Sustainable Business Seeds
Event: Global Social Business Competition 2013
Team: Pauli Pehkonen, Kimmo Lahtinen, Mikko Mielonen, Tuomo Pehkonen
Microfinance has received a lot of criticism towards how it has lost its way and how in fact it can easily drive the poor into even more troubles than they already face. Basically, this is where we want to step in.
When Pauli Pehkonen was doing microfinance volunteer work in Kenya in Kisii region’s villages at the end of 2012, he became aware of the problems that exist among microfinance groups and individual business owners – mainly farmers. Pauli received a lot of responsibility during his volunteer period, which made him clearly understand the needs of the locals. As the first microfinance worker in the main village and with no microfinance organization present, he engaged in field study for two weeks. He realized that one of the biggest issues among the locals, in addition to lack of capital of course, was the lack of information. More precisely, Pauli realized that there exist two essential problems. The first is the use of micro loans in an unsustainable way, which many times results in severe financial problems for the individuals. The second issue is the understanding of the accounting side of the groups and individuals. Especially bookkeeping is essential to have at least on a very simple level for every business despite their size.
After discovering the existing problems, Pauli initiated during his volunteering a project called Bookkeeping Project, which aims at teaching the local microfinance groups and individual entrepreneurs mainly about sustainable business and accounting. Due to the short time he had in Kenya, he was only able to plant his seeds but has an idea how to continue the improvement of the conditions in the region through education – as well as how to expand the social business outside of Kenya.
To conclude, we want to participate in the eradication of poverty through education while simultaneously enhancing the creation of jobs at the Bottom of the Pyramid. The two main problems we will tackle are:
- Understanding of sustainable use of micro loans
- Knowledge of accounting: mainly bookkeeping and enterprise planning
Our solution is to improve the information of the local microfinance groups and individuals through education, the contents of which mainly regards to sustainable business and accounting(bookkeeping and budgeting). Additionally, we will provide information to additional issues locals might have regards to microfinance and entrepreneurship.
The idea is to educate the groups, but more importantly, educate teachers inside the groups! In Kisii area where Pauli worked, the groups gathered a certain small amount of money from all group members – for example once a week – and distributed the gathered amount as micro loans to the members most in need. As you educate one person from a group – which can consist from 15 to 50 people – they have an incentive to teach the others, as this will improve the overall performance and well-being of the group. As a result, the groups will become more reliable and the amount of members not beign able to repay their loans inside the group decreases. This can additionally help the groups acquire funding from institutions and trusts.
Education will be composed mainly in two ways. The first approach is to provide education for everyone willing to learn in mass lectures. This is more about teaching sustainability and accounting on an individual business level (and also on a household level). The other more essential and efficient way is to educate teachers: detailed education for the treasurers, presidents of microfinance groups as well as other members that are comfortable with numbers. The teaching will be concentrated to microfinance groups but of course other types of groups and locals who are willing to learn are welcomed to join the education sessions.
In addition to the sustainable business and accounting education to microfinance groups and individuals, we want to facilitate education in particularly local high schools to educate also the children about the importance of understanding the matters we are teaching. In the end, the children are the future of development. In the locations we will be working at the start, majority of the children with a very high likelihood end up doing the same as their parents; farming and other entrepreneurial practices. Thus, it is important to encourage them to start learning business and accounting, which will help them and be of great importance to them in the near future.
Our business idea is to help people to achieve maximum benefit out of the microfinance loans. This means diverse teaching and education of finance, accounting practices, as well as business skills. As the farmers and other businessmen become more educated, they will become more focused on developing their businesses. In a longer-term, this will result in growth and rise in standard of living.
Eventually, the goal is, that the microfinance users will have fewer problems with the loans, there will be more jobs available and the economy will grow. Furthermore, our volunteers, the students, will learn a lot of their selves and others during the volunteering period. They will become richer persons, in term of social capital.
