The Nuru Light: A Solution to the Lighting Crisis in Sub-Saharan Africa

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Business Overview We are Nuru Light, a social enterprise that seeks to provide an affordable and clean offgrid lighting system to the rural poor of Rwanda to replace expensive, polluting, and dangerous kerosene. We were registered in June 09, but have been developing our product since 2008. We will begin wide scale distribution of the product starting in December 2009 throughout the country using a microfranchise model. Our vision is to have our light in over 750,000 households within the next five years. Our product is the Nuru LED lighting system- a modular, lighting solution consisting of individual portable, on-demand (POD) lights that can be powered on or off the grid and that can be connected together or taken apart as needed to address different household
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lighting needs. The product is appealing to upwards of 4 billion people in the world living in areas where electricity is non-existent, limited or erratic. For half of this market - rural villagers living below the poverty line earning about $1-2 a day the modularity of the product will also ensure that costs of the product can be spread over time without the need for microfinance. They will be able to buy or rent the POD light directly from local entrepreneurs who will provide recharging services for a fee and can add POD lights as and when they have more income and as and when they need more light. Designed with the villagers themselves, Nuru Light has created an extremely functional hardware platform which allows users to: 1. Have access to up to 35 hours of light on each POD light with a full recharge.
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Fully recharge up to 5 POD lights in 20 minutes (10,500 minutes of available light in 20 minutes)

3. Use individual POD lights in a variety of ways including as a head or necklamp, hung up, on a flat surface or used with a plastic/glass bottle with the optional bottle-mount. 4. Allow multiple POD lights to be connected together in various configurations lantern, tracklighting, etc to satisfy varying household lighting needs. Nuru Light has partnered with Urwego Opportunity Bank (UOB), Rwandas oldest and largest microfinance bank, to build a fund of capital loans to fund entrepreneurs to start their own microfranchises. This fund is used to purchase 200 lights and one pedal generator from the products manufacturer for each microfranchise. The entrepreneur will then have six to seven months to pay back the loan to Urwego, using the revenue generated from selling each light at $6.50 and from recharging each light at an expected $0.18 per charge. Each microfranchise keeps all of the recharging revenue, while Nuru Light charges a monthly service fee. The pool of funds that Urwego keeps will be continually reused to launch more microfranchises throughout the country. Our microfranchise model dramatically lowers upfront costs to customers. Users do not have to buy their own pedal generator, but rather they pay somebody else to charge their light. The system also lowers overhead and allows us to expand rapidly into every part of the country, while providing an income to poor men/women in the community, many of whom may be HIV+. We select these men/women from local cooperatives and then train them in basic accounting and grassroots marketing ideas. The cooperatives structure allows us to easily monitor and communicate with the entrepreneurs Current Status: After finishing our pilot study in September, we launched ten microfranchises, selling over 550 lights. We plan to sell 60,000 lights in the first year and roughly 175,000 lights each year following. The total would be roughly $1.2M in annual equipment sales (plus revenue from monthly service and maintenance fees). The Market Opportunity Our innovations are the Nuru POD Light & the worlds first commercially available pedal-generator, the POWERCycle. Both of these products were designed to lower upfront costs for consumers, making the light more accessible to the poor. First,
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customers are not required to buy a POWERCycle. Instead, they pay a $0.18 recharging fee to a local POWERCycle operator. Because customers are not required to buy the more expensive charging component, as they are with solar products, they only pay $6.50 for the light. Furthermore, customers can pay in installments of as little as $0.88 every two weeks to buy the light, which is a fraction of what they currently spend on kerosene. Second, the light has a patent-pending modular design, which allows for customers to buy more than one light and connect them to make a lantern or to continue using them separately. This system allows customers to buy more lights as they accumulate savings. Our strategy to succeed in the Bottom of the Pyramid market is to have low margins and high volumes. In order to accomplish low margins, Nuru Light has a very direct sales approach, quickly getting down to the household level. The product is manufactured in China by Nuru Design Ltd. and sold at a small margin to the entrepreneurs, who then charge just a $0.44 markup to the users. The entrepreneurs themselves then make the bulk of the money, as they collect all recharge revenue, only paying a monthly service fee of $17.50 to Nuru Light (See Value Chain). This direct strategy is in complete contrast to the kerosene and solar product distributors approach, which includes many layers of middlemen, each adding significant markups. Furthermore, solar product sellers require consumers to pay large upfront costs, which Nuru Light does not. Kerosene currently has over 90% of the market, while solar and other renewable energy products have less than 1% penetration. The POD Light solves the problem of inadequate lighting. The root cause of the problem is that kerosene based systems are the poors only source of light. Without other options, they are forced to spend up to 40% of their income 1 on an unhealthy, dangerous and environmentally unfriendly light. As C.K. Prahalad explains in The Fortune at the Bottom of the Pyramid: [the poors] sources of energy are dirty and inefficient, and on a per-kilowatt basis they cost anywhere from 5-100 times more than modern fuels and electricity. The paradox is that the poor are spending a disproportionate share of their income on a product that richer people can get cheaper and of high quality (139). The crisis of lighting is especially destructive in a poor country, such as Rwanda. Currently, it ranks 158th out of 177 in GDP per capita 2. With 90% of the population engaged in farming, mostly subsistence, there are limited opportunities for income 3. 98% of these poor farmers live without electricity4. They instead spend $8-12/month for kerosene light5. In addition to being expensive, kerosene is also detrimental to respiratory health. The World Bank estimates that women and children breathing kerosene fumes inhale the equivalent smoke from two packs of cigarettes per day. Furthermore, 8% of households reported respiratory illness caused by kerosene exposure 6. Kerosene is also dangerous, with 25% of households reporting kerosene related fires within the last year7. Kerosene is also a greenhouse gas emitter. If a family uses kerosene for 2.5hrs a night,
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The Solar Electric Light Fund Human Development Report 2007/8 Rwandan Demographic & Health Survey 2005 Rwandan Demographic & Health Survey 2005 Study by Michael Phillips & Brooks Browne Nuru Light Baseline Report Nuru Light Baseline Report 4

