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Social Franchising Models Proving Poor Bring Profits

By David South, Development Challenges, South-South Solutions

SOUTH-SOUTH CASE STUDY

The four billion people in the world who live on less than US $2 a day have been described as the bottom of the economic pyramid, or BOP for short. In his book The Fortune at the Bottom of the Pyramid, Indian business consultant and professor CK Prahalad argues that this attitude must be turned on its head: rather than seeing the world’s poor as a burden, only worthy of charity, Prahalad sees nothing but opportunity and unmet needs that business can address. In short, he argues, profits can be married with the goal of eradicating poverty.

Prahalad has gone so far as to claim this is a market potentially worth US $13 trillion, while the World Resources Institute puts it at US $5 trillion in its latest report, The Next 4 Billion.

One of the tools business is turning to reach the world’s poor is known as social franchising. The concept borrows from the business world and the highly successful franchise models that are more commonly associated with fast-food restaurants and computer and clothing retailers – wherever rapid expansion and scale are required to reach the biggest market possible. And there is no bigger market, social franchising advocates claim, than the world’s four billion poorest people.

In the past, most formal business in developing countries chased the small middle class or the even smaller elite or foreign expatriate communities. Traditional poverty eradication strategies have also been criticized for being too narrow, focused on a very small group, or for wasting time and resources replicating what has already been achieved elsewhere, and for ballooning and shrinking depending on aid grants or success at fundraising. Social franchising aims to bypass these weaknesses by finding models that work, making sure they are self-financing, and then quickly scaling them up to reach as many people as possible. It’s a model that is gaining more followers and the serious interest of big and small businesses.

One example is the Scojo Foundation in India, established to tackle the common problem of blurry vision as people age (presbyopia). Not a disease, the first symptoms occur between the ages of 40 and 50. Low vision affects 124 million people in the world according to the World Health Organization’s Vision 2020 campaign, organizers of World Sight Day 2007 on October 11.

Blurry vision is a serious disability for weavers, mechanics, goldsmiths and others whose livelihoods depend on near vision. As vision deteriorates, these people are unable to provide for their families. Yet it is easily treatable with a pair of eyeglasses.

Since, 2002, the Scojo Foundation (the social franchising wing of eyeglasses manufacturer Scojo New York, has launched operations in Bangladesh, Mexico, Guatemala, El Salvador and Ghana. Its largest and fastest growing operation is in India, where it employs more than 560 entrepreneurs in rural villages, and selling more than 50,000 pairs of glasses since 2001.

It has grown quickly because the business model has been replicated by local staff who work as franchisees. It has followed the franchise model by building a network of “vision entrepreneurs” – low-income men and women, who in turn sell reading glasses directly to rural villagers throughout India. The franchise model enables the “vision entrepreneurs” to earn a good income, and gain respect from other community members.

Nico Clemminck, co-author of a case study on Scojo, found the price was very competitive with other options in India, and that the higher quality of the glasses made them attractive to villagers.

“The franchisees, or Vision Entrepreneurs as Scojo calls them, that we met were very involved with Scojo – some of them shifting away their focus from previous occupations to spend the majority of their time on conducting vision screenings and selling glasses. The main reason is that the business is quite profitable to them – they make a US $1 margin per glasses sold, which is very high compared to other retail products. A trend we did notice is that commitment decreases over time, as the entrepreneurs exhaust their immediate circle of relatives or target village populations, and the incremental sale becomes tougher to make.”

According to Clemminck, Scojo has been able to quickly and successfully expand to other countries by forming partnerships with existing networks that reach into villages.

The profit hierarchy works like this: the manufacturer charges US $1 for the reading glasses, Scojo charges another US $1, the franchisee a further US $1, and the customer pays US $3 for the glasses. By creating profit at each stage, the model ensures the financial incentives are there to keep the distribution network active.

Prior to Scojo, it was believed developing infrastructure in rural Indian communities is too high to sustain a franchising model for low-cost products. Scojo found it was possible to succeed with this model, by focusing on profitability and sustainability right from the start, pursuing aggressive growth through partnerships to build economies of scale, blocking competitors by having a strong brand and first-mover advantage, constantly refining the model across regions, and delivering a tangible social benefit, both economic and health.

