BanaPads: To grow or not to grow?

How a business tackling a widespread social problem inspired Luisa Alemany


In 30 seconds...

  • LBS case study analyses Ugandan social enterprise to highlight the trade-offs social entrepreneurs often have to make when seeking to raise outside investment
  • Case combines tools from the world of finance and traditional VC investment with those of the social/NGO space to quantify and compare financial and social impact
  • Novel approach to measuring social impact draws on concepts and tools such as theory of change, impact metrics and the valuation of startups

When Luisa Alemany, Associate Professor of Management Practice in Strategy and Entrepreneurship at London Business School, first heard about BanaPads as a judge in a social impact competition, her interest was immediately piqued.

In fact, she was so taken with the story that she decided to turn it into an LBS case study. Co-authored with Alma Gutierrez and Nicholas Andreou, both graduates from Saïd Business School (and currently both working in the impact-investing sector), the authors’ aim was threefold: to help spread awareness of BanaPads as an organisation; help budding social entrepreneurs understand the complexities of raising finance in the social-impact space; and encourage future investors and business owners to take the social impact of their investment decisions properly into consideration (and point them to the tools to help quantify impact).

The scale of the problem

The challenge facing Richard Bbaale was considerable. Menstruation was a social taboo in many parts of the world, and rural Uganda – where most women and girls were either unaware of or could not afford solutions to manage it – was no exception. Where affordability was not a barrier, deep-rooted, gender-based cultural norms were. With the majority of shops and stores being male-owned and staffed, women and girls were reluctant to purchase sanitary products over the counter. As a result, they were often excluded from society when menstruating.

This had huge implications for their education. Twenty per cent of girls aged 13-18 reported missing at least one day of school during their period, and girls who were menstruating missed school on 28% of ‘period’ days compared to 7% on non-period days. This aggregated to absence from school of around 11% of teaching days. For women and girls to reach their full potential in terms of education, work and as active members of the community, the situation needed to be tackled. Having witnessed the problem at first hand in a family context, Bbaale resolved to find a solution.

An organic solution

In 2010, while studying engineering at university, he learned that dried banana-stem fibres are extremely absorbent and founded BanaPads as a non-governmental organisation (NGO) to manufacture and distribute affordable, eco-friendly sanitary pads made from banana-stem fibres.

The aim was not simply to tackle the difficulties Ugandan women face in menstruation management, thus helping to keep girls in school, but also to create jobs for women in poor rural areas.

To do so Bbaale created a network of female sales agents, called Bana Champions, and trained them to sell the sanitary pads directly to women at home and spread awareness of menstrual hygiene, receiving a commission on sales in return. This countered the problem of women being embarrassed to visit shops to buy sanitary products. The Champions would also speak with the heads of the household, usually male, to convince them to spend money on pads. The Champions also distributed the product and spread awareness in workshops at schools and churches.

Sales began in a single village in 2010 before expanding to district level, growing slowly at first but increasing steadily to reach 25,000 customers by the end of 2018 and distributing five million pads a year. The numbers were significant, but BanaPads had still only reached 10 of Uganda’s 134 districts, relying on a semi-automated production process that needed many manual inputs. Bbaale wanted to fully automate the production process and enable a projected increase in production of more than twelvefold.

The problem of scale

By his calculations, that meant he needed around US$500,000 to fund expansion. But, as a not-for-profit, he knew BanaPads would struggle to secure that level of finance at the speed he wanted to move. He knew he had a great opportunity: currently only 30% of Ugandan women used commercial pads that were hygienic and safe. BanaPads had entered the market with an affordable, accessible, eco-friendly pad for young women and girls across Uganda. To be able to accept financing from commercial investors, he converted BanaPads from an NGO to a for-profit company and reached out to the investment community.

However, investors expressed concerns about whether the business was ‘investable’ in its current form and proposed changes to the business model, including one option of eliminating the Bana Champions model to accelerate scale-up. Now Bbaale was faced with the decision whether to accept investors’ terms for the future of BanaPads.

It is this scenario that makes the BanaPads story such an interesting and informative case study, both for social enterprises at that critical moment in their growth and for the investment community interested in social-enterprise businesses. As Dr Alemany says, “The challenge Bbaale faced – how much to grow and how to finance that growth while increasing social impact – is something that many successful social entrepreneurs have to deal with as they move forward. Hybrid organisations, looking for external investors, have to balance the trade-off between social and financial returns.”

