Illustration by Hisashi Okawa
Illustration by Hisashi Okawa

In global development, as in business, delivery can determine failure or success. The windswept steppes of Mongolia, among the world’s harshest environments, have become a testing ground for how best to deliver something increasingly important to Earth’s entire population: electricity.

The conditions in rural Mongolia are forbidding. Winter temperatures on the steppes regularly drop to minus 30 degrees Celsius (minus 22 degrees Fahrenheit). Over a barren landscape three times the size of France, there are no paved roads. About a quarter of the country’s 2.8 million people herd goats and yaks. They shelter in traditional felt tents known as gers, as they have for thousands of years.

Today, the country is changing quickly. Mineral wealth has driven economic growth of more than 10 percent and rapid urbanization. But Mongolia’s leaders want to balance this by promoting rural development and preserving ancestral traditions. That means improving the quality of life for nomadic herders, including through electrification.

This challenge long seemed impossible. In search of fresh grazing land, herders roam far beyond the reach of fragmented power grids. In the 1990s, however, solar technology created a new possibility in the form of home solar systems light enough that herders could carry them while on the move. The Mongolian steppes also provide an almost optimal environment for harvesting solar energy, with clear skies for 250 days of the year.

Solar Power

In 2000, the government of Mongolia started the National 100,000 Solar Ger Electrification Program, a campaign to provide 100,000 nomadic herder families -- half a million people altogether -- with portable solar power units.

But how could the generators be delivered to the widely scattered nomads?

At first, the government relied on its administrative system, the only institutional network covering all of Mongolia’s vast territory. In this formerly communist country, private enterprise barely existed. No company was ready for a challenge on this scale.

Moreover, each herder family has a relationship with a government official in the village closest to where that family camps during the short summer. The government tapped these village administrators to promote and sell the power systems. Under the plan, herders would receive a government subsidy for half the cost and pay the rest themselves.

After a slow start, sales of solar systems began to rise in 2002. By late 2004, about 30,000 units had been sold. Then sales abruptly crashed. For the next year, almost no systems were distributed. The Solar Ger initiative became paralyzed less than a third of the way to its goal. At the time, no one knew the reason for the crash, let alone how to fix it.

To find a solution, in 2006, Mongolian officials convened the Renewable Energy and Rural Electricity Access Project, an alliance of the governments of Mongolia and the Netherlands and the World Bank Group.

One problem with the Solar Ger delivery model, the project administrators soon found, had to do with cash flow. Payments from herder customers were channeled into general government accounts rather than the Solar Ger program itself, and this caused delays in procuring the systems. The REAP team recommended that future income immediately be reinvested in solar systems for new customers.

Marketing Lag

A more significant problem, however, centered on the program’s incentive structure. The units hadn’t caught on in part because village administrators, already busy with their many other responsibilities, didn’t market them aggressively. Each sale required helping the buyer learn to operate the system, and administrators had no incentive to invest that effort and time.

A customer satisfaction survey in 2006 showed that after-sales service and support were the herders’ main complaint with the program. When systems needed repair, they usually needed to be taken to Ulaanbaatar, the Mongolian capital. For many, that journey was prohibitively time-consuming and expensive. Customers needed more convenient technical support.

Salvador Rivera, who coordinated the World Bank’s participation in the project, and his colleagues looked for examples of other programs or companies that had found ways to operate successfully in rural Mongolia. He started talking with leaders of the XacBank LLC, a microcredit institution that had recently built a robust clientele in the countryside.

XacBank had established tiny branches in remote Mongolian villages and, through these, acquired a tight network of personal relationships. Rural people could easily learn about the bank and its services, ask questions, and understand how microcredit might work for them. Once the bank granted a microloan, its personnel immediately followed up to provide advice and support. XacBank achieved a large volume of microlending volume with impressively high reimbursement rates.

Rivera wondered if a similar model might work for the Solar Ger program. He and the REAP team proposed creating a network of small, privately run sales-and-service centers throughout rural Mongolia, extending to towns and villages far out on the periphery. The local centers -- at least one in each region of Mongolia -- would provide sound advice about solar systems, energetic sales and reliable service.

Small Shops

The center operators, recruited through local advertisements, were mainly entrepreneurs who already ran small appliance or electronics shops. REAP provided training in how to maintain and make basic repairs to the systems. It also reinforced quality testing and introduced a limited warranty to build herders’ confidence in the technology.

REAP’s new model kept the government involved. It continued to provide the subsidy covering half the price of each unit. And it continued to shoulder crucial logistical tasks, including trucking the systems to remote areas. In especially low-density areas where private sales-and-service centers could never become profitable, government officials still served as the primary delivery agents for Solar Ger.

Almost as soon as the network of local centers was put in place, the program began to succeed. With each new sale, center owners found they had more demand for other goods that use electricity -- including light bulbs, mobile phones, radios and televisions. Many center owners thus went to exceptional lengths to spread the word about the Solar Ger program and ensure that herder families who purchased units were satisfied. Some regularly drove off-road vehicles onto the steppes to visit herders’ camps, give advice on solar energy, help families install and maintain systems, or make repairs.

Positive word-of-mouth spread among herders, sales climbed, and the program began to change lives. Herders with solar units rapidly acquired mobile phones to stay in touch with relatives and friends and to conduct business. Many began using TV and radio to get up-to-the-minute information on weather and market trends for their products, such as alpaca wool. This enabled herders to earn more money when they brought goods to market. And families’ leisure options expanded.

By 2012, the project had sold more than 67,000 solar systems, in addition to the 33,000 systems sold earlier by the government. The Solar Ger program met its goal of supplying solar power to half a million nomadic people.

Customer satisfaction among the herders has been extraordinarily high. In a survey, some 93 percent said they felt “extremely satisfied” or “very satisfied” with the systems and the service they received. Respondents unanimously said they would recommend the systems to others.

Ultimately, the REAP team members were able to turn a delivery failure into success using five strategies:

-- They got money flowing faster and brought in additional financial partners to expand the project to meet demand.

-- They listened to end-users’ complaints about inadequate and inconvenient service and repairs. This is crucial, because good delivery depends on understanding what people actually want.

-- They looked to XacBank as a model of success.

-- They brought on board an important local constituency: appliance dealers who had incentives to drive the program. Measurement of delivery success should always hinge on whether the item or service delivered satisfies people’s expectations and improves their lives.

-- They combined successful elements of the existing government-based approach with new strategies drawn from the private sector.

This success story also addresses one of the great risks inherent in development. As electricity and modern communications change the way Mongolia’s nomadic herders live, there is real concern that a long-enduring way of life may be lost. Rural communities in many developing countries face similar trade-offs as urbanization accelerates.

The Solar Ger initiative shows that safeguarding rural traditions doesn’t have to mean resisting all forms of innovation. New technologies can make it easier for people to maintain traditional rural lifestyles, while adapting to a changing world.

(Jim Yong Kim, a former president of Dartmouth College, is the president of the World Bank. This is the second in a three-part series about the importance of delivery in the success of global development projects. Read Part 1.)

To contact the writer of this article: Jim Yong Kim at president@worldbank.org.

To contact the editor responsible for this article: Mary Duenwald at mduenwald@bloomberg.net.