We try to find ways that generate revenue by serving the underbanked responsibly.  Often these two notions are in conflict.  CFSI’s Kate Marshall explores an interesting parallel:

A recent weekend’s New York Times Magazine contained a fascinating article about a product that has been remarkably successful in treating childhood malnutrition. The product, Plumpy’nut, is the subject of a power struggle between for-profit and charitable interests that has developed around the distribution of the product in impoverished countries. The story of Plumpy’nut raises some compelling questions – about limiting supply to maximize profitability – that might be relevant to those serving the underbanked.

Plumpy’nut is a calorie-dense mix of peanuts, milk, sugar, vegetable oil, vitamins and minerals that has been used effectively for famine relief. A so-called Ready-to-Use Therapeutic Food, Plumpy’nut works better than predecessor products for several reasons: it doesn’t need refrigeration; it is easy to mix, and can be produced in third-world countries where peanuts are commonly grown; its formula doesn’t include (sanitized) water; and it can be administered in the home, by parents, rather than in hospitals.

Many of the same factors that make Plumpy’nut such a powerful solution to malnutrition in developing countries also make it quite commercially viable. The market for Plumpy’nut is huge, its components are inexpensive, its assembly is simple – the potential to rapidly scale such a product is considerable. French company Nutriset grasped this potential and the private company holds a patent granting it exclusive rights to manufacture and distribute Plumpy’nut until the patent expires in 2017. As long as it is in force, the patent will protect Nutriset’s profits. But it also limits Plumpy’nut’s distribution to the production capacity of Nutriset and its affiliates – limiting the reach of a product that can cure starving children.

Maximizing profitability and maximizing social impact can easily conflict. This is a line that providers serving the underbanked walk as well.  Bankers, for example, try to protect their monopoly on providing financial services by lobbying hard to keep Wal-Mart from doing the same.  Except that Wal-Mart serves a consumer that banks refuse to serve.

Too many of the providers that have sought to serve the underbanked population have taken an approach that centers more on scaling for profitability than on social impact. But fortunately, we know of many providers that have struck the right balance between achieving commercial success and providing high quality, responsible products that can meaningfully improve the lives of the financially underserved.

With financial products, as with food, consumer needs are quite varied – from basic transactional services to credit to savings – and can be met in many different ways. Stay tuned here to read about the promising new players and ideas that come across our desks.