2011.01.31: January 31, 2011: Greg Van Kirk was a Peace Corps volunteer in Nebaj, Guatemala, a town of about 10,000 people in a mountainous Mayan region, when he thought of consignment as the solution
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2011.01.31: January 31, 2011: Greg Van Kirk was a Peace Corps volunteer in Nebaj, Guatemala, a town of about 10,000 people in a mountainous Mayan region, when he thought of consignment as the solution
Greg Van Kirk was a Peace Corps volunteer in Nebaj, Guatemala, a town of about 10,000 people in a mountainous Mayan region, when he thought of consignment as the solution
Van Kirk thought that consignment was the answer. With consignment, a supplier gives a product to a retailer, who then sells it. After the sale is completed, the retailer reimburses the seller, keeping a commission. The risk is taken not by the retailer, but by the supplier. Van Kirk made a deal with Corrio: Corrio went around to groups of people in Nebaj and surrounding villages to talk about the stove and show pictures. When a family ordered one, Corrio built it right in their house with materials Van Kirk had bought for him. Families paid in installments about equal to the money they saved by buying less wood. As payments came in, he repaid Van Kirk and kept a commission.
Greg Van Kirk was a Peace Corps volunteer in Nebaj, Guatemala, a town of about 10,000 people in a mountainous Mayan region, when he thought of consignment as the solution
When Microcredit Won't Do
By TINA ROSENBERG
If you asked poverty experts to name the single most significant new concept in the field in the last few decades, chances are they would say microcredit. Microcredit is the lending of very small amounts of money to very poor people to help them invest in things that have the potential to bring income later on - a loan of $50 to buy a sewing machine to make clothes, for instance, or piglets to raise and sell. It reaches nearly 100 million clients in more than 100 countries.
[Excerpt]
Greg Van Kirk was a Peace Corps volunteer in Nebaj, Guatemala, a town of about 10,000 people in a mountainous Mayan region, when he thought of consignment as the solution. He was an unusual Peace Corps volunteer, having already had one career as an investment banker. He had worked in structured finance for UBS, helping companies do complex deals to buy, sell or lease airplanes and power plants.
Greg Van Kirk teaches Margarita, a Guatemalan entrepreneur, how to give an eye exam.Darby FilmsGreg Van Kirk teaches an entrepreneur how to give an eye exam.
¶Van Kirk's adventures in less-structured finance didn't start with reading glasses, but with cookstoves. He saw that families in the region cooked on open fires on the dirt floors inside their houses. Their ceilings were black from smoke. People coughed all the time and children were always sick. (Respiratory illnesses are a leading cause of death in poor countries, and indoor cooking is a significant cause.) Open-pit fires, moreover, were inefficient. The heat dispersed, and only one pot could be heated at a time. That meant the family had to collect or buy a lot of firewood. Moreover, fires were unsafe, especially for children, and cooking on the floor was unhealthy, luring ants and the family's chickens into the house.
¶Van Kirk worked with a local mason named Augustín Corrio to try to find something better. Corrio took a standard stove design and rejiggered it in various ways. The best model had cement block legs, a brick chamber surrounding the fire on three sides, a metal sheet over the fire so several pots could be heated at once, and a chimney to take the smoke outside the house. This stove used 60 to 70 percent less wood than an open fire - so even though it costs about $100 it could pay for itself quickly. Buyers could pay in installments. It could be locally produced from basic construction materials.
¶The problem was how to sell it on a wide scale. No micro-borrower would take out the enormous loan necessary to buy a number of stoves to resell.
An Ixil Guatemalan woman with her improved cookstove provided through the MicroConsignment Model.Community Enterprise Solutions An Ixil Guatemalan woman with her improved cookstove provided through Soluciones.
¶Van Kirk thought that consignment was the answer. With consignment, a supplier gives a product to a retailer, who then sells it. After the sale is completed, the retailer reimburses the seller, keeping a commission. The risk is taken not by the retailer, but by the supplier. Van Kirk made a deal with Corrio: Corrio went around to groups of people in Nebaj and surrounding villages to talk about the stove and show pictures. When a family ordered one, Corrio built it right in their house with materials Van Kirk had bought for him. Families paid in installments about equal to the money they saved by buying less wood. As payments came in, he repaid Van Kirk and kept a commission.
¶The stoves and the consignment model were both successful. Soon Van Kirk and a fellow Peace Corps volunteer, George Glickley, began to train local women to sell the stoves and protective glasses, eye drops and reading glasses supplied by VisionSpring, a nonprofit organization that sells eye glasses to poor people all over the world. (My co-author, David Bornstein, is a member of VisionSpring's board.)
