This is a fascinating idea, applying the crowdsourcing successes from the microfinance and artistic worlds to the SME market. I am curious, though, at how the outreach to find the funders would work. Not all of the SMEs would necessarily be direct social-impact businesses -- some would "just" be businesses, and their beneficial impacts would be through increased employment and economic activity.
At the same time, the funding levels needed by many of these SMEs are quite large, so you would lose some element of the direct, personal connection that Kiva works diligently to provide.
What do you see as the next steps in this program? It looks like you would work with local credit unions as the on-the-ground financial institutions (where they exist). I presume the other side of the equation would be a virtual marketplace/website? How would you manage the fees on potentially large cross-border transfers, and mitigate fraud?
The other side of the equation would be a peer-to-SME lending marketplace/website.
Besides the website, there would be an API that would allow financial institutions and other organizations (e.g. foundations) to integrate the peer-to-SME lending marketplace with their information systems. For example, they may want to write an application to select the loans they want to fund and integrate that with a workflow application that handles the funding process in their organization.
Scale is needed to finance the SMEs on which a group of people within a population want to focus. That scale comes from having a large population of investors that can pool their financial resources in a peer-to-SME lending marketplace.
If the few organizations that already have large amounts of capital to invest do not share your values, the SMEs you want to support will not get financed or will not get financed on a scale that will make a big impact. Those organizations may also have no interest in financing SMEs.
If enough people in a large population share your values, the SMEs you want to focus on supporting will get financed.
People are more motivated to finance SMEs because they provide employment. A financial institution may make more money trading derivatives instead of making loans to SMEs or have to increase the amount of capital they have in order to cover potential losses from trading derivatives.
To find funders, the individuals, businesses and organizations of a developed country could sign into the website and choose the SMEs in which they want to invest.
To make a presentation on the benefits of supporting a particular SME, a video can be uploaded to Youtube and embedded in the page used to display the information on the SME on the website (peer-to-SME lending marketplace).
In a developed country, a TV advertising campaign could be used to make potential investors aware of the benefits of supporting the funding the loan of a particular SME.
Spotrunner.com makes it easy to get a commercial on TV. They pre-produce commercials that can be used for different categories of businesses and let their customer customize different portions of the commercial - voiceover, text displayed, etc. They could create a category for advertising a loan funding request of an SME.
The motivations to invest in SMEs would be different for different investors.
An individual in a developed country might have family in another country and want to help develop that country. When scaled to the individuals of an entire country, an individual's contribution to the loan may be small (e.g. $100) but the total could be substantial (e.g. $100 X 10,000,000 people = $1 billion).
A business in a developed country may just look at it as another investment. If investing in SMEs with a direct social impact makes them money, they have no reason not to invest in those types of SMEs.
For larger SMEs not funded by individuals, financial services companies could offer an investment product to their customers where they choose what loans to fund on behalf of their customers. Such an investment product could be part of the portfolio of customers in developed countries. The investor could choose an investment product that funds direct social-impact businesses and/or businesses. Something similar is available for mutual funds but in this case the investor would be funding SMEs to earn interest instead of just buying their stock via a mutual fund.
Individuals or foundations with large amounts of capital to invest would also be able to contribute to larger loans.
Criteria for what SMEs to fund would be up to the investor choosing from the SMEs available.
For example, the government of a developed country could have two accounts:
- one account where the money being invested is part of their foreign aid budget so they may want to limit their investments using those funds to direct social-impact businesses.
- another account for funding SMEs that increase employment and economic activity. Another benefit of increased employment in a developing country is the local population could eventually afford to participate in funding SMEs in their country that have a direct social impact. They would be the most motivated to do so. The local credit union could give local SMEs and individuals access to the peer-to-SME lending marketplace where Internet access is not widely available. The local credit union could handle the entire amount of the loan locally or use the peer-to-SME lending marketplace if they cannot afford to fund the entire amount with local investors. I would give investors the option of funding SMEs that are "just" businesses for this reason.
In a developing country, the credit union would be responsible for initially evaluating the SME to determine if it meets the requirements to be funded. If the credit union believes the SME meets the criteria, the funding request is entered into the online peer-to-SME lending marketplace where it is evaluated by a third party to verify the funding request meets requirements. If is passes the evaluation by the third party, it is published and made available for funding on the online peer-to-SME lending marketplace. If the loan amount is large, the third party would do due diligence by visiting the SME to examine the operation in person. Investors considering making large contributions to loans would be able to visit the SME to determine if they should invest in funding it.
In a developed country, an SME would go to a bank or credit union to have the funding request entered into the online peer-to-SME lending marketplace if the bank or credit union did not want to fund the loan or only wanted to fund part of the loan. Banks and credit unions are responsible for making the initial evaluation if an SME qualifies for funding. Again, investors considering making large contributions to loans would be able to visit the SME to determine if they should invest in funding it. In a developed country, you have additional information such as credit scores on which to base a decision. The motivation for banks and credit unions to participate is they get the first chance to fund the loan and have the opportunity to fund only part of the loan if the rest is funded in the online peer-to-SME marketplace.
If a bank or credit union does not want to provide the loan themselves, they would be required by law to enter the loan request into the online peer-to-SME lending marketplace if the SME meets the criteria. If the SME does not meet the criteria, banks and credit unions would be required by law to give the SME a letter detailing why it does not meet the criteria. If the SME can make changes to meet the criteria, they can reapply for the loan.
Since the loan may be for a project that will provide new income (e.g. new factory, new business, improvements, etc.), the repayment of the loan would be delayed until the project is completed and providing income. This allows new businesses to be financed. For example, a new construction company may need a loan for tools, vehicles, etc. before they can go into business.
Investors are repaid incrementally as SMEs pay back their loans.
As a next step in the implementation of the peer-to-SME lending marketplace, to create the software specifications and understand the hardware requirements, the implementations of Kiva.org and Kickstarter.com can be examined.
There are also several parts of the peer-to-SME lending marketplace that are similar to other services that have been implemented to handle a large number of transactions that can be examined.
Kiva has made use of existing services in its implementation. For example, Kiva uses Amazon.com Inc.'s Simple Storage Service (S3).
These existing services can speed the implementation of the peer-to-SME lending marketplace.
If companies such as Google built data centers to host federal government applications exclusively, federal governments could take advantage of software services to speed development applications such as a peer-to-SME lending marketplace.
Examples:
(a) 'Google App Engine' can be used to host the website on Google's infrastructure.
Amazon also offers web services that could be used.
(b) Paypal can be used to handle making payments. Kiva uses Paypal to move money around. In Kiva's case, Paypal donates its services so there are no transaction costs when moving money between accounts.
Amazon Flexible Payments Service could also be used.
(b) Shopping for which loans to fund is like the product catalog on Amazon.com.
'Google Commerce Search' can be used to implement searching the SME loans available to fund.
(c) Managing the payment and repayment of the loans is similar to software used by banks and similar to some features of Paypal.
If Paypal added a feature to manage loans (peer-to-peer lending), it would make implementing the peer-to-SME lending marketplace easier.
There are smaller companies that have implemented peer-to-peer lending but any company used would have to be able to handle the transaction load of an entire country.
Larger loans would require recurring payments from investors for a set period of time to fund the loan.
The information to collect from an SME that an investor needs to decide if they want to fund a loan needs to determined.
Credit unions in this country and the organizations that Kiva.org uses to handle the loans can be studied to understand that part of the workflow of distributing the loan and collecting payments.
After building the peer-to-SME lending marketplace, the next steps are:
1) Initially, make it available to the population in the developed country to invest in the economic development of their own country. With a stronger economy, they will have more money to invest.
2) After the population in the developed country is familiar with the peer-to-SME lending marketplace and understands the benefits it provides, roll it out to developing countries where credit unions already exist. The size of loans could be increased over time to see if local conditions make investment possible.
3) In developing countries where credit unions do not exist, provide training on how to create and operate one before making the peer-to-SME lending marketplace available in that country. As credit unions are created, the peer-to-SME lending marketplace can be made available. This also helps to build the banking system in the developing country.
Because governments would be using the peer-to-SME lending marketplace as part of their foreign aid and/or economic development programs, they would be motivated to work out agreements with other governments where no fees or lower fees are imposed on cross-border transfers for these investments. They could do the same for investments by individuals and businesses in their country where the SME has been categorized as having a direct social impact.
The peer-to-SME lending marketplace would be managed by the central bank of a country so managing fees would be a feature of the peer-to-SME lending marketplace.
In a developing country, fraud would show up as a high default rate on loans to SMEs.
If the fraud is perpetrated by local politicians, the federal government in the developing country could use Brazil's approach of informing the local population of which local politicians are corrupt (see the paper titled 'Exposing Corrupt Politicians: The Effect of Brazil’s Publicly Released Audits on Electoral Outcomes').
If the fraud is perpetrated by organized crime, a high default rate indicates that the local or federal government in the developing country should be notified that they have a crime problem in that area. They are motivated to deal with the problem to ensure they have continued access to funds.
If the fraud is perpetrated by the federal government in the developing country, I would not invest in that country. Though, as long as funds can be distributed to local credit unions reliably, it would be difficult for a corrupt federal government to steal the funds distributed across an entire country.
The size of loans could be limited where crime is a large problem to increase the amount of work a criminal organization would have to do to steal funds. If the local government manages to reduce crime, the size of loans can be increased.
Further loans to that country or area of that country could be suspended until the problem with fraud is resolved.
"For example, Kiva uses PayPal to move money around, and that has proved to be "even easier than credit cards" and cost-effective, he says. (PayPal Inc. donates its services, allowing Kiva to send 100% of the money pledged for loans to the entrepreneurs, according to Kiva officials.)"
"Previously, investors who loaned, for example, $25 for 10 months would have to wait the entire 10 months to get repaid. Now investors are repaid incrementally as entrepreneurs pay back their loans."
"For example, Frazao says he switched in mid-2007 from maintaining Kiva's own server to using Amazon.com Inc.'s Simple Storage Service (S3). There's no immediate cost savings, but because S3 is infinitely scalable, Kiva will never run out of space, and it will be able to create future capacity without a big capital outlay."
"PayPal provides Kiva with access to technology, research, workplace resources and employee volunteers. Additionally, Kiva uses PayPal's innovative payment solutions to securely and seamlessly collect and distribute funds around the globe."
Here is an example of how providing a loan to electric vehicle manufacturer(s) in the United States has social benefits to multiple countries as well as economic benefits.
8990000 barrels/day gasoline * 365.25 days * 42 gallons/barrel * $2.76/gallon = $380,634,622,200 spent on gasoline per year
8990000 barrels/day gasoline * 365.25 days = 3,283,597,500 barrels/year gasoline
3,283,597,500 barrels/year gasoline * 2 * $78.75 = $517,166,606,250 spent on crude oil per year to obtain the gasoline
$380,634,622,200 / 135,932,930 = $2800.1649210386328022209188016473 per passenger car for gasoline
~$2,800,164,921 per million passenger cars per year spent on gasoline
Nissan-Renault's CEO has estimated sales of 1 million electric cars per year are needed to reduce costs and no longer require financial support.
Using the peer-to-SME lending marketplace, one or more SMEs in the United States selling electric passenger cars could obtain a $10 billion long term loan to finance a $10,000 price reduction for 1 million electric passenger cars.
The loan could be obtained from individuals or financial services companies or a combination of both. Financial services companies with investments in companies related to the electric vehicle industry would be motivated to provide financing for a loan or part of a loan.
$100 x 100,000,000 people = $10,000,000,000
Besides the money earned on the loan, there is a further benefit to the United States of $2.8 billion (rough estimate) remaining in the U.S. economy for every 1 million electric passenger cars sold. That is a rough estimate since it takes two barrels of crude oil to make one barrel of gasoline and some portion of the money spent on gasoline already stays in the U.S. economy.
Some of the money saved on gasoline is spent on locally produced electricity and the remainder is kept by the owner of the vehicle.
A power plant can produce additional electricity from recovering energy from the heat in exhaust gases. It is difficult to recover energy from heat produced in a vehicle using an internal combustion engine.
If the population of the United States is made aware that $2.8 billion (rough estimate) remains in the U.S. economy for every 1 million electric passenger cars sold, the passenger car inventory in the United States could turn over quickly to electric passenger cars.
The motivations for the people of the United States are economic and not having to have the military defend access to crude oil around the world.
Making electric vehicles affordable through scaling production in the United States has economic, environmental and social benefits to countries around the world.
This process of scaling production could also be implemented in the European Union simultaneously.
"One barrel of crude petroleum contains only 30-40% gasoline. Transportation demands require that over 50% of the crude oil be converted into gasoline. To meet this demand some petroleum fractions must be converted to gasoline. This may be done by "cracking" - breaking down large molecules of heavy heating oil; "reforming" - changing molecular structures of low quality gasoline molecules; or "polymerization" - forming longer molecules from smaller ones."
Nissan, which is introducing a mass-market Leaf electric car later this year, needs government incentives to spark initial demand but understands those incentives will not be permanent, Nissan-Renault Chief Executive Carlos Ghosn said.
"You need to jump start electric cars at a certain level so that we can get scale and the scale will allow us to reduce costs," Ghosn told reporters after a groundbreaking at a plant in Tennessee that will produce the Leaf and its battery.
"We think that scale for us is between 500,000 and 1 million cars a year," he said. "When you get between 500,000 and 1 million cars per year, we don't need government support."
The uses of the peer-to-SME lending marketplace for funding loans could be expanded over time to fund revenue generating infrastructure.
