Speaking today at the Royal Geographical Society’s Explore 2016 conference.
Very excited and grateful we could share stories and lessons about the purpose of our cycle adventure, visiting environmental and sustainable energy projects in South America.
What an inspiring event! www.rgs.org/explore
Stay in touch @bicienergy
Reflections on Projects
What makes a project or a programme a success? We’ve been visiting projects and individuals on route, trying to learn a bit more. Far from academic research, we were gathering ad hoc views and insights - of those who have initiated, or managed, or benefitted from certain schemes. Here’s a little of what we’ve learned.
1. Every project is social
From deforestation to public health, conserving water to promoting youth entrepreneurship in the Sierra - what may be considered an ‘environmental’ or ‘health’ project was ultimately a social one at it’s core.
Why social? Firstly, achieving the technical aims of each project required a thorough understanding of the wider social context, on individual motivations and community ‘ways of working’. Rainforest protection could be achieved through better education in the mountains, or native chili sauce exported to Europe - because these projects understood and acted on the underlying context and drivers. In contrast, only 2/3rds of the ‘Casas Calientes’ were still operational - the technical specifications were perfect, but the coordinator hadn’t understood that villagers would be far away in their fields in the afternoon, and unable to close the stoppers on the tubes every day.
Secondly, community engagement was, of course, essential for success. Endev required that families invested themselves, to ensure they were receiving help which they actually wanted. COAGRO was founded by a community member. (In many projects, communities would be involved due to an interested contact, or a call of interest - self selecting those who would be most likely to invest time and energy, and as a result most likely to be successful.)
Thirdly, communication with those affected is crucial. The ‘payees’ for clean water in Moyobamba needed more than just a workshop to understand why they were giving money every month, and to ensure their support and the success of the scheme.
All sensible stuff. But what surprised us the most about the ‘social’ aspects of projects was the difference that personality and charisma made. Surely the success of a Payments for Ecosystem Services scheme would depend on the rigor of monetising benefits, of opportunity costs and attributing actors, actions and beneficiaries, rather than the bantering ability of an agroforester, or the charisma of a chairman? But what we found time and time again was that personality of the project leader and project field workers - and a genuine connection with those involved - was crucial for the success of projects. Farmers in Moyobamba working with AMPA and Conservation International stayed involved through difficult social times due to the support of the enthusiastic Kelvin; farmers in one of the agroforestry schemes of Stitching Samay would turn out even on ‘bad days’ due to the respect they held for the father; disputes in the Moyobamba PES committee were smoothly managed by the hugely charismatic Professora Chepita.
2. Follow through before you start…
We were faced with a number of farmers in Peru who, based on advice - and specific credit from a Government scheme - dedicated their land to growing a the latest ‘trendy’, higher value crop, such as Sacha Inchi, or Palm Oil. Farmers without access to internet, to check market prices and processing facilities, only trust in their charismatic local representative. They realised 2 years later, when the crop was mature, that there were no buyers. Or, the steps involved in transporting their crop to a buyer (or processing plant) cost more than the potential revenue from the sales. On-the-ground realities of a certain area and it’s market infrastructure were not thought through before initiating a project. A ‘success’ was announced because a certain number of people had signed up to take part in the scheme, but nothing was mentioned of the outcomes 2 years later - whether higher, more stable income, were achieved. Rather, farmers were left with credit to repay, no income, and in some severe cases, little ‘safety net’, of crops for their own consumption.
In contrast, AMPA had followed through before they started involving farmers to designate a proportion of their rice paddies to growing shrimps. AMPA had already sourced their high value market - chefs in Lima were clambering after these sustainable fresh-water shrimps, ensuring the farmers had ready buyers as soon as the first shrimps were ready. Plant Your Future had found a high-end buyer for the native chili sauce the farmers were growing and producing.
3. …to make a project last for longer
We encountered well-meaning technology projects, building a hydroelectric plant or solar panels to link remote villages to electricity. Villagers were again without electricity 2 years later. The plant had broken and no-one in the village knew how to fix it. Or the solar panel batteries needed replaced, but there was nowhere in a 100km radius to buy new ones. No-one had thought longer than the 24 months of the funding. Or when they had, the ‘longevity plans’ involved a 3 hour workshop with illiterate farmers, to explain the details of electronics and the maintenance schedule.
In contrast, we came across a number of projects which had ‘followed through’ - where the long term vision and exit plan at the end of the funding was central to their way of operating. As a result, it was often the case that fewer shorter term outcomes were achieved. Less houses in the first year, or fewer solar panels delivered. The project leaders were confident that the difference they were making would last for longer - their ‘exit plan’ meant that the existing communities or supply chains would continue the work. However, this was a clash with certain funders, wanting to see boxes ticked within 6 months, or assessing cost effectiveness during the bidding process. The continuing outputs or outcomes was rarely something which their funders would be assessing or checking up on, 5 or 10 years in the future.
