Wednesday, March 3, 2010


An unanticipated yet highly gratifying effect of writing this blog has been the reactions, feedback and new contacts it has generated. You don’t see this in direct comments on the blog itself, but I do receive comments by e-mail and on discussion boards where I have posted links. I have been learning a lot from this communication with others who have the same interest in creating access for the poor to financial services.

For example, just yesterday I had a fascinating conversation with the founder of a US based social enterprise, Microfranchise Solutions LLC, (MFS) that is very similar in concept to PT Ruma, the micro-franchise company I am advising in Jakarta. The mission of both of these firms is to create and support business opportunities for poor entrepreneurs. As I have reported in previous posts, PT Ruma is initially focused on establishing poor woman as retailers of cell phone airtime. MFS’s first franchise business is a taxi company in Lima, Peru.

Although there is quite a difference in the relative size of the two franchise operations, in concept they are very similar—create jobs for the poor, not handouts. Give the poor access to the capital resources required to run a business and the training to be successful. Another commonality is that the use of technology is absolutely critical to their success. Ruma is using mobile telephone technology to link Village Phone Operators to their accounts with airtime wholesalers, allowing them to deliver airtime to their customers via SMS.

MFS is no less innovative in its use of technology. First, the taxis they finance are fitted with special GPS equipment which allows them to track the vehicles they have financed and disable them if they are stolen or misused. This technology has the added benefit of allowing social investors who have provided financing for a discreet vehicle to literally see the impact of their investment via Google Earth! Secondly, the vehicles also have an embedded microchip that allows for the collection of loan repayments every time the driver fills his car with fuel.

It was this feature that really caught my attention because it is another example of using innovative technology to provide a financial service, in this case loan repayments. That the repayment is effected via a surcharge on a resource the driver needs to run his business neatly matches his revenue with two of his expenses, fuel and financing. I don’t know how the arrangement with the gas station works but it is ingenious and could probably be expanded to allow for the driver to pay money into a savings account or a stored value card or virtual card in a “mobile wallet.”

Both PT Ruma and Microfranchise Solutions are looking for the next franchise product to layer onto the networks they are building into the base of the pyramid. Because both of their current businesses address the “cash-in” problem of serving the unbanked, a financial product, such as mobile savings may be a good option for both.

One final word about MFS, they do offer social investors with an interesting value proposition spelled out on their web site at: I encourage readers to take a look at it.


  1. Thanks for sharing information about these innovative organizations. These sound like fantastic -- and creative -- ways to promote entrepreneurship and self-sufficiency. Great blog in general.

  2. This is a great blog. I work in the financial services industry, and while I am by no means an expert, and I've been rackign my brain to think of solutions to some of the obstacles you've described.

    If I understand correctly, there are two main problems - technical/infrastructure (actually creating/paying for robust technology to transfer credits) and legal (KYC, etc.)

    I can't help in the technology area, but the legal/transactional/compliance problems are more up my alley.

    Do you think it would be helpful if there was a pre-made (easily modifiable) portfolio of transactional documents that walked entities like PT Puma through all of the steps of becoming a chartered financial institution (capable of delivering financial products, conducting ETF transactions, etc.)? Could you share what other documents are needed?


    If you're inclined, you can reach me via email at I'd be very interested to hear more about your project, and any ways I could help.

  3. Interesting comment Mariana and thanks for your interest. I think PT Ruma's strength, and what it has to offer partners, is access to a probematic customer base. Therefore, rather than transitioning to a financial institution itself I think it may be better off partnering with an institution interested in its client base. It might do this by becoming an "agent" of the the FI. What do you think?