Follow us on Twitter Overcoming Barriers to Scale to Reach ... · Sister company Vodacom Tanzania...

Like us on Facebookfacebook.com/microlinks

Participate during the seminar:

Follow us on Twittertwitter.com/microlinks

#MLEvents

Overcoming Barriers to Scale to

Reach the Poor

Kurt Dassel, Monitor Deloitte

Harvey Koh, Monitor Deloitte India

Kurt DasselMonitor Deloitte

Kurt Dassel is a Director in Monitor Deloitte’s

Emerging Markets practice area and the co-lead for

the Regional Economic Competitiveness (REC)

practice. In this role, he has led hundreds of

projects in over 30 countries. Dassel works closely

with Professor Michael Porter of Harvard through

the Institute for Strategy and Competitiveness

(ISC). He has led major quantitative research and

tools development efforts focused on economic

development, competitiveness, policy and

entrepreneurship. As a recognized expert in the

field of economic development, Dassel has taught

courses on economics and political economy of

emerging markets as a Professor at Wellesley

College and a Lecturer at Harvard University.

BIO: Kurt Dassel

Harvey KohMonitor Deloitte India

Harvey Koh is a Director with Monitor Deloitte India

in Mumbai, where he co-leads the Monitor Inclusive

Markets (MIM) unit dedicated to harnessing

business models to serve the poor. In India, he has

directed projects facilitating market development

around specific business models in the low-income

housing and safe drinking water sectors. Prior to

joining Monitor Deloitte India, Koh was the founding

head of programs at Private Equity Foundation, a

venture philanthropy fund established by leading

U.S. and European private equity firms to tackle the

problem of the youth bulge. Previously, Koh worked

with The One Foundation, a major foundation

operating in Ireland and Vietnam, and with the

London-based advisors New Philanthropy Capital.

BIO: Harvey Koh

FOR DISCUSSION ONLY

Overcoming Barriers to Scale to Reach the Poor

USAID Seminar

January 2014

5 CA

S-C

OD

-Pre

z-D

ate

-CT

L

DRAFT FOR DISCUSSION ONLYDO NOT REPRODUCE OR CIRCULATE

IntroductionThe challenge: not just creating models but getting them to scale

What business models are truly effective in

serving the poor?

Many business models fundamentally unsound from the outset

Iterative refinement often needed as models are validated and prepared for scale

How do we scale these models to make a significant impact

on the need?

Typically multiple, tough barriers to scaling – both enterprise and market ecosystem -and these can evolve as models scale

Few scaling efforts address both enterprise and ecosystem barriers

6 CA

S-C

OD

-Pre

z-D

ate

-CT

L


IntroductionThe promise of inclusive business has yet to be delivered

Source: 1Kubzansky, M., Cooper, A. and Barbary V., (2011) Promise and Progress, Market Based Solutions to Poverty in Africa, Monitor Group, 2Saltuk, Y., Bouri, A. and Leung, G. (2011) Insight into the Impact Investment Market, J.P. Morgan and GIIN

140

439

59

0

100

200

300

400

500

Rank Challenges to industry growth

1 Lack of track record of successful investments

2 Shortage of quality investment opportunities

3 Inadequate impact measurement practice

4 Lack of innovative deal/fund structures to accommodate portfolio companies’ needs

…and impact investors are frustrated.

J.P. Morgan Survey of Impact Investors (2011) 2Number of Inclusive Businesses Studied by Monitor in Africa1

Few inclusive businesses are viable and scaling…

Typical net margins: 10–15%

Promising Commercially

Viable

At Scale

7 CA

S-C

OD

-Pre

z-D

ate

-CT

L


IntroductionPart 1: The Pioneer Gap

Impact Investor InterestThe Pioneer Gap in Funding & Support

Four Stages of Pioneer Firm Development

With impact investor interest predominantly in the growth/later stage, pioneering inclusive businesses face a critical ‘Pioneer Gap’ in funding and support