then they burn 182 kg of CO 2 per year. In total, Rwandan kerosene produces over 300,000 tons of CO2 a year. Despite the extensive use of kerosene, Rwandans still do not have adequate lighting, leaving children without the ability to study at night. Market Solution Nuru Light currently has only one product, the Nuru lighting system, which consists of the following 2 components: 1. The Nuru POD LightTM: Multiple bright white LED lights, each many times brighter than the light produced by a typical kerosene lantern. The POD lights can be used as an individual light source or can be combined in a variety of ways to provide even more light. Each POD light consists of two 5mm 45 degree super white LEDs and has its own internal 1500mAh rechargeable battery. Nuru Light guarantees all products for the first year of use. The light retails for $6.50. 2. The Nuru POWERCycleTM pedal generator kit: Can be assembled in-country, produces 70W of power with minimal human exertion (approx. 60 rpm pedaling) and can recharge up to 5 pod lights at a time.8 The generator has a built-in docking station which allows 5 POD lights to be docked and recharged. The generator can also be cranked by one or both hands or mounted to the wooden Nuru mounting frame, which is made using local resources. The POWERCycle is 525 times more efficient than most solar panels. The POWERCycle is packaged in an equipment loan to microfranchises at a value of $175. The Nuru Lighting system solves the problems of kerosene: high cost, environmentally unfriendly emissions, unhealthy fumes, and frequent fires. At just $6.50, the light is very affordable, ensuring that even the poorest have access. At just $0.18 per recharge, the project not only provides lighting to households, at a 95% reduction in cost, but it also provides an income of over $3/day to the microfranchise operators, many of whom are HIV+. Because the light is emissions free, it prevents thousands of tons of CO 2 from entering the atmosphere, improving the environment and the respiratory health of users. Furthermore, the Nuru Light eliminates the risk of fire. Ability to create barriers to entry: There are currently no other commercially pedal generator in the world. Furthermore, if one were to be produced, Nuru Light has already locked up distribution channels via a partnership with the countrys largest microfinance bank, Urwego Opportunity Bank. So, even if someone wanted to copy our product and distribution model, they couldnt implement it. The Market Nuru Light chose Rwanda to begin operations because it has one of the lowest levels of electrification in the world. Our target customers are the 95% of Rwandan households, including 98% of rural households, that do not have access to electricity. In total, the potential customer base is 9.5 million people, or 1.7 million households. Many households may buy more than one light, meaning that Nuru Light has over 2 million units of potential in country sales. With the population expected to grow at 3% per annum and thus double by 2030, the market for alternative lighting sources will
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The ability to assemble in-country creates job and income opportunities for local communities. 5

