3.1. 2012
Sisters Doing It For Themselves
A mere five years ago, Grameen’s ‘phone ladies’ and Unilever’s Project Shakti were the darlings of the world’s press, having apparently proven that money can be made by investing in entrepreneurship among the world’s poorest women. Muhammad Yunus won a Nobel Prize for supporting them with microloans in Bangladesh. C. K. Prahalad encouraged production of products for ‘the bottom of the pyramid’. Scores of young entrepreneurs set off for the developing world with a single great idea – to sell in impoverished communities.
Today, even Grameen cannot locate the phone ladies and Project Shakti is troubled. Concerns about the impact of microfinance have dimmed its appeal in the eyes of the public. Agencies like USAID have become sceptical of the ‘one trick pony’ scheme to sell a cool product to the world’s poor.
Nevertheless, important experimentation in entrepreneurship still occurs among poor women on the ground in developing nations. Twin forces fuel continued interest in so-called ‘entrepreneurship networks’. On the one hand, many in the international development community still believe that empowering women economically is the best way to fight poverty – since women often cannot work in structured jobs, entrepreneurship is a quicker way to draw them into the economy. On the other hand, multinational corporations, especially consumer goods manufacturers, are pressured to expand in the developing world to support their continued growth – and they can already see that, beyond the easier wins in big cities, it will eventually be necessary to reach the rural communities that often comprise 65 to 70 per cent of the population.
Increasing attention has therefore focused on a model we have been studying since 2008: a rural system of female entrepreneurs built by CARE Bangladesh. This interesting hybrid solves several issues that have caused other failures, while still offering the development benefits that first inspired the world community, and has the added attraction of providing unrestricted income to a major non-governmental organisation (NGO). Thus far, the CARE Bangladesh system has attracted several companies already experienced in this area – Unilever, Bata, Danone and Grameen – as participants, yet they are now drawing completely new entrants like Bic and Ajinmoto. Multinational corporations looking to grow businesses in the developing world have much to learn from this system, as do NGOs and social entrepreneurs looking to increase economic opportunities for the poor.
Three problems have haunted microenterprise networks: the high cost of recruiting and managing personnel, the need for a balanced ‘basket of goods,’ and the imperative to mitigate funding risks. The CARE Bangladesh system shifts recruitment and management to an NGO, while allowing a consortium of manufacturers to share the costs of distributing a suitable variety of goods.
Building such networks takes a long time and maintaining them is extremely costly. Whether multinational corporations or small enterprises, most companies simply do not have the money, the time, or the skills to pull it off. Usually, the staffing requires recruitment and training of women who are minimally literate and numerate. Many of them have never worked except at home and need the most basic sorts of job training and confidence building. Corporate managers normally have no experience that allows them to select appropriate candidates from among such a pool, to know how and what to teach, or to deal with the myriad problems that occur in a scarcely resourced environment. Once recruited, managing the group is a continuing, hands-on and costly affair. Employers often must run interference with local governments, clergy and even family.
Shifting this challenge to an NGO with 50 years’ community experience cut Unilever’s distribution costs in half from 17 per cent to 9 per cent. Danone spent three years training 300 women to sell fortified yogurt, suffering large losses due to constant turnover and high management costs. Within one quarter, CARE women were selling 15 per cent more per day and management costs were cut in half.
Product offerings must suit use and distribution conditions while balancing margin, size, weight and technology. Grameen’s ‘phone ladies’ simply disappeared when prices for ‘phones and time dropped, eliminating their margin. Expensive one-off purchases, such as stoves or solar lamps, quickly peak in a village, leaving the woman with nothing further to offer or earn. Infrequent purchases, such as the Bata shoes with which the CARE system began, must be offset by smaller items with high margins or frequent repurchase rates. Single-use sachets pioneered by Unilever are perfect complements to slow-turning items, but poor consumers often have no experience with the products: even washing with soap is unfamiliar in some places. The CARE system now includes ‘brand ladies,’ who go from village to village, teaching about brands, products and practices.
Vigilance about funding is imperative. It has become the norm to expect third parties to provide microfinancing to buy inventory in such programs. Repayment remains strong, but the typically very high interest rates make it hard to earn a livable income off the margin from sales, leading to costly churn in the network—and severe public concerns. CARE Bangladesh encourages women to borrow from relatives instead and advises overall to keep borrowing to a minimum. Only an organisation with the depth of understanding and breadth of involvement such as CARE has in Bangladesh are in a position to help advise on such matters.
Monitoring the success, safety and well-being of the women in the system is probably the single most important ingredient. CARE personnel watch how well women are working, but also what they are able to earn. CARE advocates for the women to distributors and suppliers, thus providing a unified voice and bargaining position the women would not otherwise have. For this, they receive a donation as a per cent of sales that keeps selling costs equal to or below the norm for urban distribution arrangements, yet provides an unduplicated channel. The donation stream thus earned is unrestricted, unlike the funds that come from big donors like the Gates Foundation or from government agencies like DfID (Department for International Development). The money gives CARE flexibility to experiment with more innovative ideas.
Currently, CARE International is working with other large multinationals, such as Procter & Gamble, to plan similar networks elsewhere in the world, including Africa. It seems likely that arrangements of this sort will provide the kind of earning power first seen in microenterprise, but with a level of stability and potential for growth that has been missing.
Linda Scott is DP World Professor of Entrepreneurship and Innovation at Oxford University’s Saïd Business School.
