The Funding Question (Re-visited)

As predicted, our funding strategy looks to have changed again.

Earlier this week we had a great meeting with a local youth group called Hope and Vision. In the seven years since their inception they’ve come a long way, from the original six members who opened the group’s first second-hand shoe store, to the eighty-five strong co-operative that they operate today. Nakuru’s market now even has it’s own Hope and Vision alley, an area populated solely by businesses managed and owned by the groups members.

What’s really interesting about the Hope and Vision story – and something that sets them apart from other youth groups that we’ve met – is their financial model; they’ve never applied for, or received, any external funding. Instead, members contribute 1000 ksh per month to a communal fund (managed by the co-operative) which is used to distribute low interest loans for anything from business development and healthcare, to school fees and household repairs (new members are required to demonstrate five months of ‘reliable behaviour’ before gaining access to the fund). As the group grows, so does it’s capacity to lend. And because each individual has invested their own savings, there is a real incentive not to act irresponsibly with credit (each loan also requires at least three members to voluntarily act as guarantors).

Since arriving in Kenya we have been told countless stories of young people – without adequate financial experience or support – squandering loans in less time than it took them to complete an application. Hope and Vision can recall only one such instance in the groups history.

Talking to the executive committee, it’s immediately apparent that the Hope and Vision approach is about a lot more than business. They see their role in much broader terms, helping to provide members with a sustainable and secure means of supporting themselves and their families, with safety nets in place to mitigate against challenging times (emergency loans have recently been used to prop up previously profitable businesses that have been hit by economic uncertainty). Kamau, the group’s treasurer, summarised their outlook nicely in our meeting; “As a group we are stronger, we can enjoy the benefits of scale. But we must also share the hits, it always goes both ways”.

This commitment to the ‘co-operative whole’ runs through everything that Hope and Vision do, and it’s an approach (and mindset) that has taken them years to cultivate and refine. It’s clear then that we are not in a position to re-produce their model. We would, however, like to collaborate in developing our own.

So, our latest idea is to work with Hope and Vision to identify groups that we are confident will commit fully to the KENYAWORKS process. They have demonstrated good judgement in vetting new candidates for their own co-op, and we are already in the process of putting together a kind of ‘suitability criteria’ with the executive committee (e.g. groups will be required to invest at least one quarter of the total amount applied for). As before, once candidates are selected they will work through our programme with UK graduates to design a commercially viable business. However, rather than pitching to external funders (e.g. MFIs or the Youth Enterprise Development Fund), they will pitch to a panel of expert Kenyan business people (small fund managers, entrepreneurs, local business owners) managing a pot of money on behalf of KENYAWORKS (Josh and I will also sit on the panel).

At the moment we expect this money to be raised from the fees that we charge UK graduates. Whether this is realistic will become clear when we test the idea back home.

We are also considering the prospect of establishing a KENYAWORKS co-operative, perhaps managed in the first instance by Hope and Vision, and then by newly funded groups who demonstrate ‘reliable behaviour’ over a sustained period. Again, it has yet to be seen whether this is possible/advisable (or how such an arrangement would work alongside the funds that arrive with each new cohort of graduates), but we are ready to test.

As you can see, there is still a lot for us to work out, but we’re really excited about the idea of setting up a self contained KENYAWORKS process (from ideation and business mapping to financial support and personal development). It’s going to be a challenge, but we’re confident that we can deliver something that works, both as a valuable experience for UK graduates, and a genuine opportunity for young Kenyans.

Keep checking out the blog to see how we get on.

At such an important stage, any comments and suggestions are very much welcome.