On average, franchisees work 20-30 hours per month and earn US $15 to US $20 per month. Considering most franchisees were living on US $1 a day, the extra income is very welcome, Clemminck said.

“This project gave me insight into the large, untapped market opportunity that exists,” says case study co-author Sachin Kadakia, “and how the concept of ‘Bottom of the Pyramid’ provides a tangible and significant improvement to the quality of life of people in these communities.”

Another social franchise gaining ground in India is Medicine Shoppe. As a chain of pharmacies, Medicine Shoppe targets underserved communities by offering entrepreneurs franchises. It is an offshoot of the largest franchiser of independent community pharmacies in the US, Medicine Shoppe International Inc.. It can draw on its strong brand and identity to appeal to potential franchises.

Acumen Fund fellow Nadaa Taiyab, who is working with Medicine Shoppe’s expansion to help the rural and urban poor, found it was important to learn lessons and adapt the model.

“When I arrived in December (2006),” she said, “we opened the first Sehat Clinic. Last weekend we opened the seventh, with an eighth shortly underway. The model has undergone a tremendous evolution in the past six months. We shifted our site selection strategy from relatively affluent areas with a slum nearby, to locating the clinics right inside slums. We redesigned the process through which we recruit doctors and created an employment package that allows us to hire experienced doctors at a salary we can afford.

“We also implemented an entirely new concept for Medicine Shoppe called community marketing outreach. Through this program, we hire local women in each area to make daily home visits, refer patients to the clinic, spread health education and awareness, and promote our free health camps and health clinics. In the past four months we have held over 35 health-plus-vision-testing camps, serving over 4,000 people.

“We have also made some changes to the look and feel of the clinics and shops and put all our marketing materials in the local language, to make our services more appealing to low-income markets.”

There are critics of the BOP approach, however. Aneel Karnani from the Ross School of Business at the University of Michigan, argues from a for-profit perspective, business would be much better off targeting the needs of the growing middle classes, especially in countries like India and China. He, however, does acknowledge that social franchising businesses like above, where social responsibility is key, are relevant to meeting the needs of the poor.

Published: August 2007

Resources

  • A detailed and thorough case study of how the Scojo Foundation model works is found here
  • An excellent set of decision matrices to help budding social entrepreneurs and existing businesses to decide if social franchising is the right solution: www.createproject.org
  • The Social Enterprise Alliance has built a knowledge network and extensive range of resources (including 160 case studies) on social enterprise.

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Global South Eco-cities Show How the Future Can Be

By David South, Development Challenges, South-South Solutions

SOUTH-SOUTH CASE STUDY

The world is currently undergoing a high-stress transition on a scale not seen since the great industrial revolution that swept Europe in the 19th and 20th centuries. Today’s urban and industrial transition involves many more people and is taking place on a greater proportion of the planet. With rapid urbanization comes a demand for middle class lifestyles, with their high-energy usage and high consumption of raw materials.

This is stretching the planet’s resources to breaking point. And as many have pointed out, if the world’s population is to continue past today’s 7 billion to reach 9 billion and beyond, new ways of living are urgently required. Radical thinking will be necessary to match the contradictory goals of raising global living standards for the world’s poor with pressured resources and environmental conditions.

But there are innovative projects already under development to build a new generation of 21st-century cities that use less energy while offering their inhabitants a modern, high quality of life. Two examples are in China and the Middle East.

Both projects are seen as a way to earn income and establish viable business models to build the eco-cities of the future. Each project is seeking to develop the expertise and intellectual capacity to build functioning eco-cities elsewhere. In the case of the Masdar City project in the United Arab Emirates, international businesses are being encouraged to set up in Masdar City and to develop technologies that can be sold to other countries and cities – in short, to create a green technology hub akin to California’s hi-technology hub ‘Silicon Valley’. Masdar City is also being built in stages as investors are found to help with funding. Both projects hope to prove there is money to be made in being green and sustainable.

The Tianjin Eco-city (tianjinecocity.gov.sg) project is a joint venture between China and Singapore to build a 30 square kilometre city to house 350,000 residents.

