3.1.1. Creating resource-constrained innovation

The narrative of innovation in Grameen Shakti is constructed within a frame of resource scarcity: scarcity of finances and human resources. To overcome this, Grameen Shakti has adopted a low-tech innovation strategy aimed at: (i) cost reduction of final products; (ii) cost reduction of services, e.g. through the innovation in, and optimization of, operational activities and services in the field and (iii) a process of learning that comes directly from experiences gained in the field.

With no effective R&D department, innovation at Grameen Shakti springs largely from a spontaneous, nonlinear process of bricolage (see Part 1). As a Grameen Shakti project development expert in Dhaka stated:

“Grameen Shakti has an R&D department, but it seems it is in sleep mode. There is no particular division. […] You cannot find the systemic R&D here. Everything is more like grassroots”.

An informal innovation process is based more on a process of learning and trial and error that occurs at the boundaries between the company and the surrounding environment. In Bangla, there is no proper translation of the English word “innovation”: our field interpreter adopted the word “unniti”, which can be roughly translated as “change for good”. As a result, the meaning of innovation assumes a wider connotation that includes not only technological innovation, but also more normative aspects. The meaning and direction of technical change in Bangla has to have a positive outcome for the lives of those who adopt it. This is reflected in the different perceptions the Grameen Shakti employees have about the company’s main innovations. A Regional Manager, for example, described the most important Grameen Shakti innovation as follows:

“Solar [home systems] has been the biggest innovation for Grameen Shakti, as people in remote areas could not study and do their work due to the absence of electricity”.

Similar statements were very common among the senior staff at the company. The Grameen Shakti General Manager, for example, stated:

“The real innovation of Grameen Shakti is to give very poor people the taste of light. Those people now have a better life and can improve their business. In the dark, you can’t walk or work. Grameen in Bangla means village. The intuition of Pr. Yunus was to invest in the poor, conquering their trust”.

In contrast, Grameen Shakti employees in the field appeared to privilege operational aspects:

“We always provide after sales services. When a client reports a problem with the system, we immediately go over and solve the problem. So, we have been successful because our service is better than our competitors”.

Grameen Shakti was faced with the challenge of making its business model profitable and scalable, balancing these normative and operational aspects in a resource-constrained environment. Innovation at GS, at least in its initial stages, was driven by: (i) a socially motivated desire to provide affordable solutions, leveraging external providers to reduce product costs and introducing an innovative micro-financing plan; (ii) the need to furnish an extremely flexible, quick and cheap after-sales service, leveraging existing Grameen Bank networks and (iii) further leveraging of a public system of incentives for rural electrification. All three emphasize the leveraging of alliances with private and public actors and institutions (i.e. elements of BOP2 thinking) to allow the delivery of appropriate products to the rural poor in a market-led paradigm, in which Grameen Shakti plays a prominent role as a key intermediary.

The first of these drivers was addressed by redesigning existing technologies in a novel, frugal fashion and complementing this with the design of an innovative financial instrument that is appropriate for the limited income of rural people (i.e. micro-financing). The frugal redesign of pre-existing technologies such as solar panels, biogas or traditional cooking stoves draws on deskilling and localization processes, using local materials and local providers. Only the solar panel and the LED light bulbs are imported from abroad, with all remaining components being locally produced and assembled. Even the most complex component of the SHS, the charger controller, is designed to be easily repaired by local technicians with limited skills, who work in the Grameen Technology Centres (GTCs). The price is also kept low by the successful negotiation of good deals with international providers (e.g. Kiocera and Schneider) of solar panels that often find it useful to associate their brand with social enterprises such as Grameen Shakti.

The second driver, to provide an efficient and flexible after-sales service to customers scattered across the country (and often in remote areas), has been addressed by exploiting the existing Grameen Bank network in the territory (90% of Grameen Shakti managers come from GB). Innovations are designed so that they can easily be fixed in situ and be robust enough to survive in the challenging conditions found in rural Bangladesh. In the case of biogas plants, servicing does not require special instruments or expertise and is usually carried out in situ in the field. The Grameen Shakti network in rural areas allows for the rapid testing and deployment of new solutions and an efficient after-sales service. The Grameen Shakti human resource director, for example, stated:

“The logic is that as we have created a huge network all over the country, with 1,300 offices, we can introduce any new product and start disseminating it in the rural communities. When we started with solar, we thought of introducing biogas and ICS because we had the network, the customers, and a good reputation. The top management chose and decided to give a new technology for Bangladesh. The result is a reduced price of the system and an affordable after-sales system for the users”.

