technologies
Housing
High demand for
housing in BoP
(mainly rural in Asia
and Africa and mainly
urban in Eastern
Europe and Latin
America)
Informal
ownership Co-design and co-
development of housing
solutions with local
stakeholders Lack access to
financial
services
Transportation
High latent demand
Direct relation
between
transportation and
Weak
distribution
channels Multi-stakeholder
transportation models Low
affordability
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economic and social
inclusion Low quality
Low availability
Health
High latent demand
Strong dependence
on pharmaceuticals as
basic treatment
Weak
distribution
systems
Franchising model
involving local shops
owners
Low quality
control
Low
affordability
Low availability
High
transportation
costs
ICT
Very high growth rate
Low access to
phone services
(including
internet and
app services)
New models promoting
share access through
local or community
phone shops or cyber-
kiosk
High latent demand
Lack of access to ICT
services in rural areas
Disconnection from
mainstream
information (mostly in
rural areas)
Water
Dependence on water
availability on wells or
surface sources with
not safety control
Low-income people
pay higher prices to
get safe water
(economically or in
effort to get it)
Low access to
clean water
Business solutions
based on small-scale
community purification
systems, public water
pipes or home filters
Financial
Services
Significant demand
High level of
informality hinders the
access because no
proven collateral
Lack access
Expansion of
microfinance institutions
(MFIs)
Entrance of large
financial institutions in
BoP High informality
(i.e. housing)
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Partnerships between
microfinance institutions
and commercial banks
6. Which are the main principles a SE should follow when operating at BoP
markets?
Component BoP Principles
Goal Triple bottom line: create economic profit while creating social
and environmental positive impact
Target market Base of the Pyramid
Business model
Innovative inclusive business models co-inventing and co-
creating with BoP communities enabling deeper and more
precise market understanding
Partnerships
Co-venturing to build deep community capability development
and higher degree of competitive advantage
Operations Small-scale, decentralised, based on clear and active
communication with local communities
Design of products
and services
Bottom-up approach, co-creating with BoP community, at an
affordable price, being scalable, using hybrid and modern
technologies while meeting world standards of safety, quality
and sustainability
Accessibility and
distribution
Reach all customers, even the most isolated, through
alternative distribution and communication channels
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Chapter 4: Case Setting
4.1 Presentation of the case: Azura Marine Earth
The company selected is called Azura Marine Earth (AME). It is a SE under the umbrella
of its main commercial company Azura Marine (AM) which designs and builds solar
electric yachts while using high performance renewable energy technologies. Although
the parent company is based in Singapore, AME bases its activities so far at the
Indonesian island of Bali. As stated by AM, the company “strives to provide pragmatic,
affordable, reliable and simple alternatives to conventional fossil-based boat propulsion
and shore-based power generation” while “respecting the environment, local
communities, suppliers, contractors and clients; sharing knowledge, education and
resources; contributing to the earth protection” (Azura Marine website). The boats
designed by AM are aimed at being used for different purposes: high-end private sector,
tourism activities or ferrying people between islands, among other possibilities. By doing
so, the company is willing to propose a sustainable alternative and reduce the
environmental impact that combustion engine boats currently generate. Moreover,
through the social enterprise AME, the company is willing to develop a social business
model in which small-scale local fishermen communities could be included by
transforming its outdated and polluting boats into solar-electric. AME intention is to bring
solar technology to less economically developed areas in South East Asia by building
boats with local workforce and materials, using traditional boat building techniques mixed
with high ecological technology. Such communities represent quite an excluded and
vulnerable part of society as they are characterized by: high levels of informality, lack or
poor access to electric energy, high dependence on fossil fuel, poor infrastructure,
outdated technology, no access to formal banking, among others.
The current study focusses on the social enterprise AME and the later described project
related to the transformation of boats from small-scale local fishermen to solar-electric.
4.1.1 Business stage of AME
Currently, the company is still on a very early stage of business development as they
have recently built and tested its first prototype named Surya Namaskar.
The innovation process through which AME goes through, can be compared with those
particularly found in social innovations. The company has identified a series of social and
environmental problems that could be solved or attenuated by generating of a revenue
generating business around.
If considering the model proposed by the Young Foundation (Murray et al, 2010), the
company is currently at a phase of prototyping (Figure 20), after being gone through
the phases of prompts and proposals, where the need for social innovation is identified
and ideas are developed respectively. However, as an iterative process, after testing its
first prototype, AME would probably need to pivot between those mentioned phases
before moving forward to the next phase of sustaining. Indeed, it would probably require
55
other prototypes or modifications on the current one before validating its design for the
different future target consumers.
Figure 20. Business stage of Azura Marine
4.1.2 First AME prototype: Surya Namaskar
Figure 21. Surya Namaskar, first AME prototype
One of AMEs objectives is to transform already existing traditional boats from small-scale
local fishermen, known as “jukung”, from petrol based into solar-electric. In line with this
idea, the co-founder of AME Julien Mélot, which counts with extensive experience on
naval architecture and electro-mechanics, bought a second hand traditional fisherman
boat with its original features and transformed it into a solar-electric boat. He was
assisted by a local man with long experience on traditional boat construction. As a result
of this first attempt, Surya Namaskar was born.
Surya Namaskar represents the seed for growing the social business AME intends to do
in the future.
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The prototype counts with the following features:
More specifically, the transformation of the old boat to the new design is based on the
following modifications:
Propulsion System
It consists in the modification of the old propulsion system from an outboard two-strokes
engine to a new propulsion system based on a high efficiency and maintenance-free
brushless direct current motor, with a power of 10KW. The system uses some of the
spare parts from the old propulsion system. The equivalent power of the new electric
engine is 30 hp when compared with a conventional gas engine due to the modification
of the old propeller to new one with higher efficiency with 5 blades (ø=320mm). The new
engine, which commercial name is Manta 3.0, is pluggable to a computer in order to
adjust different parameters allowing to set up different configurations.
▪ Length: 8m
▪ Beam: 5m with outriggers
▪ Capacity: 6 passengers
▪ Cruising/Max Speed: 6/8 Knots
▪ Solar Panel Area: 32 panels / 28 m2
▪ Max Solar Power: 5.5 Kw
▪ Battery Capacity: 4 x 12V bat. / 8 Kwh
▪ Range without Sun at 3 Kn: 30 nm (10h)
▪ Electric Motor Rated / Peak Power: 15/25 hp
▪ Propeller: High efficiency, 5 blades, ø 320 mm
▪ Navigation: GPS
▪ Lights: LED
▪ Power & Connectivity: 220 v, USB, WiFi
▪ Entertainment: Bluetooth Sound System
Figure 22. Transformation from Yamaha 15 hp two-stroke engine to Manta 3.0 electric engine
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Photovoltaic panels
Surya Namaskar is powered uniquely with solar
energy which is captured through 32 high
efficiency photovoltaic panels covering a 28 m2
roof that provides a maximum
solar power of 5.5 KW.
Navigation Control Panel
It is the area in which the boat captain controls the navigation. It is equipped with the
following components:
▪ Steering
▪ Power controller
▪ Navigation and live tracking
GPS
▪ Energy monitoring live display
▪ USB ports
▪ 220 V plug
▪ Light controller
▪ Bluetooth sound-system
▪ WIFI hotspot
Battery bank
As sun irradiation is not continuous, the boat needs a battery bank to store the energy
collected from the solar panels, so it can be used when needed. The boat counts with
high energy density and deep cycle batteries with a total capacity of 8 KWh which allows
the boat to sail without sun radiation around 9 hours at an average speed of 5 knots.
It is important to specify that the batteries need to be stored in hermetic dry boxes to
avoid the direct contact with the corrosive conditions inherent to the sea.
MPPT Controller
It represents an electronic device that optimizes the match between the solar energy
captured by the PV7 panels and the battery bank. Batteries need different current voltage
for different states of charge to fully charge so the controller makes sure that the optimal
input is given to the batteries at all times. Like any other electronic component onboard,
the MPPT8 controller needs to be well isolated form outdoor corrosive environment.
7 PV: Photovoltaic 8 MPPT: Maximum Power Point Tracking
Figure 23. Surya Namaskar solar panels roof
Figure 24. Navigation Control Panel of Surya Namaskar
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4.1.2.1 Objectives and findings from Surya Namaskar
This very first prototype, although it is a first attempt to transform a traditional Balinese
fisherman boat from its original shape and system to a boat only powered with solar-
electric energy, it does not represent the design that local fishermen would adopt in the
future as it is not adapted to their needs. Features such as GPS navigation system, WiFi
or Bluetooth are obviously not relevant for the target future consumers at the BoP and
the whole design should be rethought according to their needs. However, its construction
and testing were useful as it:
• Proofs the technical viability of the technology
• Defines the boundaries and the bases of later designs
• Raises awareness and visibility about the project and renewable energy
The results were very positive as it represented the first circumnavigation ever done with
a “jukung”9 fully powered by solar energy around the island of Bali and later a successful
sailing through different islands of the archipelago without a single technical issue,
including a 38 hours non-stop sail. In total, on its first attempt, the prototype sailed for
over 2.000 Km through different islands of the archipelago without technical issues
attracting the interest from local communities and international media, who picked up the
story in several occasions.
4.1.2.2 After Surya Namaskar
After the success with its first prototype, the company is ready to move forward and face
the challenge of proposing a business model for small-scale local fishermen to adopt this
new technology in their boats. However, the company is willing to start the social
business in a region and in a context which seem to be identified as BoP. If so, as
concluded from the literature review, BoP is quite a special market that would require
extensive analysis, multiple stakeholders’ involvement and alternative approaches
essentially different from those found in traditional business. “Changes in technology,
credit, cost, and distribution are critical prerequisites” (Prahalad & Hart, 2002).
The results derived from this study are intended to assist and guide the company towards
the definition of its new social venture.
9 Jukung: small wooden Indonesian outrigger canoe traditionally used for fishing activities. Nowadays, modern versions are made of fiver to reduce its weight.
59
4.2 Applying Framework for Social Enterprises at BoP market to the case
study
On this section, the company Azura Marine Earth is faced with the framework proposed
in this study with the purposes of:
1. Defining if the company can be considered as a Social Enterprise
2. Recognising the social and/or environmental problem identified by the company
3. Describing the level of social engagement shown by the company
4. Studying the market and identify if it could be considered as a BoP market
5. Identifying the opportunities and barriers existing in the market
6. Providing a list of principles to be considered when building a business model to
address the market
1. Is the company qualified to be considered a Social Enterprise?
This first question can be answered after interviewing AME’s co-Founder and
reviewing documents provided by the company and publications on media.
The company is qualified to be considered a Social Enterprise because it gathers
three of the main conditions described by the framework.
a) The market offering addresses a social need:
AME has identified a series of social and environmental problems and is willing
to offer a marketable solution as an attempt to tackle them.
b) The organization is financially viable, either through direct offerings or via third
party financiers:
So far, the company is self-financed with private capital from the founders.
However, the company is willing to generate a business model in which, initial
capital could be raised through different ways (crowdfunding, grants, mission-
related investment, sponsorship, etc.).
c) The organization applies business management principles in its internal
governance, marketing and delivery of goods/services:
The company carries out management activities typically found in business such
as forecasting, planning, organizing, commanding, coordinating, controlling, etc.
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2. Which is the Social and/or Environmental problems identified by the company?
3. Which is the level of social engagement shown by the company?
The company level of social engagement is medium-high represented as a form of
“Partnership”. It has a high level of engagement in the development of the social
business by directly targeting final customers and beneficiaries’ needs, offering
products and services specifically designed to fulfil BoP needs. It is involved in the
development of the social business and it is willing to provide funds and organization
specific resources such as company products or technologies. However, they still
depend on partners to co-develop the social business and fulfil its mission thus
representing a step below the total integration of social engagement, represented by
“In-House Development” form (Benedetto, 2018).
4. Can the market addressed be considered as a BoP market?
The market where AME is willing to operate can certainly be considered as a BoP
market as it gathers a fair amount of the characteristics typically found in such
markets.
First, and most evident, potential customers and beneficiaries count with a very low
income, under the value of 1,500 USD in PPP.
Indonesia continues to be a raising power both in the Association of Southeast Asian
Nations (ASEAN) and the G20, and has Southeast Asia’s biggest economy, with a
Gross Domestic Product of 1,015 billion USD in 2017 (World Bank).
Social Environmental
Traditional small-scale fishermen and local
communities are characterized by:
• Lacking access to quality electricity
• Highly depending on petrol prices and
availability
• Living under the presence of poverty
traps
• Lacking access to financial services
• Paying high prices for basic goods and
services
• Operating under high levels of
informality
• Accessing low quality of products and
services
• Obtaining poor formal education
Traditional combustion engines produce:
• Heavy emissions
• Frequent lube oil and gasoline leaks
• Loud noise emissions
Poor sanitation and waste management
services create:
• Destruction of natural resources from
which fishermen depends on
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The country has experienced significant economic growth in the last decade, and its
middle class continues to expand. Indonesia is now categorized as a lower middle-
income country. With a rising middle class expected to reach 135 million people by
2020, the country is challenged with widening inequality. (UN in Indonesia Brochure)
After the Asian financial crisis of 1997-99, Indonesia’s economy has returned to a
strong and stable 5-6% annual growth. (International Energy Agency)
However, severe poverty in rural areas and on the urban margins exists, where
access to basic services of electricity, water, sewage, transport, trade, education and
health are widely deficient.
Note: < USD1.90 a day, 96m people; USD 1.90 – USD 4.50, 107m people.
Figure 25. Indonesia's Economic Pyramid (World Bank)
Besides the economic characteristic of the market, the following characteristics have
been identified:
BoP markets
characteristics Description
Significant
unmet needs
Low access to bank account and financial services
Poor formal education
Extended phone usage but very low smart-phones presence
Lack access to clean water
Poor sanitation services
Dependence
on substantial
or subsistence
livelihoods
Lack access to markets to sell goods
High level of exploitation by middlemen
Presence of poverty traps as subsistence and informality
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Significant unmet needs:
• Low access to bank account and financial services
Although there is fair amount of financial options present in the region (Figure 26),
a very reduced part of the local fishermen community has access to formal
banking services. Most of them live under the informal sector.
Figure 26. Micro Finance Institutions in Indonesia (Sembiring and Purwanti, 2012).
The vast majority of people involved in the fishing sector (95% of the 2.2 million)
are traditional fishermen and, as 81.5 % of Indonesians, belong to the “poor”
segment of society living under 4.5 USD. Those included in this segment have
serious limitations for accessing conventional banking markets and rely on co-
operatives, rural banks (BKDs and LKBDs) or NGOs. The access to banking
financing services for the 96 million Indonesians at the very base of the economic
pyramid, living on less than 1.90 USD per day, is practically inexistent. Because
such players do not have a steady income and sufficient collateral, banks are
High level of vulnerability to destruction of the natural resources they
depend on
Impacted by
BoP penalty
Higher prices for basic goods and services (capital or time)
Low quality of products and services
Ruled under a
very weak legal
scheme
Low level of inclusion to the formal market economy
63
hesitant to provide credits due to the high level of bad debts. Bank lending to the
sector in 2015 represented only 1.85% of total bank lending that year.
“A mere 17% of Indonesians borrow from banks, and about one third more borrow
from the informal sector. On this basis, roughly 40% of the population is
‘financially excluded’ from credit. The most important reason for exclusion
appears to be inadequate documentation; evidence indicates that lack of
collateral is a secondary reason” (Improving Access to Financial Services in
Indonesia, 2009, The World Bank).
Figure 27. Share of the population with formal financial access (World Bank, 2008; Nnova et al., 2009; Indonesia Access to Finance Survey)
Another reason for local fishermen living in remote areas is that most of the “bank”
types of financial institutions are located far from their villages. Although there
are other “non-bank” types of financial institutions available closer to their
villages, local communities of fishermen rarely use them.
The most recurrent institution for fishermen to use financial services are the
cooperatives. Although they represent a good option to access financial services
for small credits, mainly to cover operational expenses and cover expenses
during low fishing seasons, they are still limited. They require an initial capital and
sometimes collateral.
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For example, as extract from some interviews, to become a member from one of
the local cooperatives it is required an initial capital of 5 Million IDR (around 350
USD). Credits are offered to its members for values up to 5 Million IDR with 2%
interest rate without collateral. If willing to ask for higher amounts, the cooperative
allows it by providing collateral.
• Poor formal education:
According to official data from the Central Bureau of Statistics Indonesia, there is
a huge gap between illiteracy rate from past generations and the current one.
