:Title: Microfinance for social entrepreneurs - a new model in the making :Author: Grace Ayaa :Date: Sat, 06 Dec 2008 11:19:19 PST :URL: http://www.ned.com/group/lia-global/news/18/ Since November, a lot has been happening at the Life in Africa Foundation camp.After setting up plans to work with many more communities, we also thought that in order for this to work better, we really need a very strong task force of Board members, since we at the moment have almost non( David and Abdul are no longer in Uganda and Christina has resigned from active operation) So with a few suggestions here and there, we have come up with about eight potential members whose names will soon appear here. At our first ad hoc meeting, there was suggestions that all members coming on board would possibly have to contribute something little as stake holders and that this may later be used as some kind of loan funds for entrepreneurs who would love to borrow for the purpose of income generating activities. This then can become some kind of revolving fund for many others. As plans were still under way to make this work properly, we already have a potential lender to Wilfried of Amasiko, who has asked the Foundation to manage and monitor this loan for her. This could become the model with which we shall be able to work with others who may need the same kind of services. We would therefore like this space to be where we shall develop the contents of the agreement for Wilfried and his lender. ---- **Comments** :Author: Grace Ayaa :Date: Tue, 09 Dec 2008 01:51:43 PST 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 ---- :Author: Wilfried van der Veen :Date: Tue, 09 Dec 2008 07:45:31 PST 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? ---- :Author: Ceris Dien :Date: Tue, 09 Dec 2008 12:27:59 PST 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? ---- :Author: Wilfried van der Veen :Date: Wed, 10 Dec 2008 00:04:49 PST 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. ---- :Author: Grace Ayaa :Date: Wed, 10 Dec 2008 02:07:11 PST 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. ---- :Author: Wilfried van der Veen :Date: Wed, 10 Dec 2008 03:05:54 PST 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? ---- :Author: Grace Ayaa :Date: Wed, 10 Dec 2008 03:36:50 PST 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. ---- :Author: Wilfried van der Veen :Date: Wed, 10 Dec 2008 05:59:56 PST 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? ---- :Author: Mark Grimes :Date: Wed, 10 Dec 2008 09:29:45 PST 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. ---- :Author: David Bale :Date: Wed, 10 Dec 2008 16:58:07 PST 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? ---- :Author: Ceris Dien :Date: Wed, 10 Dec 2008 17:23:22 PST :Modified: Wed, 10 Dec 2008 17:27:03 PST 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) ---- :Author: Christina Jordan :Date: Thu, 11 Dec 2008 01:44:04 PST 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. ---- :Author: Ceris Dien :Date: Thu, 11 Dec 2008 02:46:33 PST 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). ---- :Author: Christina Jordan :Date: Thu, 11 Dec 2008 03:23:03 PST 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. ---- :Author: Grace Ayaa :Date: Fri, 12 Dec 2008 03:04:56 PST :Modified: Fri, 12 Dec 2008 03:09:37 PST 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-global/ws/promisory_note_for_private_loan/`_ ---- :Author: David Bale :Date: Fri, 12 Dec 2008 11:55:15 PST Here's the link_ .. _link: http://www.ned.com/group/lia-global/ws/promisory_note_for_private_loan/ ---- :Author: Linda Nowakowski :Date: Fri, 12 Dec 2008 16:23:02 PST 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. ---- :Author: Wilfried van der Veen :Date: Sat, 13 Dec 2008 10:46:33 PST 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. ---- :Author: Wilfried van der Veen :Date: Sat, 13 Dec 2008 11:06:04 PST 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 ---- :Author: kayiwa Fred :Date: Sun, 14 Dec 2008 03:53:30 PST 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 ---- :Author: David Bale :Date: Sun, 14 Dec 2008 09:13:41 PST 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. :) .. _`this page`: http://www.ned.com/group/lia-global/ ---- :Author: David Bale :Date: Sun, 14 Dec 2008 09:17:21 PST 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. :) .. _`this page`: http://www.ned.com/group/lia-global/ *edited to fix link* ---- :Author: Ceris Dien :Date: Sun, 14 Dec 2008 16:25:37 PST Great job on the website Christina! I left a suggestion/comment in the in Promissory Note workspace re a couple of Linda's points. ---- :Author: Wilfried van der Veen :Date: Mon, 15 Dec 2008 07:54:58 PST 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! ---- :Author: Christina