This document proposes three ideas to revolutionize online microfinance platforms by better connecting lenders and borrowers: 1. Require borrowers to create video pitches and provide regular financial updates to give lenders more transparency. 2. Create an online "stock market" where lenders can buy and trade shares in small businesses using points instead of money. 3. Facilitate direct relationships between single lenders and borrowers so the lender can monitor progress and provide business advice through regular communication. This would encourage more prudent investments in small businesses.

1. Turning Traditional Donors into Social Investors:Revolutionizing the Online Microfinance Platformby 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 globeThe microfinancesocial impact philosophy: Providing loan capital to small private sector enterprises uses the power of incentive-based capitalism & the free market to increase GDP & living standards in poorer regions of the world.Example:Credit: kiva.org

3. However, current online micro and small business lending platforms fall short on turning traditional donors into true social investorsIssue #2: Do not allow prospective lenders to get a sense of the communicative dynamism of the entrepreneurs—as VC investors say, a huge part of an investment decision is based on seeing the entrepreneurs pitch and interpreting their passion, confidence, and articulation. Also, current platforms do not encourage the developing world entrepreneurs to practice these essential business communicative skills. Issue #1: Do not sufficiently encourage the financial accountability of the micro/small businesses, and their ability to control and interpret basic financial information.Issue #5: By concentrating too much on micro financing, as opposed to encouraging the creation of businesses that are a little larger—small business—we run the risk of not creating sufficient levels of employment, and not capitalizing on the advantages that come with cooperation and specialization of labor. Issue #3: It is true that using many different lenders to finance one micro/small business project allows for greater potential to raise sufficient capital. However this further disconnects each individual donor/lender from the project—the “feel good effect” takes over, rather than a “strategic decision guided by research and measurement of social impact.”Issue #4: Does not take advantage of the business knowledge that a developed-world lender may be able to provide the developing world entrepreneurs.

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.Solution: 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.1) Prospective borrowers create video pitches with their MFI4) Borrower receives lent funds, and provides financial and video communicative updates on a quarterly basis2) Prospective online investor reviews pitches3) Investor targets their funds based off of both financial AND communicative criteria

5. Idea #2: Create an online “stock market” for small businesses in the developing worldRationale: 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.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. 2) The IPO for the “shares” involves real money being invested into the small businesses, however, the investment does not equate to actual legal ownership of the developing world small business. If another participant in this online platform desires to buy your “shares” they must pay you the IPO price. 1) Entrepreneurs and small businesses are still highlighted on the website with the same video pitch idea from Idea #15) Participants are motivated not by financial gain, but by gain in points. This motivation stems from: a) Pride in being the best investor in the competition—you spot the successful investments early! It is embarrassing if your invested projects end up being priced the lowest. b) Doing well in the competition means you are allocating funds to the small businesses with the most promise, and ensuring that funds are not wasted on projects with no potential. BUYSELLPrice: IPO Cash $3,400 Points + 330 3) Prices of shares move up and down based on the same principals of real major stock markets—based on bid price and ask price; supply and demand! 4) Subsequent share transactions after the IPO are always purchased for the IPO price in cash, plus/minus the premium/discount of the current share price relative to what the IPO price was. However this discount/premium below/above what the IPO price was is notgained/lost in real cash, but is paid using a points system.

6. The “Deep Dive”: Idea #3 Onebusiness lender - to - onebusiness borrower relationship Introducing: The NewOnline business to business connections for the developing world:Fueling sound business growth through direct due diligence, financing, and mentorshipRationale: 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-businessone-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. Francisco: Organic Coffee FarmerExample:Credit: stonyfield.com

