A Canadian non-profit jumpstarting business in South
through microlending, microfranchising
and asset based community development.
Canadian Charitable Registration Number (86418 8420 RR0001).
Started informally in 1998 by Martha Deacon, The Townships Project has been a registered charity in Canada since 2004, providing microloans through local microfinance institutions (MFIs) in South African townships. Lending is done on the ground locally, by local people and is available to anyone with an honest intent to repay who needs a small loan to start or expand a business. These loans help to counter the very high rate of unemployment and extreme poverty. MFIs are expected to demonstrate real economic progress on the part of their clients, to become financially self-sustaining within 3 to 5 years and to maintain compliance with South African credit legislation. Many will be familiar with microlending through the work of Muhammad Yunus and the Grameen Bank in Bangladesh, who jointly won the 2006 Nobel Peace Prize.
Africa is by far the wealthiest continent in mineral resources, and by far the poorest in per capita income – and getting poorer.The Townships Project focuses on South Africa because it is the economic driver in southern Africa, and has a substantial impact on the rest of the continent. More than 20 million South Africans subsist on less than $2 a day in a country with the most advanced infrastructure in southern Africa. Loans, starting at about $100, are made without collateral to the poorest and are repaid with interest.
In the beginning, in 1998, it appeared that micro-lending alone could provide a way for the poor to escape the poverty trap. Through years of working with a number of different MFIs in Mdantsane outside East London, in the mining districts around Klerskdorp and in the townships around Groblersdal and Cape Town, The Townships Project has come to recognize that these loans by themselves are often insufficient to provide a safe rung on the ladder to economic security.
After 20 years of intensive effort and significant expense in South Africa, widespread access by the poorest to enterprise lending remains elusive. There are three relatively large organizations, Small Enterprise Foundation (www.sef.co.za), Women’s Development Businesses (www.wdb.co.za) and Marang (www.marang.co.za), each of which was started in the early 1990s with significant foreign and domestic aid. All three are close to being self-sustaining, but none has more than 100,000 clients today. A fourth enterprise microlender, Tetla Financial Solutions, was started largely with private funds by Yvonne Radinku in 2007 and is supported by The Townships Project. It expects to achieve self-sufficiency in current operations by December, 2010, with about 3000 clients. Considering that there are 20 million in great need, this is a proverbial drop in the bucket although an encouraging one.
We are recognizing that microlending alone has not proven sufficiently powerful to effect widespread improvement for the poorest in South Africa. We are therefore making efforts to coordinate our response and our actions with those of two other social and economic movements: asset-based community development and micro-franchising.
Asset-based community development encourages communities to assess their own assets – social connections, knowledge and skills, natural, institutional, business, rights and entitlements from the state – in order to truly understand what they have, so that they can make a plan to use what they have to get what they need. Part of this assessment includes tallying all income flowing into the community, from wages, diaspora transfers, government transfers and other sources, and tracing how it is spent. For many communities both of these exercises, asset assessment and income assessment, provide “lightbulb” experiences, prompting exclamations such as: “Wow! We didn’t realize how much we had and how much we earned! And we certainly didn’t realize how much we were spending OUTSIDE our community.” This assessment provides the basis for a community to make a plan to keep its income circulating within its confines to create more wealth. This plan may involve starting or supporting small businesses relating to poultry and egg production, goats milk, dressmaking, bicycle repair, health services and other areas fundamental to any community’s welfare.
Microfranchising recognizes that franchising is, quite simply, the most successful business model every created. Franchising takes a successful business and replicates it using consistent, well-defined processes and procedures, creating a brand while procuring inputs, recruiting and training franchisees, and continuously improving the business mode. Microfranchising offers this model to the poor, bringing affordable business ownership and training, reliable systems and supply links as well as family employment to many of the businesses communities recognize they need.
Micro-lending networks are filled with people who have already proven to be reliable borrowers and entrepreneurs, so they act as a natural “farm team” for franchisors looking for reliable franchisees. And for those who want to start a stand-alone business, or for whom a micro-franchising business is not available, it makes sense to have the support of a community as a result of its ABCD exercise, where it recognized the need to support the kind of business the borrower wants to start or expand.
So The Townships Project now sees its support for microlending in a much deeper, more comprehensive way than it did back in 1998, and is reaching out to other partners to make its microlending activities more effective in the communities in which they operate.
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