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Wim van der Beek, Partner - Goodwell Microfinance Development Company - Netherlands.

Wim van der Beek, Partner - Goodwell Microfinance Development Company - Netherlands.

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Presentation by Wim Van Der Beek Presentation Transcript

  • 1. Invest g o o d. D o w e l l. Investing at the Base of the Pyramid Wim van der Beek Aavishkaar Goodwell
  • 2. Contents 1. Introduction Aavishkaar Goodwell 2. Case 1: Scaling up microfinance 3. Case 2: Franchising in the BOP 4. Case 3: Micro-venture 5. Leasons learning 6. Mainstreaming sustainable PE: Crossing the chasm
  • 3. Introduction Aavishkaar Goodwell Investing in entrepreneurs in the Base of the Pyramid to create social value and generate financial returns “The bottom line is simple: It is possible to “do well by doing good.” (CK Prahalad) Benefits of scale: correlation instead of a trade-off between social impact and financial returns!
  • 4. Introduction Aavishkaar Goodwell Investing in the BOP scale effect Private equity in microventures and microfinance, 3 pools, India focus Blended value strategy: scaling up, efficiency, leverage, mainstreaming, distribution networks Approach: risk capital and handholding, financial discipline, rigorous private equity approach in mission driven setting
  • 5. Introduction Aavishkaar Goodwell Team: expertise and experience, based in India and NL Mumbai team Track record: 1st fund 2001 Aavishkaar India Micro VC Fund Award-winner, case studies Hyderabad team Professional investors: HNWs, foundations, development banks, commercial banks, corporations, institutional investors, FoFs Alliances with commercial banks, NGOs, donors
  • 6. Case 1: Scaling up microfinance Microfinance works! Commercial MF works better Growth model Igniting the accelerator • Equity funding • Capacity building
  • 7. Microfinance works for typical microcredit clients:
  • 8. Microfinance also works in other forms: Life & health Payments insurance Casualty insurance Savings
  • 9. The microfinance model works: High repayment rates Social collateral Climbing loan ladder Short loancycles Regular meetings Cost and risk control Standard product Doorstep-banking Group process Staff rotation
  • 10. Microbank: a scalable model MFI 80 branches Branch 1 Branch 80 450 field staff Staff # 1 Staff # 6 8000 centers Center 1 Center 20 40.000 groups Group 1 Group 5 200.000 clients
  • 11. The microfinance (r)evolution 1.0 Poverty alleviation 2.0 Development tool 3.0 BOP financial services
  • 12. Microfinance growth constraints Loans Growth Capacity capital building NGOs, networks, ●● ●● ●●● Dev agencies Philanthropists and ●●● ● ● social investors Banks and ●●● investment funds
  • 13. Commercial growth model works: Microfinance start-up growth model Net Profit/Loss, €k Clients 1.000 400 350 800 300 600 250 400 200 150 200 100 0 50 -200 0 2005 2006 2007 2008 2009 2010 Source: Goodwell Economist 5 november 2005 Business plan MFI startup
  • 14. Scaling up: investing in growth Microfinance start-up growth model Entrepreneurial MFIs Net Profit/Loss, €k Clients Early stage and 1.000 400 growth phase 800 350 300 New generation 600 250 400 200 150 200 Growth capital 100 0 50 Working capital -200 0 Cap requirements 2005 2006 2007 2008 2009 2010 Source: Goodwell => leverage Business plan MFI startup
  • 15. Scaling up: investing in efficiency Support Capital structuring Governance and transparancy MIS and planning Technology Innovation in Handheld device for remote products and microfinance transactions, distribution models www.sevaksolutions.org (franchising)
  • 16. Case 2: Franchising in the BOP Distribution is the major growth constraint for product/service delivery in the BOP Traditional distribution: concentric organic growth model, partnering with NGOs, wholesale push Alternative: franchising, mainstream killer app
  • 17. Why franchising in the BOP ? Parallel roll-out of distribution outlets Standardization, end-to-end solution, fit in supply chain Bundling of process, systems, training and funding Branding and quality assurance Risk management Creating a new generation of entrepreneurs in BOP
  • 18. Franchising model in the BOP Equity Franchisor Bank Training, investor systems, etc Entrepreneur (Franchisee)
  • 19. Case 3: Microventures Craftsbridge: Handicrafts design and marketing Corporate gifts marketing strategy Production outsourced to micro-entrepreneurs, talented Indian artisans Investment $ 100k in 2003 Rigorous handholding by Aavishkaar Micro VC Fund 400% growth in 2 years Outreach with 13 NGOs and 100+ craftsmen www.craftsbridge.com
  • 20. Lessons learning Small deal sizes, high engagement: manage costs, increase benefits by: • Standardizing process (e.g. franchising) • Support within portfolio network • Alliances with donors, capacity builders Operating in a mission-driven setting • Scale = social impact = financial returns • Managing different expectations
  • 21. Mainstreaming sustainable PE “Crossing the chasm” (Moore) Early adopters: enthousiasts and visionaries, “stories”, customization Early majority: pragmatists, “evidence”, standardization, user friendly Beachhead: “whole product”, compatibility: high impact, high return Bowling alley: product/market segmentation (eg HNW, institutional)
  • 22. Thank you Aavishkaar Goodwell India Aavishkaar Goodwell Netherlands Vineet Rai Wim van der Beek Aavishkaar India Goodwell Investments B.V. Micro Venture Fund Mediacentrum 341 201 & 221, Atlanta Estate, Sumatralaan 45 Estate, 1217 GP Hilversum Dr. Ambedkar Chowk, Chowk, The Netherlands Off western Express Highway Goregaon East, Mumbai 400101 Tel +31.35.6772661 Phone 91-22-39535292, 28778255 91- 22- Mob +31.6.46080801 Mobile 91-9820645736 91- www.goodwell.nl www.aavishkaar.org www.intellecap.net
