The Ideology behind CodersTrust Business model
The launch of CodersTrust in Bangladesh has ignited an interesting debate on facebook and twitter about our business model. Therefore, I am using this opportunity to explain and clarify the model so that everyone can have a better idea about CodersTrsut’s vision and mission.
It is actually very simple. You can earn more money, if you know how to code. However, learning to code can be time-consuming, difficult and expensive. Millions of people do not have the time or the money to invest in education. Even if you do invest your time and money in education, it can be a risky venture. You risk ending up with an irrelevant education, and a significant student loan that can end up as a financial burden for the rest of your life.
CodersTrust offers to facilitate an investment in your education by paying you up to 120 USD/month for cost of living and 100 USD/months to cover the cost of internet, All-In-One PC, mentor, health insurance and the learning platform for a 6-month study period where you learn how to code.
This is an opportunity for those who cannot afford an education at the moment. It is estimated that 200 million young people worldwide are trapped in poverty and unqualified jobs because they cannot afford a higher education.
The primary purpose of the study period is to onboard students to the online coding freelance market. The student loan is paid back based on the higher paid coding jobs from these portals. Currently, there are 45.000 jobs posted on the freelance portals weekly. More than half of them require basic coding skills. The freelance portal takes a 10% commission to facilitate the work, CodersTrust takes a 10% commission for facilitating the finance and the education, 50% is used to repay the loan, and the remaining 40% goes back to the student.
When the student loan is paid back, the students keeps 90% of the revenue for a three-year period.
- You as a students get paid 100 USD a month while you are studying
- When you earn an average of 1.000 USD/month on the freelance sites, you will earn 360 USD/month.
- When the loan is paid back after an average of 18 month, you earn an average of 810 USD/month.
- After a three year period you earn 1230 USD/Month
These are average numbers based on the overall freelance statistics and the value CodersTrust will add to the student skills. So it cannot be guaranteed, but if you have been selected for CodersTrust, it is because we believe that investing in your education is something everyone will benefit from. The freelance market will have more qualified workers, you will increase your earnings, and CodersTrust will make money to expand the service to more people.
In this model, you do not pay anything upfront. You are paid to take an education, so you can generate a higher income in one year into the program. So if you are currently earning 200 USD/month, you accept to lower your monthly earning as an investment in your own education, but with the prospect of increasing your earnings significantly within a year.
It is a demand driven model that adapts to the need of the freelance market instead of fueling the supply of candidates by selling loans or irrelevant education. But let’s not forget the impact of this experience for the students. Watch this video to let Ela — one of our students — explain how this changes her life: http://vimeo.com/97813384
Why is this revolutionary?
I come from a country where we not only have free, but paid education, free healthcare, and financial support, if you are unemployed. However, we have experienced that it is extremely difficult to balance generous welfare benefits with open boarders. Consequently, we are experiencing people wanting to move to Western countries, which results in a significant brain drain in developing countries.
Paid education and equal opportunities is limited to people that are born in certain countries whereas millions of people in developing countries are denied access to education. With CodersTrust — paid education is made available, if you have access to the internet. You can now choose to live in a welfare society on the internet where you have paid education, health insurance and all the benefits we know from Scandinavian societies, but it comes with high taxes. Alternatively, you can choose to live in a free capitalist way on the freelance market where you only pay a 10% commission to the market place, but then do not have access to the different welfare services that CodersTrust provides.
A big problem in developing countries is institutional failures for the free markets to grow. CodersTrust comes with an institutional framework build on top of the online labor market, which solves the problem of taxation and financing public goods such as education. So CodersTrust is the beginning of a privatized welfare system made available via the internet that could benefit millions of people worldwide. Then you might argue that the 10% commission is too high, which is the equivalent of complaining about the tax burdens in western countries. I can only point to Scandinavia as being some of the wealthiest countries, so it pays off to build social welfare institutions to provide public goods such as education.
Not everyone will think this is a good idea. It threatens existing business models, communist would hate its financial foundation, Taleban would hate its mathematical and logical learning, and nationalist would hate its global approach. However, I am proud to make a stand, and believe in this business model will benefit millions of people.
What is the big idea?
CodersTrust aims to transform the social problem of access to education and youth unemployment into an “investible” opportunity. Educational services aimed at the world’s poorest people do not yield sufficiently high financial returns to attract private investment, despite their obvious benefits to society. By attaching a monetary value to the achievement of onboarding and upgrading a young person on the freelance market, CodersTrust transform a social problem into an “investible” opportunity for investors, while allowing the local governments to transfer some of the risks which prevent them from investing in tackling these problems.
The goal of CodersTrust in the coming time is to create a “social impact investment bond” that allows local governments to partner with CodersTrust to share the upfront costs and assume the performance risk to expand its promising freelancing program, while assuring donors/taxpayers/government will not pay for the program unless it demonstrate success in achieving the desired outcomes. This enable government to set the priorities and pay for results that benefit society, while Codersrust is able to innovate and deliver flexible, high quality services which meet social needs. The business model of CodersTrust provides the flexibility to focus on addressing the individual needs of the freelancer and a clear incentive to re-engineer delivery and innovate to reflect learning as it is gathered.
Currently, there are several european pensions fund looking into investment opportunities that could not only secure a financial return, but also have a significant social impact. It is very hard for pensions funds to secure even a low interest rate in this financial climate. If we can proof a consistent and scalable model to return 10% in interest, CodersTrust will be able to provide student loans to the 200 million people worldwide that are currently being denied an education.
We must use a variety of approaches to solve the gap in digital literacy between rich and poor nations. Charities, the United Nations, and other non-profit models are great. But the tremendous leverage that capital has on problem-solving shouldn’t be ignored for ideological reasons alone. It needs to be part of the greater ecosystem through which we bring digital literacy and value creation to the whole world.
If you have specific objections to the model, I welcome them. But the greater critique of corporate capitalism might best be addressed by taking all that trapped energy and applying to the educational needs of the world. Once those people become full participants in the economy, then we’ll begin to see the change everyone is looking for. Ignoring capital will not make it go away. As our advisor Douglas Rushkoff puts it:http://vimeo.com/97960495
Therefore, as much as this is a tough capitalistic venture, it has tremendous opportunities to solve one the of biggest challenges in the world — how to end poverty as we know it. I think that is a noble cause to support. I hope you agree?