Country: India
Organization: L-RAMP- A joint initiative of Indian Institute of Technology Madras and Rural Innovations Network
2) Sector of activity: Consumer Products
3) Description of your products or services: Launched in September 2004, L-RAMP is a collaborative project of the Indian Institute of Technology Madras and Rural Innovations Network, Chennai with financial support from The Lemelson Foundation, USA. L-RAMP’s core objective is to help the society meet its basic needs in a better way through innovations. To this end, it: - Recognizes innovative efforts to solve the basic need issues. - Identifies and nurtures socially relevant innovative technologies.
The Indian Institute of Technology Madras (IITM) is an eminent centre of learning and research in science and technology in the country.
Rural Innovations Network (RIN) is a not-for-profit organization engaged in the promotion of innovations that benefit the rural poor.
“Sugandha Samridhdhi” is a project launched by MrJ.Sengolan, a grassroots innovator-entrepreneur from rural Tamil Nadu, in partnership with L-RAMP.
About 75,000 women and children from very poor families are engaged in hand-rolling incense sticks. An experienced woman rolls about 5,000 sticks a day and this fetches her, a measly 1 dollar. Contact with chemicals causes eye/skin allergies and breathing disorders.
Mr.Sengolan’s innovation is a machine for making incense sticks. A manual device, it has the capacity to produce 16,000 sticks in 8 hours – a 220% increase in productivity. Through a model that targets poor women as the prime beneficiaries, this project seeks to double their net income and protect them from health hazards.
4) Description of the operational model: The challenge in creating this model was to strike a balance between the interests of the innovator- entrepreneur and the development objectives of L-RAMP, in a situation where the product (at $500 each) was way beyond the reach of the targeted beneficiaries.
The innovator’s interests were secured by protecting his intellectual property rights, providing technological inputs to perfect the machine and ensuring him an assured market through this arrangement. The project is in talks with a major marketer of incense sticks to ensure that all the sticks produced under the project get purchased.
Under the operational model, the entrepreneur manufactures and reaches the machines to the women. The women purchase the machine in groups by availing of institutional credit.
The innovativeness in this model is that: - it has made the product affordable through group ownership and by tying up credit. - it has the potential to be scaled up by creating appropriate partnerships across different locations.
The model should also seen in the light of the fact that if such an intervention was not conceived and operationalised, the innovation would have gone to large businesses and thus bypassed the poor.
5) Description of the financial model: This is a purely commercial operation wherein the project’s revenues come from the sale of the machines. As mentioned, the affordability issue has been addressed by encouraging group ownership and tying up institutional credit. The initiative is designed as a self-sustainable and profitable one.
L-RAMP gets paid for its services by the innovator- entrepreneur from his profits. Post-refinement, L-RAMP’s role is that of a co-ordinating and monitoring agency. For scaling up, L-RAMP will help the innovator create the necessary partnerships, and the beneficiaries and the partners will interact between them as operationally required. L-RAMP’s overheads and the cost of incubating the product have been met from funds received from the Lemelson Foundation, US. However, we hope to recover all the costs incurred in promoting this innovation in the next three years by which time the project would have reached a much larger scale.
In this sense, the low-income groups do not pay directly for the services we provide.
Client fees represent this approximate percentage of operational budget: 0%
6) Key operational partnership: The first partnership in making this project happen has been between L-RAMP and the innovator-entrepreneur. To this extent, it is a partnership between a development organization and a small rural entrepreneur. For further scaling up of the operations, partnerships with different NGOs in the livelihoods domain and tie-up with incense sticks marketers have been planned. Talks have already been initiated with organizations like MYRADA. The lessons drawn from the initial stages will be an important input in refining the plan for scaling up.
7) Current outreach:
We are at the Start Up stage. We are at the Start Up stage. A pilot project in Dharmapuri district of Tamil Nadu with four machines and involving twenty women has been initiated. A purchase arrangement has also been worked out with a marketing company.
How many clients have benefited from your product/service in total? Over the last year? The project was initiated just two months back as a pilot project and the number of beneficiaries has been 20.
What percentage of your clients is below the poverty line ($2 per day)? 99% All the beneficiaries of this project are from below the
poverty line. They earn less than a dollar a day. The men
of these households are also wage earners with no regular
employment. They live in thatched shacks and rundown
tenements with poor basic amenities.
What is the order of magnitude of the potential demand for your products or services? Which
other low-income groups, countries or regions could benefit from it? Try to quantify (number
of clients, market size in currency):
India is the largest producer of incense sticks in the world. In the year 2004-05, the total production of incense sticks in the country was estimated to be 75 billion (sticks) valued at Rs.15 billion. About one-third of this was exported to countries like Sri Lanka, UAE, Malaysia, Singapore, Australia, Canada etc. The industry is estimated to be growing at 10% annually.
8) Scale-up strategy:
How many low-income individuals do you plan to benefit in three years from now? How are you planning to scale up or replicate your solution? What are the major constraints to scale up?
Though the potential market for the machine is around 7500 at present, our plans on scaling up are rather modest. We intend to take the machine to a total of 1500 beneficiaries in three years – 200 in the current year, 500 in the next and 800 in the third.
For scaling up we plan to do the following:
- Increase the production capacity for the machine by enabling venture capital investment in the innovator’s facility. - Tying up with more NGOs in the livelihoods domain with synergistic operations to increase the geographical coverage.
- Entering into purchase agreements with more marketing companies to enable assured off-take of sticks.
Which specific areas - and why - in your field would benefit most from investment by corporations, foundations, and other investors:
Innovations by their very nature do not make great candidates for commercial investments. L-RAMP’s focus has been on innovations with the potential to benefit poor people. For such innovations to realize their true potential considerable investments in product refinement, testing and trials and test marketing are initially required. Subsequent to this, they require commercial investments for manufacturing and marketing activities. The latter i.e. commercialization of innovations through manufacturing and marketing is an area where initiatives such as this one can benefit the most from investments.
9) The organization: How does the initiative fit with your overall organization's strategic goals and priorities? How did the initiative start?
The innovator-entrepreneur, Mr.Sengolan hails from a modest background. He saw the plight of the poor women engaged in making incense sticks and developed a strong desire to do something to improve their lot. This is what led to the development of this machine. In L-RAMP he found an ally which was willing to handhold him through the tough initial phase and support him in commercializing his innovation.
As for L-RAMP, reaching out to the poorest sections of the society has been one of its important strategic goals. This innovation presented one such opportunity. The initiative started with the innovator approaching L-RAMP for support to take his innovation forward from the prototype stage.
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10) On the mosaic diagram, which of these factors is the primary focus of your work?
- Factor: Limited purchasing power of individual clients
- Principle: Change radically the logic behind your business model
Contact Information:
Name: Paul Basil - CEO, Rural Innovations Network and Project Co-ordinator
Organization: L-RAMP- A joint initiative of Indian Institute of Technology Madras and Rural Innovations Network
Mailing address: #9, Second Floor, Kanakashri Nagar, Cathedral Road, Chennai - 600 086
Country: India
Email: paul@lramp.org
Tel: 91-44-28112108, 52105447
Website: www.lramp.org
Organization's legal status: Section 25 Company (RIN)
Number of Employees: 10
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