15 gathered together every week for 2 years. On Fridays, they rotated to each member's home to work on that farm. Sharing work on farms is a very common trend added onto these savings groups. And we know the efficiency of having more hands to share the work, not to mention the encouragement. After they work on that member's farm, each free laborer then pays the recipient of the labor with their weekly savings. Wow. We all work on your farm this Friday, and then we pay you our savings for the week.
They save a total of 1,100 RWF ($2.00 USD) per week, 1,000 rotates to the host farmer, and 100 goes into the accumulating fund. They make loans at 10%, and right now the group has a total of 40,000 RWF ($72.73 USD) on account and 24,000 ($43.64) out on loan. Marita uses her rotating lump sum to buy paraffin and soap, Susanne was able to purchase a phone. Francis took a 5,000 loan plus his own 2,000 and purchased a goat for 7,000 RWF ($12.73 USD). Ngendahayo has bigger plans.
Ngendahayo is quite a young man who seemingly spends much time on the farm by himself. Before this savings group, he was isolated. Isolation is a common theme for many in poverty, but here is this young man, hard working, plenty of promise, and his future is soil and toil. His future is poor and alone. Recently, his future changed. Ngendahayo has joined a savings group where he thrives, and he says that he now feels free to meet others. In fact, he is just energized about life. With a supportive social network and 16,500 ($30.00) on loan for materials and nails, he is now building a house … and plans to marry soon.
The 12 members of the Mothers Union in Butare meet on the 3rd Friday of each month. Each contributes 600 RWF ($1.09 USD) monthly; 500 rotates to one member each month, 100 accumulates on account. The group has a total savings of 12,000 RWF ($21.82 USD) and they make loans at 10% to group members.
An interesting addition to this Mothers Union group is their extra monthly activity. On that 3rd Friday after they pool their savings, they contribute some equal share of expenses for purchasing materials to make mats. With their mat materials, these mothers make as many mats as possible. For any mats made on that Friday and sold later, they contribute 100% of the sales into their accumulating savings account. That's a pretty crafty way that these mothers value their savings.
Mats sell for 1,500 RWF ($2.73 USD). I'll have to take some pictures and then you can place your orders.
Here's a quick example of a farming-based SCA.
The group meets weekly to farm and save. When they meet each week, they rotate to another member's farm to work together there. Each week, 100 RWF from each member goes to the one member whose farm they're all working on. Another 50 RWF goes into an accumulating account just for emergencies.
Once a month, the group gives another savings contribution of 750 RWF each into an accumulating account just for savings and loans. They currently have 26,000 RWF on account.
Farmers do not have the most consistent cash flow; a lot depends on weather, land, workers, and then sales. Monthly is better for regular saving. At the same time, weekly is better for small contributions towards seeds or manure fertilizer. The emergency fund is useful if someone gets robbed or maybe an animal dies or there's just no farm production and one family needs food.
Our groups are given much guidance on how to set up consistent, transparent, and understandable pay-ins and pay-outs, and also how to handle different group situations. Within that training, groups still have a wide variety of ways of making the savings group fit their lifestyles and needs.
As we collect stories about our savings groups, members and their purchases, we also collect reactions to our programs within their communities. Here is a sampling of reactions so far:
Velerie belongs to a savings group in Kayenzi that meets every Tuesday. She puts in about $1 every week; $0.90 goes into the rotating amount that goes to one member per week, $0.10 goes into an accumulating savings account.
Before belonging to a savings group, Velerie probably never thought that she might be able to put away an extra $1 per week. She never would have thought that if she could put away $1 for 4 weeks in a row that she could buy a hen for $3.65. Now that she's saving in a group of others who support and encourage her, she sees a bigger picture. Velerie comes each week, puts in a dollar, and soon the ROSCA rotates to her and she receives a lump sum of $13.50!! Velerie buys two hens and is left with money to spare for household expenses, health insurance … I don't know, chicken feed? The ROSCA payout provides her with a large sum of money at once. Money that would have never been around if she just had a little bit each week that seeped away into other, smaller, pedestrian purchases. Now, she has two hens.
Velerie cares for her hens for months and sells eggs in the community. During this time, she has built up $5.50 in egg money. Velerie sells her two hens, adds in her egg money, and she's got another large sum of $12.80 – which just happens to be the going rate for goats.