Example: California High-Speed Rail
$200/month * 24 months * 10,000,000 people = $48,000,000,000
For a loan this large, the loan would have to be funded over severals months before construction could start.
The primary return for California residents would be the jobs created, lower travel costs, reduced travel time, etc. since the rate at which this loan could be paid back would be very slow given the amount of revenue generated.
This loan is effectively a write-off in exchange for the other benefits since the rate of repayment is so low but the recipient of the loan should still repay the loan.
Since California already has some other sources of funding, investors living in California would not have to actually fund the entire amount.
China has expressed an interest in investing in the project for the opportunity to sell some of the components to build the high speed rail system.
Example: Trans-Canada High-Speed Rail
If it cost $400 billion for a Trans-Canada high-speed rail line from Vancouver, British Columbia to Quebec City, Quebec, it could be funded by Canadian taxpayers over 20 years.
This loan is effectively a write-off in exchange for the other benefits since the rate of repayment is so low but the recipient of the loan should still repay the loan.
$139 per month x 12 months x 20 years x 12,000,000 households = $400.3 billion
Example: Ultra high-speed broadband networks
Loans for Internet service providers to build ultra high-speed broadband networks will provide the bandwidth and speed to make new types of Internet applications possible.
On a small scale, Google is implementing ultra high-speed broadband networks with speeds up to 100 times what is currently available in the United States.
MIT researchers led by Vincent Chan, an electrical engineering and computer science professor at MIT, have developed technology that they claim will make the Internet 100 to 1,000 times faster and a lot cheaper.
Professor Vincent Chan's architecture, which is called "flow switching," establishes a dedicated path across the network between locations that exchange large volumes of data.
One application would be to make advanced education available to entire populations for free. Entire circululums of video instruction and text books for K-12 to university for different subject areas could be made available for free online. This is already being done on a small scale by some universities.
This would benefit entire populations in developed and developing countries.
The video instruction could be watched on Internet TVs or computers. Internet TVs are televisions that get their video feeds from video streaming sites on the Internet such as Youtube.
In developed countries, universities could charge fees to administer tests for advanced placement based upon what a student learned at home. Or, if people did not need a formal degree, they could apply what they learn to creating an SME.
Smaller revenue generating infrastructure projects such as power plants and associated transmission lines would be easier to fund.
Example: 198-megawatt wind project in Southern Colorado
A 198-megawatt wind project could be funded by 1 million households in Colorado in 6 months at $70 per month.
Example: 1 Gigawatt power plant using nuclear batteries
If a one gigawatt power plant using nuclear batteries cost about $3 billion ($50 million x 40 + $1 billion), it could be funded in one year by 5,000,000 people paying $50 per month.
$50/month * 12 months * 5,000,000 people = $3,000,000,000
"The California rail authority plans to spend $43 billion to build a 465-mile route from San Francisco to Los Angeles and on to Anaheim that is supposed to open in 2020."
"Houston firm Blue Diamond Ventures, Inc., has formed a partnership with FreedomWorks LLC to co-develop a 198-megawatt wind project in Southern Colorado. The company plans to begin construction this year on the $420 million project, along with 68 miles of new transmission lines, in Huerfano County."
"Each HPM provides 70 MW thermal energy or 25 MW electric energy via steam turbine for seven to ten years. This amount of energy provides electricity for 20,000 average American-style homes or the industrial or infrastructure equivalent. Each module will cost $50 million. Initial deliveries, slated to begin in the second half of 2013, are being scheduled."
"Hyperion Power Generation, Inc. (HPG) was formed to bring to market the unique Hyperion (formerly Comstar) small, modular, non-weapons grade nuclear power reactor invented by Dr. Otis "Pete"' Peterson at the United States' famed Los Alamos National Laboratory (LANL) in New Mexico. Through the commercialization program at LANL’s Technology Transfer Division, HPG was awarded the exclusive license to utilize the intellectual property and develop a product that will benefit the U.S. economy and global society as a whole."
The employees of a large enterprise constitute a health care risk pool which can negotiate a better price because of the amount of income to a health care insurance provider they represent. Being able to hold a job implies a certain level of health.
While each SME has employees who have the same level of health as those in a large enterprise, they do not have the same buying power because, individually, SMEs do not represent the same amount of business to a health care insurance provider.
All the SMEs and their employees in a state or province can crowdsource a loan to fund their own health care insurance provider that exists to offer better insurance to their employees.
Such a health care insurance provider can also save SMEs money by not using medications with a high 'number needed to treat' (NNT).
Sources:
University of Southern California - Reporting on Health:
"Put another way, the NNT is the number of patients that would need to undergo a particular treatment over a specific time period in order to see their health improve beyond what would have happened had they done nothing or had they undergone a different treatment.
A low number means a drug is highly effective with a broad range of people. Four people take it, and one sees better. For a vaccination, for example, the NNT might be one. A high number means the drug may be effective but only with a narrow set of people."
The uses of the peer-to-SME lending marketplace for funding loans could be expanded over time to fund residential and office energy efficiency loans.
(a) SME obtains the loan
If the profit margin is high enough, SMEs that sell and install heating and cooling equipment could get a loan to offer a discount on their products. Distributors offer a better price per item for larger orders. SMEs would have to calculate if the anticipated increased volume of sales and the discount on larger equipment orders makes the loan practical given their profit margin.
Example: Cool Energy Inc.
A company, Cool Energy Inc. in Colorado, has a solar to combined heat and power (CHP) home energy system using a low temperature Stirling engine. They claim their solar-to-CHP home energy system enables home and building owners to cut their energy bills by as much as 75%.
If those with the highest amount of disposable income needing the loans are financed first, the amount of time to repay loans is reduced allowing the next 300,000 people with houses to get financed. The rate at which loans are repaid slows down over time as people with lower incomes get financed.
If people were given 3 years to repay the loan, it would take about 50 years to finance residential energy efficiency improvements for 5,000,000 households.
Besides employing people in SMEs, these loans reduce the amount of money spent on energy freeing up money which can be used elsewhere in the economy.
Where homes are heated by oil, this would also reduce the petroleum deficit. For this reason, you could start with homes heated by oil.
SMEs owning apartment buildings or office buildings could also apply for energy efficiency loans for their buildings.
May I say that your examples (comments) are actually two potential brilliant entries? Would you have the contact of the Health Insurance initiative? Can you give more details and examples on your entry (that helps when the judges are evaluating)?
This specific competition is a bit tricky because we are looking for best practices/ideas from the private sector to finance the growth of small and medium enterprises that can lead by example. We are hoping that the public sector will embrace these ideas.
Do you see your idea growing towards becoming some sort of private bank? Or do you see some private sector banks actually implementing it? I know you mentioned that central banks might also be responsible for the implementation but I wonder how sustainable it will be if it seats under a central bank.
I don't have the contact of the Health Insurance initiative. Is that located on this website or elsewhere?
I moved some of the examples from the comments that I made into the entry for the idea. There is limited space so I could not put the same level of detail in the entry. Among others, I put the example of using an SME loan to create an SME health insurance provider in the entry.
Are the comments considered during judging or just the idea entry itself?
I updated the idea to show how the idea could be implemented by the private sector instead of a central bank.
The idea could be implemented as a private bank with private sector banks paying to access the marketplace or sharing ownership of the private bank running the marketplace.
There are a few reasons the public sector would find this idea useful:
1. it can also be used for funding the economic development of their own country.
2. it can be used to implement a portion of their foreign economic development program in a more sustainable way.
3. it provides a way of funding their country's economic recovery without raising taxes or increasing the national debt.
Reasons #1 and #3 would motivate the private sector to pay for running the marketplace.
The 'Bloom' programming language could be used in implementing the solution in combination with a product like that offered by Cloudera.com, Nimbula.com, etc..
EcoMotors has designed a more efficient internal combustion engine that can run on multiple fuels.
Prof. Peter Hofbauer, EcoMotors CEO, worked on the Volkswagen Beetle engine.
Bill Gates and Khosla Ventures are investing in EcoMotors.
EcoMotors plans on demonstrating a 100MPG car in 2010.
Lotus Engineering has designed a drivetrain similar to that in the GM Volt.
An SME that manufactures electric vehicles could make electric passenger vehicles with a PHEV drivetrain range-extended by a smaller version of EcoMotors engine which runs on multiple fuels.
The resulting PHEV vehicle would operate in the same way as a GM Volt but be able to use ethanol and biodiesel as fuel to extend its range. This vehicle would reduce the petroleum deficit even further than the GM Volt.
Fisker Automotive could get a $600 million loan to bring such a electric vehicle to market with 10 million individual investors supplying $60 each.
The PROTON Emas, a plug-in series hybrid city car, has been styled by Italdesign and was unveiled on the Italdesign stand at the Geneva Motor Show.
Lotus Engineering designed and integrated the complete drivetrain, including the electrical drive system with single-speed transmission, which delivers low emissions, optimised performance and acceptable electric-only operating range for city use.
For longer journeys, when the battery charge level falls, the 3 cylinder, 1.2 litre Lotus Range Extender engine is used to replenish the charge in the battery and provide electrical power for the drive motors.
The battery can also be recharged via an AC mains domestic outlet to achieve initial electric-only operation.
This patented design creates a ground-breaking internal combustion engine family that will run on a number of different fuels, including gasoline, diesel and ethanol. The engine operates on the 2-cycle principle, generating one power stroke per crank revolution per cylinder. It comprises two opposing cylinders per module, with a crankshaft between them, and each cylinder has two pistons moving in opposite directions. This innovative design configuration eliminates the cylinder-head and valve-train components of conventional engines, offering an efficient, compact and simple core engine structure. The result is an engine family that is lighter, more efficient and economical, with lower exhaust emissions compared with conventional designs. Here you can see this revolutionary 2-stroke engine in operation, which helps to illustrate the simplicity, elegance and compactness of its design.
Wired: GM went bankrupt; Chrysler is disintegrating. Is this really a good time to start a car company?
Henrik Fisker: It’s the perfect time. Especially for an environmentally minded automaker. Governments are handing out money—in April we got a $529 million loan from the US Department of Energy—and consumers are ready to change their lifestyles in the name of the environment.
Rene- absolutely fantastic mapping of the trend and potential design, my big question is who is going to build it? Who are the entrepreneurs who will make it happen? Or how do we provide incentives for major players to enter the space? One recent trend has been incentive funds or prize awards put up by foundation or gov'ts to encourage innovation.
David
If the government is committed to implementing a lending market on the same scale as a stock market like the New York Stock Exchange, it would go along way in providing the incentive to build the software needed.
With the software available today for cloud computing and storage, it is much easier to create an application that can scale.
Kiva.org managed to build such an application using many existing software services. Cloud computing infrastructure software exists to run those software services in-house if necessary.
Here is an animation explaining research on motivation sponsored by The Federal Reserve:
It basically says that the motivation for implementing this solution that will get a better result is "purpose" rather than "financial reward" when work requires thought.
The idea is to pay people enough that they aren't worried about money so they focus on their work. More financial rewards beyond that don't get you a better result.
Guy Kawasaki wrote an article saying something similar about startup companies - too much money can adversely affect product development.
If that research is correct, you are better off attracting people who want to solve the problem of financing economic development and economic stimulus in a sustainable way by enabling a entire population of a country to pool their resources to participate in financing loans to SMEs to help themselves and others.
(a) Building the lending market
(i) Autonomy
- people are free to choose what part of the implementation they want to work on (e.g. software, workflow, policy, etc.)
(ii) Mastery
- developing skills in writing scalable software, writing financial software, etc.
- developing workflow to make solution successful
- competing against other teams to provide the most scalable and easy to use solution
etc.
(iii) Purpose
- financing economic development and economic stimulus in a sustainable way by enabling a entire population of a country to pool their resources to participate in financing loans to SMEs to help themselves and others
(iv) Compensation
- developing marketable skills
- making their skills known to a large audience of potential employers
- contributing to solving a big problem
- chance to be on the team that implements the solution
- pay the top five teams enough that they could afford to work on their own projects for the next two years
(b) Individuals using the lending market
(i) Autonomy
- individuals in a country can direct and participate in the economic development of countries by choosing what to finance
(ii) Mastery
- choosing which SMEs to finance to make economic development of their country or a developing country successful
(iii) Purpose
- financing economic development and economic stimulus in a sustainable way by enabling a entire population of a country to pool their resources to participate in financing loans to SMEs to help themselves and others
(c) Operating the lending market
Private financial institutions would be motivated by the benefits it provides their organizations financially.
Economic development banks would be motivated by the benefits it provides to achieve their goals.
Companies that have built banking software for large private financial institutions would have an advantage building the software needed - the software to implement the lending market and the software to integrate SME loan applications with private financial institutions existing loan application workflow.
One avenue for finding entrepreneurs could be 'Sprouter':
The software to be implemented could be split into several different projects:
1. Online catalog of SME loans needing funding, "shopping cart", and "checkout" to set up investment in selected loans.
2. Loan application software
- automated checks that loan meets criteria, risk assessment, fraud detection, etc.
- submitting field reports from visits to SMEs
3. Loan management software
- set up, accept and track payments from investors and repayments from SMEs and distribution to investors
4. Web service for private financial institutions to interface with lending market.
- read catalog of loans via web service to be able to write application to choose loans, invest in loans, etc.
5. Loan application workflow integration
- either implemented at private financial institutions by internal IT departments or by contractors
6. Mobile phone and satellite Internet payments service that could be implemented in developing country to be used by SMEs, SME suppliers and customers in developing country.