Currently, literacy rate of population aged 15 years and over in Bali is quite high
in general (90% of population), with a notable difference from urban and rural
areas (urban: 94.29%; rural: 85.50%). However, when observing people with
ages over 45 years old, there is a illiteracy rate of 18.31%, meaning that almost
one out of five people in rural areas has never attended school.
In addition, teachers’ absenteeism is very high. A survey by the Analytical and
Capacity Development Partnership in 2014 showed that one in five teachers in
remote areas of Indonesia are often absent from school. This reduces the
learning outcomes and accelerates students’ drop-out.
• Extended phone usage but very low smart-phones presence
It has been observed in the expeditions to different fishermen villages that most
of the people own mobile phones but just very few own a smart-phone. New era
of smart-phones and app services haven’t yet significantly penetrated the market.
For this reason, modern communication channels such as social media or online
media are yet not exploited within this context.
• Lack access to clean water
Water is mostly collected from wells without any kind of filtration system, water
treatments or quality control. Therefore, population is quite exposed to
contaminated water usage. Moreover, seasonality inherent to tropical weather,
also affects the level of water availability.
The case the volcano Gunung Agung eruption represents a good example of
water pollution vulnerability for local rural communities. The volcano Gunung
Agung in Bali has been active since last August 2017, erupting several times for
the following months. Due to these eruptions, ashfall happened frequently,
representing a high risk for humans due to breathing contaminated air without
protection but also contaminating water in the surroundings of the volcano. Many
fishermen villages are found not far from the volcano and are vulnerable to
serious intoxications.
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• Poor sanitation services
The lack of access to hygiene facilities and sanitation has limited the human and
economic development of the country. Industrial, agriculture and domestic
wastes spilled directly into rivers, lands or the ocean. This fact combined with a
deficient solid waste management contributes to groundwater and surface water
pollution representing a big recognized problem in the country and in the island
in particular.
• Lack access to quality electricity
Most have access to electricity but with very low quality outdated installations
which reduces the reliability and increases risks related to safety. Power cuts are
common too. Most of the houses count with a very limited number of light bulbs
and do not have electric appliances such as refrigerators or washing machines.
As published on the Energy Police Review of Indonesia by the International
Energy Agency, “particularly for the poor, affordability of energy services is low in
such rural areas and this has led to a continuation of subsidised energy prices
that are well below market levels. Subsidised pricing is a blunt instrument and
imposes immense distortions on all of Indonesia’s energy sectors: it inhibits and
misallocates public and private sector investment, undermines diversification of
energy sources and technologies, undermines energy efficiency, reduces
enterprises’ capacity for environmental compliance, and locks Indonesia into non-
sustainable choices. It takes funds from the Government of Indonesia (GOI) that
could be used to provide the development services that are essential to economic
growth and poverty reduction.”
Figure 28. Fossil-fuel consumption subsidies by country, 2016 (World Energy Outlook, 2017, IEA)
66
Dependence on substantial or subsistence livelihoods:
• Lack access to market to sell goods
A deficient electric system and a very low income limits significantly the chances
of fishermen to access markets to sell their goods. Fish needs to be preserved in
cold temperature for conserving the cold chain. The poor electric system present
in local traditional villages, limits the possibilities to use the equipment required
to keep the cold chain such as refrigerators or ice making machines. Hence, the
fish needs to be sold immediately to traders counting with more resources below
the market value to avoid spoiling.
• High level of exploitation by middlemen
Middlemen are people who play an intermediate role between the producer
(fishermen in this case) and the retailer or final consumer. As small-scale
traditional fishermen do not own the resources and the skills needed to adopt this
role and competition among fishermen is high, middlemen use their high
bargaining power usually paying low prices.
Normally, when fishermen come back to shore from fishing, there is a group of
people waiting for them to check the catch and bargain the price. Sometimes,
fishermen are approached even before getting to the shore by other boats.
Fishermen are paid by cash on the spot.
• Presence of poverty traps as subsistence and informality
Small-scale local fishermen and their families live under a very limited daily
income just enough for daily purchases which allows them only to subsist. They
need to save a fix amount of money for paying petrol everyday they work and use
the rest for other basic expenses, including food, children education or expenses
related to religious ceremonies, among others. They also reserve most of the
times part of their catch for securing food.
As their income relies on self-employment, and they are paid in cash, they
operate under an informal and underground economic system which limits their
access to formal financial services, take part in bigger value chains of companies,
or sometimes even legally receive government services. As they do not pay taxes
and are invisible for the formal sector, they are destined to remain small, counting
with tremendous obstacles to generate wealth or increase job opportunities.
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Figure 29. Local fisherman getting paid in cash by middlemen in Tanah Ampo, Bali
• High level of vulnerability to destruction of the natural resources they depend on
Due to the lack of infrastructure related to sanitation services and poor education,
they contribute significantly to the pollution of the sea water. Local fishermen
communities do not have a proper waste management system and trash is piled
up on the backyards (Figure 30), ending up in the ocean and affecting fishery.
Fishermen approached expressed in many occasions that they find trash every
day in the water and recognized it is not good for them as it is affecting their
profession. In Bali they blame other islands, specially Java, for being the ones
spilling the trash into the ocean. However, it is been observed that also in Bali
people do not have the education, neither the infrastructure to properly reduce
this problem. Fishermen, who are aware about the problem, contribute at the
same time.
Figure 30. Back yard in Tanah Ampo village
Indeed, waste management is a major issue in the country. International media and
private individuals has published recently very shocking evidences (Figure 32) about
the problem of plastic and trash floating over the ocean in the region.
68
Figure 32. Diver at Manta Point, 20 Km from Bali (Business Insider, 2018)
Impacted by BoP penalty:
• Higher prices for basic goods and services
Fishermen depend directly on petrol to run their boats. Many times, petrol is
available far from their villages and they need either a larger amount of time to
obtain it or pay higher prices to other intermediate people that supplies it closer
to their locations. Moreover, because they normally do not own big vehicles and
live on daily income, they cannot purchase big volumes.
They have similar problems with any other product that needs to be transported
from far as the distribution network is often deficient.
• Low quality of products and services
Fishermen villages are often located in isolated areas where products and
services count with lower quality or are directly non-existent. As mentioned
before, electric infrastructure is mostly outdated, roads are often broken, phone
signal sometimes very weak or non-existent, etc.
Ruled under a very weak legal scheme:
• Low level of inclusion to the formal market economy
As fishermen work mostly under informal economic system, the legal scheme
does not support them most of the times. This fact reinforces corruption lowering
their chances to escape from poverty.
Figure 31. Plastic under water (visit fishermen
village “Batumanak” in Karangasem, Bali)
69
5. Which are the business opportunities and barriers found in the market that are
relevant to the activities performed by the company?
Sector Challenges / Opportunities Barriers
Energy
• High latent demand
• Lack access
• Lack affordability
• Lack infrastructure
• Located in remote
areas
• Use of electric energy is limited because
of outdated, unsafe and unreliable
electric installations which reduces their
chances to access markets to sell their
goods.
• High dependence on petrol (fishermen)
and electric grid prices (households)
which are currently highly subsidised by
the government and subject to possible
future raise
• Pay higher prices for products and
services (i.e. petrol)
Financial
Services
• Significant demand
• High level of informality hinders the
access because no proven collateral and
increases his exposure to exploitation
• Extended use of local cooperatives
• Low level of inclusion to the formal
market economy
• Lack access
• High informality
• Low awareness
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4.3 New Business Model proposal
Resulting from the interpretation of data collected during months from the specific BoP
market and the later application of the framework on the particular case of AME, it is
possible to define a first version of a possible innovative and potentially scalable
business model that AME could adopt in the future. It is worth noting to emphasise that
the business model proposed represents just an initial version of what it could become
in the future if the project is implemented.
As observed on literature and repeatedly highlighted along this study, it is of vital
importance the concept of co-creation and co-development in the developing process
and definition of social business at the BoP. Therefore, the company should construct
direct and strong links with potential partners and local communities where the project
would be implemented, creating hybrid working groups to develop jointly a final version
of the business model.
According to Simanis and Hart (2008), who defined a protocol for social business co-
creation at the BoP, it could be comparable this phase of business development with the
one described by the authors as “Opening up” phase in which the company immerses in
the community by living and sharing with them and building trust, resulting on the
generation of a first business concept.
By following the set of principles proposed by the framework, when designing products
and services for the BoP market, the company should use a bottom-up approach and
co-develop solutions with local communities by creating products that can be affordable
for the BoP consumers, scalable, using hybrid and modern technologies while meeting
world standards of safety, quality and sustainability.
4.3.1 Brief description of the model
The business model proposed is based on the conversions of small-scale traditional
fishermen boats from existing petrol powered to electric powered using solar energy as
the only source of energy. The new boats are inspired by the Surya Namaskar prototype
with the difference that the photovoltaic solar panels will be placed onshore on the top of
a building close to the seashore, instead of on the top of each converted boat. The
onshore solar power station will provide, on the one hand, energy to the electric boats
docked at the beach and, on the other, to nearby households form local communities.
Prospect users of this system will pay substantially lower prices for the services provided
when compared with their current situation. Moreover, apart from the economic benefit,
they will count with a long list of advantages: improved access to energy and financial
services, increase of their disposable income, reduction on the dependency on petrol
and electricity variable prices highly dependent on government subsidies, decrease
informality, etc.
Targeted consumers are characterised by having very poor access to formal financial
services, living under high levels of informality, paying higher prices for basic products
and services as they usually live in remote areas, high dependency on raising petrol
prices, lack of access to formal market, among others. As a solution, a micro-payment
system is proposed that will allow fishermen and local communities to pay day by day
71
for the use of energy under a prepayment-based scheme during the payback period.
After this period, the users will acquire the technology and use it free of charge.
Figure 33. Scheme of Business Model proposed for AME
For a first start-up phase of the project, a minimum number of boats conversions is
estimated to generate enough capital from the micro-prepayments to convert at least
one new boat on the time frame of no higher than a year. By using this approach, it is
expected to create a potentially scalable business model that will grow exponentially only
by internal revenue streams. Capital needed for the start-up phase is expected to be
raised using external funds in form of grants, donations, or others.
To conclude, the business model proposed is aligned with the BoP strategies suggested
by the framework presented in this study as it is based on the multi-stakeholders’ co-
creation and co-development concepts, it requires clear and active communication with
local communities, it considers local partnership for co-venturing, it uses hybrid and
modern technologies while meeting world standards of safety, quality and sustainability,
it enhances inclusiveness, affordability, accessibility and scalability by reaching the
biggest possible number of customers, even the most isolated, through alternative
distribution and communication channels.
72
4.3.2 Stakeholders’ Matrix
A stakeholder is defined as “any group or individual who can affect or is affected by the
achievement of the organization's objectives” (Freeman, 1984) and its identification its
vital to the successful accomplishment of any organizations’ project. As each stakeholder
interacts in different ways with the organization, it is important to first identify each of the
actors involved and then understand each of their implications.
In order to understand which are the main actors involved in the project, the stakeholder
matrix methodology has been used. The identification of main stakeholders represents
an evolutive process that started with the definition of some actors according to data
available and then got shaped during time towards the definition of the version here
proposed. It represents a hand-in-hand process with the definition of the business model
which evolves as the knowledge about the market and its environment increases. It is
worth noting that the version proposed is still subject to changes in the future as the
business develops. New stakeholders may appear, or others disappear from the current
matrix.
The owner and main promoter of the project is AME which prime objective is to provide
sustainable alternatives to conventional fossil-fuelled boat propulsion and shore-based
power generation while sharing knowledge, education and resources and protecting the
environment. An extensive technical know-how, the experience testing its first prototype
and the accessibility to the supply networks and international markets are its main
capabilities.
Stakeholders Interests, needs
and expectations
Capacity and motivation
in development
Possible actions to
address the
interests, needs
and expectations
Cu
sto
mers
/ B
en
eficia
ries
Sm
all-
sca
le L
oca
l F
ish
erm
en
• Increase
disposable
income
• Securing food
• Improving living
conditions
• Reduce
dependence on
variable fuel
prices
• Improve access
to energy
• Improve access
to markets to sell
goods
• Own traditional boat
• Daily and low income
• High dependent on
seasonality
• Pay high prices for fuel
supply (money and/or
time)
• Low technical skills
• Lack access to bank
and financial services
• Lack access to markets
to sell goods
• Low level of inclusion
to formal market
economy
• High level of
exploitation of
middlemen
• Convert boat to
solar-electric
• Install off-grid
on-shore solar
power station
• Build
infrastructure
• Provide day-to-
day
micropayment
options
• Training related
to usage and
maintenance
• Raising
awareness
through free
workshops &
seminars
73
• High level of
vulnerability to
destruction of the
natural resources they
depend on
• Poor or inexistent
formal education
Lo
ca
l C
om
mu
nity
• Increase
disposable
income
• Securing food
• Improving living
conditions
• Improve access
to energy
• Reduce energy
bill
• Daily and low income
• Deficient household
electric installation
• Lack access to
electricity
• Lack access to bank
and financial services
• Low level of inclusion
to formal market
economy
• Poor or inexistent
formal education
• Install off-grid
on-shore solar
power station
• Build
infrastructure
• Provide day-to-
day
micropayment
options
• Training related
to usage and
maintenance
• Raising
awareness
through free
workshops &
seminars
Su
pp
liers
Ge
ne
ral
su
pp
liers
• Generate
economic profit • Provide products
• Purchase
products
IT c
om
pan
y
• Generate
economic profit
• Technical knowledge
• Training on usage of
new IT systems
• Co-design day-
to-day
micropayment
system service
• Pay for their
services
Pa
rtn
ers
So
lar
/ E
lectr
ica
l
Te
chn
icia
n
• Generate
economic profit
• Secure future
work
• Expertise on solar and
electrical installations
• Use safety and security
standards
• Long term engagement
• Train on usage and
maintenance
• Embedded to local
culture and traditions
• Offer contract for
installations,
equipment
maintenance and
after sales
service
• Training related
to installations
and maintenance
74
Lo
ca
l C
oo
pera
tive • Improve access
to financial
services for local
fishermen
• Improve living
conditions of
local fishermen
and their families
• Community knowledge
and closeness
• Limited capital and
resources
• Access to
governmental
subsidies and
assistance
• Formal institution
• Provide day-to-
day
micropayment
system for
fishermen and
local
communities to
use new energy
systems
Fu
nd
ers
• Improve living
conditions of
disadvantaged
communities
• Promote the
creation and
growth of
entrepreneurial
sustainable
projects
• Proof of social
and
environmental
impact creation
• Financial capacity
• Consulting capabilities
• Network of large
companies
• Reporting
Table 8. Stakeholders' Matrix proposed for AME
4.3.3 New Social Business Model Canvas
Table 9. Social Business Model Canvas proposed for AME (extended version in Annex 1)
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The Social Business Model Canvas (SBMC) has been chosen as a management model
to present the social business proposed for AME (Table 9). It is a model which derives
from the traditional Business Model Canvas firstly introduced by Alexander Osterwalder
(2004) which aims at collecting and representing in a very visual way all activities and
characteristics of a specific business. The initial model counted with 9 blocks: Value
Proposition, Key Partners, Key Activities, Key Resources, Customer Relationships,
Customer Segments, Channels, Cost Structure and Revenue Structure. The proposed
version adds three more blocks slightly modifying some of the already existing ones as
an attempt to include social business specific characteristics. The blocks in this
alternative model are: Purpose, Social and Sustainable Value Proposition, Key Partners,
Key Activities, Key Resources, Customer Relationships, Customer Segments,
Beneficiaries, Marketing and Channels, Cost Structure and Revenue Structure.
Details of each of block from the SBMC are described below and a bigger version of the
model can be seen in Annex 1.
Purpose
This block describes in one sentence which is the main purpose of the company including
its vision, mission and objectives.
“Improve the living conditions of traditional fishermen, their families and their
environment and guide local communities towards sustainability.”
Social and Sustainable Value Proposition
This block describes, also using one sentence as the previous block, which is the value
proposition that the company has to offer for their customers while considering the triple-
bottom-line concept. It defines which are the problems the company is willing to solve,
proposing which kind of products or services and to who are they targeted.
Value proposition of AME: “To provide pragmatic, affordable, reliable and simple
alternatives to conventional traditional fossil-based fishing boats and shore-based power
generation systems to local communities with low resources.”
After its prototype Surya Namaskar and starting from the idea of converting existing
petrol fuelled boats into solar / electric, the company should offer a product that adapts
to the needs of those specific BoP consumers that is willing to target.
More specific information about the products and services proposed are found in the
section “Design of Products and Services”.
