In search of an optimal micro enterprise

I’ve believed firmly that microfinance is one of the most effective instruments to alleviate global poverty on a huge scale. I’ve been fascinated with microfinance, because it fosters entrepreneurship amongst the poor. However, the entrepreneur in me was always curious about the business plans (demand/supply, distribution, access to markets, etc.) of this class of new micro-entrepreneurs. I’ve always wondered, if there were proven micro-enterprises, which could be easily replicated or even franchised. In my search for such proven micro-enterprises, I’ve always looked for three key parameters in this order:

1. Direct access to highly scalable markets

2. Alignment of required skills in an entrepreneur

3. Transparent accountability

During my current visit to India, I got a chance to explore both rural and urban poverty and share my thoughts on poverty with several leading individuals and institutions. During these visits and conversations, I focused on finding consistent themes in finding examples of optimal micro-enterprises. After visiting a few rural areas, it has been apparent that “milk production” is clearly a micro-enterprise with the most direct access to the markets, due to the well-established dairy cooperative system in India. 

Direct access to highly scalable markets : It is safe to say that there is seemingly infinite demand for milk by the milk processors, a sophisticated distribution channel to collect milk from every village daily at a standardized rate and a well-understood payment channel which enables the milk producers to get paid thrice a week (every ten days).

If a poor person is empowered to purchase a water buffalo or a cow through a microloan, he/she can immediately become an entrepreneur and start leveraging the established distribution channels to sell the milk produced by that buffalo/cow.

Alignment of required skills in an entrepreneur: Maintaining water buffaloes is common in most rural areas in India and most rural poor are familiar with the tasks involved in maintaining water buffaloes.

Transparent accountability: Since the entrepreneur will get paid
only by the milk processor (which is part of the national dairy
cooperative system – Amul),all monetary transactions can be easily tracked, thus adding transparency and accountability.

There are several open questions and I’m working on finding answers to them by visiting more villages and talking with both the poor and thought leaders in poverty alleviation. But, from a variety of micro enterprises I’ve looked at/thought of so far, “milk production” seems to be the most optimal.

Thoughts?

Let’s eliminate rural poverty, one buffalo at a time!

Kintan