Creating such a network was a long journey and an intricate learning process. However, the fact that many Grameen Shakti field workers share the same conditions as their customers – the Grameen Shakti branches we visited in the field were frugal and the living conditions of the workers we encountered resembled those of their clients – certainly helped to elaborate an empathetic and effective innovation strategy. However, in many cases, the technological know-how needed to be imported from outside the company, or created from scratch. In the case of biogas, for example, the initial know-how was gained by local consultants who were trained in China. China has been experimenting with biogas plants in rural zones since the 1970s (Chen et al. 2010) and during the same period, the Chinese government encouraged the adoption of household digesters among its neighbors. This was the experience of one of the consultants working for GS:

“I was first introduced to the Chinese model in 1992 and it was working very well. I learned from a man who went to China to learn about technology. I started disseminating the technology in Bangladesh and in 1994 I also visited China for training […]. I received training for 2 months at a Chinese governmenttraining centre […]. Then, 2 projects started with our initiative, and 28,000 plants were constructed. In Bangladesh, it will continue to progress further”.

The efficiency of the biogas plant has been increased over time through incremental improvements. The first model had many problems, being expensive, inefficient and having significant gas losses. The plant that Grameen Shakti currently installs is in contrast a highly efficient concrete construction that is able to maintain the gas pressure at a constant level and produces good quality manure. This model was developed by Grameen Shakti consultants who had been experimenting for months, ending up with a cheaper plant that does not lose gas and guarantees 6 hours of cooking a day. Despite its relatively high price (between 25,000 and 35,000 taka i.e. between 300 and 450 US$), biogas plants are diffusing quickly among small farmers and the potential for further expansion is promising.

Finally, Grameen Shakti has reduced costs by leveraging the public system of incentives for rural electrification promoted by the Infrastructure Development Company (IDCOL) (IDCOL 2013). IDCOL was established in 1997 by the Bangladeshi government as a “non-bank financial institution”, a company that is a “market leader in private sector energy and infrastructure financing in Bangladesh” (ibid). IDCOL delivers loans that are payable over 8 years at a very convenient interest rate. The Grameen Shakti business model consists of borrowing money from IDCOL to cover its material and operational costs, and then recovering the money from its rural clients within 2 or 3 years via its packages.

IDCOL also manages the project of rural electrification, leveraging different kinds of foreign financial support¹ (i.e. World Bank, IMF). A Grameen Shakti manager describes the relationship between the Grameen Shakti and IDCOL as follows:

“For each installation, we are getting a loan from IDCOL, the loan is payable in 8 years. But, we get this money back from the clients in 2–3 years or even in a year or instantly. What we do is we revolve the money in the business. We get the money once, but we revolve it twice, at least two times. And, for each installation, we have some subsidy from IDCOL as well for SHS or biogas […] the government does not have access to the rural village and thus Grameen Shakti fits in. The government uses Grameen Shakti as a media. And Grameen Shakti has a brand name of Grameen and Professor Yunus and a huge network in the rural areas; it can disseminate renewable energy technology very quickly. At present, its monthly instalment rate is about 22,000 SHS, 500 biogas, 18,000 ICS. It’s a huge achievement. No other organization can do it”.

Grameen Shakti has been successful in delivering solutions that are affordable for its rural clients, robust enough to cope with the environmental specificities of rural Bangladesh and, simultaneously, profitable for the company: consistent with the BOP philosophy. However, despite the efforts to reduce the price of the products and to develop innovative funding and micro-financing schemas, products such as SHS still do not reach the poorest Bangladeshi. This is a recurrent theme among the interviewees, especially the managers:

“A biogas plant with a capacity of about 3 m costs around Tk. 30,000, and therefore it is not feasible for a small farmer […] Currently the solar PV systems are very expensive, so if some improvements are made on the reduction of the costs of solar panels, and on battery costs, then Grameen Shakti will be able to disseminate these at a more reduced price”.

