A growing number of innovative social entrepreneurs are tackling this problem by creating \u27busmesses in a bag\u27 mspired by the world\u27s largest direct seller of beauty products - Avon. These very small franchise or consignment businesses are affordable enough to be acquired and operated by women living at the base of the economic pyramid. Just as commercial franchise networks such as Avon have helped people with httle or no experience grow mto successful business owners around the world, microfranchise and microconsignment networks may hold similar promise

Burand, Deborah

English

University of Michigan School of Law

University of Michigan Law SchoolUniversity of Michigan Law School Scholarship RepositoryArticles Faculty Scholarship2012Beyond Microfinance: Creating Opportunities forWomen at the Base of the PyramidDeborah BurandUnviersity of Michigan Law School, dburand@umich.eduAvailable at: https://repository.law.umich.edu/articles/1807Follow this and additional works at: https://repository.law.umich.edu/articlesPart of the Banking and Finance Law Commons, and the Law and Gender CommonsThis Article is brought to you for free and open access by the Faculty Scholarship at University of Michigan Law School Scholarship Repository. It hasbeen accepted for inclusion in Articles by an authorized administrator of University of Michigan Law School Scholarship Repository. For moreinformation, please contact mlaw.repository@umich.edu.Recommended CitationBurand, Deborah. "Beyond Microfinance: Creating Opportunities for Women at the Base of the Pyramid." Int'l Trade Forum 2012, no.2 (2012): 20-21.(j) FEATURE beyond micro.finance CREATING OPPORTUNITIES FOR WOMEN AT THE BASE OF THE PYRAMID DEBORAH BURAHD Clinical Assistant Professor University of Michigan law School Just as commercial franchise networks such as Avon have helped people with little or no experience grow into successful business owners around the world, microfranchise and microconsignment networks may hold similar promise. 20 FORUM ISSUE 2 2012 ' s he's thanking you for her soft knees,' said the Swahili translator. 'Her what?' The translator's Eng-- lish was so heavily accented that I was not sure I had heard hun correctly. The translator tried again. This time he pointed to his knees for emphasis as he re-peated the woman's thank you and he added this explanation; 'Because of the microfinance loans you've given her business, she no longer needs to kneel before her husband to beg for money for their children's school fees.' I have repeated this story to audiences all over the world. 1 tell the soft knees story to illustrate the transformative power of m i-crofinance - to show how loans even as small as US$ 25 or US$ 40 can help to empower poor women across the globe. I also tell the soft knees story, however, to describe the limitations of micro-finance, and to highlight the importance of moving beyond rrucrofinance when servmg those 3 billion people in the world who live on US$ 2 a day or less. Over the years, as 1 have reflected on that brief encounter in Dar Es Salaam, Tanzania, I have come to realize that there was more to this soft knees story than 1 initially understood. In addition to offering thanks, this Tanzanian mother also was telling me of her dreams for her children, and describing the investment she was making in those dreams. She is not unusual in this regard, of course. Mothers all over the world share similar dreams and make similar investments in their children's futures. According to some reports, more than 800,000 Tanzanian youth, ages 15-24, enter the Tanzanian labour market annually, but only 3% secure employment irl the formal sector. The remaining 97% of entrants must tum to the in-formal economy to find or create jobs. More than a decade has passed, and I wonder if the woman's investment in her chil-dren's education has paid off as she had hoped. I worry that 1t did not. I worry that her m1croen-terprise remained micro, and that her children are among the nearly 75 million unemployed youth of the world, as described by the Interna-tional Labour Organization in its recent Global Employment Trends 2012. And I worry that if access to finance is not paired with access to inclusive and scalable business opportunities, then the last decade's achievements m expanding access to nucro-credit to over 150 million poor people will not be sufficient to keep these same people out of poverty over the long term. Microfranchise a la Avon A growing number of innovative social entre-preneurs are tackling this problem by creating 'busmesses in a bag' mspired by the world's largest direct seller of beauty products -Avon. These very small franchise or consign-ment businesses are affordable enough to be acquired and operated by women living at the base of the economic pyramid. Just as com-mercial franchise networks such as Avon have helped people with httle or no experience grow mto successful business owners around the world, microfranchise and microconsignment networks may hold similar promise. Some of these social entrepreneurs are pursuing a dual objective: building busmess opportunities for very poor women and, at the same time, creating distribution platforms to deliver much needed goods and services to poor communities around the world.