Life in Africa Foundation has been asked to manage a small loan from a private supporter in Europe for the construction of basic eco-tourism start-up facilities on the Amasiko peninsula. This dialogue is taking place to develop the contents of the loan agreement between the 3 parties. Tell us what you think

Hi Grace, this is really a very interesting opportunity. The eco-tourism facilities are supposed to generate funds for the training component and have to operate commercially. Therefore a loan to start the facilities is welcome. However many potential donors are hesitating to give money "just like that" and want some guarantee that the proposed plans are really implemented. An external monitoring opportunity based within the country of operation could create confidence and therefore more willingness to donate or lend the required funds. Some topics to be covered in an agreement are the terms of lending, such as lending period, re-payment terms, (annually? all at once? or only after the business actually generates money, sufficient for a repayment of the loan?) Actually we are looking initially for about 10,000 Euros. The offered loan amount is Euro 5000 with a deduction of some management fees. We have to agree on the % for the fee, is such a % covering the monitoring during one year of during the whole lending period?

Hello Wilfried, Hi again Grace:) I hope you don't mind if I sit in on this discussion, I'll sit in a corner and try not to slow you down! I have a feeling I'll learn a lot from observing this enterprise develope ... good luck!

So Life in Africa will derive an income from managing the loan, is that right? And Wilfried will be managing the eco-tourism facility ? Or am I getting confused already?

Hi Ceris, Of course you are welcome, it seems to be a new development and we are grateful for all ideas coming in to make this a success. Indeed, LIA will get some income, monitor our activities and report to donors,lenders on the progress. And I will develop and manage the Eco-Camp in such a way that it becomes economically viable and profits will be channelled back into community support and training of disadvantaged youth.

Thanks Wilfried for making it clearer, i had made it quite brief and could have been difficult for others to understand.

Oh Ceris, I feel that the important thing here is, even questions about what you might not have understood can make a lot of sense because it's from there that answers which can be helpful might be derived. So you are more than welcomed to chip-in whenever possible. It may not be very clear now, but am sure that with time we all will come to understand it.

One question has come into my mind: What we discuss at this time, is that we will get a loan and pay a kind of fee out if this money. For this case it will help the person who gives us this loan to ensure that her loan is actually used for the right purpose and to get update on progress from an objective external source. For us as receivers of the loan, we get regular monitoring and some (hopefully) effective and objective help in the reporting. Now the question is, can other potential donors/lenders tap into this monitoring system? Can they apply for the monitoring reports? is there a fee involved? Can we ask potential donors if they are interested to participate in the programme at a certain cost?

Yes Wilfried, that's it, we would like to build up a network of potential lenders/donors who would like to use the same kind of service( monitoring and reporting).There would be some fees actually a % of the total amount which is yet to be decided upon, to help with the travel and internet costs.This will be kept as minimal as possible.So for now we can also together work out a reasonable percentage here together.

This is a really very good beginning Wilfried , thanks for bringing in the nitty bits that I always tend to forget.

Ok Grace, it depends on which services LIA will give, and the costs involved and the amount donated/lend. and of course if there are more clients, costs actually will reduce as a monitoring journey will serve different clients. Who is actually the client? we as receivers of the money or the lender/donor who wants to have his/her money monitored?

I'm a little lost as to who all the people and organizations are involved in this, who is responsible for doing what (services), what is a loan and what is a donation, and who is responsible for paying back the loan.

Wilfried, this sounds an interesting development. Can you tell us more about the Eco-Camp? What progress has been made in planning and building this?

I too am still trying to visualise this clearly. My interpretation so far is that (1) LiA wants to set up as a microfinance agency (2) Wilfried, independently of LiA, wants to set up one or more eco-tourism projects (3) A potential "lender" has been identified who wishes to employ LiA to administer a loan to one of Wilried's projects.

My feeling is that LiA's role and structure as a microfinance agency needs to be defined first, and separately to (2) and (3). Mark's questions relate to that basic business structure, I think, then once the general guidelines are clear loan agreements could be tailored to meet individual requirements.

