Problems that Market-Based Solutions Can Fix

Take, for an example, the scenario of small rural farmers trying to eke out a living by selling their crops.  The problem for these farmers, in many instances, is not that they don’t work hard enough or that they don’t have something valuable to offer people – it’s simply that they do not have access to the necessary markets to get a deserved and fair return on their products.

The reasons for not having access to the necessary markets in this case can be caused by many different factors, of which only three are listed below:

1. They don’t have a sufficient knowledge of market opportunities or how to take advantage of these market opportunities.

2. They are forced to sell at a lower price because of larger farms owned by the wealthy that dominate the market.

3. They don’t have the capital necessary to invest in a technology that would allow them to make their product more valuable and more marketable.

Finding market-based solutions to help those in poverty overcome these challenges and gain access to markets where they can participate in a fair value exchange for their goods and services is critical if poverty is to be eradicated and those suffering under its constraints are to be placed in a position where they can provide for their families and create sustainable business.

Microfranchising as a Market-Based Solution

A microfranchise has the ability to overcome these boundaries and allow those locked in poverty to make the market work for them.  When you use a microfranchising model, you are leveraging a proven process that works for a given market – it’s already been tried and tested.  The market research, the product development, and the process refining for delivering that product to the market have all been thought through.  All of this thought and leg work, done by someone in a position to understand the markets and take advantage of the opportunities, can now be handed to the microfranchisee to use.  This overcomes the problem of insufficient knowledge of the market.

A microfranchise also allows smaller businesses to have more sway in a given market because of the ability to leverage a brand.  Each microfranchisee inherits the brand reputation of the franchise, gaining more notoriety and power in a given market.  Markets are composed of inherently risk-averse buyers; having a trusted brand name behind the microfranchisee’s products and services increases his/her ability to sell.

The microfranchising model also allows a microfranchisee to have access to transformative technology, so they can reach markets previously unattainable.  Because the microfranchiser has access to the needed capital, they are able to provide the technology to the microfranchisee to use in running the business.  Take the above example of the farmers; what if they had access to a simple piece of technology that would allow them to can some of their crops, extending their economic shelf life and allowing them to be shipped further distances?  This opens the door to new markets to which they can sell.

The use of the microfranchising model leverages the power of markets to provide much-needed opportunities for those in poverty to progress and gain a fair chance at sustainable business.

Your thoughts?

The spectrum breaks down poverty alleviation activities into two major categories: those that build dependency, and those that build economic self reliance.

Poverty Alleviation Methods that Build Dependency

The three activities that build dependency are ‘taking services, goods, or people to the poor.’ This would include actions such as doctors and dentists going to bring medical services, organizations taking goods such as food or clothing, and summer excursions bringing people and students to work on things such as building orphanages or homes.

All of these means are important under the appropriate circumstances, such as disaster relief. If a natural disaster occurs, leaving thousands without shelter or food, then all of these activities are necessary to save lives. Food, water, and supplies must be brought, workers must come to help rebuild, and professionals must come to assist in providing needed medical attention.

On the other hand, these same activities can be less effective if they are not done under the appropriate circumstance. This is because, in many cases, these types of methods build dependency into people by giving them what they need rather than helping them learn to produce it for themselves. It’s reminiscent of the age old adage that if you give a man a fish, he eats for a day; if you teach a man to fish, he eats for a lifetime.

Not only can these methods be less effective, but they can also be subtly destructive to the alleviation they are meant to promote. Take for an example a small village, where a starting entrepreneur is trying to grow a business by selling clothing that she and her family have learned how to make. This entrepreneur may be on her way to economic self-sufficiency, being able to provide for her family by the work she is performing. But what happens when a ‘relief’ group comes in, bringing piles of old clothing that they have collected, to give away? With no more demand for her work because of the inundation of free clothing, this entrepreneur now has no way of making a living and is out of business. She, with the rest of the village, has become dependent upon the ‘relief’ group’s charity.

Poverty Alleviation Methods that Build Economic Self-Reliance

The activities that seek to build economic self-reliance among those living in poverty can be seen as a logical progression. The first activity is microcredit, which is the action of lending money to the poor. This is followed, reasonably, by microfinance, which is the activity of providing financial services to the poor. Both of these are more effective by including the third activity in the progression, microenterprise development, which seeks to train the poor to grow their own businesses.

The great benefits that have been seen as a result of these three methods can hardly be disputed; they have literally helped thousands of people out of poverty and placed them in a position to provide for their families. Yet, these methods have only just begun to solve the enormous problem of world poverty.

The next step in the progression, aimed at reaching more people stuck in poverty than has previously been possible, is microfranchising, or the activity of providing proven business models to the poor. In this way, they are able to take a model and process that has already been proven to work and use this to help them rise above poverty.

With the addition of microfranchising to these methods of poverty alleviation, it will be possible to reach a vastly larger number of those living under the constraints of poverty. What we need are companies and organizations to start thinking in this way so that this strategy can be fully implemented.

What are your thoughts?

The Problem of Poverty

The global problem of poverty is one of such scale and consequence that it deserves the world’s attention and thought.

In our world today, almost half of the population (more than three billion people) live on less than $2.50 a day. (see Global Issues) According to marketing author Seth Godin, that’s enough for rent on the average American apartment for about 45 min.

According to the UNICEF organization, 25,000 children die each day as a result of poverty. (see Global Issues) Putting this into perspective, imagine 62 Boeing 747’s, full of children, crashing every single day. The number of deaths is the same.

These are just two of the many examples of the devastating consequences of world poverty; many more could be cited.

On a more fundamental level, however, it is important to understand exactly what poverty is and what its causes are.

What Poverty is

Poverty could be defined as a lack of opportunity. Some have defined it as a sense of loss. Some say poverty occurs when your basic needs are not met. All of these definitions can enhance our understanding of the term poverty, but perhaps the most telling definition is that poverty is a state of mind or lifestyle. For the billions of people who live under the restrictions and afflictions of poverty, it is just that – a lifestyle of want and captivity, and a mindset of uncertainty and inability.

What Causes Poverty

Just as there are many definitions of poverty, so also there are many causes. These causes include a lack of education, absence of the rule of law, lack of distribution, no infrastructure, no respect for property rights, and so forth. Poverty can also be caused by a people’s state of mind – if they have been raised in poverty and lived with it their entire lives, then changing the mindset to one that can rise above poverty can be difficult.

In subsequent articles, these causes will be analyzed with a perspective on how microfranchising and the power of sustainable business can not only change attitudes, but change circumstances.

Please join in on the conversation! Your experiences, opinions, and input are greatly appreciated. Many voices working together can make a significant change to the world.