1. Turning Traditional Donors into Social Investors:
Revolutionizing the Online Microfinance Platform
by Rob Krieger and Jessie Margolis

2. Online microfinance platforms have in the new millennium significantly
enhanced the ability for capital to reach millions of poor people across
the globe
Example:
Credit: kiva.org
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.

3. However, current online micro and small business lending platforms
fall short on turning traditional donors into true social investors
Issue #1: Do not sufficiently Issue #2: Do not allow prospective lenders to get a sense of the
encourage the financial communicative dynamism of the entrepreneurs—as VC investors say, a
accountability of the micro/small huge part of an investment decision is based on seeing the
businesses, and their ability to entrepreneurs pitch and interpreting their passion, confidence, and
control and interpret basic financial articulation. Also, current platforms do not encourage the developing
information. world entrepreneurs to practice these essential business communicative
skills.
Issue #5: By
concentrating too much Issue #3: It is true that using many
on micro financing, as different lenders to finance one
opposed to encouraging micro/small business project allows
the creation of businesses for greater potential to raise
that are a little larger— sufficient capital. However this
small business—we run further disconnects each individual
the risk of not creating donor/lender from the project—the
sufficient levels of Issue #4: Does not take advantage
“feel good effect” takes over, rather
employment, and not of the business knowledge that a
than a “strategic decision guided by
capitalizing on the developed-world lender may be
research and measurement of social
advantages that come able to provide the developing
impact.”
with cooperation and world entrepreneurs.
specialization of labor.

4. Idea #1: Create a video-based “pitch” system of ideas
from entrepreneurs of the developing world
Rationale: Current online microfinance platforms not only do not sufficiently connect the
online lender to the potential dynamism (or lack thereof) of the developing world
entrepreneurs and their businesses, they also do not allow for sufficient direct
screening. Simply put, there is not enough transparency.
1) Prospective borrowers create
video pitches with their MFI
4) Borrower receives
lent funds, and 2) Prospective
provides financial and online investor
video communicative reviews pitches
updates on a
quarterly basis
3) Investor targets their funds
based off of both financial
AND communicative criteria
Solution: All prospective borrowers must make a video “pitch” of their ideas, to be posted
on the website. The prospective lender thus gets a true inside look into the business,
and can much better determine the attractiveness of the investment.

5. Idea #2: Create an online “stock market” for small
businesses in the developing world
Rationale: Although online debt market platforms have been successful at raising capital for
micro and small loans in the developing world, no one has capitalized on the power of an
equities market platform to more appropriately and efficiently allocate capital online.
1) Entrepreneurs and small 2) The IPO for the “shares” involves
5) Participants are motivated not by businesses are still highlighted real money being invested into the
financial gain, but by gain in points. This on the website with the same small businesses, however, the
motivation stems from: a) Pride in video pitch idea from Idea #1 investment does not equate to actual
being the best investor in the legal ownership of the developing
competition—you spot the successful world small business. If another
investments early! It is embarrassing if BUY SELL
participant in this online platform
your invested projects end up being desires to buy your “shares” they must
priced the lowest. b) Doing well in the pay you the IPO price.
competition means you are allocating
funds to the small businesses with the
most promise, and ensuring that funds
are not wasted on projects with no
potential. Price: IPO Cash $3,400
Points + 330 3) Prices of shares move up
and down based on the same
principals of real major stock
4) Subsequent share transactions after the IPO are always purchased for the IPO markets—based on bid price
price in cash, plus/minus the premium/discount of the current share price relative and ask price; supply and
to what the IPO price was. However this discount/premium below/above what the demand!
IPO price was is not gained/lost in real cash, but is paid using a points system.
Solution: Create an online platform to allocate capital based on an equities market model, in
which shares of small businesses (although not legally owned) are traded in a game-like
competitive setting, in which the initial IPO capital extension is with real funds.

6. The “Deep Dive”: Idea #3
One business lender - to - one business borrower relationship
Introducing: The New
Online business to business connections for the developing world:
Fueling sound business growth through direct due diligence, financing, and mentorship
Francisco: Organic Coffee Farmer
Example:
Credit: stonyfield.com
Rationale: Other platforms do not establish/facilitate relationship building and mediated communication between the
lender, the local MFI and the small business owner. By establishing and facilitating a three-way symbiotic
relationship, we can ensure: 1) Selection of investments only in the best small businesses; 2) Assistance in
developing sound business management and intelligent use of capital; 3) Guidance for ensuring up-to-date,
accurate financial information.
Solution: 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. This business-to-business one-lender-one-borrower
dynamic not only ensures funds are invested much more prudently, but also allows for the investor business to take
on a consultative role for the investee. U.S. company employees collaborate on the project together.

