by Rob Krieger and Jessie Margolis

Direct Online Relationships,Definitive On-the-Ground Results

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Turning Traditional Donors into Social Investors:

Revolutionizing the

Online Microfinance Platform

Credit: kiva.org

Online microfinance platforms have significantly enhanced the ability for capital to reach millions of poor people across the globe

Example:

The microfinance social 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.

Do not sufficiently encourage the ability of each individual micro/small businesses to control and interpret basic financial information.

Do not allow prospective lenders to get a sense of the communicative skills of the entrepreneurs.

Using many different lenders to finance one micro/small business project disconnects each individual lender.

Do not take advantage of the business knowledge that a developed-world lender may be able to provide.

Concentration on micro lending doesn’t capitalize on the advantages that come with cooperation and specialization of labor.

Issue #1:Financial Statements

Issue #1:Financial Statements

Issue #2:“The Pitch”

Issue #2:“The Pitch”

Issue #3:Lender Fragmentation

Issue #3:Lender Fragmentation

Issue #4:Micro vs. Small

Issue #4:Micro vs. Small

Issue #5:Mentorship

Issue #5:Mentorship

However, current online micro and small business lending platforms fall short on turning traditional donors into true social investors

Online business to business connections for the developing world:Fueling sound business growth through direct due diligence, financing, and mentorship

The Solution . . . Development Solutions

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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.

Francisco: Organic Coffee Farmer

Credit: stonyfield.com

For Example:

. . . through high bandwidth communicationCross-Continental Interconnectedness . . .

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.

Small business leaders and entrepreneurs with the most potential work with their local MFI and Pajebal to ensure their financial literacy, and they must post statements online for lender review.

Small business managers must post a video pitch, that presents their business and defends their need for financing. Great for investor analysis and for developing entrepreneur’s presentation skills.

Business to Business Lending: The lender is compelled to monitor progress because: 1) the direct mentorship bond; 2) the entirety of a loan—a few thousand dollars—is coming from one source

U.S. business takes on a consultative role for the developing world business, via online communication—a combination of an online portal, Skype, and email.

Pajebal Provides Solutions to the “5 Issues” Development Solutions

Solution #1:Financial Statements

Solution #1:Financial Statements

Solution #2:“The Pitch”

Solution #2:“The Pitch”

Solution #3:Lender Fragmentation

Solution #3:Lender Fragmentation

Solution #4:Micro vs. Small

Solution #4:Micro vs. Small

Solution #5:Mentorship

Solution #5:Mentorship

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MyC4 does raise funds for small business (not just “micro”), and does suggest that they have financial info of prospective borrowers online. However, they fund each borrower from a multitude of lenders, do not have videos for each borrower, and do not offer direct lender-borrower mentorship.

Pajebal will offer a high bandwidth solution to online micro/small business finance that is not currently present in the market

Innovative Thinking: Compare & Contrast to Other Players in the Field la be ajP

Development Solutions

Rethink Impact proposes a video pitch approach, however: 1) the videos will be made by actual U.S. NGOs and social businesses that desire to raise grants from institutions—it’s a different business model; 2) The company is not yet operating.

The niche of the Acumen Fund and other social venture capital funds is different than Pajebal—we occupy the in-between space between them, and online platform intermediaries like MyC4 and Kiva.

The Hoop Fund is functionally quite similar to MyC4, whereas Vittana lends funds for school tuition, not for business.

For some

In a

different way

Financial Statements

Financial Statements

“The Pitch”“The Pitch”

No Lender Fragmentation

No Lender Fragmentation

Micro vs. SmallMicro vs. Small

MentorshipMentorship

Innovative Thinking: Compare & Contrast to Other Players in the Field la be ajP

Development Solutions

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• Pairing of area of expertise to the area of capacity building need.

• Matching management/communication styles, as well as with regional interests.

• Requiring slightly greater initiation time and initial fiscal investment to generate more measurable long-term social impact.

• Targeting mid-sized corporations that are committed to engaging in both financial and capacity building support.

• Loan Funding Sources: U.S. Company CSR participants.

• Operational Expenditure Funding Sources: 1) CSR partner membership fees 2) In-country interest rate of up to 5% 3) Individual and institutional donations and grants

Feasibility: Program Characteristics that will ensure our plan works la be ajP

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TranslationTranslation

Loans vs. GrantsLoans vs. Grants

Expected EngagementExpected Engagement

Feasibility:Learning from a Potential Local Partner la be ajP

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Expertise LevelExpertise Level

We will fund at least one bilingual relationship facilitator per MFI, who is a resident and national of the country being served.