The market opportunity

BanaPads had a proven operating model with a loyal customer base. Investments in the operating capacity had already yielded strong returns. After semi-automating production, it had doubled sales in two years. It also had proven local expertise and strong relationships with other villages to scale the reach of the product.

Estimations of the size of the market and its expected growth were also favourable.

In 2019, the number of women in rural Uganda of menstruation age was 10 million. This was projected to grow in the short term, as Uganda had one of the highest fertility rates in the world (5.8 children per mother, compared to an average of 2.5 worldwide, according to World Bank data). On top of this high fertility rate, improvements in healthcare were decreasing the mortality rate.

Bbaale was also considering expanding to other East African countries with similar GDP per capita and demographic distribution. By increasing sales in Uganda and expanding to Tanzania, Kenya and Rwanda, BanaPads could access a market of over 34 million women aged 15 to 49. All of these countries had a rural population of over 65%, so the BanaPads sales model targeting rural woman was potentially scalable over a large geography.

"It was inspiring to find a man fighting and providing support and help for women’s basic health in Uganda"

The current model

In 2019, only a single BanaPads product was available: a pack of 10 pads with a retail price of US$0.49 per pack. Bbaale and his team had plans to expand this product line once the production enhancements were complete, using the unique benefits of BanaPads’ door-to-door distribution model (in particular, the repeat sales due to the relationship built between the Bana Champions and their customers).

BanaPads was helping girls and women to overcome a sensitive problem. Doing so in a friendly and empathetic manner was translating into high conversion rates and high retention. Based on these calculations, Bbaale had concluded that the ratio of customer acquisition cost versus customer lifetime value was favourable.

To protect Champions from internal competition, BanaPads had capped the number of customers per Champion at 165 (four Champions per village was enough to cater to most villages’ needs). Therefore, in order to grow, the organisation needed to move into new villages. In fact, its recent rapid growth had meant that it was now capacity-constrained and, at the beginning of 2019, supply was insufficient to fulfil the demand of the 184 Champions (up to 50% of Champions were unable to fulfil the orders they had); hence the need to complete automation of the production process.

There was also a good opportunity for BanaPads to expand its product range, offering packs in different sizes to increase affordability and consumer choice. It also intended to implement a new marketing plan by adding illustrated comics to its packs, which would help educate rural women on menstrual health and hygiene using superhero characters.

The financing options

In 2019 Bbaale was in discussion with a venture capital (VC) fund that was considering an equity investment in BanaPads, but the VC had several concerns with the current business model and urged Bbaale to make substantial changes to it to secure investment, including a much more sales-driven focus.

This meant that, if Bbaale was willing to give up much of what made BanaPads successful in terms of social impact in the first place, he could get the investment – but it would also dilute and delay its social impact.

The alternative option was to stick closer to the current business model, likely limiting external investment. In that case, social impact would be deeper but on a much smaller scale and with a slower ramp-up speed.

Bbaale believed that the tension between BanaPads and the VC fund lay in the fact that the fund was more concerned about financial metrics than underlying impact, while he aimed to generate both types of value (financial and social); hence he believed the returns on investment should be assessed equally on these two fronts.

The investor also suggested reducing Bana Champions’ duties to allow new ways of distribution to be put in place, or even eliminating them completely and moving to traditional retail sales and distribution channels. This would imply lower operational sales-force costs for BanaPads (from an initial 5% of revenues to 3% in five years) and therefore a higher valuation of the company.

But Bbaale felt that the VC’s projections were treating impact as a binary variable, rather than one variable to optimise together with financial performance. He therefore decided to prepare his own financial plan, assuming no changes to the current business model and focusing only on generating social impact.

He then identified four possible options to move forward. The first was to convert BanaPads into an ‘investable business’, which he could do in two ways. One was to keep the Bana Champions in place, as they were a critical element for sales, but shift their focus from raising awareness and empowering women to driving sales. In this scenario, he would also need to adjust the product price to offset the cost of retaining the Champions.

The second VC option was to remove the Bana Champions from the model completely and instead simply use conventional retail channels, such as supermarkets, as the VC investor suggested. This would allow BanaPads to scale to new countries, driving revenue up, but would likely jeopardise social impact.

