Mobile Microfranchising in Indonesia

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Mobile Microfranchising in Indonesia

Indonesia
Organization type: 
nonprofit/ngo/citizen sector
Budget: 
$500,000 - $1 million
Website:
http://www.grameenfoundation.org
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Project Summary
Elevator Pitch

Concise Summary: Help us pitch this solution! Provide an explanation within 3-4 short sentences.

Our mission is to enable the poor and especially the poorest to create a world without poverty. We hope to achieve this vision by expanding our mobile microfranchising model across Indonesia and prove the viability of a sustainable social business, while preparing the concept to be replicated and expanded worldwide.

Over the next three years, with appropriate funding, we have a strategy to expand the current network of over 7,500 entrepreneurs to 60,000 poor entrepreneurs serving 4,500,000 customers with products and services that have measurable social impact – job search services, a mobile marketplace, mobile financial services, health or agriculture information, and small business mentoring.

About Project

Problem: What problem is this project trying to address?

Indonesia has a population of 240 million people (4th largest in the world) and Java Island itself has 140 million residents in an area the size of Florida. This population density makes Java one of the most populated places on earth which is conducive to efficiently scaling our services. 75% of the population lives below $2.50/day and 20% lives below $1.25/day – offering a tremendous opportunity to scale our unique business model and have impact on the poor and poorest. Despite high levels of poverty, Indonesia’s mobile phone penetration is 80%, and it is ranked #1 globally for mobile Facebook users. Indonesia is ranked #2 globally in volume of SMS messaging. The population is adept in using and their mobile phone gives our AppLab services a higher chance of adoption. There is also a vibrant mobile environment with 11 mobile operators, dozens of content providers and mobile development shops, Indonesia has an enabling environment of multiple market channels that are seeking to differentiate themselves, as well as an ample supply of talented application developers. Grameen Foundation has been actively working in Indonesia since 2003 to help increase the effectiveness and efficiency of microfinance services, as well as developing mobile phone-based solutions since 2007 that address “information poverty” by providing information that enables poor people to make more informed decisions and access services that help them improve their lives and livelihoods.

Solution: What is the proposed solution? Please be specific!

Due to a lack of employment opportunities and other factors, nearly 3 billion people are living in poverty on less than $2 a day. Many people have few choices and start a microenterprise in order to survive. It is a business model that adapts traditional franchising concepts for the poor and poorest by providing pre-packaged, replicable business concepts that can easily be owned and operated by less skilled and experienced budding entrepreneurs. With more than 4 billion mobile phones in the world, two-thirds of which are in developing countries, technology provides opportunities to improve the lives of the world’s poorest through access to information, financial services and viable business opportunities. Grameen Foundation’s Application Laboratory (AppLab) program in Indonesia tests, develops and scales mobile phone applications with the potential to improve lives and livelihoods in underserved communities. Most microfranchise programs require a very high touch network of field staff to support the entrepreneurs and many lack a successful financial sustainability strategy. We are seeking to transform the current models by pre-loading apps on low-end feature phones to allow anyone who buys the phone (mass market channel) to have the opportunity to become a micro-franchisee. While we will continue to use our field officer network to support poorer, more disadvantaged entrepreneurs who need more additional support (managed channel), we hope to use this new mass market channel to provide scalable income generating opportunities to large numbers of Indonesians.
Impact: How does it Work

Example: Walk us through a specific example(s) of how this solution makes a difference; include its primary activities.

For the last four years, Grameen Foundation with our collaborators Qualcomm Wireless Reach, Ruma, and Bakrie Telecom have been working to help poor Indonesians lift themselves out of poverty through unique mobile microfranchising businesses. Through our Village Phone initiative and AppLab program, we are offering the poor and poorest a profitable business opportunity by eliminating barriers to entry: primarily in the areas of financing, confidence building, training and access to the supply chain and relevant applications and services designed to be sold by the poor within the communities. The project demonstrates an innovative and sustainable solution that meets the growing demand for affordable access to information and communication technologies and services through a microfranchise model that is market-oriented and builds on the strength of microfinance, a leading poverty alleviation strategy. The core concept is simple, effective and sustainable: an interested entrepreneur, typically a poor woman, purchases a pre-packaged kit that includes a mobile phone with a microfinance loan and then sells “airtime minutes” to their neighbors. The mobile phone also serves as a platform to provide additional applications and services to further increase their revenues and margins. Once a poor woman becomes a mobile microfranchise entrepreneur, she can double her income and provide herself with lifelong skills, as well as the confidence and ability to improve her life and the lives of her children. Facilitating entrepreneurship in these poor communities is essential to strengthening their overall economies and social development, as well as directly empowering individuals.
About You
Organization:
Grameen Foundation USA
About You
First Name

Sean

Last Name

DeWitt

Twitter

www.twitter.com/GrameenAppLab

Facebook Profile

www.facebook.com/StopPovertyNow

About Your Organization
Organization Name

Grameen Foundation USA

Organization Country
Country where this project is creating social impact
How long has your organization been operating?

