The Next Frontier?

Last week at the Opportunity Collaboration in Mexico, I attended a session by Willy Foote, Founder and CEO of Root Capital.  The discussion focused on collaborative opportunities to establish efficient  distribution channels that link isolated rural communities to services via small and growing businesses (SGBs).  The conversation, of course, veered to the opportunity presented by microfinance institutions (MFIs).  Usually, because of microfinance’s high touch model that sends loan officers into the field to collect payments from borrowers once a week, MFIs develop close relationships built on trust and frequency.

Since the publication of C.K. Prahalad’s Fortune at the Bottom of the Pyramid, development practitioners have wistfully remarked on the amazing supply chain provided by MFIs for distribution of other products–from solar lamps to sanitary napkins and cellphones.  However, truth be told, no one has been able to execute at scale.

While the discussion at this Opportunity Collaboration session focused on SGBs, I couldn’t help but think of the model being pioneered by Frontier Markets, a company run by former microfinance professionals that is using a new tactic to enable cost-effective base-of-the-pyramid market entry.  What Frontier is doing that others have not done is hire local village staff to liaison firsthand with microfinance clients.  In the past, the burden of cross-selling products has fallen on loan officers.  Instead, this model uses trained local staff to do market analysis and sales.   Because Frontier has already-established relationships with MFIs, they have permission to target these clients, and instant access.

We are looking forward to hearing about the outcome of Frontier’s first pilot with Ujjivan clients in Karnataka India to find out if this could be a scalable strategy to provide new products to the poor using the microfinance channel.  Stay updated by reading the FrontierMarkets blog.

Read the latest issue of Beyond Profit to hear from the Founder of Frontier Markets, Ajaita Shah.