Velerie now owns a goat. She's not counting her eggs before they hatch (awful metaphor choice – we've moved on to goats now), but she's hoping to sell baby goats when her goat gets old enough to give birth, if she could be so fortunate [her words]. In case you're wondering, the Rwandese aren't big on consuming goat milk or goat cheese, just the goat.
An interesting part of this story, looking at it from our point of view, is that Velerie could have bought a hen without the group if she just disciplined her saving over one month. Only within the group, however, was she able to see a bigger picture and receive a bigger lump sum of money than she would ever otherwise have to spend. The "before" Velerie would never have bought those hens, even if we think she could have. The "after" Velerie invested in hens, sold eggs, and then attained a goat. The "after" Velerie is in business.
For reference: Hens cost 2,000 RWF; egg sales totaled 3,000 RWF; goats 7,000 RWF; Velerie saved 600 RWF weekly.
When I did graduate school at Georgia State, I also worked in the Office of Civic Engagement. During my time there I had the privilege of being an interim staff advisor to the Economic Empowerment Initiative (EEI), which was student led by my friend Terrance Rogers.
This group was fantastic. They trained students to be smart with their money: How to save and invest, wisely take out loans, and buy responsibly. Most students aren't learning these lessons elsewhere. They also have a Match Savings Program in partnership with Bank of America. If students continue membership in EEI, earn good grades, and save x amount of dollars, Bank of America will match their savings when they graduate (that's a loose description).
Rwanda doesn't have an EEI for students that I know of. What Rwanda does have is the Christ's Friends Anglican Student Association of Butare. These students go to high school for 3 months then break for 2 weeks. While they're off from school, they meet and save money. They are not exactly banking a lot of money being in high school, but the group puts together 100 RWF each and they have 40+ members, so the total every three months accumulates over 4,000 RWF ($7.27 USD). In total, though, they have now accumulated about 25,000 RWF ($45.45 USD).
Each student's individual share is still not very much money, but as a group they have mobilized $45 that they can make loans from. Where else can a high school student get a loan? Where else can a high school student save? More importantly, nowhere else are high schoolers learning how to save.
2 students have loans out right now. They take loans through their parents and repay them through their parents at 10%. They see their pastors saving, see their parents saving, and now these high schoolers are saving. They are practicing managing their money and making it grow. Where else is that happening among the very poor?
That's economic empowerment and a lot of initiative.
HOPE's savings and credit association (SCA) model in Rwanda partners through the local church. This provides a great institutional framework for training volunteers and mobilizing new savings groups. A danger to using the church, however, is that money is a root of all kinds of evil. Trustworthy reputation for a church (or for a microfinance institution) is vital.
So, for the savings programs to grow and be successful, we need pastors and ministry leaders to be excited and involved. For savings programs to not endanger reputations, we need pastors to keep out.
In Rwanda, the message has been clear throughout the trainings, don't handle your people's money. How have Rwandan pastors responded? Beautifully. They start their own groups.
In Kigali, Pastor Sam Mugisha has an SCA of 46 pastors, and pastors only. They are excited, involved, and they know the value of saving and how it works. In other dioceses, we have seen the same story again and again. Most pastors are in a group with other pastors, and they have passed the training on to their churches and communities. There are several good stories of the ways pastors use their own groups, and I know of one group of diocese employees that also includes the bishop (though he doesn't hold any leadership position within his group). Most pastors' groups have similar variations, but here is one example:
The 3rd Sunday of every month, 5 pastors from nearby parishes gather together in one of their parish churches, which rotates each month. A visiting pastor will preach that week. After service, the 5 gather and each save 3,000 RWF ($5.45 USD) of which 2,000 is given to the host parish pastor, and 1,000 is put into an accumulating account. Their accumulating account has grown to 30,000 ($54.55). The rotating fund typically goes to something for hosting like utensils, plates, cups … but sometimes the rotating fund goes to community projects in the parish, like new roofing for the church. When church members see visiting pastors use their own money to fix the roof, they feel it would be good to contribute, too. The pastors not only set a good example by their fellowship and savings, but also by their giving in the community. This particular group of pastors takes their monthly visits a step further toward helping the community, they dig coffee holes. 60 cm deep, 40 holes per pastor, they prepare fields for coffee plants that are purposed solely for the community to benefit.