  • 23. Invest g o o d. D o w e l l. Investing at the Base of the Pyramid Wim van der Beek Aavishkaar Goodwell
  • 24. Contents 1. Introduction Aavishkaar Goodwell 2. Case 1: Scaling up microfinance 3. Case 2: Franchising in the BOP 4. Case 3: Micro-venture 5. Leasons learning 6. Mainstreaming sustainable PE: Crossing the chasm
  • 25. Introduction Aavishkaar Goodwell Investing in entrepreneurs in the Base of the Pyramid to create social value and generate financial returns “The bottom line is simple: It is possible to “do well by doing good.” (CK Prahalad) Benefits of scale: correlation instead of a trade-off between social impact and financial returns!
  • 26. Introduction Aavishkaar Goodwell Investing in the BOP scale effect Private equity in microventures and microfinance, 3 pools, India focus Blended value strategy: scaling up, efficiency, leverage, mainstreaming, distribution networks Approach: risk capital and handholding, financial discipline, rigorous private equity approach in mission driven setting
  • 27. Introduction Aavishkaar Goodwell Team: expertise and experience, based in India and NL Mumbai team Track record: 1st fund 2001 Aavishkaar India Micro VC Fund Award-winner, case studies Hyderabad team Professional investors: HNWs, foundations, development banks, commercial banks, corporations, institutional investors, FoFs Alliances with commercial banks, NGOs, donors
  • 28. Case 1: Scaling up microfinance Microfinance works! Commercial MF works better Growth model Igniting the accelerator • Equity funding • Capacity building
  • 29. Microfinance works for typical microcredit clients:
  • 30. Microfinance also works in other forms: Life & health Payments insurance Casualty insurance Savings
  • 31. The microfinance model works: High repayment rates Social collateral Climbing loan ladder Short loancycles Regular meetings Cost and risk control Standard product Doorstep-banking Group process Staff rotation
  • 32. Microbank: a scalable model MFI 80 branches Branch 1 Branch 80 450 field staff Staff # 1 Staff # 6 8000 centers Center 1 Center 20 40.000 groups Group 1 Group 5 200.000 clients
  • 33. The microfinance (r)evolution 1.0 Poverty alleviation 2.0 Development tool 3.0 BOP financial services
  • 34. Microfinance growth constraints Loans Growth Capacity capital building NGOs, networks, ●● ●● ●●● Dev agencies Philanthropists and ●●● ● ● social investors Banks and ●●● investment funds
  • 35. Commercial growth model works: Microfinance start-up growth model Net Profit/Loss, €k Clients 1.000 400 350 800 300 600 250 400 200 150 200 100 0 50 -200 0 2005 2006 2007 2008 2009 2010 Source: Goodwell Economist 5 november 2005 Business plan MFI startup
  • 36. Scaling up: investing in growth Microfinance start-up growth model Entrepreneurial MFIs Net Profit/Loss, €k Clients Early stage and 1.000 400 growth phase 800 350 300 New generation 600 250 400 200 150 200 Growth capital 100 0 50 Working capital -200 0 Cap requirements 2005 2006 2007 2008 2009 2010 Source: Goodwell => leverage Business plan MFI startup
  • 37. Scaling up: investing in efficiency Support Capital structuring Governance and transparancy MIS and planning Technology Innovation in Handheld device for remote products and microfinance transactions, distribution models www.sevaksolutions.org (franchising)
  • 38. Case 2: Franchising in the BOP Distribution is the major growth constraint for product/service delivery in the BOP Traditional distribution: concentric organic growth model, partnering with NGOs, wholesale push Alternative: franchising, mainstream killer app
  • 39. Why franchising in the BOP ? Parallel roll-out of distribution outlets Standardization, end-to-end solution, fit in supply chain Bundling of process, systems, training and funding Branding and quality assurance Risk management Creating a new generation of entrepreneurs in BOP
  • 40. Franchising model in the BOP Equity Franchisor Bank Training, investor systems, etc Entrepreneur (Franchisee)
  • 41. Case 3: Microventures Craftsbridge: Handicrafts design and marketing Corporate gifts marketing strategy Production outsourced to micro-entrepreneurs, talented Indian artisans Investment $ 100k in 2003 Rigorous handholding by Aavishkaar Micro VC Fund 400% growth in 2 years Outreach with 13 NGOs and 100+ craftsmen www.craftsbridge.com
  • 42. Lessons learning Small deal sizes, high engagement: manage costs, increase benefits by: • Standardizing process (e.g. franchising) • Support within portfolio network • Alliances with donors, capacity builders Operating in a mission-driven setting • Scale = social impact = financial returns • Managing different expectations
  • 43. Mainstreaming sustainable PE “Crossing the chasm” (Moore) Early adopters: enthousiasts and visionaries, “stories”, customization Early majority: pragmatists, “evidence”, standardization, user friendly Beachhead: “whole product”, compatibility: high impact, high return Bowling alley: product/market segmentation (eg HNW, institutional)
  • 44. Thank you Aavishkaar Goodwell India Aavishkaar Goodwell Netherlands Vineet Rai Wim van der Beek Aavishkaar India Goodwell Investments B.V. Micro Venture Fund Mediacentrum 341 201 & 221, Atlanta Estate, Sumatralaan 45 Estate, 1217 GP Hilversum Dr. Ambedkar Chowk, Chowk, The Netherlands Off western Express Highway Goregaon East, Mumbai 400101 Tel +31.35.6772661 Phone 91-22-39535292, 28778255 91- 22- Mob +31.6.46080801 Mobile 91-9820645736 91- www.goodwell.nl www.aavishkaar.org www.intellecap.net