Customers’ Segments and Beneficiaries
These two blocks aim at identifying for whom is the company creating value. In the
original version of the Business Model Canvas, it was considered only Customers’
Segments as a unique block representing the only stakeholders the company would be
addressing its products and/or services. In the Social Business Canvas version,
Beneficiaries are added as an independent block and, although they are not represented
by being the consumers of products and/or services proposed by the company, they are
substantially positively impacted by their existence. It can be distinguished between
76
direct and indirect beneficiaries, depending in the way they are impacted by the action
of the company.
Through the process of data collection and its subsequent interpretation, different
segments have been identified. The market segmentation has been performed following
both “by product” and “by customer/beneficiary” approaches.
Segmentation by product:
Product Type / Dimensions Energy System Alternative
Energy System Uses
Boat
Small boat “jukung” (4 – 8 m)
No engine
Sail
Fishing
Medium boat (8 – 15 m)
Outboard engine Diving
Big boat (> 15 m)
Onboard engine (long tail)
Ferrying
Private
Building
Close to the shore Connected to grid Solar Familiar
Wind Industrial
Far to the shore Not connected to grid
Hydro Local government Heat pump
Table 10. Market segmentation by product
The three different segments selected as targetable by the social enterprise for the
business model according to “segmentation by product” are:
Boat transformation:
1) Small boat “jukung” (4 – 8 m) with outboard engine used for fishing activities
2) Small boat “jukung” (4 – 8 m) with onboard engine (long tail) used for fishing
activities
Figure 34. Jukung with long tail on-board
engine in Candidasa, Bali
Figure 35. Jukung navigating with sail in Karangasem, Bali
77
On-shore system:
3) Building close to the shore for familiar use (connected or not connected to the
electric grid)
Segmentation by customer:
Approach Type of
characteristics Variables Characteristics
Customer Characteristics
Socio demographic
Occupation Small-scale local fisherman
Local community members
Income
Low
Medium
High
Access to formal financial services
No access
Low access
Medium access
Full access (*)
Member of local cooperative
Yes
No (*)
Geographic
Type of residence Rural
Urban
Proximity to the shore
Close (<500 m)
Far (>500m)
Customer behaviour
Product usage
Engine usage
No usage
Low frequency
Medium frequency (*)
High frequency
Petrol consumption
No usage
Low
Medium (*)
High
Alternative propulsion usage
No alternative
Low
Medium (*)
High
Buying process Payment types Cash
Others (*)
Customer needs Benefits sought
Price
Low
Medium
High
Quality Low
Medium
Figure 36. Jukung with outboard engine in Tanah Ampo, Bali
78
High
Safety
Low
Medium
High
Functionality
Low
Medium
High
Table 11. Market segmentation by customer
The three different segments selected as targetable by the social enterprise for the
business model according to “segmentation by customer” are:
Boat transformation:
1) Small-scale local fishermen with low income, member of a local cooperative,
using with high frequency an engine with high petrol consumption, and none
alternative propulsion system available, paying in cash and needing a product /
service with a low price and high quality, safety and functionality
2) Small-scale local fishermen with low income, member of a local cooperative,
using with high frequency a engine with high petrol consumption, and rarely using
an alternative propulsion system, paying in cash and needing a product / service
with a low price and high quality, safety and functionality
On-shore system:
3) Local community members with low income, living in rural areas close to the
shore (>500m), paying in cash and needing a product / service with a low price
and high quality, safety and functionality
Customers segments formed by the iteration of the following characteristics could be
also included but with a lower level of priority or with special considerations:
• Not belonging to a local cooperative
• With full access to financial services
• With access to other payments methods apart from cash
• Medium frequency engine usage
• Medium petrol consumption
• Medium use of alternative propulsion systems
• For local government use
As one of the objectives is to promote inclusion among the target customers, those not
belonging to a local cooperative should be treated separately and the reasons for not
belonging to a local cooperative studied. As one of the services proposed is based on
the collaboration with local cooperatives to deal with payments from customers (see
design of products and services section), those fishermen not belonging to local
cooperatives could be potentially excluded from the project. Hence, the company should
find mechanisms to promote the listing of non-members in local cooperatives.
79
In the same line, those local fishermen that have full access to any kind of financial
services and can pay with other payment methods apart form cash, are not prioritised as
target consumers. The reason is that the social enterprise looks for the inclusion of high
vulnerable people with low resources as one of its core business objectives and those
described are one step above the most vulnerable. Nonetheless, as in the previous case,
the company should open dialogue with local communities and consider each particular
case.
The other three considerations related to engine usage, petrol consumption and
alternative propulsion systems, deal directly with technical features that should be
considered for each case in function of energetic requirements and financial payback.
As a result, targeted customers ordered by priority are as follow:
Type of segment
Priority Num. BOAT CONVERSION
By p
rod
uct High 1
“jukung” (4 - 8 m) used for fishing activities
With outboard engine
Medium 2 Small boat “jukung” (4 - 8 m) used for fishing activities
With onboard engine (long tail)
By c
usto
mer
High
3
Small-scale local fishermen with low income, member of a local cooperative, using with high frequency the engine with high petrol consumption, paying in cash and needing a product / service with a low price and high quality, safety and functionality
Without alternative propulsion system available
4
Small-scale local fishermen with low income, member of a local cooperative, using with high frequency the engine with high petrol consumption, paying in cash and needing a product / service with a low price and high quality, safety and functionality
Rarely using an alternative propulsion system
Low
5 Combination of 3, 4, 5, 6, 7, 8, 9 Medium use of alternative propulsion systems
6 Combination of 3, 4, 5, 6, 7, 8, 9 Not belonging to a local cooperative
7 Combination of 3, 4, 5, 6, 7, 8, 9 Using other payments methods apart from cash
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8 Combination of 3, 4, 5, 6, 7, 8, 9 Medium frequency engine usage
9 Combination of 3, 4, 5, 6, 7, 8, 9 Medium petrol consumption
Table 12. Targeted customers for boat conversions
Type of segment
Priority Num. ON-SHORE SOLAR INSTALLATION
By p
rod
uct
High 1 Building close to the shore connected or not connected to the grid
For familiar use
Low 2 Building close to the shore connected or not connected to the grid
For local government use
By c
usto
mer
High 4
Local community members with low income, living in rural areas close to the shore (>500m), needing a product / service with a low price and high quality, safety and functionality
Paying in cash
Low 5
Local community members with low income, living in rural areas close to the shore (>500m), needing a product / service with a low price and high quality, safety and functionality
With access to other payments methods apart from cash
Table 13. Targeted customers for on-shore solar installations
As described in the Social Business Model Canvas proposed, beneficiaries are
structured in the forms of direct and indirect.
Direct beneficiaries:
They represent those stakeholders that are directly affected by the implementation of the
project, meaning that they take part in some way in activities related to the social value
chain.
In this particular case, all customers targeted by the social enterprise represent also
direct beneficiaries. They are the direct consumers of products and services, but they
also benefit substantially from the implementation of the project in the following ways:
• Improving access to energy
• Improving reliability of the electric system
• Lowering dependency on variable petrol prices
81
• Improving access to financial services
• Reducing level of informality
• Reducing operating and maintenance costs
• Increasing disposable income
• Reducing vulnerability in case of work absenteeism
• Reducing chances of health problems associated to direct exposure to pollution
Additionally, another remarkable direct beneficiary is found on the local cooperative. By
being part of the project, it benefits from increasing their power as organization by
increasing its number of members.
Indirect beneficiaries:
They represent those stakeholders that are indirectly affected by the implementation of
the project.
In the case under study, indirect beneficiaries are represented by the environment and
the local government. As a direct consequence of the transformation of the boats from
combustion engines to electric, the pollution is reduced and thus the environment is
cleaner. Then, local governments who also benefit from the improvement of regional
infrastructure and welfare.
Key Partners
This block represents a list of all the main partners, understanding also suppliers, that
will interact with the company. Extended information regarding this specific block can be
found in the previous section where the Stakeholders’ matrix is presented (
Table 8).
Key Activities
In this block are listed the most important activities that the company should do for
covering the needs of stakeholders and beneficiaries but also to enable the means
through which the company can successfully satisfy them.
• Co-designing & co-developing:
Social Enterprises operating at the BoP must work in close collaboration with their
key partners, always including local communities. Hence, they should assure a
close and healthy relationship with them as the golden rule of their business
strategy.
AME, which counts with an extensive technical engineering knowledge and
experience, is the main responsible of designing and developing the solar
solutions that will be later implemented. However, it needs to keep constant
feedback with local communities and partners involved in the technological
implementation and be open to rethinking and redesigning according to the
different inputs of such stakeholders.
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A member of AMEs internal team should be assigned to each location to
coordinate activities and collect data. This person will be the main responsible of
keeping communication with the communities, based on trust and understanding.
The coordinator will be also the responsible of collecting data on site to obtain
the feedback needed to properly identify which are the interests, needs,
expectations, capabilities and motivations from the local community, evaluate the
ongoing performance of the project through the guidelines defined in the impact
measurement system and organize activities needed to co-develop the project
between AME, partners and the community, mainly through participatory
workshops.
• Fundraising:
AME will exploit their access to international markets and media to raise funds,
especially for the start-up phase of the project. It should explore different ways to
raise the capital needed without compromising the objectives of the project.
Possible funding opportunities aligned with the triple bottom line can be found,
for instance, in grants, challenge funds, crowdfunding or venture philanthropy.
• Prototyping & testing:
AME needs to create new and/or modify existing prototypes that will be directly
tested on site as pilot projects to test the validity of the technology in the specific
context. These activities also represent a temporal phase in which the company
needs to pass through before moving to the next phase of sustaining the social
business.
• Converting small-scale fishermen boats to solar-electric:
The first conversions will be executed by AME with the collaboration of certified
technicians. Later conversions, in the sustaining phase of the business
development, could be delegated entirely to trained technicians.
• Installing off-grid / off-grid on-shore solar power stations:
Same as in the previous case, the first off-shore on-shore installations will be
executed by AME with the collaboration of certified technicians. Later
installations, in the sustaining phase of the business development, could be
delegated entirely to trained technicians.
• Building infrastructure:
This activity is needed in order to connect to the new grid those households that
are close to the solar power stations on-shore.
• Controlling and monitoring:
The company should develop an impact measurement system essential to
determine if the project is accomplishing the desired social and environmental
impact. By implementing such a system, the company will be reinforced as it will
represent an evidence to proof if the project is creating positive impact or not.
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Consequently, AME could access a wider range of funding options and better
control and adjust their operations.
• Training:
This set of activities are relevant for different stakeholders. Firstly, new
technicians will be trained to learn about solar installations and boats’
conversions. Then local communities and fishermen need to be also trained for
the correct use and maintenance of the equipment.
• Marketing activities:
Marketing at the BoP, as the rest of business activities when addressing this
specific market, requires special approaches. It is possible to distinguish between
marketing activities aimed at reaching the BoP population and the ones that aim
at reaching other kind of markets. In this particular case, AME needs addresses
two markets: BoP and the funding market.
Marketing activities for the BoP will be based on free participatory workshops and
direct marketing while marketing activities aimed at fundraising will be based on
advertising, participation in trade shows and creation of audio-visual content, later
used for advertising activities.
Free participatory workshops and seminars:
As awareness is proven to be often low in such contexts, free workshops and
seminars will be conducted by AME to raise awareness about ecological
development. These activities are meant to reduce the environmental impact that
local communities exert on their own environment aiming at teaching sustainable
solutions to better conserve it.
AME should exploit different ways to reach their clients and get funds, especially
for the starting-up phase.
Direct marketing:
It represents a marketing channel used to reach the customers. As previously
described, the AME field coordinator will be the person who will keep this direct
communication with the local communities.
Participating in trade shows:
By participation in tradeshows related to sustainability and ecology, the project
will gain visibility and increase the chances of raising funds.
Creating audio-visual content:
By using this alternative, the company could create project related audio-visual
content and use it for marketing campaigns to gain visibility and enhance the
chances of raising funds and awareness.
Advertising:
84
In line with the previous activity described, it will be used as a way to promote the
project.
Key Resources
This block describes which are the main resources required by the value proposition. In
the particular case of AME, the company needs knowledge to design the products and
services, a close collaboration with the local community and the key partners, capital to
fund the start-up phase of the project, access to the supply chain to purchase the spare
parts and raw materials and distribute them and skilled labour to implement the products.
Additional resources as market understanding or access to international markets
represent enables to design appropriate products and services and to ease the raise of
funds and the project visibility.
Marketing and Channels
This block lists through which main marketing channels is best to reach the customers.
In this particular case, some of the channels described here are also intended to attract
attention from possible funders.
AME is willing to operate in a BoP context and, as many times highlighted in this study,
traditional management approaches are many times ineffective. The use of marketing
channels such as TV, radio or internet, are not valid in many occasions due to the limited
access that BoP population has to them. Therefore, the company needs to rely on
already existing formal and informal community networks represented by local micro-
entrepreneurs and other community-based organizations to promote their products. As
a result of this close collaboration, the company can build trust and positive reputation
among the community and improve the communication with target consumers.
In order to reach final customers with its products, AME should apply marketing
communication efforts on building awareness and creating trustable personal
relationships with local communities to enhance word of mouth.
On the other hand, with the intention to gain visibility and financial resources
accessibility, AME can adopt more conventional ways of marketing, such as the ones
represented by advertisement and trade shows participation.
• Direct marketing
• Indirect communication (word of mouth)
• Advertisement
• Trade shows participation
Customer Relationships
This block describes which are the kind of relationships that the different customers’
segments require.
85
AME needs to build long-term relationships with local communities and partners based
on trust and good reputation. Such relationships with will require informal dedicated
personal assistance that will enable the co-creation environment needed in such context.
Impacts and Metrics
This block, proposed as one of the variants from the traditional Business Model Canvas,
represents an essential part to be considered by SEs in general. By definition, a SE is
an organization that apart from economic profits seeks social and environmental positive
impact. Consequently, the company needs to create a set of metrics to provide evidence
of the impacts created over time as a consequence of its actions and compare if they are
aligned with its initial objectives.
AME can develop an impact measurement system to monitor the following indicators:
• Access to quality electricity
• Disposable income
• Average dependence on petrol
• Local awareness
• Business scalability
• Average CO2 emissions per community
• Average noise pollution (small-scale fishing boats)
• Waste generation
Other indicators can be included in the future in case of project implementation.
Cost Structure
This block reflects which are the most important costs inherent to the business model.
For AME, the higher costs will be the ones represented by the costs of revenue which
are costs that the company incurs as it produces products or as it delivers products and
services. Cost included are raw materials, spare parts, labour, machinery, energy for
producing the goods, delivery or transportation, marketing, etc. Other indirect costs non-
related to the production and distribution of products and services are: salaries for
administration, cost of using the impact measuring system, general supplies,
participation, staff, formation, benefits, costs from workshops, etc.
More detailed information regarding financial implications of the project is explained at
the section “Financial Considerations”.
Revenue Structure
This last block lists which are the main sources of revenue that the company will create
by selling its products.
In the case of the model proposed for AME, the company will need to fundraise initial
capital to start-up the first phase of the project which is based on the conversion of a
minimum number of boats and the installation of a solar power station to supply the
energy required by the system. Also, additional future donations, grants or government
subsidies will be contemplated. However, those are not representing revenue streams
86
as they are just punctual capital injections and are not derived from the intrinsic
mechanism of business development.
Day-to-day payments from small-scale local fishermen and local communities are the
only ones to be considered as revenue stream as they do not depend on any other factor
but the own business operation.
A possible extra source of income for AME would be considered if the parent company
is willing to adopt the so called “sponsor formula” initiative. Such initiative is based on
the allocation from the parent company Azura Marine to this particular AME project of a
certain % from the profit generated by the revenues from selling more commercial boats.
By using this formula, the parent company would be able to exploit the social value of its
products when promoting them, increasing its competitive advantage within the
mainstream market.
4.3.4 Design of Products and Services
As described in the methodological part of this study, data on-site have been collected
in several forms. For what concerns the design of the product, data collected helped to
understand the following: energetic needs, design limitations and financial needs and
limitations.
AME first consideration was to transform the system from traditional fishermen boats
from petrol fuelled to boats fully powered by solar power. Surya Namaskar represents
the pioneer on this kind of transformations and the starting point for future conversions.
However, as a consequence of the interaction with local fishermen communities and the
data collected, the version proposed in this business model slightly diverges from the
Surya Namaskar concept. Nonetheless, further considerations, re-calculations,
modifications and product design refining needs to be applied in direct collaboration with
local communities involved in the project and key partners.
In line with the set of principles proposed by the framework, when designing products
and services for the BoP market, the company should use a bottom-up approach and
co-develop solutions with local communities. Moreover, products at the BoP should be
affordable, scalable, using hybrid and modern technologies while meeting world
standards of safety, quality and sustainability.