In different pastors' groups, the stories are similar. Often the pastors are empowered to care for community members better than they otherwise could. One pastor was robbed, and with an internal loan from his group he was able to restore his household quickly and pay it off slowly, and when students came by for help with school fees, he was prepared to help. Even after an emergency like being robbed, a pastor on a pastor's salary was able to restore his house and help students with extra money, too. That is a strong statement to the parish.
A cell group in Shyogwe meets together each week representing 15 different families. Each agrees that the weekly contribution will be 200 RWF ($0.36 USD), which makes the group's total weekly contribution 3,000 RWF ($5.45 USD). After meeting for a short time, there was an incident that changed the way they saved. A single mother in their community became unemployed and had difficulty caring for her 3-year-old child. Economically empowered and mutually encouraged, the cell group intervened.
Each of the members agreed to contribute an immediate emergency fund of 20,000 RWF ($36.36 USD) per person, a total of 300,000 RWF ($545.45 USD). This is an impressive amount of capital. The purpose of this emergency offering: 50,000 RWF ($90.91 USD) per month for rent over the next 6 months.
They paid her rent for a half of a year in advance.
This cell group decided their policies needed to change. Now, the 15 members still contribute 200 weekly, but 150 goes into the accumulating ASCA account, and 50 goes into an emergency fund they can use to support their community. That's how they do economic development.
When we gather stories about SCA group members benefiting from saving together, we always like to hear that they saved $0.10 per week and then started their own barber shop franchise. I was recently very pleased to learn that is exactly what one group has done, in effect. They have saved and bought hair clippers and then saved and bought more hair clippers and they are growing their business of cutting hair as a geographically dispersed group serving different areas.
Ok. But what about the lady who wants to buy soap. That's good, too.
A widow in Byumba says that she was "poor behind the others." She had no soap. But also, she had nothing to eat so she couldn't even think about soap, but she wanted that. Joining the savings group, she has now managed her finances so that her purchases work better for her; she can purchase using lump sums and she can also see her savings grow over time and with interest on others' repaid loans. She says she has something to eat now, and she can buy soap easily. She can buy soap easily. That means something. That changes your days, makes you happier.
When Danielle and I were in graduate school, both fulltime students, we were newly married with no money so we decided no purchases. We ate cabbage and rice and beans, drank water, studied on the weekend, and didn't spend money. We would have to have a discussion before going to the dollar store. Now, it wasn't so bad, we had budget to buy cokes when guests came, we rented movies sometimes; we weren't poor. But, we had decided not to spend extra-budgetary money without serious need.
One day, I had an opportunity for extra-budgetary income. I was asked to speak at a weekend college retreat that would pay some small amount. I told Danielle, "I am going to buy you shoes." She said, "No, husband, don't do that." I said, "No, I don't care, it's my money, it's extra money, I'm going to buy you shoes." Well, all of our money is really our money, but it won the argument. She had not had new shoes in a long time and the ones she loved were ripping at the seams. When I told her I would buy her new shoes, my dear wife cried.
Another widow in Byumba said that because of her savings group, she was able to buy shoes. My eyes watered up a little. That means something, to be able to buy shoes.
Many savings group members don't save much. Many don't have much. Marie-Jeanne was asking a group, "If you have 100 RWF, what can that buy in the market? 1/2 kg of salt is 150 RWF. If you eat a cup of sorghum porridge, that's 250 RWF, you do that twice per day and that's 500 RWF. So you can save if you just miss one cup of porridge each week."
What then? What can you buy when you save that you cannot otherwise?
First, there are two types of purchases, those made from ROSCA funds and those from ASCA funds. Most groups contribute either monthly or weekly into one of each kind of fund.
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ROSCA is the rotating savings and credit association, so if my group of 10 each saves 100 per week, one week we meet I will receive the whole 1,000.
ROSCA spending is typically:
A few people report that their ROSCA amounts helped them clear debts, like one family owed 10,000 RWF for their daughter's wedding and their ROSCA cleared the whole debt in one day. The groups tend to allocate the ROSCA distribution according to the timing of members' needs, but each member definitely gets a turn before the next rotation.
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ASCA is the accumulating savings and credit association, so one meeting my group may put 500 into ROSCA, and may also put 100 into ASCA. The 100 accumulates until it is large enough to loan out at some group determined interest rate.
