Category Archives: Social Enterprise

Interview with Markus Dietrich of ASEI

The following is an interview I conducted with Markus Dietrich, the founder of the Asian Social Enterprise Incubator. This is a complement to a two-part blog post I wrote for Next Billion, seen here.

Develop Economies: How did you decide to start the ASEI?

Markus Dietrich: I have a background in business. I attended Cass Business School in London. After he graduated he joined a business selling cash registers in 1994. I worked with a family to develop a national distributorship. In 2000, we sold it to a UK company that was working on a global scale. I stayed on to start an office in Switzerland, and then we spun off one division that was moving from distribution to direct sales. We were no longer targeting dealers and enterprise integrators and instead going direct to the buyers. We went from nothing to $10 million in sales. I found that what I liked doing was starting something. Later they made them director of Europe and the Middle East. After 14 years, I decided that I’d had enough and quit the job in 2007. I didn’t really know what to do, so I started traveling in India for a while. I came across microfinance and was intrigued by the idea of fusing business with development. It was the first I realized that there was a business aspect to it. I realized that I could use the knowledge I’d gained to become involved. I was thinking about my own personal impact, and felt that what I’d been doing wasn’t really making an impact on a wealth-creation sale.

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Hapinoy Is An Open Source Model for Low-Income Markets

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This is the second of two posts about Hapinoy that I wrote for Next Billion.

As Hapinoy expands, it reaches more of the BoP market. Through its network of suki stores, the company is able to offer other products and services that do not currently reach the BoP.

The founders like to think of Hapinoy as analogous to the iPhone. In the same way that the Apple device is an open-source platform for apps created by outside programmers, Hapinoy is a distribution vehicle for products to the BoP developed by social entrepreneurs. For example, through its stores Hapinoy sells solar lanterns, mosquito nets to combat dengue fever, and, starting in April, eyeglasses.

A few years ago, it created a pharmacy program, selling low-cost over-the-counter medicines. Hapinoy stores also are mobile cash agents for Smart Money and act as a mail acceptance counter for Mail and More. In the future, it will focus on nutrition and water, health and wellness, technology, energy, and livelihood opportunities. Ruiz would like to incorporate local producers into its supply chain network. “One key pillar of the future is to open up the Hapinoy Distribution Platform for the products of community-based microenterprises as well. Product development exists to help microentrepreneurs create BoP products, but many have difficulty in marketing and sales.”

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NextBillion Post: Awakening a Sleeping Giant

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This is part I of a two-part post that appears on NextBillion today. I will post part II tomorrow.

If you’ve ever been to the Philippines, you’ve no doubt seen a row of identical tiny stores selling Coca-Cola and laundry detergent. In fact, there are about 630,000 of these sari-sari storesserving the 90 million Filipinos across the country (a little less than one per 100 people), and each one may record less than $10 per day in sales. Each store sells the same single-use household and food products, but buys its inventory from grocery stores in the cities. As a result, the BoP end up paying even more for products and services.

Mark Ruiz and Bam Aquino of MicroVentures recognized the opportunity to consolidate this supply chain by centralizing sourcing and reducing distribution inefficiencies. The result isHapinoy, a franchise that has reached nearly 10,000 sari-sari stores in a few short years.

Hapinoy is an example of a conversion franchising model, which “transforms pre-existing, independently-owned businesses into members of a standardized network.” The company manages its operations and negotiates supplier contracts with Nestle, Unilever and others from its headquarters in the capital city of Manila. Products are purchased in bulk and distributed via Hapidelivery to a network of community stores, each of which serves between 50 and 100 “suki” stores (Hapinoy sari-sari stores). The suki stores buy from the community store at a lower cost and sell at a higher margin.

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Using a Microfranchise as an Open-Source Platform

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The following is the full transcript of an interview with Mark Ruiz, the founder of Hapinoy, a franchise of sari-sari stores in the Philippines. It is a companion piece to an article published on NextBillion.

Develop Economies: How did Hapinoy start? What, in your opinion, was the problem? Why is Hapinoy the right innovation for solving this problem?

Mark Ruiz: Hapinoy started as a fusion of paradigms, ideas, and people. In terms of paradigms, we wanted to fuse social development with the discipline of business. It started a combination of people from social development and the business sector. We wanted representation from a diverse set of relevant backgrounds, including microfinance, NGO’s, government, as well as corporate experience in distribution/marketing/sales/advertising, and entrepreneurship.

There were three fundamental problems we were looking at:

The products and services needed by the bottom of the pyramid (BoP) don’t reach them. The operative word is needed – for example, medicine, water, and electricity.
The products and services that do reach the BoP end up becoming more expensive due to distribution inefficiency. The poor end up paying more for noodles and shampoo than those who have money!
The BoP doesn’t have access to market opportunities, whether it is sari-sari stores looking for financing, new businesses, etc. or microproducers looking for a distribution/market for their products.

There’s a fundamental gap to the BoP. So we ask ourselves – how do we bridge this gap? How do we enable the last mile and bring products, services, and opportunities to where they’re needed the most?

