Corporate/MFI

Partnerships that are

Profitable for the
Corporation, the MFI,
and the Clients

Written by:
Graham Macmillan, Director
Scojo Foundation, United States
Introduction
The causes of global poverty can be broadly linked to barriers to
access for health, education, employment, information, housing, human
rights, clean and safe environment, and ecological stability, among
others. Faced with the struggle about which issues to tackle,
development agencies often take a “siloed” approach to providing aid
and development resources. Too often these “siloed” approaches,
whether among separate organizations or even within the same
organization, do not effectively leverage operational cost structures to
maximize impact, streamline processes, and reduce wasteful
investment. Competing aid agencies have even been known to “carve
up” the developing world which results in organizations with good intent,
working against each other to the detriment of those in need. These
approaches to development have created serious inefficiencies in the
delivery of development services and limited success in alleviating
poverty.

In recent decades, private sector strategies to alleviating poverty have

emerged to tackle issues of inefficiency and a need for truly sustainable
solutions while providing market opportunities for business. These
strategies include microcredit/microfinance, multi-national corporations
targeting emerging markets, and social entrepreneurs utilizing practices
to create replicable and scalable models. Many of the private sector
strategies to poverty alleviation have generated great hope and, in
many circumstances, measurable improvement in the alleviation of
poverty. As a result, many partnerships between corporations and
microfinance institutions have been developed to leverage these
successes.

The purpose of this paper is to present examples of how microfinance

institutions, corporations, and private sector strategies can be applied to
overcome the challenges of poverty alleviation. Examples from

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 corporate/MFI relationships will be provided as well as an in-depth
analysis of how microfranchising, as a solution to poverty alleviation,
can work and should work in concert with existing service and product
platforms. These platforms include: microfinance institutions, consumer
products providers, information services providers, among others.
Examples will be drawn primarily from the experiences of Scojo
Foundation, a leading social enterprise which utilizes a microfranchise
approach to product and service distribution.

I. Microfinance and Corporate Partnerships-Leveraging Each

Other
Microfinance institutions provide a natural platform for business
opportunities. Their knowledge of and reach within emerging markets is
unrivaled. With more than 100 million borrowers and growing
worldwide, the power of microfinance institutions and their networks is
significant. As a result many corporations are partnering with
microfinance institutions. Some reasons include: the opportunity to
commercialize micro-lending and grow new financial markets, leverage
existing financing to introduce micro-insurance schemes, finance
purchases of capital items for SMEs, and leverage platforms for delivery
of goods and services. From a purist’s perspective, partnerships
between commercial banks and microfinance institutions are natural. As
the demand for capital grows in terms of both volume and amount,
commercial banks like Citigroup, ABN-AMRO, and ICICI are well-suited
to provide the systems and resources to meet the demand. However,
commercial banks are not the only corporate entities forming
partnerships with microfinance institutions. Insurance companies like
Allianz recognize that microfinance borrowers are an enormous potential
market. IT companies like Microsoft and HP see that microfinance
borrowers can be new customers. Consumer products companies like
Unilever know that microfinance networks represent a pre-positioned
platform for distribution and consumption.

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 “Large commercial financial institutions, including Citigroup and
Deutsche Bank, are now showing interest in microfinance, which could
increase access to credit for the poor.”1 According to University of
Pennsylvania Economics Professor, Tayyeb Shabbir, microfinance is
formalizing which, in turn, will mean that market forces will start to play
a larger role. This is where commercial banks are playing a role.
However, microfinance arose out of the public sector because there was
a market failure. MFIs and other public organizations will always
continue to rely on non-market financing mechanisms because of the
difficulty working with these populations. Nonetheless, commercial
banks do recognize the potential to provide capital to four billion people
at the base of the economic pyramid. With repayment rates at 90% and
higher along with such a large growth opportunity, commercial banks
recognize the potential.

