What is the mission of the MicroConsignment Model?
What is the MicroConsignment Model?
How does the MicroConsignment Model allow local populations to take charge of their own development?
Why do we need the MicroConsignment Model?
What are the summary benefits of the MicroConsignment Model?
How does the MicroConsignment Model empower?
How does the MicroConsignment Model ensure alignment?
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What is the mission of the MicroConsignment Model?
The mission of the MicroConsignment Model is to create first-time access to life-changing technologies, products and services for isolated villagers through locally-owned, managed and sustainable (profitable) entrepreneurial solutions.
What is the MicroConsignment Model?
Poverty and inequality is a symptom of a wider problem: lack of access and opportunity. Microcredit has offered one solution to this problem: access to capital for entrepreneurs in the developing world. But so far no one has implemented—at scale—a model that creates access to economic, health and environmental solutions to a wide spectrum of issues, including chronic conditions such as pulmonary and gastrointestinal illnesses, vision problems, malnutrition, water scarcity, and lack of energy. Community Enterprise Solutions (CE Solutions) has solved this access problem through the creation and implementation of its MicroConsignment Model (MCM).
The MCM delivers essential products and services at affordable prices to the rural poor in the developing world through empowerment. Through the MCM individuals who lack opportunity and experience, primarily young women and homemakers, can start their own ventures through “sweat equity” and earn profits within the first month. Through consignment rather than loans, MCM entrepreneurs can overcome high uncertainty and are trained, equipped and supported to provide solutions that were previously only addressed through donations. They address the real needs, perceived needs and desires of populations through village campaigns in an appropriate way at the appropriate price. They provide access to needed but previously unavailable products and services. MCM entrepreneurs “bridge the last mile” by providing solutions to health problems, save families money, help individuals increase their productivity, and help protect the environment, all while earning incomes that were previously impossible. They gain a sense of purpose and become role models and community leaders while helping other women acquire needed solutions to their problems in a dignified way that they vote for with their limited resources. MCM entrepreneurs offer solutions to the population at the “base of the pyramid”—in this case, the most vulnerable rural communities—by addressing the “what” (essential products and services), the “who” (rural villagers), and the “where” (rural villages). They do so by creating a “how”: a highly scalable local distribution network that works to diagnose and address the myriad obstacles confronting these communities.
How does the MicroConsignment Model allow local populations to take charge of their own development?
The MicroConsignment Model hinges on the work of trained local entrepreneurs. The model cannot be implemented solely by a foreign organization as it is designed and based on the work of these entrepreneurs who must adopt the model as their own. It is defined by training the local population and creating access to products that have an environmental, health and economic impact on rural communities.
The MicroConsignment Model allows the local population to take ownership of not only a business, but of the health and development of their community. Our entrepreneurs are able to both offer and become the change they hope to see. Their businesses give them a rare opportunity in their communities – many of the MCM entrepreneurs would have never thought they could offer such a service or become entrepreneurs themselves. They are homemakers, often with limited education, and thought only “doctors” could provide these services.
Through partnering with local organizations, Community Enterprise Solutions has developed a full-service community approach which allows not just individual entrepreneurs but the entire community to be involved in its own development. Organizations become micro-franchises of the MCM and sell products in their community. The local organization benefits as they earn new revenue and by gaining more trust in their community by providing people with another service. Just as the women MCM entrepreneurs are known as asesoras comunitarias (community advisors), the organizations are known as socios comunitarios (community partners). This structure creates great leverage because these organizations already work with rural beneficiaries who can buy the MCM solutions.
In Guatemala, Community Enterprise Solutions wanted to create a local social enterprise that could achieve financial and administrative self-sustainability, could access its own equity capital or loan financing, and that could be owned and run by local leaders who emerge naturally through the work. This led to the founding of the social enterprise Soluciones Comunitarias, which is owned and run by Guatemalan entrepreneurs who have risen through the ranks. Soluciones Comunitarias is the perfect example of the MicroConsignment Model allowing the local population to take charge of their own development. Guatemalans are now creating access to products with an environmental, health and economic impact and generating income for their families and their communities without the help of a foreign organization.
Why do we need the MicroConsignment Model?