There were a few key principles we learnt from such ‘longer-term’ projects:
In the Colombian highlands and lowlands, we visited a few projects of Mauricio Gnecco, an inspiring Colombian renewable energy engineer. Ensuring technological projects lasted in the long term were central to his way of working. He told us he never ‘acts the engineer’: in Los Llanos, he stood casually at the base of the wind turbine in construction, now and then providing assurance to the enthusiastic William, strapped to the turbine as he adjusted the blades. Mauricio never carries out any of the work himself. Turbines or irrigation technologies are constructed on site, by locals. Locals spend days slowly learning how to construct each part, understanding by trial and error why a screw shouldn’t go in a certain place. Later in the year, when something goes wrong, they know what needs to be fixed - and how to fix it with the things they have in the field. They don’t need to pay for an engineer, or order a part which will never arrive.
Mauricio always seeks to involve the “inner child” of adults. For example, organising football leagues which tie in with engineering maintenance schedules - using people’s existing passions to encourage interest in a certain issue. When he knew there would be a potential hydro project in San Jose, he visited the community and took the young boys and teenagers fishing - starting to form a bond through their favourite activity, then gradually showing them how a turbine moved in the water, and sparking an interest. He knew that these boys would become key throughout the building schedule and the maintenance engineers of 15 years time.
Endev were also thinking with the long term in mind, working to create a local market for these goods, to ensure that the supply chains and engineers were in place, with incentives to visit these rural areas and provide a maintenance service for decades after the short-term Endev project was over. Endev and Stichting Samay provided “no gifts” - families always had to contribute a proportion themselves - to ensure that there was a viable local market for potential businesses. Plus, the contribution - in money or time - would ensure that the services or products provided were actually something which the community wanted or needed. And, as a result, had the motivation to maintain - and make the service last for longer.
4. A patchwork of projects, but where is the master-seamstress?
We cycled through a patchwork of projects and basic service coverage in Peru and Bolivia. A village benefiting from drinking water and hydroelectricity because a French hiker passed by, saw a gap in basic services, had friendly encounters with a few locals and determined to “do something” about it. Or, a remote valley with a fully staffed hospital and children’s care centre, because the son of one of the farmers became a mountain guide and interested foreigners in the plight of his family. All amazing stories, of valient acts of kindness. But what makes these villages more deserving than others, due to this “luck” and chance encounters? What about those who live far from the track of hikers and guiders?
We were told that information is often missing. Information which we can take for granted in Europe: on community member numbers, their needs, their vulnerabilities. One Gov’t scheme, warm houses for vulnerable households, provided expensive new houses, many of which stood unused, since the regional Gov’t were not aware that these same households had already received housing support from another NGO. While a poorer village, 30km away, was crying out for support for any of it’s members.
Some groups we met were trying to improve the level and quality of information. Soluciones Practicas Peru were mapping communities, access to electricity, with potential and suitability for energy solutions, to provide a ‘heat map’ of priorities. Yet such a map of priorities didn’t seem to exist for all services, and there seemed to be a chorus line of small NGOs and individuals, trying to help out, all singing slightly different songs at different rhythms.
5. Where is the Government?
A role for Government is surely to help to provide this coordinator and ‘seamstress’ role, when it is missing. What is holding it back? In Bolivia, one of our hosts told us that whenever they had problems with their drinking water or electricity they contacted an NGO, or convinced another passing mountaineer to get involved. Even just for the equivalent of ½ a day’s engineering work, or less than $100, the process with the regional Gov’t was too bureaucratic. “It takes too long, a request often will not be successful. They are too busy building football stadiums in the towns where their brothers live, to care about drinking water for rural people”, we were told. It is easier to convince a foreigner to give some money or get another foreign NGO involved.
But where, then, is the push for the regional government to improve, to change their priorities to reflect the priorities to those of their citizens? It almost seemed that the willingness for individuals and NGOs to help could be quashing the accountability of Gov’t in some areas, halting the development of better functioning institutions.
6. “Trust me, I’m a Doctor (of philosophy)”
Projects, from Government and NGOs, need to have the ‘right’ information, the ‘right’ knowledge and technical capabilities, the right connection with and initiative from local communities, stepping out at the ‘right’ time to make sure these communities are masters of their own futures . But what happens when there is a clash between these? When peer-reviewed findings clash with what the local community thinks should happen?