ABN-AMRO is providing a strong example of a corporate partnership

with ACCION in Brazil. In the last two years, 8,000 micro-entrepreneurs
have taken out loans to support various businesses. ABN-AMRO also is
working in India with 180,000 women borrowers through a network of
microfinance institutions.2

An example of an insurance corporation working with microfinance

institutions can be found with ICICI/Lombard Insurance in India. In
partnership with BASIX, a leading Indian microfinance institution,
ICICI/Lombard created a rainfall insurance program in 2003.3
ICICI/Lombard also has partnered with Microcredit Foundation of India
through a series of rural kiosks to provide death and disability
insurance. ICICI/Lombard is working with at least seven different public
sector and microfinance institutions.

1
Microcredit Is Becoming Profitable, Which Means New Players and New Problems,” Public Policy and
Management, Wharton School of Business.
http://knowledge.wharton.upenn.edu/index.cfm?fa=viewarticle&id=1177. April 20, 2005.
2
http://www.abnamro.com/com/about/sd/sd_microfin.jsp.
3
http://www.icicilombard.com/app/Customer-segments/Rural-Insurance/Partner/basix.asp.

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 Unilever through its Indian subsidiary Hindustan Lever is leveraging
the power of microfinance to empower tens of thousands of women
entrepreneurs in India. Utilizing the structure of self-help groups
throughout India, Hindustan Lever (HLL) has developed the Project
Shakti program to provide business opportunities selling HLL consumer
products in rural villages. Over 20,000 women have taken out loans to
create a stock of inventory which is sold from their homes.4

In recent years, a tool for effective, market-based development has

emerged to complement the existing private sector strategies to
development and partnerships with microfinance institutions. This tool
is microfranchising. Microfranchises are broadly defined as small
businesses that can easily be replicated by following proven marketing
and operational concepts.5 In general, the cost of a microfranchise does
not exceed $300.6 Simply put, microfranchises utilize distribution and
marketing systems to maximize impact—both social and financial.

II. Microfranchising—A Single Tool Among Many

Microfranchising is not “the tool” to eradicate poverty. As a stand-
alone solution, microfranchising would be hard-pressed to deliver better
results than other practices.7 However, microfranchising, when bundled
with existing platforms, can deliver tremendous social and economic
returns throughout the value chain--the customer, individual

http://www.unilever.com/ourvalues/environmentandsociety/casestudies/economicDev/indiacreatingruralent
repreneurs.asp.
5
As defined by the MicroFranchise Development Initiative at Brigham Young University’s Marriott
School of Management; http://marriottschool.byu.edu/selfreliance/microfranchise/about.cfm. It is
important to note that there are varying definitions of microfranchising and uses of the term. Other
examples include social franchising. For purposes of this paper, the BYU definition will be used.
6
The cost of a microfranchise varies. Some argue that a microfranchise can cost up to $5,000 or less than
$100. For the purpose of this paper, a microfranchise is valued at $300 or less.
7
The impact evaluation of microfranchising is in its infancy. Much more needs to be done to measure its
impact through rigorous, academic analysis.

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 entrepreneur, supporting organization or company, and general
community. The benefits of microfranchising are many and include8:
• Generally identifiable local markets
• Requirements of franchisors tend to produce quality franchise owners
• Significant start-up costs have been borne by franchisor thereby
defraying the cost for franchisees
• Market-competitive price points
• Control site selection
• Economies of scale allow for intelligent and efficient procurement
• Vendors are screened and selected for quality and price
• Product standardization and uniformity
• Foster dissemination of best practices
• Easily branded and recognizable
• Offer professionally-packaged products
• Provide uniform data sets for evaluation
The potential for a powerful value-added relationship between
microfranchises and microfinance institutions is beginning to be
recognized by leaders in the field of international development including
John Hatch, founder of FINCA. “The fact is I’m absolutely not attracted
to microfranchise by itself, and certainly not as an alternative to
microfinance. Rather, what do attract me are the potential synergies
between the two concepts. Both have strengths and deficiencies, but
the strengths of one balance the deficiencies of the other. Only
microfinance has the proven service outreach capacity to reach all of the
world’s poorest households, but the micro-businesses it finances
generally have modest growth potential and create few additional jobs.
In contrast, microfranchise targets only 1-in-10 or 1-in-20 of the world’s
poorest households—the most entrepreneurial—but it has the capacity
to develop businesses strong enough to generate continuous growth in

8
List includes selections from Kirk Magleby’s recent book. This is not an exhaustive list. pgs. 48-49,
MicroFranchises as a Solution to Global Poverty, Kirk Magleby, MicroFranchises.org. 2006.

