The MicroConsignment Model: Financing Innovation that Converts Uncertainty into Opportunity

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The MicroConsignment Model: Financing Innovation that Converts Uncertainty into Opportunity

Antigua, GuatemalaNew York, United States
Organization type: 
nonprofit/ngo/citizen sector
Project Stage:
Scaling
Budget: 
$250,000 - $500,000
Project Summary
Elevator Pitch

Concise Summary: Help us pitch this solution! Provide an explanation within 3-4 short sentences.

MicroConsignment creates an opportunity for first-time women entrepreneurs to gain access to financing so that they can create access to life-changing products.

About Project

Problem: What problem is this project trying to address?

The vast majority of families throughout the developing world have virtually no access to technologies that can save them money/increase their productivity such as improved cookstoves, reading glasses, solar lamps and more. Very few organizations/businesses know how to sell these technologies and are doing it. These markets are totally underserved. Families are effectively forced to waste money and time that could be saved or invested. Why does this problem persist? In large part, because a financing mechanism that can empower entrepreneurs to serve these disenfranchised families profitably has yet to be promulgated.

Solution: What is the proposed solution? Please be specific!

The MicroConsignment Model is essentially a product loan/revenue-sharing model that finances women to start enterprises for the first time selling these much-needed solutions in isolated communities. It helps women in developing countries, usually homemakers with extremely limited employment opportunities, to start entirely new businesses with new and innovative products. Using a combination of a consignment-based model and extensive training and support, the MCM finances women to start businesses for the very first time that otherwise would not be able to and earn up to $1.50 per hour on average, an income which they are then able to save or invest in their families. The products and solutions that they offer create opportunities for purchasers to save money that they in turn can reinvest in their own businesses, school for their children and more.
Impact: How does it Work

Example: Walk us through a specific example(s) of how this solution makes a difference; include its primary activities.

The MCM converts uncertainty into opportunity. Through the MCM, primarily rural women are identified, trained, supported and equipped with a basket of life-changing solutions such as improved cookstoves, reading glasses, water purification buckets, solar lamps and more. The model utilizes a consignment financing mechanism that empowers women entrepreneurs to overcome high levels of uncertainty from both a professional and market demand perspective. These entrepreneurs hold village campaigns at which they provide free services and sell urgently needed solutions at affordable prices. The villager gains access to solutions that create investment capital by removing inefficiencies and/or increasing productivity and the entrepreneur invests their time and “sweat equity” in a venture in which they can earn a profit from their first sale without taking on a debt burden. Risk is allocated appropriately. A rotating capital mechanism is which empowers a local social enterprise to gain profitability. In addition, the MCM incorporates a social impact points program in which the implementing organization provides a match on entrepreneur earnings for high impact products. This match is deposited into a savings account opened in the entrepreneur’s name. This account integrates the entrepreneur into the formal banking system, often for the first time in her life. Ideally, this is the beginning of a process that includes increased access to other financial services such as credit. To date, our MCM has created $3.5 million in direct net economic impact.
Sustainability

Marketplace: Who else is addressing the problem outlined here? How does the proposed project differ from these approaches?

Microfranchising is a commonly cited entrepreneur-based model used to create new businesses, but, while very appropriate for use with consumables with a known market, it doesn’t allow individuals to start new businesses in uncertain environments without the risk of a loan. In a credit model like microfranchising, the entrepreneur buys products on credit, sells them and uses revenue to pay back the loan. When she can’t sell, she is left with both inventory and debt. The MCM works in reverse. The entrepreneur is provided with products at no cost, sells them, pays the supporting organization, and pockets her profits—only after completing a sale. If she doesn’t sell, the repercussions are different from those of microfranchising: she can sell another day without the burden of a debt payment.
Team

Founding Story

While working in rural Guatemala in 2003, I (Greg Van Kirk) was looking for a sustainable means to deliver improved cookstoves to villagers. I recognized there was a vacuum between donation and credit-based solutions. This was the genesis of the development of the MicroConsignment Model. Over the next few years I saw that this new model could work for myriad solutions beyond cookstoves by creating business opportunities for local entrepreneurs. Based on proven success and continuous recognition we concluded that we had developed a solution that could potentially improve the lives of millions of people. I love what I do and am passionate about my work, but most importantly I feel a moral obligation to increase our impact. The MicroConsignment Model serves a universal need. As the originators it is our obligation to create awareness, teach, train and support on the broadest scale possible.
About You
Organization:
Community Enterprise Solutions
About You
About Your Organization
Organization Name

Community Enterprise Solutions

Organization Country

, NY, New York, New York County

Country where this project is creating social impact

, ST, Antigua

How long has your organization been operating?