Finding this boundary is a remaining question for us. Ayni Wasi wanted to ensure the project was led and influenced by the local communities, so that they could better achieve their aims and work towards an ‘exit plan’, where the communities were trained sufficiently to take everything on. But there was a clash between academic research - suggesting that community health schemes are most successful when the volunteers have more than 5 years schooling - and the views of the local villagers, choosing those unable to read or write. They opted for the views of the villagers, but questioned their approach when faced with ladies unable to count breaths, or even place a cross at the appropriate place on the sheet.
We delved into the details of water management in Colombia, and specifically a project backed by US AID. To develop the best possible information, modelling tools were used which were beyond the understanding of local decision-makers and communities. The time required to input information to the model, for the ‘right’ analysis, was not a priority of already pressed local officials. (The project is now including the modelling programme in a local University course, so that local decision-makers can take their own decisions on how and when to use this).
We visited a number of successful pilot projects - where an example was going to be made, to funders, to replicate it elsewhere - but it was clear they would not be successful if applied in other, distinct circumstances. Or, schemes which would not be a success if rolled out beyond the small areas where currently applied. Tara beans, or sustainable fresh water shrimps, can only increase the incomes of poor farmers when their prices are high - but not when the numbers of suppliers increase 100-fold and they struggle even to sell the goods they have.
7. Be curious. Ask questions.
When wind-operated pumps were developed by other local businesses and NGOs, Endev stepped out. When their micro Anaerobic Digesters had a low success rate, Endev had already collected the information and knew they could improve things. “Rios Paramos de Vallees..etc” - working on water management in Colombia - realised they had to incorporate the model in University courses.
Successful projects asked the right questions - to know if their actions were working, and if not, why not. They questioned their ways of working, and were confident enough to take criticism and change approaches.
Unsuccessful projects used blinkers or even blindfolds. Representatives or farmers could seeing that there was no market or processing plant, but would continue on regardless, hoping that a road would be built in the next 3 months in time for the harvest. Funders would accept the re-scaling of a pilot project, without asking how the conditions differed, and whether this had been taken into account.
These are, of course, only what we have learnt on this specific route, along the tarmac roads and gravel paths where our mountain-bike tyres have taken us. Many aspects which we have learnt from these projects and areas won’t apply in other continents, or with other groups. Every project is, of course, social. But, many of these lessons do apply - even in the UK, or Germany - with large Government programmes or small social enterprises. More learning is ahead. We will continue to be curious.
Community power
Drops of sweat ran down our cheeks as we reached the small village of San Jose, after one and a half hours of walking along a muddy hiking track from Mosoco. 100m of steep downhill to cross a small fast running river, then trudging back up the other side of the narrow valley to the same height as our starting point. We only carried a small backpack, our bike bags were strapped to Camilla’s horse. It is the daily walk to school for most children, to the nearest market or to the road with the five hour bus to the nearest bigger town, Popayan. A long walk as long as the small cable car over the gorge does not work. We travelled 18h from Bogota to get here, on various pieces of local transport, taking us over landslides and up snaking gravel roads. Why, you might ask?
We were on a small mission to understand what could make a small hydropower plant in a distant rural community work in the long run. In Cusco, more than half a year earlier, we met up with the renewable energy team of Practical Action. Through their connection, we visited one of their success stories - a small community in Bolivia who produce their own electricity with a small hydropower plant. When we came to Tuni, to our surprise there was no evening-time glow from the houses after sunset. All was dark. We were told the one and only person who could operate the plant was on holiday and nobody else actually knew how to turn the turbine and generator on. Practical Action gave us examples of a common situation, where parts would become damaged and the community fund would not have the resources or expertise to fix things. Since the project was completed, there was no continuing ‘outside’ money to check how plants are operating, or to assist. The EnDev Bolivia team from the German Development Agency we visited in La Paz found out that two thirds of small scale hydropower plants in Bolivia were no longer functioning, after only a number of years.
Plant built. Capacity building carried out. Result achieved. Project over. Hang on, does no different approach exist? This remained an open question on our trip until we met Maurcio and spent many hours driving along the muddy tracks of Los Llanos on our way to meet the lemongrass growing communities. Many hours to hear about and discuss other projects he supported as a renewable energy engineer in Colombia. Mauricio told us about the 15kW, 10 year old hydropower plant in the indigenous community of San Jose in Southern Colombia. We had already passed through the area on our bicycles a few months earlier, but we were keen to visit a community with a small scale hydropower plant that worked for more than just a few years.