There are three different concepts considered within this business model:
A) Conversions of traditional fishing boats from existing petrol fuelled to solar-
electric powered
B) Installation of on-shore solar installations for charging converted electric boats
and supply energy to nearby local communities
C) Day-to-day phone payment system
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4.3.4.1 Energetic needs:
GPS tracking, video recordings and informal chats, were used simultaneously during the
sails with local fishermen to understand which the specific needs are in terms of
energetic requirements. Data collected involved: time sailing with engine and without
engine, speed and position of the boat, time sailing during the day and night and fishing
patterns and activities.
Figure 40. Example of GPS tracking data
On the other hand, to transform the data collected into energy required by the system, it
was needed to observe how AME electric engine Manta 3.0 works. Data resulting from
AME experience sailing with Manta 3.0 during the testing phase of its prototype Surya
Namaskar was taken into consideration for the calculations (Figure 41). Although, it is
possible that, in case the project is implemented, a smaller version of Manta 3.0 would
be used (i.e. Manta 1.5) with reduced power more and adjusted to the needs of BoP
customers, the calculation in this study have been done with this existing data. In case
of using another engine model, new calculations with new data should be computed.
Data received from Manta 3.0 was later corrected (Figure 42).
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Figure 37. Surya Namaskar (example of boat conversion)
Figure 39. Solar roof (www.venergetike.sk)
C
Figure 38. Local fisherman using phone in Karangasem, Bali
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Figure 41. Manta 3.0 engine experimental consumption
Figure 42. Manta 3.0 engine experimental consumption corrected
After data processing and counting with the higher consumption scenario (sailing twice
a day with the longest time registered) the following energetic daily requirements were
identified for the different customer segments:
Customer segment
Targeting priority
Boat conversion Energy
requirements per shift
1 High “jukung” (4 - 8 m) used for fishing activities
With outboard engine 7.26 Kwh
2 Medium Small boat “jukung” (4 - 8 m) used for fishing activities
With onboard engine (long tail)
5.68 Kwh
3 Not willing
to be targeted
Small boat “jukung” (4 - 8 m) used for fishing activities
With outboard engine and with high use of alternative propulsion system (sail)
1.06 Kwh
Table 14. Energetic daily requirements by customer segment
0
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2.5y = 0.0308x2 + 0.0329x + 0.0051R² = 0.9912
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wh
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As seen in Table 14, customer segment 1 requires the highest amount of energy. The
engine used by this type of boat is most of the time a Yamaha pk15 which has a higher
power (15 vs 5.5 hp) and a higher petrol consumption when compared to the Yamaha
MZ200 engine (longtail engine commonly known as longtail) used by the customer 2.
The highest the daily use of the engine, the faster will be the return on the investment,
thus representing a more attractive option for the purposes of this project. On the other
hand, when observing customer 3, not being very relevant which engines uses, most of
the time uses a sail for navigating requiring minimum use of petrol. In an ideal situation,
this customer would be also included in the project. However, it represents the last of the
priorities as surely will never create a positive return on investment and the propulsion
system used is already environmentally sustainable.
4.3.4.2 Design limitations:
The visits to local traditional villages served for collecting data not only to understand
energetic needs but also to understand what are the design limitations and how they can
influence the product design. By sharing with them daily activities for several times and
days, the following limitations were observed:
• Weight:
The boat cannot be too heavy as fishermen lift their boats and walk while carrying
it for several meters, from one side of the beach to the sea shore. They repeat
this process from two to four times a day.
Weight is also directly proportional to the power required by the engine. The
highest the weight, the highest the energy consumption.
• Space:
The size of the boat limits the size of the solar panels to be installed on the top
of the boat (approximately 600 x 400 cm = 24 m2).
The hulk of the boat is limited in volume as it is mainly used by one person for
transporting the nets and the fish catch.
Figure 43. Top view of traditional fishing boat, Tanah Ampo, Bali
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Figure 44. Detail of hulk size
Figure 45. Traditional fishing boat with fishing nets on top
• Solar radiation:
As the technology proposed is only sourced with solar power, it is needed to
estimate which is the worse scenario of solar radiation when dimensioning the
PV panels roof. Base on official statistical data (Annex 5), the lowest solar
radiation in the location proposed (Bali, Indonesia) is found in the month of
December, with an average daily solar radiation of 4.9 KWh / m2. It is considered
that PV panels currently used by AME have an efficiency for energy conversion
of 18%.
Total daily solar radiation available = 4.9 KWh / m2 x 18 % = 0.882 KWh / m2
4.3.4.3 Product design considerations:
When calculating the product design considerations, the less favourable scenario is
taken into account: lowest solar radiation and maximum usage of the boat.
The following data was considered for the dimensioning:
• Number of shifts per day = 2 / day
• Power PV = 0.882 KWh / m2
• Safety margin (adverse climate conditions) = 25%
• Total energy required = 7.26 KWh x 2 shifts / day x 1.25 = 18.15 KWh / day
• Area of PV required per boat = 18.15 KWh / 0.88 KWh / m2 = 20.58 m2
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4.3.4.4 Product designs options:
Considering the energetic requirements of the targeted customer and the design
limitations and considerations, the following options are proposed10.
OPTION 1:
Totally autonomous solar-electric boat powered fully with the energy coming from the
photovoltaic panels installed on the roof of the boat.
This option requires:
• Replacing existing petrol fuelled engine with electric engine (Manta 1.5)
• Installing light weighted li-ion battery bank onboard
• Installing structure for the solar roof and cabling
• Installing semiflexible PV panels onboard that will cover all energy requirements
from the system
• Installing MPPT controller
• Installing an electricity meter for each user
• Isolating all electronic components from corrosive environment and humidity by
using watertight boxes
Estimated costs11 Option 1:
Semi flexible PV panels 2,941.20 €
Li-Ion batteries 7,176.33 €
Engine Manta 1.5 Electric Outboard 3,902.44 €
Solar roof structure + cabling + bolts + various incl. labour: 609.76 €
MPPT controller: 487.80 €
Watertight box for electronics and batteries incl. labour: 121.95 €
Electricity meter 158.23 €
Testing, commissioning, various: 60.98 €
Total cost: 15,459 €
Total weight onboard: 153.9 Kg
Pros:
• The boat will be totally autonomous and will not depend on any other source of
energy
10 The financial figures found in the options proposed are estimated and should be re-calculated in case of project implementation 11 Costs are estimated taking into account energy requirement of one boat and quotations from the date of calculations. New quotations need to be requested in case of project implementation.
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Cons:
• Very heavy boat
• Large space required for the solar roof, battery bank, MMPT controller and other
components.
• High number of components directly exposed to corrosive environment and
humidity
OPTION 2:
Hybrid version that will combine a solar powered station based onshore equipped with
PV panels, MPPT controller, DC / AC inverter, lead acid batteries onshore and li-ion
batteries on the boat. As the boats are always docked at the same place at the beach,
the boats would charge their batteries by connecting to the on-shore power station.
Additionally, nearby buildings from local communities could use the solar powered
station to use electricity at their homes.
This option requires:
• Replacing existing petrol fuelled engine with electric engine (Manta 1.5)
• Installing light weighted li-ion battery bank on the boat
• Installing semiflexible PV panels onshore, on the top of a building close to the
shore, that will cover all energy requirements for all boats and eventual buildings
connected
• Installing MPPT controller (onshore)
• Installing an electricity meter for each user
• Installing DC / AC inverter (onshore) for each household user
• Installing cabling from the power station to the shore where the boats are docked
and to the houses willing to access the service
Estimated costs12 Option 2:
Rigid PV panels 2,941.20 €
Li-Ion batteries 7,176.33 €
Lead acid batteries 1,920.73 €
Engine Manta 1.5 Electric Outboard 3,902.44 €
Solar roof structure + cabling + bolts + various incl. labor: 609.76 €
MPPT controller: 487.80 €
Watertight box for electronics and batteries incl. labor: 121.95 €
Electricity meter 158.23 €
Testing, commissioning, various: 189.89 €
Total cost: 17,508 €
Total weight onboard: 79.8 Kg
12 Costs are estimated taking into account energy requirement of one boat and quotations from
the date of calculations. New quotations need to be requested in case of project implementation.
93
Pros:
• The boat is substantially lighter than with Option 1
• There are less electronic elements exposed to corrosive environment and
humidity
• The system requires less space than with Option 1
• Introduction of onshore power station that would allow the inclusion of more
people from the local community by joining the grid
Cons:
• It is not totally autonomous as it requires to go back to shore to charge the
batteries before the energy is finished
SOLUTION PROPOSED:
It seems to be more convenient for the purpose
of the social enterprise and the needs of the BoP
community to adopt option 2 as it creates higher
social and environmental impact by including
more people in need. Moreover, the estimated
costs for the implementation are not too different,
yet representing the second option more
convenient.
4.3.4.5 Payment system proposed:
The market to who AME is willing to target with this project, recognised as a BoP market,
is characterised by counting with a population who lives exposed to high levels of
informality, substantially hindering their chances to access conventional financial
services. Small-scale fishermen and their families live on daily low incomes in form of
cash and the clear majority do not own bank accounts. Reasons for financial exclusion
are many times related to lack of collateral or long distance from the closest financial
institution. Most of them rely on local cooperatives as the only financial service resource.
Although small-scale fishermen income is reduced, their profession drives them to keep
a minimum amount of capital to pay for operating expenses, especially in fuel. In most
of the cases, petrol is not available close to their villages forcing them to pay higher
prices, either money or timewise.
The system aims at mimicking existent mechanisms found in the specific context and
improve them to overcome existent barriers by proposing solutions that can potentially
benefit local communities.
Figure 46. Solar system design option 2
94
The system proposed allows target customers to pay day by day for the use of energy
under a prepayment-based scheme. The micro-payment system will allow fishermen and
local communities living close to the solar power stations installed onshore to pay to local
cooperatives periodically in cash.
Additionally and as a way to incentive target customers to join, the prices will be
substantially lower than the ones currently paid, estimating 40% on costs savings for the
boat usage and 50% for those joining the solar grid.
The use of prepaid electricity is widely spread in Indonesia. A
system introduced by the state-owned company PLN allows
customers to pay for obtaining a unique code and validate it
by introducing it on the display of their personal electricity
counter. The customer obtains credits in form of Kwh in
function of the money paid. Codes are purchased online or in
physical locations such as supermarkets, banks and other
commercial establishments.
This system has proven to be advantageous as the energy is
easy to control without extra charges for late payments and
there is no risk of default for the energy provider.
The idea is to introduce a similar system by installing a
counter like the one used by PLN. The difference is that, in
this case, instead of PLN being the provider of the service it
will be AME. The cooperative will collect the money in cash
from the users and issue codes for prepayment energetic
credits.
Figure 48. Validation process for electricity top up
Figure 47. PLN electricity meter
95
The system requires a very close collaborations with local cooperatives as they will mean
the bridge through which AME will financially interact with the beneficiaries of the project.
They will be responsible of collecting the money in cash, controlling the balance of each
member of the cooperative, transferring the money to AME and managing the top-up
validation process. The latest meaning the system through which fishermen will be able
top up the electricity credits on their electricity meters. The process is described on
Figure 49 and Figure 49.
Figure 49. Periodical payments to the Local cooperative
Local cooperative will collect the payments from both fishermen and local community.
These payments will be computed by the cooperative who will report AME. Payments
from both fishermen and local communities will reduce their debt with AME. As each user
counts with a personal electricity meter, it will be possible to control which is the usage
from each. This system will allow to understand the personal energy usage distribution.
As sometimes the boat is not sailing (globally estimated at 35% of the time) the spare
energy will be available for local communities to be used at their homes. However, the
individual calculation will allow to compute how much energy each fishermen is providing
to the grid to be used by their neighbours.
Through the use of this micro-prepayment system, AME will improve the access of local
communities to financial services through a system highly adapted to their needs and
capabilities.
It is worth noting that such system will require an initial capital investment to develop the
technology.
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4.3.5 Financial Considerations
As an attempt to assess the financial implications for the implementation of the project,
the following calculations have been performed. The financial considerations following
are to be considered just as an example and in any case are fully adjusted. It will require
further analysis and accurate data to make more reliable calculations.
As exposed in the brief description of the business model, the first phase of the project
(start-up phase) is based on converting a minimum number of boats as to generate
enough capital from users’ micro-payments to convert at least one new boat on the time
frame of no higher than a year. The capital needed for the start-up phase is expected to
be raised using external funds in form of grants, donations, or others.
Therefore, in order to define which is the initial inversion to be raised to start up the
project, it is needed to calculate which is the minimum number of boats to be converted.
According to data collected, small-scale traditional fishermen do a maximum of 2 shifts
per day. However, the second shift happens seldom. Therefore, the following estimation:
• 1st shift: 90% (328.5 shifts/year)
• 2nd shift: 40% (146 shifts/year)
The system proposed is dimensioned according to energy required by the boats in the
worse scenario. This scenario meaning that all the boats converted would sail two times
a day during the whole year. However, as described above, this does not happen. Then,
the spare energy, that surely will not be used by some of the boats, could be used by the
local communities living close to the solar power station and connected to the onshore
off-side grid. Energy use distribution is estimated as follow:
• Fishermen = 65% (475 shifts/year)
• Local community = 35% (256 shifts/year)
Energy usage by user is:
• Fishermen usage per shift = 7.26 Kwh
• Fishermen annual energy usage = 7.26 KWh/shift * 475 shifts/year = 3,448.5
KWh/year
• Local community usage per house = 2 Kwh/day
• Local community annual energy usage = (7.26 / 2) KWh * 256 shifts/year =
929.28 KWh/year
It is also considered that with the current system, both fishermen and local communities
will benefit, not only by increasing their access to reliable and clean energy, but also by
significantly reducing their operating expenses. By using the system, fishermen will save
up to 40% compared to current petrol prices and local communities will save up to 50%
compared to current PLN prices. The reason of this variance on the discounts applied
has to do with the fact that fishermen will own the installation in the long run, while local
communities just have access to the discounted service. In fact, fishermen will become
the service providers for their neighbours as the capital collected from the local
community will also individually deduct their debt according to how much energy they
leave free to be used (not used by the boat).
97
• Discount fishermen = 40%
• Discount local communities = 50%
The calculations have been done using the following data:
• Average inflation rate = 3.50%
• Petrol engine consumption = 10 litres / shift
• Cost of petrol = 0.46 €/litre
• Cost of maintenance petrol engine = 3% * Cost of petrol
• Cost of electricity (PLN) = 0.496 €/KWh
• Cost of electricity (new engine) = 0.378 €/KWh
• Cost of electricity (off-grid) = 0.248 €/KWh
• Energy used per shift = 7.26 KWh
• Cost of petrol per shift = 4.57 €/shift
• Cost of electricity (new engine) per shift = 2.74 €/shift
• Cost of new boat conversion = 17,508 €/boat
• Salaries AME = 12,500 €/year
• Equipment maintenance = 2,400 €/year
• Cost of developing payment system = 500 €
• Cost of new member (off-grid) = 400€
• Members (off-grid) = 3.63 * Nº of boats converted
Fishermen:
• Costs (currently) = Cost petrol + Cost maintenance * Fishermen energy usage=
2,237 €/year
• Costs (future) = Cost electricity (fishermen) * Fishermen energy usage = 1,303
€/year
Local community:
• Costs (future) = Cost PLN * Cost electricity (off-grid) * Off-grid availability = 461 €/year
AME:
• Revenues = Nº boats * Revenues (fishermen) + Revenues (local community) = Nº boats
* 1,764 €/year
• Unitary conversion costs = Unitary conversion cost + (Payment system cost + Salaries +
Equipment maintenance) / Nº boats = 17,508 €/boat + (500 € + 12,500 € + 2,400€) / Nº
boats
Condition: to convert a number of boats to at least cover the costs of a new boat in the following
year. Therefore:
• 17,508 €/boat + (500 € + 12,500 € + 2,400 €) / Nº boats = Nº boats * 1,764 €
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Minimum Nº boats to be converted (start-up phase) = 11
Potential nº of houses connected to grid (start-up phase) = 40 houses
Unitary conversion cost = 18,908 €/boat
Initial Investment = Nº boats * Unitary conversion costs = 11 boats * 18,908 €/boat = 207,988 €
The total initial investment to be considered for the start-up phase of the project is 207,988 €.
This initial capital would cover the cost of converting 11 boats, the cost for developing the payment
system and the operating costs of AME.
Local community will need to install a DC / AC converter and adapt their electricity meter to get
access to the off-grid service. Neighbours can join in groups to buy the DC / AC converted
collectively and reduce the installation costs.
