Is the idea really for people to make their own napkins? I thought based on the article that the point was that napkins could be manufactured cheaply in the village, rather than on half-million dollar machines owned by multinational conglomerates.
Now, his idea is that lot of NGOs in various villages have to make this investment of 1200$ (which is a LOT of money for people living in villages), install the machine, make the napkins and then sell them.
What the OP and I suggest is that he should create/install machines in his own factory, optimize the process even further and then using economies of scale create cheap napkins which every women can afford. Having a central location to drive the prices lower is much easier than installing machines in a country as big as India. And I think he should be able to easily get Investment because his invention is featured at the national level. [And if he can't get Investment, I will start a kickstarter project and send him the money.]
His plan is bad because he creates yet another cause to give money to. With a business, he gets the same outcome and doesn't need help. It's a win-win-win!
Of course, this defeats the stated purpose of encouraging usage by poor Indian women, but if the point is to make money...
Let's start from the scratch. The goal is this:
Create affordable sanitary napkins for women in India.
To achieve this goal, he worked hard to master the first step i.e. to be able to manufacture the napkins at low cost. Great.
Now there are two approaches:
1. Sell machines to different NGOs so that they can create their own napkins. As I mentioned it requires hefty investment of 1,200$. Also, I think it's easy to underestimate how much effort is required to reach different parts of India and selling the concept of these machines.
2. Create machines on his own (using outside investment if needed) and create cheap napkins afforded by economies of scale. He can use the money from the sales and extend it create a better process, better machine and drive prices even lower. He can now rely on an existing vast distributor network to spread these products all over India [I refer you to my shampoo sachet example in this comment: http://news.ycombinator.com/item?id=3370219]. Heck, he can now even export it to other developing countries.
If the goal is to make napkins available to more women in India (and everywhere else), I think that 2nd approach is vastly superior than first. What do you think?
PS: If there is a viable market, I suspect some of those groups will start to grow and you may end up with the type of large company you want him to build.
The real problems are marketing(which the article says is a huge problem) and distribution(which from what i read about india, is a huge problem too).
The franchise model seems like a good way to solve those problems, and from what i read about this stuff it's pretty common as a way to solve marketing and distribution in india.