The community of San Jose with its twenty families greeted us warmly and gradually shared the recent story of their village and their hydropower plant. Fabio and Mauricio, the two men responsible for the smooth running of the hydropower plant, plus two engaged teenagers, showed us around. They proudly took us to see the channel that separates the water from the river, rolled a few massive rocks in an ‘Obelix style’ out of the water flow and guided us into the small turbine house from where the electricity travels up to the village. As we were walking down the step hiking path, Fabio told us that the elders had initiated a first project 15 years ago. He showed us some of the first infrastructure that was built in a ‘minga’ – a community work day. Unfortunately, nobody had calculated the required water flow for the turbine and it wasn’t enough. But, there was a strong will and interest among the community of San Jose to create their electricity supply.
Mauricio Gnecco from Villavincenio was the missing piece in the puzzle. A Colombian renewable energy engineer with a deep interest in psychology. The same day it is confirmed to be technically possible to build a mini-hydropower plant, he begins to build the connections. He searches for a group of teenagers and young adults and finds out what makes them ‘tick’. And gets involved - takes them fishing, or organises a football tournament. Mauricio will interweave stories about the hydropower plant, planting seeds of interest, to begin to nurture curiosity. Once the construction begins, the football or fishing ‘team’ are involved – helping to move rocks, screwing together the parts. The future maintenance crew for a rural village is born. Creating this motivated maintenance team could be one missing link to make this type of renewable energy project work in the long-run. In the case of San Jose, Fabio and Mauricio from San Jose stayed in the village and took on the responsibility, two others of the four left, maybe it was just lucky that Fabio and Mauricio from San Jose stayed. But the connection through emotion might have pushed the luck a little bit further in the right direction.*
There was an option for San Jose to push the local government for a grid connection at the time of the hydropower plant construction. The grid runs through Mosoco, 800m away, but on the other side of the deep gorge. It seemed like the easy option, at least to us. But David, the teacher of the primary school in San Jose, told us that for the people here, the decision for their independent hydropower plant was clear. The grid connection to San Jose could have been delayed for years. Plus, once connected, it can be very unreliable and we were told that tariffs keep increasing. For San Jose the autonomy is crucial. It is mostly in their own hands to keep their radios running and there is solidarity – if a family cannot pay the monthly charge of 4,000Pesos (around £1), there is flexibility - the other families know that they will pay their fees when they can. With an electricity company, no payment means an automatic cut-off. Mauricio from San Jose, who is now responsible for the maintenance, receives a monthly salary of 50,000Peso (around £13) out of the monthly fund for clearing out leaves and stones from the water flow and dealing with any required repairs. Any larger repairs are covered by the indigenous government fund. His neighbour Fabio, who did the job for the first couple of years, is luckily still in the village and acts as a back-up. As we learned in Bolivia, it’s crucial not to rely only on one person.
For now, this foundation – the connection through emotion - worked well for San Jose. The cumbia tunes, interspersed with local indigenous radio, mark the rhythm of village life.
We will keep wondering though which other ways exist to make renewable energy projects in a development context work in the long-run.
* The project was financed half by a post-earthquake fund from the European Union and half by the Colombian state. But the community put many hours and days of hard work into its construction. It wasn’t just a gift. An aspect that makes this project a little special is the location in an indigenous community. Indigenous groups in Colombia are their ‘own states’ and receive funding from the Colombian government. We learned that this funding can play an important role in paying for emergency repairs. Funding small villages in Bolivia might not receive.
Community power in San Jose, Southern Colombia. A one and a half hour walk to the nearest road. A to-be-repaired cable car to shorten the journey. Fabio and Mauricio explaining their 10year old - still and well working hydropower plant to us. Enjoying the evening light.
Project Colombia
On a Thursday morning, shortly before our flight back to Europe, we found ourselves in the town of Cajica, speaking in front of a group of 60 engaged entrepreneurs. We were talking about some of the projects we had visited and learnt from in the past year and how these entrepreneurs in Cajica could make their business plans stronger by considering the environment. We were guest speakers for Project Colombia, a social enterprise with three arms: working with larger businesses to improve their social impact; teaching English to increase the opportunities of rural Colombians; training current and future entrepreneurs, through 4 week courses, sponsored by local mayors and the CSR budget of larger companies.
Nelson and Martha, the director and sub-director of Project Colombia, develop and lead these courses themselves. The entrepreneurship course in Cajica was packed - every seat filled, with a range of ages and backgrounds, and ideas. Restaurant owners where disadvantaged young people provided the artwork for the tiled tables, gardeners, artisanal shoe-makers, bakers, communicators. The room was buzzing with ideas - of how they could save grey-water in the dry season for growing plants, better quality equipment which could save money in the long term, using natural and traditional dyes which could be part of their marketing and appeal.
Project Colombia pull in guest speakers from across the world, some presenting via an internet connection, others, like ourselves, visiting in person (be in touch with Nelson here if you would be interested in collaborating). Have a look at this short video on our impression on our involvement.
