Chapter 4: New Model: Micro-Consignment
Micro-consignment is a commission-based sales model that provides young people a low-risk entry into the world of entrepreneurship. LivelyHoods, an NGO operating in Kenya, defines the micro-consignment model in the following way: “Sales agents receive products on consignment and earn commission for each product sold. Micro-consignment borrows heavily from traditional microfinance. Instead of borrowing money to buy product, however, youth choose which products they want to sell and only repay the cost of the product after successful sales – a low-risk alternative to micro-loans.”
The model has been used with adolescent girls and young women as well as marginalized populations that have traditionally been excluded from market opportunities. Micro-consignment has the following characteristics:
- Innovative approach to financing: The product is the loan. Any unused product can be returned if unsold, thus eliminating risk.
- Provides a scaled approach to entrepreneurial activity: Since it is commission-based, the entrepreneur can decide if s/he will sell small volumes to cover basic costs or sell large volumes in order to build capital.
Micro-consignment is similar in some aspects to micro-franchising, documented in Making Cents International’s 2009 and 2010 State of the Field in Youth Enterprise, Employment, and Livelihoods Development publications. Unlike most micro-franchising opportunities, participants do not need to take out loans to pay fees for training or inventory.