IDB’s SCALA Program Shares Lessons on Engaging Micro-distributors
Small-scale retail, or what is often called the “traditional trade” is essential to reaching low-income consumers. The thousands of shops, kiosks, or tiendas that line the streets in many developing countries often account for the majority of retail sales and are the face of brands in most low-income communities.
Although many companies, particularly in the food, beverage and fast-moving consumer goods (FMCG) sectors, have relied on these networks of micro-enterprises for years, it was not until the last decade or so that companies started to explore new models of inclusive distribution. These models seek to generate more sales while expanding economic opportunities and wellbeing for entrepreneurs and communities.
Over the last decade, many of these inclusive distribution models have become part of mainstream business operations. Vodafone’s mobile money service M-Pesa, Unilever’s Project Shakti and CEMEX’s affordable housing initiative Patrimonio Hoy are all notable examples. However, most of these models have struggled to move beyond the pilot phase. Many have remained siloed CSR initiatives, others have morphed into non-profit entities, and some have simply faded away.
It was this stark reality of the challenges in scaling inclusive distribution businesses that led the Multilateral Investment Fund and the Inter-American Development Bank (IDB) to develop SCALA, in partnership with Citi Foundation. As Aminta Perez-Gold who leads SCALA explains, “five years ago many models to integrate the BoP into distribution channels looked promising on paper but in practice, were not able to reach beyond a few hundred entrepreneurs. SCALA was created to scale inclusive distribution networks to advance economic opportunity, empowerment, and enterprise for BoP communities in Latin America and the Caribbean.”
The program takes what it calls a “top-bottom approach” by identifying anchor companies with promising models of engaging micro-distributors and then brings different parties and resources together to turn them into sustainable, scalable business initiatives. This includes providing guidance to the anchor company on effectively managing inclusive distribution networks, as it has done in a recent publication on Building Trust for Scale. It also includes supporting the growth and chance of survival of micro-enterprises through training, finance, and access to markets.
The program is now operating in 7 countries and is helping scale models with different approaches for generating economic and social impact. One is Kiteiras, a DANONE-World Vision cross-sector (corporate-NGO) model to generate business opportunities for women entrepreneurs and strengthen social and economic development in Brazil. In the Dominican Republic, SCALA is supporting the scaling of Plan Barrio, a corporate-microfinance partnership model between Nestlé and Banco ADOPEM that is exploring how linking microcredits to proven business opportunities can help micro-enterprises grow. Unilever is partnering with SCALA to replicate its Shakti model, which has already engaged approximately 70,000 entrepreneurs in India, in El Salvador and Guatemala.
It is also supporting social enterprise models including:
Although the models vary, César Buenadicha of SCALA says that the key to success is continuous co-innovation. “Even the best networks take time to scale. It is important to reframe the model at every phase.” This means considering new training needs or recruitment processes as an initiative grows from 100 entrepreneurs to thousands of entrepreneurs. It can mean considering new modes of transporting goods when demand increases and individual sales representatives are not able to carry the selection of products door to door.
Above all, these initiatives must be businesses at their core, which is why, as SCALA moves ahead, it is focusing on core business challenges like market demand, recruitment and retention, integrating technology, and improving logistics. SCALA believes in the “Power of Downstream” to achieve similar impacts on business resilience and the BoP as inclusive supply chain models such as Fairtrade.
In addition to its role facilitating and financing these initiatives, SCALA also serves as a platform for sharing lessons about how to scale inclusive business and use inclusive distribution networks as a tool for poverty alleviation. As part of this, SCALA is currently developing the Inclusive Distribution Networks Observatory in collaboration with the International Development Research Center of Canada (IDRC) and the Universidad de los Andes. With these goals in mind, SCALA is partnering with Business Fights Poverty on the Inclusive Distribution Challenge, supported by Citi Foundation, to bring the lessons from Latin America to other regions and identify new ways to overcome barriers to scale inclusive distribution networks that enhance opportunities for the BoP. We look forward to sharing more insights with the BFP community in the next few months. To receive updates on the Challenge, and/or share your perspectives, sign up to join the Inclusive Distribution Challenge.