The following discussion has been occurring in the Soap Project Development thread. Can we please discuss this further here?

By Mark Grimes (105), Fri, 21 Dec 2007 06:46:15 PST Comment feedback score: 0 +|- (net 0 from me)

>>Mark, you had talked earlier about a ned funding possibility for this - can we get an idea of what you had in mind on that?<<

Oops. Better late than never. Seems like the soap project is in the $250-500 range for a budget. Here's my idea. Ned will fund the enterprise, but instead of "traditional interest", the interest will be in the form of single beaded bracelets. So 87.5 beaded bracelets would be the "interest" on the loan for a year for a $250 loan. Once the loan is paid back, it will be re-loaned for another startup business in Uganda under the same terms. This idea came after reading a book about Room to Read which has built thousands of libraries in rural areas around the world and talked about the importance of local partnership, buy-ins and action on the ground. If we go this route, Ned could initially look at partnering with 10-15 $100-$500 business launches in Uganda.

By Mark Grimes (105), Fri, 21 Dec 2007 09:14:09 PST Comment feedback score: 0 +|- (net 0 from me)

No worries, we can right-sized the numbers...I just went the easy math route. Perhaps it looks like $250 at 35% at $1.35 each for 64.8 bracelets.

By Christina Jordan (94), Sat, 22 Dec 2007 15:51:58 PST Comment feedback score: 0

It's an interesting idea, but there are a few things that need some thought. Normally in microfinance, the interest charged contributes to the cost of processing and recovering the loan. If the cost of ned capital is 35% and then we add another percentage onto that to cover loan delivery and recovery costs, it makes the cost very high. (The highest we've ever charged is 24%; the local commercial cost of capital is 21-28%). Also, if Ned is charging interest in bracelets, then we'd either have to charge bracelets + a fee to handle the local costs (confusing?) or have LiA also charge bracelets and then have to sell them to support the ned microfinance program (they've already been earmarked as a school fees product).

Just thinking outloud... any ideas?

By Christina Jordan (94), Sun, 23 Dec 2007 00:36:55 PST Comment feedback score: 0

Mark, is Ned locked into that 35% figure? It's really feeling pretty high to me.

By Mark Grimes (105), Sun, 23 Dec 2007 04:19:46 PST Comment feedback score: 0 +|- (net 0 from me)

Not locked in at 35%, just trying to get creative with possible non-traditional methods.

By Munnu Morrish (59), Tue, 25 Dec 2007 23:59:06 PST Comment feedback score: 0 +|- (net 0 from me)

Thanks Mark for the good idea,However,I have not done any calculations on the maths you made but I would love to make few comments onto that: Its simple to repay the loan as many members know how to make the bracelets however Christina says " Mark, is Ned locked into that 35% figure? It's really feeling pretty high to me".so why can't you have a relative %age?

It would be a good idea however to have more of this projects going on as soon as possible because the soap project has really taken long withoput it kicking off.We have just been in theory,so I think its YOU now to check onto the loan %age so as projects gets on practically.

Hope all goes well in the calculations.

I've been working on some figures that are looking pretty interesting. Thinking about connecting the crafts program with the microfinance program is opening up some exciting doors in my brain. Stay tuned...

Munnu, can you please do a quick recap on the names (and responsibilities) of people that would be involved (ie, own) the liquid soap business, and the funding/dollar total needed? Thnx.

Thanks Mark

Its been in the proposal.This is a link for it:http://www.ned.com/group/neduganda/ws/project_proposal/#member-project-managers

Does this answer it or you still need some other thing other than this?

Waiting

I've put some related ideas about funding microfinance projects through products over here: http://www.ned.com/group/lia-glo bal/ws/crafts4microcredit/

Meanwhile, Mark, maybe you can elaborate your own ideas for what kind of process should be required for a project to qualify for ned funding (ie do you want an online process or a set of specific information posted about LiA selected projects), and what should be required once they have received ned funding.

>>Does this answer it or you still need some other thing other than this?<<

Munnu, I'd love to also see the marketing ideas and sales projections (who buys, how much) in that worksheet. And having all that wrapped around a timeline then too. I'll be honest, I don't get the banana thing...but that's ok. Munnu, can you report at least weekly on this online? And do you have access to a digital camera so members can see things as they develop?

