Samman Foundation-- Business model of a social enterprise

The case is reproduced based on interview with the founder as part of assignment done by Management students of XIME. The purpose of this study to understand the entrepreneurs and the process of entrepreneurship. The correctness of data has not been verified. **************** Interview of the entrepreneur Irfan Alum, Samman Foundation Q: What ignited the spark in you to start a new business venture or how did the idea for your business come about? A: It was just an incident when I conceived this idea. Long back in 1999, I had taken a ride in a cycle rickshaw. It was a hot June day and I was feeling thirsty. I asked the rickshaw puller for water. His obvious reply was he didnt have it. I started thinking why he is not carrying water. Within a week, I gave mineral water bottles to 5-6 rickshaw pullers saying that if they sell one bottle, I will give Re.1 as incentive. Even I was surprised at the good response. I continued this pilot for three months. Q: Say something about your background. A: well, I belong to an area in India where doing business is a taboo. It is because people aspire to join Government services, civil services in particular. My state contributes about 15% of total administrative force in India. My entrepreneurial journey began at the age of 13. My father had lost his savings in a stock market crash in early 90s. We had a bad time. So being a curious and strong-headed kid, I took a resolution Ill recover the money. I was always doing something or the other to earn money. I started trading in the stock market, selling products for local producers and stuff like that. But, my parents were not happy with all my adventurisms. Q: Role of your parents as in their support in your entrepreneurial venture, education? A: They wanted me to complete my study. They advised me to undertake a management course. Luckily, I got through IIM (A). There was no looking back from there. In fact, they were very supportive in each and every decision I took in my life so far. Q: Who was your mentor and how did he help you? A: Mr.Piyush Sinha who teaches Retail at IIM (A) has been my mentor. I discussed my idea with him and told him that I am raring to go to execute it. He looked at my business plan and replied that it has great odds in favour of clicking. Besides that, he sent a mail to Mr. K.V.

Kamath and Mr. Nachiket More to get their feedback over my idea. Their reply was- the idea is stunning. It filled me with great energy and enthusiasm. Q: What was the mission at the outset? A: To survive. Jokes apart, the mission is always to create value by innovating the products/service offerings or the processes involved. Q: Can you brief on the basic structure of your business plan? What were the driving force and the opportunity you looked at? A: I saw an opportunity at the bottom of the pyramid, in micro transport, non-mechanised cycle rickshaw sector. The pilot project which I did with rickshaw pullers selling mineral water was the core idea. The total no. of rickshaws plying on Indian roads is roughly 10 million. I felt its a big market and there is an opportunity. One rickshaw puller carries about 40 commuters every day. 100 million people carry 400 million people every day. Rickshaws pullers interact with their customer one-on-one basis. So, there lies a huge untapped marketing and distribution avenue. Q: Did you undertake any research before starting your venture? A: yes. I researched the market and came to the conclusion that there were some very big issues. 90% of cycle rickshaw pullers had got no financial access, basic education, nothing. They survive on barely minimum resources. It was a big challenge, yet it was a big opportunity. Q: What were other issues involved? A: The major issue was most of them were migratory labourers and came from rural parts of the country for their livelihood. Most of them were agri-workers. They go back for agri-work and come back post-harvesting. So, the first challenge was to woo them by providing them with secure livelihood. In India, 90% of them never own rickshaws. They take it on rent from fleet owners who own some 50/60/100 rickshaws. They pull it for a day and at the end of the day they pay rentals. The real problem is, irrespective of the fact they earn or do not earn, they have to pay daily rentals (25-40 bucks / day) and if they fail to pay, they have to pay Interests. Since, they did not have banking access; they parked their savings with the fleet-owners and got them back after adjusting the dues. We were lucky, that we got financing support from the banks all through our journey because of our solid business model. Q: How did you overcome those issues? A: I decided to make them owners of the rickshaws. My intervention is very simple. We get them credit through banks and financial institutions to buy rickshaws. So, they can decide on
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their hours of working as well. Then we decided to ensure that they earn more; so that they become capable to have a better living standard or they become capable to invest in the market. Q: Briefly describe your business model, revenue sources in particular. A: We made some innovative changes to the traditional rickshaw pulling. We designed the rickshaws in such a way that it gives ample space to put the advertisement on the side, front and back panels of the rickshaw. We decided to leverage on the mobility of rickshaws. Rickshaws are used for advertising and Brand Promotion in rural areas. Rickshaw puller additionally earns from various value-added services such as sale of mineral water, juices, mobile recharge. The company introduces for the first time prepaid rickshaws in India. The most important thing is dignity. They have their identity. They are no longer rickshaw pullers but rickshaw operators. Q: What is the profitability situation? A: We are not only sustainable, but also making profits. We are a five year old company. Even our first year balance sheet was in profit. Q: Where is the social quotient? A: We are now a 10,000 strong family. Each of the rickshaw operators has started earning 30% up than the traditional rickshaws drivers. Each of them carries an identity card, has a bank account. We provide insurance coverage. We have customer care no. from where you can those rickshaw operators and book rickshaws over phone. Credibility has come. They feel dignified. Since, they are earning more; they are saving more as they have now banking access. Now, they aspire to send their kids to good schools. They are aspiring to move up the social ladder. This only happened because they are now financially strong. Q: How does sudden transfer of ownership of rickshaws translate them into an innovator? Can you give some examples? A: Well, there are lots of examples. They come up with ideas to improve rickshaws. In India, rickshaws were introduced in way back 1920s and since then there was no technological improvement in the rickshaws. They come up with ideas like if we introduce this small device; they can increase the speed of the Rickshaws with even lesser physical effort. Based on their experience, these ideas come from their side. Besides that, they are laying stress on the maintenance of the rickshaws. They are taking good care of the customer. It was not only about transfer of ownership. We gave them special training to sell products, to do advertising, to deal with customer in a better way. Q: Tell something about your client base and distribution network.
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A: We are now a 10000 strong family and the opportunity is to extend it up to the no. of 10 million. You can imagine the impact of networking once we reach even half of that number. There is possibility of 20 fold growth. We have been acknowledged as the alternative channel for product distribution. We are providing one of the largest alternative channels to clients like Unilever, Tata Tea. We are distributing detergent powder, tea-leaves not only for community consumption, but also outside community. Q: What next? A: The market is growing at a rate of 10% which is not bad. The basic idea is to leverage the whole synergy. There are cases where rickshaw drivers have been upgraded to motorized rickshaws, even to taxis. There is nothing like market saturation as of now. We are quite open to replicate the idea in the other transport medium or even to other sector. The opportunity which lies here is huge network of people. Secondly, they have never been tapped to any kind of services. Today, we are dealing with rickshaw operators; tomorrow it can be any unorganised labour sector. This is what the whole idea is. Q: To what do you attribute your success? Would you like to give any suggestions to budding entrepreneurs? A: Three key mantras--- 1) Self-belief. 2) Ruthless Persistence. 3) Razor Focus. Discussion: 1. Pl discuss the business model of Samman Foundation. 2. Is this model replicable and scalable? Pl explain.

For private circulation and class discussion only. Prepared by Nawsher Khan, Manjit Kaur and Inderjit Chowdhury, students of Batch 17, XIME