Jordan :Date: Mon, 15 Dec 2008 07:59:24 PST 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. ---- :Author: Wilfried van der Veen :Date: Mon, 15 Dec 2008 08:19:35 PST David Bale said: 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? Hi David, sorry for replying late, we are on a very slow internet connection (via telephone line) and sometimes it just get blocked. The development of the eco-camp and training center is a long story. With the help of Christina I have started a blog with some background and developments of Amasiko. http://amasiko.blogspot.com/ The whole idea started some two years ago. Some people in the Netherlands wanted to donated and asked a business plan with total investments spread over five years. I prepared one and it came to an incredible amount. For many reasons I was not happy with their approach. Actually I prefer that such a place grows organically, step by step, without creating a lot of envy (which is one of the major thing hindering development in Africa). I also prepared a project proposal based on a format for the Dutch embassy. It was found to be perfectly fundable, but the diplomats decided that from this year onwards all funds have to go to Northern Uganda! This proposal had almost all potential developments included based on pro-formas and architects calculations. it totalled to Euro 58.000/= Again a total picture with all possible agricultural enterprises, cottages, restaurant, seminar hall, dorms for students. Again too much to implement at once, but feasible if the embassy had accepted. In the last two years we have bought 12 plots, totalling to slightly more than a ha on the tip of a peninsula. There are three mud and wattle houses. we have employed a young lady as farm manager, who has made some good gardens and takes care of some animals. The plans for next year is to buy one piece of land offered to us by a neighbour, develop demonstrations of erosion control on it, and develop the sit such that visitors can come for camping. One local house will become a simple kitchen, one remains for staff and the other one I will use myself. We want to buy some tents and construct a wooden house in the small forest. (log hut) Further we need to construct a chicken house and goat shed, water tank, jetty for access to the lake for swimming. The expected loan will get us started, such that visitors can come for camping.Hopefully this will generate enough funds to cover operational costs and to allow us to start some simple training of surrounding communities. Meanwhile we want to continue fund-raising!. I hope that your question is a bit answered, but please feel free to ask more! ---- :Author: Christina Jordan :Date: Mon, 15 Dec 2008 10:06:09 PST Hey David, I also wrote about wilfried's project on my blog some time back... http://christinaswwworld.blogspot.com/2008/10/adventure-amasiko-community-based-eco.html ---- :Author: kayiwa Fred :Date: Mon, 15 Dec 2008 12:05:25 PST I read Wilfried van der Veen's posting and Christina's blog then i come to understand the all sense of this its perfect I wonder if i can also start up KJT blog but we have a website for it. what do you think? ---- :Author: David Bale :Date: Mon, 15 Dec 2008 12:40:33 PST Thanks, Wilfried, for your summary of progress and plans. Thanks too, Christina for the additional link! I didn't realised Wilfried had written the report for Opok Farms. That was so good I forwarded it to Jim Stevenson, the man in charge of the nature reserve where I work, and a former Bird Officer for East Africa. He also thought the report was very good and that there were no reasons why Eco-tourist enterprises in Uganda should not be every bit as successful as they have been in Kenya. Lake Bunyonyi looks so beautiful! ---- :Author: Christina Jordan :Date: Mon, 15 Dec 2008 16:39:51 PST Hey Fred, please put the next KJT blog project on hold til after the holidays and then talk to Grace about it :) Have worked on the agreement and it feels very detailed to me (though not *quite* finished - I've gotta get some sleep). Now waiting for feedback from the parties concerned. Wilfried do you have a printer/scanner so we can continue working on this and print it out while Grace is in Kabale later this week? I've just realized there's no penalty specified for failure to follow the reporting and monitoring plan. Ideas anyone? ---- :Author: kayiwa Fred :Date: Tue, 16 Dec 2008 11:05:14 PST Perfect Jordan ---- :Author: Grace Ayaa :Date: Wed, 17 Dec 2008 05:49:41 PST Thanks everybody for trying to put the Agreement into shape and thanks Christina for making it as detailed as possible. I am again off to Kabale but this time I think I might be a bit online according to how am seeing Wilfried's participation, it seems it's a lot more relaiable there than in