More than 5 years

Is the project that you are entering related to this organization?

Yes

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Innovation
What stage is your project in?

Operating for 1‐5 years

Share the story of the founder and what inspired the founder to start this project

Grameen Foundation was founded by Alex Counts in 1997 after having worked in microfinance and poverty alleviation efforts for 10 years. A Cornell University graduate, Counts’ commitment to poverty eradication deepened as a Fulbright scholar in Bangladesh, where he witnessed innovative poverty solutions being developed by Grameen Bank. He trained under Dr. Muhammad Yunus, the founder of Grameen Bank, and co-recipient of the 2006 Nobel Peace Prize.

The Application Laboratory is an initiative of the Grameen Foundation that seeks to promote innovation in the provision of information and services using mobile phones to alleviate poverty in the developing world. Poor and rural populations often lack access to important information and knowledge that would enable them to start businesses, find jobs, improve their crop yields, make better decisions, live healthier lives - improve their lives and livelihoods. By leveraging the power of mobile phones, AppLab seeks to overcome the barriers to accessing information that contribute to the poverty cycle.

Our applications can also be used for collecting information. For example, surveys conducted by mobile phones can be used to collect information on access to health services or the types of crops being grown in a specific region, expected yields, or disease outbreaks. This information can provide a detailed understanding of the challenges poor communities face and equip service providers with the knowledge they need to better serve the poor.

Social Impact
Please describe how your project has been successful and how that success is measured

We measure success by our ability to recruit and retain women entrepreneurs, and those who are in the “Poor” and “Poorest’ categories. In addition, we measure the degree to which poor entrepreneurs can increase their incomes after participating in our program.

As of May 2011:
* We have recruited over 7,600 micro-entrepreneurs.
* The entrepreneur network serves more than 775,000 unique customers.
* More than 85 percent of the businesses are owned by women and over 63% were earning less than $2.50/day before launching their business.
* An estimated 47 percent of the micro-entrepreneurs who stay in the portfolio for more than four months are able to nearly double their incomes, effectively moving them over the World Bank poverty line of $2.50/day income.
* 100% of the Village Phone Operators are profitable.

How many people have been impacted by your project?

1,001- 10,000

How many people could be impacted by your project in the next three years?

More than 10,000

How will your project evolve over the next three years?

We will continue development of additional applications provided through the mobile-enabled microfranchise model, creating the ability to ensure income increases for poor entrepreneurs, and to ensure financial viability of the overall franchise model. These activities will prove the mobile franchisor business concept can work in Indonesia with our social business partner Ruma by ensuring sufficient return on investment.

Based on the successful completion of the above we will begin to identify strategic geographies and partners for replicating and scaling the business model, while further scaling across Indonesia, and rolling out new lines of business for entrepreneurs, and new socially impactful mobile services that they can deliver in their communities.

Sustainability
What barriers might hinder the success of your project and how do you plan to overcome them?

Securing sufficient patient capital is one of the largest barriers to success for our program. We currently do not have multi-year philanthropic funding to finance the development of applications, and support the growth of the franchisor network, which, until it reaches a certain scale is not sustainable due to the low margins involved in the mobile microfranchise lines of business and the cost of providing additional capacity building and direct support required by entrepreneurs.

Additional risks include the inability of poor entrepreneurs to secure working capital - micro-loans that allow them to grow their businesses or sustain a variety of income shocks that the poor and poorest frequently face. We have a program targeting the development of specific financial products that can help overcome these barriers, but the proposed activities to develop these financial services is currently unfunded.

Long-term success demands that we build products and services with sustainable business models and support local institutions providing these services. To achieve these outcomes, Grameen Foundation will continue to focus on developing sustainable business models (either individually for each application or as a suite, involving some cross-subsidization for high impact mobile services). Once the mobile services are created and the business model is validated, it will both increase the income of the micro-entrepreneurs themselves, as well as support the earned revenue targets of Grameen Foundation’s AppLab program, as well as those of its partner, Ruma.