“The price of the SHS is still very high and people are therefore still not very interested to purchase the system.”

What was in fact observed in the field is that the biogas plants and SHS are usually purchased by those who are relatively affluent or privileged in the village. To overcome those issues, in the future, Grameen Shakti has two strategies. One is to provide subsidized prices for those who still cannot afford to pay the monthly installments of a standard SHS. The second is to reduce the price through technological improvements, e.g. by developing village “mini-grids” to sell the energy instead of the physical systems, or by reducing the cost of the batteries and other components by setting up local production units in situ. However, the price of the most onerous component, the photovoltaic panel, does not depend on internal factors but on international markets. A substantial drop in the panels’ price depends on the foreign manufacturers and external markets, a variable that Grameen Shakti cannot control.

3.1.2. The green sub-narrative

The innovation narrative at GS embeds significant “green” elements: first, it implies a need to overcome those “environmental constraints” that affect rural areas in Bangladesh; second, the desire to design its innovations as eco-friendly products; and, linked to this, the desire to promote “environmental awareness”. The Bangladeshi environment is generous and provides abundant food, but it is ecologically fragile and unstable. Water beats the rhythm of Bangladeshi lives. It blesses the land with fertile silt, but it also hits the region with the bold violence of the monsoon. Bangladesh lies on a delta formed by the rivers Ganges and Brahmaputra which channel the water flowing from the Himalayas (van Schendel 2010). Every year, periodic floods erode the soil, destroying arable areas and accumulating sediment to create new land. This new land is up to 90% more fertile than before (Lewis 2011). Those new portions of land, often seasonal islands, are known as chars. Although the exact number is unknown, between 200,000 and 500,000 people are believed to live permanently on the chars (Wimmer 2012). This natural, precarious equilibrium makes the life of the char dwellers extremely insecure and unstable. Many people are forced to move every year due to the floods. This instability has increased since the construction of the Farakka Dam on the Padma River on the border with India. According to the Grameen Shakti workers of Rajshahi, the dry seasons are getting drier and the rainy seasons are getting more destructive, due to the fact that the Indians close the dam in the winter and are compelled to open the gates during the monsoon. As a result, the higher speed of the water is the cause of the increasing erosion of the banks of the rivers. The Padma River is the source of the wealth, and the misery, of thousands of inhabitants of the chars. Despite the harsh living conditions, people are attracted to, and fight for, the fertile land of the chars. As a Grameen Shakti fieldworker tells:

“The river is changing its position as the banks are destroyed and the soil keeps moving. About 500 metres of land are being shifted every year in this process. For example, according to the local people, the Padma River used to be located about 2–3 km away from Pabna city. Now, the same stream can be found at least 14–16 km away. As a result, Pabna has not been developed in the way it was supposed to. That’s why people name Padma, ‘Sharbanasha’ (the destroyer). […] However, the land is very fertile. People fight for the land. They keep guns with them, they kill each other. This is one of the dangerous places in Bangladesh”.

Public infrastructures in the chars are virtually absent. Roads and paths are continuously swept away by the water and deploying a proper energy supply network is an immense, sometimes impossible, challenge. However, the Grameen Shakti sales energy product sales in the chars are soaring. The Rajshahi field work team knows the local market very well:

“There is no chance of national grid connection, and the people knew this and buy Solar Home Systems. […] The highest number of Solar Home Systems sold is in the char. We have already installed more than 700 SHSs. […] 95% of our work is done in the char. […] All the houses in these areas are temporary and they have to move every time the water level rises. I had an experience, when I visited a client and I found that their lives are very difficult. I noticed that the water level was very high, and they made houses on banana plants that helped them from the hazardous exposures. The solar panels were working, which was very delightful to see”.

