IXL Social Enterprise Case Studies Food Security January 2013 | Page 23

Food Security in Urban Slums by 2018

“After water security, food security is one
of the world’s most pressing challenges.
That said, I am optimistic. There are
exciting opportunities to leverage what’s
already working and to tap advances in
microfinance and telecommunication to
create new and innovative solutions!”
Gary White, CEO and Co-Founder,
Water.org

Provide value exchanges and microfranchises to make the offering affordable
The BOP provides an untapped market with rapid growth for most companies. It is challenging for
companies to generate profit when following traditional business models targeted at the BOP where
customers demand very low-priced and high-quality products and services. Alternative business models
such as value exchanges (exchanging labor and credits for food, water or money), microfinance and
microfranchising can deliver this and still make profit for a company or social enterprise.
As mentioned previously, Taskrabbit is a company that shares people’s time and skill with others for
a price. Workers can earn over US$5,000 exchanging their time and skill to do a task or temporary
job.83
A microfranchise is a new and evolving tool (similar to microfinance) that aims to alleviate poverty
in small increments at a global scale. Like a traditional franchise, microfranchises are replicable
and operate for profit to be self-reliant; however they also have a social impact component.
Entrepreneurs by necessity in developing countries can become microfranchisees and earn income
that helps move them above the poverty line. A microfranchise provides products and services,
economies of scale, an efficient supply flow and a brand that an individual could not have accessed
or created on his/her own. The franchisor provides the tools, training, quality control and supplies
needed to be successful.
Because microfranchises replicate successful businesses, they substantially decrease the risks of
entrepreneurship, leading to higher start-up and survival rates. A microfranchise business model
should be simple, well-documented, easy to understand and easy to implement. When creating a
microfranchise, entrepreneurs need to start small, do pilots, identify successes and have a system
to quickly implement any changes required.

What is your solution for capturing value? For example, consider business models of Grameen
Bank in India, Ingles Individual in Mexico, Pride in Africa and Yogurt Persa in Ecuador.
Use relationships and reputation to ensure reliability
The BOP is disproving the long-held belief that it is too risky to lend to the poor. On the contrary,
the poor are willing and able to repay their loans (there are about 300 million individuals with US$12
billion of pent-up demand for water and sanitation loans between now and 2015).84
Water.org and Grameen Bank have both recorded about 97 percent repayment rates of their microloans.85 Moreover, the BOP is demonstrating that other means of collateral can be used beyond
economic assets. In small group loans with family and friends, reputation becomes a powerful form of
“social collateral” (i.e., the trust and respect of those closest to people who have taken out loans that
would be at risk if they defaulted on the loan). Peer pressure helps ensure reliable repayment.86

What are other ways to ensure reliability at the BOP? Beyond “peer pressure,” you could use the
“freemium” model and give something away now for more return later.
Create intangible value beyond the offering
Some projects seem inappropriate for the BOP because they do not deliver enough tangible value.
However, even if some benefits of an offering are not tangible, the value to the user may be much
greater than what meets the eye.
For exam