>>Meanwhile, Mark, maybe you can elaborate your own ideas for what kind of process should be required for a project to qualify for ned funding (ie do you want an online process or a set of specific information posted about LiA selected projects), and what should be required once they have received ned funding.<<

I'm open to suggestions. An online process using Ned.com would be fantastic. As much as "the product/service" I really want to make sure the market, market demand, the sales projections and strategy, the timelines are all fairly well thought out. The 10% re-investment I see more of an annuity that can be directed by local members/participants on the ground and the Ned community online as a whole.

It kind of concerns me that so many additional costs are supposed to be absorbed by the project. At this point I do not see how any profit will be left. If I understand correctly, what's expected/required is:

• 10% reinvestment of profit (forever? if not, then for how long?)
• xx% interest to ned (possibly paid in bracelets)
• xx shs to pay for for weekly internet access
• xx hours of time spent by an online reporter per week (what if the proposed project does not have an internet literate person?)

I worry that these very real resource pressures may end up undermining the intent - which I hope is to create a sustainable project that can grow. Margins on business simply are not very high in Uganda's market, and the requirements assumed here are rather expensive. If we want the soap to sell competitively against soap manufacturers that don't have internet reporting costs, then we need to put some serious thought into who pays for the internet reporting costs.

imo - local soap production does not need to be reported about weekly on the internet to be successful.. and how long does the reporting need to continue weekly? Nor does a plan need to be approved online by foreigners to be a good plan in the local context. I really think we need to try to think a bit about the weight of the burden we are putting on potential projects. Otherwise, I am afraid it will simply be too expensive for the micro-businesses to source capital this way.

Also Mark, are you intending for Life in Africa as an organization to have any responsibility for pre-selection, application preparation, disbursal and recovery, or are you planning to lend to Munnu directly without organizational facilitation and accountability? It's not very clear to me what role Life in Africa should play or how that role should be facilitated financially. Any thoughts?

The 10% ongoing annuity versus interest paid in bracelets are two different things. It would be an either/or. WRT internet access, have people in Gulu still access to the Inveneo machines online? Reporting should be thought of as dialogue and discussion threads and be minutes per week, not hours. "Approved online by foreigners", I was thinking more partnership...specially because the foreigners would likely be the ones investing funds, offering guidance and such. WRT any LiA responsibilities, I don't quite follow where the org even stands now that it has dissolved. What does LiA (or new org) look like on the ground in Kampala/Gulu once you move back stateside?

Mark Grimes said:

The 10% ongoing annuity versus interest paid in bracelets are two different things. It would be an either/or.

I hadn't understood that would be an either/or

WRT internet access, have people in Gulu still access to the Inveneo machines online?

The machines are there but the internet service needs to be paid for monthly and it is one of the CBOs largest operating costs.

Reporting should be thought of as dialogue and discussion threads and be minutes per week, not hours.

It would be really useful if we had a better idea about what you are expecting to see every week (and for how long?) in terms of content. For you it might only take minutes, but on our connectivity that's not at anyone's home it will certainly take longer. And with other computer training and service activities scheduled it's going to require some organization/allocation of online time that would otherwise be used for other things.

"Approved online by foreigners", I was thinking more partnership...specially because the foreigners would likely be the ones investing funds, offering guidance and such.

So far we foreigners are not a very good model of efficiency. We've debated and held this project up for months now and meanwhile many of the members it was intended to benefit have gotten very frustrated. This is why I was asking if we couldn't come up with some kind of defined process. A form perhaps; a ned voting procedure perhaps; a list of requirements for each project perhaps.

WRT any LiA responsibilities, I don't quite follow where the org even stands now that it has dissolved. What does LiA (or new org) look like on the ground in Kampala/Gulu once you move back stateside?

We have not dissolved but are restructuring, and I am not disappearing but simply taking some time away from Uganda (though I will still be working online). We've been discussing the new structure at http://www.ned.com/group/lia-usa /news/3/, where Life in Africa Foundation (under Grace and a chief accountant in Uganda) is to be accountable to Life in Africa USA and other donors for disbursal and monitoring of donor funds to the CBOs. Sorry you'd missed that.

