Taking Micro-Finance a Step Further: the Birth of Micro-Franchises

Joseph Bornstein — Thu, 26 Jun 2008 09:16:27 -0400

June 26, 2008 - 09:00, BYU NewsNet

Micro-Franchises Provide Business Solutions for Poverty

Story Link: http://newsnet.byu.edu/story.cfm/68895

Teaser:

It's no secret in the business world - if you want to start your own business with little risk, you buy a franchise.

For decades, successful American businesses have been franchised, allowing would-be entrepreneurs a safe place to begin their business. Thanks to a team of BYU researchers and developers, the success of franchises is being used to bring people out of poverty through a new initiative called micro-franchise.

For years, economic development practitioners have used micro-finance as a tool to alleviate poverty. Micro-finance organizations give small loans, or micro-loans, to individuals otherwise unable to obtain necessary capital to start or grow a small business.

Many recipients of micro-loans, however, have struggled to get their businesses off the ground, lacking basic business skills.

"Giving micro-credit helps, but it's not the full package," said Jason Fairbourne, micro-franchise initiative director at BYU.

More than three years ago, Fairbourne began working on developing what was originally called the "business in a box" model to address some shortcomings of micro-credit.

"Plumbers pass on their trade through an apprentice program," said Steve Gibson, a micro-franchise researcher and business professor at BYU. "New doctors have a residency program to learn from established doctors; however, entrepreneur wannabes have no such mentoring program."

Micro-franchises as defined by the initiative Web site are "small businesses that can easily be replicated by following proven marketing and operational concepts." Micro-franchises provide entrepreneurs with small franchises that require little start up costs.

"A franchise in a third world or developing country might sell for somewhere between $25 in the case of rat catchers in India to $6,000 in the Philippines [for] a retail cell phone store," Gibson said.

These little franchises create a training ground for budding entrepreneurs in the third world, Gibson said. Thus, even those who have little money can learn from those who have experience.

Micro-franchises are used by both the non-profit and the for-profit sectors to help alleviate poverty.

One successful example of the use of micro-franchises is the VisionSpring, formerly known as the Scojo Foundation.

VisionSpring sells eyeglass kits to men and women in Latin America, South Asia and Africa. These people become micro-franchisees, selling eyeglasses to their communities. Most of the people in the communities served by VisionSpring earn less than $4 a day, making owning a $40-60 pair of eyeglasses a near impossibility.

VisionSpring micro-franchisees, sell a pair of glasses for $4, making vision possible for community members and extending the productive life of the skilled laborers they serve.

Any students interested in how they can get involved in the micro-franchise Initiative can visit the Center for Economic Self-Reliance in Room 360 of the Tanner Building and talk to Jason Fairbourne, the micro-franchise Initiative director.

Fairbourne looks for students from all academic disciplines to help with the movement and not just business students.

"The more the merrier," Fairbourne said.

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Taking Micro-Finance a Step Further: the Birth of Micro-Franchises