Social Business: Healthcare, with a difference

• Miscellaneous
• 07th July 2010
• YC

BASF Grameen takes chemically-treated mosquito nets to the rural poor

Sohel Parvez - Wednesday, July 7, 2010

Saria Sadique, chairman of BASF Bangladesh Ltd, spends more time and energy just to explain the concept of social business. His organisation has made a foray into this spectrum with Grameen Healthcare Trust and set up the entityBASF Grameen Ltd (BGL).

The main purpose of the venture that was launched in March 2009 is to improve the health and business opportunities of the poor in Bangladesh.

"It's not about donations or charity projects, but about economically viable enterprises that aim to continuously improve the living conditions of the economically disadvantaged people," said Sadique, also the chief executive of BGL.

 

Explaining the difference between a conventional and a social business, he says, "One emphasizes own profits, while the other generates profit to better the community. Profits (in social business) are not taken back by the investors, but are reinvested to benefit a wider population."

The company began its journey with an initial capital of 200,000 euros ($251,058) that was injected by the partners, with BASF accounting for the majority of the contribution. They introduced the first product that was a chemically impregnated mosquito net, to help people combat insect-borne diseases, like malaria.

"The reason is obvious, Bangladesh had an estimated 2.9 million cases of malaria in 2006 and 72 percent of the population is at risk of the disease," says Sadique, citing the World Malaria Report 2008 by World Health Organisation.

As a remedy, BGL came up with the long lasting impregnated net (LLIN), branded as the 'Interceptor'. It aimed to market it across Bangladesh, especially in the remote areas.

"It is not a simple mosquito net. It is chemically impregnated when the fabric of the net is produced," he says.

The mosquito net contains Fendozin, a textile-finishing chemical that binds insecticide Fendona in a special coating to the fibres of the net. 

The insecticide, Fendona, diffuses in a controlled manner to the surface of the coating with a triple effect, which repels, knocks down and kills mosquito when they come into contact with the net.

BGL insists that the net has no harmful effects on the human body and provides an odourless and invisible protection against mosquitoes. 

Another feature of the net, Sadique says, is it gives protection even after 20 washes.

Since the time the product was first launched, BGL sold about 40,000 units in the local market by importing it from Vietnam and China . 

Shafkat Mustafa, manager of sales and marketing for BGL, says they got a "fantastic" response from the market. "There is no question on quality and efficacy."

But high import duties, VAT and taxes (an additional 94 percent on top of the cost-insurance-freight value) have made the nets less competitive against the locally made mosquito nets.

Now, an Interceptor is sold at Tk 520 due to the high duties and taxes, but Sadique says the price will drop as BGL has started setting up a manufacturing plant to make it locally.

The factory, which is being established at the Grameen Social Business Industrial Park in Gazipur, is expected to start production by the second half of 2011 to make 600,000 nets a year.

The social business entity looks to tap the domestic market at a time when 23 lakh pieces of mosquito nets are consumed a year. The company expects to capture 5 percent of the market within 4 years.

To ensure an increased availability of the net, BGL hired distributors and also involved NGOs. It uses Grameen's network to cater to the remote locations and raise awareness. The nets will also be available at the BGL appointed distributors at grocery stores, clothing and bedding shops and superstores in the urban areas.

The company is also thinking about using agricultural products distribution channels, by involving the poor women in villages, by giving them microfinance.

To popularise the nets, the company wants to take advantage of an interim recommendation from the Pesticide Evaluation Scheme. 

"The UN and other international agencies are using our interceptors to combat malaria in Africa," says Sadique.

BGL expects sales to grow at 20 percent a year till 2014 and then it will slow down to 10 percent.

According to insiders, it aims to payback investors' investment in 4.5 years and begin repatriation of share capital from 2013.

The company is yet to make the nets widely available in the local market because of a limited supply from the plants in China and Vietnam , which are booked with orders from other buyers, according to BGL chief executive.

It expects the next consignment to arrive in August.

Sadique believes the mosquito net will be readily adopted because of a growing consciousness among people on the harmful effects of mosquito coils and aerosol sprays on health and the environment.

In the months to beginning production locally, consumers will have pay high prices because of the taxes. "We approached and tried to convince the NBR to waive the additional duty for the sake of social business and to extend the product to the poor. But all our attempts were turned down."

The main problem in a failure to convince the officials of government agencies, like the National Board of Revenue, is a lack of understanding of the concept of social business.

"It is another challenge," says Sadique.

But he believes that the fight to establishing and running such a business will ease in the future, with more entities like this emerging. 

"As many international universities are now offering social business as a subject, it will help ease the set up social business venture in future."