As a model, the intent is NOT to take each case to investors. I will setup a NBFC which will be capitalized and Mesoloan's team will assess each borrowing group/project against our risk methodology, portfolio mix, etc. and fund the loan accordingly. Currently, I have raised a seed round that is funding the startup costs plus the pilot.
Thanks for your interest. Let me know if you have any further questions.
This is a very good idea. Here are some things that I think might make your entry stronger:
1) Who are your channel partners? How long have you worked with them? How do they screen applicants?
2) As the G20 is very interested in how the public sector can help ideas such as yours scale up, so as to impact the greatest number of people, can you think of some ways in which public sector support could increase the proposals ability to reach a larger number of SMEs, increase channel partners, improve lending, etc?
Currently, we have confirmed 3 social enterprise partners and have a further pipeline of 10 partners ready to launch. Each of these partners has an entrepreneur network of 30 on the low end to 12,000 on the upper end and growing. My pilot launch channel partners are: Industree Crafts, Villgro and Drishtee.
1. Industree Crafts: Industree seeks to connect retail demand with artisan skills by organizing larger scale artisan production units into a vertically invested product-to-market design, manufacturing, distribution and sales cooperative that is co-owned by the rural communities. Today, Industree Crafs has 4 retail stores (growing to 6 by Dec 2010) under the Mother Earth brand targeting the socially conscious young urban Indian market providing local sustainable artisan food, home décor, furniture and apparel. In order to create differentiated products, Industree must drive product design down to manufacturing for which they need producer companies that can cater to their design needs. Currently, Industree has setup 6 such production units comprising 15-25 people in a self help group model in Bangalore, Tamil Nadu and Orissa. Each producer company needs capital loans in the amounts of $2000-$10000 for capital assets and working capital. Future Ventures Group (the financial services arm of Future Group that owns Pantaloons, Big Bazaar, etc) is the key investor in Mother Earth/Industree.
2. Villgro identifies and incubates grassroots innovations, which can have a significant impact on rural lives. Since inception in 2001, Villgro has activated close to 1500 innovations and impacted more than 350,000 rural lives. Typical categories of innovations are energy, agriculture, dairy and water. Example innovations include:
• an energy efficient biomass stove which uses fuel pellets prepared from solid farm waste
• an enriched fiber protein based low cost cattle feed which increases milk yield (10%)
• a neem based organic fertilizer which saves 70% of pesticide/fungicide cost.
Villgro’s business model is driven by rural entrepreneurs in a franchise operation. The rural entrepreneur/franchisee purchases the products for resale locally to his fellow farmers/community. Most of the entrepreneurs start as a franchisee with their own capital. The loan capital needed is for growth to take the franchisee typically from $600/month sales to $1000+/month sales. Villgro currently has 40 franchisees with a plan to grow to 400 in 4 years. Villgro is a Rockfeller investment.
3. Drishtee: operates a 12,000+ rural retail franchise network providing supply chain services for FMCG products sold through these retail outlets. In their interactions with rural retail, Drishtee has identified several opportunities to leverage their network and utilize a reverse supply chain solution for selling locally built/grown products on their network. For e.g. a rural bakery that produces toasts/biscuits requires a $3500 loan for a commercial kneader to increase production. These products could be picked up when Drishtee delivers goods to their rural retail stores and resold to other retail points on their network. Drishtee is an Acumen Fund investment.
I have worked with Drishtee and Industree Crafts for over 3 years. I have been a business mentor to these (and other such premier social enterprises) through the Santa Clara University’s Global Social Benefit Incubator program.
Application Assessment
The application screening process is two-fold.
- As social businesses, these channel partners are evaluating the ability of their franchisees or self help production groups to meet their business needs. They are also providing capacity building to these individuals/units to grow. Ultimately their beneficiaries success is translated into their success due to increase in product sales (Villgro), franchise fees (Drishtee) and differentiated products (Industree Crafts). Hence, these channel partners are invested in the individuals/self help group when they are presented to Mesoloan for funding.
- Mesoloan conducts its own evaluation of the applicant(s). Our evaluation methodology includes an intimate understanding of cash flows as pertaining to that business operator, validation of their sales growth, purchase order history, turnover of members, bank savings, etc. This is a risk management step that is crucial to our ability to minimize default as well as create a balanced diversified portfolio of loans/sectors.
Public Sector Support
Currently, the Reserve Bank of India mandates both public and private banks to extend capital for “priority sector” (bottom of the pyramid) lending. However, most private banks fulfill this requirement by purchasing government low interest coupon bonds. Public banks are decentralized in their decision making and access to this capital requires strong local relationships. For a business such as Mesoloan, the best help public sector finance can provide is to mobilize local, low cost (4%-7%) capital in significant quantities (in millions of USD) for scaling at large to reach the bottom of the pyramid.
I am unable to edit my entry hence, the lengthy response. Let me know if you have any further questions.
Thanks again for the response. I'd like to point out that you could always provide a link in your entry that redirects readers to your organization's website, specifically the pages that are most relevant to the section where you posted that particular link.
Also, when thinking about the public sector's role in your project I think it would make sense to think a bit more broadly than what the Indian government is doing now. It might be useful if you came at the question from a perspective of what might be possible if the public sector had funds (albeit scarce amounts) to commit to your innovation. How could they assist Mesoloan, scale it up, etc.?
The G20 and the Development Banks (e.g. World Bank, African Development Bank, etc.) are looking for innovations they can get behind and implement on a large scale. So be imaginative (while maintaining a realistic frame) and continue to be as innovative as you have to date!
Comments
Hi Hardika,
Do you have a team of regular investors or do you take individual cases to investors and get financing?