8 CA

S-C

OD

-Pre

z-D

ate

-CT

L


Government

IntroductionPart 2: Beyond the Pioneer – Ecosystem Barriers to Scaling

Not exhaustive

Potential Barriers to Scale for a Market-Based Solution

Public GoodsValue ChainEnterprise

Source: Monitor Deloitte analysis

9 CA

S-C

OD

-Pre

z-D

ate

-CT

L


PHOTO: Mobile phone

10 CA

S-C

OD

-Pre

z-D

ate

-CT

L


Mobile Money in TanzaniaIntroduction

Initial Situation Local Context

M-PESA in Kenya, launched by Safaricom, widely hailed as a beneficial and easy-to-use product that quickly scaled across Kenya

Sister company Vodacom Tanzania launched M-PESA in April 2008

– Same technology platform

– Same business model

– Same ‘Send Money Home’ marketing campaign

But M-PESA did not take off in the same way in Tanzania

– 0.28M registered users in Tanzania after 14 months compared to 2.7M for M-PESA in Kenya after the same period of time

Two different countries

– More scattered population

– Less knowledge of financial services

– Lower mobile phone penetration

– Lower density of bank branches

– Weaker remittance culture

Two different mobile telco sectors

– Highly competitive mobile telco industry

– Highly concentrated ‘super agent’ channel structure

11 CA

S-C

OD

-Pre

z-D

ate

-CT

L


Public GoodsValue ChainEnterprise Government

Mobile Money in TanzaniaIdentifying Barriers to Scale

Weak distribution channels to rural markets and BoP consumers

Lack of financing for agents in the value chain for carrying e-float

Lack of customer awareness of the benefits of a mobile money as new product

Source: Primary interviews; Monitor Deloitte analysis

Potentially inhibitory legal and regulatory framework

12 CA

S-C

OD

-Pre

z-D

ate

-CT

L


Mobile Money in TanzaniaMarket-Based Solution – Initial Model

Mobile money is an agent-assisted, mobile phone-based, secure, money transfer and payment system

In the ‘operator centric’ model1, the mobile operator acts as the business owner, partnering with one or more banks which provide e-float services

Primarily used for person-to-person transfer and for making payments to businesses

Note: 1Followed by M-PESA in Tanzania; 2Mobile money agents channel can be separate or be part of the existing talk-time network; 3M-PESA agents do both Enrollment as well as Cash In-Cash Out, but functions are often separated in case of other deploymentsSource: Monitor Deloitte analysis; Primary interviews

Agents2,3Mobile Network

Operator‘Super Agents’

Merchants (bill payment, insurance, etc.)

Core firm

Customers

In 2008, Vodacom launched mobile money through its six national airtime distributors – super agents

13 CA

S-C

OD

-Pre

z-D

ate

-CT

L


Mobile Money in TanzaniaMarket-Based Solution – Adapted Model

The Aggregator model was introduced to accelerate the growth of the mobile money distribution channel

Aggregators are responsible for the acquisition, training, monitoring, and location tracking of M-PESA agents

Existing super agents did not drive mobile money growth especially in rural markets

Agents3,4Mobile Network

Operator

Banking Partner

‘Super Agents’

Merchants (bill payment, insurance, etc.)

Customers

Aggregators

Note: 1Followed by M-PESA in Tanzania; 2E-Float is measured in the same units as money but held in users’ account operated and managed by the MNO; 3Mobile money agents channel can be separate or be part of the existing talk-time network; 4M-PESA agents do both Enrollment as well as Cash In-Cash Out, but functions are often separated in case of other deploymentsSource: Monitor Deloitte analysis; Primary interviews

Core firm

14 CA

S-C

OD

-Pre

z-D

ate

-CT

L


2002 2007 2008 2009 2010 2011 2012

Mobile Money in TanzaniaIndustry Timeline

2008 2009 2010 2011 2012

Letter of no

objection to

Vodacom

Vodacom begins

building MM

agent network Vodacom

merges

M-PESA and

airtime

channel

Agent aggregator

model to speed

acquisition of agents

New use cases, on-the-

ground campaigns

(focus on rural areas)