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 sales, jobs, and profits.”9 The previous quote offers a fine example of
the recognition of the potential synergy between a microfinance
institution and a microfranchise but does miss one critical point.
Microfranchises, if designed properly and for the right audience, can and
do target a non-entrepreneurial person which increases the breadth of
potential franchise owners. An illustrative example of this will be
provided later, but it is necessary to note that microfranchises for the
developing world can and should be designed for those with limited
entrepreneurial spirit and education.

It is well-known that finding a truly successful entrepreneur is like

finding a needle in a haystack. How many Bill Gates’ and Steve Jobs’
are there in the world? Despite these exaggerated examples, one could
agree that a successful entrepreneur is hard to find. Many academics
and authors have defined the traits and characteristics of a successful
entrepreneur, but if you just read their books the likelihood that you will
start a successful business is limited. Microfranchising reduces, if not
eliminates, the need to be a truly creative entrepreneur with a singular
idea that will change the world or at least the neighborhood.
Microfranchises are designed to be clear, easy-to-follow instruction for
how to run a successful business. In other words, if one wants to make
money, don’t re-invent the wheel, pay for the license.

Formal education in the developing world is done by rote learning.

Teachers and education systems are designed to teach children how to
recite problems and solutions to those problems. In fact, developing
countries like India and China are so successful at following rules they
are leading the world in manufacturing of goods and services now.
Microfranchising falls elegantly into the system of rote education. By
providing a simple set of instructions for business planning, operations

9
pg. 2, “Slogging Toward a Poverty-Free World: The Need for Microfinance-Microfranchise Partnership,”
John Hatch. January, 2006.

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 management, product sourcing, branding, marketing, and sales
strategies, microfranchisors are increasing the likelihood of success for
the franchise owner. So, to counter the opinion that microfranchises
only target 10-20% of people, all one has to do is design the
microfranchise in the simplest manner with clear and concise operating
instructions.
III. The Power of the Platform
Microfinance, consumer goods, healthcare, education, and information
technology organizations represent an under-utilized platform for
delivery. Worldwide there are hundreds, if not thousands, of
organizations and companies which have people based at the village
level delivering a variety of products and services financed through
loans and/or other financial vehicles. Often, these organizations and
companies only provide a limited selection of good and services that
consumers can purchase and entrepreneurs can sell. This under-
utilization can be easily overcome by bundling services and products.
Because microfranchises are efficient systems of distribution, they would
be a logical “tool” to be added to the kit of services.

Some countries have larger delivery infrastructures than others with

India being a leading example. According to Sukhwinder Singh of the
Department for International Development there are over 1.2 million
Self-Help Groups (SHGs) in India which alone account for nearly 20
million members.10 These members are supported by hundreds of large
and small microfinance institutions. Each institution represents a
potential platform for delivery of a macrofranchise while each SHG
represents a platform for delivery of a microfranchise.

There are other examples of large existing platforms through which

emerging microfranchises can be integrated and add value. As

10
“The Future of Microfinance in India: The Microfinance India Conference and a Look at an Expanding
Market,” Sukhwinder Singh, Microfinance Matters. Issue 13, June 2005.

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 mentioned, these networks are not exclusively microfinance institutions
but can include consumer goods companies such as Hindustan Lever in
India and Unilever in East Africa. Hindustan Lever’s (HLL) Project Shakti
program has been well-documented in recent literature including C.K.
Prahalad’s Fortune at the Bottom of the Pyramid. Shakti Amma's are
village-based, women entrepreneurs trained by Hindustan Lever’s sales
force to expand their consumer goods product offerings. These goods
include soaps, shampoos, and other products. The current
infrastructure of 7,018 Shakti Amma’s operates in 11 states throughout
India and covers 300,000 households. Clearly, this infrastructure of a
trained sales force presents a tremendous opportunity for distribution.
There are already examples, including Scojo Foundation, of
microfranchises leveraging HL’s platform to deliver goods and services.