- deploying wireless broadband Internet with support for IP backhaul of mobile phone traffic
- some existing local wireless broadband Internet networks in developing countries connect to more developed parts of the country via satellite Internet
- includes tracking of SME supplier payments
The initial part of the implementation could be run as a contest:
(a) Provide a cloud computing and storage data-center for teams competing in the contest to run and test software implementations. A corporate sponsor such as Google, Cloudera, Nimbula, etc. could provide this.
(b) The software written for the contest has an open source licence compatible with all or part of the software implementation later being incorporated into a commercial implementation.
(c) The top five winning teams in each category get enough money to work on their own projects exclusively for the next two years.
(d) The top three winning teams in each category get a contract to work together to implement the final software in their category.
Governments:
The benefits to the economic development in their own country would motivate governments to participate.
The lending market also provides a way of making part of governments' foreign aid programs more sustainable.
Individuals:
The lending market providing the means for individuals to participate in the economic development of their country or a developing country they have an interest in and getting a return on their investment is motivation for the population of a country to participate. The alternative is more taxes and more national debt to fund the economic stimulus.
Private Financial Institutions:
Private financial institutions can charge a fee for processing an SME loan application for an SME in a developed country to fund their share of the operating costs of the lending market.
The lending market also provides them a way of distributing the risk over an entire population for the portion of an SME loan they do not want to fund.
They also get the first chance to fund an SME loan by participating.
It gives them the opportunity to make money funding SMEs in emerging markets.
It gives them a way of funding SMEs supporting their investments in other companies. For example, if they have invested in an electric car company, they can use the lending market to have SME loans to scale battery production funded.
"South Korea and Egypt differ in another important respect. Fifty years ago, when South Korea’s adult literacy rate was already 71%, Egypt’s trailed at a dismal 25%. With 72% now, Egypt has only just passed South Korea’s level of 1960. That has had serious repercussions. According to a government-commissioned study, one reason why poverty has endured, despite Egypt’s rapid growth, is that too few people have the skills to exploit the opportunities available to them. Egyptian businessmen complain that a shortage of talented workers is one of the biggest obstacles to growth, second only to obstructive bureaucracy."
"Historic comparison offers some cause for optimism. Egyptians’ educational level now equals not only South Korea’s in 1960 but also Turkey’s in 1980 and much of western Europe’s at the end of the 19th century. In all those places the threshold of 75% literacy proved a starting point not just for faster economic growth and human development but for political transition too."
"(Reuters) - Boosting credit to struggling small businesses is "crucial" to the economy's recovery and poses an important policy challenge, Federal Reserve Chairman Ben Bernanke said on Monday.
"To support the recovery, we need to find ways to ensure that credit-worthy borrowers have access to needed loans," he told a Fed-sponsored conference on small business financing."
Rackspace Open Sources Cloud Platform; Announces Plans to Collaborate with NASA and Other Industry Leaders on OpenStack Project
More than 25 companies, including Citrix and Dell, support open source cloud platform to accelerate industry standards
Rackspace
July 19, 2010
San Antonio, TX - July 19, 2010 - Rackspace® Hosting (NYSE:RAX) today announced the launch of OpenStack™, an open-source cloud platform designed to foster the emergence of technology standards and cloud interoperability. Rackspace, the leading specialist in the hosting and cloud computing industry, is donating the code that powers its Cloud Files and Cloud Servers public-cloud offerings to the OpenStack project. The project will also incorporate technology that powers the NASA Nebula Cloud Platform. Rackspace and NASA plan to actively collaborate on joint technology development and leverage the efforts of open-source software developers worldwide.
"Modern scientific computation requires ever increasing storage and processing power delivered on-demand," said Chris C. Kemp, NASA's Chief Technology Officer for IT. "To serve this demand, we built Nebula, an infrastructure cloud platform designed to meet the needs of our scientific and engineering community. NASA and Rackspace are uniquely positioned to drive this initiative based on our experience in building large scale cloud platforms and our desire to embrace open source."
OpenStack will feature several cloud infrastructure components including a fully distributed object store based on Rackspace Cloud Files, available today at OpenStack.org. The next component planned for release is a scalable compute-provisioning engine based on the NASA Nebula cloud technology and Rackspace Cloud Servers technology. It is expected to be available later this year. Using these components, organizations would be able to turn physical hardware into scalable and extensible cloud environments using the same code currently in production serving tens of thousands of customers and large government projects.
"We are founding the OpenStack initiative to help drive industry standards, prevent vendor lock-in and generally increase the velocity of innovation in cloud technologies," said Lew Moorman, President, Cloud and CSO at Rackspace. "We are proud to have NASA's support in this effort. Its Nebula Cloud Platform is a tremendous boost to the OpenStack community. We expect ongoing collaboration with NASA and the rest of the community to drive more-rapid cloud adoption and innovation, in the private and public spheres."
Rackspace and NASA have committed to use OpenStack to power their cloud platforms, and Rackspace will dedicate open-source developers and resources to support adoption of OpenStack among enterprises and service providers. An OpenStack Design Summit hosted by Rackspace was held July 13-16 in Austin, where more than 100 technical advisors, developers and founding members joined to validate the code and ratify the project roadmap. More than 25 companies were represented at the Design Summit including AMD, Autonomic Resources, Citrix, Cloud.com, Cloudkick, Cloudscaling, CloudSwitch, Dell, enStratus, FathomDB, Intel, iomart Group, Limelight, Nicira, NTT DATA, Opscode, PEER 1, Puppet Labs, RightScale, Riptano, Scalr, SoftLayer, Sonian, Spiceworks, Zenoss and Zuora.
"OpenStack provides a solid foundation for promoting the emergence of cloud standards and interoperability," said Peter Levine, SVP and GM, Datacenter and Cloud Division, Citrix Systems. "As a longtime technology partner with Rackspace, Citrix will collaborate closely with the community to provide full support for the XenServer platform and our other cloud-enabling products."
"We believe in offering customers choice in cloud computing that helps them improve efficiency," says Forrest Norrod, Vice President and General Manager of Server Platforms, Dell. "OpenStack on Dell is a great option to create open source enterprise cloud solutions."
To download or contribute code and get involved, visit OpenStack.org. Follow OpenStack on Twitter @ twitter.com/openstack.
"TCM has developed a REVOLUTIONARY, PATENTED ”cellular“ technology which delivers ALL forms of mobile telecommunication services such as Voice, Data and Location-based Advertising (”Pop Up“ format) and Pinpoint Location functionality via one mobile device.
This technology uses FREE, UNLICENSED spectrum (i.e. 2.4 GHz, traditionally used for broadband wireless data services - ”Wi-Fi“) to deliver quality voice, data and location-based advertising within large area network environments. The use of FREE spectrum allows TCM to build a SIGNIFICANTLY lower cost ”cellular“ platform.
Traditional cellular technologies, in comparison, require a licensed spectrum purchase at a cost of billions of dollars, and such spectrum is typically not readily available. Since TCM”s equipment is small and can be strategically placed on building rooftops, the infrastructure costs are a fraction of that of traditional cellular.
TCM’s achievement is unique in that it has successfully solved the many challenges confronted when using unlicensed spectrum. These include interferences, seamless roaming, network design etc.
TCM has deployed its network in downtown Syracuse, New York, a city well-known for introducing emerging telecommunication technologies. To date, field-testing has proven resilient and robust.
TCM’s technology is ideal for rural area deployments, locations commonly under-served by traditional cellular, due to its expensive build-out costs. Opportunity for rural deployments is great, both domestically and in underdeveloped countries around the world."
They licensed their technology to a joint venture in India to create a mobile phone network to be rolled out to 100 million subscribers.
"Led by Flinders University’s Dr Paul Gardner-Stephen, the Serval Project – named after a problem-solving African wildcat – aims to provide fast, cheap, robust and effective telecommunications systems where conventional phone infrastructure has been destroyed or is not cost-effective.
There are many situations and places where telephone infrastructure is damaged by bushfire, earthquake, tsunami or unrest, or where no infrastructure exists – where conventional networks are of less value,” Dr Gardner-Stephen said. “We are aiming to fill that void.”
The Serval Project consists of two systems.
The first is a temporary, self-organising, self-powered mobile network for disaster areas, formed with small phone towers dropped in by air.
The second is a permanent system for remote areas that requires no infrastructure and creates a mesh-based phone network between Wi-Fi enabled mobile phones, and eventually specially designed mobile phones that can operate on other unlicensed frequencies, called Batphone. The two systems can also be combined.
We have developed software which we’ve called Distributed Numbering Architecture (‘DNA’) that allows people in isolated or temporary networks to immediately use their existing phone numbers.
We believe that for a phone network to be useful, you must be able to call people, and have people call you on numbers that they know. This is especially true in disasters. This is the magic of DNA: it allows people to use their existing phone numbers, so that others can call them easily.
By integrating DNA with existing mesh network technology developed by Village Telco with unlicensed wireless spectrum, Dr Gardner-Stephen and his team will be able to provide telephone access to literally millions of people who currently lack any or affordable telephone coverage, as well as being able to help those affected by disaster.
“It will allow people in remote or isolated townships, or farm workers in network black spots to talk to each other,” he said.
“People in a disaster ravaged area will be able to contact friends and family and aid workers will be better able to coordinate relief efforts.”
Professor Paul Arbon, Director of Flinders University’s Research Centre for Disaster Resilience and Health said recently the Serval Project addresses several key emerging issues in the management of disasters and emergencies.
“The impact of disasters is increasing as more people live in locations where they are at risk and become more dependent on essential societal infrastructure,” Professor Arbon said.
“During disaster, most of the response capacity comes from within the local community with community members rescuing others. Mobile phones provide an important part of this response. They can be used to maintain the connections between family members, to alert and coordinate volunteers and, most importantly, can be used to provide the community with warnings and updates,” he said.
“The Serval Project provides a novel strategy to sustain mobile phone communications where other systems have been knocked out or overwhelmed by traffic on the system.”
The US$1000 Fellowship, provided by the Awesome Foundation’s Boston Chapter, will enable the project team to demonstrate a prototype of the system in coming weeks.
Dr Gardner-Stephen said that with adequate financial support, the systems could be fully operational within 18 months."
Would the same 4G-LTE open wireless broadband network technology being offered by LightSquared in North America provide the infrastructure needed for banking via mobile phone in Africa?
It is a hybrid network using cell towers and satellite connectivity.
In Africa, the ground portion of the network could use the lower cost technology provided by TCM Mobile.
The WiFi mobile phone technology in the Serval Project developed by Flinders University in Southern Australia could have a role as well.
"LightSquared is building the only national 4G-LTE open wireless broadband network that incorporates nationwide satellite coverage and has the capacity to support the anticipated explosive demand generated by new consumer devices and mobile applications."
"From a technology perspective, LTE has a maximum data rate—over 100 MB/second—which enables LightSquared to offer more immediate communication with minimal delay and faster upload and download speeds."
"LightSquared will launch a satellite built by Boeing into geostationary orbit over North America. It will be among the largest commercial satellites ever launched. Via the satellite, people can operate their wireless devices from every single part of the country. Never again do they have to worry about traveling out of network or losing their connection. For the first time ever, people can enjoy universal network coverage, no matter where they are in the United States."
"The Entrepreneurial Finance Lab (EFL), a branch of the Harvard Kennedy School's Center for International Development, has devised a psychometric test to help banks in emerging markets easily screen loan applicants. The goal is to spur lending to small and midsize companies, a vital sector often underfunded in the developing world. These companies are too big to rely on microfinance, yet not big enough to be served efficiently by the banks. "There are millions of businesses in developing countries that could earn significant returns on additional capital that aren't financed," says Bailey Klinger, EFL's director. "And it's not that banks aren't interested in them. Quite the opposite. They just don't have the right tools.""
"The 40-minute computer-based test assesses traits like honesty, ethics, intelligence, and motivation. The EFL says three years of pilots in South Africa, Kenya, Rwanda, Colombia, and Peru have shown that the test achieves the same—or better—results than traditional ways of assessing a borrower's future success and ability to repay a loan. With the test, local banks can cut default rates by 25 percent to 40 percent, says D.J. DiDonna, EFL's director of business development. They will also be able to extend loans to clients whose credit histories are sparse or nonexistent."
"South Africa's Standard Bank, the continent's biggest, has signed on to become EFL's first paying client and roll out the test in South Africa and Kenya this August. "We're hoping a flagship client like Standard Bank, as they scale up quickly, will open the door for other banks," says DiDonna. "As you can imagine, banks are pretty risk-averse." If the test works in Africa, EFL hopes to introduce it to the U.S. and Canada, where many immigrant entrepreneurs also lack credit histories and collateral.
The bottom line: Harvard researchers have devised a simple, inexpensive way to test the business skills of would-be entrepreneurs in emerging markets."
Are you aware of existing companies that are establishing crowd sourcing platforms and the barriers they face in terms of government regulation and legislation?
Changes to government regulation and legislation are needed to make this solution possible and legal.
In the United States, funding an SME loan through an entire population of a country participating in funding an SME loan is currently illegal.
Having the SME loan applications evaluated by credit unions, banks, economic development banks, etc. with the capital for the loan coming from the SME lending market would make it possible to have a government change regulation and legislation without worrying the such a market becoming a massive source of fraud.
If a financial institution evaluating the SME loan application did not want to fund an SME loan or the entire amount, they would be required by law to publish the loan application on the SME lending market if the SME met the criteria or provide a letter to the SME detailing why the SME did not meet the criteria.
There is a list of existing social lending crowdsourcing platforms in the idea entry. I'll add the ones you mentioned to the list.
A few existing social lending sites operating via crowdsourcing do lend to SMEs but they cannot currently do what I am suggesting because of the barriers from government regulation and legislation that you mentioned.