Tianjin (http://en.wikipedia.org/wiki/Tianjin) is a large industrial city southeast of China’s capital, Beijing. It is a place that wears the effects of its industrial expansion on the outside. Air pollution is significant and the city has a grimy layer of soot on most outdoor infrastructure.

China has received a fair bit of criticism for its polluted cities as the country has rapidly modernized in the past two decades. This sprint to be one of the world’s top economic powers has come at a cost to the environment. In this respect, China is not unusual or alone. Industrialization can be brutal and polluting, as Europe found out during its earlier industrial revolution.

But China is recognizing this can’t go on forever and is already piloting many initiatives to forge a more sustainable future and bring development and high living standards back in line with what the environment can handle.

Sino-Singapore Tianjin Eco-city is the second large-scale collaboration between the Chinese government and Singapore. The first was the Suzhou Industrial Park (http://www.sipac.gov.cn/english/).The Tianjin project came up in 2007 as both countries contemplated the challenges of rapid urbanization and sustainable development.

The project’s vision, according to its website, is to be “a thriving city which is socially harmonious, environmentally-friendly and resource-efficient – a model for sustainable development.”

The philosophy behind the project is to find a way of living that is in harmony, with the environment, society and the economy. It is also about creating something that could be replicated elsewhere and be scaled up to a larger size.

The city is being built 40 kilometres from Tianjin centre and 150 kilometres from Beijing. It is located in the Tianjin Binhai New Area, considered one of the fastest growing places in China.

Construction is well underway and can be followed on the project’s website (http://www.tianjinecocity.gov.sg/gal.htm). It will be completed in 2020.

This year, the commercial street was completed and is ready for residents to move in.

Residents will be encouraged to avoid motorized transport and to either use public transport or people-powered transport such as bicycles and walking.

An eco-valley runs down the centre of the city and is meant to be a place for pedestrians and cyclists to enjoy.

The basic building block of the Eco-city – its version of a city block – is called the Eco Cell. Each Eco Cell measures 400 metres by 400 metres, a comfortable walking distance. Four Eco Cells make a neighbourhood. Several Eco Neighbourhoods make an Eco District and there are four Eco Districts in the Eco-city. It is a structure with two ideas in mind: to keep development always on a walkable, human scale and also to provide a formula for scaling up the size of the Eco-city as the number of residents increases.

It is a logical approach and seeks to address one of the most common problems with conventional cities: sprawling and unmanageable growth that quickly loses sight of human need.

Agreement was also reached on the standards that should be achieved for a wide variety of criteria, from air and water quality to vegetation, green building standards, and how much public space there should be per person.

An ambitious project in the United Arab Emirates is trying to become both the world’s top centre for eco cities and a living research centre for renewable energy. Masdar City (http://www.masdarcity.ae/en/)is planned to be a city for 40,000 people. It is billed as a high-density, pedestrian-friendly development where current and future renewable energy and clean technologies will be “marketed, researched, developed, tested and implemented.”

The city hopes to become home to hundreds of businesses, a research university and technology clusters.

This version of an eco-city is being built in three layers in the desert, 17 kilometres from the Emirati capital Abu Dhabi. The goal is to make a city with zero carbon emissions, powered entirely by renewable energy. It is an ambitious goal but there are examples in the world of cities that use significant renewable energy for their power, such as Reykjavik, Iceland in Northern Europe, which draws much of its energy from renewables and geothermal sources.

Masdar City is designed by world-famous British architect Norman Foster (fosterandpartners.com) and will be 6.5 square kilometres in size.

The design is highly innovative. The city will be erected on 6 metre high stilts to increase air circulation and reduce the heat coming from the desert floor. The city will be built on three levels or decks, to make a complete separation between transport and residential and public spaces.

The lowest deck will have a transportation system based on Personal Rapid Transport Pods. These look like insect eyes and are automated, controlled by touch screens, using magnetic sensors for propulsion. On top of this transport network will be the pedestrian streets, with businesses, shops and homes. No vehicles will be allowed there, and people will only be able to use bicycles or Segway (segway.com) people movers to get around. An overhead light railway system will run through the city centre, all the way to Abu Dhabi City.

“By layering the city, we can make the transport system super-efficient and the street level a much better experience,” Gerard Evenden, senior partner at Foster + Partners, told The Sunday Times. “There will be no car pollution, it will be safer and have more open spaces. Nobody has attempted anything like this.”