If loan extension is not in accordance with the company’s CSR program, a grant can be made instead, which will effectively act as a revolving loan fund.

Lenders/mentors are not meant to be international business development experts. They are there to provide added value and vigilance, to amplify Pajebal’s on-the-ground training.

Will be agreed upon by the two sides before formal engagement and disbursal of funds. All communication is recorded.

“My company has had a big Kiva account for a while, but most employees haven’t seemed to care about it. If this could build a better connection beyond the people managing the

loan and giving advice, getting the whole company aware of the impact it was having and the progress of the business, that would be awesome.”

However, potential concerns were brought up, which we addressed. . .

First Year Income Statement for PilotRevenues

Member fees from CSR partners of 20% of loan outstanding*: $ 24,000 Interest Revenue of 5% of loans outstanding (paid by MFI): $ 6,000 Private Donations and Institutional Grants**: $ 24,000 TOTAL REVENUES $ 54,000

Expenses Salaries (3 Guatemala staff plus 1 U.S. intern): $ 34,500 Website Development $ 6,000 Other General and Admin Expenses $ 7,500

TOTAL EXPENSES $ 48,000

Change in Net Assets $ 6,000

*Membership based off of total loans outstanding of $120,000. This comes from 25 different CSR partners totaling 30 different loans amongst them. Average loan size is $4,000 (30 * $4,000 = $120,000)**Pajebal currently has some modest private donor support, which we seek to increase. Additionally, we receive pro bono services from a premier global law firm.

Feasibility:The Guatemala Pilot: Projected Financial Statements la be ajP

Development Solutions

Pre-Loan Extension Phase StepsPre-Loan Extension Phase Steps Post-Loan Extension Phase StepsPost-Loan Extension Phase Steps

1. Build U.S. corporate relationships through partnership and membership.

2. Add one more employee to Guatemala staff (total 3) and one U.S. paid intern.

3. Upgrade current website to accommodate new lending model.

4. Select initial small business borrowers from Pajebal’s existing MFI partners.

5. Guide potential borrowers in developing their financials, and video pitch.

6. U.S. companies select businesses

1. Matched partnership Introduction.

2. Lender & borrower establish goals and define the terms of their relationship. Pajebal stands as a support and resource during this process.

3. Maintenance of regular & consistent communication about practices and progress, through Skype and email. The Lender provides feedback.

4. Progress assessment: working with borrower & lender to evaluate & set/reset goal achievement after each quarter.

Feasibility:The Guatemala Pilot la be ajP

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• Kiva’s and myC4’s scalability success provide some evidence for our own. • Our project will certainly provide more “bang for the buck”—more measurable social

impact per dollar spent—thus financial backing is warranted.

Scaling la be ajP Development Solutions

First “Scale Deep”Then “Scale Out”

First “Scale Deep”Then “Scale Out”

Learning from Existing Companies

Learning from Existing Companies

Planting SeedsPlanting Seeds

Standardization vs. Local Adaptation

Standardization vs. Local Adaptation

• We will move along the learning curve with each solid, inter-company relationship we help to form and nurture.

• There will likely be many repeat lenders after the initial couple of years. • The idea, therefore, is to “scale deep” at first, partnering with various U.S. companies

, but sticking with only two or three MFIs in one country. • Once we have accumulated sufficient knowledge and skills through deep scaling in

Guatemala (2 to 3 years), we will be prepared to “scale out.”

• Currently have substantial, long-running MFI relationships in Guatemala.• Recent work in India on a consulting project for the MFI the BASIX Group

• Standardized: 1) The website and exchange platform; 2) 4 Step Process of relationship facilitation (slide 11)

• Localized: 1) Flexibility within the 4 Step Process; 2) Branch scaling in Central America; affiliation and/or dissemination scaling elsewhere

Board of Directors

Marketing & Fundraising Director

Fundraiser CSR & SB Marketing

Finance Director

Accountant

Operations Director

Communications Manager

IT / Website Manager

Economic Development Director

Guatemala Country Office

Nicaragua Country Office

India Country Office

Executive Director

Scaling:Post-Pilot Organizational Chart (5 Years in) la be ajP

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Potential Impact:Aligning Goals, Methodologies, and Strategy

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1. U.S. company, Pajebal, and MFI collaboratively chose social impact metrics.

2. Capacity building for small business metrics monitoring and

evaluation.

3. Review of limitations, data accuracy and reflection of

social value.

5. Gain input from Social Impact Assessment experts.

Research best current methods

4. Reflect upon how metrics incentivize

growth, quality and investment

leverage.

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

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