The number of conversions and the number of people impacted by the project is expected to
follow an exponential distribution, validating the scalability of the project (Figure 51).
Figure 50. Number of conversions per year
Figure 51. Cumulative number of conversions per year
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Chapter 5: Conclusions and Future Steps
This final chapter aims at summarizing through the revision of the main objectives of this
study, synthetically exposing how each of them have been responded and defining which
has been the research contribution. At the end of the chapter there is a section dedicated
to the limitations of the study and the possibilities for further research.
5.1 The issue
Traditionally, for-profit corporations have been pursuing the maximization of
shareholders’ economic value without giving a core importance to social or
environmental consequences. (Doh & Yaziji, 2009). However, in recent years, terms
such as Social Entrepreneurship and Social Entrepreneur which are related to alternative
ways of running business that differ from the most traditional has appeared. Social
entrepreneurship recognizes the business opportunity by identifying a social problem
instead of only seeking the opportunity to make economic profit (Ramani S. V. et al,
2016). Social Enterprises are recognized by following what it is known as the Triple-
Bottom-Line, which it is a concept that describes the balance between pursuing the
economic profit while generating social and environmental positive impact.
The World population has doubled in the last fifty years in a context in which capitalism
prevails as the most extended economic system and in which income is used as the
most recurrent indicator to measure wealth in society. Within this scenario, wealth
distribution is spread uneven, as half of the total Worldwide wealth is in hands of less
than 1% of Worldwide population and over four billion people live under 2 USD per day.
(Credit Suisse Global Wealth Databook, 2017; Prahalad and Hart, 2002; Anderson and
Billou, 2007). The latest, known as the Base of the Pyramid (BoP), represents a very
large and heterogenous market full of business opportunities that has been for long
underestimated by the traditional business world (Prahalad and Hart, 2002; Prahalad,
2011; Hammond et al., 2007). However, companies willing to use the business
opportunities laying in BoP markets should be aware that BoP is a special market which
requires special approaches that challenge the most rooted rules of traditional business.
It has been studied and discussed extensively the relevance of Social Enterprises
carrying out their business activities in BOP contexts, the substantial factors that
motivate companies to explore BOP markets and the considerations and strategies that
companies should take into account if willing to be successful when operating in such a
context. Yet, this study aims at contributing at an academic level by extending the
literature on social business and BoP and at a practitioner level by providing a framework
and guidelines for social entrepreneurs willing to operate at the mentioned context. In
addition, it is presented a first attempt to use the framework proposed with a case study
of a Social Enterprise operating in Indonesia.
100
5.2 Research Objectives:
Objective 1: Create a new Framework that can be used by Social Enterprises wiling
to operate at BoP markets as a guideline to take better strategic decisions and
create sustainable and potentially scalable social business models.
Objective 2: Apply the Framework on a case study represented by a Social
Enterprise selected
Objective 3: Propose an innovative, sustainable and potentially scalable social
business model for the Social Enterprise selected as a case study
5.3 Response to Objective 1: Framework proposal
The framework is presented in respond to the first research question of this study. It is
built as the result of a wide review of state-of-the-art literature related to social business
at BoP markets and the interaction of social enterprises within this specific context. It
aims at exposing which are the different barriers that a social enterprise may need to
face and which kind of strategies should consider when addressing a BoP market. Is it
based on a list of questions and recommendations that the company exposed can follow
to later assist in the creation of successful innovative, sustainable and potentially
scalable business models to operate at such market. More specifically, the company can
use this framework with the purposes of:
1. Defining if the company can be considered as a Social Enterprise
2. Recognising the social and/or environmental problems identified by the company
3. Describing the level of social engagement shown by the company
4. Studying the market and identify if it could be considered as a BoP market
5. Identifying the main business opportunities and barriers existing in the market
relevant to the activities performed by the company
6. Providing a list of principles to be considered if willing to address the market
7. Building up the guidelines needed for the social entrepreneur to create a
potentially successful business model at the BoP
5.4 Response to Objective 2: Application of the Framework
A potential Social Enterprise was chosen with the intention of testing the framework
proposed in the study. The following results were found when applying the framework:
1. The company is qualified to be considered a Social Enterprise because it gathers
three of the main conditions described by the framework.
2. The social and environmental problems identified by the company were
recognised and listed.
3. The level of social engagement shown by the company is classified as medium-
high represented as a form of “Partnership”.
101
4. The market where the company is willing to operate can be considered as a BoP
market as it gathers a fair amount of the characteristics typically found in such
markets. A detailed explanation on each characteristic can be found.
5. The main opportunities and barriers were identified in the energy and financial
services sectors and listed one by one.
5.5 Response to Objective 3: Business Model proposal
After the application of the framework on the particular case of the Social Enterprise
selected, a new business model is proposed. The business model was developed taking
into account the results on the previous section where the framework is applied and the
list of strategic principles and recommendations.
The business model proposed is aligned with the BoP strategies suggested by the
framework presented in this study as it is based on the multi-stakeholders’ co-creation
and co-development concepts, it requires clear and active communication with local
communities, it considers local partnership for co-venturing, it uses hybrid and modern
technologies while meeting world standards of safety, quality and sustainability, it
enhances inclusiveness, affordability, accessibility and scalability by reaching the
biggest possible number of customers, even the most isolated, through alternative
distribution and communication channels.
The concept of scalability is on the core strategy of the business model proposed. Hence,
it is aligned with the definition of social innovation suggested by Murray et al (2010) in
which the scaling phase of a social business is described as the way to reach the highest
number of people and create the highest possible positive social and environmental
impact.
The business aims at growing at an exponential rate with the objective of reaching the
highest of beneficiaries, even the most isolated.
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Figure 52. Cumulative yearly growth of beneficiaries
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5.6 Research contribution
The study contributes at academic level as it extends the literature on Social Business
and BoP by proposing a new framework that aims at clarifying the process through which
Social Enterprises go through when willing to operate in BoP markets. The research
contributes to expand the legitimacy of existing literature related to Social
Entrepreneurship, Social Business, Social innovation and its strategic implications.
Moreover, the framework also contributes at practitioner level as it provides a new
framework and guidelines for social entrepreneurs willing to operate at the BoP. The
framework can be used as a managerial tool that can be implemented by companies to
ease their process of business model creation and development. Furthermore, the
application of the framework on a real case study provides an example that can help on
the implementation of the framework and be used as a reference.
5.7 Limitations and further research
The main limitations were found mostly in the data collection due to several reasons:
cultural, linguistic, infrastructural, economic or climatological. The data was collected in
the field, in the island of Bali in Indonesia. It was essential for the purpose of this study
to directly interact with local communities many times located in remote areas of the
island.
Firstly, some difficulties were faced when approaching some communities because of a
lack of understanding due to language related barriers but also because some of them
showed reluctance to interact with no economic exchange. The collaboration with a
community-based organization was of great help in the first visits to get introduced to
some fishermen communities, however, other expeditions were done with no assistance.
Nevertheless, people in Bali are characterized for being friendly, curious and helpful most
of the times. So, despite the punctual situations previously described, local communities
showed a high level of cooperation.
Another remarkable limitation was the lack of financial resources. Field data collection,
especially in BoP contexts, can be complex, requiring high resources. The locations from
where data was collected were often far from urban areas and not connected with public
transportation. Hence, it required long time to reach and means of private transportation.
Weather conditions were another factor that influenced the data collection process. Bali
is located in a tropical zone. Its weather is affected by Monsoon and two distinct seasons
exists, the wet (from October to April) and the dry (from May to September). The data
collection process took place most of its time in wet season conditions. This condition
enhanced the effects of the previously mentioned limitation. Heavy rains difficulted the
access to remote areas and the approach to local communities turned to be more
complicated.
Future considerations can be presented in two different streams, from an academic and
from a practitioner point of view. From an academic point of view, the framework could
be reinforced in the future by considering new findings and introducing new
considerations. Concepts related to Social Business are still quite new when compared
to traditional approaches and many still do not count with an accepted consensus among
scholars. Therefore, as the topics discussed are subject to constant changes and new
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perspectives, the framework may be revised in the future. From the practitioner
perspective, it is obvious that further applications of the framework with new case studies
would contribute to its validation as the case presented in this study represents the very
first attempt. Moreover, further research should be done also in the business model
proposed for the Social Enterprise to align it with accurate and updated data, specially
by refining the energetic needs of stakeholders according to the location selection and
by reviewing the financial considerations. Moreover, as business models at the BoP
should be co-created and co-developed following a multi-stakeholders’ approach,
involving the social enterprises, the local communities and the partners, variations due
to such synergies are highly expected.
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Annexes
Annex 1: Business Model Canvas for Azura Marine Earth
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Annex 2: Interviews
Interview with Azura Marine Earth Co-Founder
Meeting type: Skype
Date: 29/08/2017
Interviewed: Julien Mélot – Co-Founder of Azura Marine Earth
ABOUT AZURA MARINE
A: Tell me a bit about Azura Marine Earth
J: AME is a social enterprise who is born as a spin from another commercial company
based in Singapore called Azura Marine. The new company was born after a diving
expedition I did in Papua. I experienced in first person how current fossil powered boats
are polluting and disturbing the environment with their dirty and noisy engines. Divers
look for being in contact and observe the nature at its pure state and not being part of its
destruction instead.
A: Can we say that AME is a CSR from AM or a pure independent social enterprise?
J: I like to call it an initiative, maybe brand, subsidiary… but not completely independent
as it is under the umbrella of AM. We could say AM is sponsoring AME.
A: Is it for profit or non-for profit?
J: It is something in between. It cannot be called a normal for-profit company as the
company is mainly pursuing a social and environmental benefit more than an economic
return.
A: What is the main objectives of AME?
J: Through the concept of “Organic Engineering”, AME strives to provide pragmatic,
affordable, reliable and simple alternatives to conventional fossil fuel based boat
propulsion and shore-based power generation. By avoiding usual intermediaries, they
can be affordable and economically very viable, even for the least fortunate. Considering
the state of degradation of our Planet Earth, it is urgent to make these technologies
available to everyone.
A: What do you mean with the concept of “Organic Engineering”?
J: Organic engineering involves keeping costs low, using locally sourced, recycled and
sustainable materials, and building a boat that is simple enough to be operated and
maintained by local boatmen.
A: What is the mission “Surya Namaskar Bali” and which are its main objectives?
J: “Surya Namaskar” literal translation is “Sun salutation”. The mission will represent the
first circumnavigation ever around Bali on a sun powered “jukung” (Balinese traditional
fishing boat). It will be a 10 days long voyage to show the reliability, economic viability
and great potential of solar power. We expect to give visibility to the project and attract
investors as well as helping the team to find local communities in need of such
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technological change. After this first mission, it is expected other expeditions along other
islands with the same purpose.
PROJECT’ STRATEGY METHODOLGY
A: Let’s talk about the strategy pursued so far by AME on various aspects: site selection,
team composition and partnerships.
Why have you chosen to develop your project in Indonesia and particularly, why starting
in Bali?
J: I first moved to Bali for personal reasons. When the idea of AME came to my mind I
thought there was no better place to start in Indonesia than Bali as it is a place I know
well and where I already had a good network by that time. Moreover, the island is the
most internationally popular spot in the archipelago which eases the visibility of the
project and improves its commercial possibilities.
A: How have you chosen your team members and up to which point have you involved
other team members in the project?
J: Bali is a transient place for most of foreign people so many people have contributed
punctually somehow. There is not a core team and no employees. There is only people
contributing more than having a core team.
Currently, there is one Dutch guy in charge of social media and an Italian girl working on
the boat transformations, being in contact with institutions (UN, Unicef…) and in charge
of the crowdfunding campaign. There is another local man with who I have been
modifying the first boat. He will be the boat captain in the expeditions as he has wide
experience in sailing. In addition, three volunteers will start at the end of September also
cooperating in the project. Finally, yourself are also part of our team. Also, people I know
in Singapore contribute with the project. There used to be a Balinese friend with local
connections in charge of some aspects but now he is busy working on something else
because he needs some personal financial stability and I cannot offer it to him at this
point.
A: Are you familiarized with the term co-creation? Have you applied this logic when
developing your strategy?
J: I am not particularly familiarized with the term.
A: Have you already considered any kind of cooperation with a CBO in order to stablish
a local partnership?
J: I think it could be useful to consider it, especially when doing the boat expeditions.
FINANCE
A: Which is the financial strategy pursued by AME?
J: Just donations, crowdfunding and sponsorships at the moment. However, there is not
real business model at the moment.
As a part of the crowdfunding campaign, we are planning to receive donations and use
them to bring solar sets to the communities in need found in our expeditions and teach
them about renewable energies and sustainability. If enough funds are raised, we would
like to convert boats from petrol to solar powered.
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IMPACT MEASUREMENT SYSTEM
A: Have you thought about possible ways to measure the social and environmental
impact produced by your organization?
J: It is a tricky thing to do. For instance, how do we measure how much awareness it is
been raised? After we teach the communities maybe we can measure it.
A: There are methodologies which use certain indicators in order to fairly quantify how
much impact is being generated. Would you be interested in implementing such a
measurement system in your company?
J: I would be very open to implement it. I think it could be very useful as a way to give
transparency and positive reputation.
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Structured Interviews with local fishermen
Template of Structured Interview form (1):
This interview track is to be followed during a whole working day with each interviewee.
Data was collected along the day shared with each fisherman and his family and
specially designed as part of the development of the Constructed Stakeholder Persona
methodology.
Interviewee’s name: ……………………………………………………………………………..
Profession: ……………………………………………………………………………………….
Date and place of the interview: ……………………………………………………………….
Contact details: ……………………………………………………………………………….….
Information I want to obtain: ……………………………………………………………………
Equipment required:……………………………………………………………………………..
A day in Life:
1. Where do you live?
2. How many members are in your family?
3. Which activities do you perform in a day at work?
4. Do you employ somebody?
5. What are your business objectives? (Short and long term)
6. Are you trying to expand the business somehow?
7. Which is your working schedule? (specify number of shifts and time per shift)
8. Where do you sell the fish?
9. Are you selling the fish to one buyer or many?
10. Are you a member of any cooperative?
11. What the cooperative does for you? (including financial assistance)
12. Which other activities do you perform after work?
Personality (Traits/Attitudes, Goals, Motivations)
13. Do you have any hobbies?
14. What do you do with your friends?
15. Which are your personal objectives (children, family, friends…)?
16. Which is your religion?
17. Is your religion influencing in your daily activities? In which way? (celebrations,
ceremonies, praying…)
18. Who is taking care of your children?
19. Which is your relationship with your family?
20. What are you children doing?
21. Do you think they will follow your profession?
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Purchasing habits (Location/Travel, Finances & Decision Making, Purchasing Patterns)
22. Where do you buy food for your family?
23. Do you keep part of the fish for daily food security?
24. Who is in charge of household purchases?
25. Who is taking purchasing / investing decisions? (business and household)
26. Which is the average monthly energy consumption at your home?
27. Are you affiliated to any bank?
(1) Rural Bank (Bank Perkreditan Rakyat, BPR / Bank Perkreditan Rakyat Syariah,
BPRS)
(2) Micro unit of Commercial Bank
(3) Village Credit Agency (Badan Krdit Desa, BKD)
(4) None
28. Does the bank offer line of credit?
29. Are you affiliated or have ever used any other kind of financial institution?
Formal:
(1) Cooperative
(2) Pawn shop (Pegadaian)
(3) LDKP (Village Fund and Credit Institutions)
Non-Formal:
(4) NGO
(5) SHG (Self Help Group)
(6) Others
30. Has the financial institution offered you a line of credit?
31. Have you ever got one credit?
32. Which kind of purchases do you do for your profession?
33. Are you getting any kind of subsidy?
34. Is the supply always reliable during the year?
Education, Skills & Training
35. Have you been in school?
36. For how many years have you attended school?
37. How have you learned your profession?
38. When did you started working?
39. Have you been working ever since in the same profession?
40. Are you learning any news skills from someone (personal or professional)?
41. Do you follow news?
Technical information
42. Which are the boat specifications?
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• Size:
• Passengers:
• Day use:
• Night use:
• Power:
• Consumption: ……….. litres / session ------ ……….. litres / Nmi
• Maintenance required:
• Other:
43. Which are the costs related?
• New boat: ……….. IDR
• New engine: ……….. IDR
• New net: ……….. IDR
• Petrol: ……….. IDR / litres
• Maintenance: ……….. IDR
• Other: ………..IDR
44. Who does the maintenance of your boat?
45. Are you able to maintain your boat by yourself? (level of technical knowledge
required)
46. If you use a third person, is the technician only able to do this specific maintenance
or he does some other activities?
