Hybrid Business Models

The hybrid business model (nonprofit with a profit-earning arm) is a central figure as a certain type of social enterprise, and is a topic of discussion by SocialEdge and books such as “The Power of Unreasonable People” or “How to Change the World: Social Entrepreneurs and the Power of New Ideas.”  The Christian Science Monitor covers this movement and uses the example of Industree Crafts in Bangalore to show how there can be two branches of one organization:

Industree has split into two organizations: Industree Crafts Private Limited, a for-profit company that’s opening a new line of stores and products called Mother India; and Industree Crafts Foundation, a nonprofit group that accepts charitable grants to help it train more artisans.

The CSM article also discusses the advantages and challenges of such a model.  Nonprofits which face a crunch for resources may be able to sustain themselves through their associated for-profit.  At the same time, striking the balance between the social mission and generating profit is always a challenge.

Feel free to share information about other successful examples of hybrid models in India, such as Industree.

Maximizing efficiency in Microfinance: Interview with Equitas founder

The Hindu just published a great interview with Mr P.N. Vasudevan of Equitas Micro Finance, a start-up MFI based in Chennai, Tamil Nadu. Vasudevan is an interesting entrepreneur, having spent 20 years in the traditional banking industry working with Cholamandalam Investment and Finance Co Ltd and Development Credit Bank. Reading the interview, its easy to see that he brings a lot of that financial acumen into the microfinance sector, especially in running Equitas:

We have put in place the best software available for MFIs and were the first MFI in the country to start business after the full IT system was in place. Internet-enabled software, combined with centralised processing, ensures that all backend operations are done at the HO, leading to higher efficiencies and also releasing the branch staff fully for customer-facing activities, thus enhancing their productivity.Typical cost of delivering a rupee is about one paisa; and, for collecting, it costs about 8 paise currently. Though we are already the most efficient in our operations, the challenge will be to continuously keep raising the bar on productivity and efficiency and scale up to absorb the cost better

On the same note, here is a SocialEdge interview with Mr. Vasudevan.

Overall, it will be interesting to see how quickly Equitas can grow. Clearly, the competition in the Indian MFI space is growing, and thats never a bad thing for the BOP consumer!