IV. Products and Services of Social Benefit

In the early discussions on microfranchising, there has been much
emphasis on the need to simply create as much wealth as possible for
the microfranchise owner that the ultimate value lies in the individual
earnings. While there is certainly a lot to be said about generating
wealth for individuals who are low-income, microfranchises can be a
vehicle for beneficial products and services which provide a double-
bottom line return. There are myriad examples of franchises that sell
products and services that many in the development sector would argue
add limited value to low-income communities beyond creating wealth for
the owners of the franchise and distributors. An example of this might
include a McDonald’s franchise. The purpose of this statement is not to
disparage McDonald’s but rather make the point that microfranchising,
in reference to its value as a tool to poverty alleviation in development,
has the opportunity, at this early stage, to stake its claim that it will be
a vehicle for value throughout the value chain. That the franchisor,
distributor, franchisee, and consumer will benefit, in a socially

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 meaningful way, from the product or service that is being offered is
important and should be core to future discussions on microfranchising.

There are some proven examples of socially beneficial products being

sold. One example is of the BRAC IGVGD program which utilizes women
community health workers or Shastho Shebika 11. The Shastho Shebika
currently sell basic health products such as ORT (oral re-hydration
salts), sanitary napkins, condoms, and aspirin, among other health
products. With these sales, the women earn a reasonable living, can
work on a part-time basis, pay off loans, and benefit their communities
by improving health and reducing productivity loss.

Another wonderful example of an innovative microfranchise approach

with a double bottom line is The HealthStore Foundation.12 HealthStore
helps people start microfranchise pharmacies in Kenya. These
pharmacies provide a good living wage to their owners while
concurrently benefiting the local population through the distribution of
medications for treatment of malaria, worms, and respiratory infections.

V. Microconsignment and Microfranchising—Perfect Together

Unlike microfinance, microfranchises do not have to rely on credit or
financing mechanisms to enable entrepreneurs to start their own
businesses. Because franchisees are not necessarily accessing capital
but rather license to a good or service, they can obtain franchises on a
microconsignment basis. While many would argue that this does not
create a sense of ownership, this does not prevent a franchisee, or
enterprise owner, from making a considerable amount of money while
delivering a product or service of great social value. The use of
microconsignment makes a business opportunity available to one who
cannot afford the risk of a loan. While the loan repayment rates of

11
http://www.brac.net/cfpr.htm.
12
http://www.cfwshops.org/.

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microfinance organizations are well-documented and often exceed 97%,
there are clearly times when borrowers are unable to make payments
on time. The reasons for failure to make payment are many but can
include: natural disasters, conflict, family emergencies, etc. All of these
events are common the world over, but when one is working in the
developing world it is necessary to recognize how fragile the lives of
these individuals and their support structures can be. Instead of having
savings accounts or a herd of animals to cover missed loan payments,
people have to miss payments. Certainly microfinance institutions are
intimately familiar with the life challenges faced by their borrowers,
however, microconsignment can provide a solution to this challenge and
is directly applicable to microfranchising.

Microconsignment takes the simple principle that products can be

distributed through a network of sales people. Often known as multi-
level marketing, microconsignment relies on a manufacturer, a
distributor, an areas sales manager, and the sales agent to distribute a
product or service. Margins throughout this value chain enable
everyone to earn a profit thereby keeping everyone motivated to sell.
Multi-level marketing and sales chains are often poorly perceived for a
variety of reasons. However, as this paper suggests, if the product or
service adds social value, causes no harm, and adds values throughout
the value-chain, then multi-level marketing can be tremendously
beneficial.

Microconsignment through multi-level marketing takes the risk away

from the entrepreneur. By enabling entrepreneurs to take ownership of
microfranchises through microconsigment, one is potentially able to
open access to even more people than the lowest cost microloans.

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 VI. Micro- & Macrofranchising --“The Scojo Foundation
Example”
A solid, illustrative example of the microfranchise model coupled with
microconsigment while utilizing existing delivery platforms comes from
Scojo Foundation. Scojo Foundation provides a clear and effective
demonstration of a microfranchise model that is having a dramatic
impact in four countries.

