Sunday, August 29, 2010

Microfranchising: Depth and Breadth in Development, Pt. I of II

“One problem with development is that you have to figure out what’s your focus. Do you want to work with a million farmers or do you want to work with a thousand farmers and get it right?”

--CLUSA Mozambique management official, during a conversation last December

Meet Kwame. For the past three months on his summer school break, he's been spending his days, from about 7:00 or 8:00 in the morning until sometimes as late as 9:00pm, selling frosty yogurt, flavored ice, ice cream, and other refreshing cold items (Tampico, below) which sell well (I can attest) in the brutal Ghanaian heat.

What’s different about Kwame than other street hawkers is that he’s selling a branded item. These refreshments are produced by FanMilk, a Dutch-founded Nigerian company. FanMilk recruits the poor to sell their goods to thirsty guys like me, pretty much anywhere hilarious English is spoken in Ghana...which is everywhere (post coming soon). They’re dispatched on bicycles or with a walking cart, like Kwame, and are always honking their bike horns to get attention (in fact, I can hear one as I type this). Kwame said he can earn up to 10 GHC (~$7) in a day, but had to deposit a down payment of 30 GHC to as collateral against the cart. His brother helped him with this. And all franchisees are required to save 10% of their profit, to be returned to them when leaving the company. You can probably imagine how this extra money is helping himself, his education, and/or his family in pretty tangible way.

FanMilk is a for-profit business that uses the conceptof microfranchising – somewhat like McDonald’s, but for the little guys. It uses pre-prepared business templates that allow it to scale quickly. For Kwame, he didn’t have to think about which products to sell, how to distribute the product, or what price to charge. But, he’s responsible for running his own business – he knows how many items he needs to sell to break even and has a selling strategy to accomplish this (e.g. where to take his cart and when?).

I finished my last post before the caveat post by saying I was going to talk about a development approach that’s pretty near the junction of top-down and bottom-up development approaches. I was misleading – rather I think it’s an approach which has results that correlate well with results of top-down and bottom-up approaches simultaneously. It’s the end, not the means. I've broken it down so as not to strain your eyes - I'll get into it next post.

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