Jayamma Dumpa knows only too well the difficulties of cooking the old-fashioned way. Outside her tiny one-room house on the outskirts of Hyderabad, she demonstrates how she fabricates a makeshift stove to prepare a meal for her family of seven.

She squats down and packs sawdust into a rickety old metal bucket, with an empty beer bottle placed in the centre. The bottle is removed, leaving a hole to hold her fuel, which she lights using kerosene. Once it gets going, plumes of black, acrid smoke rise quickly into the air.

She burns wood mostly, bought from a market around 2km away and carried back on her head. But when supplies are scarce or times are tough, she makes do. On the ground nearby lies a pile of alternative fuels, including plastic bags and an old punctured football.

Dumpa is just one of an estimated 2.7bn people worldwide who depend on food cooked on rudimentary or traditional stoves, roughly a third of them living in India. The practice is an important, if lesser-known, contributor to climate change. Its health effects can be severe, too. “Every year we see about 2m deaths as a result of smoke from these traditional stoves,” says Radha Muthiah, executive director of the Global Alliance for Clean Cookstoves, a campaigning body. “That is a life lost every 16 seconds or so.”

Such problems were well known to Christine Werthmann, an economist from Berlin’s Humbolt University. In 2010, she conducted a survey examining energy use patterns in Hyderabad, as part of a wider academic programme examining ways to promote green policies in rising global “megacities”. With a population projected to hit around 10m by 2030, according to McKinsey, the consultancy, Hyderabad’s growth will lead to increased demand for fuel of all descriptions. But her team was convinced that the city’s slum-dwellers would prefer to cook with liquefied petroleum gas (LPG) stoves. These are cleaner and more convenient than their wood-burning cousins. What, then, was holding them back?

Working with The Energy and Resources Institute (TERI), a New Delhi-based sustainability research group, Werthmann’s team began to dig into the problem. Although the researchers had assumed cost to be the most likely barrier, the results of their survey suggested otherwise. “What we realised was that these women spent the same amount on wood that others spent on gas,” she explains. “This was confusing. If it was just as cheap, why were they still using the wood?”

The reason turned out to be twofold. First, the women were unable to convince the local agents from state-controlled gas companies to supply them with the gas cylinders, which are rented and require a security deposit. Most lacked proper identification documents, even if they did have enough money.

Many were also waiting for a long-running government programme that promised to cover much of the cost of buying a stove – which the supply companies try to persuade customers to buy from them – but repeatedly failed to deliver.

Yet even those who had documents and a willing supplier faced a second problem: saving enough to afford the upfront cost of roughly Rs3,600 ($65) for the stove and a deposit for two canisters. With an average monthly income for most slum-dwellers of only about Rs5,000 ($90), the price was too steep for most.

The researchers turned to the work of Muhammad Yunus, the Bangladeshi economist who pioneered microlending to the poor, for inspiration. “We all knew about Muhammad Yunus, and we knew about the critics, too,” says Werthmann, referring to widespread criticism that some micro-finance organisations over-lent to their clients and then used aggressive collection methods to recoup investments.

But she decided to explore a version of his approach by encouraging local women to save small amounts in groups. “Our question then was would there be enough trust in an urban community to make this work?”

At first glance, the slums of Hyderabad seem unlikely to be wellsprings of mutual aid. Take Nandanavanam, which I visited to learn about the cook stove problem. Compared with the tightly packed shanties of cities such as Mumbai, it is reasonably spacious, with rows of single-room brick houses on either side of dirt lanes. Even so its name, which means “celestial garden” in the local language, could hardly be less apt.

These are places that throw together the city’s very poorest, and most residents eke out a subsistence living. Yet under the surface these slums turn out to be surprisingly co-operative, not least in the form of local self-help groups that work with residents to support each other in times of need, or to lobby for the provision of basic public services.

“This approach dates back to traditional groups in India’s villages,” explains CS Reddy, chief executive of APMAS, a charity that helps to facilitate self-help groups. To see whether they could form the basis of a cook stove saving team, the researchers conducted an unusual field experiment. Working with APMAS, they invited around 270 residents in eight slums to play a game designed to measure levels of trust. It is a technique used widely in experimental economics, although more typically with students in laboratory conditions.

Participants play in pairs. Each person receives four Rs50 notes. The first is asked to hand over some money to the second. Whatever that person gives is trebled by the organisers. The second player is then able to return the favour, by giving as much money as she or he pleases.

The more money each side gives, the higher the returns to both. And the more they play, the more they learn that co-operation benefits both sides. “We discovered that while most people in the slums didn’t send much, mostly 50 or 100 rupees only, we also found that no one sent nothing …so we could be sure there would be no free riders,” says Werthmann.

Encouraged, the project team sought volunteers to take part in pilot projects. Two slums were chosen, including Nandanavanam, with 30 households taking part in each. Every participant in the Nandanavanam pilot put in Rs600 ($11) each month. This was a manageable amount, but one that created a total large enough to purchase gas stoves for five members, with the recipients chosen by a lottery. The next month the process was repeated. Over a period of six months, each member of the group received a cook stove.

The process was surprisingly trouble free, says Reddy. At one point the gas company suddenly increased prices, but everyone still made their payments. “They already knew they needed gas stoves, so there wasn’t much need for education,” he says.

Those who took part are clear about the benefits. There is less smoke in their houses, and cooking is easier. Time is also freed up, explains Rangamma Namala, one of the oldest participants. “We used to wake up between 4 or 4.30, but now we can sleep until 5 or 5.30, or cook food first and then rest,” she says.

Many of the women used the extra time to work, earning additional income for their families. “Before we got the stoves, we had to spend much longer cooking. Now we can spend more time earning,” she adds.

Laxmi Gomara, another pilot participant, mentioned an unexpected benefit: “With the new stove, my husband started to cook. It’s easy, and he is now a good cook.”

Not everything is perfect. They sometimes run out of gas, and must revert to wood before replacement cylinders arrive. The pilot reached only 30 people, while around half of the slum’s residents, including Dumpa, are still cooking with wood.

The organisers are keen to scale up the project, although they admit this would require greater co-operation from the local authorities and gas companies. And in a slum like Nandanavanam, new stoves do not represent an end to the residents’ problems. Even so, Werthmann is happy with their first steps. “Its a small project, yes, and it’s simple, but it works. And that is the beautiful thing about it.”