Finance: Spurring inclusive innovation

This article first appeared in Unlisted & Unlimited, The Edge Malaysia Weekly, on March 13, 2017 - March 19, 2017.
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The High Impact Programme 6 provides funding for what is known as “inclusive innovation”, or innovation aimed at improving the lives of the bottom 40%. The programme, which comes under the auspices of Yayasan Inovasi Malaysia (YIM), helps the economically disadvantaged to participate in the economy and increase their productivity and income.

Programme director Abdul Razak Ahmad tells Unlisted & Unlimited that HIP 6, which is entering its second year, is not about handouts or subsidies. It is about encouraging those at the bottom of the pyramid by providing them with the appropriate enablers to participate in the economy and thus, gain more income and move up the economic ladder. It is also about helping them participate in the fruits of the economy of an almost-developed nation.

HIP 6 is a part of the SME Masterplan 2012-2020, which lists six significant high-impact programmes to be undertaken. “Each programme serves a different purpose. But ultimately, the goal is to bring the smallest SME from the start-up phase all the way to exporting its products and services,” he says.

Abdul Razak adds that Malaysia decided to add “inclusive innovation” to its list of high impact programmes because the country was found to have one of the largest gaps between the haves and the have nots in the region. 

“The World Bank, which was the consultant for the SME Masterplan, discovered that Malaysia has one of the largest Gini co-efficients in the region,” he says. The Gini co-efficient refers to the degree of variation or inequality between various groups in a particular economy.

“What this says is that despite our efforts [to shrink the gap between the haves and the have nots], there is an access gap. And if you allow this gap to grow, we may have social problems,” he adds.

Therefore, HIP 6 is all about identifying and developing affordable, high quality innovation and making it accessible to the target groups. “The first thing we did was to identify the recurring or common problems, especially for the rural or urban poor. When I say excluded groups — be it single mothers, OKUs (the disabled) or disenfranchised youth — poverty is the common factor,” says Abdul Razak.

YIM was appointed the lead agency for HIP 6 because it had been heavily involved with the grassroots community since 2010. YIM is a foundation limited by guarantee established by the Ministry of Science, Technology and Innovation to promote and inculcate a culture of innovation among the grassroots community.

Abdul Razak, an entrepreneur in his own right, has been with YIM since it started the programme in 2015. “Inclusive innovation is all about bringing innovation, whether it is from the outside or within the community itself, and making it affordable and accessible to the target groups,” he says.

Basically, there are three models that he looks at when considering applications for funding or help with innovations — the innovator-entrepreneur, licensing and community-enablement models.

“For the innovator-entrepreneur model, the entrepreneur comes in and says, ‘This is my innovation and I would like to promote the technology as my own, so I am selling it to whoever wants it’. This is not a subsidy. The whole idea is that the innovator-

entrepreneur is motivated to set up a company and sell the product,” says Abdul Razak.

“We also help on the pre-commercialisation side. Anyone with intellectual property (IP) can come in and say, ‘I think I have an innovation that can solve some of the community’s problems or some problems of excluded groups’. We will evaluate the merit of those innovations and market potential.”

Basically, every idea has to go through a QATOS evaluation — it must be equal or better than the status quo, affordable, targeted at the right groups, have sufficient outreach and the business built around it must be sustainable.

“First, we look to see if the innovation is equal or better than existing innovations. For example, if you come to me and say you have what Samsung has at a fraction of the cost, that idea would be good enough. I do not need an expensive phone. I just need an access device I can repurpose into an educational access device for people to use,” he says.

“I can even introduce an instalment plan where you pay RM20 to RM30 a month for the next six months, so you can get it for a small price. That is the kind of thinking I am talking about.”

Because of who the target group is, any product or service has to be affordable. “It has to cost a fraction of what is available out there,” says Abdul Razak.