OTHER TOPICS
Consumer awareness
47. Have you ever heard about solar energy?
48. Have you ever thought about alternative ways of sailing without a petrol engine? (sail,
electric, …)
49. Do you know about any business related to solar / electric technologies close to your
working location?
50. Do you think it could be interesting to use this kind of technology? Why?
OBSERVATIONS:
MISSING INFORMATION:
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Interview with Local Fisherman (1)
General Information
Interviewee’s name: Wayan aka Keli, 38 years old
Profession: Fisherman
Date and place of the interview: 10/11/2017, Tanah Ampo, Desa Ulakan, Kecamatan Manggis, Bali, Indonesia
Contact details:
Data to collect:
Boat specifications, Fishing patterns (GPS details), Other activities, Relation with technology, Financial situation, Environmental awareness, Educational level, Mindset orientation, Household energy consumption
Equipment required:
Telephone (Android), GPS application (Open CPN, Velocimetro GPS), Xiaomi action camera, Waterproof case, Tripod, Floating accessory, Microphone, Computer (data processing)
A day in Life:
1 Tanah Ampo village, Manggis region, Bali
2
My wife, my son Gede (14 years old), my daughter Komang (4 years old), my parents and other family members like my brother and his family. We all live in the same house complex. It is a traditional Balinese house which is composed of several small houses all inside a same complex and sharing a garden, toilet, kitchen and family temple.
3 I go fishing early morning (3:30 – 8), I prepare the nets, my wife and mother sell the fish and if morning shift is productive, then I also go fishing in the afternoon (14 – 18/19).
4 Sometimes one person joins and we split the benefit. It is most of the times a family member.
5
I need to be able to fish every day. For this, I always need to have the equipment ready, in good condition. Also on monthly basis, I need to arrange good financially in order to pay a credit for the engine I bought 3 years ago. I am paying 300 k IDR per month for 3 years and I still need 2 more years to pay the full credit. The engine was provided from the government to the fishermen cooperative and the cooperative is financing me. Apart from this, I also need to save some money for when there is no fish or there is a big celebration.
6
I am planning to buy a new hull for my boat. I think I can still use the same stabilizers from the current one and certainly the same engine. I want to buy a new one bigger and lighter made of fibber glass. In this way I can take more nets (5/6 instead of 4), store more fish during the fishing time, consume less fuel in
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proportion and also move the boat easier from the shore to the sea every day. My current boat is already old and made of wood, which makes it very heavy. I estimate I could sell the current one only for 1 million IDR. The new hull will cost me around 15 million IDR.
7 1st shift (every day): off shore fishing (on boat) - 3:30 – 8 h 2nd shift (if previous shift was good): off shore fishing (on boat) - 14 – 18/19 h On shore fishing – if 1st shift is good and a lot of fish going to the shore – 6 – 9 h
8
When coming back from off shore fishing, some buyers are waiting at the beach. They pay the fish from the day before and check if they could be interested on the new fresh one. I take the fish home and my wife places it on ice and wait for the interested buyer to come and pick it up. My wife is dealing with the buyer. If the buyer is not coming or there is any fish remaining, the day after at 4am my mother is going to sell it to the market.
9 Sometimes to one and sometimes to several buyers. Also, some people from the village come when I come back from fishing and take some without any charge. We all know each other and we always help each other.
10 Yes, he is member of the second cooperative in his region. Kelompok Nelayan, SEKAA RUKUN II
11
The cooperative can offer some products to the fishermen (nets, boats, engines, etc.) with long term financing. They offer credit with 1% interest rate. It is easier to get from them than from a bank as they are members from the cooperative and know each other. However, we need to provide a guarantee (e.g. motorbike papers). Maximum 5 million IDR. As all cooperative members gather at the same place, we help each other on daily activities. Nevertheless, I think it’s hard to get many members involved in one same project as we all have different business point of view and objectives and we are very independent.
12 I spend time with family, hiking sometimes, attending to religious ceremonies, collaborate on some community work at the village…
Personality (Traits/Attitudes, Goals, Motivations)
13 When I am free I like hiking. When my son is free I like taking him with me too.
14 When there is a celebration (birthday or any special ceremony) we gather and have some food and spend some time together. We also meet quite often on some community related activities.
15 I have already taught my son my profession. However, I want to let my kid to decide what he wants to do with his life. I think it’d be very unlikely that my son is going to university as it is very expensive and I have no financial capacity.
16 Me and my family follow Balinese Hinduism, same as most of the people in the island.
17
Absolutely, also the same as the rest of Balinese people. It affects specially financially and it is also highly time consuming. Ceremonies are very expensive and they require big financial efforts. For example, a standard weeding for a family like mine, costs at least 50 million IDR. Apart from weddings, there is also other big ceremonies in a Balinese lifetime (children birth, 42 days from birth, 3 months from birth, 6 months from birth, teeth filling (when kids become adult), cremation…) Then, there are daily expenses on offerings too (around 15k/day).
18 My wife is mostly in charge of the children care. Also rest of the family at home.
19 In Balinese culture, family is one of the most important things in life. I live in a traditional Balinese house configuration (all the family members together). When
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a woman gets married, she is moving to her husband house with his family and leaves hers. My family work together too adopting different roles.
20 My son is in school and my daughter is starting next year.
21 My son knows already the profession but he is free to choose. It will be hard for him to go to university as it is very expensive and we have not enough financial resources to pay for it.
Purchasing habits (Location/Travel, Finances & Decision Making, Purchasing Patterns)
22 We buy food in local shops and market.
23 I usually keep some.
24 Most of the times my wife is taking care of that.
25 We do it together. However, I take more care of business purchases and my wife takes more care of household purchases.
26 75.000 IDR per house. Me and my direct family live in one of those houses. The rest of the family in two more houses that would spend on average the same as we do.
27 (4) None
28 They do but I have very difficult access to it.
29 (1) Cooperative, (3) LDPK (Village Fund and Credit Institutions)
30 Yes.
31 Yes, now from the fishermen cooperative for the new engine I bought 4 years ago.
32 Petrol (daily), nets (every 2 years), boat (every 5 years), engine (every 8 years) Maintenance: boat (every 1,5 years), engine (every 2 years), net (often, every time it breaks)
33 Sometimes the cooperative receives some goods with a government subsidy. Thanks to that we can get some lines of credit.
34
Many times, cheap petrol (premium) is not available and need to buy more expensive one (Petralite, Pertamax and Solar). Spare parts for the engine are also sometimes hard to find if the engine is not the most popular which is Yamaha.
Education, Skills & Training
35 Yes.
36 Until I was 17 years old.
37
My father is a fisherman and he taught me the profession when I was a kid. However, my father used to fish with a jukung without engine and only powered by a sail and a paddle. For that reason, he couldn’t go too far from the shore and couldn’t take much fish either. I had to learn by myself the fishing technique I currently use nowadays.
38 I started working right after I finished school. I used to help my dad many years before but I just went by my own at that time.
39
I stopped fishing for a while when I was 20 years old and started working as a tourist driver. However, after 6 years I switched again for fishermen, that was 12 years ago. I like fishing very much. Once a week I also do farming, same as my father does. We work on the rice field.
40 Not really, everything I know or learn is by myself.
41 Yes, TV, radio…
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Technical information
42
Size 625 x 45 cm
Passengers 2
Use during day 2.5 – 7 h
Use during night 2 – 3 h
Power 15 hp
Consumption 10 litres / session
Maintenance required
Other
43
New boat 15 M IDR
New engine 18 – 22,5 M IDR ((depends on brand: Suzuki, Mercuri, Tohatsu, Yamaha….) Yamaha is the one with the highest spare parts availability.
New nets 2,5 M IDR
Petrol 6.700 IDR / liter
Maintenance
Other
44 Sometimes I do if it is something small. Otherwise I take it to the mechanic.
45 Not 100%.
46 It is specialized professional on fishermen related activities.
Consumer awareness
47 Yes, I have some idea. I know I can get energy from the sun but I don’t know much how it works technically.
48 My father used to fish with sail and a paddle. However, he couldn’t go too far, it was much harder to move. I have never thought about electric though.
49 No but I have seen solar panels in traffic lights.
50 Yes, because there would be less pollution, less money spent daily as no need to buy petrol and I think it is convenient as there is a lot of sun here.
OBSERVATIONS:
MISSING INFORMATION:
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Interview with Local Fisherman (2)
General Information
Interviewee’s name: Gede Muliana, 39 years old
Profession: Fisherman
Date and place of the interview: 16/12/2017, Pasir Putih, Bugbug, Karangasem, Bali, Indonesia
Contact details:
Data to collect:
Boat specifications, Fishing patterns (GPS details), Other activities, Relation with technology, Financial situation, Environmental awareness, Educational level, Mindset orientation, Household energy consumption
Equipment required:
Telephone (Android), GPS application (Open CPN, Velocimetro GPS), Xiaomi action camera, Waterproof case, Tripod, Floating accessory, Microphone, Computer (data processing)
A day in Life:
1 Bugbug, Karangasem, Bali
2 I life with my wife (35 years old) and my two sons (16 and 10 years old).
3
I go fishing every morning (4:00 – 8:00). Later I work at a warung (restaurant) as a waiter at the beach (10:00 – 17:00). If fishing in the morning shift is good, I also go fishing in the afternoon (14:00 – 18:00) if the warung is not too busy or someone can back me up. Sometimes I also take tourist for fishing. In that case I go fishing with them and I get paid from them about 250.000 IDR.
4 No, I always go alone.
5 I need to have my jukung always ready so I can go fishing every day.
6
I would like to buy a new engine but not long tail this time. Although long tail engine is cheaper compared to outboard (5.5 M IDR compared to 22.5 M IDR), consumption is much lower and it is easier to find spare parts, the engine is less powerful (5.5 hp instead of 15 hp) and it is more uncomfortable as it is in the middle of the boat, more dangerous as it gets very hot and more harmful as the exhaust pipe is next to the passengers (smoke and noise).
7 1st fishing shift (every day): off shore fishing (on boat) - 4 – 8 h 2nd fishing shift (if previous shift was good): off shore fishing (on boat) - 14 –18 h Waiter –10 – 17 h
8 I sell it always at the beach. If volume is small, the fish is bought by small buyers directly at the beach. If volumes are higher, there is a unique bigger buyer buying it all.
9 I have several clients (around 5 in total)
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10 Not anymore because it required time and dedication for periodical meetings. I refused my membership 4 years ago.
11 Mostly provide financial help to members for operational costs. They offer loans to cooperative members up to 5 million IDR for a low interest of 1% without the need of collateral.
12 I work as a waiter every day, work cleaning gardens sometimes and I attend ceremonies every time there is one at my village.
Personality (Traits/Attitudes, Goals, Motivations)
13 Fishing is my work and only hobby.
14 Sometimes we meet to talk and drink tuak.
15 I wish my children will have a better life than mine. I would like them to work in another profession, not fishing as it is a very unstable and risky job. I would prefer they would work in a hospitality related job for example.
16 Hindu Balinese.
17 Religion for Balinese people is strongly influencing in our daily activities. We pray every day before daily activities wishing that today will be better than yesterday.
18 My wife and I take care of the children.
19 I live at home with my closest family only. However, we meet almost every day the rest of the family because all live very close to each other.
20 They are both studying. Putu is 16 years old and he is in senior high school. Kade is 10 years old and he is still in elementary school.
21 I hope they won’t follow it. Although they will have this option as a last resort as I know well the profession.
Purchasing habits (Location/Travel, Finances & Decision Making, Purchasing Patterns)
22 We buy the food in the traditional market mainly.
23 I always do.
24 Mainly my wife is taking care of that.
25 My wife is mostly taking care of monetary control and decisions.
26 Around 150 k per month.
27 (4) None
28 Yes, but it is more complex. If using a commercial bank, I need to move to the city many times. Instead, if using LPD, one of their members comes and collects the money periodically.
29 (3) LDKP (Village Fund and Credit Institutions) / (1) Cooperative (before, not anymore)
30 Yes, for nets, boat, engine…
31 Yes, once I got a loan of 10 M IDR from the LPD.
32 Generally, purchases related to operational activities such as petrol, hooks, lines, nets or others like utility expenses or repair and maintenance expenses for nets, engine or boat from time to time.
33 No.
34
Most of the supplies are quite stable in terms of availability. However, sometimes we cannot rely on the cheapest option of fuel, as Premium petrol is not always available, so we are forced to buy other less economic types such as Pertamax or Petralite.
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Education, Skills & Training
35 Yes.
36 Until I was 18 years old.
37
My father used to be a fisherman too and I used to join him early morning before going to school. I learned from him this profession and I also learned how risky it is as he disappeared one day in 2009 in the ocean and never came back. That is one of the main reasons why I do not want my children to follow mine and my father’s path.
38 I started working in 1997, at the age of 19.
39 No, I have also worked as a scooter driver, waiter or gardener, just to mention some.
40 No, I only learned what I know from my father until he was lost.
41 Yes, TV mostly and sometimes facebook.
Technical information
42
Size 550 x 50 cm
Passengers Max. 4
Use during day 2.5 – 7 h
Use during night 2 – 3 h
Power 5,5 hp
Consumption 4.5 litres / session
Maintenance required Every 2 months – spark plug Every month – engine maintenance (clean carburettor, filter, etc.)
Other
43
New boat 15 M IDR
New engine 5,5 M IDR (long tail) / up to 25 M IDR (Yamaha outboard engine).
New nets 2,5 M IDR / Used net: 3 x 4 M IDR
Petrol 6.500 – 9.000 IDR / litre
Maintenance
Other
44 I always outsource this part and use some professional to do it.
45 Only if it is something little.
46 It is specialized professional on fishermen related activities.
Consumer awareness
47 Yes.
48 Well, I already use sail when wind is favourable.
49 Not really. I have seen in Lombok some houses with solar panels though.
50 Yes, because there is no need to use petrol so operational costs would be reduced and it would also be cleaner.
OBSERVATIONS:
Pak Gede points out that his job is quite seasonal. High season peak is in the month of October and November where net income could be around 1,5 M IDR per month. However, in low season months, many times the profit is even negative. He also explains about a non-formal way of financing common in his professional environment. He tells me that LPD (formal non-bank village based financial institution)
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can provide a maximum loan of 10M IDR with a yearly interest rate of 2,5 % during 3 years with collateral when requesting more than 1M IDR. As many fishermen cannot provide a collateral, it exists another way of non-formal financing. There is another actor, normally women that buy daily the fish from the fishermen at the beach, that offer small loans to the fishermen. In exchange, these buyers have exclusivity on fish purchase from their customers at a reduced price until the loan is paid back. This kind of financing tool is based on trust and completely informal.
MISSING INFORMATION:
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Interview with Local Fisherman (3)
General Information
Interviewee’s name: Made Sudama, 28 years old
Profession: Fisherman
Date and place of the interview: 19/12/2018, Batumana, Karangasem
Contact details:
Data to collect:
Boat specifications, Fishing patterns (GPS details), Other activities, Relation with technology, Financial situation, Environmental awareness, Educational level, Mindset orientation, Household energy consumption
Equipment required:
Telephone (Android), GPS application (Open CPN, Velocimetro GPS), Xiaomi action camera, Waterproof case, Tripod, Floating accessory, Microphone, Computer (data processing)
A day in Life:
1 Batumana village, Karangasem
2 I life in a traditional Balinese house with my wife (27 years old), my two daughters (11 and 7 years old), my son (2 years old) and my parents.
3
go fishing every morning (4:30 – 7:30). Later, before placing my boat back at the shore, I approach some of my clients (other fishermen) directly boat to boat to collect their catch and pay them for it. Once I’m back on the shore, with all the fish (mine and my clients) I load it to a little truck which is going later to Kusamba, the main fish market in Bali.. I also offer small loans for other fishermen so they can buy some materials for fishing or maintain their equipment. Later they also pay me back with their catch.
4 Yes, I offer job to some women from the village. They help me transporting the baskets full of fish up to the main road, where I load the truck. I pay them 4.000 IDR per trip.
5
I started this entrepreneurial venture of wholesaling and loaning just half a year ago. I hope I can manage to run it well so I can expand a bit the business. For now, however, I just need to make sure my equipment is good so I can still go fishing every day.
6
I would like to get more clients and try to be able to collect more fish. On the long run I’d love to open a fresh seafood restaurant with diving centre near by the village. The area is perfect for diving and I can use my boat and other fishermen boats for that. My goal is that my children can run the place one day.