One of the most compelling differences between credit and consignment is related to risk and uncertainty. Credit works in risky markets; the MCM works in uncertain markets. The MCM’s power lies in its ability to create first-time sustainable access for apparently new products in new markets through new entrepreneurs. As James Surowiecki writes in his New Yorker article “Hanging Tough,” referring to economist Frank Knight, “Risk describes a situation where you have a sense of the range and likelihood of possible outcomes. Uncertainty describes a situation where it’s not even clear what might happen, let alone how likely the possible outcomes are.” But one person’s risk may be another person’s uncertainty. Perception, not necessarily reality, defines this distinction. Although almost any endeavor involves some risk, actors in high-risk situations may feel so much discomfort that they cross the line from risk into uncertainty.
Credit-driven structures work when the entrepreneur perceives risk. An entrepreneur whose inventory is funded 100 percent up front through credit has little time for learning and a slim margin of error. She must sell immediately and sell consistently without fail, or she will likely fall further into poverty. Therefore, she must understand and feel comfortable with her risk before she takes out a loan to buy her inventory. So she first has to know her supply-and-demand equation and predict that she will likely be able to sell her products. She can understand the possible outcomes.
However, when potential entrepreneurs perceive the market as not just risky, but uncertain, the MCM has proven to be an optimal solution. With new products for new markets, primarily high-value-added products, sometimes an entrepreneur simply cannot calculate risk. No one has knowledge on which to base a risk assessment. An entrepreneur who is highly skeptical of a new product and market demand will not want to take out a loan and bear all the upfront risk. And even if she wants to, she probably shouldn’t. Conversely, the implementing organization with a different, more informed perspective, such as Community Enterprise Solutions, simply sees risk, not uncertainty. So it utilizes the MicroConsignment Model.
Thus, the MCM was designed to fill the gap for previously unknown and/or inaccessible products from the perspective of both the entrepreneurs and the villagers—their potential customers. MCM entrepreneurs engage in businesses where supplies never existed, perceived demand is highly unpredictable, and thus the environment is uncertain. Where the MCM is most effective, many of the client beneficiaries never realized they needed those products and services. For example, MCM entrepreneurs have instantly helped thousands of village weavers who thought they were going blind by giving them a free eye exam and then selling them a simple $5 pair of reading glasses. The weavers would never have thought to seek out this solution because they did not even understand their problem. And the MCM entrepreneurs would have never thought they could offer such a service. They are homemakers, often with limited education, and thought only “doctors” could provide these services. This is a highly uncertain situation for an entrepreneur. I cannot count the times a woman has given me a “What are you smoking, gringo?!” look when I said she could start a business giving eye exams and selling reading glasses. “Who me?” she responds. “Impossible!” “Yes, you,” I reply. “It’s totally possible!” Therefore, on-the-job learning must be a part of this enterprise and is inherent in the MCM—potential entrepreneurs can learn by doing. They must be empowered through a mechanism that provides the support and time needed to overcome the barrier of high uncertainty and turn obstacles into opportunities.
What are the summary benefits of the MicroConsignment Model?
- Community problems are solved by community members.
- New income generation opportunities are created through an investment of “sweat equity”
- Entrepreneurs realize a profit within one month of start-up
- Individuals with very little education or with limited time can become very successful entrepreneurs
- Individuals are able to “test drive” an entrepreneurial opportunity and do not suffer financially if it doesn’t work out.
- Entrepreneurs are provided with the capital(consigned products), resources (marketing materials et al), training, strategic and tactical support on an ongoing basis
- Entrepreneurs efficiently “reinvest” in their ventures. As they must return a portion of sales to the organization to restock their inventory they do not see that portion as theirs, and thus do not consume revenues needed for capital reinvestment.
- A rotating capital mechanism is utilized whereby the impact of capital/donations is “multiplied”.
- Entrepreneurs can be used as the initial vetting mechanism for new technologies and marketing strategies. They have a vested interest in not wasting their time and responding to leadership with what will work and what won’t.
- Entrepreneurs gain respect in their communities, and are therefore looked at to provide additional, new beneficial products and services. They can expand their offering and “piggy back” new products and services
- A high- quality product/service is assured as the beneficiaries are paying clients who are “voting” for what they want with their scarce resources
- Impact is measurable on an ongoing basis as entrepreneur income is recorded and actual access creation is known as sales to villagers are tracked as opposed to sales to entrepreneurs.
- When entrepreneur attrition occurs products are returned to the organization, which maintains brand and territorial integrity. Former entrepreneurs are not selling post involvement.
- An elegant mechanism for transferring knowledge is created as entrepreneurs must be responsive to villager needs, and the NGO/social enterprise must be responsive to subsequent entrepreneur stated needs to serve those villagers.