It also has to be targeted. “We are not doing this for the rich or the mass market. We are doing this specifically to address the needs of the target group, which can be chronically ill patients, senior citizens, single mothers or indigenous groups. The idea is not to provide inferior products expensively to these people because they will just reject them outright,” he says.

The entrepreneurs must also be able to figure out how they intend to reach their target market. “Even if I am introducing the world’s cheapest tablet, if I cannot distribute it, there is no point because that means the people I am targeting it at still cannot benefit from the innovation,” says Abdul Razak.

Finally, the entrepreneur must figure out a way to make the business sustainable. “We cannot afford to keep giving handouts. So, whatever we fund must be sustainable. We hope what we are giving is enough to kick-start a sustainable venture,” he says.

YIM will provide up to RM200,000 to those who qualify as innovator-entrepreneurs to assist them in areas such as IP filing, industrial design, finding the right partners and marketing. “We do not take ownership of the IP. It is filed under the entrepreneur’s name. In fact, they are surprised when we ask them to file for IP. Kampung folk have always shared everything from the goodness of their hearts. They do not do it because they want recognition, so they do not even know the value of IP,” says Abdul Razak.

He adds that those in the grassroots community are naturally generous and have no notion of holding back. “They just talk and talk. So, if you were one of those people who wanted to steal the idea, you could easily do that. They would even teach you how,” he laughs.

While that may seem admirable, Abdul Razak points out that it has adverse implications. “In the real world, it means they will get ripped off — left, right and centre. But what we are saying is that in the future, there might be an opportunity for someone else to take the IP, license it and do greater things with it, right? That is why we encourage the entrepreneurs to file for IP,” he says.

YIM also helps the innovator-entrepreneurs with industrial design to improve their prototypes and make them market-ready. “Say you come to us with a prototype of something that works but looks downright ugly. It is something we know the market will reject even though it is fully functional,” says Abdul Razak.

YIM then looks for partners and fabricators in its network and pays them to produce a better version of the product. “The whole idea is to improve the capability of the innovation to the point where it is very close to being market-ready,” he says.

The foundation also helps with product testing. “Say you come up with a water filter. I cannot take you at your word that the water is safe. I will not drink a drop until the filter been fully tested and I know that the water is safe to drink,” says Abdul Razak.

“Someone needs to test the water that comes out of the filter. So, we actually do that. We pay for the testing and also help with the SIRIM certification.”

The money YIM provides is not equally weighted for every innovator-entrepreneur. After the foundation has assessed your idea, it decides where you most need funding. 

“Some innovators, for example, come to us with products that are mature. They just do not have the budget for marketing. So, we help them with that, whether it is for social media expenses, buying certain keywords, setting up a website or printing marketing brochures and pamphlets,” says Abdul Razak.

The second way it helps entrepreneurs is through its licensing model. “The fund for this model is not that big — the cap is about RM50,000. The idea is that we can help them improve the product so that it becomes a market-ready prototype. We also help with the licensing agreement,” he says. 

“This is the typical model for innovators who come from universities and colleges [rather than the community itself]. They spend a lot of time thinking and coming up with solutions to common problems.”

The third way the foundation helps is with its community-enablement model, which also has a RM50,000 cap. “Sometimes, people come up with an innovation that has a clear benefit but we are just not convinced about the sustainability of the idea. Nevertheless, we do not feel that we should deprive the community of the innovation. This model is about helping the community,” says Abdul Razak.

YIM used this model to fund a volvariella mushroom project. “These guys came to us through one of the challenges we run and asked, ‘What if we could increase the income of rubber tappers by RM500 to RM1,000 a month even when commodity prices drop?’ Naturally, we were interested,” he says.

“These guys have developed a technique to grow volvariella mushrooms in rubber estates. They developed it over time and through trial and error by using plant waste material. They pile up the husks and waste matter, put some fertiliser, then plant the mushroom seeds in these piles and cover it up. In two to three weeks, the mushrooms can be harvested. And because they are selling them at a premium, they can make RM200 to RM300 per row [of mushrooms].”

