page_title: MicroConsignment
section_title: MicroConsignment vs. Microcredit
hierarchical_section_title: MicroConsignment / MicroConsignment vs. Microcredit
caption_attribution_description: English: Products for sale at an entrepreneur's village campaign.
context_page_description: The MicroConsignment Model establishes profitable income generating opportunities for primarily women that to date are selling products such as wood-burning stoves, reading glasses, water filters, seeds and gardening techniques and energy efficient lightbulbs to villagers. Through the MCM local individuals with entrepreneurial qualities can start their own business through “sweat equity” and realize profits from inception. Although it rarely works in practice, the model allows for collaboration with local strategic partner organizations to adapt local solutions and train and support local entrepreneurs who serve rural communities within designated territories. What drives the model is an interdisciplinary, intuitive and non-linear approach whereby all stakeholders add value. The model utilizes a rotating capital mechanism with low start-up costs that are continually reinvested. In essence, the MCM strives to intervene at all levels by creating an “ecosystem” whereby problems are diagnosed and products are encountered/designed which are then inserted into the distribution model via the locally trained and supported entrepreneurs.
context_section_description: Microfinance often provides entrepreneurs with much-needed funding that would not otherwise be available. But navigating the terrain of owning a successful business is more complicated than securing loans.  The MCM offers "a more focused effort on assisting in entrepreneurship – the whole process from start to end, not just the financing of it."
  A key difference between microcredit and the MCM is when the product purchase takes place. In a microcredit model, the entrepreneur first buys the products on credit and then sells them. She then uses her sales revenue to pay back the loan, and ideally buys more products to sell after taking out her profit. If the entrepreneur doesn't sell, she is left with both inventory and debt.
  The MCM has the opposite timing. The entrepreneur is first provided products at no cost, then she sells them, pays the supporting organization, and pockets her profits—but only after having completed a sale. At that point she gets her inventory restocked and the cycle begins again. If she doesn't sell, just as in a credit scheme, when the woman doesn't sell, organizational capital is tied up out in the field. However, this capital is tied up in the organization's products that the entrepreneur is simply holding for sale and not in a loan that the entrepreneur must find some way to pay back. The woman can go out and sell the next day, or the next week or next month without falling into debt.
  Another difference between the two models can be observed in how entrepreneurs reinvest their earnings. Where credit is used as the enabling mechanism, entrepreneurs may use their earnings for personal consumption before they have time to restock their inventories, which stunts their growth. MCM entrepreneurs reinvest efficiently in their ventures. Because they buy their goods after they make a sale, they do not consider the portion of their revenues that goes to restocking their inventory as theirs.
  One of the most compelling differences between microcredit and the MCM is related to risk and uncertainty. Credit works in risky markets, whereas the MCM works in uncertain markets. The power of the MCM lies in the fact that it creates new access and new markets where none previously existed.
  As James Surowiecki writes in his article for The New Yorker, “Hanging Tough,” referencing economist Frank Knight, “Risk describes a situation where you have a sense of the range and likelihood of possible outcomes. Uncertainty describes a situation where it’s not even clear what might happen, let alone how likely the possible outcomes are.” However, one person's risk may be another person's uncertainty. Perception, not necessarily reality, defines this distinction. Although there is risk in almost any endeavor, actors in high-risk situations may feel such a level of discomfort that they cross the line from risk into uncertainty.
  Credit-driven structures work when the entrepreneur perceives risk. An entrepreneur whose inventory is 100 percent funded up front through credit must sell immediately and sell consistently in order to avoid debt. Therefore, she must understand and feel comfortable with her risk before taking out a loan. For example, if I know my supply-and-demand equation and can predict that I will likely be able to sell my products, I might take out a loan to buy my inventory.
  However, when a potential entrepreneur perceives the market as not just risky but uncertain, the MCM has the potential to be an optimal solution. When offering new products to new markets, it can be impossible for an entrepreneur to calculate their risk. If an entrepreneur is highly skeptical of market demand for a new product, she will not want to take out a loan and bear all of the up-front risk.
  Consequently, the MCM was designed to fill the gap for previously unknown and/or inaccessible products from the perspective of both entrepreneurs and the villagers — their potential customers. MCM entrepreneurs engage in businesses where supplies have never existed, perceived demand is highly unpredictable, and thus the environment is uncertain. Benefic
caption: Products for sale at an entrepreneur's village campaign.
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