Beyond Microfinance

By David Stoker, Guest Author

After 2005 was declared the year of Microcredit and 2006 had the father of microcredit, Muhammad Yunus, being awarded the Nobel Peace Prize, microcredit has become a mainstream concept and strategy in poverty alleviation. (Even my eighty-year old grandfather is a lender on Kiva.org now)

However, with increased attention comes increased scrutiny. Criticism has focused on mission drift (not reaching the ‘poorest of the poor’), exaggerated claims of being a single solution to end poverty, and mounting data that suggests that borrowers reach a plateau in business growth with subsequent loans being used as consumer loans which can lead to increased burdens of debt on top of their initial poverty.

One problem is that most borrowers do not have the business knowledge or skills to effectively manage and grow their businesses. An emerging movement called MicroFranchising is seeking to address that deficiency as well as being a solution to reach the poorest of the community through employment. The concept is to use the successful operational, marketing, and growth strategies of a traditional franchise (such as a McDonalds or Subway) and apply it to small businesses tailored for microentrepreneurs in developing countries.

This month sramanamitra.com will feature a series of posts on microfranchising. Future posts will explore the movement’s vision, successful models, and future possibilities and needs.