Because of the barriers of government regulation and loan applications on existing social lending crowdsourcing platforms not being screened by financial institutions, there is not any competition.
Having the solution fragmented into many social lending crowdsourcing platforms will not work for funding large SME loans since you need a large population contributing to a loan for small contributions to have an impact.
A social lending crowdsourcing platform with a small number of contributors would not be able to compete.
There are very few stock markets in a country. If you had to go to hundreds or thousands of stock markets to buy shares in a company, the stock market would be ineffective. You would encounter the same problem if you fragmented the SME lending market.
Other social lending crowdsourcing platforms would continue to exist to fund loans to individuals but they would not have the resources to fund SMEs adequately.
Hey Rene, I think you have a great idea with a ton of potential. I recently did some research in Bangladesh on SME financing. The majority of small businesses, especially in rural areas, are constrained by a lack of access to financial resources. They are greatly under-served in this regard because they fall in the gap between microfinance and commercial banking. Commercial banks are starting to venture into the market but tend to stick to the larger end of the spectrum while most MFIs don't have the necessary resources. While in Bangladesh I worked with the SME financing arm of the Grameen Bank. They had a model for recruiting and building relationships with small businesses that was working extremely well but of course had trouble raising capital. Crowd-sourced loans seem like a potential solution.
My question is what type of organization did you envision partnering with for loan issuance, collection, and support? In the way that Kiva uses MFIs would you partner with local commercial banks? Or 'social businesses' like the Grameen Bank? Clearly mobile banking technology would be an effective facilitator but you are still going to need a local presence if this going to build the same personal connections as a kiva-type platform. I see that you mention credit-unions but I was hoping you could provide some examples as I'm not sure specifically what you mean.
On the supply side of the equation there is a lot of interest in these sort of 'social investments' right now. I think it could have success similar to that of kiva but of course the challenge is generating buzz in the initial period. I am currently in business school at Ivey/Western and have been a guest speaker in MBA programs and the audience is always incredibly interested in getting involved with this sort of idea.
To develop the banking industry in developing countries, community development credit unions targeted to funding SMEs could be created to handle loan issuance, collection, and support.
If possible, existing organizations (e.g. Grameen Bank, MFIs) already operating in the area could be developed into community development credit unions or help establish community development credit unions with the capital provided by SME lending markets in developed countries.
Over time, individuals and SMEs would have their own income to contribute to the services provided by the credit union supplemented by SME lending markets in developed countries.
Eventually, members (e.g. individuals, SMEs) of the credit unions would have enough capital to fund the services they provide to SMEs.
I think the buzz in the initial period would come from individuals in developed countries being able to use the SME lending market for economic development in their own country.
Given the financial situation many developed countries find themselves in, it is an opportune time to establish an SME lending market. Individuals in these countries want more jobs and with an entire population of a country participating in an SME lending market small individual loan contributions could fund very large loans.
It would be very frustrating if they could not use the SME lending market for their own country's economic development.
A lot of public education regularly provided on national television would be needed to make the population of a developed country aware of the benefits of being able to directly participate in the economic development of their country via an SME lending market.
Part of that public education would include advertising the ability to provide SME loans in developing countries as well as their own country. There are large populations of people from other countries in developed countries such as the United States, Canada, members of the European Union, etc. that would have an interest in helping to develop countries where they have family.
"A community development credit union (CDCU) is a credit union with a special mission of serving low- and moderate-income people and communities.
More than sixty years ago, a small number of credit unions were founded with the specific mission of serving low-income and minority communities beyond the reach of banks and mainstream credit unions. These “community development credit unions” (CDCUs) specialize in serving populations generally considered the hardest to serve, including low-income wage earners, recent immigrants, and people with disabilities.
CDCUs are:
* Nonprofit and tax-exempt (but not a charity)
* Cooperatively owned and governed -- one member, one vote
* Government-regulated, fully insured financial institutions
CDCUs provide:
* Fairly priced loans, including to members with imperfect, limited or no credit history
* A safe place to save
* A place to conduct transactions at reasonable cost
* Financial education and counseling for its members
* Products, services and support that can help members to free themselves from high-cost and predatory debt, gain control over their personal finances, and achieve economic independence."
World Council of Credit Unions (WOCCU) "international development programs assist credit unions and national/regional associations with rebuilding during and after conflict, providing access to the underserved, developing integrated business networks, supporting communities at risk, reconstructing after disaster and encouraging legislative reform and regulatory system development."
"Credit unions worldwide offer members much more than financial services. They provide members the opportunity to own their own financial institution and help them create opportunities such as starting small businesses, building family homes and educating their children. In some countries, members encounter their first taste of democratic decision making through their credit unions.
Credit unions are democratic, member-owned financial cooperatives. Each member, regardless of account size in the credit union, may run for the board and cast a vote in elections. As financial intermediaries, credit unions finance their loan portfolios by mobilizing member savings and shares rather than using outside capital, thus providing opportunities for generations of members.
Credit unions exist to serve their members and communities. As not-for-profit cooperative institutions, credit unions use excess earnings to offer members more affordable loans, a higher return on savings, lower fees or new products and services. They serve members from all walks of life, including the poor and disenfranchised."
A $35 computer would put a complete online K-12 to university education within reach of a lot of people.
It would also make online banking available if paired with hybrid wireless/satellite broadband Internet networks.
100 million people contributing $29.17 per month for 12 months could fund a $35 billion loan to supply $35 computers to 1 billion people.
Example: $35 computers for 1 billion people
100,000,000 people * 12 months * $29.17 per month = $35,004,000,000
The $35 tablet computer which India's government is subsidizing by $15 to bring the cost down to $20 is part of their education technology initiative to bring broadband Internet to their 25,000 colleges and 504 universities and make course materials available online.
"$35 computer aims to bring cheap technology to India's schools and universities. The $35 computer also targets a vast, untapped market of 1.2 billion people.
By Anuj Chopra, Correspondent / July 23, 2010
Mumbai, India
The sleek handheld device includes an Internet browser, a multimedia player, a PDF reader, and video conferencing ability.
But its biggest attraction is the price: $35.
Kapil Sibal, India’s human resources development minister, today unveiled the prototype of an unnamed Linux-based computing tool for students to be introduced in higher educational institutions by 2011.
“The aim is to reach such devices to the students of colleges and universities, and to provide these institutions a host of choices of low-cost access devices around $35 or less in near future,” the human resources ministry said at the launch of the computer.
The latest gadget is a thrilling prospect for the future of global education, says Anand Nandkumar, a professor of business strategy in the field of innovation and entrepreneurship at the Hyderabad-based Indian School of Business."
The lack of available skilled workers is one of the conditions limiting the success of SME's in developing countries (in developed countries too).
Together with India's $35 tablet computer and laptop.org's devices, free textbooks and other course material would make education available to many more people around the world.
A broadband Internet network can be deployed faster than the education system of a developing country being built. While people in developing countries are waiting for teachers and schools, they could be learning online educating future teachers for those schools.
In cultures where the education of women is not a priority or discouraged, having an education available online gives them a chance to get an education. It is more difficult for a country to be successful if it does not fully utilize the skills and abilities of its entire population.
Former Sun Microsystems CEO wants to make K-12 textbooks available online for free.
He has a non-profit called Curriki which provides a directory of free textbooks and other course material.
Vinod Khosla's (who co-founded Sun with McNealy) wife Neeru heads up the CK-12 Foundation which has already developed nine of the core textbooks for high school in California.
"Mr. McNealy, the fiery co-founder and former chief executive of Sun Microsystems, shuns basic math textbooks as bloated monstrosities: their price keeps rising while the core information inside of them stays the same.
“Ten plus 10 has been 20 for a long time,” Mr. McNealy says.
Early this year, Oracle, the database software maker, acquired Sun for $7.4 billion, leaving Mr. McNealy without a job. He has since decided to aim his energy and some money at Curriki, an online hub for free textbooks and other course material that he spearheaded six years ago.
“We are spending $8 billion to $15 billion per year on textbooks” in the United States, Mr. McNealy says. “It seems to me we could put that all online for free.”
The nonprofit Curriki fits into an ever-expanding list of organizations that seek to bring the blunt force of Internet economics to bear on the education market. Even the traditional textbook publishers agree that the days of tweaking a few pages in a book just to sell a new edition are coming to an end."
"“Five years from now on the web for free you’ll be able to find the best lectures in the world,” Gates said at the Techonomy conference in Lake Tahoe, CA today. “It will be better than any single university,” he continued."
"But his overall point is that it’s just too expensive and too hard to get these upper-level educations. And soon place-based college educations will be five times less important than they are today."
To implement a software project on this scale, you need to be aware that organizational structure and performance management practices affect software quality.
Conflicting goals and differing priorities introduced by organizational structure and performance management practices can prevent a software project from succeeding or cause it to progress more slowly than it otherwise would increasing software development costs and reduce the quality of the finished product.
"The Influence of Organizational Structure On Software Quality: An Empirical Case Study
Nachiappan Nagappan, Brendan Murphy, and Victor Basili
January 2008
Often software systems are developed by organizations consisting of many teams of individuals working together. Brooks states in the Mythical Man Month book that product quality is strongly affected by organization structure. Unfortunately there has been little empirical evidence to date to substantiate this assertion. In this paper we present a metric scheme to quantify organizational complexity, in relation to the product development process to identify if the metrics impact failure-proneness. In our case study, the organizational metrics when applied to data from Windows Vista were statistically significant predictors of failure-proneness. The precision and recall measures for identifying failure-prone binaries, using the organizational metrics, was significantly higher than using traditional metrics like churn, complexity, coverage, dependencies, and pre-release bug measures that have been used to date to predict failure-proneness. Our results provide empirical evidence that the organizational metrics are related to, and are effective predictors of failure-proneness."
"Federal securities regulators are weighing demands to make it easier for fast-growing companies to use social networks such as Facebook and Twitter to raise money by tapping thousands of investors for very small amounts of shares.
The Securities and Exchange Commission is looking at adapting its rules to encourage Internet-age techniques for small companies raising capital. The issue is part of a wider review by the agency into whether to ease decades-old constraints on share issues by closely held companies."
"Funding Circle, the alternative small business loan provider, has secured private equity funds to expand.
Index Ventures has invested £2.5m alongside existing investors into the service, which launched in August last year and has already facilitated loans of £11.5m to established businesses.
Funding Circle is an online marketplace that brings savers and investors directly in contact with credit worthy small businesses looking to borrow."
Comments
Rene,
This is a fascinating idea, applying the crowdsourcing successes from the microfinance and artistic worlds to the SME market. I am curious, though, at how the outreach to find the funders would work. Not all of the SMEs would necessarily be direct social-impact businesses -- some would "just" be businesses, and their beneficial impacts would be through increased employment and economic activity.
At the same time, the funding levels needed by many of these SMEs are quite large, so you would lose some element of the direct, personal connection that Kiva works diligently to provide.
What do you see as the next steps in this program? It looks like you would work with local credit unions as the on-the-ground financial institutions (where they exist). I presume the other side of the equation would be a virtual marketplace/website? How would you manage the fees on potentially large cross-border transfers, and mitigate fraud?
The other side of the equation would be a peer-to-SME lending marketplace/website.
Besides the website, there would be an API that would allow financial institutions and other organizations (e.g. foundations) to integrate the peer-to-SME lending marketplace with their information systems. For example, they may want to write an application to select the loans they want to fund and integrate that with a workflow application that handles the funding process in their organization.
Scale is needed to finance the SMEs on which a group of people within a population want to focus. That scale comes from having a large population of investors that can pool their financial resources in a peer-to-SME lending marketplace.
If the few organizations that already have large amounts of capital to invest do not share your values, the SMEs you want to support will not get financed or will not get financed on a scale that will make a big impact. Those organizations may also have no interest in financing SMEs.
If enough people in a large population share your values, the SMEs you want to focus on supporting will get financed.
People are more motivated to finance SMEs because they provide employment. A financial institution may make more money trading derivatives instead of making loans to SMEs or have to increase the amount of capital they have in order to cover potential losses from trading derivatives.
To find funders, the individuals, businesses and organizations of a developed country could sign into the website and choose the SMEs in which they want to invest.
To make a presentation on the benefits of supporting a particular SME, a video can be uploaded to Youtube and embedded in the page used to display the information on the SME on the website (peer-to-SME lending marketplace).
In a developed country, a TV advertising campaign could be used to make potential investors aware of the benefits of supporting the funding the loan of a particular SME.
Spotrunner.com makes it easy to get a commercial on TV. They pre-produce commercials that can be used for different categories of businesses and let their customer customize different portions of the commercial - voiceover, text displayed, etc. They could create a category for advertising a loan funding request of an SME.
The motivations to invest in SMEs would be different for different investors.
An individual in a developed country might have family in another country and want to help develop that country. When scaled to the individuals of an entire country, an individual's contribution to the loan may be small (e.g. $100) but the total could be substantial (e.g. $100 X 10,000,000 people = $1 billion).
A business in a developed country may just look at it as another investment. If investing in SMEs with a direct social impact makes them money, they have no reason not to invest in those types of SMEs.
For larger SMEs not funded by individuals, financial services companies could offer an investment product to their customers where they choose what loans to fund on behalf of their customers. Such an investment product could be part of the portfolio of customers in developed countries. The investor could choose an investment product that funds direct social-impact businesses and/or businesses. Something similar is available for mutual funds but in this case the investor would be funding SMEs to earn interest instead of just buying their stock via a mutual fund.