Grameen Shakti has found a profitable niche in the chars, not only because it develops and markets products that are appropriate for the environment into which they are introduced, but also because the financial conditions of dwellers there were found to be much better than expected. Many dwellers benefit from uncertain but abundant harvests and from selling their wares across the Indian border. Despite their uncertain living conditions, they can often afford a portable SHS to carry along with them in their semi-nomadic existence. Grameen Shakti has even developed an innovative solution to introducing biogas in the char, which consists of a fiberglass digester that can be easily installed in the sandy soil and removed relatively quickly in case of flooding. The char case illustrates that innovations can be shaped by environmental constraints, as in the case of the portable biogas and SHS. By developing innovative products appropriate to the context and environment of the char, Grameen Shakti has successfully opened up a previously untapped and neglected new market.

The second element of the green narrative is one that reflects the fact that the SHS, ICS and biogas plants aim to reduce pressure on local ecosystem services, notably those that have traditionally provided biomass for lighting and cooking, while reducing carbon emissions which is important for attracting investors. Data released by the company in January 2013 claims an approximate saving of 920,000 tons of CO₂ per year from its combined SHS, ICS and biogas plants (Grameen Shakti 2013). At the time of our research, Grameen Shakti was planning to initiate a program under the Clean Development Mechanism (CDM), the emission trading system defined in the Kyoto protocol (IPCC 2007). In the words of one project manager:

“[GS] is the only company in the country registering for CDM in case of both SHS and ICS. […] So, developed countries are getting interested in CDM for buying carbon quotas. Grameen Shakti is the frontier in this regard in Bangladesh”.

Grameen Shakti argues that such innovations are intrinsically eco-friendly because they aim to minimize the use of energy and raw materials across the entire value chain. In the words of the Grameen Shakti chief engineer:

“Grameen Shakti is contributing to global environment systems by reducing the emission of carbon in all its programs. […] Through SHS we can save kerosene, while from ICS we can save wood biomass and biogas, which is a complete substitution of wood, and without, biogas burners would otherwise need traditional biomass. In these ways Grameen Shakti is reducing global carbon emissions”.

Grameen Shakti also claims that its activities are improving the environmental awareness of Bangladeshis in rural areas. It conducts educational programs and marketing activities in schools to promote its products and to raise environmental awareness among young students. These activities have been crucial for penetrating the closed nature of local communities. Grameen Shakti field workers use schools, community centers and local markets, for example, to highlight the risks of using biomass for cooking and kerosene for lighting.

3.1.3. Institutional weaknesses and voids

A fundamental element of Grameen Shakti’s narrative focuses on its institutional role within the country. This emerged from our field data in two different ways: first, a claim to “remediate institutional failures” (e.g. addressing patronage relations, female segregation and social exclusion). Second, Grameen Shakti claims to “address institutional voids” (i.e. the incapacity of the state to deliver a functioning energy infrastructure).

Formal institutions in Bangladesh are closely intertwined with a complex system of informal institutional elements that encompass social, religious and cultural practices. The institution of patronage is a dominant practice, not only within the state, but also in the daily activities of the informal system of courts known as shalish (Lewis 2011). Within patron–client networks, loyalty to the ruling group hampers any real investment other than where it furthers the interests of the party in power. Patronage, often accompanied by bribery, is the unofficial door to gaining access to public jobs and justice. The asymmetric relationship between patrons and clients hinders any independent initiative and disheartens entrepreneurial activity. Other social institutions, which include the patrilineal system and other kinship norms of behavior, limit the access of women to the public sphere. Local authorities have very limited resources to deliver public services such as water sanitation, energy and healthcare to the rural areas. The char is a clear example of institutional voids, but the incapacity of public institutions is evident even in a megalopolis such as Dhaka, where public facilities and services are extremely limited and faulty. In many cases, NGOs and social enterprises such as Grameen Shakti have succeeded where formal institutions have failed. The government needs entities such as Grameen Shakti despite the threat such organizations might pose to its credibility and authority. However, Grameen Shakti also needs government support, for example, by leveraging the incentive schemes the government offers.