At the end of each course, the three best ideas are awarded seed-capital, to develop their business plan into a reality. All entrepreneurs in the course remain linked up in Project Colombia’s social network community, to support each other, continue to provide feedback and congratulate successes. Nelson and Martha follow up with alumni entrepreneurs - the 4 weeks of the course are only the beginning of developing skills.
In 5 years time, Project Colombia aim to be the ‘go-to’ organisation for innovation and social enterprise training in their country. They certainly have the energy and passion to make it happen.
Project Colombia: a room full of energy, with Colombia’s future entreprenuers
Changing Plants and Lives: a journey into Los Llanos
Una gota. One drop. Ein Tropfen. In your palms, rub it and inhale it, close to your nose. Lemongrass. An intense smell, sensation, refreshing energy. For us, it brings back memories, the colours and sounds of Los Llanos, an extensive landscape of dry savannah plains and rivers of rainforest in Eastern Colombia. And the communities of Muruji and Guanapi, home to the hopes and dreams of a few families, re-finding their feet after years of fear.
Dona Rosa never wanted to produce cocaine, she told us, hiding the slight shake in her hands by clasping them tightly together. Her family moved here from Boyaca and had been working on this land for almost 30 years, growing basic crops, keeping chickens and cows - a few of which they took on the week-long trip to market twice a year to trade for the goods they couldn’t produce themselves, such as clothes, shoes, sugar, salt. In the 90s, guerilla groups took control of the region, to increase their financial income. Families were obliged to pay a charge on any goods brought in or out, gatherings were strictly controlled, teenagers and younger children ‘disappeared’ - taken to combat training camps or taken in as prostitutes. Families would be exempt, and helped, Dona Rosa was told, if they grew and processed coca. The guerillas would bring the items they needed from the markets from far away, in exchange for the processed good.
What choice did she have?
Coca took over their lives. The work was intensive, requiring long hours, in exchange for small sums or few goods. They had to use many chemicals, she explained, not only for growing the coca on the sandy soil, but also to process the leaves, hidden in sheds under trees. Illnesses plagued her and her husband’s lives. Fear and guilt coated their everyday actions.
Hope comes in small drops
At 5am, the first morning colours emerged as we set off with Mauricio in his weathered but carefully maintained pick-up truck, for the 14 hour journey ahead of us. The evening before had dropped us 3,000m on the 100km journey from Bogota, into these vast plains reaching towards Venezuela, a quarter of Colombia’s land mass, the size of Germany. Through the morning banks of fog emerged cattle grasslands, oilfields, monocultures of sugarcane giving way to miles of palmoil. Agricultural land reaching the border with savannah. Tarmac turning to gravel and disintegrating into mud-tracks.
For the past 4 years, a few families at the end of these tracks now have an alternative. They are growing and distilling lemongrass, to be sold in Villavincencio and Bogota. “A market to be expanded to guarantee their income.” The never-tiring Mauricio drives every month to visit the families, to talk through their ideas for improving processes, deliver packages of ordered food, and pick up the glass bottles of distilled oil. He initiated this project with the families: gently teasing out their ideas for how they could give themselves another option, a product they may be able to sell to ensure an alternative, stable income. The small lemongrass plant, used by the families to make a medicinal tea, provided the answer. Mauricio’s tinkering engineering, designing a ‘field distillation process’, provided the next step. There is no NGO support, no grand charity providing back-up funding - only an engineer strongly motivated in his work for others, given energy from the hope these families distill.
Mauricio offered to take us with him on his April trip. 5 days with a few isolated families in Los Llanos in their 'new lives’: the now chuckling, smiling Don Pedro, showing us proudly round his 'limonaria’, the ¼ hectare of lemongrass plants. The agile Don William, showing us how to fish in the small river by his house. The shy, warm Janet, washing her floors with a by-product from the lemongrass process ('hydrolata’, the distilled water with traces of lemongrass), which keeps the disease-carrying mosquitos away. Dona Isabel, who wouldn’t take no for an answer, filling us with home-ground 'arepas’, rice and 'revueltas’ and making us a tea with a few drops of lemongrass oil, to ward against stomach upsets, colds, and almost any other ailment possible.
Distilling their future
Don Pedro’s face clouded when he talked about the past with us. After a number of years under FARC control, Paramilitaries seized the region, killing anyone who was considered to have been helping the guerilla groups. They spared those who agreed to grow coca, to fuel their work. We drove across the flat, open lands to the house of Don Pedro’s neighbour, passing several wooden crosses in the savannah. Paramilitaries would kill random people in the small villages to keep their 'reign of fear’, we were told. A cold shiver runs down our backs.