More than 5 years

Has the organization received awards or honors? Please tell us about them

Greg Van Kirk is an Ashoka-Lemelson Fellow and a member of Ashoka Globalizer, Clinton Global Initiative and the Siemens-Siftung Community Impact Development Group. In 2012 Greg Van Kirk was named Social Entrepreneur of the Year Latin America by the Schwab Foundation.

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Innovation
How long have you been in operation?

Operating for more than 5 years

Which of the following best describes the barrier(s) your innovation addresses? Choose up to two

Access, Equity.

Social Impact
Please describe the goal of your initiative; outline what you are trying to achieve

Our goal is to expand the global implementation of the MCM, increasing access to financing for women entrepreneurs to start new businesses creating access to products and solutions with an economic benefit. We believe that expansion of the model will lead to the global financial inclusion of entrepreneurs and purchasers of these products. Over the next 3 years, we project that through the MCM, entrepreneurs throughout the developing world will sell more than 100,000 products, creating a net economic impact of at least $2.5 million for more than 250,000 people living in underprivileged communities. They will do this while generating approximately $280,000 in net earnings for themselves and local leadership.

Which barrier(s) to financial inclusion does your solution seek to address? (select all applicable)

The lack of affordable financial products tailored to the needs of underserved and excluded communities,, Other (Please describe below).

If you selected 'other' above, please specify which other barriers to financial inclusion you solution seeks to address:

The lack of financial products that allow entrepreneurs to start up businesses in new and/or uncertain markets

For which underserved or excluded communities will your solution create access to valuable, affordable, secure and comprehensive financial services?

The model primarily serves two groups of beneficiaries: first-time women entrepreneurs and village families. Women entrepreneurs are typically between the ages of 18 and 55 with limited education, little business experience and few (if any) income generation opportunities. The MCM allows them to generate income and open a savings account usually for the first time, putting them on the path to full financial inclusion. They are able to start businesses that they would never be able to using only microcredit. Village families save money and increase productivity by purchasing previously unavailable solutions to local needs. The village families generally live in communities with populations of between 500 and 5,000 inhabitants. These communities lack access to even the most basic products and services. The MCM creates economic opportunity for the first time for women entrepreneurs and economic security for the first time for village families.

Could your solution work in other geographies or regions? If so, where?

After beginning in Guatemala in 2004, the MCM has now been replicated in Ecuador, Nicaragua, South Africa, the Dominican Republic and Haiti. Successful feasibility studies have been conducted in Peru, Mexico and Egypt. The MCM can be replicated in any region where there are individuals interested in starting new businesses and isolated villages that lack access to basic products such as reading glasses, water filters, solar solutions and more. Our plan is to establish incubators in different regions throughout the world to create appropriate modifications and scaled impact.

If your solution is dramatically successful, how will things be different in 10 years?

If the MCM continues to be successful, in ten years the global landscape for starting new and uncertain businesses will be dramatically different. Individuals with an interest in entrepreneurship but without a business background or education will have access to financing in order to be able to “test drive” an entrepreneurial opportunity and generate an income with taking on the risk associated with a loan. These entrepreneurs will have access to savings accounts and over time, other financial services. And through their businesses, they will create access to products and services that provide a high economic return from a savings/cost avoidance/productivity increase perspective for isolated villagers throughout the world. These villagers will have the economic security that comes with being able to save more and spend less.

What will have had to have changed to make this happen?

In order for the global landscape of entrepreneurship in new and uncertain markets at the base of the pyramid to have changed dramatically, the MCM will have had to have been implemented in regions across the world. Organizations working to support villagers throughout Latin America, Africa, Asia and the Middle East will have had to adopt the MCM as a successful part of their activities. For there to be a true shift in the opportunities available to new entrepreneurs, the MCM cannot expand only under the name of CE Solutions. We must work to make the model as replicable as possible so that NGOs working on a range of other initiatives can add the MCM to their array of initiatives. We will have had to have spent a good deal of time over the next ten years focusing on creating an intelligent and efficient mechanism for the continuing global expansion of the MCM, which is precisely what we plan to do.

What has been the impact of your solution to date?

