Investing the pyramid epub format
Longtime microfinance expert Elisabeth Rhyne and her team guide readers through the landscape of financial-inclusion opportunities, providing lessons from companies around the world that are leading the way in earning profits while addressing global poverty.
Microfinance for Bankers and Investors reveals: Changes in the market allowing for increased private investment in microfinance New technologies and delivery channels that reduce costs for small transactions Proven ways to overcome the unique challenges of serving customers at the bottom of the pyramid Innovative products for grassroots finance, such as mobile phone banking and microinsurance The extraordinary social value and business sustainability of microfinance Microfinance for Bankers and Investors breaks new ground by showing how microfinance attracts top organizations to engage in double and triple bottom-line business activities.
With deep insight and clear vision, it examines the unique opportunities and challenges of providing financial services for low-income people. Inclusive finance gives companies the prospect of aligning social values with long-term business strategies. Microfinance for Bankers and Investors offers the facts and insights you need to enter this fast-growing market with confidence. A few successful investments can draw others in.
The mispricing of risk can be corrected through a combination of high quality research and clever, long-term capital. I believe there are two kinds of SMEs, ones that have the potential to scale up dramatically, and ones that will always remain SMEs. The SONG Fund, 21 as an equity vehicle, targets the first kind, though there is a very real opportunity 22 to provide debt finance to the other variety of SMEs, especially given the unwillingness of banks to lend to them.
A fundamental premise of the fund was that if we targeted the BOP market well, the social impact would follow. We have done so, simply by catering to that market segment. In addition, SONG is a returns-first fund, so social impact cannot be used as an excuse to not return money to the investors.
Finally, SONG was set up with a belief that the social lens belonged to the investor and not to the entrepreneur. Often, investors make the mistake of backing mission-oriented people who turn to entrepreneurship as a way to execute on mission. However, in keeping with our belief that entrepreneurship is a highly specialized skill, we back strong entrepreneurs who cater to BOP markets.
This guarantees the social impact, irrespective of whether the entrepreneur is actively working towards that outcome or not. Our experience shows that scale and success are closely related to the ability to making bets on the right kind of entrepreneurs, rather than the right cause.
The hospital operates using a hub-and-spoke model, with a main hub hospital in a big city providing spokes into Tier 2 and Tier 3 towns. Our research 24 of the housing development market identified just two housing projects aimed at the low-income segment, which represents a huge mismatch between demand and supply. We did 12 months of research and identified the following key insights: Most developers made a fundamental mistake by segmenting the market by income, when in fact a slum dweller in Mumbai most likely makes more money than a middle class person in a Tier 3 town.
We discovered that segmentation is best done geographically, with each geography requiring a different housing solution. Industrial clusters 25 alone have a shortfall of over 6 million houses, despite formal sector jobs and the potential for payroll deductions. Outside of the big cities, low-income home owners prefer to live in ground-only, brick-and-mortar structures.
Moving to a working capital model with quick exits, rather than the traditional real estate model of land banking, 26 there was a potential for generating significant profits. Rental Housing -- There is an acute shortage of rental stock in the market, across all price points, but especially in low-income housing. Below a certain income level, ownership is out of the question and rental housing becomes a more attractive option. A migrant worker who moves newly to a city has neither the need nor the ability to maintain a house, until his family joins him and his space needs go up.
Housing Finance -- Currently, banks provide mortgages to our clients because they have formal sector jobs. However, there may be a significant opportunity to provide housing finance for informal workers at lower cost than the banks. Contours of a well functioning society 33Have a look at the figure below. You could think of it in terms of elements of a well-functioning society or think of it in terms of the pillars of urbanization or urban growth.
Or you could think of it in terms of potential innovation and investment in the Base of the Pyramid BOP space, except for the 3 boxes in grey. You cannot have healthy societies or well-functioning cities without each of these issues being properly addressed. Figure 5. In addition, all of these sectors can tolerate a high degree of competition.
For example, in housing, an additional 10 companies in the space will not really hurt existing businesses, even while greatly benefiting consumers. Even assuming a best execution case, we will be hard pressed to build , houses in a 5-year period. Given the shortfall of 30 million houses or 6 million in industrial areas alone , competition is the least of the worries. Execution is the real crux. If the focus is on innovation, business fundamentals, execution, and being cash flow positive as soon as possible, there are huge opportunities in each of these sectors.
Role for multinationals? I believe yes. Some of it may involve direct-to-consumer opportunities, like selling shampoo to the poor, but there may be much bigger and less costly opportunities in addressing the transaction costs faced by smaller, more innovative and entrepreneurial firms.
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