(Editor’s note: This piece originally appeared in The Guardian.)
Mafubira, Uganda – A dose of competition is sometimes what’s required to get life-saving medicines and other needed products to urban slum dwellers and the rural poor.
Drugs to treat malaria, for example, are a recurring necessity in towns like this one east of Kampala. Uganda has an estimated 478 cases of malaria per 1,000 people per year, one of the highest rates in the world. Infections are treatable with the right drugs, so-called artemisinin-based combination therapy, or ACT.
But those drugs are too often hard to come by. They’re officially free at public hospitals, but are chronically out of stock. The drugs are expensive at private clinics and pharmacies. What’s more, as many as one-third of the ACTs sold at such stores are fake.
Enter Living Goods, a social enterprise based in San Francisco that over the past five years has built a network of door-to-door saleswomen (and a few men) in Uganda. The more than 1,000 agents, dubbed community health promoters, sell genuine ACTs and other products at a deep discount to the retail price. Residents are eager to buy.
“I offer them good health plus commodities – that’s the business,” says Eve Alituvera, a Living Goods agent, as she makes her rounds in a poor neighborhood on the outskirts of town.
Incumbent retailers have objected to the new competition, but they appear to respond positively nonetheless. A report last year by researchers at Harvard’s Kennedy School of Government found that the arrival of Living Goods distributors caused the incidence of fake drugs in local shops to fall by half. Prices dropped nearly 20%. Critically, the study found that the presence of Living Goods saleswomen in a village increased the use of ACT medicines by children thought to be sick with malaria by almost 40%.
Living Goods is a nonprofit, but it’s not a charity. Rather, it’s seeking to build a sustainable distribution channel for “pro-poor” products. The organisation recruits and trains agents and stakes them to a low-interest loan for their initial inventory, which includes fortified cereals, vitamins and soap and larger items such as cookstoves, solar lanterns and bednets. Monthly sales per agent average about $100; agents keep 20%. Alituvera says the extra cash for a few hours’ work a week supplements her income from selling chickens and helps her pay school fees for her two sons.
Living Goods sets prices at 20%–40% below local retailers, as confirmed by monthly price checks. The assortment allows the organisation to subsidise prices of essential goods with higher-margin items such as cookstoves.
Indeed, cookstoves accounted for more than half of Living Goods’ gross profit margin last year. Agents sold nearly 18,000, up more than four-fold over 2011. The stoves have value in their own right, doubling the life of a bag of charcoal fuel and effectively paying for themselves in a month. Buyers save about $90 a year, according to Living Goods.
Living Goods says it broke even at the branch warehouse level in Uganda for the first time last year, though wholesale sales to the independent agents of just over $500,000 aren’t enough to cover the country staff in Kampala.
“The win for us is to build a commercially viable model,” says Molly Christiansen, Living Goods’ director of research and strategy. “If we can prove this thing makes money, others can say, ‘We’ll do this in, say, Indonesia.’ That’s how you can take this to scale.”
Now, Living Goods is helping other organisations adopt the model. Marie Stopes Kenya, a branch of the UK women’s health organisation, is seeking to extend the reach of its storefront family planning clinics. It has recruited 80 agents in the Nairobi slums of Kibera and Kangemi and the nearby town of Machakos, who are set to go into the field this month.
In Latin America, a Clinton Foundation programme called Accesso Chakipi (“to your home” in Quechua), backed by billionaires Frank Giustra and Carlos Slim, is building a network of thousands of sales agents both to improve health and create jobs. The first 16 went into the field in Peru in January.
Living Goods is not unique in using microentrepreneurs to reach customers at the so-called base of the pyramid, a consumer market estimated at $5 trillion globally. In Uganda, Rwanda and Sudan, Solar Sister sets up saleswomen with an assortment of solar lanterns and phone chargers. In India, the local unit of Unilever says it is reaching millions of poor customers through more than 45,000 door-to-door entrepreneurs.
But Living Goods goes further in using its sustainable business model to field a large corps of trained health workers and overcome the high turnover than often plagues volunteer efforts. Living Goods trains its CHPS to know which women are pregnant, which children need treatment for diarrhea and who needs to go to a clinic, and has set a goal to reduce deaths in general under five by 15%, as measured by a randomised trial conducted by the Jameel Poverty Action Lab at MIT due to be completed this year. A recent study by the Johns Hopkins School of Public Health found community health worker programmes that expand access to existing health interventions could save more than 3.6 million lives a year.
Alituvera recalls one family that had relied on a traditional healer rather than doctors. On her first visit she found one child so malnourished he could barely move. The boy would barely eat when she started him on fortified maize and oral rehydration. Two days later, he had started to take the porridge, she says. “Now he is fine and that family is so happy.”