Masdar City is being built in stages as funding comes, with the goal of completion by 2016. It hopes to achieve its aspiration to be the most technologically advanced and environmentally friendly city in the world. As for water supplies in the desert, there is a plan: dew collected in the night and morning and a solar-powered desalination plant turning salt water into drinking water.

Electricity will come from a variety of sources. Solar panels will be on every roof and double as shade on alleyways. Non-organic waste will be recycled, while organic waste will be turned into fuel for power plants. Dirty water will be cleaned and then used to irrigate green spaces. Because of the design, the planners hope the city will just use a quarter of the energy of a conventional city.

To keep the city smart and the project on top of developments in renewable energy, the Masdar Institute of Science and Technology (http://www.masdar.ac.ae/) will specialize in renewable energy technology.

The cost for the city was pegged at US $22 billion in 2009.

The chief executive of Masdar – Abu Dhabi’s renewable-energy company – is Sultan Al Jaber. He sees the city as a beacon to show the way for the rest of the Emirate to convert from a highly inefficient consumer of energy to a pioneer in green technology.

“The problem with the renewable-energy industry is that it is too fragmented,” he told The Sunday Times. “This is where the idea for Masdar City came from. We said, ‘Let’s bring it all together within the same boundaries, like the Silicon Valley model (in California, USA).’”

The project needs to gather much of its funding as it progresses. The United Nations’ Clean Development Mechanism (http://cdm.unfccc.int/) is helping with financing. Companies can earn carbon credits if they help fund a low-carbon scheme in the global South. The sultan is ambitious and sees this as a “blueprint for the cities of the future.” It has been able to bring on board General Electric (GE) and the Massachusetts Institute of Technology (MIT) to sponsor the university.

It is possible to visit Masdar City and take a tour (http://www.masdarcity.ae/en/105/visit-masdar-city/) and it is also possible to view online what has been built so far (http://www.masdarcity.ae/en/32/built-environment/).

Resources

1) Center for Innovation, Testing and Evaluation (CITE): Located in Texas, USA, CITE is a fully functioning city with no residents to test new technologies before they are rolled out in real cities. Website: http://www.pegasusglobalholdings.com/test-center.html

2) Digital Cities of the Future: In Digital Cities, people will arrive just in time for their public transportation as exact information is provided to their device. The Citizen-Centric Cities (CCC) is a new paradigm, allowing governments and municipalities to introduce new policies. Website: http://eit.ictlabs.eu/action-lines/digital-cities-of-the-future/

3) Eco-city Administrative Committee: Website: http://www.eco-city.gov.cn/

4) Sino-Singapore Tianjin Eco-city, Investment and Development Co., Ltd. Website: tianjineco-city.com

5) ‘The Future Build’ initiative, a new green building materials portal from Masdar City. Website: thefuturebuild.com

6) UNHABITAT: The United Nations Human Settlements Programme is the UN agency mandated to promote socially and environmentally sustainable towns and cities with the goal of providing adequate shelter for all. Website: http://www.unhabitat.org

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Cooking Bag Helps Poor Households Save Time, Money

By David South, Development Challenges, South-South Solutions

SOUTH-SOUTH CASE STUDY

For millions of poor people around the world, life is lived on the economic margins and household and personal budgets are tight. There were 1.29 billion people in the world living on less than US $1.25 a day as of 2008 (World Bank), and 1.18 billion living on US $1.25 to US $2 per day. There was only a modest drop in the number of people living below US $2 per day – the average poverty line for developing countries – between 1981 and 2008, from 2.59 to 2.47 billion.

Since the global economic crisis erupted in 2008, the world’s poor have seen prices fluctuate wildly as the international financial system fights the effects of the turmoil. In 2008, this led to the Food and Agriculture Organization sounding the alarm about the harmful effects of rising food inflation.

Increasing hunger led to civil unrest and rioting that year.

Anything poor people can do to make their slim daily budgets go a little bit further means more money left over for better quality food and other expenses, like clothing, shelter, fuel and education. One clever invention from South Africa is trying to tackle household cooking costs and shave the cost of fuel required to prepare the family meal. The Wonderbag (http://nbwonderbag.com/) is a brightly coloured, puffy cooking bag that slow cooks a meal in a pot – be it a stew, curry, rice, soups – to save energy.

