bidhaa sasa – executive summary...solar lamp, a 6kg lpg cylinder with a grill and bidhaa sasa’s...

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Bidhaa Sasa Ltd - CPR/2015/178450 The Kijiji, Daykio Plaza, Ngong Road, Nairobi

Bidhaa Sasa – Executive summary An introduction to Bidhaa Sasa’s business model

Bidhaa Sasa is an international startup set up in 2014 in the UK with fully owned subsidiaries in Kenya and soon in Uganda. Bidhaa Sasa uniquely combines financing and last-mile distribution of modern household goods. At Bidhaa Sasa we strive to improve the quality of life of families in rural Kenya, Uganda and beyond by making technology goods both accessible and affordable by offering consumer financing to the under-served and unbanked. We use Tupperware-style direct selling techniques - by women for women - to deliver life improving products to our clients’ doorsteps while making all products payable in affordable instalments and mobile money.

Women in particular suffer the most from poor living conditions as they are tasked with most household chores, like cooking or fetching wood and water and spend more time at home and so they would benefit the most from these technology goods. They not only form our main clientele but are also at the core of our sales strategy.

Market context and target customers Whilst the infrastructure in Kenya’s cities is continuously improving, rural life remains a struggle: families use kerosene for a little light at night; travel often on foot to charge their phones; cook on smoky open wood fires; and rely on unsafe water, and to make it even worse their agricultural yields are one of the lowest in the world. The rural women are the ones that suffer the most from these conditions as they are in charge of most household chores, while looking after the children and the farm. In addition, most rural families in Kenya not only lack access to basic public services but also bank accounts and credit histories excluding them from accessing formal credit services.

There have been great developments in recent years in technologies for clean lighting with solar-based solutions, for clean cooking with improved stoves or liquefied gas, and equipment for more efficient farming. However, these technologies are still too expensive for most rural families, as they are available only in towns and payable with cash up-front. They do not even exist in the markets rural people frequent and too often they are unknown to them.

Bidhaa Sasa exists to overcome the barriers of accessibility and affordability that rural families, and women in particular, face when trying to improve their living conditions through the acquisition of clean technologies and goods. Biddha Sasa’s targets smallholder families (farmers with very small plots of land) who represent the vast majority of people in rural Kenya, and women in particular as an entry point into their communities. As shown in the map below, there are about three main regions in Kenya with high rural density populations: The Western, South Rift and Central regions. These are the geographical regions where Bidhaa Sasa has or will have a physical presence and where the vast majority of its employees are based.

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Our products and services At Bidhaa Sasa we source all our goods from reputable suppliers because we believe that only high-quality goods can be offered when selling products on credit. We buy our goods from suppliers in Nairobi and stock them at our warehouse managed by our logistics partner who also delivers the goods to our clients' doorstep.

Our current product range focuses exclusively in products and technologies that have the potential to improve people’s living conditions and that make them save time or money. Today the range is split in four main categories as shown below: clean lighting and phone charging; clean cooking and accessories; smart agriculture tools; water and sanitation. All are sourced from suppliers who offer warranties.

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Shown below one can see a water tank installed at a client’s home, a complete solar home system, a solar lamp, a 6kg LPG cylinder with a grill and Bidhaa Sasa’s branded efficient charcoal stove. All of these products save time and money (because the user buys less or no fuel at all for example) and of course make living conditions more comfortable.

Our approach is holistic, we offer a series value added services together with the technologies in offer: we offer un-collateralised credit to all clients; we deliver to our clients' doorsteps; we educate end-users on product usage and payment methods; we install complex products at clients' homes, and we offer after-sales services and honour the products' warranties.

Our credit model We believe that to make these goods accessible and affordable users need access to flexible repayment terms spreading the cost of these goods over time. Therefore, we offer payment plans of on average 6 months to all clients. For example, instead of paying upfront 5600 shillings to buy a new cookstove our clients pay 700 shillings upfront when they receive it and then 700 shillings on a monthly basis for seven months. All payments by clients are made via mobile money using their own phones.

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We don't require collateral (the products act as collateral), we don't perform credit checks (most clients, and particularly women, don’t tend to have credit histories) but we do leverage the social capital that exists in villages to ensure timely repayment by requiring that our clients are organised in groups so they share the liability and all act as cross-guarantors. Each group is represented by a leader who is a client and our main point of contact.

Peer pressure is the most important incentive for clients to pay on time. In our model, we strengthen the group liability concept by ensuring all members always know who is in arrears (with SMS) and involving leaders in chasing late payers. In addition, we celebrate and reward timely repayments of the whole group giving away gifts and small cash incentives and organising small “end of cycle” parties as shown below.

The last resource used with a client in arrears is the repossession of the good once all the other avenues have been exhausted (normally after one month of chasing). Clients have a second opportunity to pay their debt when the goods are repossessed but if after a month this does not happen, the debt is written off and the goods maybe refurbished and resold or used for marketing purposes.

Our marketing and distribution model Our marketing model has been influenced by the success of Tupperware and other door-to-door models because as in most societies social capital is an asset that can be leveraged to distribute efficiently products and services.

