Rob Katz

Guest Post: Community Based Enterprise Development

IndianWomanWeavingThis post was written by Vincent Ricasio, a retired investment banker currently working on microfranchising and other community development strategies at New York University. Contact Vincent using the comment field below to discuss his Community Based Enterprise Development concept.

Is it really possible that poverty and underdevelopment, two of the most intractable economic and social problems of our time, can be solved simply by doing more of the same, that is, by throwing money and aid at the problems that underlie them? Most development experts have long conceded that it cannot, but just as sincerely most of them have admitted that they do not really know what else will work.

This is quite ironic, because a dispassionate analysis of what has been done (and persisted for so long) reveals that every tool and every developmental intervention that can be devised has already been tried. And so it is not that another approach is needed, it is just a different way of doing the same things. Even the mantra has been coined–community based enterprises (which is just a fancy terminology for small, household or village level entrepreneurship). But certain ingredients need to be thrown in if the desire is to make development sustainable. And that is the crux of why, so far, development remains mired in donations, grants and subsidies – and the huge bureaucracy that comes as an inevitable accoutrement. The crucial but missing ideas are prototyping, standardization, replication and franchising (or more broadly, value chains and contingent supports).

When one considers that franchising has been successfully employed by the formal sector even in the underdeveloped world, one wonders why there’s such reticence to draw upon the obvious lessons.

While these ideas are not novel, I did not stumble on microfranchising by accident. For some years I worked with microfinance institutions when I went to Asia on sabbatical from 1996-2002. While there I discovered a couple of insights which have since dominated my thinking about how the success rate of development can be improved:

  • That underdevelopment itself supplies the very same conditions and structures needed to eliminate poverty or at least to reduce it significantly.
  • That the way to do it is not by copying blindly what many are attempting to do eg, in SME development or microfinance) but to use modern business concepts (explained below) and market methods to achieve sustainability.

C-BED, shorthand for Community Based Enterprise Development is a unique approach to combating poverty and underdevelopment that integrates several elements, all pretty ?old hats? in themselves, but which heretofore have only been superficially applied (eg, microfinance and a cooperative distribution systems). At the heart of this strategy lie online systems that can provide the wherewithal to sustain the franchising part of the strategy. I firmly believe that the entire package, if franchised and replicated globally, will provide the financial resources needed to sustain development in the third world. If this is proven to work, it will be the first large scale application of the microfranchising concepts and contingent support vehicles (such as risk mitigation contracts) applied not to individual businesses but to community enterprise ecologies.