Tell us about your partnerships

The relationship between Grameen Foundation and our collaborators is a shining example of how organizations can work together to generate positive economic and social returns that can bolster an entire community.

Ruma, an Indonesian social enterprise that launched with Grameen Foundation assistance in August 2009, is the local operating entity that works directly to recruit, train and mentor entrepreneurs. It is the franchisor for the businesses AppLab creates. Grameen Foundation provides Ruma capacity building and financial support to ensure it meets business growth and poverty outreach targets.

Qualcomm, a global leader in developing innovative digital wireless communication products and services, through its Wireless Reach™ initiative has provided critical project funding since 2007. A key aspect of its projects involves building partnerships with nongovernmental organizations, universities, government institutions, development agencies and other private sector companies. In additional to financial support, Qualcomm has also provides engineering, business development, and marketing resources.

Bakrie Telecom, a fixed wireless access service provider in Indonesia using both CDMA and EVDO technology, holds 12% market share with 14 million subscribers. Bakrie Telecom provides in-kind support to entrepreneurs by providing branding, marketing materials and other business tools; use of its network to test applications; and is supporting the release of mobile phones pre-loaded with applications on the commercial market

Explain your selections

Grameen Foundation receives philanthropic funding from diversified sources and in-kind donations of products and services.

How do you plan to strengthen your project in the next three years?

We have developed a project to study the barriers to the poorest, and especially women, becoming entrepreneurs and staying in the project.  We will design a series of products and services to increase adoption and retention rates of the poor in the Ruma managed channel by: identifying effective ways to recruit the very poor; designing working capital loan products to increase retention and smooth cash flows; and designing savings products to encourage them to mitigate risk effectively through mobile or MFI-based savings.

In addition to our traditional focus on the Ruma managed channel where all entrepreneurs are recruited one by one, we will launch a series of applications in the mass market channel as well. AppLab livelihood applications will be pre-loaded on a large number of handsets sold on the market by our mobile operator partner, Bakrie Telecom. This allows the benefits to reach more people and generates revenue from application use that contributes to Ruma’s ability to scale and better target the poorest in its managed channel

Adding to our livelihood services that aim to increase the incomes of poor entrepreneurs, with sufficient funding we plan to develop mobile information services that build on our success launching similar services in Uganda and Ghana. The services will be developed with content experts & be simplified and packaged into timely, relevant, localized, actionable tips on health, agriculture, financial services, etc. Entrepreneurs will be trained as "infomediaries" and be able to earn from delivering valuable information to their peers.

Challenges
Which barriers to employment does your innovation address?
Please select up to three in order of relevancy to your project.

PRIMARY

Lack of skills/training

SECONDARY

Underemployment

TERTIARY

Lack of access to information and networks

Please describe how your innovation specifically tackles the barriers listed above.

Our business-in-a-box provides entrepreneurs a business opportunity that is easy to operate. Micro-entrepreneurs do not need to be educated in order to use them and be successful in operating their business. GF is currently seeking funding to develop a mobile mentoring service to improve poor women entrepreneurs’ ability to own and manage their own small business.

In order to increase adoption and retention rates of the poor in the Ruma managed channel, we have projects that are structured to:
* identify the most effective ways to recruit the very poor;
* design working capital loan products to increase retention and smooth cash flows for the very poor; and
* design savings products to encourage the very poor to mitigate risk more effectively through mobile or MFI-based savings.

Are you trying to scale your organization or initiative?
If yes, please check up to three potential pathways in order of relevancy to you.

PRIMARY

SECONDARY

Enhanced existing impact through addition of complementary services

TERTIARY

Grown geographic reach: Multi-country

Please describe which of your growth activities are current or planned for the immediate future.

Our immediate plans are to increase the size of the micro-franchisee network within Indonesia. We are also planning to increase the income potential of our “business-in-a-box” this year by adding additional services, in addition to airtime top-up, that micro-franchisees can offer their customers.

Do you collaborate with any of the following: (Check all that apply)

Technology providers, NGOs/Nonprofits, For profit companies.

If yes, how have these collaborations helped your innovation to succeed?

Our collaboration with Qualcomm, through its Wireless Reach initiative, has helped us succeed not only through their direct financial support but also through engineering, business development, and marketing support for our collaboration in Indonesia. Additionally, we have benefited from our collaboration with Bakrie Telecom in the access they have given us to their network by pre-loading our micro-franchise apps onto their feature phones and marketing the products.

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