Pact

PACT

Have you ever wondered how life would be without electricity? Living without electricity is unfathomable for those living in developed countries, especially us as Columbia students.  However, approximately 16% of the global population have limited or no access to electricity. The striking similarity among this 16% is geographic location: over two-thirds of those below the energy-poverty line live in rural areas and the current situation in Myanmar is no different. More than 2/3 of the country’s population lack access to the national electricity grid and rural access is even more limited. To help address this issue, Net Impact took on Pact Innovation as a client. Pact anticipates these rural areas will still lack access despite national efforts to expand the grid. Further, microgrids are posed as an alternative solution for rural areas that cannot access the national grid.

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Economic development becomes increasingly difficult without access to electricity; meanwhile the economic viability of an alternative electricity supply is low without proper demand. Team Myanmar’s mission was to address and stimulate the demand for electricity by supporting micro entrepreneurship in rural Myanmar, with the end goal of increasing GDP growth in selected areas. The team of five came up with comprehensive solutions to stimulate business demand for electricity. Team Myanmar consisted of five members from a diverse array of backgrounds, bringing a breadth of expertise to the project. Crysta, Frances and Pol worked diligently to develop a business template and industry specific business plans as two of the team’s deliverable’s. Their combined expertise in communications, corporate strategy, accounting and international development provided a solid foundation for the task. Team lead, Chanty, and Britt used their expertise in finance, project management and research to develop a guaranteeing financial system for the micro-entrepreneurs and local microfinance institutions. With the guidance of faculty advisor, Phil LaRocco, Team Myanmar developed four tools for Pact in a timely, coherent manner.

Team Myanmar’s journey began on a sunny Wednesday afternoon in Columbia University’s Science & Engineering Library where they met to narrow the scope of the project and discuss the first call with their point contact in Myanmar. The purpose of the first call was to attain first hand insight on the current situation in Myanmar. To complete their comprehensive understanding of Myanmar, the team performed extensive research on Myanmar’s geography, demographics, economy, business landscape, electrification status and its social and political stability. After narrowing the scope of this project, Team Myanmar subdivided into two groups: the business template/plan team and the financial system team.

BUSINESS TEAM

In order to build the template model, Crysta used two credible examples of business templates in developing economies – REED Toolkit: A Handbook for Energy Entrepreneurs recommended by Professor LaRocca, and the International Labor Organization (ILO) Improve Your Business/Planning for Your Business Toolkit. The ILO toolkit was developed as part of a management-training program for small businesses, especially in poor populations and developing economies. It is very simple and straightforward – often using images and simple “quizzes” to teach management concepts, which inspired her to create an equally simple and straightforward template that entrepreneurs could use at the onset of their process to create their business and in conjunction with the other tools developed by the team (business models, money flow chart, and guaranteeing system). The flow-chart design is to allow users to work their way through all of the tools through a series of easy-to-answer questions. Pol and Frances used several resources to establish a specific business plan for both irrigation pump and oil expeller businesses. In addition to the ILO or REED catalogues, they used information from IRENA (International Renewable Energy Agency), cases studies from the Hystra report on scaling energy projects in developing countries as well as some of the results from the Multifunction Platform in West Africa developed by the UNDP. Access to data from the focus areas was a huge barrier for the business team, yet they countered this by developing a model that is applicable in different types of settings.

FINANCIAL TEAM

Pact asked Team Myanmar to research and recommend a guaranteeing system based on financial institutions’ credit assessment. Myanmar’s microfinance system is still in its nascent stages and faces internal and external challenges. The Microfinance Law passed in 2011 has imposed numerous restrictions making it extremely difficult for local and foreign owned MFIs in Myanmar to secure funding from larger institutions. Moreover, the microfinance institutions lack collateral and adequate operational capacity, impeding the success and growth of these institutions. Individuals and communities in need of a proper financial system are also affected. On an individual level, access to financing is extremely difficult, even for those with viable business models. Eighty percent of Myanmar’s population has little or no access to credit.

Chanty and Britt tackled this by researching the current state of Myanmar’s microfinance system on an industry and individual level. They additionally researched best lending practices among international microfinance institutions as ranked by Forbes and the Mekong Business Initiative, which is a joint advisory facility of the Asian Development Bank and the Government of Australia. This research was used to compile a “borrower criteria checklist” and an “MFI guaranteeing system.” Amidst confusion around what constitutes as a “guaranteeing system,” the financial team developed two tools: one that can be used by a borrower and a tool useful for MFIs. The former deliverable is in the form of a yes/no survey, listing numerous individual and group lending standards that must be met in order to secure a loan. The latter deliverable will ensure MFIs can obtain funding from larger institutions, ultimately trickling down to individuals within society.

TEAM CHALLENGES

Team Myanmar experienced significant challenges throughout the project. Lack of access to hard data was a major challenge to the project’s progress and contact with the client was limited. Understanding what constitutes as a “guaranteeing system” and an “energy-based enterprise” was difficult given lack of clarity from the client. Nevertheless, the team’s goal was achieved by developing tools that are easy to use and able to facilitate training and education for a population of low literacy.

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