Micro-franchising potentially offers the most successful business model on earth to the poor, bringing affordable business ownership and training, reliable systems and supply links as well as family employment, building assets and income.  Ownership is key as it motivates hard work and ensures accountability.  It changes the incentives that drive bribery and fraud.  Franchising tends to be a family affair involving all family members, teaching financial literacy, while at the same time building a family asset that can be sold when necessary.

Micro-lending networks are filled with people who have already proven to be reliable borrowers and entrepreneurs, so they act as a natural “farm team” for franchisors looking for reliable franchisees.   It makes economic sense to offer micro-loans to the poor to purchase products and services that are both life-enhancing and replace those currently purchased out of subsistence income. For instance, if a solar home energy system with electric lights and a cell-phone and radio battery recharger can be supplied for the same cost as two years’ worth of candles and kerosene (plus interest), it makes economic sense to advance a two year loan for it, as it will enhance the health, safety, learning and work hours of a family, although not strictly speaking a business investment.   If the family is already finding the money to pay for the less efficient products, it will likely find the money to pay for dramatically improved products. Thus micro-franchises and micro-lenders may evolve a symbiotic relationship in some instances, each one strengthening and providing markets for the other.  This relationship can transform inefficient spending into efficient spending by changing the products being purchased for the same amount of cash: from candles and kerosene, to electric lights and battery rechargers.

The Townships Project is working with members of the Franchise Association of Southern Africa and others to hold a Trade Show and Forum to promote micro-franchising in South Africa during 2011.  For those who are interested in exploring this concept, please check out microfranchising.blogspot.com and stay in touch with developments on our website.

Two excellent resources on the subject of micro-franchising:

1. Where There Are No Jobs:The MicroEnterprise Handbook, Vol.4, Version 2, by Stephen W. Gibson and Jason Fairbourne with research by BYU students
   
   
2. Ending Global Poverty:  The Microfranchise Solution, by Kirk Magleby, PowerThink Publishing