On our lecture on business planning we had an assignment of analyzing a business plan, and for this post I'm going to analyze the Indonesian based Social Business RUMA.
Having won the first prize of the Harvard Social Enterprise “Pitch for Change” competition, the acronym that gives name to this social business literally to Your Micro Business Partner. Through their business model they pretend to empower poor women by supplying them with a kit that enables them to start their own micro franchises hence becoming micro-entrepreneurs.
Using the strucutre seen during the lecture I'll try to make the analysis:
What?
Most of the time when poor people ask for a loan, they fall into a vicious cycle of debt. This is often caused by the way the money is spent after the loan is granted. No money is generated back so, in order to repay another loan has to be made. The RUMA business addresses this problem through the lending of Microfranchises, in their own words, they lend businesses to generate money.
Literally called a Business in a Box this micro-franchises provide all the tools and training required for selling electronic airtime minutes through mobile phones.
Who?
Knowing that the mobile phone industry has a high penentration on Indonesia, RUMA partnered with the Grameen Foundation as well as with Qualcomm to put this business into work. The Grameen Foundation provided the initial investment funds through its Pioneer Fund, as well as technical assistance that helped RUMA to build its initial operational framework (which includes technology systems and human capital). Qualcomm supplied the technological expertise on mobile phones through its Wireless Reach initiative.
How?
In order for RUMA to be a successful business they stipulated that the revenues will come from selling franchise kits that will be leased to the borrower by the financial institution, as well as for a margin obtained for each airtime sale. In that sense, the borrower of the microfranchise will use the revenue obtained to repay their loans. The estimated profit for the borrower is approximately $1/day. This business defines the poor as people as those living with less $2,5 a day (World Bank poverty line), so a steady $1/day supposes a 50% overall increase.
For measuring their results, RUMA chose the Grameen Foundation's Progress out of Poverty Index (PPI) since t's country specific and it's based on a ten-question survey of readily identifiable indicators.
As for their fanantial sustainability, RUMA plans to break even within its first 2.5 years. In order to reach that goal they need to empower 5,000 of the poor and poorest by August 2011, having as a target to reach a 70% of people below the poverty line.
RUMA in numbers (current situation).
At this point, Ruma has:
- Created more than 600 new micro-business.
- 100% profitability for the micro-business owners.
- 97% of owners are women.
- 68% of business owners are below the poverty line ($2,5/day)
For more information I leave a link were you can download a through presentation
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