making a difference in africa

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Making a Difference in Africa

The Townships ProjectFrom Microlending in South Africa to

Systemic Poverty Eradication: The Next 12 Years

by Martha Deacon, B.A. (Hons), J.D.Founder and CEO

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The Townships Project

• started supporting microlending in South Africa in 1998

• currently supports Tetla Financial Solutions (around Cape Town) and Phakamani Foundation (around White River), two of South Africa’s best run microlenders

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Microlending entails • making tiny loans (starting at $100) • to the very poorest (living on $2 a day)• mostly women (98% of our clients)• in groups of 5 (each member guarantees

loans of others)• to start or expand a small business

(consumer loans make poverty worse)

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Microfinance refers to the whole suite of financial services for the poorest, including

• loans• savings • insurance• mortgages• money transfers

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• MicroFinance Institutions (MFIs) are those institutions that provide microfinance services

• The Townships Project has steadily improved its knowledge, connections and effectiveness over the past nearly 13 years…

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1999 - 2004 = 6 years 2005 - 2009 = 5 years 2010 = 1 year 2011 = 8 months0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

1,034

9,710

7,195

16,905

Number of Loans Disbursed 1999 - Aug 2011 by MFIs We Support

We’re now supporting twice as many loans each month as we did in all of the first 6 years

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1999 - 2004 = 6 years 2005 - 2009 = 5 years 2010 = 1 year 2011 = 8 monthsR 0

R 5,000,000

R 10,000,000

R 15,000,000

R 20,000,000

R 25,000,000

R 686,300

R 12,059,850

R 10,368,300

R 22,428,150

Value of Loans Disbursed 1999 - Aug 2011 (8 Rand = $1 CDN)

The monthly value of loans supported is about $300,000 amongst 5,000 clients

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1999 - 2004 = 6 years 2005 - 2009 = 5 years 2010 = 1 year 2011 = 8 months0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

5,170

48,550

35,975

84,525

Lives Changed Assuming 5 Lives per Loan

Total Lives changed in 12 years 8 months = 174,220About the size of Saskatoon, Regina or St. John’s Nfld.

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1999 - 2004 = 6 years 2005 - 2009 = 5 years 2010 = 1 year 2011 = 8 months$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$194,084

$992,710

$228,173

$101,115

Total Spent in 12 Years and 8 Months ~ $1.5 Million

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1999 - 2004 = 6 years 2005 - 2009 = 5 years 2010 = 1 year 2011 = 8 months$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

$40.00 $37.54

$20.45

$6.34

$1.20

Cost Per Life Changed

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• We’ve built a solid foundation and in 2011 we launched a game-changing approach to eradicating systemic poverty…

• By applying the world’s most successful business system – franchising – to the world’s most intractable problem – poverty

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• MicroFranchising applies the principles of franchising - branding, systematization, and replication - to tiny businesses ….

• Objective: Eradicate systemic poverty

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• We found a partner - University of Cape Town’s Graduate School of Business, the premier business school on the continent

• We found a major sponsor - Standard Bank, the largest bank on the continent

• And we created something amazing…

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MicroFranchising Launch:Trade Show and Workshops

by Martha Deacon, B.A.(Hons), J.D.Founder and CEO

The Townships Project

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Report from South Africa

31 August – 2 September 2011

O.R. Tambo Recreation CentreKhayelitsha, Cape Town

South Africa

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• MicroFranchising Launch was designed to address the four limiting factors in microlending

• All microlenders face the same challenges… and they prevent microloans alone from eradicating systemic poverty…

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The Unicycle

Limits to Microlending:

1) “whack-a-mole” jealousy from lack of community support: “who do you think you are?!”

2) Most borrowers are not entrepreneurs: they just want a job

3) Lack of business innovation, skills and systems result in “selling rotten tomatoes to each other”

4) Business expansion requires more $$$ than microloans can provide

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The Unicycle

Getting from the Unicycle of Microlendingto

Four Wheel Drive Mobile and a massive job creation engine at the base of the economic pyramid by using existing tools…

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The Bicycle

By adding a 2nd wheel…

Asset-BasedCommunity Development (“ABCD”)

To give direction and overcome “whack-a-mole” syndrome

By turning victims into activists… asking the question: “What do we have?” instead of “What do you need?”

