Strategic Alliances for Scale and Scope Economies: Lessons from FADES in Bolivia
This article presents a case study of Fundación para Alternativas de Desarrollo (FADES), an MFI in Bolivia that expanded its rural outreach by entering into strategic alliances with several public and private institutions. It introduces FADES innovative range of diverse linkages, and shares initial results. FADES entered into strategic alliances with other institutions in order to expand outreach, while limiting the cost of expansion. FADES board and management deemed the development of alliances necessary to create additional services for new and old clients. Alliances helped FADES to:
- Create economies of scale and economies of scope at the branch level through additional information and relationships that favoured development of additional products;
- Manage liquidity;
- Diversify its sources of revenues;
- Experiment with different schemes for offering services through strategic alliances;
- Increase sustainability through reduced client transaction costs;
- Develop markets and infrastructure;
- Bypass regulatory constraints;
- Improve client loyalty.
FADES experience highlights the importance of developing alliances with organizations that are of the same size, with similar objectives and comparable mission and vision. Organizations with as many linkages as FADES also require a separate unit for sound administration.
