Web2.0 and SE101: Is there anybody out there?

After completing the SE101 project on the ground in Kenya, I packed my bags to go on exchange at the Copenhagen Business School (CBS) and finish my Sauder MBA requirements abroad. I felt like this was a great opportunity to further expand on my International Business acumen and broaden my experience as a whole. I planned on taking a few courses in Social Entrepreneurship (SE) and Sustainability at CBS and the timing coming from Kenya to the classroom could not have been better. The CBS SE course offered a dynamic look at how Web2.0 (Social Media and User-driven content platforms like facebook, twitter etc.) is being used by Social Entrepreneurs to generate not only interest and support, but also Social Innovation.

Reflecting on what organizations like MYC4, and Kiva are doing with Web2.0, I started to see a need to integrate more social media into the SE101 strategy. While MYC4 and Kiva allow users to actively engage in (near) direct lending to those in need, this has a limited impact on capacity building. Their model is effective for generating funds because of the nature of their social media use - providing those-in-need place to connect with those-with-funds and vice-versa. Nevertheless, their overall use of Web2.0 is rather static, providing a means for information dissemination not idea generation or knowledge transfer. Since SE101 is not a financier (at this point), this model connecting 'investors' directly with our students is not useful. However, in our effort to build capacity on the ground, we do need to raise funds to deliver our program - in effect we need to be connected to donors and sponsors in the same way these other platforms connect those-in-need to those-with-funds. The difference between our models creates a question of impact: Will an exchange of funds alone successfully grow the recipient's business and drive durability or would on capacity building be a more effective stabilizer in the long term?

I'm not sure anyone has the answer to this question. What I can say is, after spending time in Kenya on SE101 and looking into the primarily negative return on investment (ROI) for the social media based funding platforms, I feel capacity building is the better way to equip those in need. By teaching our students the business skills needed to actively research, estimate, project, and plan their ventures, we are creating real value and equipping them with the skills that not only benefit the actual entrepreneurs of our class, but challenging those that are not the entrepreneurial type. Moreover, while in the classroom, we are creating a diverse and dynamic network of individuals with ideas and drive and connecting them to their future employees, service providers and customers - real social networking.

I believe there can be a better use of Web2.0 resources from existing organizations. What might this look like? Well, Kirby, an SE101 Project Coordinator and Content Strategist for the Business Objects Community on the SAP Community Network, has been developing an online community for our students and student teachers to collaborate and communicate in a similar way to Facebook. This means SE101 can offer our students online post-program support and real time access to Sauder business school students and their knowledge. This is capacity building and what I see as the future benefit of Web2.0 in social development.

Social Media in many ways rests on the laurels of Crowdsourcing, essentially outsourcing tasks to a community and leveraging mass collaboration to reach an ideal result - think monkeys typing on typewriters. While SE101 is developing the typewriter to integrate its Kenyan and UBC students, we also need to inform the public about what we are doing (static) and engage our potential donor networks (dynamic) to help fund our efforts. This is where SE101's integrated use of blogging, Facebook, and Twitter come in. We hope that by using social media we can enhance our venture, engage our stakeholders and generate more significant donations. Only time will tell if using these channels will be more or less effective than traditional fund raising efforts. Ideally, if we could exceed our annual 'project' need and start generating greater income from donors, this would ultimately provide us with a greater ability to create long term ROI in the form of successful, sustainable development in Kenya. Until then, we hope we can at least use these channels to further document and legitimize our existing successful efforts and future goals.

Please feel free to engage SE101 through any of our available Web2.0 channels (blogging, Facebook, and Twitter) or by email, telephone, telegraph, snail mail or carrier pigeon. The point being, we want you to engage us, we have a lot of incredible stories to share with you and we want to show you how your support will make a lasting difference.

Part 3 - The Way Forward

In part 1 and part 2 of a 3-part blog about Social Entrepreneurship 101: 2009, I discussed the program details and micro-finance options. In this final part of the blog, I share with you the 5-year plan for the SE 101 program.

After four years, while we have a comprehensive and well-tested curriculum for teaching how to write a business plan, we realize that SE 101 could not JUST be about UBC students travelling to Kenya or other African country to co-teach business planning. It is important to have a sustainable and scalable program.

In lengthy discussions with our local business partners and associates, we mapped out a 5-year vision to establish an (youth) entrepreneurship center, jointly supported by the Sauder School of Business and a Kenyan educational institution. The center would have the mandate of teaching youth how to write business plans, providing access to loans at reasonable interest rates, incubating and supporting businesses, conducting research, and providing for-fee consulting and executive education services (to sustain the center’s operations). The Sauder School of Business will take part in student and faculty exchanges, but the majority of the operations will lead by local partners.