Training program for agents and

performance, quality monitoring

BoT introduces

KYC guidelines

for MNOs

Liquidity & e-

float for agents’

working capital

2007

BoT

guidelines

for

electronic-

based

schemes

BoT comes

up with draft

regulations

Adapted Model

implemented

Grants from BMGF and GSMA to

Vodacom

BoT/AFI visit

to the

Philippines

Finscope

Survey

Finscope

Survey

FSDT FI

conference

in Dar

BMGF

engagement with

BoT

AFI working

group on FI


15 CA

S-C

OD

-Pre

z-D

ate

-CT

L


Mobile Money in TanzaniaResults – a competitive, large-scale industry

Value of Mobile Money Transactions (2008 – 2013)

2025

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2013*

4,345

2012

3,743

2011

1,524

2010

1,226

20092008

Player A

Player B

Player C

Player D9.56

6.35

2.31

0.700.170.01

0

1

2

3

4

5

6

7

8

9

10

2013*20122011201020092008

* As of August 2013

Number of Active Mobile Money Accounts (2008 – 2013)

35% of households have at least one mobile money user and awareness is at 99%

Competition has resulted in much lower tariffs for the end-user: a $25 transfer is 65% cheaper in Tanzania compared with Kenya

$ M

illio

n

Acc

ou

nts

(M

illio

n)

Source: Primary data from the Bank of Tanzania; Intermedia tracker study in Tanzania, ‘Mobile Money: User barriers and opportunities‘; World Bank blogs, “The mobile money revolution in Tanzania”; Monitor Deloitte analysis

16 CA

S-C

OD

-Pre

z-D

ate

-CT

L


Mobile Money in TanzaniaKey Findings

It takes leadership.

Get the model right.

It takes money.

Facilitation helps.

FOR DISCUSSION ONLY

PHOTO: Tea field

18 CA

S-C

OD

-Pre

z-D

ate

-CT

L


1011141415

53

0

10

20

30

40

50

60

Kenya BurundiMalawi Uganda TanzaniaRwanda

USD

(C

ents

/kg)

Green leaf tea price paid to smallholders(2010-11)

Smallholder Tea in Kenya Smallholders in Kenya get paid more for their tea leaf – why?

Source: FAO, Monitor Deloitte analysis

19 CA

S-C

OD

-Pre

z-D

ate

-CT

L


KTDA

Smallholders Tea Factory Processed Leaf

Smallholders Tea Factory Processed Leaf

Green Leaf

Sales & Marketing Unit

Green Leaf

Mombasa Auction / Direct

Buyer

Inputs on credit

Government’s Swynnerton Plan in the 1950s encouraged native African smallholder agriculture

In 1964, Kenya Tea Development Authority (KTDA) established as a parastatal tasked with developing the smallholder tea industry – it was both enterprise and facilitator

The emphasis was then, as still is today, on producing high-quality premium tea for export

In 2000, KTDA was privatized – it is now owned by the 560,000 smallholders who supply it

Management Services until 1974

Commercial Tea Companies

Smallholder Tea in KenyaMarket-Based Solution – Smallholder Contract Farming

20 CA

S-C

OD

-Pre

z-D

ate

-CT

L


Public GoodsValue ChainEnterprise Government

Poor access to credit limiting smallholder ability to purchase inputs

No existing channel for sourcing and aggregating green leaf from smallholders

Lack of smallholder knowhow on cultivation of quality tea

Lack of improved tea varieties bred for Kenya

Poor feeder road network for factories


Lack of capital to set up factories

Lack of managerial and technical skills needed to run factories and marketing operations

Smallholder Tea in KenyaBarriers to Scale (1960s and 1970s)

21 CA

S-C

OD

-Pre

z-D

ate

-CT

L


Smallholder Tea in KenyaA strong enterprise grew on the back of wide-ranging facilitation

Kenyan Government Agencies & Parastatals

(including KTDA)

Conducting research to improve tea cultivation practice in Kenya

Developing improved tea varieties adapted to local conditions in Kenya

Providing extension services to smallholders to ensure cultivation and harvesting to high quality standards

