Your SlideShare is downloading. ×
Upcoming SlideShare
Loading in...5

Thanks for flagging this SlideShare!

Oops! An error has occurred.

Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply



Published on

Published in: Education

  • Be the first to comment

  • Be the first to like this

No Downloads
Total Views
On Slideshare
From Embeds
Number of Embeds
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

No notes for slide


  • 1. Turning Traditional Donors into Social Investors:Revolutionizing the Online Microfinance Platform by Rob Krieger and Jessie Margolis
  • 2. Online microfinance platforms have in the new millennium significantly enhanced the ability for capital to reach millions of poor people across the globe Example: Credit: kiva.orgThe microfinance social impact philosophy: Providing loan capital to small private sectorenterprises uses the power of incentive-based capitalism & the free market to increase GDP & living standards in poorer regions of the world.
  • 3. However, current online micro and small business lending platforms fall short on turning traditional donors into true social investorsIssue #1: Do not sufficiently Issue #2: Do not allow prospective lenders to get a sense of theencourage the financial communicative dynamism of the entrepreneurs—as VC investors say, aaccountability of the micro/small huge part of an investment decision is based on seeing thebusinesses, and their ability to entrepreneurs pitch and interpreting their passion, confidence, andcontrol and interpret basic financial articulation. Also, current platforms do not encourage the developinginformation. world entrepreneurs to practice these essential business communicative skills.Issue #5: Byconcentrating too much Issue #3: It is true that using manyon micro financing, as different lenders to finance oneopposed to encouraging micro/small business project allowsthe creation of businesses for greater potential to raisethat are a little larger— sufficient capital. However thissmall business—we run further disconnects each individualthe risk of not creating donor/lender from the project—thesufficient levels of Issue #4: Does not take advantage “feel good effect” takes over, ratheremployment, and not of the business knowledge that a than a “strategic decision guided bycapitalizing on the developed-world lender may be research and measurement of socialadvantages that come able to provide the developing impact.”with cooperation and world entrepreneurs.specialization of labor.
  • 4. Idea #1: Create a video-based “pitch” system of ideas from entrepreneurs of the developing worldRationale: Current online microfinance platforms not only do not sufficiently connect the online lender to the potential dynamism (or lack thereof) of the developing world entrepreneurs and their businesses, they also do not allow for sufficient direct screening. Simply put, there is not enough transparency. 1) Prospective borrowers create video pitches with their MFI 4) Borrower receives lent funds, and 2) Prospective provides financial and online investor video communicative reviews pitches updates on a quarterly basis 3) Investor targets their funds based off of both financial AND communicative criteriaSolution: All prospective borrowers must make a video “pitch” of their ideas, to be posted on the website. The prospective lender thus gets a true inside look into the business, and can much better determine the attractiveness of the investment.
  • 5. Idea #2: Create an online “stock market” for small businesses in the developing world Rationale: Although online debt market platforms have been successful at raising capital for micro and small loans in the developing world, no one has capitalized on the power of an equities market platform to more appropriately and efficiently allocate capital online. 1) Entrepreneurs and small 2) The IPO for the “shares” involves5) Participants are motivated not by businesses are still highlighted real money being invested into thefinancial gain, but by gain in points. This on the website with the same small businesses, however, themotivation stems from: a) Pride in video pitch idea from Idea #1 investment does not equate to actualbeing the best investor in the legal ownership of the developingcompetition—you spot the successful world small business. If anotherinvestments early! It is embarrassing if BUY SELL participant in this online platformyour invested projects end up being desires to buy your “shares” they mustpriced the lowest. b) Doing well in the pay you the IPO price.competition means you are allocatingfunds to the small businesses with themost promise, and ensuring that fundsare not wasted on projects with nopotential. Price: IPO Cash $3,400 Points + 330 3) Prices of shares move up and down based on the same principals of real major stock 4) Subsequent share transactions after the IPO are always purchased for the IPO markets—based on bid price price in cash, plus/minus the premium/discount of the current share price relative and ask price; supply and to what the IPO price was. However this discount/premium below/above what the demand! IPO price was is not gained/lost in real cash, but is paid using a points system. Solution: Create an online platform to allocate capital based on an equities market model, in which shares of small businesses (although not legally owned) are traded in a game-like competitive setting, in which the initial IPO capital extension is with real funds.
  • 6. The “Deep Dive”: Idea #3 One business lender - to - one business borrower relationship Introducing: The New Online business to business connections for the developing world: Fueling sound business growth through direct due diligence, financing, and mentorship Francisco: Organic Coffee Farmer Example: Credit: stonyfield.comRationale: Other platforms do not establish/facilitate relationship building and mediated communication between the lender, the local MFI and the small business owner. By establishing and facilitating a three-way symbiotic relationship, we can ensure: 1) Selection of investments only in the best small businesses; 2) Assistance in developing sound business management and intelligent use of capital; 3) Guidance for ensuring up-to-date, accurate financial information. Solution: A single business in the U.S. lends to a single business in the developing world, through funds from the business’s Corporate Social Responsibility (CSR) program. This business-to-business one-lender-one-borrower dynamic not only ensures funds are invested much more prudently, but also allows for the investor business to take on a consultative role for the investee. U.S. company employees collaborate on the project together.
