The McDonald's of foreign aid

    A McDonald's sign. Photo by: Håkan Dahlström / CC BY

    As the international development community gets more comfortable engaging with the private sector, it may be able to adapt a business model that has helped turn companies like McDonald’s into the global giants they are today.

    Franchises rake in hundreds of billions of dollars in revenue each year; in the United States, for instance, 4 percent of U.S. businesses are operated as a franchise. Owners usually pay royalties for the ability to use a company trademark. They may reimburse the company for training and advice received, and share a portion of their profits with headquarters.

    Social franchises may work differently — especially when it comes to money — but the general idea is the same: If you have a promising idea, allow likeminded people around the globe to use it. It may help aid organizations scale up interventions and make them sustainable even beyond the end of a donor-funded project.

    Social franchises add something new to international development, writes Kate Wareing, Oxfam’s strategy development director, in a blog post published Wednesday (Aug. 1). Then again, they’re not easy to operate; implementation should start with a how-to guide “that doesn’t depend on the reader having a degree in development studies and the ability to decipher a secret development language,” she says.

    Take Saving for Change, for instance, a program Oxfam America launched in 2005 to increase access to financial services of rural communities that are not served by mainstream microfinance. The program forms groups of 20-25 people, primarily women, who pool their savings, lend money to each other and pay the group-established interest.

    Similar to other franchises, Saving for Change has grown rapidly: As of July 2011, it had created 24,000 groups with more than half a million members in five countries, namely Cambodia, El Salvador, Guatemala, Mali and Senegal. These members were able to save $9 million, savings that each year are distributed to members when they need it the most.

    The key to its success may be its simplicity. Forming a group does not involve massive startup capital, it involves self-policing so compliance is by theory not problematic, and most importantly, it is democratic, Wareing says.

    “Social franchising works,” argues the International Center for Social Franchising, whose mission is to help successful social impact projects replicate. “Not everyone can be an innovator, but there are many people willing to work hard to create social change.”

    Do you have experience with social franchising? In what contexts do you think it may succeed? Let us know by leaving a comment below.

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    About the author

    • Eliza Villarino

      Eliza Villarino currently manages one of today’s leading publications on humanitarian aid, global health and international development, the weekly GDB. At Devex, she has helped grow a global newsroom, with talented journalists from major development hubs such as Washington, D.C, London and Brussels. She regularly writes about innovations in global development.