My concern is that from experience I know that people are going to hold Life in Africa accountable even if they want to deal directly with our members. If ned funds are to be a part of Life in Africa's microfinance portfolio then we have to be facilitated to manage it in some way. Kiva provides zero interest capital so that we can earn the interest, but in practice even that is not financially meaningful since we are operating on such a small level so far. If we are going to introduce new source of loan funds, we need to make sure it is scalable and adds to our ability to manage more loans instead of only adding to the already high cost of running microfinance on a small scale. (btw if it's not going to be Life in Africa, then imo you need another partner who can handle disbursement and recovery. I don't see practically how you are going to manage that from portland).

I tried to put this in sales projection on worksheet but failed.could some one please table this and I do the editing

Month ,% of mkt ,firms ** and Total(horizontally to the right)

estimating sales,Total Market (qty of prospects),Percentage of firms in our target group,Target Market (qty. of high probability customers),Est. market penetration rate of untapped potential,% of total firms expected to eventually try the product.,Estimated total time period t (months)(12),Target Market - qty of firms,vertically to the left.

Thanks in advance

>>The machines are there but the internet service needs to be paid for monthly and it is one of the CBOs largest operating costs.<<

A couple questions. How much per month USD? Is the connectivity still on? Is it being resold and made available commercially to offset costs?

>>It would be really useful if we had a better idea about what you are expecting to see every week (and for how long?) in terms of content.<<

Journal style conversational reporting. Length could/would depend on the deal outline. If team has access to in-house machines, how much of an issue is this?

>>So far we foreigners are not a very good model of efficiency. We've debated and held this project up for months now and meanwhile many of the members it was intended to benefit have gotten very frustrated. This is why I was asking if we couldn't come up with some kind of defined process. A form perhaps; a ned voting procedure perhaps; a list of requirements for each project perhaps.<<

If there was a proposal on the floor in Sept/Oct this would have been funded then I guess. People got so hung up on the term coop that it rather fell apart then. As I've said for three years, NPO, NGO, LLC...it's all just an entity selection. I can put $25-100 into Kiva, spread the risk over time, and no that of $10,000 it will all come back and be reused again for a great purpose. But 5-10-20K needs to be (for Ned) into a situation where the funds have a good chance at coming back whole, or whole overtime, or something. At some stage, it seems like I was told to wait until at least December too, until certain issues were resolved.

>>If ned funds are to be a part of Life in Africa's microfinance portfolio then we have to be facilitated to manage it in some way. Kiva provides zero interest capital so that we can earn the interest, but in practice even that is not financially meaningful since we are operating on such a small level so far. If we are going to introduce new source of loan funds, we need to make sure it is scalable and adds to our ability to manage more loans instead of only adding to the already high cost of running microfinance on a small scale. (btw if it's not going to be Life in Africa, then imo you need another partner who can handle disbursement and recovery. I don't see practically how you are going to manage that from portland).<<

But now Kiva is requiring a fairy significant capital match to access the zero interest funds for certain MFI field partners, correct? There's Liquid Soap (for a team of people) and there's things beyond...and Ned has been ready to get the liquid soap thing going for 4 months. Munnu. LiA. Grance. Christina. Ned has the capital. Ned's got the online network and software. Ned's got the access talented people to offer advice. I see on Kiva when entrepreneur defaults the MFI is still paying back the note to Kiva/lenders. I suppose I can do a Kiva like loan thru LiA with LiA guaranteeing the loan. It almost seems like any other arrangement at this juncture is simply causing too much confusion. Let me know what direction you'd like to go.

Mark, I didn't realize that the funds coming back whole was the question. What we've been trying to get at from this end is what are the requirements in addition to paying back the whole loan amount. Both the administrative requirements and the rates of return that have been suggested are pretty heavy, so operationally the cost of ned capital is something we need to get clear on. We can only guarantee the capital's return inasfar as we believe we can manage the cost of it. It's great that you have the capital, but we really need to work out the conditions before jumping into a financial agreement. I am truly sorry that you are frustrated by this need, but it's a real one.