7. Idea #3 leverages some variants of other ideas described
previously to maximize its value proposition
Issue #1 : No true idea of the state of (or encouragement for Issue #2 : No knowledge of communicative
development of) the developing world business’s financial dynamism (or lack thereof) of developing
knowledge . . . Solution #1: Small business leaders and world business managers . . . Solution #2:
entrepreneurs with the most potential work with the local MFI and Small business managers must post a video
Pajebal to ensure their financial literacy, and only then can they pitch, that presents their business and defends
post financial statements online for prospective lender’s review. their need for financing.
Issue #5: Over- Issue #3 : Using many scattered lenders to
encouragement of a micro finance one micro/small business
business-based economy disconnects each one from the ability or
may not always be best for Business to Business Connections for desire to measure or encourage social
regional economic Developing World Small Business
impact . . . Solution #3: A single business
development . . . Solution in the U.S. lends to a single business in the
#5: Increased efficiency of developing world. The lender not only is
specialization of labor and Issue #4: No opportunity for added compelled to monitor progress due to the
cooperation that comes value from lender . . . Solution #4 inherent bond of the two parties, but also
when we encourage and U.S. business takes on a consultative because the investment is relatively
finance small to medium role for the developing world significant in size—the entirety of a loan of
businesses as well, moving business, via online communication— a few thousand dollars—financial
beyond the micro phase. a combination of an online portal and investments are made with much more
Skype. prudence.

8. First, how current major online
Next, how the New works:
finance platforms work:
Step 1: An online microfinance Step 1: Pajebal works on-the-ground with the local
intermediary organization posts a short MFI and the best prospective small business borrowers
description and a few picture of a to ensure they have up-to-date financial information,
developing world micro business on their and post this to Pajebal’s website, along with a video
website. pitch of their company’s plans and clear justification for
need of debt financing.
Step 2: John Doe in the U.S. sees the $300
loan on the website, likes the story and Step 2: Stonyfield Farm in New Hampshire (for
pictures, and extends a $50 loan. example), as part of their CSR program, decide to invest
$3,200 in a small organic coffee farm in Guatemala that
Step 3: When John extends his funds they is looking to expand. They make this decision after
are placed in a general pool to, at the end reviewing the farm business’s financial information and
of the month, be transferred in bulk to the being impressed by the business pitch given in the
MFI that is facilitating the loan to the end video by the small business’s management.
borrower. Often, that specific loan has
already been extended to the borrower, Step 3: When Stonyfield extends their funds, those
and John’s funds are really going to funds specifically are channeled to the end borrower,
replenish the capital of the MFI. facilitated through an international wire transfer by
Pajebal to the MFIs bank. The MFI then extends the
Step 4: John liked the idea that his funds funds to the borrower at a reduced interest rate. The
were lent, not donated, and that the wire charge to individually transfer these funds does
borrower will use them to aid her business, not represent too burdensome of a cost (as a % of the
and then pay them back to him. However, total loan), b/c this small loan is substantially larger
he would not be too concerned if he was than most micro loans.
not paid back, and thus did not see
rigorous evaluation of the micro business Step 4: With an investment of a few thousand dollars,
as a desired nor warranted aspect of his Stonyfield wants to make sure they get paid back.
participation in this project. Therefore they have analyzed the project in depth using
all available information—written, video-based, and
Step 5: John never had a direct connection Skype-based communication facilitated by Pajebal.
with the borrower, and thus may or may
not think much going forward about the Step 5: Stonyfield, through Skype and the use of a
borrowing business, their ability to bilingual Pajebal employee who covers the region (or a
effectively grow and generate profits, and U.S. volunteer) gains further insight into the operations
to therefore generate a social benefit to of the company, and can provide the small business
the community through better business. with consultative advice.

9. Idea #3: Implementation
The 6 step process: Pajebal will establish this process as part of their innovation implementation by using online
information sharing & communication and Skype video meetings to guide the
development of the lender-borrower relationship.
1. Pajebal facilitates the 3. Lender/borrower develop a
introduction of lender to 2. Lender/borrower establish
regularly practiced feedback process
borrower: profile exchange and goals and define the terms of
that could occur once a week, to
initial get-to-know the business their relationship. Pajebal stands
once a quarter. This would include
and investor-vision/investee- as a support and resource during
setting goals and next steps.
vision conversation. this process.
Business to Business Connections for
Developing World Small Business
4. Lender writes document articulating
6. Pajebal works with the perception of organization and its
borrower & lender to evaluate 5. The borrower maintains
growth trajectory. Lender taps into his or
change relative to set goals after regular and consistent
her expertise to propose
each period. New goals can be set communication about its
recommendations and stand as an
and processes can be established. business practices and progress,
information resource (advisor) to the
or lack of progress.
small business.
Pajebal, Inc. is a registered North Carolina nonprofit corporation with an office in Quetzaltenango, Guatemala. Pajebal seeks to
substantially alter its operations based on our new ideas as outlined in this PowerPoint deck. We will of course start with
western Guatemala, and then look to scale out to other areas of Latin America. Any funds won in this competition would be
donated to Pajebal.

10. 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