Individuals or foundations with large amounts of capital to invest would also be able to contribute to larger loans.
Criteria for what SMEs to fund would be up to the investor choosing from the SMEs available.
For example, the government of a developed country could have two accounts:
- one account where the money being invested is part of their foreign aid budget so they may want to limit their investments using those funds to direct social-impact businesses.
- another account for funding SMEs that increase employment and economic activity. Another benefit of increased employment in a developing country is the local population could eventually afford to participate in funding SMEs in their country that have a direct social impact. They would be the most motivated to do so. The local credit union could give local SMEs and individuals access to the peer-to-SME lending marketplace where Internet access is not widely available. The local credit union could handle the entire amount of the loan locally or use the peer-to-SME lending marketplace if they cannot afford to fund the entire amount with local investors. I would give investors the option of funding SMEs that are "just" businesses for this reason.
In a developing country, the credit union would be responsible for initially evaluating the SME to determine if it meets the requirements to be funded. If the credit union believes the SME meets the criteria, the funding request is entered into the online peer-to-SME lending marketplace where it is evaluated by a third party to verify the funding request meets requirements. If is passes the evaluation by the third party, it is published and made available for funding on the online peer-to-SME lending marketplace. If the loan amount is large, the third party would do due diligence by visiting the SME to examine the operation in person. Investors considering making large contributions to loans would be able to visit the SME to determine if they should invest in funding it.
In a developed country, an SME would go to a bank or credit union to have the funding request entered into the online peer-to-SME lending marketplace if the bank or credit union did not want to fund the loan or only wanted to fund part of the loan. Banks and credit unions are responsible for making the initial evaluation if an SME qualifies for funding. Again, investors considering making large contributions to loans would be able to visit the SME to determine if they should invest in funding it. In a developed country, you have additional information such as credit scores on which to base a decision. The motivation for banks and credit unions to participate is they get the first chance to fund the loan and have the opportunity to fund only part of the loan if the rest is funded in the online peer-to-SME marketplace.
If a bank or credit union does not want to provide the loan themselves, they would be required by law to enter the loan request into the online peer-to-SME lending marketplace if the SME meets the criteria. If the SME does not meet the criteria, banks and credit unions would be required by law to give the SME a letter detailing why it does not meet the criteria. If the SME can make changes to meet the criteria, they can reapply for the loan.
Since the loan may be for a project that will provide new income (e.g. new factory, new business, improvements, etc.), the repayment of the loan would be delayed until the project is completed and providing income. This allows new businesses to be financed. For example, a new construction company may need a loan for tools, vehicles, etc. before they can go into business.
Investors are repaid incrementally as SMEs pay back their loans.
As a next step in the implementation of the peer-to-SME lending marketplace, to create the software specifications and understand the hardware requirements, the implementations of Kiva.org and Kickstarter.com can be examined.
There are also several parts of the peer-to-SME lending marketplace that are similar to other services that have been implemented to handle a large number of transactions that can be examined.
Kiva has made use of existing services in its implementation. For example, Kiva uses Amazon.com Inc.'s Simple Storage Service (S3).
These existing services can speed the implementation of the peer-to-SME lending marketplace.
If companies such as Google built data centers to host federal government applications exclusively, federal governments could take advantage of software services to speed development applications such as a peer-to-SME lending marketplace.
Examples:
(a) 'Google App Engine' can be used to host the website on Google's infrastructure.
Amazon also offers web services that could be used.
(b) Paypal can be used to handle making payments. Kiva uses Paypal to move money around. In Kiva's case, Paypal donates its services so there are no transaction costs when moving money between accounts.
Amazon Flexible Payments Service could also be used.
(b) Shopping for which loans to fund is like the product catalog on Amazon.com.
'Google Commerce Search' can be used to implement searching the SME loans available to fund.
(c) Managing the payment and repayment of the loans is similar to software used by banks and similar to some features of Paypal.
If Paypal added a feature to manage loans (peer-to-peer lending), it would make implementing the peer-to-SME lending marketplace easier.
There are smaller companies that have implemented peer-to-peer lending but any company used would have to be able to handle the transaction load of an entire country.
Larger loans would require recurring payments from investors for a set period of time to fund the loan.
The information to collect from an SME that an investor needs to decide if they want to fund a loan needs to determined.
Credit unions in this country and the organizations that Kiva.org uses to handle the loans can be studied to understand that part of the workflow of distributing the loan and collecting payments.
After building the peer-to-SME lending marketplace, the next steps are:
1) Initially, make it available to the population in the developed country to invest in the economic development of their own country. With a stronger economy, they will have more money to invest.
2) After the population in the developed country is familiar with the peer-to-SME lending marketplace and understands the benefits it provides, roll it out to developing countries where credit unions already exist. The size of loans could be increased over time to see if local conditions make investment possible.
3) In developing countries where credit unions do not exist, provide training on how to create and operate one before making the peer-to-SME lending marketplace available in that country. As credit unions are created, the peer-to-SME lending marketplace can be made available. This also helps to build the banking system in the developing country.
Because governments would be using the peer-to-SME lending marketplace as part of their foreign aid and/or economic development programs, they would be motivated to work out agreements with other governments where no fees or lower fees are imposed on cross-border transfers for these investments. They could do the same for investments by individuals and businesses in their country where the SME has been categorized as having a direct social impact.
The peer-to-SME lending marketplace would be managed by the central bank of a country so managing fees would be a feature of the peer-to-SME lending marketplace.
In a developing country, fraud would show up as a high default rate on loans to SMEs.
If the fraud is perpetrated by local politicians, the federal government in the developing country could use Brazil's approach of informing the local population of which local politicians are corrupt (see the paper titled 'Exposing Corrupt Politicians: The Effect of Brazil’s Publicly Released Audits on Electoral Outcomes').
If the fraud is perpetrated by organized crime, a high default rate indicates that the local or federal government in the developing country should be notified that they have a crime problem in that area. They are motivated to deal with the problem to ensure they have continued access to funds.
If the fraud is perpetrated by the federal government in the developing country, I would not invest in that country. Though, as long as funds can be distributed to local credit unions reliably, it would be difficult for a corrupt federal government to steal the funds distributed across an entire country.
The size of loans could be limited where crime is a large problem to increase the amount of work a criminal organization would have to do to steal funds. If the local government manages to reduce crime, the size of loans can be increased.
Further loans to that country or area of that country could be suspended until the problem with fraud is resolved.
Sources:
http://www.networkworld.com/news/2009/030909-it-innovations-help-kiva-ex...
"For example, Kiva uses PayPal to move money around, and that has proved to be "even easier than credit cards" and cost-effective, he says. (PayPal Inc. donates its services, allowing Kiva to send 100% of the money pledged for loans to the entrepreneurs, according to Kiva officials.)"
http://www.networkworld.com/news/2009/030909-it-innovations-help-kiva-ex...
"Previously, investors who loaned, for example, $25 for 10 months would have to wait the entire 10 months to get repaid. Now investors are repaid incrementally as entrepreneurs pay back their loans."
"For example, Frazao says he switched in mid-2007 from maintaining Kiva's own server to using Amazon.com Inc.'s Simple Storage Service (S3). There's no immediate cost savings, but because S3 is infinitely scalable, Kiva will never run out of space, and it will be able to create future capacity without a big capital outlay."
http://www.kiva.org/about/supporters
"PayPal provides Kiva with access to technology, research, workplace resources and employee volunteers. Additionally, Kiva uses PayPal's innovative payment solutions to securely and seamlessly collect and distribute funds around the globe."
http://www.spotrunner.com/Local/
http://code.google.com/appengine/docs/whatisgoogleappengine.html
https://www.x.com/community/ppx/xspaces/cloud-computing
http://www.google.com/commercesearch/
https://www.paypal.com/cgi-bin/webscr?cmd=_wp-pro-feature-list-outside
http://aws.amazon.com/
Here is an example of how providing a loan to electric vehicle manufacturer(s) in the United States has social benefits to multiple countries as well as economic benefits.
8990000 barrels/day gasoline * 365.25 days * 42 gallons/barrel * $2.76/gallon = $380,634,622,200 spent on gasoline per year
8990000 barrels/day gasoline * 365.25 days = 3,283,597,500 barrels/year gasoline
3,283,597,500 barrels/year gasoline * 2 * $78.75 = $517,166,606,250 spent on crude oil per year to obtain the gasoline
$380,634,622,200 / 135,932,930 = $2800.1649210386328022209188016473 per passenger car for gasoline
~$2,800,164,921 per million passenger cars per year spent on gasoline
Nissan-Renault's CEO has estimated sales of 1 million electric cars per year are needed to reduce costs and no longer require financial support.
Using the peer-to-SME lending marketplace, one or more SMEs in the United States selling electric passenger cars could obtain a $10 billion long term loan to finance a $10,000 price reduction for 1 million electric passenger cars.
The loan could be obtained from individuals or financial services companies or a combination of both. Financial services companies with investments in companies related to the electric vehicle industry would be motivated to provide financing for a loan or part of a loan.
$100 x 100,000,000 people = $10,000,000,000
Besides the money earned on the loan, there is a further benefit to the United States of $2.8 billion (rough estimate) remaining in the U.S. economy for every 1 million electric passenger cars sold. That is a rough estimate since it takes two barrels of crude oil to make one barrel of gasoline and some portion of the money spent on gasoline already stays in the U.S. economy.
Some of the money saved on gasoline is spent on locally produced electricity and the remainder is kept by the owner of the vehicle.
A power plant can produce additional electricity from recovering energy from the heat in exhaust gases. It is difficult to recover energy from heat produced in a vehicle using an internal combustion engine.
If the population of the United States is made aware that $2.8 billion (rough estimate) remains in the U.S. economy for every 1 million electric passenger cars sold, the passenger car inventory in the United States could turn over quickly to electric passenger cars.
The motivations for the people of the United States are economic and not having to have the military defend access to crude oil around the world.
Making electric vehicles affordable through scaling production in the United States has economic, environmental and social benefits to countries around the world.
This process of scaling production could also be implemented in the European Union simultaneously.
Sources:
http://www.eia.doe.gov/emeu/steo/pub/#US_Crude_Oil_And_Liquid_Fuels
http://www.elmhurst.edu/~chm/onlcourse/chm110/outlines/distill.html
"One barrel of crude petroleum contains only 30-40% gasoline. Transportation demands require that over 50% of the crude oil be converted into gasoline. To meet this demand some petroleum fractions must be converted to gasoline. This may be done by "cracking" - breaking down large molecules of heavy heating oil; "reforming" - changing molecular structures of low quality gasoline molecules; or "polymerization" - forming longer molecules from smaller ones."
http://www.bts.gov/publications/national_transportation_statistics/html/...
Passenger Car 135,932,930 (2007)
http://www.reuters.com/article/idUSTRE64P5PY20100526
Nissan, which is introducing a mass-market Leaf electric car later this year, needs government incentives to spark initial demand but understands those incentives will not be permanent, Nissan-Renault Chief Executive Carlos Ghosn said.
"You need to jump start electric cars at a certain level so that we can get scale and the scale will allow us to reduce costs," Ghosn told reporters after a groundbreaking at a plant in Tennessee that will produce the Leaf and its battery.
"We think that scale for us is between 500,000 and 1 million cars a year," he said. "When you get between 500,000 and 1 million cars per year, we don't need government support."
The uses of the peer-to-SME lending marketplace for funding loans could be expanded over time to fund revenue generating infrastructure.
Example: California High-Speed Rail
$200/month * 24 months * 10,000,000 people = $48,000,000,000
For a loan this large, the loan would have to be funded over severals months before construction could start.
The primary return for California residents would be the jobs created, lower travel costs, reduced travel time, etc. since the rate at which this loan could be paid back would be very slow given the amount of revenue generated.
This loan is effectively a write-off in exchange for the other benefits since the rate of repayment is so low but the recipient of the loan should still repay the loan.
Since California already has some other sources of funding, investors living in California would not have to actually fund the entire amount.
China has expressed an interest in investing in the project for the opportunity to sell some of the components to build the high speed rail system.
Example: Trans-Canada High-Speed Rail
If it cost $400 billion for a Trans-Canada high-speed rail line from Vancouver, British Columbia to Quebec City, Quebec, it could be funded by Canadian taxpayers over 20 years.
This loan is effectively a write-off in exchange for the other benefits since the rate of repayment is so low but the recipient of the loan should still repay the loan.
$139 per month x 12 months x 20 years x 12,000,000 households = $400.3 billion
Example: Ultra high-speed broadband networks
Loans for Internet service providers to build ultra high-speed broadband networks will provide the bandwidth and speed to make new types of Internet applications possible.
On a small scale, Google is implementing ultra high-speed broadband networks with speeds up to 100 times what is currently available in the United States.
MIT researchers led by Vincent Chan, an electrical engineering and computer science professor at MIT, have developed technology that they claim will make the Internet 100 to 1,000 times faster and a lot cheaper.
Professor Vincent Chan's architecture, which is called "flow switching," establishes a dedicated path across the network between locations that exchange large volumes of data.
One application would be to make advanced education available to entire populations for free. Entire circululums of video instruction and text books for K-12 to university for different subject areas could be made available for free online. This is already being done on a small scale by some universities.
This would benefit entire populations in developed and developing countries.
The video instruction could be watched on Internet TVs or computers. Internet TVs are televisions that get their video feeds from video streaming sites on the Internet such as Youtube.
In developed countries, universities could charge fees to administer tests for advanced placement based upon what a student learned at home. Or, if people did not need a formal degree, they could apply what they learn to creating an SME.
Smaller revenue generating infrastructure projects such as power plants and associated transmission lines would be easier to fund.
