How did the MicroConsignment Model come about?
New Development Solutions Group co-founders Greg Van Kirk (recognized as an Ashoka Fellow in 2008) and George Bucky Glickley were Peace Corps Volunteers in Guatemala from 2001 to 2003. While still in the Peace Corps Greg recognized that tourists were regularly visiting the Guatemalan town of Nebaj where he was working and leaving quickly without spending any money due to a lack of infrastructure. Identifying a problem, he received special dispensation from the Peace Corps to invest some of his own funds that he had saved working in investment banking to start several tourism businesses with local residents, including a restaurant, a Spanish language school, a hiking and trekking service and an artisan store. The idea was to help the local economy by creating local jobs and to motivate tourists to stay an extra day or two in Nebaj spending money on goods and services. The long term strategic vision was to have local entrepreneurs earn ownership of the ventures through sweat equity and take over when financial and administrative self-sustainability was achieved. This “hand off” successfully took place in early 2004 and these ventures continue to function profitably to this day.
The MicroConsignment Model (MCM) first emerged when Greg donated money from the profits of these tourism businesses to a wood-burning stove project. This donation supplied a handful of stoves to an equal number of families in a local village. Like millions of Guatemalans, these families had always cooked campfire-style on their dirt floors. Cooking this way had long been recognized as extremely energy inefficient and harmful to the health of family members, particularly women and children. Relief agencies had determined that the construction of inexpensive, locally manufactured, concrete stoves could immediately and dramatically reduce energy costs and improve the health and safety of family members. Greg realized, however, that merely donating stoves severely limited the capacity for distribution. Once the relief money was spent, nobody else could get a stove. Greg concluded that many more people could obtain these stoves if their distribution was built on a sustainable economy. As a response to this ongoing challenge he developed what would become the MCM. Stoves would be locally manufactured, with materials provided to local entrepreneurs on consignment, and marketed and sold to low income families in villages on on an interest-free basis. The money saved in energy costs allowed the stoves to essentially pay for themselves as families made payments over six months. The health, economic and environmental benefits would go on for years. This model would not only provide an essential, high-quality product at an affordable cost to villagers, but would also provide new income generating opportunities to local individuals as entrepreneurs. Soon after this initial iteration of the model was launched, George joined Greg to further develop and expand this initiative amongst others.
Upon completing their Peace Corps responsibilities, Greg and George stayed in Guatemala and formed New Development Solutions as a means to provide consulting services to USAID, Chemonics, Soros Foundation and other organizations. In March of 2004, they were contracted by Scojo Foundation (now VisionSpring) to work in El Salvador to help find an effective way to distribute reading glasses to low income villagers. It is estimated that more than 90 percent of people over 40 years old will need near-vision reading glasses to see up close. VisionSpring was utilizing a microcredit model at the time to provide local women with a means to distribute the glasses, but it wasn’t working effectively. Greg and George noted that microcredit is very effective for people who already have established businesses and purchase raw materials from a local distributor to meet unmet demand. However, selling reading glasses, much the same as selling wood burning stoves, requires a different approach. Awareness needs to be created, a high quality service is the driver, there are no local distributors, training is essential, and the perceived and real financial risk by potential entrepreneurs is very high. They concluded that microcredit was a suboptimal model to achieve VisionSpring’s desired outcomes because microcredit is generally neutral regarding what the businesses buy and sell. Any effort to deliver new “medium and high intervention” products and services to vulnerable villagers must first look at the villagers’ needs and then inductively create an entrepreneurial structure that meets those needs. Greg and George concluded that the MCM could effectively mitigate the challenges that VisionSpring was confronting in utilizing microcredit. After in-depth analysis and testing, VisionSpring decided to adopt the MCM as its implementation mechanism. For Greg and George this was the moment in which they realized that the MCM could work as a unique means to get villagers potentially myriad products and services that addressed health, economic, environmental and educational needs. It was this realization that led to them to establish the US non profit 501 (c) (3) Community Enterprise Solutions (CE Solutions) in 2004 as the engine to test, develop, implement and expand the MCM in Guatemala and ideally other countries in the future.
