Friday, March 23, 2007

John Hatch on Microfranchising

I am currently attending a two day training seminar by John Hatch the "father of village banking". He has mentioned microfranchising a number of times in his first session. One particular insight that I think is quite valuable is his vision that microfranchising will not be for the same target audience as microcredit, but the children of the borrowers.

I think this is true for a number of reasons: the average microcredit borrower is a middle-aged woman, often illiterate. They are closer to 'retirement' than the beginning of their working life and are therefore looking for stability and not higher risk activities such as launching a startup. Data from microcredit institutions shows after a few cycles of loans the business income of these owner operated businesses plateaus. They are satisfied with increasing their inventory and sales in their owner operated business but generally they do not hire employees and seek for expansion of their business. Data from FINCA shows that as the size of the loan increases less of the percentage of the loan goes directly into the business. One expense that they are paying is schooling for their children. The problem will be that they will be educated but will find a lack of jobs in the marketplace. Microfranchising is a perfect fit for such a group. They will be able to do bookkeeping, open for new education and training, and have the youthful zeal to see a startup get off the ground.

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