How might we develop a loan product to help local

entrepreneur led franchises access credit and thereby

scale up the retail franchise model?
Overview:
Piramal Sarvajal has been a pioneer in deploying remotely tracked community-level drinking water
purification systems by bringing accountability to day-to-day operations. By being technology-driven,
we ensure better machine and operator accountability, meaning better service for our communities.

Piramal Sarvajal provides safe drinking water through customized decentralized drinking water
solutions at selected urban / rural locations. This is achieved through installation of a state-of-the-art
community level purification plant for delivery of safe drinking water at affordable prices to the
beneficiaries.

Image: Sarvajal’s Installed Facility

The project is operated in partnership with a local entrepreneur or the local Panchayat/ Community
Based Organization; thereby creating sustainable livelihood opportunities within the chosen
community.
To address the issue of effective post-purification water distribution, Piramal Sarvajal has innovated a
unique Water ATM model that uses smart cards to create price transparency and quality
accountability to the last mile.

Image: Sarvajal’s Water ATM

Context:
Piramal Sarvajal’s one of the operating models is called the Single Unit Community Solution. A few
specifics about this model are as follows:

• Installation of one purification plant in any community (village, school, construction site etc.).

• Optional installation of Water ATMs to track water consumption by beneficiaries

• Piramal Sarvajal trains an operator/entrepreneur who manages local daily operations

 • Piramal Sarvajal provides regular maintenance support and community awareness drives

• All partners have access to daily and monthly performance reports using real-time data from
the ground

As an operator/ entrepreneur is pivotal in managing local daily operations, an Entrepreneur led

Ecosystem (ELES) is critical to the functioning of the Single Unit Community Solution operating model.
As a result, Piramal Sarvajal has created a retail franchise model, where a person with
entrepreneurship potential from the local community is identified to run a decentralized community
level drinking water outlet in the village.

This is the stage where potential franchisees need loan funding

Image: Entrepreneur led Ecosystem

The franchise is provided marketing assistance and maintenance support while local sales and
operations are managed by the franchisee. The model can either be risk participative (under a
revenue sharing arrangement, with the franchisee retaining 40% of revenue), or a fully franchisee
invested model (more suitable for franchisees already running other established businesses). This
essentially combines livelihood creation (entrepreneur who also employs operator, driver, etc) with
the objective of serving safe drinking water.

We have a well-established network of 220+ franchises in 7 states (which has outreach of 1000
individuals daily), which showcases the potential of generating sufficient water revenues over
sustained time periods. The retail franchise model has also created a ripple effect by spurring the entry
of other local entrepreneurs who seek to provide purified water to meet the local demand. As of
today, for every 1 entrepreneur we set up, 5 semi formalized entrepreneurs come up. In order to meet
the service gap, there is an estimated need of 3,62,000 players (local entrepreneurs) with each player
responsible for 3000 litres per day.
Challenge:
The total project cost for each franchise is in the range of 8-9 lakhs, with capital recovery typically in
a period of 18-36 months. The current model, however, requires high upfront investment by Sarvajal
to identify the right candidates and many of those identified, cannot proceed further due to lack of
loan capital to start such a business. The current success ratio is approximately 1:8 i.e. 16 local
entrepreneurs have got loans and about 133 have been rejected by banks/ NBFCs. Some of the reasons
for this are:

1) Turn- Around- Time (TAT): Turn-around time (TAT) of banks and NBFCs ranges from 90 to 100 days
from sharing of shortlisted prospect to screening and assessment of credit worthiness. This leads to
loss of interest in starting a franchise business.

2) Geographical Presence: Limited branches of NBFCs/Banks in important, needy locations leads to

lower priority accorded in supporting such potential franchises. Banks with the largest branch
networks- SBI, PNB, HDFC et al have been reluctant in providing loans to franchises. So far, all the 16
entrepreneurs who have succeeded in getting loans have got it from smaller NBFCs and cooperative
banks et al.

3) High Interest Rate charged by NBFCs: Interest rates above 15-16% would render the retail franchise
model unviable. While government schemes may provide lower rates, the TAT is high, leading to a loss
of interest as stated earlier. The current interest rates for the 16 successful loans are between 11-
18%- which makes the investment too expensive for local entrepreneurs and thus, deters other
candidates.

4) Mortgage requirement and documentation: Most of the mortgage requirements are not
applicable to franchisee prospects and the absence of sufficient documents results in loan applications
being rejected. Apart from the 133 rejected applications, there are many more that were rejected due
to this reason.

Case Question:
Keeping the above challenges in mind, what loan product can Piramal Sarvajal develop to help local
entrepreneur led franchises access credit and thereby scale up the retail franchise model?

About Piramal Sarvajal:

Piramal Sarvajal is a mission led social enterprise seeded by Piramal Foundation in 2008, with the
intent of providing safe, affordable drinking water to underserved communities. Sarvajal promotes
the use of community level, decentralised solutions consisting of the following components:

• Network of purification plants (depending on local contamination) and dispensing units (solar
powered Water ATMs)
• Pay –per-use mechanism wherein consumers access water via an RFID enabled smart card,
allowing them to take as little or as much water as needed
• Patented Remote Monitoring technology which leverages Internet of Things (IoT) based
devices that provide real-time data on quality and quantity of water dispensed, among 14
other indicators
 • Community engagement efforts that create sufficient demand for safe drinking water,
creating long-term health impact and boosting the sustainability of solutions offered to the
community

Sarvajal currently operates in 20 states serving over 6,00,000 people with safe drinking water every
day, and had partnered with Tangram 2018 wherein over 70 IIM students attempted to solve a case
study around improving water offtake from Sarvajal’s plants and ATMs, via behaviour change efforts.

For more information, visit our official website.