Founded in 2001, Scojo Foundation13 is a non-profit organization

dedicated to improving the economic condition of families in the
developing world by broadening the availability of reading glasses and
other eye care products and services. Scojo Foundation trains and
equips low-income men and women as “Vision Entrepreneurs” to start
their own microfranchises selling affordable reading glasses and other
eye care products. These Vision Entrepreneurs screen for blurry up-close
vision (presbyopia), sell affordable reading glasses to those in need and
refer those requiring more advanced eye care to reputable eye clinics.
Through a simple pair of affordable reading glasses, Scojo Foundation
doubles the productive life of those whose livelihoods depend on up-
close vision, such as weavers, tailors, goldsmiths, and mechanics, while
raising the standard of living for local entrepreneurs and their families.

Presbyopia affects 95% of the population aged 35 or older.14 Nearly

1.6 billion people living in the developing world need reading glasses.
Yet less than 5% of people in those countries currently have access to
reading glasses they can afford. Presbyopia occurs naturally in all
people and progressively worsens with age. The condition can easily be
corrected with simple magnifying “reading” glasses. Left untreated,
presbyopia can impede economic productivity and diminish quality of
life. Individuals whose livelihoods depend on clear up-close vision such
13
www.scojofoundation.org.
14
In addition, 40% of people age 35-40 and 75% of people age 41-50 are presbyopic. These statistics are
for people without other refractive errors like myopia, hyperopia and astigmatism.

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as tailors, bookkeepers, or mechanics become unable to work after they
reach a certain age and they lose their ability to earn an income.
People’s quality of life suffers too as they become unable to sew, cook,
or read newspapers, literature or religious texts.

In the West, low-cost reading glasses are conveniently sold in

pharmacies and supermarkets without a prescription. In the developing
world, however, readymade reading glasses are neither accessible nor
affordable to the majority of the population. People living in rural areas
are rarely able to access urban optical shops and hospitals where
glasses are available. Even when they can access them, the price of the
exam, frames, and lenses is often prohibitive to the poorest citizens. To
create a market for reading glasses to tackle the burden of presbyopia,
Scojo Foundation developed its microfranchise and macrofranchise
distribution model.

Scojo Foundation’s microfranchise kit consists of all the tools and

training necessary to start a business selling reading glasses and
referring people in need of advanced eye care to reputable partner eye
clinics. Equipment in this kit includes 20-30 pairs of reading glasses and
UV-protected sunglasses (prescription powers range from +1.00 to
+3.00; come in four different styles and in four different price points),
eye drops, cases, cords, a mirror, vision screening charts, uniform, data
collection materials, and banners. These tools enable Scojo Vision
Entrepreneurs, or microfranchise owners, to sell reading glasses directly
within their communities at price points that are affordable to local
customers. Through the microconsigment model, the Scojo Vision
Entrepreneurs makes a 30% margin on each pair of reading glasses sold
(an average of $1-3 depending on the country) while Scojo Foundation
earns 20% to recover costs for sustainability. What makes the model so
beneficial for the Vision Entrepreneur is that they can sell up to 20 pairs
of reading glasses in less than three hours. The potential earnings

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 revenue far exceeds that of other entrepreneurial ventures in rural
communities for the time committed. Furthermore, working a partial
day enables Vision Entrepreneurs to manage other businesses they
might have.15 Beyond the business perspective, it enables women Scojo
Vision Entrepreneurs to address family matters. To date, Scojo
Foundation has sold over 34,000 pairs of reading glasses,
trained more than 550 Vision Entrepreneurs, and referred nearly
35,000 people for advanced eye care at partner eye hospitals.
While these figures only make a small dent in the global need for
reading glasses, it is important to note that 80% of these sales have
occurred in the last six months.

How does a small social enterprise working in four countries utilizing a

microfranchise model scale up to meet the needs of one billion people
with presbyopia? How does this same organization manage to sell more
than 24,000 pairs of reading glasses in six months? The answers are
large markets, existing platforms, and macrofranchising.

