Business Model Innovation: Supporting Scaling Up Microfinance


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Business Model Innovation: Supporting Scaling Up Microfinance
Elaine L. Edgcomb, FIELD at the Aspen Institute Ginger McNally, National Federation of Community Development Credit Unions

Session Goal and Objectives
Goal: Identify opportunities to improve microfinance business models to achieve greater effectiveness, efficiency and scale.
Objectives: • Examine the role of business model innovation in
microfinance survival and growth • Explore issues of pricing, structure and sustainability • Consider ways to increase an organization’s “innovation IQ” • Identify opportunities for continued technical assistance

Getting Started
• Your organization
- CDFI type: loan fund, credit union, bank, hybrid structure
- Loan portfolio: Under $5MM, between $5MM$25MM, over $25MM
• Your role in your organization
- Senior management (CEO, COO, CFO, Director of Lending, Director of Programs)
- Mid management (administration, finance, lending, programs)
- Volunteer (Board member, Committee member, other)
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Agenda
• How can a business model support scaling up microfinance? - What is a business model? - What is scale? - What is microfinance?
• Creative destruction and continual innovation • Business model canvas
- Using the business model canvas tool in your organization • Case studies & discussion • Nurturing innovation in your organization • Opportunities for collaboration and strategic partnership

Shared Definitions: Business Model
How can a business model support scaling up microfinance?
“A business model describes the rationale of how an organization creates, delivers and captures value”
From Business Model Generation by Alexander Osterwalder & Yves Pigneur (2010)

Shared Definitions: Scale
How can a business model support scaling up microfinance?
The goal of scale is reaching large numbers of people…Scale is a significant leap forward, a
transformative change.
From Dollars for Dreams: Scaling Microlending in the United States FIELD at the Aspen Institute (Edgcomb, Klein, Gomez) (2010)

Shared Definitions: Microfinance
How can a business model support scaling up microfinance?
• Financial products for low-income/low-wealth clients:
- Small loans – business, consumer, credit building - Small savings products - Affordable transactional products
• Often combined with:
- Financial education, IDAs, and other income generation and asset development programs

Business Models and Scaling Up Microfinance
• Every business – small or large – has an implicit or explicit business model
- Customers, value proposition, infrastructure, costs & revenues
• Every CDFI has a business model, too, in the way it:
- Creates value for its clients - Creates a sustainable revenue and cost structure for the
organization
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Business Models and Scaling Up Microfinance (continued)
• In order for a CDFI to scale up its microfinance activities, the components of its business model need to be consistent in focus:
- Customers - Value proposition - Infrastructure - Cost/revenue structure
• Every organization’s business model is different
- No “one size fits all” or cookie cutter approach
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Developing business model innovation is a process Model Inn
Process
A fact in the corporate world. A fact in the microfinance world.
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Business Model Innovation: Supporting Scaling Up Microfinance