continue to grow. Currently, there is a significant unmet need for nighttime lighting 9. Mothers require lighting most; 70% of households reported that mothers were the main user of lighting, as their days are consumed with responsibilities that leave little to no time for cooking and other household chores.. School children also require lighting for their studies 19% of households reported that children were the primary users. In the developing world, there is no portable, modular LED lighting system on the market. Nuru Lights initial focus will be on densely populated areas; specifically, we will first target the Bugesera district and its 15 sectors, home to over 300,000 people. Rwanda is the most densely populated area in continental Africa, with more than 370 people per square kilometer, implying there are ample potential locations for operation. Management Team Julio De Souza, the Managing Director, has experience working in five African countries through the UNDP as a private sector development expert, project manager, and Results Based Management Platform (RBM) trainer. He has worked for NURU since May 2008. He holds a Masters in Development Studies from the University of Oslo and a BA in International Studies from California State -Long Beach. Julio is a Brazilian national. Charles Ishimwe is the director of sales and marketing. His responsibilities include identifying, selecting, and overseeing all microfranchise operators (entrepreneurs). He is currently a student at the Adventist University of Central Africa, where he studies information management. Prior to Nuru Light, Charles worked as a data entry clerk and enumerator for the Millennium Villages Project. He is a Rwandan national, fluent in English, French, Swahili, and Kinyarwanda. Max Fraden, the Monitoring and Evaluation Director, has experience working in three African countries for the UN Millennium Villages Project. He has worked in Rwanda specifically for two years. At NURU, he is responsible for evaluating the social and economic impact of the Nuru Light. Currently, he attends medical school at the University of Massachusetts and intends to specialize in family or internal medicine. Max earned Financial and Social Impact Summary We expect to sell 60,000 lights in 2010, 169,680 in 2011, following by 175,200 (one full 20-foot containers worth) for the subsequent three years. At this rate of sales, we will have annual revenues of $427,644 in 2010; $1,335,115 in 2011; $1,680,283 in 2012; $2,012,692 in 2013; and $2,367,155 in 2014. Our gross margins will increase from $72,175 in 2010 to $1,344,863 in 2014. We will have an operating loss (EBITDA) of $82,668 for 2010, but positive income for operations for the next four years, increasing from $33,919 in 2011 to $545,811 in 2014. After including non-operating costs (VAT taxes, interest charges, depreciation) and corporate taxes, our net profit for 2010 will be -$86,636, $19,013 for 2011, $135,297 for 2012, $241,272 for 2013, and $369,626 for 2014. Thus, our cumulative net profit for the five year period will be $678,572. These figures only include Rwandan earnings; we also plan to expand throughout East Africa
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The sun sets at 6:30 PM year-round

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(Burundi, Kenya, Uganda, Tanzania, Ethiopia) in 2010 and perhaps to other countries, as well. We assume that only one sales and marketing representative will be responsible for overseeing up to 50 microfranchises and one senior level manager (at $36,000 per year) will be needed for every 25 employees (minimum two managers); both of these assumptions might have to be revised as operations continue. These projections also assume 0% inflation. In order to begin operations, we require close to $400,000 in working capital, with roughly 85% allocated to the production and shipment of equipment. In terms of addressing social impact, the following are our five areas of intervention, goals, and means of assessing social impact:

Income: Provide an income of $3/day to 4,000 people within 5yrs Mostly women will draw an income by charging light owners $0.18/charge. We will track entrepreneurs active and the sales/charging logs of each entrepreneur to determine the income and then place this info into a customized computer program.

Lighting: Light over 750,000 households (4M people) within 5yrs We will track sales to determine the number of houses lit. Savings: Reduce the amount 4M people spend on lighting by 95% within 5yrs A family spends $0.13/hr with kerosene vs. just $0.007/hr with the Nuru, a 95% reduction. We can track the number of households that purchased lights and light use to determine the savings created.

Emissions Reductions: Replace the release of 400,000 tons of CO2 within 5yrs If we assume that a household uses kerosene for 2.5hrs/day, then a household burns 70 liters per year, which produces 182 kg of CO2. By tracking the number of households that purchased the Nuru, we can determine how much CO2 is displaced.

Accident Prevention: Prevent accidents to millions of people Because 25% of households reported kerosene fires within the last year, we can estimate that our work will prevent fires in households that purchased lights each year. Supplementary Materials Profit & Loss Statement
USD Revenues Total Revenues Cost of Sales or Direct Costs Cost of Sales Gross margin (Net revenues) 2010 427,6 44 427,644 355,468 355,468 72,175 2011 1,335,11 5 1,335,115 990,083 990,083 345,032 2012 1,680,2 83 1,680,283 1,022,292 1,022,292 657,991 2013 2,012,6 92 2,012,692 1,022,292 1,022,292 990,400 2014 2,367,1 55 2,367,155 1,022,292 1,022,292 1,344,863

Operating Costs Income from Operations (EBITDA) VAT taxes* Interest charges Depreciation Non-operating costs Gross profit Corporate tax: Net profit

154,844 -82,668 0 0 3,968 3,968 -86,636 0 -86,636

311,113 33,919 0 0 8,510 8,510 25,409 6,396 19,013

454,252 203,738 0 0 11,100 11,100 192,638 57,342 135,297

631,902 358,498 0 0 13,667 13,667 344,831 103,559 241,272

799,051 545,811 0 0 16,222 16,222 529,590 159,963 369,626

Dividend payments Retained earnings

0 -86,636

0 19,013

0 135,297

0 241,272

0 369,626

Number of Staff (add 2009)

12

30

48

67

85

*VAT is included in the cost of sales. Product Design

Value Chain

Projections

Product Functionality
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Map of Rwanda

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