Gulu. ---- :Author: kayiwa Fred :Date: Tue, 23 Dec 2008 08:57:27 PST :Modified: Tue, 23 Dec 2008 09:02:36 PST Thanks Grace for the Update how is Kabale it looks do cold? than Gulu ---- :Author: Christina Jordan :Date: Wed, 11 Feb 2009 13:40:46 PST Grace, I've heard from Wilfried that some other sources of income he was waiting for have come through, so the amount he's borrowing will reduce to 4,000 euro. Passing this back to you to finalize the documents now. ---- :Author: Grace Ayaa :Date: Sun, 15 Feb 2009 20:50:58 PST Thanks Christina . I have tried to change a few things to suit the amount that has been changed , but you can look through to check if I might have missed out somethings. Wilfried I think you should also look through to see if the repayment schedule is okay for both of you. ---- :Author: Christina Jordan :Date: Mon, 23 Feb 2009 06:31:02 PST Hi grace, sorry i didn't realize you had already worked on this. Will review it later and see if I can think of any other changes. ---- :Author: Wilfried van der Veen :Date: Tue, 24 Feb 2009 11:59:29 PST Dear friends, sorry for not being involved for so long. Internet has been very much disturbing us, disconnecting almost continuously. it seems a bit better now so I will try to go through all the work done. I am waiting for confirmation that a donation of 4000 is actually transferred. I read quickly through the promisory note., but have to come back to it tomorrow. for now one comment: The budget I made covers an amount of 7500 Euros, which is the money I expect soon (donation of Euro 4000) and the loan of Euro 3600. So the total amount of Ush 16million is not only for the loan amount. Secondly, please let the repayment start 12 months after the payment is made. We specify it on the day of signing, is that ok? Good night Wilfried ---- :Author: Wilfried van der Veen :Date: Thu, 26 Feb 2009 03:16:09 PST Dear friends, Yesterday I got an e-mail from the private lender, that due to some outstanding loans which are defaulting, he is not able to live a loan to our programme. it is understandable, with the present economic crisis we will probably get more surprises. For Amasiko, this means a serious set-back. And for LIA (Grace) it must also be a disappointment. This idea of giving interest free loans to starting social entrepreneurs is so interesting en innovative. Now I would like to ask other members advice, what can be done at this stage? Can we find another person willing to give us such a loan? I would like to send this whole idea to some friends and see how they look at such a model. How can I invite someone to join this discussion? Do they have to become members or can I send a link of this page. However I would like to propose another repayment schedule. with the proposed loan and a grant of 4000 Euro, that's on the way, we will not have enough invested to get much accommodation for visitors and we will have to look for more funding to increase on the capacity. The expected income in the first year is probably not high as we do not have much publicity. Therefore I would like to reduce the repayment amount as follows: 1st year: 4 quarterly payments of 250 Euro = Euro 1000 2nd year: 4 quarterly payments of 300 Euro = Euro 1200 3rd year: 4 quarterly payments of 450 Euro = Euro 1800 By the way, with the proposed loan in mind and with the start of the rainy season (planting season) we have started the intake procedure for the first trainees! It would be such a blessing if another donor could be found. Please advice! ---- :Author: Christina Jordan :Date: Tue, 03 Mar 2009 11:17:55 PST :Modified: Tue, 03 Mar 2009 11:22:34 PST Wilfried, I was very sorry to learn that this fell through, but we can keep trying. I've sent the link to the workspace http://www.ned.com/group/lia-global/ws/promisory_note_for_private_loan/ and the link to this discussion http://www.ned.com/group/lia-global/news/18/ to another contact who may be interested in this. I believe he is currently traveling though, so I've not yet got a response. Ned is a tool we use for editing. While it would be great if potentially interested lenders would like to chime in, like your first potential lender they don't need to be members of ned to view the ongoing workspace and/or discussions. They would need to join if they want to add anything to the discussion or edit the workspace. if you want to edit the promissory note to reflect different terms as you mention above, then go ahead and do that. The link will not change. ---- :Author: Wilfried van der Veen :Date: Wed, 11 Mar 2009 01:50:00 PST Hi Christina, Thanks for all the efforts. I have now seen that it is possible to see the pages whithout logging in and will send the links to some other contacts. Lets hope we will still be able to continue with the model in making. ----