April Allderdice ’94 had not ridden horseback in years, but that didn’t dampen her enthusiasm for a ride on the Mongolian steppe, a vast grassland. A sense of adventure, after all, is exactly what an entrepreneur needs.
That same spirit drove this Wesleyan physics major to leave management consulting and start a company that enables Mongolians living in yurts to tap into the worldwide carbon credit market to reduce their use of coal and cut pollution. That is a gross oversimplification of what she does. But it does underscore the fundamental goal of her work: use carbon credits to fund micro-finance projects related to clean energy in developing countries.
“Microfinance” is a word barely heard until the 1990s when the concept of making small loans to poor people in developing countries caught hold. The idea was that many poor people have entrepreneurial desire and know–how, but lack even a minimal amount of capital to start a business. Since then, microfinance has grown into a multi–billion–dollar enterprise with millions of participants worldwide.
At the same time that microfinance was taking off, Allderdice was in Egypt working on her Wesleyan honors thesis, a project dealing with solar lighting installations in the desert. Following graduation and a stint at the National Renewable Energy Laboratory, she went to Bangladesh to work at Grameen Shakti, a sister company of Grameen Bank. With the aid of a Fulbright grant and a fellowship from Echoing Green Foundation, she helped develop a program in rural energy independence.
Grameen Shakti offers a portfolio of products that poor people in villages can purchase with microfinance loans, such as solar home systems and biogas digesters to provide fuel.
“These villagers are using biogas for their cooking needs and solar for their lighting,” she says. “Some of them rely entirely on renewable energy. They don’t care if the power goes out. If the price of kerosene goes up, they still have light to read or work.”
In 2007, after an interlude in her life for business school and other ventures, she and a business partner who also was interested in microfinance both quit their jobs at the same time and set out to create MicroEnergy Credits. The company came into existence in Seattle as more of an idea than a full–fledged venture.
Lacking an office, they and volunteers interested in the project met in coffee shops—lots of coffee shops, Allderdice says. Despite the onset of worldwide recession that made procuring financial support difficult, in 2008 the company won the Global Social Venture Business Plan Competition for its innovative business model.
Though microfinance is fairly new, the carbon credit markets are even newer. Signatories to the Kyoto Protocol of 1999 operate on a system that, in brief, allows companies to purchase the right to pollute; that is, to produce carbon at rates above their allotted levels. A small portion of the $120 billion in this market supports projects in developing countries that are using clean technologies.
The United States is not a signatory to the treaty, which has one beneficial effect for MicroEnergy Credits. A number of U.S. companies voluntarily purchase carbon credits as offsets to their pollution, and they typically want the funds from those purchases used to support socially worthy ventures in poor countries.
Enter MicroEnergy Credits. Allderdice and her partner realized that the only thing separating the carbon credit market from yurt dwellers in Mongolia—or millions of other impoverished people—was a way to track small–scale efforts to reduce carbon emissions so that the quality of the information would be investment grade and useful to large firms.
“You need to track carbon emission reductions that are created by lots and lots of small investments in clean energy—a $100 solar lighting system, a $50 cook stove,” she says.
Now ensconced in a modern Seattle office building not far from the Space Needle, MicroEnergy Credits acts as a middleman between large purchasers of carbon credits and microfinance institutions, such as banks, that run the same kinds of programs as the one developed by Grameen Shakti.
If this sounds abstract, think eBay, which enables millions of individuals to participate in a large information–based market.
That’s how Allderdice wound up in Ulaanbaatar, the capital city of Mongolia, in a toasty warm yurt set up to demonstrate energy–saving products. Outside, snow was pelting down.
XacBank, a microfinance institution in Ulaanbaatar, had asked for help in setting up a microfinance project that would be funded through carbon credits.
“It’s a great microfinance bank with a good brand, well–respected in Mongolia,” she says. “Energy was a completely new area to them. We helped them put together a business plan and provided technical assistance.”
The area was ripe for a clean energy program. About 50,000 people were living in yurts with polluting, coal–burning stoves. MicroEnergy Credits helped XacBank set up a program to market insulating felt blankets to yurt owners, along with energy–efficient stoves. Together, the improvements dramatically cut coal use and household expenditures on energy. In a city where the wintertime temperature can drop to 40 degrees below, that’s no small matter.
As Allderdice and bank officials were inside the demonstration yurt with press and TV cameras, an old woman came in off the street to inspect the blanket and stove. Allderdice wound up staying for an extra hour as the woman relentlessly pressed her and others with questions while she decided whether or not to make a purchase.
That experience underscored a truth about their work in microfinance. Most of the effort is in education and handholding. While carbon credits subsidize the blanket and stove, XacBank uses its funds mostly to educate consumers and to make sure that the products continue to be used properly. Using mobile phones, global positioning devices, and the Internet, MicroEnergy Credits is able to track every single installation of clean energy products. The company is thus able to assure large purchasers of carbon credits that the program delivers on its promise.
The horseback ride had nothing to do with yurts and was pure pleasure. Allderdice travels a lot but doesn’t often have much time to scoot out for fun. Such is the life of an entrepreneur. She seems to relish the challenge, however. MicroEnergy Credits is raising funds to support a rapid scale–up.
“I do love innovation,” she says. “We try to innovate in order to leapfrog our problems. That takes me back to my problem–solving days in physics at Wesleyan, long before I ever anticipated that business would be so rewarding.”