We were greeted at Audelino’s house with a warm smile and a plate of freshly chopped pineapple. Don Pedro and Don Audelino are excited to show us their current lives - how they distill the lemongrass plants into oil. Pedro loads 30litres of water and about 40kg of the green leaves into a metal barrel, and feeds the fire underneath. The steam heats the lemongrass leaves, evaporating the water and essential oil within them, which rises, travelling through the 2nd hand metal tubes, until it condenses in the pipe construction at the end of the process. Drop by drop, their hope is collected in re-used bottles, cleaned and then transferred to the 10ml blue glass bottles.
Climates of conflict
This area knows only two seasons: dry and rain. We are arriving at the beginning of the latter season. We are lucky enough to still have roads which are drivable - the ground is not yet completely flooded. But the families have suffered long months without rain - an especially harsh, dry, El Nino year.
Gilberto and Delio, the two sons of Dona Rosa, are enthusiastically perfecting their skills constructing 'Ram pumps’: using old plastic bottles and the deceleration force of a flow in a river to pump water up to the fields, without having to rely on a costly diesel generator. Mauricio encourages attentively as William adjusts the tilt of the air-compressor wind turbine, pulling water up to the house and fields of Don Pedro and Dona Isabel. ‘Ingeniero Campesino’ - engineers of the field - they are using the resources they have, and importantly, building themselves the skills they need - an important aspect of this project. There is no 'outside expert’ taking over the tasks, leaving technology which cannot be fixed in the field by those in the field.
The rain shows up the evening before we leave: 12 hours of unbreakable torrents. The distance between these families and their nearest town widens with the lakes and baths of mud on their 'road’ leading out. Nature determines your path and speed, at least in these parts of Colombia. Nothing perishable can be sold in the markets - it simply won’t get there on time, in one piece, with enough value to cover the costs of these distances.
The glass bottles of lemongrass oil lasts the journey.
In the morning, muddy tracks first have to dry. We eventually set off, with bags of mangoes, arepas, homemade cornbread, a last ceilidh dance and warm wishes. Hopes are travelling with us. And the motivation of these families too. Lives are changing, with every drop.
A journey through Los Llanos - the Eastern Plains of Colombia.
Doña Rosa, with her delicious areas; a hearty breakfast at Doña Isabel’s.
Don William fixing the wind-operated pump, as Mauricio stands by.
Don Pedro and Gilberto and Delio with the distillation machine.
Don William and Don Pedro in their ‘lemonarias’: the small field where they grow their lemongrass.
Development and Social Impact Bonds
How can we seek that every $1 spent on development aid is used in the best possible way? This is the question which fuels Instiglio, a social enterprise based in Colombia which, for the past 3 years, has been developing, testing and giving every ounce of energy they have, to apply social impact bonds in a developing world context.
What are Social Impact Bonds?
In short, a social impact bond (SIB) is a contract between an investor, a service provider and a Government. The investor gives funding to a service provider, who carries out their ‘intervention’. This may be an intervention to reduce reoffending, or to increase enrollment of girls in school. If the agreed results are achieved, the Government will pay the investor the agreed figures.
In a Western world context, successful schemes will reduce future costs to Government, ideally at the time when the Gov’t needs to pay for the scheme. In the UK, SIBs have already been used to reduce reoffending rates and the US have examples in healthcare, homelessness and employment. Lower reoffending will reduce future prison and social service costs; meaningful employment will reduce future costs associated with unemployment. This means that a SIB can also re-align the costs of prevention to the time when the £ savings are realised, in theory making these prevention options more possible for cash-strapped Governments.
Development Impact Bonds (DIB) use the same concept, with the end payer as a development charity or NGO.
Why are they useful?
- Finding better ways of doing things, i.e. Innovation, requires risk taking. Governments, on the whole, are not risk takers. Passing this risk on to private investors, where Governments pay only if the project is a success, encourages new approaches for old problems.
- The investor wants the project to succeed, to receive their payout. This can encourage involvement, working with the service provider to improve effectiveness and the design and management of the intervention.
- Possibly most importantly, SIBs and DIBs focus attention on achieving results - on aligning incentives towards achieving stated outcomes and making a measurable difference.
They are not the only “method” to focus incentives on achieving outcomes. Payments by Results / Results-Based Financing has been championed by the UK Government (among others) in the past few years, in an attempt to align financial incentives with outcomes and improve the effectiveness of spending. Service providers are paid for every improved cooking stove in rural areas, or every house linked up to a sanitary system*.
However, the approaches are different. Results Based Financing (RBF) often link only a certain proportion of a provider’s income to results - the rest of the service provider’s funding is tied to pre-agreed activities. SIBs go further - 100% of funding is linked to results.
