By Kimia Raafat, KF10 Paraguay

College students must pick a major.  They distress over the decision:  economics or accounting? Political science or general studies? Should I double-major? Add a concentration?  And throughout the process, there are many that pick one out of obligation (with no path in mind), they hope for the best, and of course, hope this decision will lead to future professional success.

Microfinance borrowers must pick a career—they risk taking out a loan to invest in their business. They distress over the decision: Despensa(general store) or clothing sales? Should I double-up my business by selling empanadas? And throughout the process, there are many that pick an activity out of obligation (often with no path in mind), they hope for the best, and of course, hope this decision will lead to future professional success.

At my college, I was given two years to try my hand at economics, calculus, psychology, biology and more, before settling in on one area of focus and continuing with advanced courses and trainings.  Most microfinance borrowers lack the luxury of “trying out” businesses and/or receiving any training before choosing their “major” business activity.  Borrowers often follow previous pathfinders, mimicking the only businesses they know–convenience stores, clothing shops and restaurants.  What if all college students chose the same 3 majors??  In my humble opinion, the market for certain business concepts and majors are often saturated.  Every other person cannot sell rice, oil and pasta in a Despensa or market clothing from the city.

Saturnina at her despensa

One borrower I met, Saturnina used to have a despensa(convenience store) based out of her home in Ita, Paraguay. A few months ago, her family moved and her home business quickly dissolved.  Saturnina has no plans to resurrect her despensa, she would rather move towards a more lucrative activity such as distributing coca cola products. I admire Saturnina’s initiative; while all borrowers are grateful for the access to credit, many lack Saturnina’s awareness of the market, which inhibits their ability to efficiently use their loan.

Fundación Paraguay, Kiva’s local field partner, has decided to take charge of this issue by creating a “micro-franchises” division

HOW IT WORKS:  Fundación Paraguaya orders pre-packaged products and delivers them to one of their 20 branches.  From there, borrowers may use their loan to buy these products and sell them as their own “franchise”.  For example, in February Fundación Paraguaya created school kits with backpacks, notepads, pens, pencils and erasers.  Fundación Paraguaya distributed these school kits to their branches, allowing Paraguayan borrowers to manage their own backpack franchise. Fundación Paraguaya promotes micro-franchises that should improve poverty indicators: first-aid kits, eye-glasses, school supplies, etc.

Franchises with successful business models

Avon's direct sales model is similar to the "micro-franchise" idea

This sort of direct-sales, “micro-franchise” model has worked for Avon (beauty products) and Yanbal (fragrances).  Borrowers are eager to be entrepreneurs and to use their micro-credits wisely; they simple need exposure to more products.  To me, the potential for giving a list of “micro-franchise” ideas to borrowers is like giving lost college freshmen a catalog of majors to choose from. The “micro-franchise” division of Fundación Paraguaya may expose borrowers to business opportunities beyond the standard convenience stores and clothing shops. This model would slowly diversify the marketplace throughout the country.  Eventually, Fundación Paraguaya should aim to connect more pre-packaged products to these borrowers.

Overall microfinance is about an opportunity—and making the most of an opportunity.  Whether a loan is micro or otherwise- a successful outcome depends on how the borrowers invest. After meeting borrowers in Ecuador and Paraguay, I know we have the same uncertainties when choosing a career path, and we all risk time and money for the hope of professional success.   My courses in college exposed me to a world of possibilities, so why shouldn’t MFIs provide borrowers with a catalog of “major” franchise possibilities?

Kimia Raafat is a Kiva Fellow (KF9/KF10) working with Fundación Paraguaya in Asunción,  Paraguay.  Click here, if you would like to know more about Fundación Paraguaya or feel free to send questions, comments, or requests for future blog topics to

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