Building and upgrading feeder road networks around tea factories

Standing guarantor for loans made by international investors to build new tea factories

KTDA Enterprise

Aggregating green leaf from smallholders through a network of collection centers, buying to strict quality standards

Establishing and operating factories to process tea grown by smallholders

Providing inputs on credit for smallholders –collective purchasing to lower costs

Marketing and selling tea to international buyers primarily at the Mombasa auction

“Two Leaves & a Bud”Quality Green Leaf

Source: Monitor Deloitte analysis; Primary interviews

22 CA

S-C

OD

-Pre

z-D

ate

-CT

L


Smallholder Tea in KenyaResults – better earnings for over 200,000 smallholders by 1990

Note: Interpolation used for some years for number of smallholders, smallholder production and annual smallholder paymentsSource: KTDA Annual Reports; A Success Story of Organizing Small Scale Farmers in Kenya, Mogens Buch-Hansen; Tea Board of Kenya; Report on Smallholder Tea Sector in Kenya, Christian Partners Development Agency; Monitor Deloitte analysis

Number of smallholders engaged (1960 – 1990)

Annual smallholder payments(1960 – 1990)

Smal

lho

lder

s(‘0

00

s)

Yiel

d (

kg/h

a)

0

300

600

900

1960 1965 1970 1975 1980 1985 19900

50

100

150

200

250

1960 1965 1970 1975 1980 1985 1990

Pro

du

ctio

n T

on

s (M

illio

ns)

An

nu

al P

ayo

uts

($

)

0

50

100

150

1960 1965 1970 1975 1980 1985 1990

0

500

1,000

1,500

2,000

1960 1965 1970 1975 1980 1985 1990

Smallholder production(1960 – 1990)

Smallholder productivity(1960 – 1990)

56% of national

production

23 CA

S-C

OD

-Pre

z-D

ate

-CT

L


Smallholder Tea in KenyaDramatic contrast with Tanzania s/h tea and Kenya s/h coffee

Source: Tea Board of Kenya; An International Tea Trade Policy for East Africa: An Exercise in Oligopolistic Reasoning; Tea Board of Kenya 2007; Coffee in Kenya: Some challenges for decent work, ILO; World Bank reports for lending to KTDA; Tanzania’s Tea Sector: Constraints and Challenges; Monitor Deloitte analysis

1965 1970 1975 1980 1985 1990 1995 2000

150

120

90

60

30

0

Smallholder Production

(1965-2000)

0

500

1,000

1,500

2,000

1965 1970 1975 1980 1985 1990 1995 2000

Kenya coffee

Tanzania tea

Kenya tea

Smallholder Productivity

(1965-2000)

Tanzania tea

Kenya tea

Kenya coffee

Ton

s/ H

ecta

re

Ton

s (‘

00

0s)

24 CA

S-C

OD

-Pre

z-D

ate

-CT

L


Smallholder Tea in KenyaKey findings

It takes leadership.

Get the model right.

It takes money.

Facilitation helps.

Thank you for joining us!

Microlinks and the MPEP Seminar Series are managed by the Feed the Future Knowledge-Driven Agricultural

Development (KDAD) Project, implemented by Insight Systems Corporation.

Upcoming EventsShare Feedback Stay In Touch

Leave a comment or

ask a question:

http://bit.ly/1jAJzD8

Presenter Name:

Kurt Dassel

Harvey Koh

Contact Us:[email protected]

Subscribe today:microlinks.kdid.org/subscribe

Stayed tuned for the

next event coming

this February!

Find upcoming events

& past presentations:

microlinks.org/MPEPseries

Thank you

http://bit.ly/1jAJzD8

mailto:[email protected]



http://microlinks.kdid.org/learning-marketplace/email-updates

http://microlinks.kdid.org/events/mpep-seminars

Follow us on Twitter Overcoming Barriers to Scale to Reach ... · Sister company Vodacom Tanzania...

Documents

Transcript of Follow us on Twitter Overcoming Barriers to Scale to Reach ... · Sister company Vodacom Tanzania...