Personally I find that I can't think of loans and donations in the same space, I have to put them in totally different boxes - loans have to be repaid, donations don't. Though in this context there's less of a distinction because essentially they are simply packages of money which LiA will transfer from A to B, which simplifies things, but then there is the monitoring and reporting which adds another "box" so to speak.

So that's 3 basic components of (1) above, LiA's new enterprise : (a)arranging/managing microfinance agreements (b) delivering donations (c) monitoring third party projects. I would be concentrating hard (and doubtless getting muddled) on the whos and whats of (a)since that seems to be the core element.

:)

(Edited for novice student smilie)

Hi all

there are some very recent revisions at http://lifeinafrica.com which I think might help put these developments in perspective.

We've been undergoing a major transition at LiA for the past year plus, devolving operations that used to all be under the Ugandan Foundation's umbrella to a collection of LiA orgs with distinct purposes. In that context, Grace has been working on repositioning Life in Africa FOUNDATION as a service provider that can help small grassroots orgs like Wilfried's and KJT and LiA Kireka (and several others in the pipeline) to connect better with their global supporters.

One thing to clarify, perhaps, is that Life in Africa FOUNDATION was incorporated in Uganda in 1999 for the purpose of facilitating opportunities for Africa through the internet, specifically including microfinance. My own vision has always been to create an online superstore of impact alternatives, that would include a number of ways in which people around the world could connect and engage for Africa's grassroots development. In terms of where we started and where Grace has plans to take the Foundation as a service provider, our adventures in hands-on community building were a very educational diversion with regard to what it's possible to achieve beyond microfinance as a grassroots community with a strong interactive network of online supporters. Putting that experience to use in supporting many grassroots orgs to create opportunities for their own development online brings us back to the Foundation's original purpose, and was one of the main objectives of the transition we've been undergoing.

In the KJT case, Grace has demonstrated the utility of verification services - main cornerstone of the service we can provide through a network of trusted computer literate folks on the ground; the challenge we're actively working on now is figuring out how to capture the cost of that in future cases so that it helps to sustain LiA. For other orgs like KJT, the plan is to offer access to fundraising tools like chipin, and charge a disbursal/monitoring/reporting fee on the monies raised.

That still doesn't cover the upfront verification costs of getting orgs into the system. We can foresee situations where the demand for such services may come from online supporters like Ceris, or it may come from organizations like KJT themselves. The stage we're at now is developing models for how LiA as a service provider can add value in the supporter/project relationship under different scenarios.

The Amasiko project case gives us an opportunity to put the LiA costs in as a fee on a loan. At some point, the Foundation may also invest directly with funds they have raised for that purpose, but in this case the Foundation is simply providing loan management & online reporting services on a privately arranged loan for a 10% fee. The lender doesn't receive interest, nor will LiA receive interest; Wilfried pays back the full amount though, including the 10% deducted upfront by LiA as a disbursal, management and monitoring fee.

One last thing about loans versus donations: it is very, very difficult for social entrepreneurs to source financing for the income generating aspects of their plans. Legal frameworks have traditionally separated do-good and business activities so that the two cannot mix. Wilfried sees that the eco-tourism activity will generate profit that can be channeled into community building and youth training, but it's impossible to use donated funds legally for that purpose in Holland, where he's got some folks willing to raise funds. They can only raise funds that will be spent directly on "charitable" activities like community building and youth training. Wilfried's whole concept is to eventually sustain those activities through eco-tourism profits instead of relying on charity from outside.

This loan is targeted specifically for the business side of the Amasiko project, as distinct from the "charitable" activities undertaken by the community development association he's set up. It's a private loan to Wilfried personally as a social entrepreneur. He is responsible for paying it back, not the charitable organization he hopes to support with the profits and operational activities in his business plan. Meanwhile, the charitable organization's development can most certainly continue to happen in parallel through grants and donations if they are available. As long as Wilfried is able to separate those clearly (which is a brainteasing challenge I know he'd love some help on), then there is no conflict between working with borrowed money and with donated money to achieve his objectives as a social entrepreneur.

I love the Amasiko case because I have believed for a long time that targeted lending to social entrepreneurs is a potentially very powerful yet unexplored niche in the microfinance landscape. Hopefully the development of this case-study can serve as a basis for similar loans in the future.

