Economies of scaling down

26 April 2011 at 02:00 4 comments

Nearly half the world’s population lives on less than $2.50 per day. That’s a lot of people, and finance isn’t the only sector that’s gone micro to reach this huge market. In many ways, the developing economy here in Sierra Leone is on a completely opposite scale to what I’m used to in my developed home country of the United States. In the U.S., giant stores like Costco and Sam’s Club urge us to buy in bulk so we can ‘save money.’ Most people here in Sierra Leone don’t have the savings or the cash flow to afford wholesale purchases or even regular monthly bills. But the people here still want access to all the goods and services we all love and enjoy. So businesses have found ways to scale down to meet this demand, and Kiva’s microloans are actually servicing a multitude of these microbusinesses.

How much of your business would fit on your head?

Take cell phones for example. Back home I pay a monthly rate for a bucket of minutes whether I use them or not. Here a new cell phone can be purchased for as little as $35 and people sell prepaid minutes on almost every street corner. Thus the cost of using a cell phone is quite small and directly proportional to how much it gets used, allowing all but the poorest to take advantage of this technology. Since most people here don’t have electricity in their homes, they can charge their cell phones for 25 cents at a charging station – yet another microbusiness. Or clean water. Since most people don’t have indoor plumbing, there are people walking around with buckets on their heads filled with these little plastic packets of clean drinking water for sale.

A 500mL packet of clean drinking water that costs 3.5 cents in bulk and sells for about 7 cents individually on the street.

And the list goes on – ice cream can be purchased in a little plastic bag, peanuts by the handful, pineapple by the slice, socks by the pair, soap by the bar, or even candy and gum by the piece. Instead of stuffing my shopping cart, my car, my cupboards and my house with more than I want like I would in the US, I can usually buy what I need for the day from people on the street as I walk to and from work. It’s a different sort of convenience. So what else do we need to scale down to reach this huge micromarket? By David McNeill, KF14 Sierra Leone

Entry filed under: Africa, KF14 (Kiva Fellows 14th Class), Sierra Leone. Tags: , , , , , , , , , , , .

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4 Comments

  • [...] Walking around the streets you can find ladies carrying clear buckets on their heads (check also David’s blog), there’s a good variety of snacks and food to be found in these buckets; donuts are easy to spot [...]

  • 2. Carlos  |  28 April 2011 at 07:36

    Great post David… Here in Liberia there are $10 and $20 cellphones…

    Hey Jenn, to add to David’s comments BRAC Small Enterprise Program gives loans to small businesses so they can grow, the objective is to create more jobs and hopefully more local production. But there are products coming from neighboring countries like Guinea, several BRAC borrowers I’ve talked to travel there regularly to get merchandise.
    Cheers,
    Carlos KF14, Liberia

  • 3. Jenn Beard  |  26 April 2011 at 08:59

    Hi David,
    I just got back from visiting Liberia and their consumer economy is identical to Sierra Leone. It’s too bad most of the items come from China – it would be nice to see some small-scale production businesses to supply the market stalls with as well.

    ~Jenn

    • 4. biodavid  |  26 April 2011 at 09:20

      Hi Jenn,
      I agree – so much of what’s being sold on the streets here comes from China. However, the little bags of water I mentioned in my post are produced locally, so that’s one supply business that is local. I’m currently working with BRAC, one of Kiva’s local partners, and they are also working on helping establish a poultry industry. So there is some progress being made.

      ~David


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