Opening Markets for Microfinance Goods

Posted on June 18, 2006

On the heels of one of my articles being published in the MicroVest summer 2006 newsletter I thought I would write a piece on microfinance I have had in my head for a while. I really need to get this idea out of my head and on to this blog so all of you can help me refine it. I also hope that some of you will be interested in helping to build it. Alright, here we go!

The question: Where can you or I buy goods made by microfinance backed entrepreneurs? Having found no answer to this question in a lengthy google search my mind shifted to one of the shortcomings of microfinance. In most cases microfinance will allow the borrower to reach a level of living above the poverty line but there is a glass ceiling that limits their business’ growth. I believe the glass ceiling stems from, in part, a lack of distribution channels for the goods the entrepreneurs produce.

A possible solution: an amazon.com style site where only goods produced by microfinance borrowers are sold. There is a great market for these goods here in the US and elsewhere. People are constantly looking for exotic handmade goods to spruce up their homes and, a lot of times, settle for mass produced look-a-likes from places like Pier-1 and Crate and Barrel (nothing against those places - I do like both of them). With an online store we could probably get buyers the real thing, possibly even for less than the big market stores price, and the purchaser will also know they are helping the world’s poorest people with their purchase. A unique product for a great price with an intangible feel good add-on. Sounds like a winning combination for the consumer. Now, what about the microfinance borrower?

The online store will open up vast markets for microfinance produced goods and, in doing so, breaks the glass ceiling while also creating jobs (which is listed as another drawback of MF - people say it doesn’t create jobs). Seems interesting for sure. Of course building the actual website would be fairly easy (for a web developer not for me personally - anyone up for the task?). The logistics of getting the goods together and shipped is the hard part here. My initial thought is to rope in the larger microfinance institutions who have a lot of people on the ground. These people could possibly facilitate the picking up of goods and the transporting of them to a central location. Then, we could employ some people to pack and ship the items from the central location. What do you all think? Obviously this needs to be fleshed out so please jump in on the comments.

In the end of the day, if this gets going, everyone wins and poverty comes closer to being eliminated. On a side note: I would also take a large portion of the profits from the company and donate them directly to microfinance institutions so they can make more loans (maybe even into my own MFI - I am thinking of starting an MFI in Cairo so if you know someone willing to give me a start-up grant please ping me). Looking forward to hearing your thoughts!

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5 Comments so far
  1. ben casnocha June 21, 2006 10:14 am

    Eric, I’d love to visit some microfinance facilities / meet people involved in Asia when I’m out there in the fall (I hope). if you have any suggestions let me know. thanks

  2. Nicole July 24, 2006 8:25 am

    Eric, thanks again for the article! I have been thinking the same thing for a couple of years now. It would be so simple too. The quickest option would be an eBay company with one central computer in the capital city. After living in Uganda for six months I am 100% convinced that all it would take is an individual trained in the world of eBay and a computer with internet access. That said, my sources tell me a similar business may be in the making as we speak. Of course, there are several logistics that come into play with working in a developing country - it’s not just accessing global markets it’s also incorporating time and shipping expenses and ensuring that the local postal workers don’t walk off with the product (which I’m sad to say has happened on more than one occasion).

    In the mean time, Indigenous Designs Corp. has a similar mission but is regionally concentrated in Latin America and has a much more sophisticated business plan. That said, they gave an impressive showing at Investor’s Circle in Boston last fall.

    There are some serious market linkages to be had by the expansion of existing companies into the microfinance world. As you mentioned before, places like Pier 1, World Market, or even Starbucks could potentially gain great talent and some exciting new products if they were to partner with existing MFI clients.

    Microfinance is doing some amazing things on the supply side, and with rising income levels there will be a natural increase in demand, but it would be great to see world markets open on the demand side as well!

    Oh, btw Ben - let me know where you’re going and I can suggest a number of MFI’s to visit on your trip.

    Keep it coming!

  3. Eric July 26, 2006 9:45 am

    Hey Nicole - No prob on the article. My pleasure completely. I am looking forward to writing for the next newsletter as well if you’ll have me.

    Thanks so much for input on this idea. I didn’t realize there was already alot going on in this area. I started thinking about it when I received a handmade bag from Unitus as a thank you. I gave the bag to my gf and she loved it. It is also a great conversation piece. I figured more people would be interested in buying these goods since they are stylish, interesting and they help the poor.

    I see your point on shipping logistics, prices and procurement. That could be tough. The eBay store is a great idea though as far as getting a quick storefront up and running. I wonder if it would be too outside the core compentecies of groups like Unitus to help with the shipping of batches of MF goods back to the states to a central location as they already interact with a lot of MFIs (or the MFIs, like Grameen since they have the capacity, could branch out and become distribution arms for their borrowers). These guys would also have a bit of clout as far as setting up distribution deals with large players like Pier 1 and S’bucks. The “produced via microfinance” (that tagline stinks but you get the idea) tagline could become as ubiquitus as the fair trade notification on food products like coffee.

    Hmmmmm I think we could be on to something here!

  4. Jeff November 23, 2006 12:08 am

    Hi Eric-

    Great site btw—I’ve been researching this same idea and agree that it’s a great concept and one that could be developed both overseas and here in the states.

    I am working on some things to replicate the work that’s been done w/ microfinance here in the states on a similar level as well and would love to talk at some point.

    Take care and hope to chat w/ you soon!

    Jeff

  5. […] on the web for microfinance goods for a while. I first wrote about the idea in a post titled “Opening Markets for Microfinance Goods” where I talked about the idea as a simple online store. As the idea evolved in my mind […]