Ella Peinovich is revolutionizing the supply chain of local, hand-made crafts by empowering women to use technology as a way to directly connect to reliable and fair international markets. In doing so, she is giving local artisans control over the price at which they sell their products and ultimately increasing their incomes and standard of living.
The New Idea
The technology platform that Ella has created sets a new precedent by extending the boundaries of the global web economy to include mobile technology, hence seamlessly connecting web-based communities of the developed world to mobile-based communities of the developing world. Via their mobile phones, local artisans can now have a visible web presence and do business as global entrepreneurs directly with international consumers.
Ella is leveraging existing resources such as telecommunications infrastructure, distribution networks, and even international trade policies to make her re-imagined supply chain more efficient, secure, timely, and cost effective for both producers and consumers. Free and fair access to markets provides for a more equitable supply chain that commensurately rewards artisans for their creativity, hard work, and entrepreneurship. Through a recruitment, training and business development support program, Ella helps artisans make the shift from informal to formal business operators. She is opening doors for them to new opportunities for growth, including access to bank loans. Although both women and men can access the SOKO platform and support services, she focuses on using the model to empower women, who represent the majority of the artisan community in Kenya and 70 percent of those working with SOKO.
The majority of the working population in sub-Saharan Africa (up to 90 percent in Kenya) is employed in the informal sector and barely earns enough to survive. One of these informal sector industries is the female-dominated arts and crafts industry. Women account for more than 80 percent of the microentrepreneurs in this industry across Africa and produce the majority of its products. Despite this, these women take home only about 10 percent of the income generated from the crafts supply chain. The same trend can be seen across other industries in which production is predominantly done in emerging economies for consumer markets in developed economies. 60 percent of all crafts and jewelry in the global market are exported out of emerging economies and command a premium price in developed economies because they are made from local resources and have a rich cultural heritage and beautiful indigenous designs. There is huge opportunity in the global fashion jewelry industry, with a $1.8 billion market in the US alone. An inequitable supply chain, however, ensures that the majority of the market value is retained at the top of the supply chain, leaving the majority of producers living in poverty despite their creativity and hard work.
The supply chain of crafts is primarily organized in three ways, all of which make it difficult and even impossible for grassroots producers to directly interact with the buyers of their products in the international market. One way involves collaboration between a company, citizen organizations (COs) or designer and a selected local community to produce products following very specific design parameters. This approach is highly localized, hard to scale and delivers more in perceived social value than economic empowerment for artisans. The second involves fair trade exporters who consign the production of specified products at scale to a local group of artisans who are paid a fair wage. But international shipping, marketing, and sales leads to high prices, with the majority of the profits channeled outside the local economy. The third way involves the use of traditional e-commerce websites such as eBay and Etsy, which provides a platform for entrepreneurs from anywhere around the world to sell their goods online. However, the requirement to have access to the Internet as well as a bank account in order to use these services has made them inaccessible to the vast majority of artisans in emerging markets. None of these options gives much control to the local artisans.
The Internet has created economic opportunity for entrepreneurs globally and its power to break down barriers and turn the world into one large marketplace cannot be overstated. However, 70 percent of the world’s population and over 80 percent of Africa’s population lacks access to the Internet. Filling this gap, however, is the emergence of mobile technology. There are over 5.2 billion mobile phones worldwide with a penetration of over 80 percent in Africa. In Kenya, there are 2,000 mobile phones for every one Internet user. What computer-based Internet is for developed economies, the mobile phone is for Africa and other developing economies. The Internet and mobile technology are two technological revolutions that have created new possibilities and redefined the way business is done in two separate parts of the world. In the developed world, the Internet has made it possible for people to trade across continents via online stores, online banking systems, and online credit card payments. And in Africa, mobile technology has given birth to mobile money, which makes it possible to send money, make purchases and even save money on a virtual mobile money account. The limited integration of these technologies, however, means that people who are limited to using one or the other can neither connect with nor transact with people on the other side. So even though M-Pesa in Kenya accounted for more in mobile money transfer then Western Union managed globally in 2012, the 75 percent of Kenyans using mobile money, including informal economy workers, are and will continue to be cut off from the global web economy.
Ella established SOKO in 2012 and began by focusing on breaking down the technological barrier that prevented local artisans from directly doing business with international markets. She worked with her team to create the world’s first web-integrated mobile marketplace, which allows online credit card users to make payments directly to mobile money users. The SMS based query system allows artisans to create personal online storefronts using mobile business tools created by SOKO in order to market their products to online customers. With the ability to see local artisans’ products online, interact with them directly and make credit card-to-mobile money payments online, international consumers are now for the first time able to buy directly from artisans on SOKO’s e-commerce website, www.shopsoko.com.
To ensure secure and timely delivery of goods to consumers, Ella had to create a mechanism for efficiently managing logistics including quality assurance, collection, and shipping. To do this, she partnered with Safaricom, the largest mobile telecommunications company in Kenya who are letting SOKO use their pervasive countrywide network of 45,000 mobile money agents as collection points for artisans’ products bound for shipping. On accepting the products, the agents perform a quality check to ensure consistency of the product and then facilitate payments to the artisan. SOKO then collects products from agents, checks for quality and ships them to their respective destinations. SOKO leverages the African Growth and Opportunity Act trade policy that exempts crafts and textile products from Africa into the US from customs duty to keep shipping costs low, hence reducing the overall price of products to consumers.
