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Jan 2011
Microfranchises at Work in the Developing World
Riccardo Gangale
Using micropharmacies like this one, the HealthStore Foundation has treated over 2 million low-income patients in central Kenya.

In 2000, the HealthStore Foundation built its first 11 micropharmacies in central Kenya. Today, the network has expanded to include 48 basic medical clinics and 17 micropharmacies. Over these ten years, the HealthStore Foundation has served roughly two million low-income patients in central Kenya.

The HealthStore Foundation is an example of a microfranchise, an emerging development strategy that builds and, possibly, improves on the microfinance model. Microfranchises use many of the same commercial practices as traditional franchises (e.g., Subway or McDonald’s) to create scalable business opportunities for the world’s poor.

As part of a microfranchise, a new franchisee gets training and support; a tested system for starting and operating a business; and instant brand recognition. For example, each “Vision Entrepreneur” with the microfranchise VisionSpring receives a so-called “Business in a Bag,” a sales kit with all the products and materials necessary to sell eyeglasses. Franchisees attend a three-day training session in basic eye care and business management and receive ongoing support from VisionSpring staff. To date, VisionSpring has sold over 100,000 pairs of reading glasses, trained over 1,000 “Vision Entrepreneurs,” and referred over 80,000 people for eye care in South Asia, South America, and Africa. Steve Hamm of Bloomberg Businessweek says of the microfranchise: “It’s business ownership on training wheels.”

Microfranchises also create jobs, something microfinance—the lending of small amounts of money to the poor—does not always do on its own. A study conducted by the global microfinance network FINCA found that many microenterprises (the kind of small businesses typically funded by microfinance) are not growing, and, therefore, are not hiring more people. On average, microfranchises create two to three more jobs than microenterprises.

Other examples of microfranchises include SELCO Solar Light, India, which, with the help of microfinancing institutions (MFIs), has sold and serviced over 100,000 small-scale solar power systems in the developing world and RedPlan Salud, Peru, which purchases bulk contraceptives from pharmaceutical companies and distributes them through a network of midwives, each of whom is a franchisee.