Thanks for that information Christina, you've clarified much of the background detail I was missing :)

I can see there is a need for such services, and perhaps more specifically for guidelines and models of good practise. I recently wanted to make a personal loan to KJT (to cover their bank account set-up charges) but ended up treating it as part donation, part investment, where the investment will be repaid by the future success of KJT as a social organisation and the skills and experience I myself gain from working with them, not by financial reimbursement. Not very business like perhaps in the traditional sense, but that's the decision I made at the time. It may be however that a monitored agreement with a trusted 3rd party such as LiA would have been the appropriate choice had the service been available, especially if the mechanism was in place to administer the agreement speedily and transparently and get the funds where they were needed in time. From the point of view of reassuring potential donors to Dream for the KJTeam it might help too if LiA were identified as "monitors", as you point out Grace has already provided excellent documentary evidence of the KJT's current circumstances. I ought to make her link with LiA explicit in the info on the DreamKJT site. We should explore this further (Dream, LiA, the KJT). My main concern would be that the monetary value of very small donations is not diminished (pay-pal already takes a share).

My main concern would be that the monetary value of very small donations is not diminished (pay-pal already takes a share).

Ideally, the value of LiA's services would not be a diminishment but an enhancement to the financial relationship and to the org's development itself. Hopes are that working through some practical models will help to demonstrate that value.

Thanks so much Christina for helping me put more light onto this. I hope this has given a more defined background of what is up with this idea.

Ceris I like the idea of looking at it as a monitoring team.So inspiring.

I have started a workspace with a draft of the Promissory Note and will really be very helpful if together we try and add/remove wherever necessary. Today am travelling to Gulu where I may not be able to access the internet, so I will need some assistance here.Christina would you mind this? I would be very grateful if you would jump in and help with the editing and responding to a few things as they may come up.Thanks

Here's the link http://www.ned.com/group/lia-glo bal/ws/promisory_note_for_privat e_loan/

Here's the link

I made some grammatical corrections and had some questions that I have marked in the contract. It seemed easier to do it there than have to copy things over to here but I wanted to alert you to the changes.

The promissory note so far seems ok to me. However I wonder if it is an agreement between the lender and the borrower with an separate agreement between the lender and LIA for management services or will it be between three parties? it that case I would like add the role of LIA and the amount we have to pay for the services of LIA.

I don;t have permission to edit in the workspace directly therefore some additions in this comment: Once again on the promissory note. I would like to add interest free: I have received an interest free loan in amount of..... The re-payment is not very clear to me : 1. The note says: I have received a loan of...... Than: I shall pay in 5 years and the note spells out the first and last payment date. do we leave the instalments open to our own discretion? 2. Please add the name and number of the relevant account

Thanks Grace, Christina, Ceris, Wilfried, David, linda and Mark for coming up to back this i dea I too represent KJT and i do welcome it for sure

Wilfried said:

I don;t have permission to edit in the workspace directly therefore some additions in this comment: Once again on the promissory note.

What you need to do to get permission to edit the workspace yourself, Wilfried, is to join the Life in Africa-Global group by visiting this page.

Then you can edit it to your own satisfaction. No-one's version gets lost in a workspace, so feel free to make any changes you want.

:)

Wilfried said:

I don;t have permission to edit in the workspace directly therefore some additions in this comment: Once again on the promissory note.

What you need to do to get permission to edit the workspace yourself, Wilfried, is to join the Life in Africa-Global group by visiting this page. (The Join button is just above the Group Tags)

Then you can edit it to your own satisfaction. No-one's version gets lost in a workspace, so feel free to make any changes you want.

:)

edited to fix link

Great job on the website Christina!

I left a suggestion/comment in the in Promissory Note workspace re a couple of Linda's points.

David Bale said:

What you need to do to get permission to edit the workspace yourself, Wilfried, is to join the Life in Africa-Global group by visiting this page. (The Join button is just above the Group Tags)

Hi David, thanks for the tip! I am still new in all this internet community business and have to learn a lot. It's really exiting and I am tempted to spend all my time on it! Thanks again I have joined and will see how it works!

I've been working on adding substance from behind the scenes emails the agreement workspace for much of the day today... will come back to it after dinner. Comments on anything up to where I've left off would be welcome.