Why rubber plantations? Abdul Razak says the promoters of this idea found that it would not work in oil palm plantations because the soil is not fertile enough and there is not enough sunlight hitting the ground as the trees are planted too close together. Rubber trees are planted more sparsely, so there is enough sunlight and moisture. 

“Obviously, a lot of thought went into this. The whole idea is that they want the planters to grow the mushrooms, which they will help sell. If enough of a community plants the mushrooms, they will have enough volume and can make some real money,” he says.

YIM helps with the marketing. “At the moment, we are selling to the mom-and-pop shops which, in turn, sell to the cooperative so they can make cendawan goreng (fried mushrooms) or whatever else they want,” says Abdul Razak.

Last year alone, YIM awarded grants totalling RM3 million to RM4 million to 24 projects under HIP 6. It had an approved budget of RM6.5 million, but it did not receive all the money because of government funding constraints. This year, it has an approved budget of RM5 million. 

“At this point, we certainly need some money for operating expenses. But we are hoping that when we start diffusing these projects as community projects, we can get a lot more support from the corporate sector. I have been building up a network with the likes of the Malaysian Global Innovation and Creativity Centre (MaGIC) and other social enterprises,” says Abdul Razak. 

YIM uses several ways to source for innovations. One is the walk-in. “You can just go to our website and sign up to share with us your idea or prototype that you think will benefit the community. But we advise you to read the terms and conditions and understand what we are trying to solve. We get a lot of cockamamie ideas which people feel solve a lot of problems, but are not the core problems we are trying to address,” he says.

What are these core problems? “Firstly, utilities. This means renewable energy and clean drinking water, access to healthcare, innovations that help increase productivity and access to education,” says Abdul Razak.

YIM also holds challenges or Cabaran to source for innovations. The ones who typically apply for these are college and university students. 

“We have Cabaran covering six zones — North, East Coast, South, Central, Sabah and Sarawak. We promote this idea and we brief the local universities. Usually, they respond by submitting applications,” he says.

“So, we have different categories of applications from the public to government agencies to institutions of higher education. The ideas will be judged based on QATOS and how inclusive they are.”

The challenges follow a simple format. “Once you apply, the window closes and the application is processed with the help of our subject-matter experts. They put the scores into an online assessment form and we tabulate and average out the higher scores. Then, we invite the top 20 or so of each category to present their idea. The pitch is seven minutes followed by three minutes of Q&A,” says Abdul Razak. 

YIM selects the top three from each category and, depending on the priority, puts them on a list for further due diligence and pitches them to the steering committee. The steering committee either approves, rejects or puts the ideas on the back-burner due to a lack of information.

This year, the foundation plans to run a challenge about every two months. It is also on the lookout for referrals from its grassroots network. 

“We work with non-governmental organisations and associations. Sometimes they say, ‘One of our members has a great idea. Can you look into it?’ So, we get them to submit the idea for assessment and evaluation. If we think the idea is good, we bring it to the steering committee,” says Abdul Razak.

As YIM only handles pre-commercialisation, the entrepreneurs who graduate from HIP 6 can turn to other government programmes for further assistance. “We do not work in silos. We work with PlaTCOM Ventures Sdn Bhd (the national technology commercialisation platform) and SME Corp. Once they graduate, they can either move up to PlaTCOM, go back to SME Corp or stand on their own,” says Abdul Razak.

Most of the innovators it took on last year will graduate this or next month. “When the opportunity arises, we do linkages for them. The whole idea is to get the ball rolling,” he says.


School gardener develops mini-hydro system from scraps

 Hamid Jasmin is one of the earlier innovator-entrepreneurs discovered by Yayasan Inovasi Malaysia (YIM). Living deep in the mountains of Tambunan, Sabah, this school gardener and village head used scraps and recycled materials to develop a mini-hydro system to power his village.