We initially contact prospective clients and group leaders in mobilisation meetings like the one shown below.

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Prospects would typically invite friends and neighbours or allow us to meet their savings or cooperative groups. There, we demonstrate the goods and leave behind samples for trial for several days in the hands of the most promising leads.

To recruit people in their community group leaders with the help of our staff showcase the goods to people in their social circle, likely at their home, similar to Tupperware-style parties (as shown below). This homely and familiar setting at their friend’s or neighbour’s place allows women to be more inquisitive compared to perhaps a busy market or a shop.

Our marketing strategy relies on a word-of-mouth effect as clients and leaders promote the goods they bought themselves and recruit new clients. Today 70% of our clients have been recruited by an

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existing client, a leader, proving this strategy is more cost-effective than traditional agent-based solutions. Leaders that form more than one group earn cash and non-cash incentives and also benefit from improved social status in their village.

Our track record We launched in May 2015 in Webuye, Bungoma County, Kenya, and have since tested and validated our product range selection, sales process and credit terms based on users’ feedback using the Lean Startup methodology.

As of end of August 2019 we have reached from six rural hubs in the Western region more than 30,000 clients of which 70% are women generating $1,900,000 in revenues. We employ more than 70 full-time staff of which the vast majority are based in our rural hubs (shown in map above) creating high-quality rural employment opportunities. As a women-centred company it is not by chance that 60% of our staff are women at any level of seniority. To date we have worked with more than 2000 group leaders of which 80% are women and are the cornerstone in our women-to-women model.

To date, 45% of all units sold have been LPG cylinders, 25% improved charcoal stoves, 21% solar solutions, while the remainder have been cooking accessories and farm tools. Our repayment rate at 98% is probably one of the best in the rural market in Kenya.

Our unit price ranges between $40 and $140 with an average of $60 making Bidhaa Sasa probably the only player that offers uncollateralised payment plans at this price point which we believe is attractive for most, even for the ones at “lower end of the pyramid”.

We plan to prove that a Tupperware-style model is highly scalable as it has been proven in both rich and in middle-income markets by Avon, Tupperware and others, and that our model is particularly suited to highly dense rural areas where strong social cohesion can be leveraged for the credit liability element and marketing at once.

Financial needs and expansion plans By end of 2025 we plan to manage up to 16 hubs in Kenya across the three main farming areas in the country: Western, South Rift and Central, while growing the product catalogue with more life-improving goods and technologies. By end of 2025 the business would have reached half-a-million clients of which most will be women.

The table below illustrates how the business has planned to grow between now and 2021 setting up new hubs in the South Rift and Central farming regions, reaching up to 16 hubs by end of 2021. For this expansion phase the business would need ca. 700,000 EURO between now and the end of 2020 in the form of debt to purchase inventory to resell to its clients. The table below shows among other figures the value of the inventory needed to support Bidhaa Sasa’s growth plans in Kenya.

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Financial Model and Cashflowplan of the project Bidhaa Sasa buys in bulk goods such as the cookstoves and solar lamps at wholesale prices from local and international suppliers and pays them upfront. It then resells the goods to its clients who pay for them using payment plans over time, typically six months.

The business makes money by charging a margin between the wholesale price paid to suppliers and the retail price paid by the clients. Since all clients use payment plans to pay for their goods, it means that the business does not realise these margins upfront but over time.

On average the clients’ payment plans last six months and it is therefore crucial for the business to access debt to finance its inventory and bridge this time gap. In addition, the business is in its growth phase adding more hubs and employees in Kenya over the next 5 years which requires funds to purchase its inventory to serve future clients.

The Bettervest project’s loans will finance only material, ca.5,000 units of clean cookstoves, solar lamps, solar radiolamps and solar home systems which will be sold to mostly female clients within six months of the project inception from all our rural hubs in Kenya. The loan from the crowd will sustain the growth of the business over the next years.

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Bidhaa Sasa will service the loan from the proceeds generated by the sale of the solar products and cookstoves. The loans principal will be repaid from the cash coming from clients as they make their instalment payments while the loan interest will be part of the margin the business charges to its clients.

In order to secure the financial situation of the company as a whole, however, the company's shareholders have paid additional equity capital of 265,000 Euro into the company. Thus Bidhaa Sasa has an equity capital of 757,000 Euro as of today.

Each client buys their goods using payment plans, this means that they sign a contract that stipulates the monthly instalment amount and the date this instalment needs to be paid. To reduce costs all payments are made via mobile money so clients have the convenience to make the payments from their own phones.

These 5,000 units will be sold to 1000 new groups of clients each of them headed by a leader who supports the business raising awareness of the products, finding new clients and managing their groups. Not only do they get cash rewards for these activities, but they also earn social recognition in their own social circles (in their own words: “I am the one that brought clean lights to the village”).

Founding and Management Team, and Legal Structure Bidhaa Sasa UK is the mother company based in the UK and is fully owned by its two founders Rocio Perez Ochoa and David Disch. It owns fully the subsidiary in Kenya and soon a new one in Uganda as shown below.

