Babyloan and Total have teamed up on the very first microcredit crowdfunding platform specializing in access to energy. The partnership will give the public a way to fund energy access projects and make it easier for microbusinesses in the energy sector to get microloans.Arnaud Poissonnier, Babyloan's founder, and Philippe Cabus "Access to Energy" head at Total, share their take and their goals.
Total and Babyloan would seem to inhabit very different worlds. How did you meet?
Arnaud Poissonnier: Total and Babyloan both have the same ambition: To promote crowdfunding initiatives in renewable energy. Our shared story began two years ago, when Total's teams met Babyloan, which was exhibiting at the Convergences World Forum in Paris.
Philippe Cabus: The conversation with Babyloan got going naturally. We wanted to add to our portfolio of energy microfinance projects and Babyloan was enthusiastic. Arnaud is really open-minded — something I appreciate — and jumped at the chance to work on a joint project.
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What mutual benefits have you found in the partnership?
AP: There are several. For starters, working with Total involves lots of discipline and professionalism, especially in project management, which is very organized.
The partnership has also enabled us to act on something that is very important to us: Funding renewable energies and access to energy. At the time, we didn't have the resources to pursue that ambition. Now we do.
We also make a good team on the front lines. Babyloan has to recruit and audit microfinance institutions (MFIs). Total helps us with that in certain countries.
Plus, the communications resources Total is dedicating to this inspiring project — the first of its kind anywhere in the world — are very helpful.
PC: For any area we're interested in getting into outside our core business, we need to find the right partners, such as start-ups and social entrepreneurs. Our mutual expertise helps to nurture the relationship between us. It's a different way to approach innovation.
So where do things stand today for energy and microfinance?
AP: The microfinance world hasn't paid much attention to funding local renewables or access to energy. That makes it tough to find stakeholders and partners that meet our very stringent standards for reliability and financial stability. But it's starting to come together. We've already vetted three MFIs and another three will be added to the list soon. We want to bring the number up to ten quickly.
PC: The access to energy market is on the verge of taking off. Total's solar solutions were only launched in 2010 and have succeeded mainly because of their superior technical performance. Funding now looks to be a key factor in scale-up. Especially since energy-related projects are the most popular ones and generate the biggest lender response.
Babyloan is a disinterested loan. What are the advantages and limitations of that model?
AP: The concept is an incredible innovation, almost a revolution, in the world of philanthropy. Before, donors gave money to a cause promoted by an NGO. When Kiva came up with the idea of interest-free microloans, it invented another way to help: Lending for a specific cause, microbusinesses. It created a market.
But I see two limitations. The first is that all new concepts require "converting" the market. There's a huge amount of marketing that has to be done and it takes time and resources. And Babyloan has little or no money for marketing.
The second is the difficulty of identifying projects offering optimal financial security and sustainability. That's why our focus is on selecting the right MFIs.
PC: I wouldn't say that microfinance is disinterested. Lenders will put their money to use in economic development. Granted, they don't earn anything on their loan. But it's not a gift. The money circulates and is reinvested, creating business activity and development. The lender is an agent of change.
Microcredit has its limits. How do you get around them?
AP: In the early days of microcredit — invented by Muhammad Yunus — the media presented it as a revolutionary way to alleviate poverty. Four or five years ago, we realized that things weren't quite so simple and scandals, especially involving too much debt, reared their head. Yes, there were abuses and mistakes. But they're the exception rather than the rule and, on the whole, the microfinance world remains sound. At Babyloan, we use tried and tested processes that help us be vigilant about the debt trap.
PC: There's no perfect or miracle recipe. Babyloan has devised and uses precise rules to vet and approve MFIs. Especially for financial criteria and social-impact best practices. Its audit is a lengthy, thorough process double-checked and approved by a committee of outside experts. We trust this know-how and expertise.
What are your ambitions for the Babyloan/Total crowdfunding platform? And what's your time frame?
AP: Babyloan is the European leader and number two microfinance operation globally. In other words, a real global microcredit player. Our growth is being driven by a number of projects, including the one with Total. We have to show that we can contribute to the energy sector, by funding 2,000 projects.We also hope it will be a chance to recruit new lenders.
PC: We aim to be active in 10 countries within two years, to finance at least 2,000 microbusinesses. But we have to do that while creating value along the chain. Because Total's goal, let's not forget, is to provide access to energy to as many people as possible. That means using every resource to cover that last mile. Babyloan is one tool that will help us do that. Ultimately, it's the number of people impacted that will be the key indicator. We're aiming to reach 25 million people in Africa by 2020.
Is it a business or philanthropy?
AP: It's a social business. We're a social business start-up, a cross between pure philanthropy and a profit-making business. I strongly believe that businesses can address public interest issues, formerly confined to subsidies and donations. I really want to prove it.
PC: You can innovate through your products, but also in how you do business. In other words, you can do business differently. Granted, profitability expectations aren't the same, and it certainly takes more time. But that doesn't mean running a money-losing operation. That wouldn't be a sustainable business.
What do you think of Total's ambitions as expressed in its commitment to better energy, specifically the access to energy part? Have you seen anything like that at other energy companies?
AP: What's interesting at Total is that developing renewable energies is a real ambition, backed by genuine credibility. It's a strategic choice and the logical next step in the development of a business. It all fits together and makes sense as a whole.
PC: This isn't an area we need to compete in; there's room for everyone. The more of us there are, the better it will be for the 1.3 billion people who, as we speak, don't have access to reliable energy. AP: We've noticed lenders can't get enough of this kind of project. It will be a good way to accelerate development to achieve our goals.Historically, the media helped Babyloan grow its community of lenders. Forty percent of them came to us as a result of our media visibility. But in the last three years, that's been less true. This project may get the media interested again and restore the visibility that helps us attract new lenders.We don't know yet whether the profile of lenders will change, but if it does, it will be a real mark of success. Our "Babyloaners" are highly activist and engaged. We hope the lenders interested in the issue of access to energy will be even more so. PC: Naturally, quantitative indicators such as the number of projects referred and funded by MFIs, the number of countries, the quality of the MFIs and the fact that they've added access to energy projects to their program, and the number of people impacted are important. But we also want the partnership with Babyloan to lead to a growing, lasting operation that outperforms its goals and brings unexpected benefits.
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