Hamid was not only able to build the system at a fraction of what it cost in the market but also improve on what was available. “Rivers are not good for the turbine because the speed of the water is not constant, which messes up the system,” says Abdul Razak Ahmad, programme director of YIM’s High Impact Programme 6 (HIP 6).

Hamid had fashioned his system with a used gearbox from a truck and employed it in a novel way — to monitor the speed of the stream and regulate the speed of a used dynamo that generates enough electricity for 20 houses in his village. 

Before this, the villagers used dynamos that could only run for seven hours a day. The diesel alone cost RM300 to RM400 a month. To save diesel, they would turn it off early. This meant they lost two to three hours that could have been used for work or study (meaning a drop in productivity).

Because of his tinkering and modifications, Hamid’s design is more robust and reliable than many industry-grade dynamos. And because he developed it on-site, he was able to modify it according to the actual river conditions, says Abdul Razak.

YIM provided the funding to help him develop the system. “A turbine system typically costs RM100,000 to RM200,000 just to produce 50kW. His system — if you add up the total installation costs, cement, hut and everything else — is less than RM50,000. So, that is a fraction of the cost of a regular system. And it is powering 15 to 20 households,” he says.

Abdul Razak points out that Hamid is a gardener with a secondary school education. “The point is that inspiration is everywhere. You do not have to be a rocket scientist to figure out the turbine system. And we see a lot of these — innovators who are inspired to transform their community.”

He adds that YIM is trying to distribute this system to as many villages as it can. “In Sabah and Sarawak, easily 20% to 25% of the population still do not have access to utilities because they live in remote areas. 

“They cannot be connected to the grid because they would need to pull the wires pretty far and there is a lot of transmission loss. And if they live in a mountainous area, they are subjected to heavy winds and rainfall, and something may happen to the line. So, renewable energy is the answer.”


Padi thresher that does the work of five 

 Siteo Akang is a farmer from Keningau, Sabah, who developed a padi-threshing machine that can replace five labourers. Large tractors are not suitable for small padi plantations. So, most of the time, they have to employ labourers to manually thresh the padi.

Siteo’s machine requires only one person to operate and it is able to thresh padi up to 10 times faster than four draft animals. “You just put the harvested padi into the machine and it separates the rice from the husks. And it is powered only by a small diesel engine,” says Abdul Razak Ahmad, programme director of Yayasan Inovasi Malaysia’s High Impact Programme 6.

The machine can also be used to thresh moist crop. It is able to retain the complete rice straw instead of chopping it. The straw, grains and chaff are separated automatically with a blower, which reduces the labour required.

Abdul Razak says a version of this machine from China costs RM4,000 to RM5,000. “But this machine costs a little over RM2,000, which is at least half the price. We are now helping Siteo by engaging with Lembaga Peladang to offer his product at a discount or subsidised price. They are buying this machine from China anyway and now they can get a local substitute for a fraction of the price.”


Pineapple seeder that increases productivity tenfold

 Sopa Yahya, a retired military man, has developed a machine to help him plant pineapple seeds — a wheelbarrow pineapple transporter and a precision spot-on fertiliser dispenser. He built these labour-saving devices using only discarded parts. 

“The conventional way is to poke a stick into the ground and put in the seed, which requires a lot of manual labour,” says Abdul Razak Ahmad, programme director of Yayasan Inovasi Malaysia’s High Impact Programme 6. 

The pineapple seeder can be adjusted for different types of plants. “What he did was create a diesel-powered seeder. As it rolls, it creates two holes that are a uniform distance apart and consistent depth. Sopa, who endured 17 years of back-breaking manual labour to plant seeds, swears by it,” says Abdul Razak.

“He is a pineapple planter and he says the machine increases his productivity tenfold. He is selling it for RM7,000 to RM8,000 and other planters are willing to pay the amount, especially since the machine reduces the time taken by a factor of three.”

He adds that pineapple planters typically spend RM20,000 a year on machinery and equipment. “So, what is RM7,000?”

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