Monitor group, a global strategy consulting firm, recently released a study on Market Based Solutions in Africa, looking at how these solutions have contributed to the eradication of poverty in Africa. This report is the second installment of the firm’s study into MBSs, the first was focused on India.
The report titled Promise and Progress found out that despite several obstacles< MBSs are proliferating in Africa. The study provided some of the promising MBSs including: Voltic Cool Pac, Jeppe College of Commerce and Computer Studies, Afro-kai and Kilimo Salama. Three major business models were identified to suit the extreme conditions of low income markets in Africa:
· Aggregators: For example in agriculture, to ensure that smallholder farmers have guaranteed stable supply, many aggregators offer premium and forward pricing, and provide the farms with services such as credit, storage, and transport, as well as with low cost seeds and fertilizer to help improve their yields.
· Companies organizing and upgrading informal retail operation and working with vendors to sell socially beneficial products such as clean water, healthcare goods and agricultural inputs
· Vocational colleges that provide high quality, no frills training to a range of individuals including the very poor. These institutions also enhance employability by helping students to obtain internships and work experience.
Although it’s exciting to see new MBSs in the market, there is some uncertainty on how the development of these initiatives would pan out, as microfinance, which was once the poster child for MBSs has experienced slow growth and its impact has been called into question.
The report also identified some trends in the market. One was the insurgence of impact investors both in sub Saharan Africa and globally. The Global Impact Investing Network estimates that about $50 billion of impact capital had been invested globally by 2010. Also the Food and Agriculture Organisation of the United Nations estimates that 18 new agriculture investments funds focused on Africa were announced between 2007 and 2009 alone, some of which were impact investment vehicles.
Other observations from the research include:
· To serve the poor sustainably, it is often necessary to target a broader segment
· MBSs can operate by selling ‘push’ products and services
· Government can and does plays strong supporting role in the success of market based solutions
· Corporations facilitate progress when they customize their approach to low income markets
· Achieving scale occurs more rapidly for ‘market joiners’ than for ‘market makers’
Though the report is 200 pages long, I recommend you all read this one, as it is very insightful and informative.