7
1st fishing shift (every day): off shore fishing (on boat) – 4:30 – 7:30 h 2nd fishing shift (if previous shift was good): off shore fishing (on boat) – 14:30 – 17:30 h Wholesale – 8:30 – 10:30
120
8 Nowadays I sell the fish to a big buyer who transports the fish later to Kusamba, the biggest fish market in Bali.
9 I only sell the fish to one buyer.
10 No, there is no cooperative in our village.
11 If providing initial capital of 5 Million IDR, credits are offered to its members for values up to 5 Million IDR with 2% interest rate without collateral. If willing to ask for higher amounts, the cooperative allows it by providing collateral.
12 I basically stay with family and friends at the village. We are all a very tight community and are always together.
Personality (Traits/Attitudes, Goals, Motivations)
13 Fishing and my business is my job and hobby. I love eating too.
14 I share my time with them eating, joining in whatever celebration takes place and helping if needed.
15 I am working hard and focussed on being able to reach my business objectives so my family can have a good life.
16 Hindu Balinese.
17 It is but it is just part of our life. We cannot say it is an effort for us, it is how we are. We pray, we prepare and give offerings daily to our gods and follow ceremonies when they take place.
18 We both, my wife and I, take care of children. However, my wife takes a bit more of the load.
19
We all live together as a traditional Balinese family. Apart from this, neighbours in the village are most of them also family and we live all very close to each other. It is normal to see all the time any member of the family sharing time with us at our home or us at their home.
20 My daughters are going to school and my son is still at home.
21 I hope they won’t follow. I hope they can work somewhere else, far from fishing. Maybe in a hotel, or luckily in my future restaurant.
Purchasing habits (Location/Travel, Finances & Decision Making, Purchasing Patterns)
22 We buy the food in the warungs or traditional market.
23 I always keep some for the family.
24 Mostly my wife.
25 We take decisions together, my wife and I.
26 We spend 50k up to 100k per month.
27 (1) Rural Bank
28 Yes, but with collateral.
29 (3) LDKP (Village Fund and Credit Institutions); (1) Cooperative (recently)
30 Yes.
31 Yes.
32
Generally purchases related to operational activities such as petrol, hooks, lines, nets or others like utility expenses or repair and maintenance expenses for nets, engine or boat from time to time. For my new line of business I also needed to buy baskets and containers to put the fish inside and transport it to the truck at the main road and containers to keep the fish fresh until it gets to the buyer at the market.
33 No.
34 Most of the supplies are always available.
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Education, Skills & Training
35 Yes.
36 In total 6 years, from 5 to 11 years old.
37 My father was a fisherman too and he taught me all I know.
38 I started working when I was 12 years old. I started to go with the jukung sailing alone, the same way as I do today.
39 Yes, I’ve been always a fisherman. For the last 6 months I am also running my own wholesale business.
40 Yes, a friend of mine from another village is helping me to learn this new business.
41 Not too much.
Technical information
42
Size 670 x 50 cm
Passengers I’ve transported up to 10 people but for work only 2 pax.
Use during day 2 – 8 h
Use during night 2 – 3 h
Power 15 hp
Consumption 10 liters / session (if not using the sail)
Maintenance required
Other
43
New boat 15 M IDR
New engine 22,5 M IDR (Yamaha outboard engine)
New nets 2,5 M IDR
Petrol 6.500 – 9.000 IDR / litre
Maintenance Sail: 500 k / year for a new one
Other
44 A professional workshop.
45 Not really.
46 He is specifically specialized on boats.
Consumer awareness
47 Yes, we have a small solar panel at home but it’s not working for a long time. Someone came to install it long ago with some lights for the yard but it stopped working.
48 Yes, we sail normally. Many times, if the wind is good, we don’t even use the engine at all, except for some minutes just to get far from the shore and back. 49. Do you know about any business related to solar / elect
49 No.
50 I guess yes but the one I use doesn’t work so I’m not sure if it’s very reliable.
OBSERVATIONS:
Some time ago a Chinese person went to the village with the good will of installing for free some small solar panels around. He installed next to the road some for lighting and also in some houses. He also installed one at Sudana’s house. He installed a lighting system of 4 light bulbs connected to a small solar panel (about 50 x 50 cm) that was working by itself. However, with time, the system stopped working. I tried to
122
see what was wrong but I had no proper tools to check and so they don’t have at the village and neither the technical knowledge. They got the installation but not any kind of explanation or training about how to maintain it. That situation created distrust on the technology installed among the community.
MISSING INFORMATION:
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Template of Structured Interview form (2):
This interview track represents a shorter version of interview to collect data from other
fishermen from traditional villages.
1. How old are you?
2. Are you married?
3. How many children do you have?
4. How many family members depend on your income?
5. Have you ever been in school?
6. For how many years?
7. When did you start working as a fisherman?
8. How many hours do you spend on your fishing related activities per day?
9. Where do you sell the fish?
10. Is it your only job?
11. Which other jobs do you have?
12. Do you have a bank account?
13. Have you ever asked for a bank credit?
14. Which are the conditions the bank can offer you for a credit?
15. Are you a member of any cooperative?
16. Which are the benefits of being part of the cooperative?
17. Have you ever heard about solar energy?
18. Do you think solar energy could be beneficial (after brief explanation)?
Translation to Indonesian:
1. Berapa umur Anda?
2. Apakah Anda sudah menikah?
3. Berapa jumlah anak yang Anda miliki?
4. Berapa jumlah keluarga yang Anda tanggung?
5. Apakah Anda pernah sekolah?
6. Berapa tahun Anda sekolah?
7. Sejak kapan Anda mulai bekerja sebagai nelayan?
8. Berapa jam Anda habiskan untuk mencari ikan setiap hari?
9. Dimana Anda menjual ikan ?
10. Apakah Anda bekerja hanya sebagai nelayan?
11. Apakah anda memiliki pekerjaan lain?
12. Apakah anda punya rekening di bank?
13. Apakah anda pernah bertanya tentang kredit di bank?
14. Apa saja persyaratan memperoleh kredit di bank?
15. Apakah anda anggota dari koperasi?
16. Apa keuntungan menjadi anggota dari koperasi tersebut?
17. Apakah anda pernah tahu tentang energi Matahari ( solar energy)?
18. Apakah menurut anda energi Matahari sangat bermanfaat?
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Interview with Local Fisherman (4)
1. 54 years old
2. Yes
3. 8
4. 5
5. I have never attended school
6. None
7. Since I was 15 years old
8. 8 hours per day
9. From people that pick it up from the shore
10. Yes
11. None
12. No
13. No
14. I know nothing about banking conditions.
15. No
16. By being a member of a cooperative, … CHECK TRANSLATION
17. No
18. It seems very interesting for me. If we have solar energy we can use it to reduce
the amount of electricity bills
Interview with Local Fisherman (5)
1. 35 years old
2. Yes
3. 5
4. 6
5. I have never attended school
6. None
7. Since I was 17 years old
8. 5 hours per day
9. From people that pick it up from the shore
10. Yes
11. None
12. No
13. No
14. I know nothing about banking conditions.
15. No
16. WHY NO ANSWER?
17. No
18. Yes
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Interview with Local Fisherman (6)
1. 30 years old
2. Yes
3. 3
4. 4
5. Yes
6. 2 years
7. Since I was 20 years old
8. 5 hours per day
9. From people that pick it up from the shore
10. No
11. WHICH??
12. No
13. Yes
14. Collateral is needed
15. No
16. WHY NO ANSWER?
17. No
18. Yes
Interview with Local Fisherman (7)
1. 35 years old
2. Yes
3. 5
4. 6
5. No
6. None
7. Since I was 20 years old
8. 5 hours per day
9. From people that pick it up from the shore
10. Yes
11. No
12. No
13. No
14. I don’t know
15. No
16. WHY NO ANSWER?
17. No
18. Yes
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Interview with Local Fisherman (8)
1. 35 years old
2. Yes
3. 5
4. 6
5. I haven’t been in school because at that time I didn’t want to attend
6. None
7. Since I was 20 years old
8. 5 hours per day
9. From people that pick it up from the shore and also directly from the sea to
other fishermen that come to buy it
10. No
11. I take care of the livestock with my wife
12. Not at the moment
13. Yes
14. It is needed to show a collateral like: BPKB13, a land ownership certificate
among others
15. No because I don’t have enough money to join as a member
16. I don’t know because I have never been a member
17. No
18. Yes
13 BPKB stands for Buku Pemilik Kendaraan Bermotor which literal translation from Indonesian language is Ownership Book of Motor Vehicles. It is a book issued by the traffic unit of the police as a proof of ownership of motor vehicle, serving as a certificate of ownership.
127
Interview with PT Surya Sakti Bali founder
Interviewee’s name: Asep 27 years old
Profession: Owner of solar installations’ company and solar technician
Date and place of the interview: 12/06/2018, Ubud, Bali, Indonesia
Contact details:
Information I want to obtain:
Situation about solar technology in Indonesia; Barriers found by his company; Supply
chain conditions
Equipment required:
1. What is your company doing?
We offer solar installations of any kind adapted to customers’ needs. We are also
trying to create a product based on a simple solar lighting installation and
commercialize it under our own brand.
2. For how long is the company operating?
The company was founded 1,5 years ago.
3. Which barriers have you encountered to run your business?
There is a very low awareness about solar energy so we need to do great efforts to
explain to the people what is the technology we are proposing, how does it work and
why could it be beneficial.
4. Which barriers have you encountered to run your business?
There is a very low awareness about solar energy so we need to do great efforts to
explain to the people what is the technology we are proposing, how does it work and
why could it be beneficial.
5. Do you consider the distribution network for components needed for solar installation
is good?
The distribution network is good but the prices are still very expensive. So far I get
almost all the components from a wholesalers in Jakarta. There is an importation
license that allows the direct import of products from China, which is the biggest
producer. However, this license is also very expensive and would require high
volumes to justify the investment.
128
6. Are there any subsidies that you know for solar energy?
There are still not subsidies.
7. Which is the regulations regarding off-grid installations? Is it legal?
Off-grid is completely legal.
8. Have you heard about the net metering from PLN? How does it work?
Yes, it is an electric counter offered by PLN to be installed at buildings counting with
a power generation station. Once installed, the counter measures how much energy
the building consumes from PLN and how much the building is supplying to PLN.
Then, PLN calculates monthly which is the energetic balance and, in case PLN
supplied more electricity, it charges for it. Otherwise, in case the building supplied
more electricity to PLN, it provides a voucher to be used in the following month.
9. What is your general impression about solar energy environment in Indonesia at the
moment?
Materials and installations are still costly. PLN is highly subsidized by the
government, so it leaves solar and other renewables solutions in a very weak
competitive situation. I believe that if the government would cut petrol subsidies and
would start promoting renewables, the sector will bloom.
129
Report from Semi-Structured Interviews to diving centres
Dates: 06/03/2018 – 08/03/2018
Locations: Amed, Jemeluk, Candidasa (Bali)
Numer of diving centres interviewed: 7
Diving centre # 1:
I speak to the manager of the diving centre. He is in Amed for 9 years. The company doesn’t own
any boat. They outsource the service to the local fishermen cooperative and pay 250k for 2 dives,
if the dive is not too far. If they are going a bit further, they’d need to pay a bit more. The boat
spends around 5 to 6 litres per expedition. He explains that all the diving centres in the area are
forced to use boats from the fishermen cooperative. It is not on their hands to choose which boat
they are going to use. There is a responsible from the local fishermen cooperative that is selecting
the boat captain and providing it to the dive centre every time it is needed. The price is fixed by
them and standardized through all the area. Lawrence thinks that in case of purchasing a boat,
they will have problems with the local fishermen community. When I suggest the idea about
buying the boat anyway and proposing to the fishermen cooperative to still pay a fee for the
captain service, he thinks it probably won’t work as it is in their business model to rotate captains
every day, so all the fishermen have same chances. Because of this rotation system and the high
number of fishermen, he thinks /fishermen won’t sail properly as they won’t be familiarized with
the solar boat system. He is also sceptical about the acceptance by the local community (local
council and fishermen cooperative) of such a business proposal.
Diving centre # 2:
I have been in contact by email last week with the owner of this dive centre. However, when
visiting their place, he was out and I spoke to one of their team members. He is working in Amed
for a year now. He’s been working in Philipines for some years before coming here. He expresses
his deep frustration with the current situation in the area. He says that the boats that are currently
forced to use, the ones from the local fishermen, are not satisfying their needs. The boats are
small (only 3 passengers and the captain can fit very tight), not prepared to transport their
equipment, not able to go too far, dirty and not well maintained. Because of this, they can’t offer
a proper service, they miss some interesting diving points not reachable by the boat or reachable
at a high cost. Moreover, as they can only sail with 3 people, they need to rent several boats when
having a bigger group, also multiplying their expenses. He’s been thinking for a long time about
owning a boat. Definitely, that would be the best solution for offering a proper service, suitable to
their customer needs. However, the local situation is a big barrier.
Diving centre # 3:
I speak with both of the managers of the diving centre. They are one of the very few dive centres
in the whole area that own a boat for their dives. They tell me they can use their boat because
the owner is Balinese and ex-fisherman from the same village where they operate and, even
though they own the boat, they still provide with a lot of work to the local fishermen cooperative
by outsourcing their services often. He confirms fees of 250k per 2 dives and around 5/6 litres.
When explaining a bit about the project, he thinks it’s very hard to change the local people minds
as they mostly plan in short time basis. They can also dive without using a boat and sometimes
they do, however, when doing so, they miss a lot of diving points that are not that easily reachable
from the shore.
130
Diving centre # 4:
I speak to one of the local staff in charge of keeping the place while other staff is diving. He
repeats the same story. They don’t own boat, price for the jukung is the same, they are ruled the
same way by the local organization. He adds info about the price for sailing further. For instance,
for sailing from their place to Gili Selang and back they are charged 400k.
Diving centre # 5:
I meet with the owner of the diving centre, fast boat company and former local fisherman. He
opened his own company 7 years ago after 11 working for a different one. He owns a diving
centre, a restaurant and 3 speed boats operating every day. He repeats same story again
reconfirming the local reality. He assures that their business development is totally stacked by the
rules of the local council and fishermen cooperatives. He explains that, as long as the fishermen
still work in the area, nothing will change and their business will grow much slower as they are
constraint by their rules. He tells me that their bargaining power is very low as local communities
are still very strong and high in numbers of affiliated. There are 90 fishermen at his location. He
explains about the rotational system to assign boats to diving centres. He tells me that even in
high season, when rotation is high, one fisherman won’t get more than one chance to be assigned
per month. If low season, this is reduced to once every 3 months maybe. That means that, in the
eyes of the fishermen, they have already little income from them. He highlights the closed and
short time-oriented mind of local people and thinks that they have very low resilience.
We discuss about the Surya-like model. I explain about the features and he shows big interest.
He asks if this could be used also as a fast boat. I explain that Surya model has a maximum
speed of 6/8 knots. He tells me that if AM would have a model reaching 30kn with a similar
capacity of his current boat, he would be definitely interested.
Diving centre # 6:
I contact several times with the company by email. When visiting this diving centre / resort I meet
with the owner. We discuss about the same topics and he confirms the same story. He is located
close to a known diving spot that is reachable from the beach. He is most of the time diving in that
particular location, however, he also sails to other locations from time to time. Even though he is
located close from the beach, he is forced to use porters for moving his equipment from the centre
to the beach and he pays a fee for it. Apart from that, in case of needing a boat, as usual in the
area, he needs to inform a local responsible and a fisherman is assigned to him. As there are
strong currents around his location, he is asked a higher fee than in the rest of the places. He
finds the project interesting and, according to him, it should be targeted to those very few
companies in the area, owned by local people and allowed to own a boat. He points out the high
power of local leaders over companies operating in the area and the how they can’t do much to
change the status quo.
Diving centre # 7:
I stop at this dive centre / restaurant on my way back. I speak to one member of the staff, an
experienced diving instructor that I know for some time. I have a chat with him, asked him same
questions and got practically same responses. The boats are also managed by the local
fishermen organization and have no option to own a boat. He tells me that they are around 11
diving centres at his location and no one can own a boat. All of them operate just the same way.
The only difference in this area compared to others is that they have the option of renting a bigger
boat (6 passangers) if needed. However, they are also charged double the price compared to
131
renting one for 3 passengers. He tells me that it would be a very good idea if there would be a
way to implement the project. He thinks that if one boat proofs to work for one fisherman, rest of
them will follow the lead. However, he also notices the big barrier for local people to access credit.
As an example, he tells me about himself that, even having a steady work contract and being
eligible for asking a bank credit, he is only allowed to finance 50 million IDR with a monthly interest
rate oscillating between 1.5% and 2%.
