CASE 2: SZ / GIZ Bangladesh Bondhu Chullah Program
Sandra Romero Ruiz May 27th, 2014 -‐ Phnom Penh
How we adapted the Methodology • Development of quesAonnaires (Value Chain Analysis) ✓ • Individual interviews (program managers, business units of the value chain) ✓ • Visits to the field ✓ • Focus group discussions ✗ • Desk review ✓ • Preliminary findings presentaAon ✗
INTERVIEWS & FIELD VISITS Where?
GIZ Bangladesh main office in Dakha & stove producAon sites in Gazipur, Dhaka East & Dhaka West (subdistricts of Dhaka)
When?
Last week of April 2014
What kind of interviewees?
Program managers, field staff, promoAon volunteers Stove producers / distributers, users
INTRODUCTION & HISTORY What is SZ?
It is a Social Enterprise that deals with climate change related issues on the backdrop of Kyoto Protocol with a primary objecAve of facilitate CDM projects formulaAon and implementaAon Established in 2008 it is managing the CDM project Bondhu Chullah ICS project
STUDY FINDINGS 1. OrganizaAonal CharacterisAcs 2. Business Strategies Employed a) GIZ / SZ Consultancy Services Ltd. Value Chain 3. Financial Model 4. Market access and trends 5. Channel Strategy
ORGANIZATIONAL CHARACTERISTICS • Type of organizaFon: Social enterprise established in 2008 to manage the CDM and responsible for CDM registraAon (July 2011) • MAIN GOAL: proacAve role for a sustainable development of Bangladesh. Working areas: climate and energy. To make the world a beger living place through nurturing environment and reducing carbon to offset greenhouse effect • Project registered with the UNFCCC as a CDM project
ORGANIZATIONAL CHARACTERISTICS
• IniAal Business Model partnering with high number of NGOs and some small private organizaAons (>250 partners) • In 2012 a 18 month project – market approach – MOUs with SMEs • GoB + GIZ -‐-‐-‐-‐-‐-‐-‐-‐> Project Management Unit (PMU) for implementaAon • 500,000 ICS sold • Partners -‐ 5,500 local entrepreneurs “sanitary shops”
ORGANIZATIONAL CHARACTERISTICS OWNERSHIP OF THE MEMBERS – Business Units
At the output/acFvity level:
• Sanitary shops, acAve in the construcAon sector, are brought to the ICS Industry – throughout the country (Exit Strategy) • They receive training on construcFon and installaFon of Bondhu Chullah and some equipment support & molds • GIZ signs an agreement (MoU) with each SME
ORGANIZATIONAL CHARACTERISTICS
• Specialized in Improved Cookstove Sector • Social purpose
WHERE THEY WORK
• T h e y c o v e r a l l 7 divisions of the country • 4,451 Unions • 32 Villages are 100% Bondhu Chullah users
ORGANIZATIONAL CHARACTERISTICS
PromoAon
• High subsidy support • Market intelligence • Embedded services
BUSINESS STRATEGIES EMPLOYED ESSENTIAL ELEMENTS OF Bondhu Chullah VALUE CHAIN Inputs
Production
Distribution & Commercialization
PRODUCTION FLOW FINANCIAL FLOW INFORMATION FLOW
GOVERNANCE MEASURES
End User
BUSINESS STRATEGIES EMPLOYED 500,000 Bondhu Chullah installed
5,500 partners All districts are included
Bondhu Chullah Value Chain D e c e n t r a l i z e d C e n t r a l i z e d V A L U E C H A I N ( 5 , 5 0 0 manufacturers – install t h e I C S a t e v e r y customer HH) • 500,000 ICSs installed/ sold Final Price: 8 USD / unit • Channel strategy: MoU with SMEs (Sanitary shops 5,500) • Massive MarkeAng and promoAonal campaigns •
PromoAon Volunteers
Sanitary Shops (The Partners)
End Users
1,300 PromoAonal Volunteers
VALUE CHAIN
BUSINESS STRATEGIES EMPLOYED
Sanitary Shops (The Partners)
5,500 partners All districts are included
PromoAon Volunteers
30,000,000 Bondhu Chullah End Users
4,000 PromoAonal Volunteers VALUE CHAIN