There are a lot of demands on the computers we have - there is online reporting work, there is administrative work, there is training, there is promotion & networking, and there are only so many hours per day. The cheap link we're on costs about $65 per month and doesn't always work - it's not commercially viable to sell it. The next step up in quality would cost us $750 to install and $250 per month at each center. It would be somewhat more reliable and hopefully quicker when it's on (ie more commerically viable to sell), but operationally we do not have enough computers to do everything we need to do at either center as it is. Selling connected computer time commercially becomes challenging to orchestrate when team computer time is required in order to access other kinds of income sources. We know this from experience. and the time & effort of those doing the online reporting needs to be rewarded - unless you assume that every project ned funds will have an internet literate member. In reality that just isn't a reasonable assumption to make when dealing with Ugandan small businesses. Your market of potential borrowers becomes very small. Honestly - I wouldn't try to make an issue of the online reporting cost if there wasn't one. 3 years of trying to get Ugandans online has taught me about some of the things that will bite us in the butt if we ignore them. Not accounting for enough of the cost and time involved in online reporting is one of the huge flaws in the model I've been trying to build. I'd really like to avoid some past mistakes.

I've actually been toying with another kind of idea all together that I want to toss out here. Will do so in a separate post.

For the sake of loan speed at this time, how about if Ned just provides the capital for the Soap Project under the same terms as Kiva with LiA (only without the new matching funds provision).

Mark Grimes said:

For the sake of loan speed at this time, how about if Ned just provides the capital for the Soap Project under the same terms as Kiva with LiA

That's great Mark - thank you - but under Kiva's terms the online reporting is far more rare than what I think we can expect on this experiment.

Munnu and Mark - Could the following schedule for "touching base online" after disbursal of the loan seem reasonable?

• min 1x/week for the first 2 months (Munnu)
• min 1x/month for the following 10 months (Munnu)
• min quarterly independent reports published by Life in Africa (i4c Agents/Int'l Volunteers)
• min 1x/year for the following 4 years (as part of a Life in Africa annual report)

Seems to me that if ned is able to engage the project with useful information and helpful advice, then there will naturally be more interaction than the min schedule I've proposed above. It might also be worth thinking through what happens if Munnu doesn't keep to the reporting schedule during the first year.

An aside to explain where I'm coming from with this - we are building Internet4Change reporting systems into the 2008 program budgets that assume the reporting will be done by people external to the program itself (i4c agents who are not otherwise involved with the program's management and/or int'l volunteers). Under that structure, Life in Africa takes responsibility for ensuring that a story-form status update and other information (what info do you want here) gets published with as little bias as possible. In this case of the soap project it's a little different, since there is an assumption/expectation (I think) that the project initiator will also be actively online in an engaged way. While Life in Africa Foundation can pledge to produce regular (quarterly) external narrative reports about the project, we have no way that I can think of to guarantee Munnu's or the soap project's participation online at ned.

Here's a thought - microfinance all over the world works through systems of sticks and carrots - penalties and incentives. Are there perhaps any penalties or incentives that can be offered to the soap project that can tie to keeping up with the online reporting schedule?

Oops - had copied this to move it and forgot to paste it to the end of my last post.

Mark Grimes said:

(only without the new matching funds provision).

Kiva's new provision (a good one, imo) is that Kiva funded loans should come to represent no more than 1/3 of any org's total microfinance portfolio. In that sense, incoming ned funds are already matched from the outset by the existing portfolio that's funded by Kiva and other sources (currently $11,500). What we all want to avoid, I think, is that any organization becomes too dependent upon any single source of funds.

Christina Jordan said:

Mark Grimes said:

For the sake of loan speed at this time, how about if Ned just provides the capital for the Soap Project under the same terms as Kiva with LiA

That's great Mark - thank you - but under Kiva's terms the online reporting is far more rare than what I think we can expect on this experiment.

Munnu and Mark - Could the following schedule for "touching base online" after disbursal of the loan seem reasonable?

• min 1x/week for the first 2 months (Munnu)
• min 1x/month for the following 10 months (Munnu)
• min quarterly independent reports published by Life in Africa (i4c Agents/Int'l Volunteers)
• min 1x/year for the following 4 years (as part of a Life in Africa annual report)

Its nice that its at this point of reporting,The idea is I will do the reporting and some one will make an independent report,your schedule is Ok,

touching base sked seems great to me. Would be fantastic if some photos could get worked in too...just because everyone is so visually oriented. Can anyone get a hold of Stephen Okello?