The MicroConsignment Model (MCM) is currently operating in six countries (Guatemala, Ecuador, Nicaragua, South Africa, the Dominica Republic and Haiti). We are working with partners in Egypt, Peru and Mexico to increase global use of the model. Our entrepreneurs have conducted over 3,500 village campaigns offering a mix of 15 base-of-the-pyramid product solutions and earning over $150,000 while doing so. More than 95,000 products have been purchased generating over $3.5 million in net economic impact to more than 175,000 direct beneficiaries.
The MicroConsignment Model has impacted the lives of tens of thousands of rural villagers in developing countries. Entrepreneurs gain not only a source of income, but also a path towards financial inclusion through access to savings accounts for the first time. Community problems are addressed by these entrepreneurs, limiting the need for continuous relief work, keeping communities healthier and creating economic security.

What is your projected impact over the next five years?

Over the next five years, we project that through the MCM, entrepreneurs throughout the developing world will sell more than 200,000 products, creating a net economic impact of at least $5 million for more than 500,000 people living in underprivileged communities. They will do this while generating approximately $540,000 in net earnings for themselves and local leadership and making regular deposits to new and previously unattainable savings accounts. We also intend to increase the impact of the MCM by increasing our capacity to train and provide assistance to organizations interested in implementing the model.

What barriers might hinder the success of your project? How do you plan to overcome them?

The MCM has been successful for over eight years. We have created profound impact in the most marginalized communities. The challenge now is determining how to effectively and efficiently expand our impact on a global level.
We have identified three primary challenges. We need financial resources. To overcome this obstacle, 80 percent of our financial resources needs are addressed through sales, income in the field, and our innovative Social Entrepreneur Corps internship program. We need strategic partners in new countries. We can reach out and create partnerships through our Ashoka network. And we need to capture and spread knowledge of and about the MCM. We have launched the Center for MicroConsignment at Miami University to foster this dissemination.

Winning entries present a strong plan for how they will achieve and track growth. Identify your six-month milestone for growing your impact

Successful launch of pilot program in the Middle East with two local partners

Identify three major tasks you will have to complete to reach your six-month milestone
Task 1

Finalize feasibility study with Together Foundation and Association for the Development and Enhancement of Women in Up. Egypt

Task 2

Send senior staffmember to conduct trainings and arrange administration and logistics

Task 3

Import eyeglasses, solar lamps and water purifiers

Now think bigger! Identify your 12-month impact milestone

Successful launch of an enhanced knowledge sharing platform and global replication fund

Identify three major tasks you will have to complete to reach your 12-month milestone
Task 1

Redesign www.microconsignment.com with a focus on media

Task 2

Secure mutually beneficial arrangements with impact investors

Task 3

Disseminate knowledge throughout Ashoka, CGI and Schwab Foundation networks regarding the opportunities

Sustainability
Tell us about your partnerships

Village leadership is the gateway to the community. Entrepreneurs work with them to assess needs and promote campaigns. Grassroots organizations help us identify entrepreneurs and support activities and growth. We partner with technology/product providers such as VisionSpring, Barefoot Power and Catapult Design to identify new opportunities, modify technologies and support each other. We have partnerships with universities throughout the US. We have created the Center for MicroConsignment at Miami University as a strategic partner. We work very closely with Ashoka and Lemelson.

Are you currently targeting other specific populations, locations, or markets for your innovation? If so, where and why?

We are currently focused on Latin America and Africa as we feel that given our experience in these two regions we are currently most capable of expanding the model successfully in these areas. Having extensive experience with the various cultures in Latin America and Africa makes us most confident in our ability to adapt the model to other countries within these regions. We are specifically targeting Peru, Mexico and Egypt as we have strategic partners in these three countries that are interested in working with us to replicate the MCM as part of their activities.

What type of operating environment and internal organizational factors make your innovation successful?

CE Solutions operates in a collaborative and conversational environment. We are constantly discussing new iterations of the model and testing new ideas to see what works and what doesn’t. We have both a top-down and a bottom-up approach: some of our best ideas for new products, programs and processes have come from entrepreneurs out in the field. It is important that everyone on our team feels that their opinions and ideas are valued – the nature of our work means that oftentimes our field consultants are the ones most in touch with what would work best on the ground. Our savings account match program began only after discussing the idea with the entire team and getting everyone’s input. The MCM is successful because it leverages the ideas, values and perspectives of every stakeholder.

Please elaborate on any needs or offers you have mentioned above and/or suggest categories of support that aren't specified within the list