“The cost and savings per household are significant,” according to the Wonderbag’s inventor, Sarah Collins.

It has many other advantages, too: it is a time-saver, allowing people to spend the time doing something other than just tending the cooking pot. It can also reduce cooking accidents because less time is spent around the stove or fire.

It is an efficient cooking method that uses less water to cook meals. And it even avoids the risk of burning – and wasting – food.

“20 per cent of all staple food in Africa is burned, due to pots being placed on open fires and unregulated stove tops. With the Wonderbag, no burning happens,” confirms Collins.

To date, the Wonderbag has created 1,000 jobs and is looking to increase this to 7,000 jobs in the next five years.

Wonderbag bills itself as “eco-cooking that’s changing lives.”

Eco-cooking seeks to use every joule (http://en.wikipedia.org/wiki/Joule) of energy from the cooking fire or heat source to maximum effect. A pot is placed on the stove and brought to the temperature required for cooking the dish. Then the pot is placed in the Wonderbag. Since the bag is heavily insulated, it reflects back the existing heat in the dish and allows it to continue cooking for up to 12 hours. It can cook rice in one hour and lamb in two to three hours.

It works in four easy steps, summed up on the Wonderbag website: “boil it, bag it, stand it, serve it”.

The Wonderbag claims to use 30 per cent less energy than other cooking methods. According to cost breakdowns on the Wonderbag website, someone with a Wonderbag would use 2.4 litres a week of paraffin – a common fuel for cook stoves – compared to 4 litres without. This works out to a cost of US $2.40 a week with a Wonderbag and US $4.00 a week without.

The trade-off with the savings in money and energy is time – Wonderbag is not suitable for those looking for a quick meal. According to Wonderbag, meat that cooks in 20 minutes on the stove will take five hours in the Wonderbag.

Chicken that takes 15 minutes on the stove takes three hours in the Wonderbag. Vegetables that take five minutes on the stove will cook in an hour in the Wonderbag.

South African entrepreneur and inventor Collins originally developed the Wonderbag for people living in the townships of Durban (http://en.wikipedia.org/wiki/Durban). She found many of the residents spent up to a third of their income on fuel for cooking. They would either use paraffin or spend many hours gathering wood or dung.

These common fuel sources for cooking give off toxic fumes and are a health hazard if used for long periods. The Wonderbag means households spend less time inhaling fumes from a stove.

“The Wonderbag will always be a work in progress for me as I look to adapt the bag in line with my consumers’ feedback,” confirms Collins. “For example, we are now about to launch Wonderbag 2, which has an even more efficient insulator than polystyrene and is more readily available and easier to recycle following feedback earlier in the year.”

In South Africa, the bags sell for R170 (US $22) and there are discounts for the very poor. Collins estimates that a family of four could save US $80 a year if they used the Wonderbag two or three times a week.

Collins has used clever marketing strategies to get the Wonderbags out to the public, and 150,000 have been sold so far. One promotion gave away a Wonderbag with every purchase of boxes of curry powder.

Wonderbag has also partnered with local communities. Swartland Municipality (swartland.org.za) purchased 5,000 Wonderbags and distributed them to 4,700 of “the most indigent and deserving households – the poorest of the poor.”

It is also running a promotion in the United Kingdom where, for every Wonderbag bought, one is given to a family in the developing world.

The popularity and success of the Wonderbag prompted the multinational food company, Unilever – one of the world’s leading suppliers of fast-moving consumer goods – to purchase 5 million bags for distribution. According to the Wonderbag website, this could lead to savings of US $1.35 billion on fuel for the users.

“The partnership has also enabled us to scale up and test the Wonderbag in different markets,” explains Collins.

Wonderbag hope to expand to 12 or 15 developing countries in Africa in 2012.

The company says it plans to target developing countries with high poverty, fuel supply shortages, high incidence of health problems from air pollution, and high incidence of injuries from fuel fires.

And for Wonderbag’s success so far, Collins has this advice: “Immerse yourself in your product and the way of life of your consumers. Understand it and them inside out so you can be your best advert. Word of mouth is by far the best form of advertising and the truth out of your own mouth is a great start.”