Some ASCA purchases have included:
Obviously there are varying amounts of what people can save, but there are also different degrees to which the savings and loans enable purchases that otherwise wouldn't have happened. Susanne was very proud to purchase and own a phone; that was a big purchase for her that may create new opportunities for her. In Shyogwe, we heard of a more elaborate use of an ASCA. One group member used a loan to purchase 216,000 RWF worth of musical instruments to donate to the church and for the use of the group. That's about $393 USD. A purchase like that means they already had some money and some purchasing confidence, but then again, they may have never felt capable of mobilizing that much money at one time and paying for it slowly.
Spreading out payments on what would otherwise be inaccessible purchases, that's what savings and credit can do for individuals.
After visiting three Rwandan dioceses and their respective savings and credit associations (SCAs), we are beginning to get a picture of what the average group looks like. Of course, we haven't seen enough groups to be scientific about all of this, but again, we're getting a picture. There are lots more stories forthcoming that illustrate what individual groups may look like, and in the next post, what group members actually buy with their savings and loans.
SCAs ON AVERAGE
18 Group members
5:1 Ratio of ROSCA (rotating) contributions to ASCA (accumulating) contributions
8:5 Ratio of groups contributing monthly to groups contributing weekly
MONTHLY-MEETING GROUPS
1,800 RWF ($3.27 USD) - Monthly individual contribution, ROSCA + ASCA
21,000 RWF ($38.18 USD) - Monthly group contribution, ROSCA + ASCA
ROSCA
1,500 RWF ($2.73 USD) - Monthly individual ROSCA contribution
18,000 RWF ($32.73 USD) - Monthly group ROSCA contribution
ASCA
300 RWF ($0.55 USD) - Monthly individual ASCA contribution
3,000 RWF ($5.45 USD) - Monthly group ASCA contribution
WEEKLY-MEETING GROUPS
350 RWF ($0.64 USD) - Weekly individual contribution, ROSCA + ASCA
5,800 RWF ($10.55 USD) - Weekly group contribution, ROSCA + ASCA
ROSCA
300 RWF ($0.55 USD) - Weekly individual ROSCA contribution
4,000 RWF ($7.27 USD) - Weekly group ROSCA contribution
ASCA
50 RWF ($0.09 USD) - Weekly individual ASCA contribution
1,800 RWF ($3.27 USD) - Weekly group ASCA contribution
**Remember, ROSCA goes to one member each week; ASCA goes into a loan fund or bank account.
Byumba, Jan 22-23If you want to visualize where we are, and I'm sure this is particularly helpful for my wife who is wondering where I am right now, then this map gives all of the Anglican diocese locations with an added bonus of emphasis placed on dioceses with the most churches. Byumba has 327, Cyangugu has 76.
Shyogwe, Jan 27-28
Butare, Jan 29-30
Kigeme, Feb 3-4
Cyangugu, Feb 5-6
Kibungo, Feb 10-11
Gahini, Feb 12-13
Shyira, Feb 17-18
Kigali, TBD
Kivu, TBD
Brotherly love, like the city of Philadelphia, can sometimes be an enigma. Brothers fight. Philadelphians can be rude.
Living in the same Rwandan village there were two brothers, neighbors, who would not talk to each other. Their families would not talk to each other, and their children were not allowed to play with each other. I don't know how the feud started, and there's a good chance that they don't know either, but these things have a tendency to die hard.
Somehow the two brothers ended up in the same savings group. Probably because there was just one savings group, and both valued membership enough to somehow tolerate the other. This savings group, like many others, rotates locations in each member's home. How did the brothers not see this coming?
The first time the rotation lands on one of the brothers, the other brother had to choose.
Surprised, at the end of the meeting the other brother returned home safely and nothing had happened. He shared his brother's home for the first time, and both faced another day.
The next tense meeting, the brothers switched roles. Now the first brother entered his brother's house and again nothing bad happened.
Actually, on this second occasion, something did happen. At the beginning of these meetings someone usually prays. At this meeting, someone read John 3:16 and began to discuss love. That was enough for the brothers to begin crying and ask forgiveness.
Reconciled brothers. I think something meaningful happens when you put faith, community, and what you do with your money in the same gathering. These are important matters.