Example: 198-megawatt wind project in Southern Colorado
A 198-megawatt wind project could be funded by 1 million households in Colorado in 6 months at $70 per month.
$70/month * 6 months * 1,000,000 households = $420,000,000
Example: 1 Gigawatt power plant using nuclear batteries
If a one gigawatt power plant using nuclear batteries cost about $3 billion ($50 million x 40 + $1 billion), it could be funded in one year by 5,000,000 people paying $50 per month.
$50/month * 12 months * 5,000,000 people = $3,000,000,000
Sources:
http://www.cahighspeedrail.ca.gov/
http://www.recovery.ca.gov/content/newsroom/speeches/documents/High%20Sp...
http://masstransitmag.us/print/Mass-Transit/High-Speed-Rail/1$9216
http://www.nytimes.com/2010/04/08/business/global/08rail.html?pagewanted...
"The California rail authority plans to spend $43 billion to build a 465-mile route from San Francisco to Los Angeles and on to Anaheim that is supposed to open in 2020."
http://googleblog.blogspot.com/2010/02/think-big-with-gig-our-experiment...
http://www.google.com/appserve/fiberrfi/
http://web.mit.edu/chan/www/vincent_project.html
http://www.youtube.com/edu
http://www.brighterenergy.org/13047/news/wind/deal-agreed-for-420m-wind-...
"Houston firm Blue Diamond Ventures, Inc., has formed a partnership with FreedomWorks LLC to co-develop a 198-megawatt wind project in Southern Colorado. The company plans to begin construction this year on the $420 million project, along with 68 miles of new transmission lines, in Huerfano County."
http://www.hyperionpowergeneration.com/product-purch.html
"Each HPM provides 70 MW thermal energy or 25 MW electric energy via steam turbine for seven to ten years. This amount of energy provides electricity for 20,000 average American-style homes or the industrial or infrastructure equivalent. Each module will cost $50 million. Initial deliveries, slated to begin in the second half of 2013, are being scheduled."
http://www.hyperionpowergeneration.com/about.html
"Hyperion Power Generation, Inc. (HPG) was formed to bring to market the unique Hyperion (formerly Comstar) small, modular, non-weapons grade nuclear power reactor invented by Dr. Otis "Pete"' Peterson at the United States' famed Los Alamos National Laboratory (LANL) in New Mexico. Through the commercialization program at LANL’s Technology Transfer Division, HPG was awarded the exclusive license to utilize the intellectual property and develop a product that will benefit the U.S. economy and global society as a whole."
Example: SME Health Care Insurance Provider
The employees of a large enterprise constitute a health care risk pool which can negotiate a better price because of the amount of income to a health care insurance provider they represent. Being able to hold a job implies a certain level of health.
While each SME has employees who have the same level of health as those in a large enterprise, they do not have the same buying power because, individually, SMEs do not represent the same amount of business to a health care insurance provider.
All the SMEs and their employees in a state or province can crowdsource a loan to fund their own health care insurance provider that exists to offer better insurance to their employees.
Such a health care insurance provider can also save SMEs money by not using medications with a high 'number needed to treat' (NNT).
Sources:
University of Southern California - Reporting on Health:
http://www.reportingonhealth.org/blogs/nnt-can-be-tnt-blowing-pharma-mar...
"Put another way, the NNT is the number of patients that would need to undergo a particular treatment over a specific time period in order to see their health improve beyond what would have happened had they done nothing or had they undergone a different treatment.
A low number means a drug is highly effective with a broad range of people. Four people take it, and one sees better. For a vaccination, for example, the NNT might be one. A high number means the drug may be effective but only with a narrow set of people."
The uses of the peer-to-SME lending marketplace for funding loans could be expanded over time to fund residential and office energy efficiency loans.
(a) SME obtains the loan
If the profit margin is high enough, SMEs that sell and install heating and cooling equipment could get a loan to offer a discount on their products. Distributors offer a better price per item for larger orders. SMEs would have to calculate if the anticipated increased volume of sales and the discount on larger equipment orders makes the loan practical given their profit margin.
Example: Cool Energy Inc.
A company, Cool Energy Inc. in Colorado, has a solar to combined heat and power (CHP) home energy system using a low temperature Stirling engine. They claim their solar-to-CHP home energy system enables home and building owners to cut their energy bills by as much as 75%.
http://www.coolenergyinc.com/
(b) Individuals obtain a loan to buy SMEs' products and services that improve energy efficiency
A $10,000 residential energy efficiency loan for 300,000 people could be financed over 12 months by 5,000,000 households paying $50 per month.
$50/month * 12 months * 5,000,000 households = $3 billion
If those with the highest amount of disposable income needing the loans are financed first, the amount of time to repay loans is reduced allowing the next 300,000 people with houses to get financed. The rate at which loans are repaid slows down over time as people with lower incomes get financed.
If people were given 3 years to repay the loan, it would take about 50 years to finance residential energy efficiency improvements for 5,000,000 households.
Besides employing people in SMEs, these loans reduce the amount of money spent on energy freeing up money which can be used elsewhere in the economy.
Where homes are heated by oil, this would also reduce the petroleum deficit. For this reason, you could start with homes heated by oil.
SMEs owning apartment buildings or office buildings could also apply for energy efficiency loans for their buildings.
Hi Rene,
May I say that your examples (comments) are actually two potential brilliant entries? Would you have the contact of the Health Insurance initiative? Can you give more details and examples on your entry (that helps when the judges are evaluating)?
This specific competition is a bit tricky because we are looking for best practices/ideas from the private sector to finance the growth of small and medium enterprises that can lead by example. We are hoping that the public sector will embrace these ideas.
Do you see your idea growing towards becoming some sort of private bank? Or do you see some private sector banks actually implementing it? I know you mentioned that central banks might also be responsible for the implementation but I wonder how sustainable it will be if it seats under a central bank.
What are your thoughts?
Renata
I don't have the contact of the Health Insurance initiative. Is that located on this website or elsewhere?
I moved some of the examples from the comments that I made into the entry for the idea. There is limited space so I could not put the same level of detail in the entry. Among others, I put the example of using an SME loan to create an SME health insurance provider in the entry.
Are the comments considered during judging or just the idea entry itself?
I updated the idea to show how the idea could be implemented by the private sector instead of a central bank.
The idea could be implemented as a private bank with private sector banks paying to access the marketplace or sharing ownership of the private bank running the marketplace.
There are a few reasons the public sector would find this idea useful:
1. it can also be used for funding the economic development of their own country.
2. it can be used to implement a portion of their foreign economic development program in a more sustainable way.
3. it provides a way of funding their country's economic recovery without raising taxes or increasing the national debt.
Reasons #1 and #3 would motivate the private sector to pay for running the marketplace.
I sent an email to Temenos to find out if they can implement this idea using their banking software. It looks like it has many of the features needed.
I also sent an email to Oracle asking if their financial services software can be used to implement this solution.
What are some other banking software providers used by large banks?
Banking software:
http://www.temenos.com/Software/
http://www.oracle.com/
U.S. Bank is using CashEdge's PopMoney service for P2P payments online or using mobile phones.
http://www.cashedge.com/
https://www.popmoney.com/
Some other possible technology partners:
http://www.google.com/commercesearch/
https://appengine.google.com/
http://aws.amazon.com/
http://www.cloudera.com/
http://nimbula.com/
http://www.softlayer.com/
http://www.vmware.com/
http://fathomdb.com/
http://www.scaledb.com/
http://www.objectivity.com/
http://www.imatix.com/
The 'Bloom' programming language could be used in implementing the solution in combination with a product like that offered by Cloudera.com, Nimbula.com, etc..
http://www.technologyreview.com/computing/25089/?a=f
Azul Systems' products are used by companies like Credit Suisse to scale Java applications.
http://www.azulsystems.com/products
http://www.terracotta.org/
EcoMotors has designed a more efficient internal combustion engine that can run on multiple fuels.
Prof. Peter Hofbauer, EcoMotors CEO, worked on the Volkswagen Beetle engine.
Bill Gates and Khosla Ventures are investing in EcoMotors.
EcoMotors plans on demonstrating a 100MPG car in 2010.
Lotus Engineering has designed a drivetrain similar to that in the GM Volt.
An SME that manufactures electric vehicles could make electric passenger vehicles with a PHEV drivetrain range-extended by a smaller version of EcoMotors engine which runs on multiple fuels.
The resulting PHEV vehicle would operate in the same way as a GM Volt but be able to use ethanol and biodiesel as fuel to extend its range. This vehicle would reduce the petroleum deficit even further than the GM Volt.
Fisker Automotive could get a $600 million loan to bring such a electric vehicle to market with 10 million individual investors supplying $60 each.
Example:
$60 x 10,000,000 = $600 million
http://www.lotusfuturethinking.com/index.php5?page=demonstrators&t_post=...
The PROTON Emas, a plug-in series hybrid city car, has been styled by Italdesign and was unveiled on the Italdesign stand at the Geneva Motor Show.
Lotus Engineering designed and integrated the complete drivetrain, including the electrical drive system with single-speed transmission, which delivers low emissions, optimised performance and acceptable electric-only operating range for city use.
For longer journeys, when the battery charge level falls, the 3 cylinder, 1.2 litre Lotus Range Extender engine is used to replenish the charge in the battery and provide electrical power for the drive motors.
The battery can also be recharged via an AC mains domestic outlet to achieve initial electric-only operation.
http://www.ecomotors.com/technology
Engine Design
Opposed-Piston Opposed-Cylinder Engine
This patented design creates a ground-breaking internal combustion engine family that will run on a number of different fuels, including gasoline, diesel and ethanol. The engine operates on the 2-cycle principle, generating one power stroke per crank revolution per cylinder. It comprises two opposing cylinders per module, with a crankshaft between them, and each cylinder has two pistons moving in opposite directions. This innovative design configuration eliminates the cylinder-head and valve-train components of conventional engines, offering an efficient, compact and simple core engine structure. The result is an engine family that is lighter, more efficient and economical, with lower exhaust emissions compared with conventional designs. Here you can see this revolutionary 2-stroke engine in operation, which helps to illustrate the simplicity, elegance and compactness of its design.
http://www.wired.com/magazine/2010/06/ff_qa_fisker_karma/
Wired: GM went bankrupt; Chrysler is disintegrating. Is this really a good time to start a car company?
Henrik Fisker: It’s the perfect time. Especially for an environmentally minded automaker. Governments are handing out money—in April we got a $529 million loan from the US Department of Energy—and consumers are ready to change their lifestyles in the name of the environment.
Rene- absolutely fantastic mapping of the trend and potential design, my big question is who is going to build it? Who are the entrepreneurs who will make it happen? Or how do we provide incentives for major players to enter the space? One recent trend has been incentive funds or prize awards put up by foundation or gov'ts to encourage innovation.
David
If the government is committed to implementing a lending market on the same scale as a stock market like the New York Stock Exchange, it would go along way in providing the incentive to build the software needed.
With the software available today for cloud computing and storage, it is much easier to create an application that can scale.
Kiva.org managed to build such an application using many existing software services. Cloud computing infrastructure software exists to run those software services in-house if necessary.
Here is an animation explaining research on motivation sponsored by The Federal Reserve:
http://www.youtube.com/watch?v=u6XAPnuFjJc
The animation is based upon this talk:
http://www.ted.com/talks/dan_pink_on_motivation.html
It basically says that the motivation for implementing this solution that will get a better result is "purpose" rather than "financial reward" when work requires thought.
The idea is to pay people enough that they aren't worried about money so they focus on their work. More financial rewards beyond that don't get you a better result.
Guy Kawasaki wrote an article saying something similar about startup companies - too much money can adversely affect product development.
http://www.openforum.com/idea-hub/topics/the-world/article/why-too-much-...
If that research is correct, you are better off attracting people who want to solve the problem of financing economic development and economic stimulus in a sustainable way by enabling a entire population of a country to pool their resources to participate in financing loans to SMEs to help themselves and others.
(a) Building the lending market
(i) Autonomy
- people are free to choose what part of the implementation they want to work on (e.g. software, workflow, policy, etc.)
(ii) Mastery
- developing skills in writing scalable software, writing financial software, etc.
- developing workflow to make solution successful
- competing against other teams to provide the most scalable and easy to use solution
etc.
(iii) Purpose
- financing economic development and economic stimulus in a sustainable way by enabling a entire population of a country to pool their resources to participate in financing loans to SMEs to help themselves and others
(iv) Compensation
- developing marketable skills
- making their skills known to a large audience of potential employers
- contributing to solving a big problem
- chance to be on the team that implements the solution
- pay the top five teams enough that they could afford to work on their own projects for the next two years
(b) Individuals using the lending market
(i) Autonomy
- individuals in a country can direct and participate in the economic development of countries by choosing what to finance
(ii) Mastery
- choosing which SMEs to finance to make economic development of their country or a developing country successful
(iii) Purpose
- financing economic development and economic stimulus in a sustainable way by enabling a entire population of a country to pool their resources to participate in financing loans to SMEs to help themselves and others
(c) Operating the lending market
Private financial institutions would be motivated by the benefits it provides their organizations financially.
Economic development banks would be motivated by the benefits it provides to achieve their goals.
Companies that have built banking software for large private financial institutions would have an advantage building the software needed - the software to implement the lending market and the software to integrate SME loan applications with private financial institutions existing loan application workflow.
One avenue for finding entrepreneurs could be 'Sprouter':
http://sprouter.com/
The software to be implemented could be split into several different projects:
1. Online catalog of SME loans needing funding, "shopping cart", and "checkout" to set up investment in selected loans.
2. Loan application software
- automated checks that loan meets criteria, risk assessment, fraud detection, etc.