Resources 

1) Haybox: Haybox is another variation on the concept of heat retention for efficient cooking. Website: http://haybox.co.uk/

2) How to build a clay oven. Website: http://clayoven.wordpress.com/2008/08/29/1-building-a-clay-oven-the-basics/

3) Solar ovens and cookers are another way to cut costs when making meals.This website has many designs and plans on how to build a solar cooker. Website: http://solarcooking.org/plans/

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Energy-Efficient Wooden Houses are also Earthquake Safe

By David South, Development Challenges, South-South Solutions

SOUTH-SOUTH CASE STUDY

In Argentina, an innovative housing project has married good design with energy efficiency, earthquake resilience and the use of local materials and labour. As energy resources continue to be stretched around the global South, innovative building designs will be critical to the creation of sustainable housing for the future.

The happy mix of efficient modern design with affordable local materials and labour can be seen in three row houses designed and built by Buenos Aires-based Estudio BaBO (estudiobabo.com.ar) in the El Once neighbourhood in Villa La Angostura, Patagonia, southern Argentina.

The wooden houses are built in a Norwegian style. Estudio BaBO, founded in 2007, discovered that the Scandinavian nation’s housing traditions were well suited to the particular needs of the region and the local government.

The local government imposed a number of planning guidelines and restrictions that needed to be met to receive planning permission. This included creating row houses which must be made of wood – a plentiful local resource. They also had to be earthquake-safe since the region is seismically active and be able to withstand the heavy rains common to the region.

Looking around for the right guidance to tackle this brief, Estudio BaBO discovered SINTEF – Norway’s leading disseminator of research-based knowledge to the construction industry (http://www.sintef.no/home/Building-and-Infrastructure/). The Nordic nation has many wooden homes and also has similar environmental conditions and challenges to Patagonia – though its precipitation tends to fall as rain, rather than snow.

The black-painted homes look typically Norwegian, with a tasteful and clean design that does not clash with the forested surroundings. An air chamber has been created inside the homes’ walls allowing for constant ventilation of the wood, which prevents the wood from rotting and extends the life of the house. With the high rainfall of the region, wood is at risk of rotting if allowed to become damp. The air cavity also insulates the house, providing significant energy savings while keeping the interior warm and comfortable.

Adding to the energy efficiency of the design, the windows are double glazed and heat is also circulated through the floor – an efficient way to heat a home because heat rises.

To keep costs down and the project simple, the palette used for the homes is simple but attractive: black, white, wood and metal. The local wood is cypress and is painted black. The interior walls are all white and the floors are made from black granite on the ground floor and cypress wood parquet on the upper floor. The rest of the woodwork in the house is also made of cypress.

Using locally sourced materials also helps to keep costs down.

The project was initially conceived in 2009 and the houses were built in 2010-2011. While wood is plentiful in Patagonia, traditionally the use of wood in construction was rudimentary and local labour skill levels were low. This meant the design had to be simple and easy to build.

“Despite the profusion of wood as a material in the south of Argentina, the lack of specialized knowledge and of a specialized industry narrow its uses to isolated structural elements and interior and exterior finishes,” said one of the architects, Marit Haugen Stabell.

The three units of two-storey row houses each come with a living room, dining room, kitchen, toilet, two bedrooms and a laundry room. Each home also has an outdoor patio. The homes are designed to receive maximum natural light. Deploying this energy efficient design is considered unusual for Argentina and Estudio BaBO has set a new standard for sustainable housing in the country.

It looks like the CLF Houses could inspire others to look again at wood as a building material.

Resources

1) A story on how researchers are perfecting wooden home designs to withstand heavy earthquakes. Website:http://inhabitat.com/wooden-house-can-withstand-severe-earthquakes/

2) A website packed with photographs of wooden and other houses for inspiration and lesson learning. Website:http://www.trendir.com/house-design/wood_homes/

3) A step by step slideshow on how a Norwegian wooden house was re-built. Website:http://www.dwell.com/articles/norwegian-wood.html

4) Inspirational wooden home decorating ideas from across Scandinavia. Website:http://myscandinavianhome.blogspot.cz/

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© David South Consulting 2021