The biggest thing we realised in 2017

There’s a spate of blogs on the highs and lows of 2017. Instead of covering a whole spectrum of what we’ve learned, I’d like to share the biggest realisation I had in the PledgeMe office.

Last year I had a realisation.

While the work we’re doing is supporting greater access to capital, it’s not really democratising access to capital like we had been saying. Equity crowdfunding, as it currently stands, isn’t doing what it’s name states — making things equitable. That’s because the world in which we’re operating, isn’t equitable.

But, everyone can use that platform right? So there’s equality in access? Yep, that is true. Equality is when you treat everyone the same. Equity is when you realise that the social systems we operate in don’t allow everyone to start at the same place, and that you might need different policy settings or support to produce a fair society. It’s when you understand fair is people getting what they need, not everyone getting the same.

Used under a Creative Commons licence. Credit: @communityeyehealth

While access to our platform is equal, we aren’t making it equitable.

Most of our founders are of European descent; men founders raise on average more money than our women campaign creators; and while we do have regional campaigns they typically raise less money than campaigns from the main cities (Ocho is definitely an exception to that rule). I know equity crowdfunding is relating to a different type of equity, but I don’t think it should.

As a group, we are deeply committed to democratising capital. We believe diverse companies and founders support stronger communities. In order to walk our talk around supporting diversity, we knew we had to do more.

I felt this most strongly when I went to speak at the launch of He kai kei aku ringa, the Iwi/Government Māori Economic Development strategy in Rotorua in June. The strategy literally means providing the food you need with your own hands.

For the first time, I opened a presentation with my Pepeha. Something that terrified me sadly more than it should have. Not only did I try to open in Te Reo Māori, I tried to share stories of Māori campaigners. Unfortunately, despite 1,200 successful campaigns, I didn’t have that many examples. And, I ended my talk by stating we needed to do more.

One of the attendees came up to me afterwards, and asked about our crowdlending product. Wouldn’t that be something to look at? Couldn’t we model something similar to the Grameen Bank, but co-create it locally?

And, they were right. We believe our crowdlending platform could be used to democratise capital, if we tweaked it. In fact, it is in some ways, the way things used to be done. Historically, communities funded community assets, and then benefited from the value generated from those assets.

How does microlending actually work overseas?

Internationally, the idea of using microlending as a means to bring people out of poverty really isn’t new. The Grameen Bank, arguably the granddaddy of microlending, started almost half a century ago in Bangladesh. We’ve been fans for a very long time. They have been so successful in their attempt to disrupt the cycle of poverty, their founder Muhammad Yunus received a Nobel Prize for his work in 2006.

The Grameen Bank makes small loans (known as microcredit) to those typically unable to borrow without requiring collateral. The bank originated from a research project to study how to design a credit delivery system to provide banking services to the rural poor — a group that was known as the unbankable.

The founding principle is that loans are better than charity to interrupt poverty: it’s about getting money for self determined solutions rather than someone elses idea of what’s needed. They offer people the opportunity to take initiatives in business or agriculture, which provide income to pay off the debt. The bank is founded on the belief that people have endless potential, and unleashing their creativity, initiative and leadership helps them end poverty.

Grameen offers credit to people formerly underserved in Bangladesh: the poor, women, less educated, and unemployed people. Access to credit is based on reasonable terms, such as the group lending system and weekly-instalment payments, with reasonably long terms of loans, enabling the poor to build on their existing skills to earn better income in each cycle of loans.

Every borrower goes through an education programme around what the loan means for them, and is required to bring five of their community through that process with them. That means, when they start repaying their loan their wider community understands what that means and can support. This inclusive approach to debt means that borrowing is no longer an individual activity, and the community understands and supports the borrower personally (not just financially).

Peer-to-peer lending isn’t new either. It accounts for over two thirds of the crowdfunding market internationally (yep, more than Kickstarter-styled project crowdfunding and equity crowdfunding combined). And, peer-to-peer lending as a mechanism to support microlending isn’t new either. The likes of Kiva has been a major proponent in bringing international money into developing countries.

Kiva is a non-profit organization that allows people to lend money via the Internet to low-income entrepreneurs and students in over 80 countries. Kiva’s mission is “to connect people through lending to alleviate poverty.”