While Ella’s idea affects all local artisans, she is very much focused on specifically reaching poor women. To recruit this group, she has created a network building system anchored around community agents. Community agents recruited and trained by SOKO are tech savvy, entrepreneurial and able to build and work with a large community of artisans. The agents in turn recruit, train and mentor artisans and provide them with ongoing support as they build their online business. Agents also provide quality assurance oversight incentivized by a commission structure that rewards them for every successful sale made by the artisans under them. This agent model is a great way to scale impact while at the same time building community ownership. Training of both agents and artisans includes online business management, customer retention, marketing, and financial management among other skills. Every week, artisans are provided with information via text message on the latest trends in the market so as to keep up with consumer requirements. For most artisans, working with SOKO is their first experience of formalizing their business. Being able to track sales and prepare financial reports is making it possible for women to dialogue with banks and MFIs for the first time; who would never before considered giving them loans. To date, SOKO has recruited 250 artisans, some of whom have seen their incomes increase up to threefold, and is engaging with 10,000 active customers internationally.
The supply side of SOKO’s platform is only half the story, as Ella has to ensure that there is a ready international market available to buy products from an increasing number of local artisans. To drive traffic to the SOKO online platform, Ella is using fashion blogs, magazines, and product features to publicize the products of local artisans. She is also exploring partnerships with both Etsy and eBay who have both approached SOKO with a keen interest in having their platforms integrated with SOKO’s as a way of extending to the huge untapped market that SOKO is focused on serving, and the two online giants are currently not able to reach. Ella is also using social media to reach niche markets around the world and is using such platforms to tell the stories of artisans and artisan industries to create global awareness about the challenges and opportunities facing poor informal economy workers in emerging economies. To build trust on the consumer end, Ella is creating a certification process for artisans to guarantee to the consumer that each artisan on the platform has undergone training and that their products have been checked for quality. In addition, consumer feedback is relayed to the artisans along with e-commerce best practices to ensure that they are constantly improving and growing their online businesses.
Currently, SOKO has an active consumer base of 10,000 but they hope to grow this number to 600,000 buying product from a community of 6,000 artisans by 2015. In Kenya alone, there are over 2 million artisans that could benefit from this work and Ella recognizes that her organization alone can’t directly reach everyone. Thus, she has developed an e-commerce education curriculum that will be administered by agents and partnering community groups across the country. SOKO has just received a grant from USAID to implement an Impact Measurement and Evaluation exercise over the next year to establish the social impact that this model is having on Kenyan artisans. Results from this study will go a long way in setting SOKO up for scale across Kenya and the continent. But even as SOKO embarks on intensive M&E, it is already laying the foundation for expansion in other parts of Kenya including Mombasa, Tana River and Kisumu. Outside Kenya, SOKO is looking to leverage Airtel’s 17-country network across Africa to reach artisans in the same geographies. Research is also being carried out in Peru, Mexico, Pakistan, and India where technological pilots have proven successful. Important partners including the International Center for Research on Women, UNWomen and GSMA’s M-Women’s Initiative have all extended their support to SOKO to ensure its success in reaching and empowering an ever growing number of women in the informal sector through technology.
Born to a musician and an artist, Ella lived most of her childhood life in the creative arts space. Her parents turned their passion for art into a business in the form of an art gallery that allows other artists to showcase their work. Much later in her life, Ella would use the same art gallery to showcase and sell crafts of local African artisans. With her parents Ella travelled widely, so much so that by the time she graduated from high school, she had been to 47 states in the US as well as Europe and South America. At an early age, she developed an international and global perspective. From the age of 14, Ella was joining Lutheran church service trips for several weeks at a time each summer through which she volunteered to build homes, wheelchair ramps, and vegetable gardens among other things in economically depressed areas throughout the US.
As a student of architecture, Ella spent her spring breaks leading Habitat for Humanity trips and building homes in poor communities. In addition she managed community improvement projects at a freelance Community Design Solutions group within the School of Architecture and Urban Planning, where she developed usable public spaces for impoverished communities. She would later use this experience in her research at MIT, collaborating with local engineers to develop the manufacturing process of low-cost toilets for the slums in and around Nairobi. This experience led Ella to the FabLab at Nairobi University where she taught a class and in the process also developed a methodology of technology transfer and capacity building for locals. This would come in handy when she—in partnership with University of Nairobi—set out to start a local construction consultancy, LocalDM, which creates computer-generated design and digital fabrication methods for producing low-cost building materials. LocalDM is today an independent, highly sophisticated company run and managed entirely by local engineers. Tutorials that Ella created about this highly specialized skill have been shared with the growing network of FabLabs around the world to facilitate the development of local talent in technology use for development.
While working in Kenya and in the slums of Nairobi in particular, Ella was exposed to local artisans who developed the most exquisite crafts she had ever seen. She would often buy a number of crafts to take home with her to sell at her mother’s art gallery to consumers who were happy to pay multiples more than what the artisans received for the same products locally. The disproportionate value placed on the artisans’ work, and the poverty they lived in, compared to the premium prices being paid to middlemen in the international market compelled Ella to action. When she started SOKO, Ella quickly identified a Kenyan partner who brought a deeper understanding of the local context to co-develop the idea, and together they recruited and built the capacity of a local team to drive SOKO’s vision.