To ensure that our business stays on track and that our operations are in line with our goals, we will put a lot of efforts into measuring our performance. We will conduct regular inquiries to our clients (the local businessmen), as well as to the volunteers. Also, we will regularly interview the teachers that we educate to teach others.
An important check-point will be when a new volunteer will come to the sight and begin the new period. At this point, an evaluation of the predecessor’s work is performed.
First-tier Customers (University Students) & Value Propositions
The business model is based on voluntary workers who pay to go volunteer, as usually is the case with volunteering. Our competitive advantage is that we provide the possibility to volunteer for affordable fees and with very flexible volunteering periods.
Many volunteering institutions charge fees that are quite unaffordable or even unreasonable, especially if one is a student. Also students would be able to do shorter even 2-3week period education projects, which can be considered adequate as we will provide all the main material in advance for volunteers to use at the education location.
The focus of the volunteer workers will be on particularly students studying business-related subjects in Universities and Universities of Applied Science, at start from Europe.
Marketing for Students
Marketing plays an important role in our business model.
The issue especially with students – based on some field study we have conducted – is that they are not aware of the possibilities to do volunteer work, and if they are, they do not seem to have pure interest to put enough effort to find out more how volunteering can actually be done. Also they might not have the time and money to do it, particularly the more expensive volunteering.
In our marketing we will emphasize the easy access to information regards to doing volunteer work and that volunteering will provide the students a unique experience of putting their business studies to good use. So basically, students will buy an experience that will be of value not only to them but to the less privileged as well.
The marketing will be mainly done through various channels universities have to offer. We will exploit the CEMS university network. Also social media will be exploited as much as possible. Furthermore, the first persons who go volunteer through SBS, are made a deal with to write a blog about their experience, which helps with our word-of-mouth marketing.
Revenue and Financing Streams
Our framework for financing the expansion of our social business consists of three parts:
Volunteering fees from participating students
- The fee is estimated to be between 600-2000€ per student per trip. However, with the involvement of companies and the public sector we can make it even cheaper.
Companies who want to be involved
- Participating firms would get visibility and social recognition. Sustainable business is a common trend in these days and many companies would perhaps want to be involved in our business.
- The Finnish government, like many others, gives development aids for poor countries. Kepa is the umbrella organisation for Finnish civil society organisations (CSOs) who work with development cooperation or are otherwise interested in global affairs. At the moment Kepa has roughly 300 member organisations, ranging from small voluntary-based organisations to major national organisations.
- We aim at getting involved with the public sectors development aid program and thus get financing.
Maintenance and Costs
No huge fixed expenses are needed for the social enterprise to start its operations, and basically very little variable costs are needed for the business to operate. Our current team will start running the enterprise. Later on, younger students will be hired to continue running the business also with zero or minimal wages. This is the one of the key factors that make our business model sustainable. Furthermore, setting up a homepage for the enterprise as well as marketing can produce some but minor costs.
Our social enterprise will have a geographical starting focus on Africa, and more precisely on Kenya. In Kenya the official language is English, which makes it a relatively easy country to access and operate in. Additionally, Pauli has local contacts, which will make the start of the operating much easier at the location.
The key resources are students and their business and financial know-how. Additionally, our Kenyan contacts are essential particularly at the start of our operations.
Our end-customers are Bottom of the Pyramid entrepreneurs in developing countries, more precisely the local groups and their members who are provided with the education. But the first-tier customers are mainly university students who want to do and who will be marketed so well that they will want to engage in volunteer work. More about our first-tier customers in the business model section. The following of this section concentrates on end-customers and the value we are able to bring them.
We provide the BoP entrepreneurs with information, the lack of which is one of the main problems they have. We provide education regards to sustainable business, which is essential for microfinance to work properly. One big problem as mentioned before is that the locals took loans but did not understand how to use them in a sustainable way. So we will help the locals with the use of their loans and save them from defaulting and thus running into more issues that they might already have, as the majority of the people Pauli worked with and we will be working with live in poverty.