  • 7. Idea #3 leverages some variants of other ideas described previously to maximize its value propositionIssue #1 : No true idea of the state of (or encouragement for Issue #2 : No knowledge of communicativedevelopment of) the developing world business’s financial dynamism (or lack thereof) of developingknowledge . . . Solution #1: Small business leaders and world business managers . . . Solution #2:entrepreneurs with the most potential work with the local MFI and Small business managers must post a videoPajebal to ensure their financial literacy, and only then can they pitch, that presents their business and defendspost financial statements online for prospective lender’s review. their need for financing. Issue #5: Over- Issue #3 : Using many scattered lenders to encouragement of a micro finance one micro/small business business-based economy disconnects each one from the ability or may not always be best for Business to Business Connections for desire to measure or encourage social regional economic Developing World Small Business impact . . . Solution #3: A single business development . . . Solution in the U.S. lends to a single business in the #5: Increased efficiency of developing world. The lender not only is specialization of labor and Issue #4: No opportunity for added compelled to monitor progress due to the cooperation that comes value from lender . . . Solution #4 inherent bond of the two parties, but also when we encourage and U.S. business takes on a consultative because the investment is relatively finance small to medium role for the developing world significant in size—the entirety of a loan of businesses as well, moving business, via online communication— a few thousand dollars—financial beyond the micro phase. a combination of an online portal and investments are made with much more Skype. prudence.
  • 8. First, how current major online Next, how the New works: finance platforms work:Step 1: An online microfinance Step 1: Pajebal works on-the-ground with the localintermediary organization posts a short MFI and the best prospective small business borrowersdescription and a few picture of a to ensure they have up-to-date financial information,developing world micro business on their and post this to Pajebal’s website, along with a videowebsite. pitch of their company’s plans and clear justification for need of debt financing.Step 2: John Doe in the U.S. sees the $300loan on the website, likes the story and Step 2: Stonyfield Farm in New Hampshire (forpictures, and extends a $50 loan. example), as part of their CSR program, decide to invest $3,200 in a small organic coffee farm in Guatemala thatStep 3: When John extends his funds they is looking to expand. They make this decision afterare placed in a general pool to, at the end reviewing the farm business’s financial information andof the month, be transferred in bulk to the being impressed by the business pitch given in theMFI that is facilitating the loan to the end video by the small business’s management.borrower. Often, that specific loan hasalready been extended to the borrower, Step 3: When Stonyfield extends their funds, thoseand John’s funds are really going to funds specifically are channeled to the end borrower,replenish the capital of the MFI. facilitated through an international wire transfer by Pajebal to the MFIs bank. The MFI then extends theStep 4: John liked the idea that his funds funds to the borrower at a reduced interest rate. Thewere lent, not donated, and that the wire charge to individually transfer these funds doesborrower will use them to aid her business, not represent too burdensome of a cost (as a % of theand then pay them back to him. However, total loan), b/c this small loan is substantially largerhe would not be too concerned if he was than most micro loans.not paid back, and thus did not seerigorous evaluation of the micro business Step 4: With an investment of a few thousand dollars,as a desired nor warranted aspect of his Stonyfield wants to make sure they get paid back.participation in this project. Therefore they have analyzed the project in depth using all available information—written, video-based, andStep 5: John never had a direct connection Skype-based communication facilitated by Pajebal.with the borrower, and thus may or maynot think much going forward about the Step 5: Stonyfield, through Skype and the use of aborrowing business, their ability to bilingual Pajebal employee who covers the region (or aeffectively grow and generate profits, and U.S. volunteer) gains further insight into the operationsto therefore generate a social benefit to of the company, and can provide the small businessthe community through better business. with consultative advice.
  • 9. Idea #3: Implementation The 6 step process: Pajebal will establish this process as part of their innovation implementation by using online information sharing & communication and Skype video meetings to guide the development of the lender-borrower relationship. 1. Pajebal facilitates the 3. Lender/borrower develop a introduction of lender to 2. Lender/borrower establish regularly practiced feedback process borrower: profile exchange and goals and define the terms of that could occur once a week, to initial get-to-know the business their relationship. Pajebal stands once a quarter. This would include and investor-vision/investee- as a support and resource during setting goals and next steps. vision conversation. this process. Business to Business Connections for Developing World Small Business 4. Lender writes document articulating 6. Pajebal works with the perception of organization and its borrower & lender to evaluate 5. The borrower maintains growth trajectory. Lender taps into his or change relative to set goals after regular and consistent her expertise to propose each period. New goals can be set communication about its recommendations and stand as an and processes can be established. business practices and progress, information resource (advisor) to the or lack of progress. small business.Pajebal, Inc. is a registered North Carolina nonprofit corporation with an office in Quetzaltenango, Guatemala. Pajebal seeks tosubstantially alter its operations based on our new ideas as outlined in this PowerPoint deck. We will of course start withwestern Guatemala, and then look to scale out to other areas of Latin America. Any funds won in this competition would bedonated to Pajebal.
  • 10. The word Pajebal is the original indigenous Kiche Maya name for the Guatemalanvillage that inspired our work. “Pajebal” means “at the snake’s tail,” or, “at the end of the line.” The people of Pajebal, and of all the Pajebals spread out across thedeveloping world, have been at the end of the line for too long. Pajebal, Inc. exists to provide them with real business growth solutions rooted in sound businessmanagement, intelligent use of capital, and effective intercontinental business-to- business communication. View the current state of the project at