Here in the Philippines, the most common use for a microloan is a sari-sari store – otherwise known as a general or convenience store.  There are an estimated 700,000 of them here, and you can find one on just about every block in the country.  In 2007, an organization called Microventures Incorporated introduced its Hapinoy program, which is a coop of sari sari stores across the country.  By joining together, these stores can get leverage economies of scale to get volume discounts, competitive pricing, and more favorable terms for microloans.  The organization purchases products in bulk from Procter & Gamble and other large manufacturers, and distributes them to each Hapinoy store via a community store.  It is a hub-and-spoke model with a wholesale store serving different regions.  Here is a program that operates within the existing framework of the country, improving what exists, rather than trying to change it altogether.

This is a really interesting model that is fairly innovative in the microfinance community.  Again, as with any new development in any field, not just microfinance, the Philippines meets certain requisite preconditions necessary for something like Hapinoy to work.  First, there are hundreds of thousands of stores, all buying the same products (shampoo, soft drinks, detergent, snacks).  These stores are highly fragmented, but similar in almost every way.  Second, the location density of sari-sari stores is high, and the distance between them is low, lowering the cost of delivery for the supplier.  Third, the value proposition for the sari-sari store owners is high, and the cost of joining is minimal.  All of these factors contribute to the fact that it is an industry that is ripe for consolidation.  It functions the same way as a cooperative.  In its description of the organization, the National Franchise Office of the Philippines runs down the benefits:

Hapinoy seeks to become a “preferred business partner of the poor” by partnering with local microfinance institutions to provide women borrowers with top credit scores a Hapinoy sari-sari store franchise. Hapinoy provides value by serving as a retail consultant, brand marketer and merchandise consolidator (it deals with manufacturers directly). The company makes money by getting a percentage off the merchandise, which ties its long-term interests with each individual store’s sales growth and inventory turnover. Because of the network effect and economy of scale achieved by being under one Hapinoy brand, store owners still end up with higher margins compared with traditional unbranded sari-sari store owners. Hapinoy store owners also learn best practices on key retail essentials such as inventory management, store efficiency and branding. They achieve better negotiating power for merchandise, financing and even technology. Some stores are already planning to install internet kiosks to provide their communities with much-needed online access. The social community factor has been retained as well: stores allocate space on the walls for posters promoting local events and seminars.

A Hapinoy store owner.

These benefits may be taken for granted in other types of business.  Marketing, branding, inventory management, negotiating power, and access to technology might be a foreign concept to someone with little higher education and no formal business training.  Therefore, to offer training in these subjects and free consulting from experts is invaluable.  What’s more, to be able to profit from this kind of venture is even more reassuring.  If these kinds of cooperatives are shown to be lucrative for the investors, they will be become more popular, spreading to different industries and countries.  Hapinoy is an example of the double bottom line in action, highlighting the fact that it is possible to have a meaningful social impact without sacrificing profit.  Again, the National Finance Office:

This business is not only ideals-driven, but strategically successful as well. Because of how asset-lite the model is (microfinancers provide the capital and absorb the financial risks, lenders build/convert the stores, manufacturers supply the goods), the company has achieved a considerable level of scalability. Hapinoy is planning to open/convert 40,000 stores by the end of 2008 and 100,000 stores by the end of 2009.

Hapinoy is a great success story.  In any business, efficiency is key.  Offering microbusinesses an opportunity to streamline their operations by working as part of an umbrella organization could pay dividends in the long-run.  Unfortunately, like any solution in microfinance (or anything else), there is a downside.  By working with multi-national consumer products manufacturers to consolidate sourcing, Hapinoy undercuts local manufacturers, which previously had the competitive advantage of being local.  Also, traditionally, sari-sari stores would work with a member of the community that would take orders and buy the products at the cheapest outlet.  Hapinoy eliminates these jobs in the community. The downside of this model This is another great example of the Philippines solidifying its reputation as a leading innovator in the world of microfinance.

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