- submitting field reports from visits to SMEs
3. Loan management software
- set up, accept and track payments from investors and repayments from SMEs and distribution to investors
4. Web service for private financial institutions to interface with lending market.
- read catalog of loans via web service to be able to write application to choose loans, invest in loans, etc.
5. Loan application workflow integration
- either implemented at private financial institutions by internal IT departments or by contractors
6. Mobile phone and satellite Internet payments service that could be implemented in developing country to be used by SMEs, SME suppliers and customers in developing country.
- deploying wireless broadband Internet with support for IP backhaul of mobile phone traffic
- some existing local wireless broadband Internet networks in developing countries connect to more developed parts of the country via satellite Internet
- includes tracking of SME supplier payments
The initial part of the implementation could be run as a contest:
(a) Provide a cloud computing and storage data-center for teams competing in the contest to run and test software implementations. A corporate sponsor such as Google, Cloudera, Nimbula, etc. could provide this.
(b) The software written for the contest has an open source licence compatible with all or part of the software implementation later being incorporated into a commercial implementation.
(c) The top five winning teams in each category get enough money to work on their own projects exclusively for the next two years.
(d) The top three winning teams in each category get a contract to work together to implement the final software in their category.
Governments:
The benefits to the economic development in their own country would motivate governments to participate.
The lending market also provides a way of making part of governments' foreign aid programs more sustainable.
Individuals:
The lending market providing the means for individuals to participate in the economic development of their country or a developing country they have an interest in and getting a return on their investment is motivation for the population of a country to participate. The alternative is more taxes and more national debt to fund the economic stimulus.
Private Financial Institutions:
Private financial institutions can charge a fee for processing an SME loan application for an SME in a developed country to fund their share of the operating costs of the lending market.
The lending market also provides them a way of distributing the risk over an entire population for the portion of an SME loan they do not want to fund.
They also get the first chance to fund an SME loan by participating.
It gives them the opportunity to make money funding SMEs in emerging markets.
It gives them a way of funding SMEs supporting their investments in other companies. For example, if they have invested in an electric car company, they can use the lending market to have SME loans to scale battery production funded.
Here are a couple of examples of obstacles to economic growth mentioned in the media recently:
(a)
http://www.economist.com/node/16564142?story_id=16564142
"South Korea and Egypt differ in another important respect. Fifty years ago, when South Korea’s adult literacy rate was already 71%, Egypt’s trailed at a dismal 25%. With 72% now, Egypt has only just passed South Korea’s level of 1960. That has had serious repercussions. According to a government-commissioned study, one reason why poverty has endured, despite Egypt’s rapid growth, is that too few people have the skills to exploit the opportunities available to them. Egyptian businessmen complain that a shortage of talented workers is one of the biggest obstacles to growth, second only to obstructive bureaucracy."
"Historic comparison offers some cause for optimism. Egyptians’ educational level now equals not only South Korea’s in 1960 but also Turkey’s in 1980 and much of western Europe’s at the end of the 19th century. In all those places the threshold of 75% literacy proved a starting point not just for faster economic growth and human development but for political transition too."
(b)
http://www.reuters.com/article/idUSTRE66B3CS20100712
Bernanke says spurring credit key to rebound
"(Reuters) - Boosting credit to struggling small businesses is "crucial" to the economy's recovery and poses an important policy challenge, Federal Reserve Chairman Ben Bernanke said on Monday.
"To support the recovery, we need to find ways to ensure that credit-worthy borrowers have access to needed loans," he told a Fed-sponsored conference on small business financing."
The software to run a cloud platform to host scalable software is now available as open source.
Both Rackspace and NASA are contributing to the project.
http://www.openstack.org/press/rackspace-openstack-7-19-2010/
Rackspace Open Sources Cloud Platform; Announces Plans to Collaborate with NASA and Other Industry Leaders on OpenStack Project
More than 25 companies, including Citrix and Dell, support open source cloud platform to accelerate industry standards
Rackspace
July 19, 2010
San Antonio, TX - July 19, 2010 - Rackspace® Hosting (NYSE:RAX) today announced the launch of OpenStack™, an open-source cloud platform designed to foster the emergence of technology standards and cloud interoperability. Rackspace, the leading specialist in the hosting and cloud computing industry, is donating the code that powers its Cloud Files and Cloud Servers public-cloud offerings to the OpenStack project. The project will also incorporate technology that powers the NASA Nebula Cloud Platform. Rackspace and NASA plan to actively collaborate on joint technology development and leverage the efforts of open-source software developers worldwide.
"Modern scientific computation requires ever increasing storage and processing power delivered on-demand," said Chris C. Kemp, NASA's Chief Technology Officer for IT. "To serve this demand, we built Nebula, an infrastructure cloud platform designed to meet the needs of our scientific and engineering community. NASA and Rackspace are uniquely positioned to drive this initiative based on our experience in building large scale cloud platforms and our desire to embrace open source."
OpenStack will feature several cloud infrastructure components including a fully distributed object store based on Rackspace Cloud Files, available today at OpenStack.org. The next component planned for release is a scalable compute-provisioning engine based on the NASA Nebula cloud technology and Rackspace Cloud Servers technology. It is expected to be available later this year. Using these components, organizations would be able to turn physical hardware into scalable and extensible cloud environments using the same code currently in production serving tens of thousands of customers and large government projects.
"We are founding the OpenStack initiative to help drive industry standards, prevent vendor lock-in and generally increase the velocity of innovation in cloud technologies," said Lew Moorman, President, Cloud and CSO at Rackspace. "We are proud to have NASA's support in this effort. Its Nebula Cloud Platform is a tremendous boost to the OpenStack community. We expect ongoing collaboration with NASA and the rest of the community to drive more-rapid cloud adoption and innovation, in the private and public spheres."
Rackspace and NASA have committed to use OpenStack to power their cloud platforms, and Rackspace will dedicate open-source developers and resources to support adoption of OpenStack among enterprises and service providers. An OpenStack Design Summit hosted by Rackspace was held July 13-16 in Austin, where more than 100 technical advisors, developers and founding members joined to validate the code and ratify the project roadmap. More than 25 companies were represented at the Design Summit including AMD, Autonomic Resources, Citrix, Cloud.com, Cloudkick, Cloudscaling, CloudSwitch, Dell, enStratus, FathomDB, Intel, iomart Group, Limelight, Nicira, NTT DATA, Opscode, PEER 1, Puppet Labs, RightScale, Riptano, Scalr, SoftLayer, Sonian, Spiceworks, Zenoss and Zuora.
"OpenStack provides a solid foundation for promoting the emergence of cloud standards and interoperability," said Peter Levine, SVP and GM, Datacenter and Cloud Division, Citrix Systems. "As a longtime technology partner with Rackspace, Citrix will collaborate closely with the community to provide full support for the XenServer platform and our other cloud-enabling products."
"We believe in offering customers choice in cloud computing that helps them improve efficiency," says Forrest Norrod, Vice President and General Manager of Server Platforms, Dell. "OpenStack on Dell is a great option to create open source enterprise cloud solutions."
To download or contribute code and get involved, visit OpenStack.org. Follow OpenStack on Twitter @ twitter.com/openstack.
http://www.openstack.org/
http://nebula.nasa.gov/
Here is a company providing VOIP (Voice Over IP) via WiFi technology to lower the costs of deploying a mobile phone network.
http://www.tcmmobile.com/about_y_technology.html
"TCM has developed a REVOLUTIONARY, PATENTED ”cellular“ technology which delivers ALL forms of mobile telecommunication services such as Voice, Data and Location-based Advertising (”Pop Up“ format) and Pinpoint Location functionality via one mobile device.
This technology uses FREE, UNLICENSED spectrum (i.e. 2.4 GHz, traditionally used for broadband wireless data services - ”Wi-Fi“) to deliver quality voice, data and location-based advertising within large area network environments. The use of FREE spectrum allows TCM to build a SIGNIFICANTLY lower cost ”cellular“ platform.
Traditional cellular technologies, in comparison, require a licensed spectrum purchase at a cost of billions of dollars, and such spectrum is typically not readily available. Since TCM”s equipment is small and can be strategically placed on building rooftops, the infrastructure costs are a fraction of that of traditional cellular.
TCM’s achievement is unique in that it has successfully solved the many challenges confronted when using unlicensed spectrum. These include interferences, seamless roaming, network design etc.
TCM has deployed its network in downtown Syracuse, New York, a city well-known for introducing emerging telecommunication technologies. To date, field-testing has proven resilient and robust.
TCM’s technology is ideal for rural area deployments, locations commonly under-served by traditional cellular, due to its expensive build-out costs. Opportunity for rural deployments is great, both domestically and in underdeveloped countries around the world."
They licensed their technology to a joint venture in India to create a mobile phone network to be rolled out to 100 million subscribers.
http://gttel.com/
Other mobile phone technology that uses WiFi comes from Flinders University in South Australia:
http://www.servalproject.org/how-it-works
"Led by Flinders University’s Dr Paul Gardner-Stephen, the Serval Project – named after a problem-solving African wildcat – aims to provide fast, cheap, robust and effective telecommunications systems where conventional phone infrastructure has been destroyed or is not cost-effective.
There are many situations and places where telephone infrastructure is damaged by bushfire, earthquake, tsunami or unrest, or where no infrastructure exists – where conventional networks are of less value,” Dr Gardner-Stephen said. “We are aiming to fill that void.”
The Serval Project consists of two systems.
The first is a temporary, self-organising, self-powered mobile network for disaster areas, formed with small phone towers dropped in by air.
The second is a permanent system for remote areas that requires no infrastructure and creates a mesh-based phone network between Wi-Fi enabled mobile phones, and eventually specially designed mobile phones that can operate on other unlicensed frequencies, called Batphone. The two systems can also be combined.
We have developed software which we’ve called Distributed Numbering Architecture (‘DNA’) that allows people in isolated or temporary networks to immediately use their existing phone numbers.
We believe that for a phone network to be useful, you must be able to call people, and have people call you on numbers that they know. This is especially true in disasters. This is the magic of DNA: it allows people to use their existing phone numbers, so that others can call them easily.
By integrating DNA with existing mesh network technology developed by Village Telco with unlicensed wireless spectrum, Dr Gardner-Stephen and his team will be able to provide telephone access to literally millions of people who currently lack any or affordable telephone coverage, as well as being able to help those affected by disaster.
“It will allow people in remote or isolated townships, or farm workers in network black spots to talk to each other,” he said.
“People in a disaster ravaged area will be able to contact friends and family and aid workers will be better able to coordinate relief efforts.”
Professor Paul Arbon, Director of Flinders University’s Research Centre for Disaster Resilience and Health said recently the Serval Project addresses several key emerging issues in the management of disasters and emergencies.
“The impact of disasters is increasing as more people live in locations where they are at risk and become more dependent on essential societal infrastructure,” Professor Arbon said.
“During disaster, most of the response capacity comes from within the local community with community members rescuing others. Mobile phones provide an important part of this response. They can be used to maintain the connections between family members, to alert and coordinate volunteers and, most importantly, can be used to provide the community with warnings and updates,” he said.
“The Serval Project provides a novel strategy to sustain mobile phone communications where other systems have been knocked out or overwhelmed by traffic on the system.”
The US$1000 Fellowship, provided by the Awesome Foundation’s Boston Chapter, will enable the project team to demonstrate a prototype of the system in coming weeks.
Dr Gardner-Stephen said that with adequate financial support, the systems could be fully operational within 18 months."
Africa has satellite coverage.
Would the same 4G-LTE open wireless broadband network technology being offered by LightSquared in North America provide the infrastructure needed for banking via mobile phone in Africa?
It is a hybrid network using cell towers and satellite connectivity.
In Africa, the ground portion of the network could use the lower cost technology provided by TCM Mobile.
The WiFi mobile phone technology in the Serval Project developed by Flinders University in Southern Australia could have a role as well.
Sources:
http://www.tcmmobile.com/about_y_technology.html
http://lightsquared.com/what-we-do/technology/
"LightSquared is building the only national 4G-LTE open wireless broadband network that incorporates nationwide satellite coverage and has the capacity to support the anticipated explosive demand generated by new consumer devices and mobile applications."
"From a technology perspective, LTE has a maximum data rate—over 100 MB/second—which enables LightSquared to offer more immediate communication with minimal delay and faster upload and download speeds."
"LightSquared will launch a satellite built by Boeing into geostationary orbit over North America. It will be among the largest commercial satellites ever launched. Via the satellite, people can operate their wireless devices from every single part of the country. Never again do they have to worry about traveling out of network or losing their connection. For the first time ever, people can enjoy universal network coverage, no matter where they are in the United States."
http://www.tcmmobile.com/about_y_technology.html
http://www.servalproject.org/
Harvard has developed a psychometric test to screen SME loan applicants that they say will cut loan default rates by 25 percent to 40 percent.
http://www.businessweek.com/magazine/content/10_30/b4188020389751.htm?
"The Entrepreneurial Finance Lab (EFL), a branch of the Harvard Kennedy School's Center for International Development, has devised a psychometric test to help banks in emerging markets easily screen loan applicants. The goal is to spur lending to small and midsize companies, a vital sector often underfunded in the developing world. These companies are too big to rely on microfinance, yet not big enough to be served efficiently by the banks. "There are millions of businesses in developing countries that could earn significant returns on additional capital that aren't financed," says Bailey Klinger, EFL's director. "And it's not that banks aren't interested in them. Quite the opposite. They just don't have the right tools.""