In the more immediate future, we will be dividing the program into pre-core, core, and post-core segments. The pre-core program will help interested program participants develop their ideas, gain experience running a business, and learn basic business skills. The core program will continue to teach business planning but will focus on those participants who have had some demonstrated entrepreneurial experience. Clearly, not everyone can or should be an entrepreneur and therefore we must focus our efforts on those individuals who have the highest chance of success. By training and supporting these individuals who have shown a passion and talent for entrepreneurship, we aim to launch businesses that can provide jobs to other community members. Finally, the post-core program will teach intermediate and advanced business skills training. Throughout all the programs, SE 101 will bring in mentors and advisors from the local business community to provide guidance to current and past program participants. In fact, the first post-core program is currently running at our sites, run by our local coordinator, Barlet Jaji.

We have big plans for the SE 101 program, with many details to be worked out, tasks to be completed, and people to speak to, but we are truly excited about the opportunity to have a positive, sustainable impact on (youth) unemployment in Kenya. I will continue to provide updates on our progress and welcome any feedback or suggestions for what we can do to make this vision come to fruition.

Part 2 - Micro-Finance
Part 1 - What a Difference a Year Makes

Part 2 - Micro-Finance

Continuing from Social Entrepreneurship 101 - 2009, Part 1, Professor Nancy Langton and I met with a number of micro-finance institutions and banks in Nairobi, Kenya over the summer.

Group Lending Model

I learned more about the group-lending circle model in which up to 20 members guarantees the loans to individuals in the group. Each member takes turns borrowing money and once he/she pays back the money, another member is able to borrow money. If one member defaults on the loan, no other loans are disbursed until the outstanding loan is repaid. In the end, this model helps to build a credit history for each participant and reduces the need for collateral in that some MFIs perform spot checks of small business assets. For the first loan, the group must pool their savings to cover 100% of the loan, which can be a maximum of 20,000 KSH or about $260 US. Furthermore, all loan recipients must take a 3-day training program on leadership, loan management, recordkeeping, group dynamics, marketing, and business fundamentals. Even more important than basic business training to demonstrate credit-worthiness is actual experience running a business. For those without demonstrated entrepreneurial experience, they must start up and run a micro-business for up to six months before they can qualify for loans. If they eventually qualify for a business loan and their business fails, at least they will have the micro-business to fall back on. Once all the pre-requisites have been met, loan proceeds are typically distributed in 4 weeks. Thereafter, MFI representatives try to meet with loan groups on a weekly or bi-weekly basis but the sheer number of groups makes regular monitoring difficult.

Another Funding Model

Even with these methods to reduce credit risks, loan interest rates can climb close to a crippling 30% and likely contributes to the near 30% default rate (the economic downturn has also played a large role). We spent hours ruminating the possibilities between ourselves and with our Kenyan business associates about other ways to reduce risk, and therefore, provide loans @ lower interest rates to SE 101 participants with viable business plans. One model is a shared ¼, ¼, ¼ model where a local partner (such as a church or school), MFI, and the Sauder School of Business could each deposit a fixed sum of money (for example, $1,000) as security deposits for the loans. The remaining ¼ of the loan would need to be covered by the qualified borrower. We pitched this option to a few MFIs and while in principle they support the idea, we are still awaiting word from the respective decision-makers.

A potential drawback of this model is that those entrepreneurs who are not affiliated with one of our partners could be tasked with raising 1/2 or more of the loan as collateral. A key part of the risk reduction is a community group vouching for the character of the applicant. In rural areas there are a strong community bonds, but in the urban areas we need to find a surrogate community support system for a changing population.

Another way to help reduce loan risk is to help MFIs and banks train their staff in business planning, in order to help them properly evaluate the plans submitted by their clients. Furthermore, we could help them learn how to properly monitor and evaluate a business, to deal with issues early on before they threaten the viability of the business. Currently, many financial institutions simply lack the in-house knowledge and training. Many small business clients are evaluated based on "presence of simple assets", with monitoring sporadic at best. We could collaborate with the financial institutions to identify effective ways to monitor businesses effectively, given the limited resources. In return, not only could SE 101 clients be given lower interest rate loans, but also non-SE 101 clients.

A question to our readers: What other ways are there to reduce loan risk in urban areas of developing countries?


5-year Plan

We spent considerable time in Kenya developing the major parts of the 5-year plan. I’ll describe the plan in my next blog.