Bookkeeping can be considered, even on a very simple level, as the foundation for an entrepreneur to understand his/her business. If the locals learn to understand the numbers of their business, meaning bookkeeping, they will learn to better understand and thus further improve their business. This will also help them in regards to enterprise planning and budgeting, which are also crucial concepts in terms of improving the future profitability of their businesses. Budgeting will also help them when they acquire for funding externally from institutions trusts (particularly on a group level). Furthermore, we will tackle other sustainable business and entrepreneurial problems like composing loan proposals that the locals might have.
To conclude, our education will increase the locals’ access to information concerning sustainable business and accounting, which will help them improve the way they do business. This leads to increased profitability, which can result in more jobs in the regions particularly if the businesses expand. More importantly, the living standards of the locals will increase, which will eventually lead to decreasing poverty.
The main differentiating factor in our project is the level of individuality and independence during volunteering. We can provide the volunteers with a unique experience that most of our competitors cannot match. From day one the student has to face real challenges and responsibility. The circumstance our ambassadors face, forces a concrete usage of real-life knowledge. The students are unattended and in most scenarios by themself which provides them with a remarkable opportunity to teach and learn tangible skills usable in many business-related areas of expertise later in their respective careers. Furthermore, the lack of any organizational supervision tenders the liberty to express and gain individuality that will enhance future corporational endeavors. During the first years of university-level business education, chances to practice the taught skills in concrete scenarios come around infrequently. Through our program inexperienced students can early on attain real-life experience on how the theory can be put in practice.
The vast major of our competitors have a fixed schedule that forces students to arrange their timetable according to the organizational terms. We however provide extremely flexible volunteering periods, which take volunteers’ preference into consideration. You can decide for yourself when and for how long you actually want to commit to the program. We have a clear vision on what we are set out to do. Seeking a multitude of personalities and ways of teaching is characteristic to the program. Bringing out the facts through different personal approaches will definitely be more effective than just giving out paper sheets filled with information to the locals. We provide the material and general guidance on what you should discuss and what has already been taught. The rest is up to you!
We try to eliminate all excessive effort so that the departure will be as smooth and swift as possible. There are no external or hidden costs in our program. Through funding, we seek to provide the volunteers with a relatively affordable journey.
Because of the clear focus to the business education, the intensity of the program is beyond rewarding. It is an education equally gratifying both to the locals and the volunteer. Through this education the welfare and economy will substantially improve. The microfinancing aspect can be considered a specialty of ours and in its complexity it will eventually simplify and improve the economical interaction of the locals. Improving lives of others combined with the satisfaction of teaching, our program is more than an experience, it is a unique learning possibility!
Our direct competition is basically organizations that send volunteers abroad, and more precisely to do business and microfinance related work. One of our main competitors we consider to be the international non-profit organization Aiesec, which has programs to send students abroad for volunteering.
Our indirect competition includes organizationg like Unicef that engage in arrangement of volunteering. However, many of these organizations can in fact be complementary to our business.
To conclude, as SBS concentrates on sending mainly business students to abroad, we do not believe to face fierce competition.
- Strong and dedicated team
- Team members are familiar with each other
- We all strive to improve the world
- Our team consists of students from different disciplines, such as finance, information technology and civil engineering
- One of our team members has concrete experience working in Kenya as a volunteer
- Our focus on teaching sustainable business and accounting gives us competitive edge
- Our earnings will be invested to further expand our business
- We already have a coordinator in Kenya to help us
- Lack of financing (students have to pay for their volunteering)
- Our current focus is on university business students in Finland, which is quite small
- We might not find enough volunteers
- Expand our business to a world-class organization during the years, first, to other European countries
- Establish branches to other CEMS schools, which would broaden our clientele
- More participant schools would bring more visibility to us and thus, more volunteers
- Expanding further in Africa, to Tanzania, for example
- Establish microfinance education offices in Kenya
- In years to come, we could even establish a microfinance bank in Africa
- Competition from other volunteer organizations
- Not enough interested students to volunteer
- Political situation in our operating countries, such as Kenya