“…1 million farmers in Mexico live on less than $2 a day. They can’t afford drip-irrigation systems, which would save them time, allow them to grow more crops, and often double or triple their income. At least that’s what a first analysis might conclude.

But Amanco, a multinational company that focuses on water distribution solutions in Mexico and throughout Latin America decided there was a way to help these farmers. With the help and insight of citizen-sector organizations in Mexico, Amanco re-engineered its business model to increase the cost-effectiveness of small transactions, especially with regards to quotation, system design, and installation…..This new model has been profitable for Amanco. In Mexico alone, the newly created drip-irrigation market is reported to be $200 million a year…Amanco estimates income from low-income market segments will double year on year, compared with just five to 15 percent growth in other segments.”, Valeria Budinich (Vice president at Ashoka: Innovators for the Public) in the Harvard Business Review.

What we witness here is the power of investing in low-income markets by partnering with citizen-sector organizations (or non-profits) and working with local communities to build solutions, hence building what we call a “Hybrid value chain“.  According to Ashoka, “Hybrid Value Chain (HVC) is a business model that leverages the capabilities of the business and citizen sectors to enable the delivery of needed goods and services to low-income populations in a more cost-effective way.” What an HVC does is help corporations understand these markets better, build localized solutions and deliver products and services at affordable prices. CSOs or non-profits, who have local knowledge and strong relationships with the community, help these corporations and in the process, build new sources of revenue and accelerate social impact in the community. It’s a win-win for everyone.

In several developing countries including India,  the rise and spread of MFIs has also made the delivery of basic services in last mile areas easier and below poverty line populations are now getting access to low cost water, healthcare and education services. Leading corporations are using this infrastructure too to reach out to new markets and make more revenues.

The opportunity here is not just for big companies but for start-up entrepreneurs too who want to build services in unformed markets be it for street vendors or rickshaw-drivers. It’s very much the right time to get started!

Advertisements