In addition, RBF payments are often received by the service provider only at the end of the programme, once outcomes are achieved. This excludes smaller potential providers who don’t have the existing capital to pay staff in the meantime, shouldering the risk of their approach working. SIBs provide funding to service providers at the beginning of certain stages of the programme. The service provider has money to pay staff and try new approaches, with the majority of risk carried by the investor.
As a result, they encourage more innovation than payments-by-results - since the service provider is completely free to amend activities to focus resources where they can best achieve results. For this reason, SIBs are well suited to complex problems, such as behavioural problems, without a straightforward technical solution - problems we don’t understand in their entirety and can benefit from a fresh, innovative approach.
Sounds great. But how do they work in reality? And in a developing world context?
Learning by doing…
We talked to Siegrid Holler, who has been working with Instilgio since their initiation in 2012. It has not been an easy ride.
Bringing Governments initially on board has been perhaps their greatest challenge. Legal risks, stemming from a bureaucracy built to combat corruption, has created a culture of fear, Siegrid felt. No-one wants to sign anything, let alone an agreement with a young start-up, trying to shake up the approach to development assistance. Instiglio took their first steps in through approaching in partnership with established foundations. It was then difficult, Siegrid told us, to convince Governments to base their intervention on the evidence Instilgio and the service providers had gathered - of costs of operating, success rates, etc.
More formal write-ups of Instilgio’s learnings are available here.
Development Impact Bonds in practice
Their journey has taken them a long way. The world’s first Development Impact Bond is now in place in India, developed by Instiglio:
to increase female school enrollment, plus learning of boys and girls, in 250 schools in Rajasthan.
An investor,
UBS Optimus Foundation, pays out roughly $270k in 2015-16, to receive a one-off outcome payment of $0-412k in 2018, depending on the outcomes achieved (a target internal rate of return of 10%, up to 15%). However, at $676k, the transaction costs (i.e. costs of developing as well as the monitoring and evaluation) dwarf the actual amounts invested. With the high levels of risk involved, a 10% IRR is not high enough to attract any investor other than a social financer.
But these are all problems associated with early days - as more blueprints for SIBs and DIBs are developed, these transaction costs will dramatically reduce. Perhaps the IRR will never be high enough to attract investors without some form of social mission. But perhaps that doesn’t matter, if these SIBs achieve their aims in increasing the effectiveness of $ spent, then the (redirected) funding from foundations alone will be enough to make a difference.
Challenges with SIBs in lower income countries
There are additional challenges with developing SIBs in a developing world context. The ‘case for prevention’ and saving future costs is not relevant. The countries they are working in do not have the same size of social safety net as in the UK or US - as a result, the potential savings from keeping a future % of people off the streets, or in a job, or out of hospital, are small in comparison. Siegrid told us that they never frame the SIBs in terms of cost savings. Their ‘selling point’ to Governments and Investors is effectiveness - that this is a method to better achieve results. (this can be an attractive enough offer - when in the status quo, money is being spent with very little results.)
Secondly, data, which can be used to inform the payment schedule and design, as well as the evaluation methods, is often not available.
There are certainly challenges all over the world with using results-based financing of any form, including Social Impact Bonds. The experiments in the UK with payments by results have shown there can be problems with Results Based Financing. Service providers tend to choose those who are easiest to reach, named “creaming” by experts. Employment schemes have focussed on 18-25 year olds, who are more likely to ‘achieve outcomes’ and remain in full-time employment than the older age categories. Women in cities are easier to reach with healthcare than those in rural areas. And so on. Not all projects are suitable. For those that are, they need to be well designed to minimise these adverse consequences.
Time will tell how Social Impact Bonds will develop in developing world countries. And, once results come in, if they do indeed increase the effectiveness of aid. It is likely that the next social impact bond in a developing world context will be in Colombia, working with the Government for an intervention to increase employment. With the determination we saw in Siegrid, I have trust that Instiglio will give things their best shot.
- Bogota, May 2016
Good Gold? Fairmined in South America
Gold comes at a high price. Conflicts, environmental destruction, worker deaths and illnesses. Don’t think only of sparkling jewelery or the financial sector - the electronics industry is the 3rd largest consumer of gold.
12% of gold mined every year is estimated to be mined by artesanal miners. Such small scale gold miners, using simple technologies, have a hard time: the legal titles for mining are often available only for large tracts of land, too large for a one-family operation. Operating without titles means also without safety regulations. On 1st April this year, 5 were killed as an illegal mine in the Cauca department collapsed, not an isolated case. According to El Pais, mining has been the cause of 1,000 deaths in Colombia in the past 10 years. Operating also outside of environmental regulations has brought significant water pollution from mercury and cyanide, and, throughout South America, widescale destruction of rainforest. When selling their small quantities of gold to middle-handlers, it is often at a price much lower than the world market price. It is estimated that the rise in the gold price has increased the numbers of small scale miners across the world to 25million, with a further 150-170m people indirectly reliant.