HOPE's savings program in Rwanda is partnered through the local church. Church leadership has decided that poverty is not a good condition for the human soul, and so their churches are involved in various development endeavors to strengthen the local community, Christians and non-Christians.
Hopefully, our savings programs also support the church and its ministry. Well, we see that happening in hundreds of ways through the stories of these savings groups, but here is one story that does more than support its local church.
In Shyogwe diocese, a group of about 11 households have been meeting together and saving together. They were trained by a pastor who was trained by HOPE. The pastor set up the group, taught them the foundations and principles, help them set guidelines, monitored their progress. The group traveled long distances to attend church and they consistently met and saved.
Over time, the group decided they would not travel long distances to come to church anymore.
Instead, they took a portion of their savings and rented a house for 5 months. Everyday … full time. They plan to buy the house. The house is where they meet, where they save, where they discuss common concerns. The house is also where they gather on Sundays. They have asked the parish priest to provide a catechist who will lead their "home" church. Not only has this group of households decided that they no longer accept poverty, but they have also decided that they will be responsible for shaping their own community - even starting their own local church. That's one way to support the local church.
(As a side note, successful savings groups in the area are drawing many Christians and non-Christians who want to join these church-based cell groups that are "doing savings.")
How you define poverty makes a big difference in how you respond to poverty. Do you think poverty is …
Is lack of money a lack of cash flow (income) or cash stocks (savings)? Is lack of education a lack of trade skills (sewing) or human capital (ingenuity)? Is lack of health disease or malnutrition? The point that follows from these questions is that there are many pieces in the poverty puzzle.
If we have an idea that we need to do something about poverty, then we also probably have an idea what we mean by "poverty." If it's just a lack of money, well, let's send money. The last 50 years of sending money, however, has proven poverty more complex. Bill Easterly, a critic of foreign aid (Amartya Sen critiques his criticism here), describes in The Elusive Quest for Growth some economic growth panaceas that have failed chronically poor countries over the last 50 years:
Capital accumulation: there is insufficient savings and investment, but if foreign aid supplies investment for machinery and factories, then what about human capital plus the incentives to make capital productive?
Education: schooling is just part of human capital (think information networks for entrepreneurs), and does more education funds mean better education or increased national income? Sometimes it means educated people leave the country or learn to redistribute existing wealth instead of stimulate the economy.
Loans conditional upon policy reforms: how do you measure true reform instead of encouraging shifty adjustments, and does this still reward neediness instead of growth?
Debt forgiveness: perhaps poor countries want to grow but we've saddled them with too much debt … let's wipe the slate clean, right? Data from 41 high-debt countries from 1989-1997 shows that these nations were forgiven $33 billion in debt, yet in the years thereafter these same countries incurred $41 billion dollars of new debt.
Bono and the ONE Campaign have argued for debt forgiveness (somewhat as a Judeo-Christian "jubilee" concept) and have taken a lot of flak for such a bad idea, but they have worked with Jeffrey Sachs, noted economist and UN advisor, and have coupled their strategy with policy reform conditions for better future results. Philanthropists and scholars are working toward better responses - especially after years of seeing Africa grow poorer - but the lesson learned is that poverty requires nuanced strategy, holistic approach, noting that we treat poverty by how we perceive the poverty problem.
As Chalmers describes it, poverty is a mix of material poverty, isolation, physical weakness, powerlessness, and vulnerability. HOPE International applies Chalmers materials in our Savings and Credit Associations (SCAs) because our view of poverty is spiritual, physical, and social; poverty is a condition of the whole person and all of her relationships.
Read here how a Rwandan HOPE staffer describes the purpose of our savings groups.
SCAs are empowering at a micro level, they do not encourage dependency, and their results are more than just savings. SCAs are supporting renewed communities that believe in their ability to end their own poverty; progress that may well lead to a more sustainable development for economic growth.
For more reading:
Stuart Rutherford, The Poor and Their Money (FREE DOWNLOAD)
That is to say, we need to connect the coffee mugs.
There was a church program to increase food security in the village. There were no regular meetings, but every so often a grant would provide cows or goats or pigs that would be distributed to the community according to need. Most vulnerable families received first.
Once livestock was given, instruction provided, the families returned home. However, families were still isolated. They did not come together, and even if they were Christians, they did not pray together. The families considered themselves very different and for various reasons did not feel comfortable praying with those other people.