The third option was to dismiss the VC investor’s offer and focus on social impact. This would mean going back to an NGO structure and looking for more grants in order to increase production and grow the business. In this scenario, BanaPads could reduce prices and put much of its focus on female empowerment.

Finally, he could dismiss the VC investor’s offer and instead look for other types of equity investor who were more aligned with his business philosophy, including his view on the Bana Champions and product pricing. But this would mean that full automation and subsequent growth would be delayed, and he would have to start looking for new investors again – a time- and energy-consuming process which would also divert his focus from the business.

The case is a classic illustration of the tensions between financial and social impact, and the inevitable trade-offs that have to be made by social entrepreneurs when seeking to raise outside investment in order to scale. In teaching it, Dr Alemany draws on concepts and tools such as Theory of Change, impact metrics and the valuation of startups.

While the VC industry is accustomed to using various tools and metrics for the valuation of startups, combining tools from the world of finance and traditional VC investment with those of the social/NGO space to quantify and compare both types of impact – financial and social – is a highly novel approach.

Using the concepts

Theory of Change (ToC)

ToCs (see box) are a useful way to capture how an organisation or initiative creates change in the world. The ToC starts from the current problem (needs) and ends with the desired state of the world (impact). Each step in between represents a logical jump from input and activities of the initiative to outputs, outcomes and, finally, impact. Most impact investors expect to see a ToC in pitch materials, and a compelling ToC has evidence to prove that the ToC is valid in the real world (ie that the activities lead to the desired changes).

Impact Measurement Project (IMP)

The IMP breaks down impact into constituent parts. Generally, people only consider the actual changes, but it is also important to consider who the changes affect and how much they will impact on them, including the depth of change (is it a big change or a small one?) and its scale (how many people will it impact?). The IMP will likely also include an estimation of the duration of the impact and the key risks that may follow from the impact created. It may also consider the question of additionality will change occur anyway, even if the initiative does not take place? And how ‘additional’ is the new initiative?

Impact Money Multiple (IMM)

Developed in 2016 by an impact-investing fund for growth-stage companies and a social-impact advisory firm, the IMM applies the rigour of financial performance measurement to the evaluation of social and environmental impact.

It has four steps: assessing scale (number of people reached by the initiative); identifying social or environmental outcomes; estimating the economic value of outcomes to derive a monetary value for the impact created; and adjusting for risks (including issues in transferring academic findings to new contexts and adjusting figures accordingly).

The aim is to calculate the financial value of the social good projected to result from each pound invested, thereby enabling social-impact investors to estimate the projected return on an opportunity.

But it was not merely pedagogic utility that attracted Dr Alemany and her co-authors to the BanaPads story. One of the most encouraging aspects of the case is that, given the powerful gender taboos in Uganda, the protagonist is male: “It was inspiring to find a man fighting and providing support and help for women’s basic health in Uganda,” Dr Alemany says. “Richard Bbaale represents the type of person we need in this world: empathetic, supportive and hard-working.”

His is certainly quite a story, and made for quite a case study: in June this year it won the European Foundation for Management Development Case Writing awards in the category ‘Inclusive Business Models’.

‘BanaPads: To grow or not to grow? That is the question’ is now available on the LBS case portal. You can access it here. An accompanying teaching note for educators is also available

Luisa Alemany is Associate Professor of Management Practice in Strategy and Entrepreneurship; Academic Director, Institute of Innovation and Entrepreneurship at London Business School

Theory of Change (ToC)

A ToC describes how the action that an organisation takes creates change in the world. It is typically captured as a diagram and usually involves the following steps:

  • Needs: A clear articulation of the needs of a group of people (eg poor financial literacy in rural households).
  • Inputs: The key resources used to deliver an intervention (eg financial literacy expertise).
  • Activities: The key actions the organisation takes to address the problem (e.g. financial literacy training).
  • Outputs: The immediate consequences of an organisation’s actions (eg rural households trained in financial literacy).
  • Outcomes: The final results for the organisation and the society.
  • Impact: Actual change effected (eg better financial decision-making).

For more information, see J. Noble (2019) ‘Theory of Change in Ten Steps’.


Institute of Entrepreneurship and Private Capital

This article was provided by the Institute of Entrepreneurship and Private Capital whose aim is to inspire entrepreneurs and investors to pursue impactful innovation by equipping them with the tools, expertise and insights to drive growth.