Experiment: Franchising Microfinance

This presentation discuses the franchise model for MFIs to increase their operations, allowing private banks to reach the rural areas. The presentation describes the constraints faced by MFIs in expansion of their products and services, including:

• Lack of large subsidies for expansion;
• Need for local understanding from district to district;
• Organic branch-by-branch expansion model;
• Systems not designed to manage nationwide presence.

The presentation explains the term franchising and raises questions on whether microfinance can be franchised. It also highlights the successful franchises from all over the world. It elucidates the concept of franchising microfinance that includes:

• Selling franchisees the business package;
• MFIs providing the ongoing and monitoring support;
• In return, MFIs taking upfront fee and a share of income.

The presentation argues why franchising might work:

• It attracts capital from the entrepreneurs and investors;
• Entrepreneurs are rural and have a local understanding;
• Franchisees make profit from day one.

The presentation highlights the advantages of accepting the model:

• For the franchisee:
  • Access funds through franchisor's relationship with banks;
  • Incentive to grow rapidly to recover the initial franchise purchase payment.
• For the MFI:
  • Help in expanding the brand to new areas;
  • Rapid expansion;
  • Additional source of revenue;
  • Option to expand products.

The presentation concludes that the main constraints faced by the banks are inappropriate products and staff orientation that can be solved through adopting the franchise model.