>>John Berger asked: Who takes the currency risk?<<

Given the structure as outlined above, I would guess that the acting MFI takes the currency risk (LiA in this case).

Are wee ready to go with the project now?

What, if anything, needs to be done to get the funds over there and get this product made and test marketed?

Are we ready to go with the project now?

Well, umm. How to explain this?

I guess the first thing to do will be to identify another local project champion to do the online reporting and take charge of the project :-(

We found out yesterday - quite out of the blue as far as everyone here (including his sister) is concerned - that our friend Munnu has gone and joined the Ugandan army. He left for training on Monday.

Believe me, we here are as speechless as you all probably are right now.

I'm pretty sure Dennis Katusi will be able to carry the project forward, but will let you know when we've got more clarity from Gulu on what they propose to do.

btw - yes, LiA takes the currency risk.

Rats. Bummer. Curses.

Well, we'll see where the next step takes us.

Just browsing the forums and it looks like this project petered out. Mark, is this what NedSpaces would be an evolution of?

Hey Jon, on the ground leadership is going to be very important with any NedSpace locations, it simply cannot be managed/lead from online. There needs to be one or more persons live, present and working FTF with people.

Also, not only did Munnu join the army, which left was challenging, the entire LiA/Gulu location in essence fell apart as I've been told not long after this.

In this situation, and with any other new startup(s), there needs to be strong leaders, ideas, management, flexibility, and a solid business base of support to allow for success to build on.

Mark,

Absolutely, Mark and it's good to see you recognize that early on. I think that's why it's an asset to have someone on the ground who is as excited about this as you are (me) but I do need to know some details.

Is NedSpaces the same idea as the incubation model we talked about? I just want to be clear on the expectations. Is this a starting point? Will it grow to that?

The space is being donated but is time being donated as well? If so, it'll be easy to ask the students to help monitor the space but then you lose a certain level of accountability. Night Guards are cheap but we've got to make sure we get the right (re: very trustworthy) person.

During the day the space will have a purpose (the bead co-op) but at night. Are you allowing me to use the space as I see fit, or are we trying to seed the early part of the incubation idea?

Just want to make sure we're on the same page moving forward.

>>Is NedSpaces the same idea as the incubation model we talked about? I just want to be clear on the expectations. Is this a starting point? Will it grow to that?<<

For now, the NedSpace in the evening is a place where young college students/entrepreneurs (as chosed by you) with innovative ideas can have access to a free place, with power, security, connectivity and some online guideance and support from Ned members from around the world.

>>The space is being donated but is time being donated as well? If so, it'll be easy to ask the students to help monitor the space but then you lose a certain level of accountability. Night Guards are cheap but we've got to make sure we get the right (re: very trustworthy) person.<<

Space and computer time is being included for you and the entrepreneurs/tech/students. With regards to night guards, I spoke with Evvy and they already have (and will contrinue to have) a night guard there, even when yourself and the entrepreneurs are there. My guess is Grace and Peter would introduce you to him as well.

>>During the day the space will have a purpose (the bead co-op) but at night. Are you allowing me to use the space as I see fit, or are we trying to seed the early part of the incubation idea?<<

Well discuss with Grace and Peter what some of the ideas you have for the nighttime space are. During the day the space may indeed be used for more than the bead co-op, I suspect it will be used for other internet connectivity for people living in the Acholi Quarters in the way of an interenet cafe. There may be some other different ways, both for the community and as revenue generation that the space could be used during the day.

>>Just want to make sure we're on the same page moving forward.<<

Agreed, and I think right now...emergence is part of the process. You, Grace and Peter working together. You getting the entreprenuers/students/developers online and participating actively within ned.com so current members here can get to know them, and they can get to know current members.

I can envision things happening, but don't want to project too far...as again, letting things evolve can uncover interesting opportunities. Like, it would be interesting if the college students/entrepreneurs you are bringing to NedSpace would say take 10-15 high school aged youth from the Acholi Quarters that are really interested in tech, and spend an hour or so once a week and really give them some technology training. Many interesting things could happen there.

Will stop rambling now, 11:30PM in NYC and the conference starts again tomorrow morning at 6:30AM...time for sleep.

BTW, I need to reconnect with Erik Hersman again very soon, but it may well be that NedSpace Kampala could be joined by a NedSpace Nairobi in the near future.