~ Take, for example, Livmg Goods, a non-profit organization operating in Uganda that was founded in 2007 by Chuck Slaughter after he studied Avon's distribution methodology (www.livinggoods.org). Calling itself the 'Avon of pro-poor products', Living Goods has built and is expanding a distribu-tion platform for a bundle of products designed to fight poverty and disease. Whereas an Avon representative might go door-to-door selling lipstick and mascara to her neighbours, Livmg Goods representatives sell products like clean cook stoves, bed nets, soap and fortified foods. Another Avon-inspired business, also in East Africa, is Solar Sister (www.solarsister. org), which was founded in 2010 by Katherine Lucey. Solar Sister entrepreneurs, like !heir Liv-mg Goods counterparts, go door-to-door sell-ing products to poor communities. In !his case, however, lhe focus is on selling clean energy products such as solar-powered lighting units to replace kerosene lamps and candles. Solar Sis-ter provides its entrepreneurs with a start-up kit of clean energy products, including portable solar lights, mobile phone chargers and radio battery chargers, along with training and marketing sup-port Solar Sister is a self-described 'jobs-creation initiative, a women's empowerment initiative, a small-business mitiative, and a clean-energy initiative.' Importantly, Solar Sister is constructed on a microcon-signment, rather than a micro-franchise, model. Tlus means that the Solar Sister entre-preneurs do not pay for theu inventory up front, but rather pay only for inventory that What is needed to expand the number and reach of m1crofranch1se and m1croconsign-ment networks? Here are three lessons that the experience of microfinance might offer • Build investment-ready networks that are financially and operationally sustainable at multiple levels - for the individual micro-entrepreneur and for the network as a whole. As microfinance networks and providers worldwide have learned, they are only as vi-able as the micro-entrepreneurs they serve. Accordingly, products and services need to be sized and then priced at rates that the tar-get customer can afford. Additionally, building sustainable networks not only ensures their longevity and viability, but such a strategy also will allow these networks to tap into the grow-ing number of impact investors who are seek-ing social enterprises to support, while reduc-ing the networks' dependency on more limited donor funds • Measure the success of these networks holistically and transparently - both as to financial outcomes and development impacts on the micro-entrepreneurs and the communities that they serve. Be wary of metrics that can trigger, even if inadver-tently, undesirable behaviours and outcomes. Microfinance has learned the bard way that more is not always better. Put differently, a single-rrunded focus on spurring the growth rate of a microcredit portfolio can mask underlying weaknesses in its products and services. The same is likely true of micro-franchise and mi-customer service or micro-entrepreneur de-velopmenVtraining. • Front-load micro-entrepreneur and cus-tomer protections into the business model of microfranchise and microconsignment networks from the start. Such protections were too long in coming to the microfinance sector, unfortunately. As a result, good in-tentions have been an inadequate defence against accusations that some in the mi-crofinance sector rely on predatory lending and irlappropriate debt collection practices. As microfinance has learned, it takes only a handful of 'bad actors' to tarnish the appeal of the sector as a whole. Similar concerns could be raised in the microfrancluse and micro-consignment context, particularly smce two vulnerable populations could be impacted by microfranchise and microconsignment platforms - the micro-entrepreneur who is sellirlg goods and services for the network, and the poor people in her community or vil-lage that are buying her wares. These micro-entrepreneur and customer protections are likely to dnve, at least in part, the business model of the network, so it makes sense to embed them from the start. For example, there may be some products and services that are inappropriate to be included in a 'business in a bag' distribution platform - for example, inven-tory that could be diluted, tampered with, or con-tarrunated. Similarly, IDJcro-entrepreneur protec-tions are likely to colour and shape the nature of the relationship and support offered to the rrucro-entrepreneur by the network. If microfranchise and microconsignment networks were able to scale in number and out-croconsignment reach to approxunate the footprint that microfi-networks that nance enjoys today, the world at the base of the econoffilc pyraillld would look markedly differ-ent. New business and employment opportu-nities would be generated in rural villages as well as in urban settings. Youth unemployment and underemployment rates would fall. Much-needed products and services would reach poor communities, no matter how isolated, through innovative distribution platforms. In short, this would be a world where investments like that of the mother in Tanzama generate ex-traordinary returns. © FORUM ISSUE 2 2012 21 

Beyond Microfinance: Creating Opportunities for Women at the Base of the Pyramid

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Beyond Microfinance: Creating Opportunities for Women at the Base of the Pyramid

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