Growth Pathway 1. Replicate and Scale Social Lending
Social lenders can continue to expand their existing model of creating and supporting producer organizations and providing short-term trade finance to them. Social lending is targeted toward exportable cash-crop value chains characterized by high levels of smallholder aggregation into producer organizations. This growth pathway is driven by the marketing cost of increasing financial literacy and creating and acquiring producer organizations as clients. Risk management and operating costs are also relevant, but because this model is well established, the cost of R&D is negligible.
Growth Pathway 2: Innovate Into New Financial Products Beyond Short-term Export Trade Finance
Building on the social lending model, this pathway involves social lenders, smallholders in producer organizations, and exportable cash-crop value chains. Currently, social lenders primarily provide short-term trade financing for producer organizations. Through product innovation, social lenders could expand to meet other financing needs, such as working capital, longer-term financing of equipment and tree renovation, and on-l ending schemes for financing individual organization members. Some social lenders have already begun to experiment with these products.
This growth pathway is driven by high risk-management costs that stem from long-term lending exposure to market fluctuations. It also involves high R&D costs for developing and testing new products. Because new financial products would be marketed to existing clients, the cost of acquiring customers is small, but there is some cost associated with introducing a new product to customers.