7. Idea #3 leverages some variants of other ideas described previously to maximize its value propositionIssue #2 : No knowledge of communicative dynamism (or lack thereof) of developing world business managers . . . Solution #2: Small business managers must post a video pitch, that presents their business and defends their need for financing.Issue #1 : No true idea of the state of (or encouragement for development of) the developing world business’s financial knowledge . . . Solution #1: Small business leaders and entrepreneurs with the most potential work with the local MFI and Pajebal to ensure their financial literacy, and only then can they post financial statements online for prospective lender’s review.Issue #5: Over-encouragement of a micro business-based economy may not always be best for regional economic development . . . Solution #5: Increased efficiency of specialization of labor and cooperation that comes when we encourage and finance small to medium businesses as well, moving beyond the micro phase. Issue #3 : Using many scattered lenders to finance one micro/small business disconnects each one from the ability or desire to measure or encourage social impact . . . Solution #3: Asinglebusiness in the U.S. lends to a singlebusiness in the developing world. The lender not only is compelled to monitor progress due to the inherent bond of the two parties, but also because the investment is relatively significant in size—the entirety of a loan of a few thousand dollars—financial investments are made with much more prudence. Business to Business Connections for Developing World Small BusinessIssue #4: No opportunity for added value from lender . . . Solution #4 U.S. business takes on a consultative role for the developing world business, via online communication—a combination of an online portal and Skype.

8. Next, how the New works:First, how current major online finance platforms work:Step 1: Pajebal works on-the-ground with the local MFI and the best prospective small business borrowers to ensure they have up-to-date financial information, and post this to Pajebal’s website, along with a video pitch of their company’s plans and clear justification for need of debt financing.Step 2: Stonyfield Farm in New Hampshire (for example), as part of their CSR program, decide to invest $3,200 in a small organic coffee farm in Guatemala that is looking to expand. They make this decision after reviewing the farm business’s financial information and being impressed by the business pitch given in the video by the small business’s management. Step 3: When Stonyfield extends their funds, those funds specifically are channeled to the end borrower, facilitated through an international wire transfer by Pajebal to the MFIs bank. The MFI then extends the funds to the borrower at a reduced interest rate. The wire charge to individually transfer these funds does not represent too burdensome of a cost (as a % of the total loan), b/c this small loan is substantially larger than most micro loans. Step 4: With an investment of a few thousand dollars, Stonyfield wants to make sure they get paid back. Therefore they have analyzed the project in depth using all available information—written, video-based, and Skype-based communication facilitated by Pajebal.Step 5: Stonyfield, through Skype and the use of a bilingual Pajebal employee who covers the region (or a U.S. volunteer) gains further insight into the operations of the company, and can provide the small business with consultative advice. Step 1: An online microfinance intermediary organization posts a short description and a few picture of a developing world micro business on their website.Step 2: John Doe in the U.S. sees the $300 loan on the website, likes the story and pictures, and extends a $50 loan. Step 3: When John extends his funds they are placed in a general pool to, at the end of the month, be transferred in bulk to the MFI that is facilitating the loan to the end borrower. Often, that specific loan has already been extended to the borrower, and John’s funds are really going to replenish the capital of the MFI. Step 4: John liked the idea that his funds were lent, not donated, and that the borrower will use them to aid her business, and then pay them back to him. However, he would not be too concerned if he was not paid back, and thus did not see rigorous evaluation of the micro business as a desired nor warranted aspect of his participation in this project.Step 5: John never had a direct connection with the borrower, and thus may or may not think much going forward about the borrowing business, their ability to effectively grow and generate profits, and to therefore generate a social benefit to the community through better business.

9. Idea #3: ImplementationThe 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 introduction of lender to borrower: profile exchange and initial get-to-know the business and investor-vision/investee-vision conversation.3. Lender/borrower develop a regularly practiced feedback process that could occur once a week, to once a quarter. This would include setting goals and next steps.2. Lender/borrower establish goals and define the terms of their relationship. Pajebal stands as a support and resource during this process.Business to Business Connections for Developing World Small Business4. Lender writes document articulating perception of organization and its growth trajectory. Lender taps into his or her expertise to propose recommendations and stand as an information resource (advisor) to the small business.6. Pajebal works with the borrower & lender to evaluate change relative to set goals after each period. New goals can be set and processes can be established. 5. The borrower maintains regular and consistent communication about its business practices and progress, or lack of progress.Pajebal, Inc. is a registered North Carolina nonprofit corporation with an office in Quetzaltenango, Guatemala. Pajebal seeks to substantially alter its operations based on our new ideas as outlined in this PowerPoint deck. We will of course start with western Guatemala, and then look to scale out to other areas of Latin America. Any funds won in this competition would be donated to Pajebal.

10. The word Pajebal is the original indigenous Kiche Maya name for the Guatemalan village 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 the developing 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 business management, intelligent use of capital, and effective intercontinental business-to-business communication. View the current state of the project at www.pajebal.org