Kiva never collects interest on loans and individual Kiva lenders do not receive interest from loans they support on Kiva. Borrowers might pay interest to local field partners, but not to Kiva. Field Partners are nonprofit organizations, microfinance institutions, schools, social enterprises and are responsible for assessing borrowers and providing training, financial literacy and even health services. Partners must be focussed on alleviating poverty and not be charging excessive interest rates. Kiva has a very high repayment rate (currently 96.9%), and is internationally recognised for the work they do. Here an international community supports the borrowers financially, but not personally.

How could it work here in Aotearoa?

We believe there is a gap in the market: lending money within OECD countries to parts of the population that have been disadvantaged or excluded through structural inequality. We believe a community can support borrowers both personally and financially, creating a circular and supportive economy. We believe with the right tools and approach, communities can be part of the solution to to provide local opportunities, in a way that empowers rather than excludes. We believe this includes:

  • Co-creation — anything that is done should be done with the community, not to the community.
  • A focus on removing structural inequality — we need to name it as the problem it is.
  • Simplicity– people need to be able to understand what they’re getting into.
  • A transparent platform — people need to see what’s happening both for themselves and others.
  • Matched funding — we believe government has a role in matching the funding raised.
  • Education — not just of the entrepreneurs, but of the wider whānau and community. Both in person, and online.

That’s why we’ve partnered with Māori Women Development Inc (MWDI) to create a new way for communities to fund indigenous and regional entrepreneurs. We believe supporting tangata whenua to access new forms of capital using platforms and tools that have worked can create a whole range of new opportunities — some of which we might only scratch the surface on.

Who are MWDI?

Founded in the 80’s out of the Māori Womens Welfare League an organisation dedicated to the health and wellbeing of Wāhine Māori, MWDI provides loans to Māori women and their whānau to help them to start, expand, or restructure businesses.

MWDI have the ability to lend up to $600,000 per annum and also provide a series of programmes to support wāhine Māori including coaching, financial capability and business development programmes that are delivered regionally. They are constrained by how much they can lend, it needs to be between $10,000 — $50,000, and they can only lend money to women that have not been able to access bank loans and can provide security to back up their loan.

We have partnered with MWDI to ensure enterprises have access to education and support. We also see the potential in increasing the number of Māori entrepreneurs and enterprises who might choose to use this platform and provide more whānau and community members the opportunity to invest in businesses that are doing good and have the potential to make a significant social and environmental impact.

What are we doing?

We’re co-creating a platform with the wider community. With MWDI we’re looking at completing research, creating a first version (if that’s what needed), going out to the wider community to share our plans, and then launching our first campaigns. We’re going to hit go with our research mid January. Here’s our proposed timeline:

  • Jan 2018 — Research
  • Feb 2018 — Co-design Workshop & Prototype
  • March 2018 — Hikoi — through the regions to support 200 early stage entrepreneurs
  • April 2018 — Education Programme — Deliver programme (online and in person) to participants and their five whānau.
  • May 2018 — Campaigns Launch

Here’s what we think the process for the platform will look like (but, first, we need to test it):

Instead of Crowdlending, we’re planning to call it Whānau Lending, and we will call this platform Tā Koha.

Koha = 1. (noun) gift, present, offering, donation, contribution — especially one maintaining social relationships and has connotations of reciprocity.

The platform will be focussed both on supporting funding within communities, as well as across communities. In the words of one of our friends, we see this as a chance to “redress in a small way the tilted scale, the imbalance between communities”

We need as much input with this as we can get. This could come in the form of:

  1. Signing up to attend one of our workshop sessions — this can either be in person or online to assist our team in the co-creation and co-design of this platform. We are really interested in your thoughts:
  2. do you think crowdlending/crowdfunding works for Māori? If yes, why, if not why not and what can we do to improve?
  3. If you wanted to contribute to a campaign — what would motivate you to do this? As a hapu or Iwi partner — what would make you feel compelled to invest. What return on investment might you expect?
  4. Registering interest to: complete our survey, support campaigners once launched, or launch a campaign
  5. Sending us links to your favourite micro lending / P2P platforms overseas
  6. Reaching out to Barry to share your thoughts, or just tell him, Kaye-Maree and the rest of the team they rock!

Questions? Get in touch with Barry on barry@pledgeme.co.nz or comment below.

Anna, Kaye-Maree, Barry, Teresa and Linda (the team co-creating this platform)