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Asset-Based Community Development helps communities to understand

The Leaky Bucket

The Leaky Bucket provides a simple way for communities to understand their assets and their income: what they have, what’s coming in and what’s leaking out …

Developed in ‘90s in Chicago with Michelle Obama’s keen involvement

The Townships Project recommends the first money invested in any community be used to introduce ABCD …

Getting communities to think about how they can use what they have to get what they want…

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The Three-Wheeler

Now add a 3rd Wheel:

Corporate Social Investment/Enterprise Development

Once a community is motivated, it is ready to seek additional investment…

BBBEE laws in South Africa today require about $1 billion annually spent on enterprise development…In an ABCD community, all eyes will be on this money

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Four- WheelDrive

And finally the 4th Wheel:

MicroFranchising and other commercial solutions

Answers the lack of skills and diversity; brings the potential to systematize, replicate and brand a tiny business

For 40 years franchising has created as many as 9 out of 10 successful businesses (versus as low as 1 out of 10 for stand-alones)

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Mobile

And now Mobile Technology Since 1998, virtually all South Africans (and about 80% of all Africans) have gained access to Mobile Telephones allowing access to:• Market information• Banking services

• Money transfer• Repayments• Savings

• Inventory restocking• Systems control • Accounting• Training

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Jealousy – and “whack-a-mole” syndrome Corporate Social Investment funding pays for ABCD to motivate community

People just want a job; they lack of diversity of businesses and lack of skills

Franchises allows franchisees to effectively “purchase a job” showing them exactly how to run a variety of businesses; mobile telephones increase business efficiency dramatically

No capital available to purchase micro-franchises

Microloans can be used

Lack of sufficient funds to develop franchise by franchisor and lack of social/partnership resources

Enterprise Development funds are plentiful and sadly not well spent: ABCD and mirofranchising change that and can create a massive job engine at the base of the pyramid

Four Wheel Drive Mobile drives out systemic poverty…

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Four Wheel Drive Mobile meets MicroFranchising Launch!

plus

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MicroFranchising Launch:Trade Show and Workshops

Intentionally Creating a MicroFranchising Industry

31 August – 2 September 2011 in Khayelitsha, Cape Town, South Africa

• Government policy makers met townships entrepreneurs met corporate entrepreneurs met franchisors met community activists met social workers met charities…

• To create and support new microfranchising businesses to build a massive job creation engine at the base of the economic pyramid…

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MicroFranchising Launch

On left: Tumelo Chipfupa, Deputy Director-General, Enterprise Development, Department of Trade and Industry

On right:

Sadi Luka, Chief Director of Community Development, Department of Social Development

First Plenary Session:

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Tumelo Chipfupa came for 2 hours, stayed for 2 days. DTI wants The Townships Project’s MicroFranchising Launches in all 10 provinces – WHY?

• Since 1995, South Africa’s economy has grown from $500 billion to $2.7 trillion; taxpayers have increased from 1.8 million to more than 10 million; taxes from $113 billion to $664 billion (The Mail and Guardian, 27 Aug 2011) yet 20 million are still living on $2/day, under and unemployed, at the base of the economic pyramid

• 70% of enterprises with 5 – 50 employees, and 30% of those with 100+, started as micro-enterprises; all face the same challenges: formalization, credit, bank accounts… can be addressed by microfranchising

• MicroFranchising needs to be jump-started: even Vodacom didn’t recognize the fabulous market it has enjoyed in South African townships in the past 10 years

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Sadi Luka from the Department of Social Development was elated to share the platform with the Department of Trade and Industry… WHY?

• Typically the Department of Social Development just hands out the monthly grant cheques: they’ve gone from 2.9 million to 13.9 million since 1995 representing a massive monthly income in all townships, which must be used to create new business if the 20 million on $2/day are ever to escape poverty…

• DSD also works with motivating communities through ABCD activities; these activities flow naturally into Department of Trade and Industry activities, aided by private/public partnerships…

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THREE CASE STUDIESFrom MicroFranchising Launch:

Trade Show and Workshops

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• Example: Keys Communications

• Challenge: Securing exclusive sites on home walls owned by grannies who resell them several times to competitors

• Solution: Find the “chief” granny through local church; deal with her to build community

understanding and loyalty, thereby increasing competitive uniqueness – ACHIEVED in 2 hour workshop

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• Example: Crime Scene Clean-Up

• Challenge: Cost of franchise R 136,000 ($20,000) vs. township entrepreneur ability to pay about R 10,000 ($1,500)

• Solution: Downsize without losing any branding, systematization or replication functions – ACHIEVED in 2 hour workshop

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• Example: Honda Scooters

• Challenge: Maximizing the townships market even with

100% financing strategy; Honda thought its market was commuters to the city

• Solution: Focus on micro-businesses lacking transit options rather than on city commuters; micro-businesses have credit rating with local microlenders – ACHIEVED in 2 hour workshop

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1st element:

PlenarySessions

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2nd element:

Workshops

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3rd element:

Trade Show

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At the first everMicroFranchising Launch…

• 15 businesses were workshopped to become or expand as microfranchises by a cross-section of townships people, community workers, entrepreneurs, students, charities and government policy makers

• Everyone saw the power of small: microfranchising is now starting to be integrated into the mainstream at a public and private level

• Intentionally creating microfranchises can be a game changer in eradicating systemic poverty

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Thank you!

[email protected]

www.thetownshipsproject.orgCharitable Organization No. 86418 8420 RR0001

mailto:[email protected]

http://www.thetownshipsproject.org/




making a difference in africa

Documents

cape townsouth africa

ceothe townships project

poverty worse

tiny loans

intractable problem

small business consumer

premier business school

phakamani foundation