Another crucial asset of Grameen Shakti is its ability to fit into the local social institutions without creating disruptive cultural clashes. The case of the GTCs is a good example of this process. Gender division of labor is evident in all aspects of life in Bangladesh. Allowing young female engineers to work in a safe, dignified and controlled environment such as the GTC is a non-invasive way to foster a positive social change towards a more equal relationship between genders. Women in the GTCs work in a familiar environment, usually a private house where they share food and accommodation. Educated women in the rural areas would hardly find a better occupation. Grameen Shakti makes the observation that women perform better than men in technical tasks because they are more focused and patient. Working in the GTC provides an income that, it is argued, empowers local women. Grameen Shakti’s GTCs evoke the feminist utopia described by the Bengali writer Rokeya Sakhawat in the tale “Sultana’s dream” written in 1905. She describes a futuristic world based on a mirror image of the traditional practice of purdah in which society is dominated by women and run by wonderful machines fueled with solar energy (Sakhawat Hussain 1988).

3.1.4. Empathy and creating social value

According to Grameen Shakti managers, the microcredit schemes and affordable prices of their products explain only in part the wide diffusion, penetration and success of their activities. People at Grameen Shakti have a very clear idea of what the key to their success is: they succeed because they understand the field. Its narrative is enriched by: (i) a deep sense of empathy and (ii) the belief that social value can be created by fostering the capacity of people to perform as active economic actors.

Empathy emerged at many levels from our interviews. The Grameen Shakti Operational Manager, for example, described why he joined the company in the first place:

“The village I am from did not have power or electricity ‘til I passed my university studies. I had to use kerosene lamps for my studies, which has very little light. […] I got the chance to visit a very remote area in Bangladesh, where I followed a staff and a technician. The technician and I travelled 16 km by rickshaw to houses where he had to install a SHS. I helped him with the installation, and did not let him know that I was working for Grameen Shakti and was under the impression that I was a visitor. In the evening he asked all the children to come along with some adults too, saying that he would show them something magic. When a huge crowd had gathered he asked who was the youngest among them, and a 2 year old boy came forward whom he asked to turn on the switch for the light. Then all the lights were turned on and everyone started shouting in excitement at seeing light. Among the crowd there was a very old woman whom we asked if she had ever seen electricity or a switch on a light. She was afraid at first but after showing her how to switch on the light and turn it off, we saw the smile and happiness in the faces of the children and women. This was my motivation, and I thought that we should work to provide people with power as it brings happiness in their lives”.

All the Grameen Shakti employees told us a similar story. Coming from the same background as their customers, Grameen Shakti staff claim to share a very similar cognitive frame and livelihood as those in the rural population. Field workers in local branches share the same living conditions. They often live in isolated areas, use solar energy and are integrated members of the local community. They, like their customers, have a limited income because Grameen Shakti wages are intentionally maintained slightly under the market rates to encourage sales. The field worker knows the local ecosystem, family income, problems and aspirations better than anybody else because they are embedded in the customers’ social context.

Grameen Shakti also has a deep conviction that even the poorest people can perform well if they are offered the opportunity. In the Grameen Shakti narrative, access to energy is an indispensable factor for increasing the productivity and incomes of the poor. This idea is borrowed from the GB and permeates all the Grameen family of organizations. The losers of the patron/client structure in Bangladeshi society are those who are not strongly affiliated to influential groups of power or who are not members of any patronage. Living under such conditions means limited access to basic services such as water, education, healthcare and energy. Grameen Shakti claims that it can serve a wider group of people in a more inclusive way in comparison with the traditional system of patronage. Unlike the traditional mechanisms of power, the interest of Grameen Shakti is to sell as many products as possible to maintain business profitability and sustainability. At least in principle, the opportunity to purchase an SHS, an ICS or a biogas plant is not given on the basis of being a member of a specific clan, but on the capacity of people to pay back the loan with their work. This mechanism however has strong limitations since it excludes a priori a huge segment of the population that cannot afford Grameen Shakti products. According to the Grameen Shakti, this is, however, a problem linked, on one hand, to the high cost of the technology and, on the other, to the incapability of the Bangladeshi economy to raise the minimum income of the vast majority of the population above a certain level that would allow it to address their basic needs. In the mind of Grameen’s creators, entities such as Grameen Shakti are proof that a business can both be profitable and create social value, and also have a remarkable impact on the lives of millions of people.