"The 40-minute computer-based test assesses traits like honesty, ethics, intelligence, and motivation. The EFL says three years of pilots in South Africa, Kenya, Rwanda, Colombia, and Peru have shown that the test achieves the same—or better—results than traditional ways of assessing a borrower's future success and ability to repay a loan. With the test, local banks can cut default rates by 25 percent to 40 percent, says D.J. DiDonna, EFL's director of business development. They will also be able to extend loans to clients whose credit histories are sparse or nonexistent."
"South Africa's Standard Bank, the continent's biggest, has signed on to become EFL's first paying client and roll out the test in South Africa and Kenya this August. "We're hoping a flagship client like Standard Bank, as they scale up quickly, will open the door for other banks," says DiDonna. "As you can imagine, banks are pretty risk-averse." If the test works in Africa, EFL hopes to introduce it to the U.S. and Canada, where many immigrant entrepreneurs also lack credit histories and collateral.
The bottom line: Harvard researchers have devised a simple, inexpensive way to test the business skills of would-be entrepreneurs in emerging markets."
Kia Ora Rene
Are you aware of existing companies that are establishing crowd sourcing platforms and the barriers they face in terms of government regulation and legislation?
Here in New Zealand for example the p2p crowd sourcing model is under development by http://nexx.co.nz/ I'm also aware of the dutch team at http://www.crowdaboutnow.com/
Who do you see as your main competition in this market?
Changes to government regulation and legislation are needed to make this solution possible and legal.
In the United States, funding an SME loan through an entire population of a country participating in funding an SME loan is currently illegal.
Having the SME loan applications evaluated by credit unions, banks, economic development banks, etc. with the capital for the loan coming from the SME lending market would make it possible to have a government change regulation and legislation without worrying the such a market becoming a massive source of fraud.
If a financial institution evaluating the SME loan application did not want to fund an SME loan or the entire amount, they would be required by law to publish the loan application on the SME lending market if the SME met the criteria or provide a letter to the SME detailing why the SME did not meet the criteria.
There is a list of existing social lending crowdsourcing platforms in the idea entry. I'll add the ones you mentioned to the list.
A few existing social lending sites operating via crowdsourcing do lend to SMEs but they cannot currently do what I am suggesting because of the barriers from government regulation and legislation that you mentioned.
Because of the barriers of government regulation and loan applications on existing social lending crowdsourcing platforms not being screened by financial institutions, there is not any competition.
Having the solution fragmented into many social lending crowdsourcing platforms will not work for funding large SME loans since you need a large population contributing to a loan for small contributions to have an impact.
A social lending crowdsourcing platform with a small number of contributors would not be able to compete.
There are very few stock markets in a country. If you had to go to hundreds or thousands of stock markets to buy shares in a company, the stock market would be ineffective. You would encounter the same problem if you fragmented the SME lending market.
Other social lending crowdsourcing platforms would continue to exist to fund loans to individuals but they would not have the resources to fund SMEs adequately.
Hey Rene, I think you have a great idea with a ton of potential. I recently did some research in Bangladesh on SME financing. The majority of small businesses, especially in rural areas, are constrained by a lack of access to financial resources. They are greatly under-served in this regard because they fall in the gap between microfinance and commercial banking. Commercial banks are starting to venture into the market but tend to stick to the larger end of the spectrum while most MFIs don't have the necessary resources. While in Bangladesh I worked with the SME financing arm of the Grameen Bank. They had a model for recruiting and building relationships with small businesses that was working extremely well but of course had trouble raising capital. Crowd-sourced loans seem like a potential solution.
My question is what type of organization did you envision partnering with for loan issuance, collection, and support? In the way that Kiva uses MFIs would you partner with local commercial banks? Or 'social businesses' like the Grameen Bank? Clearly mobile banking technology would be an effective facilitator but you are still going to need a local presence if this going to build the same personal connections as a kiva-type platform. I see that you mention credit-unions but I was hoping you could provide some examples as I'm not sure specifically what you mean.
On the supply side of the equation there is a lot of interest in these sort of 'social investments' right now. I think it could have success similar to that of kiva but of course the challenge is generating buzz in the initial period. I am currently in business school at Ivey/Western and have been a guest speaker in MBA programs and the audience is always incredibly interested in getting involved with this sort of idea.
To develop the banking industry in developing countries, community development credit unions targeted to funding SMEs could be created to handle loan issuance, collection, and support.
If possible, existing organizations (e.g. Grameen Bank, MFIs) already operating in the area could be developed into community development credit unions or help establish community development credit unions with the capital provided by SME lending markets in developed countries.
Over time, individuals and SMEs would have their own income to contribute to the services provided by the credit union supplemented by SME lending markets in developed countries.
Eventually, members (e.g. individuals, SMEs) of the credit unions would have enough capital to fund the services they provide to SMEs.
I think the buzz in the initial period would come from individuals in developed countries being able to use the SME lending market for economic development in their own country.
Given the financial situation many developed countries find themselves in, it is an opportune time to establish an SME lending market. Individuals in these countries want more jobs and with an entire population of a country participating in an SME lending market small individual loan contributions could fund very large loans.
It would be very frustrating if they could not use the SME lending market for their own country's economic development.
A lot of public education regularly provided on national television would be needed to make the population of a developed country aware of the benefits of being able to directly participate in the economic development of their country via an SME lending market.
Part of that public education would include advertising the ability to provide SME loans in developing countries as well as their own country. There are large populations of people from other countries in developed countries such as the United States, Canada, members of the European Union, etc. that would have an interest in helping to develop countries where they have family.
Sources:
http://www.cdcu.coop/
"A community development credit union (CDCU) is a credit union with a special mission of serving low- and moderate-income people and communities.
More than sixty years ago, a small number of credit unions were founded with the specific mission of serving low-income and minority communities beyond the reach of banks and mainstream credit unions. These “community development credit unions” (CDCUs) specialize in serving populations generally considered the hardest to serve, including low-income wage earners, recent immigrants, and people with disabilities.
CDCUs are:
* Nonprofit and tax-exempt (but not a charity)
* Cooperatively owned and governed -- one member, one vote
* Government-regulated, fully insured financial institutions
CDCUs provide:
* Fairly priced loans, including to members with imperfect, limited or no credit history
* A safe place to save
* A place to conduct transactions at reasonable cost
* Financial education and counseling for its members
* Products, services and support that can help members to free themselves from high-cost and predatory debt, gain control over their personal finances, and achieve economic independence."
http://www.woccu.org/microfinance/programs/
World Council of Credit Unions (WOCCU) "international development programs assist credit unions and national/regional associations with rebuilding during and after conflict, providing access to the underserved, developing integrated business networks, supporting communities at risk, reconstructing after disaster and encouraging legislative reform and regulatory system development."
http://www.woccu.org/about/creditunion
"Credit unions worldwide offer members much more than financial services. They provide members the opportunity to own their own financial institution and help them create opportunities such as starting small businesses, building family homes and educating their children. In some countries, members encounter their first taste of democratic decision making through their credit unions.
Credit unions are democratic, member-owned financial cooperatives. Each member, regardless of account size in the credit union, may run for the board and cast a vote in elections. As financial intermediaries, credit unions finance their loan portfolios by mobilizing member savings and shares rather than using outside capital, thus providing opportunities for generations of members.
Credit unions exist to serve their members and communities. As not-for-profit cooperative institutions, credit unions use excess earnings to offer members more affordable loans, a higher return on savings, lower fees or new products and services. They serve members from all walks of life, including the poor and disenfranchised."
A $35 computer would put a complete online K-12 to university education within reach of a lot of people.
It would also make online banking available if paired with hybrid wireless/satellite broadband Internet networks.
100 million people contributing $29.17 per month for 12 months could fund a $35 billion loan to supply $35 computers to 1 billion people.
Example: $35 computers for 1 billion people
100,000,000 people * 12 months * $29.17 per month = $35,004,000,000
The $35 tablet computer which India's government is subsidizing by $15 to bring the cost down to $20 is part of their education technology initiative to bring broadband Internet to their 25,000 colleges and 504 universities and make course materials available online.
http://www.csmonitor.com/World/Asia-South-Central/2010/0723/35-computer-...
"$35 computer aims to bring cheap technology to India's schools and universities. The $35 computer also targets a vast, untapped market of 1.2 billion people.
By Anuj Chopra, Correspondent / July 23, 2010
Mumbai, India
The sleek handheld device includes an Internet browser, a multimedia player, a PDF reader, and video conferencing ability.
But its biggest attraction is the price: $35.
Kapil Sibal, India’s human resources development minister, today unveiled the prototype of an unnamed Linux-based computing tool for students to be introduced in higher educational institutions by 2011.
“The aim is to reach such devices to the students of colleges and universities, and to provide these institutions a host of choices of low-cost access devices around $35 or less in near future,” the human resources ministry said at the launch of the computer.
The latest gadget is a thrilling prospect for the future of global education, says Anand Nandkumar, a professor of business strategy in the field of innovation and entrepreneurship at the Hyderabad-based Indian School of Business."
The lack of available skilled workers is one of the conditions limiting the success of SME's in developing countries (in developed countries too).
Together with India's $35 tablet computer and laptop.org's devices, free textbooks and other course material would make education available to many more people around the world.
A broadband Internet network can be deployed faster than the education system of a developing country being built. While people in developing countries are waiting for teachers and schools, they could be learning online educating future teachers for those schools.
In cultures where the education of women is not a priority or discouraged, having an education available online gives them a chance to get an education. It is more difficult for a country to be successful if it does not fully utilize the skills and abilities of its entire population.
Former Sun Microsystems CEO wants to make K-12 textbooks available online for free.
He has a non-profit called Curriki which provides a directory of free textbooks and other course material.
Vinod Khosla's (who co-founded Sun with McNealy) wife Neeru heads up the CK-12 Foundation which has already developed nine of the core textbooks for high school in California.
http://www.nytimes.com/2010/08/01/technology/01ping.html
"$200 Textbook vs. Free. You Do the Math."
"Mr. McNealy, the fiery co-founder and former chief executive of Sun Microsystems, shuns basic math textbooks as bloated monstrosities: their price keeps rising while the core information inside of them stays the same.
“Ten plus 10 has been 20 for a long time,” Mr. McNealy says.
Early this year, Oracle, the database software maker, acquired Sun for $7.4 billion, leaving Mr. McNealy without a job. He has since decided to aim his energy and some money at Curriki, an online hub for free textbooks and other course material that he spearheaded six years ago.
“We are spending $8 billion to $15 billion per year on textbooks” in the United States, Mr. McNealy says. “It seems to me we could put that all online for free.”
The nonprofit Curriki fits into an ever-expanding list of organizations that seek to bring the blunt force of Internet economics to bear on the education market. Even the traditional textbook publishers agree that the days of tweaking a few pages in a book just to sell a new edition are coming to an end."
http://www.curriki.org/xwiki/bin/view/Main/
http://www.ck12.org/
http://linear.ups.edu/opentexts.html
http://techcrunch.com/2010/08/06/bill-gates-education/
http://www.flatworldknowledge.com/
http://www.clrn.org/
"“Five years from now on the web for free you’ll be able to find the best lectures in the world,” Gates said at the Techonomy conference in Lake Tahoe, CA today. “It will be better than any single university,” he continued."
"But his overall point is that it’s just too expensive and too hard to get these upper-level educations. And soon place-based college educations will be five times less important than they are today."
To implement a software project on this scale, you need to be aware that organizational structure and performance management practices affect software quality.
Conflicting goals and differing priorities introduced by organizational structure and performance management practices can prevent a software project from succeeding or cause it to progress more slowly than it otherwise would increasing software development costs and reduce the quality of the finished product.
http://research.microsoft.com/apps/pubs/default.aspx?id=70535
"The Influence of Organizational Structure On Software Quality: An Empirical Case Study
Nachiappan Nagappan, Brendan Murphy, and Victor Basili
January 2008
Often software systems are developed by organizations consisting of many teams of individuals working together. Brooks states in the Mythical Man Month book that product quality is strongly affected by organization structure. Unfortunately there has been little empirical evidence to date to substantiate this assertion. In this paper we present a metric scheme to quantify organizational complexity, in relation to the product development process to identify if the metrics impact failure-proneness. In our case study, the organizational metrics when applied to data from Windows Vista were statistically significant predictors of failure-proneness. The precision and recall measures for identifying failure-prone binaries, using the organizational metrics, was significantly higher than using traditional metrics like churn, complexity, coverage, dependencies, and pre-release bug measures that have been used to date to predict failure-proneness. Our results provide empirical evidence that the organizational metrics are related to, and are effective predictors of failure-proneness."
http://online.wsj.com/article/SB1000142405274870484340457625116099984892...
"Federal securities regulators are weighing demands to make it easier for fast-growing companies to use social networks such as Facebook and Twitter to raise money by tapping thousands of investors for very small amounts of shares.
The Securities and Exchange Commission is looking at adapting its rules to encourage Internet-age techniques for small companies raising capital. The issue is part of a wider review by the agency into whether to ease decades-old constraints on share issues by closely held companies."
Peer-to-peer small business lending in U.K.:
http://www.telegraph.co.uk/finance/yourbusiness/8466335/Funding-Circle-e...
"Funding Circle, the alternative small business loan provider, has secured private equity funds to expand.
Index Ventures has invested £2.5m alongside existing investors into the service, which launched in August last year and has already facilitated loans of £11.5m to established businesses.
Funding Circle is an online marketplace that brings savers and investors directly in contact with credit worthy small businesses looking to borrow."
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