Tuesday, June 17, 2008

Micro-investment: Fabindia

Business Standard has a story on Fab India, owned by William Bissell, working with weavers to put together joint ventures.
The concept, now a Harvard Business School case study, is simple. A fully-owned subsidiary of FabIndia, Artisans Micro Finance, a venture fund, facilitates the setting up of these companies, which are owned 49 per cent by the fund, 26 per cent by the artisans, 15 per cent by private investors and 10 per cent by the employees of the community-owned company.

The investment by these four categories of investors provides the paid-up capital. The company promotes the sales of its artisan community to FabIndia, which is the principal buyer. Eventually the companies will sell to other buyers, too. Haryana and Faridabad have already started independent sales.
The results seem impressive too.
Although the villagers see it as a gamble, there is already evidence that it works. A community-owned company promoted a year ago in Jodhpur with a paid-up capital of Rs 34 lakh is valued at Rs 1.10 crore. The company, which totted up sales of Rs 5.7 crore and a profit after tax of Rs 22 lakh in its first year, has 2,300 artisan shareholders.

Each of their Rs 100 shares is worth about Rs 300. As many of them hold 10 shares each, their investment of Rs 1,000 has tripled to Rs 3,000, an escalation they couldn't have dreamed of. Through a complicated internal trading system, an artisan can — if he wishes — recover his investment.

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