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Franchising as an instrument for the ADB for SME development

M. BourenaneEnterprises Support Service

Division Managerm.bourenane@afdb.org

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I. SMEs and economic development

II. Franchising as an SME development tool

III. Franchising in AfricaIV. Franchising and the ADB

V. Some Concluding Remarks

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I. SMEs and economic development

• over 90% of private businesses are SMEs

• main generators of employment

• contribute to a more equitable distribution of income

• contribute to local and regional development

• promote a culture of entrepreneurship and other business-related skills due to their low entry barriers

In Africa, SMEs generally lack technological and managerial capacities, leading to high failure rates

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• Job creation: direct and indirect jobs

• Wealth creation: contribution to poverty reduction

• Skills transfer and business linkages

• Improvement in standards and quality

• Generate entrepreneurship

Franchising has a significantly higher rate of success than independently run SMEs

II. Franchising as an SME development tool

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Evidence of the Existence of Franchising

Adequate Environment to Support Franchising

Varying degrees of franchise activity were found to exist in 22 African countries

III.Franchising in Africa

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Factors that affect the development of franchising in African countries:

General enabling business environment

Population and market size

Proximity to larger franchising nations

Level of urbanisation

Literacy rates

Corruption

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Constraints to the development of franchising:

Poor awareness by the different stakeholders

Lack of financing available

No specific franchising regulation

Disinformation as to existing business opportunities

Little private sector involvement and support

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ADBLEGAL AND

REGULATORY INITIATIVES

INTERNATIONAL MARKETING AND

AWARENESS INITIATIVES

CAPACITY BUILDING

INITIATIVES

FINANCING PROGRAMMES

Franchising and ADB: Main axes of intervention

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Sponsor and participate in Franchising Seminars

and Conferences

Awareness Creation: Research and Publications

INTERNATIONAL MARKETING AND

AWARENESS INITIATIVES

MOROCCO

EGYPT

SOUTH AFRICA

NIGERIA

JAI Seminar (TUNIS, CAIRO)

Franchising Toolkit

Franchising Report

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CAPACITY BUILDING

INITIATIVES Technical Assistance

Programme:FRANCHISE

ASSOCIATIONS

MOROCCO

EGYPT

Non-regional Franchise

Associations

Other Local and International

Experts

Franchise Association of

Southern Africa

Network of African FRANCHISE

ASSOCIATIONS

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FINANCING PROGRAMMES

FIRST PROGRAMME to finance franchisees in

South Africa

ROLL OUT OF THE PROGRAMME

SADC ? Morocco Egypt ???

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Last year’s seminar an overview:Franchising as business format

Status of franchising

Challenges

Role of private sector and its support institutions

Access to finance

Policy and regulatory issues

International versus indigenous franchising

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This year more in-depth and new topics:Franchising associations

Self-regulation

Laws and regulations

Business development services for franchisees

Regional franchising development through indigenous and international franchising

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IV. Concluding Remarks1. Franchising can have positive development impact

in Africa

2. Potential should be assessed with a medium to long term perspective

3. Important to bring all stakeholders together to address existing constraints with a Public-Private Partnership approach

4. ADB can play facilitative role along with other stakeholders