Market Linkage ModelMarket Linkage Model
The market linkage model of social enterprise facilitates trade relationships between the target population or “clients,” small producers, local firms and cooperatives, and the external market. The social enterprise functions as a broker connecting buyers to producers and vice versa, and charging fees for this service. Selling market information and research services is a second type of business common in the market linkage model. Unlike the market intermediary model, this type of social enterprise does not sell or market clients' products; rather it connects clients to markets.
If the enterprise is stand-alone; its mission revolving around linking markets, and its social programs support this objective, the model is embedded. In this case, the social program is the business, income generated from enterprise activities is used as a self-financing mechanism for its social programs.
Market linkage social enterprises are also created by commercializing an organization's social services or leveraging its intangible assets, such as trade relationships, and income is used to subsidize its other client services. In this second example, social program and business activities overlap, hence follows the integrated model.
Many trade associations, cooperatives, private sector partnership and business development programs use the market linkage model of social enterprise. Types of social enterprises include, import-export, market research and broker service.
Theoretical example: an agricultural cooperative grows fruits, vegetables and horticulture products, which it sells in domestic, and export markets, saw a business opportunity to leverage its exclusive database of agricultural market data. Until this time only cooperative members had access to the comprehensive information market, however, producers and buyers alike could benefit from this valuable information. Therefore, the cooperative launched a market data and research social enterprise as a means to augment its social programs by extending services to nonmembers. The market linkage social enterprise sells information on local and export market for types of agricultural products, including buyers and producers, prices, export duties, shipping, and chemical and fertilizer regulations, storage, etc. The enterprise has two main services: database search and market information updates that can be purchased individually or by subscription; and market research services such as feasibility analyses and market studies. Most of the social enterprise's clients are farmers, other cooperatives, trade unions, producer groups, small agricultural firms and food processors. The cooperative uses the income generated by its social enterprise to subsidize member services concerning crop improvement, sustainable farming, animal husbandry and agricultural loans.
PhytoTrade, an example of Market Linkage Model
In Southern Africa few economic opportunities exist for the rural poor, many of whom live on annual incomes below $100. An emphasis has been placed on cash-cropping for employment, though 65% of the region is arid and agricultural cash crops are risky for vulnerable populations, ecologically inappropriate and financially unproductive. Employment alternatives residing in the $45 billion global market for natural products have been largely inaccessible for rural African producers. Natural products made from African plant species have a multitude of applications: beverages, cosmetic oils, health care products, herbal teas, jams, nutritional supplements and medicinal products. Because natural products are grown in the wild, their collection and cultivation can easily be managed by rural producers.
PhytoTrade Africa is a non-profit trade association social enterprise that promotes sustainable production and fair trade, contributing to the economic development of southern Africa. PhytoTrade's main aim is to develop business partnerships between rural producers and buyers, major European natural products companies. In doing so, the social enterprise links rural producers in six southern African countries directly to source suppliers, buyers, quality control evaluators, product development specialists; additionally it helps its clients secure export contracts, and provides a clearinghouse for research and development information on African natural products.
In partnership with another nonprofit, Southern African Marula Oil Producers Network (SAMOPN), PhytoTrade Africa embarked on a new venture designed to promote a biodiversity-friendly rural production system. Marula oil is derived from an indigenous plant species that is critical to the maintenance of ecosystem integrity in dryland areas. Commercialization of a range of new marula products is projected to earn between 8,000 and 10,000 rural producers as much as $8-12 million per year, giving rural communities faced with growing economic pressure to convert natural woodlands into arable cropland incentives to invest in sustainable management of dryland ecosystems. SAMOPN helps rural producers with sustainable production and extraction of quality marula oil while PhytoTrade Africa facilitates market linkages and the commercialization process.
In another example, PhytoTrade Africa signed an agreement with Aldivia S.A, a French lipids company. Aldivia is specialized in the sourcing, design, manufacture and commercialization of lipids of plant or vegetable origin for cosmetic and industrial use. PhytoTrade works collaboratively with Aldivia to develop and market a range of biologically active lipid ingredients fabricated by rural producers from a variety of botanical resources indigenous to Southern African. 1
[Source: Information provided by World Bank Development Marketplace 2003]
- 1PhytoTrade Africa website