The two founders have prior experience in renewable off-grid energy, finance and last-mile distribution businesses. David, based in Kenya, and Rocio, based in the UK make all the strategic business decisions jointly.

David (pictured below) manages all day-to-day operational activities, including the sales process, staff development and supervision, stock and logistics management, and supplier relations. He sets up the rural hubs, trains staff, and generally ensures that things are going smoothly.

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Rocio (in picture below), current majority shareholder, is responsible for managing the holding company in the UK and supporting David in Kenya. She manages administration and financial matters like accounts and fundraising, and she is responsible for our client data analysis and research.

The business in Kenya is co-run by David and Rocio who support the local management team for the following functions: Human Resources; Suppliers Management; Logistics; Sales; Finance and Research as shown in organisational chart below.

Competitive landscape Bidhaa Sasa competes with a few players but none of them represents a direct threat. M-Kopa, who sells solar systems (small and large), is a notable player but it operates out of town-based shops reaching peri-urban users which means it does not overlap with Bidhaa Sasa target market (rural

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women). Also, their clients can only purchase non-solar products on credit (like a stove) only after acquiring an expensive solar system.

Micro-finance institutions (MFIs) and banks in rural areas offer loans for similar products (e.g. cookstoves) but it is usually restricted to existing clients of larger loans. These banks also have to work in partnership with distributors adding costs and making the products more expensive to the end user.

A notable competitor is The One Acre Fund, an agricultural non-profit cum MFI that offers to their farmers top-up loans for solar lamps and other goods, but clients can only purchase these goods once a year as they are bundled with the main agricultural loan that is linked to the farming cycles. They do target smallholder farmers so they operate in the rural space, but they do not target women in particular and their typical loan size is well above $100.

Unique selling points We believe our model has several advantages over competitors: a) we cater for customers all year around and we are independent from the farming cycles, and our clients don't need to have a bank account or credit history or a previous larger loan; b) we do not rely on a specific technology such as PAYG (which allows to switch off remotely a battery for example), so we can extend credit for the purchase of non-electrical goods; c) with our low operating costs resulting from our Tupperware model we can offer standalone loans of $60 on average which nobody else currently offers.

Our unique women-to-women model designed around women’s needs and desires makes us the only company that truly serves the female market which represents a huge market opportunity on its own right.

The Diversification Strategy The business is diversified across geographies and product offering. Today we sell from six hubs growing to 16 in the next years covering most of rural Kenya where density population is high. Expanding the product range for solving different problems covering lighting, cooking, and farming also helps to diversify. This strategy has already pay off as demonstrated by our excellent repayment rates at 98%.

Social and environmental impacts Our Theory of Change hypothesis is that Bidhaa Sasa improves the quality of life of rural families by selling on credit a range of household goods using an innovative women-to-women distribution

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model based on female staff members’ and clients' empowerment. We measure through quantitative and qualitative indicators changes in empowerment of female staff and leaders, changes in the lives of clients due to the use of the products bought and client satisfaction.

The technologies acquired by our clients save them time and/or money and also improve their quality of life. For example, an improved cookstove uses less than half the charcoal the user would normally use saving them up to $200 per year with current charcoal prices. In addition, the use of solar technology and improved cookstoves reduces or even eliminates the use of non-sustainable fuels like kerosene and charcoal. The quality of indoor air and health of the family improves when using solar for lighting and improved cookstoves for cooking. A single stove can avoid 3 tonnes of CO2e being emitted each year when continuously used in rural Kenya. Typically, our solarlampsandradiolampsdisplaceroughly280KgCO2eperyearperunitandoursolarsystem900KgCO2eperyearperunit.Theseproductslastforaboutfiveyearsuntilthebatteryneedstobereplaced,aserviceBidhaaSasaalsofacilitates.The sale of a total the 5,000 products funded by with the Bettervest loans thus avoids emissions of around 11,250 tonnes of CO2 every year.

Our partners and memberships

Our supplier for the solar products is Green Light Planet one of the most established manufacturer of such goods. Biolite/Ecozoom manufactures our stove that has our own brand which is the only Tier 3 stove in the market today in Kenya (meaning it is the most efficient and cleanest device availble). Bidhaa Sasa is member of the Clean Cooking Alliance that promotes clean cooking in developing countries.

Risk and Mitigation

The political and economic risks of this project are low because Kenya is one of the most stable countries in the region. It is a democracy with free elections and an economy open to foreign investments and a relatively stable currency.

Bidhaa Sasa’s main market risk is driven by its competitors’ landscape. However, these competitors do not operate in the same price range (sub $100 per unit), not all are focused serving the ultra-rural, none of them cater for women’s needs and they do not offer added value services that our Tupperware-style model allows to do.

Closing Summary

Bidhaa Sasa’s unique women-focused model is making technologies for clean cooking and clean lighting more affordable and accessible to the ones the need them the most: low-income rural women. With the loans from Bettervest crowd the business will be able to fund its growth in Kenya reaching even more women with life-improving goods.

bidhaa sasa – executive summary...solar lamp, a 6kg lpg cylinder with a grill and bidhaa sasa’s...

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