After everything, the families still had a poverty mindset. There was no money to care for the cows if they got sick, and there was little incentive to do so because they might just get more animals through the next grant.
A few years later, our savings program was integrated into the food security program. This is how things changed:
People met together. They heard that they could save money together, let it grow, and have access to larger lump sums of money. Perceptions changed. Before if someone was given a cow, he then had more disposable income for drinking or smoking. Now, the more he saves the more he has. The money has purpose and the community begins to take account of their assets. Not only do people meet together, they rotate meeting in each family's home. After they meet and save money, they fix one family's roof and next week work another family's field. Now, the communities cherish praying together because they truly share concerns, and they also share enthusiasm.
No more isolation. Community reconciliation. Praying together, working together. Perceptions of poverty change when people are empowered. That's what we try to do with our savings training. We don't just train in counting money, that's why other groups in the region that do similar self-help models are asking our "champions" to help their groups, too.
Our champions are bringing the coffee mugs into the village and connecting them with straws and pens and napkins. That changes the poverty mindset.
Group members enjoy sharing how the savings program has helped them and changed their lives. Sylvain stands up. Sylvain was known to be a beggar, yet still he was invited to bring 100 RWF (18 cents USD) per week to join the local savings group.
This group uses a rotating savings and credit association (ROSCA), so when each of 16 people put in 100 RWF, they distribute 1000 to one person one week and then rotate to another person the next week. Each week, someone gets a lump sum that is larger than what they would normally have on hand to spend. This is very useful, even though still very small. After the 1000 is given, there is still another 600 each week that goes into a general savings pool of which everyone in the group owns an equal share (like an accumulating savings and credit association, ASCA). When that pool of savings is big enough, they may lend it to some better use with a nice return, or they may start a joint venture together and purchase livestock or seeds.
For Sylvain, he has changed. The savings itself is useful, but he has also changed in how the community sees him. He has changed in how he sees himself. Sylvain has a purpose for his time and money, and more importantly, because this savings group shares his concerns and works together to lift everyone up, Sylvain no longer feels isolated.
Isolation is a significant part of being poor, especially for a beggar. But Sylvain is no longer isolated, and in fact, he is no longer a beggar. Lately he has been working in agriculture and some carpentry. And he is still saving and thinking about the future.
Meanwhile, the poor family is now poorer. The abandoned woman still must feed her children, and she is committed to providing their school fees so they can have a decent try of their own one day. To take care of everything, the woman must work very hard. When you work so hard to get by, it's even harder to look ahead and insure against harder times, which will come. In spite of the difficulties, this woman joined a savings group and contributed her 18 cents USD per week.
This particular group is partnered with other programs that help them get medical insurance and some agricultural assistance. The woman now has a burden lifted, if but slightly. When the burden is lifted, she is able to take more time away from barely getting by and to spend time on higher and better uses: making baskets. Through the savings group, the money for schooling is there when she needs it. Imagine the stress relieved …
People are designed to be productive and enjoy life. Both are difficult when you struggle to get by. Struggle leaves little room for the joy of creating something beautiful and valuable, something you can sell in the market instead of just toiling in the dirt. Lighter burden, more joy, kids in school; now you are able to make baskets. And smile more.
When you work for an organization called HOPE International, you hope that when you ask someone about our impact, they say that we bring hope.
I'll be bringing lots of stories from the field over the next few weeks because we are traveling and speaking with group members. Many of the group members we meet will be women, but recently we met a young man who stood up and wanted to share.
He is young; he is energetic and handsome. He is also sitting around with mamas with babies, some widows, and others. He can make money because he is a young man. But he is still quite poor, relatively, and lives in a remote, poor area, so the question is: what is the point of making money? He will not go to the University of Florida, won't become an entrepreneur. He won't open a franchise coffee shop.
The young man stands up and says that his savings group has taught him hope. You don't save if you don't have hope for the future. You don't have hope for the future if someone doesn't believe in you, support you, and share stories of transformation.
In my thinking, it was not possible for me to have a cow. In future, I hope to buy [another] free range cow.
(He now already has one cow.)
The truth is, that village won't see a new Starbucks franchise in my lifetime (maybe I'm wrong), but the young man can become an entrepreneur. He has time, and now he has hope.