Macrofranchising is a concept that Scojo Foundation embraced after

three and a half years of struggling to build its own network of
entrepreneurs. As previously mentioned, identifying a true entrepreneur
is not an easy task. Keeping an entrepreneur active is even more
difficult. So, for three and a half years Scojo Foundation worked
diligently to cultivate and train Vision Entrepreneurs identified through
local contacts including religious organizations, mayor’s offices, Peace
Corps volunteers, and word of mouth. Success was not easily realized,
yet, Scojo Foundation staff knew it had large goals to accomplish. The
solution emerged when an organization known as Byrraju Foundation16
approached Scojo Foundation in late October 2006.

15
Also known as patching. Patching is frequently practiced in the developing world where entrepreneurs
run multiple businesses offering a variety of products and services.
16
www.byrrajufoundation.org

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 Byrraju Foundation has 140 Community Health Workers who operate
in two districts of Andhra Pradesh, India. Byrraju Foundation’s
programming takes a holistic approach where they provide a full
continuum of services including health, education, water, sanitation, etc.
Scojo Foundation was invited to implement a macrofranchise strategy
where Scojo Foundation staff would train the trainers of Byrraju
Foundation. Byrraju Foundation Community Health Workers would then
receive the microfranchise kits and begin selling. As a result of this
partnership, nearly 10,000 reading glasses have been sold through
Community Health Workers who, in turn, earned generous profit. The
benefit for Scojo Foundation was that it was able to reach a large
market through Community Health Workers that it did not have to
identify and cultivate, draining valuable resources, as is the case for its
own Scojo Vision Entrepreneurs. Furthermore, Scojo Foundation and
Byrraju Foundation agreed on this partnership on a contract basis
whereby Byrraju Foundation paid, on a cash and carry basis, the costs
of launching this program. This provided a whole new revenue stream
for Scojo Foundation.

The partnership with Byrraju Foundation represents just one of 23

partnerships in the pipeline for the Scojo Foundation’s program in India.
Other examples of partnerships in India include Hindustan Lever’s
Project Shakti program, Drishtee, ITC, among others. Potential new
partnerships are currently being negotiated to help Scojo Foundation
expand to eight new states throughout India, identify nearly 100,000
potential entrepreneurs, and sell more than 200,000 pairs of reading
glasses. If Scojo Foundation were to do this on its own, it would take
years of planning and raising the necessary financial resources.

Scojo Foundation has other examples of macrofranchises in operation

including in Guatemala through Community Enterprise Solutions17 and in

17
www.cesolutions.org.

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 Bangladesh through BRAC. Both examples represent situations where
Scojo Foundation has no staff but relies on the infrastructure of both
organizations. As a result of leveraging these infrastructures, Scojo
Foundation dramatically reduces its own costs of operation while
instilling a sense of ownership. Furthermore, these two organizations
have significantly better knowledge of the local environment and
therefore are more capable and effective in implementation.

VII. Conclusion
Microfinance Institutions (MFIs) have revolutionized low-income
peoples’ access to affordable capital. It has been well-documented that
with access to affordable capital, low-income people are capable of
utilizing their entrepreneurial traits to not only earn a living to support
their families but, in some cases, thrive to become successful business-
women and men. It has been proven that, with increased earnings,
low-income people are more likely to fight off starvation, combat
disease, gain access to information, and live in safe housing. With
millions and millions of borrowers worldwide, MFIs have a reach into the
remotest locations and provide a robust platform for delivery.

In addition to MFIs, there are other networks of providers including

consumer goods company, health providers, education systems, etc.,
which have an equally strong network. These infrastructures reach far
into remote communities worldwide. They also add value by have in-
depth knowledge of the local environment.

Microfranchising and macrofranchising represent a new way of thinking

in development. While franchising has been in practice for many years,
there are a limited number of cases where franchising on a grand scale
has been applied for a social good. This paper has argued that
microfranchising and macrofranchising have the potential, and in some
cases have proven that they are capable of adding tremendous value to

16
development efforts. Through streamlined delivery mechanisms,
bundled products and services, and new forms of financing,
microfranchising and macrofranchising should be considered as a
valuable tool in the fight against poverty which microfinance institutions,
their clients, and other partners should consider.

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