¶VisionSpring had started out using microcredit for part of its sales - its retailers took out loans to buy glasses to sell. But it didn't work very well. "We needed a financing arm - but we weren't a microfinance institution," said Malini Krishna, the company's vice president of development. At Van Kirk's urging, in 2004 the organization switched from microcredit to a consignment model. "Why put all that risk on somebody up front?" said Krishna. "Why not help them put the glasses out there and then get repaid when glasses sell?"
¶One of the first entrepreneurs Glickley and Van Kirk trained was Yolanda García. She was a primary school graduate and housewife - she knew the men because Glickley had lived in her family's house when he was in the Peace Corps. Consignment was key for her, she said. "If I had had to take out a loan I wouldn't have done it. I always felt I wanted to do something, but we didn't have the economic resources beyond what we needed for the day."
Maria, a Guatemalan MicroConsignment Model entrepreneur, administering an eye exam in a village in Quetzaltenango.Community Enterprise SolutionsA Soluciones entrepreneur administered an eye exam in a village in Quetzaltenango.
¶Van Kirk and Glickley trained her in how to test eyes and fit glasses, but more important was boosting her confidence to sell a mystery product. "No one knew about reading glasses," she said. "People thought I was crazy." That wasn't the only obstacle. Her first customer was eager - she wanted to be able to read her Bible again. "But who will do the examination?" she said, looking around. Clearly, there was no doctor there.
¶"I will," said García.
¶García nervously took out her charts and instruments. A few minutes later, the customer was reading small print and grinning from ear to ear.
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¶"Luckily, "the ‘aha!' moment comes quickly," says VisionSpring's Krishna.
¶Still, García said, it was not a very successful campaign. She sold five pair of glasses and netted 65 quetzales - about $8. But García was thrilled to be earning anything. She spent the money on school supplies for her kids.
¶In 2006, Van Kirk and Glickley founded Soluciones. Its entrepreneurs - the vast majority of them women - now travel from village to village selling glasses, water-purifying buckets, solar flashlights, a solar panel that powers a lamp and cell phone charger, eye drops, sunglasses, energy-efficient light bulbs and vegetable seed packets. (The stoves are mainly sold around Nebaj.) A campaign in a village takes two days - one for publicity and one for sales - and usually nets each entrepreneurs some 200 quetzales, although once in a while a lucky salesperson can triple that. Van Kirk said that a new salesman started just two weeks ago and has already earned $100 - more than he would make in two or three months in a different job.
¶Soluciones is still very small. In the last two years, it has sold fewer than 7,000 pairs of glasses. The solar lamps are the most popular big-ticket item, with 3,000 sold since their debut. Soluciones today is owned and run by eight Guatemalans who were its original entrepreneurs, including Yolanda García and Clara Luz de Montezuma. By the end of the year, it will be running a consistent profit.
¶Soluciones is an incubator, testing new strategies and new products that may some day sell all over the world. (Van Kirk and Glickley have more information about their non-profit efforts at cesolutions.org.) Improved cookstoves, reading glasses, water purifiers, solar lamps - these are all products that can provide equity, in the form of ability to work and better health, to villagers who before only had access to microcredit debt. Yet the real news here isn't the cookstove or the lamp. Dozens, perhaps hundreds, of such practical and ingenious products exist. Yet they do little good if the rural poor can't use them. A constant drumbeat of the Fixes column is that the more important innovation is the delivery mechanism.
¶Is microconsignment a system that can deliver these products on a sustainable basis and large scale to people who need them? If so, how? Saturday's column will respond to comments, and will explore answers to those questions.
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Headlines: January, 2011; Peace Corps Guatemala; Directory of Guatemala RPCVs; Messages and Announcements for Guatemala RPCVs
When this story was posted in May 2011, this was on the front page of PCOL:
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| Peace Corps: The Next Fifty Years As we move into the Peace Corps' second fifty years, what single improvement would most benefit the mission of the Peace Corps? Read our op-ed about the creation of a private charitable non-profit corporation, independent of the US government, whose focus would be to provide support and funding for third goal activities. Returned Volunteers need President Obama to support the enabling legislation, already written and vetted, to create the Peace Corps Foundation. RPCVs will do the rest. |
| How Volunteers Remember Sarge As the Peace Corps' Founding Director Sargent Shriver laid the foundations for the most lasting accomplishment of the Kennedy presidency. Shriver spoke to returned volunteers at the Peace Vigil at Lincoln Memorial in September, 2001 for the Peace Corps 40th. "The challenge I believe is simple - simple to express but difficult to fulfill. That challenge is expressed in these words: PCV's - stay as you are. Be servants of peace. Work at home as you have worked abroad. Humbly, persistently, intelligently. Weep with those who are sorrowful, Care for those who are sick. Serve your wives, serve your husbands, serve your families, serve your neighbors, serve your cities, serve the poor, join others who also serve," said Shriver. "Serve, Serve, Serve. That's the answer, that's the objective, that's the challenge." |
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Story Source: NY Times
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