PROSPECTIONS FOR THE FUTURE • End users – use of Bondhu Chullah 100% • AddiAonal 850,000 ICS expected to be installed/sold by the end of 2015 (II Phase soon to be Started) • 30 Million users by the end of 2030 • Channel strategy: Mature market -‐ all rural communiAes using Bondhu Chullah
FINANCIAL MODEL ACCESS TO FINANCIAL CAPITAL • • • •
• •
Carbon Finance – CDM since 2011 In October 2012 MoU between GIZ (ODA) & Gov. of Bangladesh (GoB), Department of Environment (DoE) Access to Energy Project 18 month project (October 1st, 2012 – March 31st, 2014) • Target achieved by December 2013 • 2 M Euro GIZ + 2,5 M Euro GoB Phase II Access to Energy Project GIZ + GoB – soon to be started – goal 815,00 ICS sold Profit from sales. Stove pricing strategy – Fix Price = 8 Euro
FINANCIAL MODEL Origin of the Capital invested:
INVESTMENTS
CDM – Carbon Credit ODA (GIZ) & Subsidy from GoB SMEs – profit from sales – re-‐invested in the VC
Mainly in:
• CDM: Monitoring & EvaluaAon • Funds from GoB provided subsidy for end users • GIZ for: • Staff salaries (550 staff) & Volunteers (1,300) and administraAve costs • MarkeAng & promoAonal acAviAes • Training programs (ProducAon Units) • All Services are built in-‐house • SMEs – incenAves to Volunteers for local promoAon
FINANCIAL MODEL RETURN ON INVESTMENTS • All returns are made at the level of the producAon units • 1,5 Million Bondhu Chulas have been disseminated throughout Bangladesh • II Phase of the Project starAng soon 815,000 ICS expected to be sold • Growing sales – promising naAonal market (middle and low income households from rural areas)
FINANCIAL MODEL RETURN ON INVESTMENTS • Entrepreneurs: supplies for producAon, some incenAves to promoAonal volunteers, promoAonal materials • Margins belong to the producers / installers – no middlemen (4 USD margin) • Turnover revenues mainly spent for social and family needs more than business scaling • GIZ / SZ is NUMBER 1 Market Aggregator in Bangladesh… But there is NO Number 2
MARKET ACCESS & TRENDS • 1,500,000 ICS sold -‐ 500,000 only in the last 12 months – throughout Bangladesh • 5,500 local SMEs were developed for construcAon and installaAon of ICS all over the country. It is expected that SMEs will carry forward ICS disseminaAon as their business and beyond any project period. • 1,300 volunteer / promoters. Future projecAon of 4,000 volunteers • High level of visibility
CHANNEL STRATEGY •
October 2012 new business model adopted for faster disseminaAon of stoves, locaAons closer to end users and beger aqer sales service, and sustainability
•
Decentralized channel, open source
•
Aqer sales support maintenance (by SMEs, or by the volunteers) & 1 year warranty
SWOT ANALYSIS
STRENGHTS
WEAKNESSES Bondhu Chullah
OPPORTUNITIES
THREATS
RECOMMENDATIONS
RECOMMENDATIONS • “Bring addiAonal financial support to reach global naAonal goals 30,000,000 peoples using BC.” • “Financial support should be invested in PromoAonal campaigns, awareness to Develop the Market” • “We are number 1 in Bangladesh but there is not a number 2” • “Safe investment opAon, government, donors and internaAonal mechanisms involved”
RECOMMENDATIONS • “Important to conAnue invesAng in ICS industry, the biomass market is large, and will exist for many years, very limited access to clean fuels” • “ T h e c u l t u r a l & historical agachment to tradiAonal stoves will be challenging to overcome. All new stove designs should fi t w i t h e x i s A n g cooking habits”
RECOMMENDATIONS • “Stove designs should accommodate all types of biomass fuels” • “The strong involvement of women brings the connecAon with end consumers and it is the key for growth” • “Local iniAaAves are successful and accepted by communiAes” • “Local business, local product, is the key for success”
May 27th, 2014 -‐ Phnom Penh