In the highlands of Peru, we met families whose sons and fathers were gripped by the gold rush, leaving to seek their fortune panning for gold in the slowly disappearing Madre de Dios rainforest; our route in Colombia dragged us up and down impossibly steep paths in Huila, where cafe and bananas are grown above ground and gold is hidden below, in deep seams where families chip away to separate the particles of gold from soil.
And the site of Iquira, Colombia’s first Fairmined Gold cooperative.
Similarly to the Fairtrade certificate for coffee, there are strict environmental, social and safety standards to meet. Farmers must be part of a producers’ cooperative - the Fairmined premium of $4,000USD/kg is paid to this group, who decide democratically how the funds are spent. This may be used to increase productivity, improve practices*, invest in infrastructure, organizational strengthening, community Development projects, or distribute to members. Unlike fairtrade coffee and other agricultural products, there is no minimum price - but buyers need to pay 95% of the current world market price.
(*There is an additional ecological premium of $2000/kg for cooperatives which meet even stricter ecological standards.)
There are now 10 mining cooperatives certified by Fairmined, supporting roughly 1660 miners. 20 further mining cooperatives are working with Fairmined to improve their standards and reach certification.
“If you can find a path with no obstacles, it probably doesn’t lead anywhere”
This has not been an easy ride. In the year 2000, a cooperative of low income artesanal miners in Choco, Colombia, were first to test the concept of ‘responsible gold’. Standards were established which ensured the miners didn’t contaminate the biodiverse land and their drinking water. Direct buyers in luxury jewelery were found. The concept worked. However, demand was small. Even the higher premium was not enough to sustain the cooperative, when only minimal amounts were bought every month. As the gold price rose between 2001 and 2011, other actors looking to capitalize on the gold rush convinced these smallholders to rent their land for much larger sums. Mechanised mining followed, employing those from outside the region, the cooperative was disbanded.
But this group provided the invaluable evidence that the concept and standards worked. Fairmined continued - scoping potential areas and assessing potential producers who may be able to meet the strict standards, then working with these groups to become certified: 2-3 years from start to certification.
Success. The first year brought 500kg of gold produced at these high standards. However, only 20kg of sales. The gold was traded in a fully segregated supply chain - at each stage of processing, the gold had to be separated from the rest of the uncertified gold. The chain of processing is long, with many different actors involved. And as a result, the additional cost was high - too high, and too complex, for luxury brands.
Mass Balance Model
The certification split in half. Fairtrade continued with the fully segregated model, Fairmined changed approach to a ‘Mass Balance Model’, or ‘Integrated Sourcing Mode’: the buyer purchases exactly the percentage of Fairmined Gold on Fairmined terms which they will use in their final product, but during the process, the ‘types’ of gold can be mixed, (as is the case for Fairtrade cocoa and the renewable electricity market you may purchase in the UK)*.
In the first year after this change, sales for Fairmined were up 500%. There currently is enough demand to buy all the gold produced from 7 out of the 8 small Fairmined cooperatives.
(*A few years later, Fairtrade have amended their approach to ‘Mass Balance Model’ - the fully segregated gold, with the FT stamp, is still available at a much higher price)
The search for a golden chip
And in electronics? Some actors in the electronics industry have shown interest in sourcing responsible gold for their microchips through Fairmined. However, the supply chain is complex - chips are bought complete, from a range of different suppliers, who have already bought their gold from a number of intermediaries who combine gold from a multitude of countries and sources. For ‘conventional’ electronics firms, tracing this chain was too much of a challenge. But the interest in responsibility is there - Microsoft, for example, is currently supporting Fairmined’s work via donations. In the meantime, Fairphone have shown it is possible for an electronics firm to source ‘fair’ gold in their chips, with enough dedication and determination, and responsibility at the centre of their business model. Their latest model includes gold from Sotrami, a Fairtrade and Fairmined certified mine.
Expanding the reach
Kenneth from Fairmined told us only perhaps 10% of all artesanal miners would ever be able to meet the very high standards required for Fairmined certification. Which leaves 90% of small scale miners without the support to improve practices which certification can bring. To reach more mines, they are introducing an “entry level standard” - for mines demonstrating compliance with laws, for e.g. safety and labour standards. Mines can continue to work towards further, stricter standards, with time. And, importantly, buyers who are not interested in paying the Fairmined premium, have an option to source their gold with an assurance of a certain responsibility.