Emerging Markets, Emerging Models: Market-Based Solutions To The Challenges of Global Poverty

Emerging Markets,
Emerging Models
MARKET-BASED SOLUTIONS TO THE CHALLENGES OF GLOBAL POVERTY
Ashish Karamchandani Michael Kubzansky Paul Frandano
March 2009
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FOR MORE INFORMATION PLEASE CONTACT:
Michael Kubzansky
mkubzansky@monitor.com
+1.617.252.2486
Ashish Karamchandani
akaramchandani@monitor.com
+91.22.6658.2000
www.mim.monitor.com
www.monitor.com
Emerging Markets,
Emerging Models
MARKET-BASED SOLUTIONS TO THE CHALLENGES OF GLOBAL POVERTY
Ashish Karamchandani Michael Kubzansky Paul Frandano

with the assistance of Victoria Barbary, Anamitra Deb, Davis Dyer,
Nishant Lalwani, Varad Pande, and Suchitra Shenoy
Executive Summary ............................................................. 2

Introduction .......................................................................... 8
New Approaches to Low-Income Markets .......................... 16
Business Models That Work .............................................. 34
PAY-PER-USE .................................................................................................. 40
NO FRILLS SERVICE ..........................................................................................47
PARASKILLING ................................................................................................. 55
SHARED CHANNELS .........................................................................................64
CONTRACT PRODUCTION.................................................................................. 77
DEEP PROCUREMENT...................................................................................... 86
DEMAND-LED TRAINING ...................................................................................95
What the Models Teach .................................................... 102

Recommendations and Concluding Thoughts ................... 120
APPENDIX: OVERVIEW OF THE INDIA STUDY .............................................. 131
ACKNOWLEDGEMENTS ............................................................................ 135
NOTES .................................................................................................... 136

Appendix
Executive Summary
EMERGING MARKETS, EMERGING MODELS 3
Executive Summary
THIS REPORT INVESTIGATES “MARKET-BASED SOLUTIONS”!

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READING BY SOLAR LANTERN

The poor participate daily in markets, whether for livelihoods, food,
social services, or basic products like lamps and stoves. But these
markets are often informal and provide low quality goods and services
at a penalty. Market-based solutions are delivering better outcomes.
© MONITOR COMPANY GROUP, L.P. 2009

4 EMERGING MARKETS, EMERGING MODELS
Executive Summary
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Introduction
Introduction
SEVERAL YEARS AGO,!H%,6"*#9!"!#$"**!2($+"&3!-&!A)%&&"-9!>&.-"9!-&',(:

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A SELF-HELP GROUP IN ANDHRA PRADESH

Village women meet regularly to manage credit and savings for
purchases of dairy cows and other income-generating assets.

Introduction
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Introduction
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married to a noble mission
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is rarely enough to make
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Introduction
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of market-based approaches )-/)!+('%&'-"*4
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investigation proved not to be #%*1:#8#'"-&-&/! "&.! (11%,! ')%! +,($-#%! '(! #2"*%! -&!
commercially viable or scalable.
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New Approaches to
Low-Income Markets
New Approaches to Low-Income Markets
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GRINDING FLOUR
Among low-income families, food preparation is often laborious and
time-consuming. Today, market-based solutions offer better ways to
simplify traditional chores like cooking or securing clean water.

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than if it had to purchase #8+%,$",;%'!+,(28,%$%&'!#'"&.",.#4
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manage production

Gherkin Cultivation Accounts for a 125 Percent Increase in a Farmer’s Income

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Costs of Intermediation and Wastage Represent Significant

Opportunities to Increase Incomes of Tomato Farmers
SYSTEM COSTS OPPORTUNITY
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What the Models Teach
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ROUTES TO COMMERCIAL VIABILITY
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TEACHING AND LEARNING IN UTTAR PRADESH

Education is highly valued in India, where many low-income
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-(&!"0(8'!U<)"'!)%*+#!')%$!$(#'V!1(,!<)"'!*(<:-&2($%!+%(+*%!"2'8"**3!#"3!')%3P,%!
<-**-&/!'(!083!"!(8'#!0"#-2!'%&%'#!(1 !08#-&%##!"&.!$",;%'-&/4!g%'!(8,!#'8.3!1(8&.!
$"&3! %7"$+*%#! (1 ! %&'%,+,-#%#! "&.! -&6%&'(,#! <)(! 1(28#! (&! ')%! .%6%*(+$%&'! (1 !
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R-;%!')%!TSHM!#(*",!*"&'%,&!(,!')%![%&8#!08,&%,9!+,(.82'#!<%**:.%#-/&%.!1(,!*(<:
-&2($%!$",;%'#!(1'%&!#'-**!1"-*!'(!#%**!-&!#-/&-!!2"&'!6(*8$%9!"!(8'-&/!Q8#-&%##!BJB!
-&!(06-(8#!<"3#?!03!$-#+%,2%-6-&/!<)"'!*(<:-&2($%!2(&#8$%,#!<"&'!'(!083!<)%&!
')%3!2"&!"11(,.!-'!(,!)"6%!"22%##!'(!2,%.-'W!"&.!03!$-#8&.%,#'"&.-&/!')%-,!2"#)!"!(<#9!
(,!"0#(*8'%!"0-*-'3!'(!+"34!
!"#$'8/&$.*+2&'&#1
“I know I pay a lot for renting the diesel pump, but I can pay it back much later — even up
to a year later. I know the dealer very well.”
“I can only afford cattle because I have a dairy loan. I want other products to be offered in
the same way.”
“We want gold on credit. Everyone in our village does.”
H(8,2%?!L(&-'(,!X(28#!_,(8+#9!5&.),"!E,".%#)!"&.!k''",!E,".%#)9!X%0:L"3!CJJ]4

