MicroFranchise:MicroFranchise:The Real Deal inThe Real Deal inMicroEnterprise MicroEnterprise DevelopmentDevelopmentStephen W. GibsonStephen W. Gibson

Tony San GabrielTony San Gabriel

Scott HillstromScott Hillstrom

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Small Really ISN’T Beautiful

Stephen W. Gibson

What is good for our clients?What is good for our clients?

What is good for the NGO?What is good for the NGO?

What if these objectives conflict?What if these objectives conflict?

The Academy forThe Academy forCreating EnterpriseCreating Enterprise

We seek completeWe seek complete

self-reliance of our self-reliance of our graduates.graduates.

ZionZion

ideal community

difficult to attain

state of economic equality and self-sufficiency

“no poor among us”

utopia

commitment to care for the poor

An Academy Objective:An Academy Objective:

To help establish Zion through building To help establish Zion through building self-reliant LDS families in the self-reliant LDS families in the Philippines.Philippines.

For us, the ideal is self-sufficiency For us, the ideal is self-sufficiency among our graduates with a among our graduates with a dependence on the Lord.dependence on the Lord.

Literature ReviewLiterature Review

““Give us Credit” by Alex Counts Give us Credit” by Alex Counts ““The Price of a Dream” by David BornsteinThe Price of a Dream” by David Bornstein ““Pathways out of Poverty” Chapter Two by Pathways out of Poverty” Chapter Two by

Chris DunfordChris Dunford ““The Miracles of Barefoot Capitalism” by The Miracles of Barefoot Capitalism” by

Jim KlobucharJim Klobuchar ““Working Toward Zion” by Warner Working Toward Zion” by Warner

WoodworthWoodworth

What MicroCredit doesWhat MicroCredit doesfor the borrower:for the borrower:

1.1. Teaches them to Teaches them to write things down.write things down.

2.2. Gives them money.Gives them money.3.3. Increases family Increases family

income, health, and income, health, and stability.stability.

4.4. Teaches the Teaches the consequences of consequences of keeping promises.keeping promises.

5.5. Teaches them the Teaches them the power of a routine.power of a routine.

6.6. Provides leadership Provides leadership roles for many.roles for many.

7.7. Teaches them Teaches them personal discipline.personal discipline.

8.8. Allows borrowers to Allows borrowers to do business.do business.

9.9. Enables women to Enables women to have roles of dignity.have roles of dignity.

10.10. Empowers women to Empowers women to be good citizens by be good citizens by voting, etc.voting, etc.

MicroCredit Methods:MicroCredit Methods: Lower interest rates than most Lower interest rates than most

other available loans.other available loans. Peer lending and peer guarantees.Peer lending and peer guarantees. Weekly meetings.Weekly meetings. Passbook lending.Passbook lending. Values training (16 decisions).Values training (16 decisions). Implementing the 15-minute rule.Implementing the 15-minute rule.

What Makes Strong What Makes Strong MicroCredit NGOs:MicroCredit NGOs:

Uniformity of practices.Uniformity of practices.

Enforce policies.Enforce policies.

Book of rules.Book of rules.

System of checks and System of checks and balances.balances.

Employees undergo specific Employees undergo specific training in the lending training in the lending business.business.

Strong business systems inStrong business systems inplace.place.

What Clients Get What Clients Get From MicroCredit From MicroCredit NGOs:NGOs:Generally no uniformity of training Generally no uniformity of training on how to run a MicroEnterprise.on how to run a MicroEnterprise.

Only policies that are taught are Only policies that are taught are about loan repayment.about loan repayment.

Few (if any) business principles Few (if any) business principles taught.taught.

No checks or balances suggested No checks or balances suggested for implementation in their for implementation in their MicroEnterprise.MicroEnterprise.

Generally the poor run their Generally the poor run their business however they think is business however they think is right.right.

No training in business systems.No training in business systems.

