Written By Brett Smith
As an innovative way to alleviate poverty, a number of social entrepreneurial approaches have focused on enabling poor people to help themselves through the power of entrepreneurship. Micro-credit has provided billions of dollars in start-up and growth capital to encourage micro-entrepreneurs around the world to launch their own enterprises to lift themselves out of poverty.
The majority of the methods employed are designed to provide financial resources – and while this has been successful in some circumstances, it has not been as effective in many others. Examples around the world suggest that financial capital alone may not be sufficient to spur effective entrepreneurship among people who may lack business acumen, a vetted opportunity, and a network of advisers.
To unleash more micro-entrepreneurs around the world, social entrepreneurs have begun moving to models that reduce risk for the micro-entrepreneur. Following the growth of micro-credit, the micro-franchise approach has gained traction by providing a proven business model to micro-entrepreneurs that may lack an entrepreneurial opportunity. Moving beyond micro-credit and micro-franchise, a new approach called the MicroConsignment Model has emerged as a first step on the ladder of micro-entrepreneurship at the Base of the Pyramid.
The MCM – developed by Ashoka Fellow Greg Van Kirk – acts as an initial distribution channel to provide access to basic products – eyeglasses, water filtration buckets, cook stoves and solar lamps – for rural villagers in “Base of the Pyramid” markets. It creates opportunities for villagers to act as micro-entrepreneurs to their fellow citizens, arming the individuals with the education, training and products necessary to successfully market and sell essential products in developing countries – especially in very rural areas.
It also lowers the barriers to entrepreneurship by providing micro-entrepreneurs with an opportunity to ‘test drive’ a business by investing only their time. Equally important, it reduces potential negative outcomes for micro-entrepreneurs by eliminating the need for start-up capital and avoiding financial failure because the goods are consigned – eliminating the potential for the havoc that can result from outstanding loans or failed franchises. In this way, the MCM adheres to the Hippocratic Oath of development: first, do no harm.