As Suppliers Or Producers
>@99#--(-,*$,-(*,(,:#(,/8(/F (,:#(-@8815(9:*&'I(M)%!$(#'!#822%##18*!"&.!#2"*"0*%!08#-&%##!
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"*-/&$%&'!(1 !,-#;!'(!')%!+",'3!0%#'!"0*%!'(!0%",!-'4!X(,!')%!%&'%,+,-#%!(6%,"**9!')%!'(+!
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-#!"0*%!'(!',"&#*"'%!$",;%'!&%%.#!.-,%2'*3!.(<&#',%"$!'(!#$"**!+,(.82%,#4!M)%!'(+!
2"&!"*#(!"*-/&!-&2%&'-6%#!.(<&!')%!2)"-&9!+,(6-.%!=8"*-'3!"##8,"&2%9!(11%,!-&'%,$%.-:
"'%!-&1,"#',82'8,%!8&"6"-*"0*%!-&!+80*-2*3!#)",%.!#3#'%$#9!"&.!%6%&!+,(6-.%!',"-&-&/4!
>&! 2(&',"2'! +,(.82'-(&9! 1(,! %7"$+*%9! A"*3+#(! X((.#!
The most successful and +,(6-.%#! 2,%.-'9! 2(6%,#! #<-'2)-&/! 2(#'#9! "&.! #8++*-%#!
scalable business models %##%&'-"*! %=8-+$%&'4! H82)! $(.%*#! )"6%! -$+*-2"'-(&#!
all featured a similar 1(,!+(*-23:$";%,#!"&.!.(&(,#!;%%&!'(!)%*+!')%!+((,!
attribute: they were set /"-&!"22%##!'(!$",;%'#?!-'!#8//%#'#!')"'!-&'%,6%&'-(&#!
up tooth-to-tail by an $"3!.(!<%**!'(!'",/%'!')(#%!<)(!",%!2"+"0*%!(1 !%11%2:
organizational “brain” at '-6%*3!"&.!%2(&($-2"**3!(,/"&-N-&/!#8++*3!2)"-&#!"'!')%!
or near the head of '(+!-&!"..-'-(&!'(!<(,;-&/!.-,%2'*3!<-')!+((,!+,(.82:
the supply chain.
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,-#;! '(*%,"&2%!1(,!#<-'2)-&/9!"&.!')8#!&%%.!"!08#-&%##!$(.%*!')"'!-&2*8.%#!#($%!
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Aggregation can transform
'(,!1(8&.!')"'!$(,%!')"&!]D!+%,2%&'!(1 !"**!0(,,(<%,#!1,($! poor people into viable
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#(8,2%#!(1 !.%0'4!S6%&!#(9!0(,,(<%,#!,%+(,'%.!')%3!<"&'%.! worthwhile to involve in a
$(,%!2,%.-'9!<)-2)!')%3!#"3!')%3!2"&!"11(,.4! supply chain or to target for
infrastructure or finance.
As Both Customers And Suppliers
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Recommendations
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FRUIT AND VEGETABLE MARKET IN AURANGABAD, MAHARASHTRA

New business models that aggregate low-income farmers in efficient supply chains
can improve livelihoods dramatically.

For Commercial and Impact Investors
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CONCLUDING THOUGHTS
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Whatever doubt there is about
2(&6%&'-(&"*!%7+%2'"'-(&#9!"&.!%&*",/%!')%!0(8&.",-%#!
financial returns and opportunity
(1 !2($$%,2-"*!"&.!#(2-"*!%&'%,+,-#%4
size, the vast potential to
provide positive social returns
O)"'%6%,! .(80'! ')%,%! -#! "0(8'! !!&"&2-"*! ,%'8,&#! "&.!
should elicit no doubt.
(++(,'8&-'3!#-N%9!')%!6"#'!+('%&'-"*!'(!+,(6-.%!+(#-'-6%!
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Appendix,
Acknowledgements & Notes
Appendix, Acknowedgements & Notes
Appendix: Overview of the India Study

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HOUSING IN MUMBAI
New assured demand business models promise improved
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Number of Initiatives Profiled by Sector

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@@@A%&3(5$3/#%("4/8"$(/"0A;"8'<"0'8"0&'($<"084/("$'4$%'20"K&;/'34826&3A
Cert no. XXX-XXX-000

Michael Kubzansky
mkubzansky@monitor.com
+1.617.252.2486
Ashish Karamchandani
akaramchandani@monitor.com
+91.22.6658.2000
www.mim.monitor.com
www.monitor.com

Emerging Markets, Emerging Models: Market-Based Solutions To The Challenges of Global Poverty

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Emerging Markets, Emerging Models: Market-Based Solutions To The Challenges of Global Poverty

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Emerging Markets,

FOR MORE INFORMATION PLEASE CONTACT:

Ashish Karamchandani Michael Kubzansky Paul Frandano

Executive Summary ............................................................. 2

What the Models Teach .................................................... 102

ACKNOWLEDGEMENTS ............................................................................ 135

NOTES .................................................................................................... 136

THIS REPORT INVESTIGATES “MARKET-BASED SOLUTIONS”!

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SEVERAL YEARS AGO,!H%,6"*#9!"!#$"**!2($+"&3!-&!A)%&&"-9!>&.-"9!-&',(:

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The Poor as Economic Actors

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Business Models in Low-End Markets

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Where the Formal Economy Reaches…and Doesn’t.

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Just How Big, Really, is the Opportunity?

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Education in India: Market Size Comparison (US$B)

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Whom Can We Expect to Find in These Markets?

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The Imperative to Scale

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Four That Scaled

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COMPANY KEY INFORMATION OBJECTIVE AND STRATEGY

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Less Diversified MFIs Have Grown the Fastest

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