Conclusions:
- Local organizations (local council and fishermen cooperatives) have a total control in
the region and the exclusivity for exploiting boats usage. They fix prices and control
supply
- Fishermen boats, which are used by diving centres, are not meeting minimum
requirements to satisfy customers’ needs
- Diving centres are overcharged for using local fishermen boats
- Diving centres are willing to find an alternative to the current situation
- Local people are perceived as not planning mid/long term
- Local people with low resources have high limitations to access bank credits
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Annex 3. Constructed Stakeholder Persona example
Fisherman “Owns a small boat, head of the household & father of two”
Organization: Member of Kelompok Nelayan, SEKAA RUKUN II
Location: Banjar Dinas Tanahampo, Desa Ulakan, Kecamatan
Manggis
A day in life
Wayan, head of household and father of two, lives in a fishermen
village and earns through fishing. Every morning at 3:30 AM until
8:30 AM he goes fishing with his owned small traditional fishing
boat. After a day at work he brings fish back home and his wife
takes care of selling activities. If it is a productive fishing day he
also works an afternoon shift. The fish is mostly sold to buyers who
are intermediate people between the fishermen and the market. If
there is any fish left at the end of the day, his mother sells it next
morning at the local market. Wayan lives in a traditional Balinese house complex where all the
family members live together. When not working, he spends time with his family, hikes with friends
and his son or participate in some community related activities, mostly religious related.
Personality
Traits/Attitudes
Hard working, family and community oriented and very welcoming.
Goals
Have the boat in good conditions to continue business. He bought a more powerful engine and
he is planning to buy a bigger boat hull to increase in fishing volume and consequently in higher
income.
Motivations
Religion (Balinese Hinduism), family (wife, children and parents), community relationship
Purchasing habits
Location/Travel
His wife takes care of household purchases. Food is bought in local shops and market. Wayan
use to keep part of his fish for his family own consumption.
Finances & Decision Making
His wife is mostly taking care of household finance. He decides on business finance and
investment decisions. As his income is very low, it is very unlikely for Wayan to access
conventional banking financial services. That is the reason why he is a member of the local
fishermen cooperative, as they provide credit to the local fishermen for small business
investments.
Purchasing Patterns
Purchases are mostly cyclical as he needs to buy petrol daily. Sometimes he needs to spend
money in maintenance (engine, nets and hull) and fixing the engine which breaks down from time
Wayan aka Keli Male, 38 Married, 2 children (13,4)
133
to time. He is paying monthly a loan to the fishermen cooperative for an engine he bought 3 years
ago.
Education, Skills & Training
Wayan has been in school until he was 17 years old. His father, also a fisherman, taught him the
profession when he was a kid. However, his father used a sailboat and a paddle so he could not
go too far from the shore. Wayan had to learn by himself how to fish in deeper waters with the
engine boat. He has learnt everything by himself as he goes fishing most of the times alone.
Design Criteria
Must:
• Low-cost
• Easy to use
• Beneficial for overall family
• Improve current system
• Community accepted
• Involve other members of the community
Must not:
• Reference to counter culture / stigmatized activities
• Increase time dedicated to business activities
• Require technical expertise
• Require big investment at once
• Reduce working space
134
Annex 4. GPS Boat Tracking Results
GPS TRACKING #1:
Date: 14/12/2017
Location: Tanah Ampo,Desa Ulakan
Manggis, Bali
Fisherman: Wayan aka Keli
Age: 38 y.o.
Boat size: 625 cm x 45 cm
Engine: Yamaha outboard
15 hp
Consumption: 10 liters/shift
0.41 liters / Km
Consumption: 6700 IDR / liter
Pax: Max. 4
Shifts: 2 shifts
Morning (4:30 - 7:30)
Afternoon (14:00 - 18:00)
Extras: Sail
0.00
5.00
10.00
15.00
20.00
25.00
30.00
012345678910
Dis
tan
ce (
Km
)
Time (h)
Spee
d (
Km
/h)
Speed / distance
Distance Speed
135
Activities: 04:11 - 07:51
ACTIVITY - Sail to dropping point ACTIVITY - Drop net
Total time: 75.0 min Total time: 15.0 min Total distance: 10.88 Km
Total distance: 0.50 Km
Max speed: Km/h Max speed: Km/h
Avg. Speed 8.7 Km/h Avg. Speed 2.0 Km/h
Night time: 75.0 min Night time: 15.0 min
Day time: 0 min Day time: 0 min
ACTIVITY - Line with hooks ACTIVITY - Net pull
Total time: 20.0 min Total time: 40.0 min Total distance: 2.33 Km
Total distance: 1.33 Km
Max speed: Km/h Max speed: Km/h
Avg. Speed 7.0 Km/h Avg. Speed 2.0 Km/h
Night time: 13.0 min Night time: 0.0 min
Day time: 13.0 min Day time: 40.0 min
ACTIVITY - Sail back to shore
Total time: 70.0 min Total distance: 10.73 Km
Max speed: Km/h
Avg. Speed 9.2 Km/h
Night time: 0.0 min
Day time: 70.0 min
TOTAL
Total time: 3.67 h Total distance: 25.8 Km
Max speed: Km/h
Avg. Speed Km/h
NIGHT DAY
Total time: 1.72 h Total time: 2.05 h Total distance: 12.89 Km
Total distance: 13.58 Km
Max speed: Km/h Max speed: Km/h
Avg. Speed 7.5 Km/h Avg. Speed 7.9 Km/h
136
Sunrise time: 05:54 h Sunset time: 18:32 h
Engine on: 88 min Engine on: 83 min
12.4 Km 12.3 Km
ENGINE CONSUMPTION
Day: 5.03 liters
33693 IDR
Night: 4.97 liters
33307 IDR
Total: 10.00 liters
67000 IDR
ACTIVITIES DESCRIPTION TIME (min)
DISTANCE (Km)
AVG. SPEED (Km/h)
MAX SPEED (Km/h)
DAY / NIGHT
ENGINE (ON/OFF)
STAKEHOLD. INVOLVED
Preparation •Place boat on the shore •Place net inside boat •Push the boat into the sea
15
Night - Fisherman Fishermen cooperative
Sail to the nets’ dropping point
•Sail 75 10.9 8.7
Night ON Fisherman
Drop nets •Attach flag to first net •Drop nets •Attach each net to next one with floaters •Attach flag to last net
15 0.5 2
Night OFF Fisherman
0
5
10
15
20
25
0.00 0.22 0.43 0.61 0.79 0.98 1.28 1.80 2.11 2.29 2.46 2.64 2.82
0
2
4
6
8
10
12
Dis
tan
ce (
Km
)
Time (h)
Spee
d (
Km
/h)
Speed / distance
Distance Speed
137
Fishing with line and hooks
•Drop the line with hooks •Pull the line when notice fishes
20 2.3 7
Day ON Fisherman
Pull nets •Pull net from the first flag •Separate fish from net •Put net back in net bags
40 1.3 2
Day OFF Fisherman
Sail back to shore
•Sail •Fish with line and hooks technique
70 10.7 9.2
Day ON Fisherman
Post fishing •Place boat back on the beach •Place nets to its place out of the boat •First meeting with buyers •Pick up fish from boat •Count fish •Sell fish straight away at the beach
15 - 30
Day - Fisherman Buyer Family (sometimes) Fishermen cooperative
Selling fish •Family member sells the remaining fish from the previous day in the market •Buyers go to fishermen houses to buy fresh fish
1 day
Day / Night
- Family member Buyer
Table 15. Activities performed by fisherman #1
138
GPS TRACKING #2:
Date: 16/12/2017
Location: Pasir Putih, Candidasa,
Karangasem, Bali
Fisherman: Gede Muliana
Age: 39 y.o.
Boat size: 550 cm x 50 cm
Engine: Onboard (long tail)
5.5 hp
Consumpt: 4.5 liters/shift
0.23 liters / Km
6700 IDR / liter
Pax: Max. 4
Shifts: 2 shifts
Morning (4:30 - 7:30)
Afternoon (14:00 - 18:00)
Extras: Sail
Figure 53. GPS tracks fisherman #2
139
Activities: 04:28 - 07:20
04:28 - 05:29 05:29 - 05:37
ACTIVITY - Sail ACTIVITY - Drop net
Total time: 60.6 min Total time: 8.1 min Total distance: 8.5 Km
Total distance: 0.5 Km
Max speed: 9.8 Km/h Max speed: 4.2 Km/h
Avg. Speed 8.5 Km/h Avg. Speed 3.1 Km/h
Night time: 60.6 min Night time: 8.1 min
Day time: 0 min Day time: 0 min
05:37 - 05:55 05:55 - 06:24
ACTIVITY - Line with hooks ACTIVITY - Net pull
Total time: 17.4 min Total time: 29.1 min Total distance: 2.0 Km
Total distance: 0.8 Km
Max speed: 9.9 Km/h Max speed: 2.7 Km/h
Avg. Speed 7.1 Km/h Avg. Speed 1.4 Km/h
Night time: 16.4 min Night time: 0.0 min
Day time: 1.0 min Day time: 29.1 min
06:24 - 07:20
ACTIVITY - Sail back to shore
Total time: 54.7 min Total distance: 8.2 Km
Max speed: 9.9 Km/h
Avg. Speed 9.0 Km/h
Night time: 0.0 min
Day time: 54.7 min
TOTAL
Total time: 2.84 h Total distance: 19.98 Km
Max speed: 9.90 Km/h
Avg. Speed 8.17 Km/h
NIGHT DAY
Total time: 1.42 h Total time: 1.42 h Total distance: 10.84 Km
Total distance: 9.13 Km
Max speed: 9.83 Km/h Max speed: 9.90 Km/h
Avg. Speed 7.97 Km/h Avg. Speed 8.40 Km/h
140
Sunrise time: 05:55 h Sunset time: 18:33 h
Engine on: 86 min Engine on: 55 min
10.8 Km 8.4 Km
ENGINE CONSUMPTION
Day: 2.54 liters
17005 IDR
Night: 1.96 liters
13145 IDR
Total: 4.50 liters
30150 IDR
ACTIVITIES DESCRIPT. TIME (min)
DISTANCE (Km)
AVG. SPEED (Km/h
)
MAX SPEED (Km/h)
DAY / NIGHT
ENGINE (ON/OFF)
STAKEHOLD INVOLVED
Preparation •Place boat on the shore •Place net inside boat •Push the boat into the sea
15 - - - NIGHT OFF Fisherman Other fishermen
Sail to the nets’ dropping point
•Sail 61 8.5 8.5 9.8 NIGHT ON Fisherman
Drop nets •Attach flag to first net •Drop nets •Attach each net to
8 0.5 3.1 4.2 NIGHT ON Fisherman
0
5
10
15
20
25
0.00 0.35 0.60 0.75 0.92 1.28 1.88 2.14 2.33 2.51 2.68 2.86
0
2
4
6
8
10
12
14
16
18
20
Dis
tan
ce (
Km
)
Time (h)
Spee
d (
Km
/h)
Speed / distance
Distance Speed
141
next one with floaters •Attach flag to last net
Fishing with line and hooks
•Drop the line with hooks •Pull the line when notice fishes
17 2.0 7.1 9.9 NIGHT ON Fisherman
Pull nets •Pull net from the first flag •Separate fish from net •Put net back in net bags
29 0.8 1.4 2.7 DAY OFF Fisherman
Sail back to shore
•Sail •Fish with line and hooks technique
55 8.2 9.0 9.9 DAY ON Fisherman
Post fishing •Place boat back on the beach •Place nets to its place out of the boat •First meeting with buyers •Pick up fish from boat •Count fish •Sell fish straight away at the beach
- - - - - - Fisherman Buyer Family (sometimes) Other fishermen
Selling fish •Family member sells the remaining fish from the previous day in the market •Buyers go to fishermen houses to buy fresh fish
- - - - - - Fisherman Family member (sometimes) Buyer
Table 16.Activities performed by fisherman #2
142
GPS TRACKING #3:
Date: 19/12/2017
Location: Batumana, Gili Selang
Karangasem, Bali
Fisherman: Made Sudana
Age: 28 y.o.
Boat size: 670 cm x 50 cm
Engine: Yamaha outboard
15 hp
Consumption: 10
liters/shift (if using engine 100% of time)
0.44 liters/Km
Price: 6700 IDR / liter
Pax: Max. 4
Shifts: 2 shifts
Morning (4:30 - 7:30)
Afternoon (14:00 - 18:00)
Extras: Sail
Figure 54. GPS track fisherman #3
143
Activities: 04:34 - 07:35
04:34 - 05:27 05:27 - 05:38
ACTIVITY - Sail ACTIVITY - Drop net
Total time: 52.9 min Total time: 10.2 min Total distance: 6.5 Km
Total distance: 1.0 Km
Max speed: 13.6 Km/h Max speed: 6.9 Km/h
Avg. Speed 9.2 Km/h Avg. Speed 5.7 Km/h
Night time: 52.9 min Night time: 10.2 min
Day time: 0 min Day time: 0 min
05:38 - 05:55 05:55 - 06:33
ACTIVITY - Pick up sail & wait ACTIVITY - Net pull
Total time: 16.7 min Total time: 38.3 min Total distance: 1.0 Km
Total distance: 1.8 Km
Max speed: 6.6 Km/h Max speed: 13.6 Km/h
Avg. Speed 3.7 Km/h Avg. Speed 2.8 Km/h
Night time: 16.7 min Night time: 1.7 min
Day time: 0.0 min Day time: 36.1 min
06:33 - 07:35
ACTIVITY - Sail back to shore
Total time: 62.4 min Total distance: 9.8 Km
Max speed: 18.6 Km/h
Avg. Speed 9.4 Km/h
Night time: 0.0 min
Day time: 62.4 min
TOTAL
Total time: 3.01 h Total distance: 20.04 Km
Max speed: 18.61 Km/h
Avg. Speed 8.30 Km/h
NIGHT DAY
Total time: 1.36 h Total time: 1.65 h Total distance: 8.54 Km
Total distance: 11.50 Km
Max speed: 13.59 Km/h Max speed: 18.61 Km/h
Avg. Speed 8.08 Km/h Avg. Speed 8.46 Km/h
144
Sunrise time: 05:57 h Sunset time: 18:35 h
Engine on: 6 min Engine on: 15 min
0.1 Km 2.9 Km
ENGINE CONSUMPTION
Day: 0.03 liters
203 IDR
Night: 1.26 liters
8470 IDR
Total: 1.29 liters
8673.02 IDR
ACTIVITIES DESCRIPT. TIME (min)
DISTANCE (Km)
AVG. SPEED (Km/h)
MAX SPEED (Km/h)
DAY / NIGHT
ENGINE (ON/OFF)
STAKEHOLD INVOLVED
Preparat. •Place boat on the shore •Place net inside boat •Push the boat into the sea
15 - - - NIGHT
OFF Fisherman Other fishermen
Sail to the nets’ dropping point
•Sail with engine
6 0.1 3.6 7.7 NIGHT
ON Fisherman
•Sail with sail
47 6.4 9.3 13.6 NIGHT
OFF Fisherman
Drop nets •Attach flag to first net •Drop nets •Attach each net to next one with floaters •Attach flag to last net
10 1.0 5.7 6.9 NIGHT
OFF Fisherman
Pick up sail and wait
•Pick up sail •Wait until time to pull nets
17 1.0 3.7 6.6 NIGHT
OFF Fisherman
145
Pull nets •Pull net from the first flag •Separate fish from net •Put net back in net bags
38 1.8 2.8 13.6 DAY OFF Fisherman
Sail back to shore
•Sail with sail
47 6.9 8.9 11.6 DAY OFF Fisherman
•Sail with engine
15 2.9 10.9 18.6 DAY ON Fisherman
Post fishing
•Place boat back on the beach •Place nets to its place out of the boat •First meeting with buyers •Pick up fish from boat •Count fish •Sell fish straight away at the beach
- - - - - - Fisherman Buyer Family (sometimes) Other fishermen
Selling fish •Family member sells the remaining fish from the previous day in the market •Buyers go to fishermen houses to buy fresh fish
- - - - - - Fisherman Family member (sometimes) Buyer
Table 17. Activities performed by fisherman #3
146
Annex 5. Energy data
Table 18. Monthly Solar radiation from 30. Indonesian cities (Rumbayan et al., 2012)
147
PV panels Batteries
Rigid Li-ion Gel deep-cycle
Unitary cost [€/W]; [€/KWh] 0.81 533.5 114.3
Weight [Kg/m2] ; [Kg/KWh 12 8.8 22.9
Security SOC14 [%] 20 50
Table 19. PV panels and batteries (commercial quotations)
14 SOC: State of Charge
148
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