It is no wonder it It is no wonder it takes takes eight yearseight years

for 46% of for 46% of borrowers to get borrowers to get out of poverty.out of poverty.

NGOBorrower

Teaching simple business Teaching simple business principles can benefit the principles can benefit the

NGONGO Increased success among their Increased success among their

borrowersborrowers

Development of income-generating Development of income-generating activities by the NGO (e.g., activities by the NGO (e.g., Grameen phone ladies)Grameen phone ladies)

““If we imagine a world where If we imagine a world where every human being is a every human being is a potential entrepreneur, we’ll potential entrepreneur, we’ll build a system to give build a system to give everybody a chance to everybody a chance to materialize his or her materialize his or her potential.”potential.”

--Muhammed Yunus--Muhammed Yunus

How much greater to build a How much greater to build a system that teaches the system that teaches the customer to build systems customer to build systems within her own within her own MicroEnterprise.MicroEnterprise.

What is the real magic of the What is the real magic of the Grameen Bank? And how Grameen Bank? And how does that answer apply to our does that answer apply to our discussion today?discussion today?

Importance of Building a Importance of Building a SystemSystem

““The genius of Muhammad Yunus' work is The genius of Muhammad Yunus' work is not that he figured out how to empower not that he figured out how to empower poor people with loans but that he was poor people with loans but that he was able to develop a able to develop a modelmodel that he could that he could replicatereplicate more than a thousand times more than a thousand times while maintaining control over the quality while maintaining control over the quality of the enterprise.”of the enterprise.”

-Alex Counts-Alex Counts

Franchises’ Extended ReachFranchises’ Extended Reach

““The difference is critical to understanding The difference is critical to understanding the implications of what he has the implications of what he has accomplished. One branch can serve 2,000 accomplished. One branch can serve 2,000 people, whereas a thousand branches can people, whereas a thousand branches can serve 2 million. It takes an entirely serve 2 million. It takes an entirely different set of skills to start a pilot project different set of skills to start a pilot project than it does to successfully than it does to successfully franchisefranchise it. it. Pilot projects reach hundreds of poor Pilot projects reach hundreds of poor people; people; franchises touch millionsfranchises touch millions.”.”

-Alex Counts-Alex Counts

Village banking works Village banking works because it is run like a because it is run like a franchise.franchise.

FranchiseFranchise

““People know the quality of our service. Our job People know the quality of our service. Our job is to make sure it doesn’t deteriorate in any is to make sure it doesn’t deteriorate in any corner of the country.” corner of the country.” --Muhammed YunusMuhammed Yunus

The franchise model allows NGOs to replicate The franchise model allows NGOs to replicate their product or service all over the world while their product or service all over the world while maintaining the quality and consistency of their maintaining the quality and consistency of their system.system.

Success of FranchisingSuccess of Franchising

80 percent of all 80 percent of all start-up businessesstart-up businesses in in the U.S. fail before 5 years.the U.S. fail before 5 years.

80 percent of all 80 percent of all franchisesfranchises are still are still alive and doing well after 5 years.alive and doing well after 5 years.

Why the difference?Why the difference?

A well-designed MicroFranchise A well-designed MicroFranchise eliminates uncertainty. The owners eliminates uncertainty. The owners know what to do in almost every know what to do in almost every business situation.business situation.

The MicroFranchisee just follows the The MicroFranchisee just follows the system—for months or years—until system—for months or years—until they can develop a better way.they can develop a better way.

The Academy is The Academy is working on working on

developing five developing five MicroFranchise MicroFranchise

models.models.

Academy Franchise ModelsAcademy Franchise Models

Concluding Suggestions:Concluding Suggestions:

More NGOs need to teach business skills.More NGOs need to teach business skills.

More NGOs need to establish franchise More NGOs need to establish franchise systems.systems.

NGOs must not only establish systems, NGOs must not only establish systems, but also aid peak performers in starting but also aid peak performers in starting and building their own MicroFranchises.and building their own MicroFranchises.