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Impact Investing: Venture Capital for Do-Gooders Takes Off

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The other day a friend put me in touch with a friend of his who had just moved to Accra. She works the Acumen Fund, a social venture capital fund that invests in promising entrepreneurs in developing countries. The use of the adjective “social” is a bit misleading, in the sense that the companies are purely for-profit and do not need to have an explicit social motive guiding the business strategy. What distinguishes them is the market they serve, termed the base of the pyramid, or BoP for short. The name is derived from C.K. Prahalad’s books “Fortune at the Bottom of the Pyramid.” These businesses typically serve the poor in some way. Acumen has invested in agribusinesses and businesses in healthcare, water, and energy. The broader term for the modus operandi of Acumen Fund and other investment funds is “impact investing.” The unfailingly reliable Wikipedia describes impact investing as “an investment strategy whereby an investor proactively seeks to place capital in businesses that can generate financial returns as well as an intentional social and/or environmental goal.” It is a relatively new concept, and it has taken off in recent years.

So we met up at one of the many Lebanese restaurants in town for a drink and talked about all things development. There aren’t too many impact investors operating in Ghana, or West Africa in general. A few local private equity firms and some U.S.-based venture capital funds are the only ones I have come across. But it is the next big thing in development, which, in general, tends to driven by fads and has an often-changing flavor of the month. For a few years, microfinance was the darling of the donor communities, as Dr. Muhammad Yunus took that Nobel Peace Prize and ran with it. But now, microfinance is experiencing its own serious growth pains in its biggest and most dynamic market, India, and has been criticized for being, at best, ineffective, and, at worst, actively counterproductive in alleviating poverty. Continue reading →

Next Billion Post: Energy to the BOP Made “Simple”

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For my second post at Next Billion, I wrote about a company called Simpa Networks. Simpa was founded by Jacob Winiecki and Mike MacHarg, two people I have known since I started out in the development game. Here is a tangential story about the smallness of the world.

I used to work for a consulting firm in Boston. I wanted to work in development but wasn’t sure how to get in the door. I knew I was interested in solar energy and read about a lot of exciting things revolving around energy solutions in the developing world. I went on NextBillion, a blog about market-driven solutions to poverty alleviation, and looked up posts on solar energy. I came across a post on a Brazilian NGO called Ideaas, an organization that focuses on clean energy for the poor. Mike MacHarg had posted a comment about integrating micropayments into the Ideaas business model. He had a Duke email address, so I reached out to him to talk about what he was doing. He happened to be passing through Boston on the way to a wedding in Vermont, so we met up for coffee. He introduced me to Jacob Winiecki, who he’d been working with at Arc Finance, another NGO focusing on rural energy delivery. We talked on the phone, I told him I was applying to Kiva. Arc Finance, as it turned out, was trying to work with Kiva to get an energy loan portfolio going on the website. They were piloting a solar lantern program with an MFI in the Philippines and wanted to get the loans up on Kiva’s site.

A month later I was accepted to the Kiva Fellows program and given my assignment in the Philippines. As it turned out, I was placed with NWTF, the very same MFI that Arc Finance was doing a pilot with. So, when I got down to Bacolod, I worked together with Kiva, Arc Finance, and NWTF to get the loans up on the website. We were the first MFI in Kiva history to post clean energy loans.

Now, things have come full circle. Jacob and Mike started Simpa, and I am writing a profile on the company for the website that started the cycle a year and a half ago. You can read my full piece here. Below is the transcript of an interview I had with Jacob Winiecki to write the piece.

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Hello, This is Manila. How Can I Help You?

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Last week I tried to pay my credit card bill online. Using a different computer, the site wanted to verify my identity with a security question – “what is the name of your elementary school?” After three failed attempts, the system locked my account, forcing me to call to re-activate. When I called Capital One, the girl on the other end of the line spoke perfect English, though she had a slight, almost unnoticeable accent that has become very familiar to me over the last three months. I asked where she was located, and she said Manila.

In order to get into the Philippines, you need a flight out of the country. Back in November I booked a refundable ticket from Manila to San Francisco on United Airlines. The other day I called up to cancel the flight and collect my cash. The girl picked up the line and same song, second verse. I asked if she was calling from Manila, and she confirmed – Makati, to be more specific. “I was just in Makati for a conference,” I said. “Yes, this is the business center of Manila, sir,” she responded. I felt better knowing that I was dealing with a Filipino on the other end of the line. Continue reading →

Solar Energy in the Developing World

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This is a journal about the practice and theory of microfinance, and, more broadly, international economic development and poverty alleviation globally. If you’d like to get new posts sent to your inbox, please sign up, or subscribe to to my RSS feed. Thanks.

In an earlier post, I talked about green products and the concept of the triple bottom line. Environmental cookstoves save money, save lives, and produce less carbon emissions. Believe it or not, black carbon, or soot from cookstoves in developing countries, is the number-two contributor to global warming. These more efficient stoves pay dividends. But this is not the only green product serving the developing world. Solar products – lanterns, cell-phone charging stations, DVD players, and even micro-utilities – offer a cheap, alternative means of energy delivery in the third world.

Much of the Philippines - the areas in red - is less than 75% electrified.

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The Problem of Rural Education in the Philippines

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In this journal, I have discussed the relationship between education, poverty alleviation, and economic development. The link is critical and the three are self-reinforcing. Education creates greater opportunities for the youth, who go on to work decent jobs in cities like Bacolod, Manila, and Cebu. The children remit money back to the parents, who spend on home improvements and the tuition fees for the younger siblings. College-educated individuals are much less likely to end up impoverished (about 1 in 44). Trade schools also create opportunities, with only one in 10 people with post-secondary degrees living below the poverty line. Unfortunately, the ratios drop precipitously after that. One in three high school graduates and half of elementary school grads are impoverished. Here are the sobering education statistics: Continue reading →