Thanks!
hi Rachna
As a model, the intent is NOT to take each case to investors. I will setup a NBFC which will be capitalized and Mesoloan's team will assess each borrowing group/project against our risk methodology, portfolio mix, etc. and fund the loan accordingly. Currently, I have raised a seed round that is funding the startup costs plus the pilot.
Thanks for your interest. Let me know if you have any further questions.
regards
-h
Sounds great Hardika.
All the best for its success!
This is a very good idea. Here are some things that I think might make your entry stronger:
1) Who are your channel partners? How long have you worked with them? How do they screen applicants?
2) As the G20 is very interested in how the public sector can help ideas such as yours scale up, so as to impact the greatest number of people, can you think of some ways in which public sector support could increase the proposals ability to reach a larger number of SMEs, increase channel partners, improve lending, etc?
Best of luck.
hi Josh
Currently, we have confirmed 3 social enterprise partners and have a further pipeline of 10 partners ready to launch. Each of these partners has an entrepreneur network of 30 on the low end to 12,000 on the upper end and growing. My pilot launch channel partners are: Industree Crafts, Villgro and Drishtee.
1. Industree Crafts: Industree seeks to connect retail demand with artisan skills by organizing larger scale artisan production units into a vertically invested product-to-market design, manufacturing, distribution and sales cooperative that is co-owned by the rural communities. Today, Industree Crafs has 4 retail stores (growing to 6 by Dec 2010) under the Mother Earth brand targeting the socially conscious young urban Indian market providing local sustainable artisan food, home décor, furniture and apparel. In order to create differentiated products, Industree must drive product design down to manufacturing for which they need producer companies that can cater to their design needs. Currently, Industree has setup 6 such production units comprising 15-25 people in a self help group model in Bangalore, Tamil Nadu and Orissa. Each producer company needs capital loans in the amounts of $2000-$10000 for capital assets and working capital. Future Ventures Group (the financial services arm of Future Group that owns Pantaloons, Big Bazaar, etc) is the key investor in Mother Earth/Industree.
2. Villgro identifies and incubates grassroots innovations, which can have a significant impact on rural lives. Since inception in 2001, Villgro has activated close to 1500 innovations and impacted more than 350,000 rural lives. Typical categories of innovations are energy, agriculture, dairy and water. Example innovations include:
• an energy efficient biomass stove which uses fuel pellets prepared from solid farm waste
• an enriched fiber protein based low cost cattle feed which increases milk yield (10%)
• a neem based organic fertilizer which saves 70% of pesticide/fungicide cost.
Villgro’s business model is driven by rural entrepreneurs in a franchise operation. The rural entrepreneur/franchisee purchases the products for resale locally to his fellow farmers/community. Most of the entrepreneurs start as a franchisee with their own capital. The loan capital needed is for growth to take the franchisee typically from $600/month sales to $1000+/month sales. Villgro currently has 40 franchisees with a plan to grow to 400 in 4 years. Villgro is a Rockfeller investment.
3. Drishtee: operates a 12,000+ rural retail franchise network providing supply chain services for FMCG products sold through these retail outlets. In their interactions with rural retail, Drishtee has identified several opportunities to leverage their network and utilize a reverse supply chain solution for selling locally built/grown products on their network. For e.g. a rural bakery that produces toasts/biscuits requires a $3500 loan for a commercial kneader to increase production. These products could be picked up when Drishtee delivers goods to their rural retail stores and resold to other retail points on their network. Drishtee is an Acumen Fund investment.
I have worked with Drishtee and Industree Crafts for over 3 years. I have been a business mentor to these (and other such premier social enterprises) through the Santa Clara University’s Global Social Benefit Incubator program.
Application Assessment
The application screening process is two-fold.
- As social businesses, these channel partners are evaluating the ability of their franchisees or self help production groups to meet their business needs. They are also providing capacity building to these individuals/units to grow. Ultimately their beneficiaries success is translated into their success due to increase in product sales (Villgro), franchise fees (Drishtee) and differentiated products (Industree Crafts). Hence, these channel partners are invested in the individuals/self help group when they are presented to Mesoloan for funding.
- Mesoloan conducts its own evaluation of the applicant(s). Our evaluation methodology includes an intimate understanding of cash flows as pertaining to that business operator, validation of their sales growth, purchase order history, turnover of members, bank savings, etc. This is a risk management step that is crucial to our ability to minimize default as well as create a balanced diversified portfolio of loans/sectors.
Public Sector Support
Currently, the Reserve Bank of India mandates both public and private banks to extend capital for “priority sector” (bottom of the pyramid) lending. However, most private banks fulfill this requirement by purchasing government low interest coupon bonds. Public banks are decentralized in their decision making and access to this capital requires strong local relationships. For a business such as Mesoloan, the best help public sector finance can provide is to mobilize local, low cost (4%-7%) capital in significant quantities (in millions of USD) for scaling at large to reach the bottom of the pyramid.
I am unable to edit my entry hence, the lengthy response. Let me know if you have any further questions.
Thanks for your interest and time.
Thanks again for the response. I'd like to point out that you could always provide a link in your entry that redirects readers to your organization's website, specifically the pages that are most relevant to the section where you posted that particular link.
Also, when thinking about the public sector's role in your project I think it would make sense to think a bit more broadly than what the Indian government is doing now. It might be useful if you came at the question from a perspective of what might be possible if the public sector had funds (albeit scarce amounts) to commit to your innovation. How could they assist Mesoloan, scale it up, etc.?
The G20 and the Development Banks (e.g. World Bank, African Development Bank, etc.) are looking for innovations they can get behind and implement on a large scale. So be imaginative (while maintaining a realistic frame) and continue to be as innovative as you have to date!
Best of luck,
Josh
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