Project: Sponsor a Student

Finalist discussion: http://www.omidyar.net/group/cmp s80j/news/71/

Earlier discussion for this project: http://www.omidyar.net/group/cmp s80j/news/28/

Summary

• What are you going to do? (in one sentence if possible)

Provide a medium for students, in good standing, who attend public universities in Mexico to borrow money from people in developed countries in order to finance their education.

Team

• List team members by name

Perla Miranda, Cinthia Diaz, Nohemi Cardenas

Social

• What social problem are you solving?
• Lack of college graduates in Mexico.
• What is the magnitude of this problem?
• A lot of students don't have access to education because of the lack of financial resources in Mexico, so it's pretty large.

• Quantify.

• In Mexico, in 2005, only 47.8% of the population between the ages of 16-19 were enrolled in school. Of the population between the ages of 20-24, only 20.8% were enrolled. In 2004, only 10.9% of the students who entered a higher education institute graduated with a degree.
• How will you evaluate progress/success?
• By seeing how the numbers of students who graduate from college increases.

• Quantifiably

• In the first year we hope to see the number of college graduates to increase by at least 1,000.
• What is your expected social return?
• We expect to see more students in Mexico graduate with a degree and a good job offer.

• (How much success in quantifiable units?)

By the year after our organization is launched we hope to see at least 5,000 more students entering and graduating from a university.

Background

• What have people done with regard to this social issue already?

The Mexican government developed a becas (scholarship) program that provides money to low income students. However, the people of Mexico have demanded that the government develop a financial aid program or system that will provide equal access to money for a higher education. * If anyone is pursuing a similar strategy, have they been successful? After conducting research, it seems that there aren’t any programs in Mexico like the one that we are trying to establish that address this issue.

• Quantify past success or failure of similar plans

• Why are existing methods not solving the problem?
• • Unlike in the United States, where students simply fill out the FAFSA and are considered for financial aid, the Mexican government has not developed a financial aid program. In 2001 under President Vicente Fox PRONABES was developed. It is a government sponsored grant program that offers grants to low income students registered at a public university. Unfortunately, Mexican banks aren't as willing to loan money to students as banks in the U.S are, so the lack and underdeveloped of existing methods are definitely not solving the problem.
• Who is the customer in terms of the social good you are providing?
• Directly the students, but in the long run, the country.
• Do the people you are serving think this project is a good idea?
• We've gone to several chat rooms in Mexico, trying to find students who are currently attending, or are in the age of attending, a university there. We asked them what they thought about a program such as the one we are trying to create. We asked, if they would be willing to take loans from people from other countries, if they think they'd be able to pay them back,how would they pay them back, how much money they would need in order to pay for a year in a university, and how long it would take them to pay the money back, along with other questions. We talked to 15 students from different parts of Mexico, and most of them thought that this was a great idea, they did have concerns about the time period they would have in order to pay their loans back, and about the interest they would be responsible for, they also asked what would happen if they were unable to pay the money back within the time frame given. These were really good questions that made us think about the problems that we still have to work out.

• Go ask them and provide evidence that they think so.

• What are the risks of failure, in broad terms?
• • The risks are that people are not going to have enough incentives to lend money for the education of a student in Mexico. This is a valid concern since the Mexican government does have a scholarship program and many embassies offer Mexican students an opportunity to study abroad with all expenses paid. The PRONABES program does offer scholarships but the amounts of the scholarship and the number of scholarship given out are a low number. Also, with our program we are trying to reach those students that have some family income going into their education, yet the students still have to work to make ends meet. One of the concerns that we have as a group is also student’s being able to pay back their loans. Even with a bachelors degree many Mexican graduates have a hard time finding a job let alone in the field that they studied.

• What are the potential pitfalls of your plan?
• What are the potential consequences if something doesn't go as expected?

• • That people will not place any trust in this program and so will not be willing to lend money to students. One of the hardest yet important components of this project is outreaching to potential donors and students.

Economics

• What sustainable business are you running?
• It's going to be like a loan program, so I guess you could say a loaning company.

• What are you selling, and to who?

• Loans to students in Mexico.
• How big is your expected market?
• Since there are around 118,000 students enrolled in college right now, we would like to increase that number to at least 200,000, so that's how big our market's going to be.

• If you controlled all of the customers, how much could you make?

• Enough to keep this project going, I am not sure of an exact number yet.
• Who makes money in this market right now?
• After doing a lot of research we found out that there aren't many banks or companies in Mexico that are willing to loan out money to students so there isn't really a major company who makes money off of an org like ours.

• How will you compete against prior business X?

• Our interests will be much smaller
• Who is your economic customer?
• Students in Mexico

• Who is handing you $$?

• People in developed countries who are willing to lend out their money to students in Mexico
• How do you plan to reach this customer?
• We are planning on advertising this program on line and in news papers in the U.S. In Mexico we are planning to work directly with schools in order to attract possible students. We are hoping that people will act out of the kindness of their hearts because being that this is pretty much a loan program, the amount that they lend cannot be deducted from their taxes. This is definitely possible being that people already do something similar with the KIVA organization.
• What are your costs associated with doing business?
• We are going to need money to advertise our organization both in this country and in Mexico, perhaps even traveling to different parts of the country and informing people about the program.
• What are the financial risks of failure?
• The people who will loan the money are risking not getting the money paid back, but we're going to do something to prevent this risk from turning people away from this idea.

Technology

• Is the technology feasible?
• Yes, the internet is a pretty reliable source

• (provide citations/evidence/letters-from-experts if there is any question)

• What are the risks of failure associated with the technology?

Resource Requirements

• What resources do you need?

• (startup capital, contacts, information, technological inventions, anything that you don't have right now.)

• We will need the contacts of schools in Mexico. We will need to create this website where students will be able to post their profile, since none of us know how to build a website we would have to pay someone to make our website, but there is also another option. Since we are a nonprofit organization, there is an organization called Charity Focus that helps non-prof orgs. create their own sites at no cost to them so that could be a possibility. We're also going to need the lenders who are going to fund the students' education
• How long will these resources last?
• As long as the company is reliable

• Especially in the case of money, how long until you run out of startup funds and need to be making money?

• Not too long, since our plan is going to depend more on the money of the lenders, but if I have to put a number for the maintenance of the website, maybe a year.

Objections

• • What interest rate would be acceptable? Due to the fact that Mexico lacks a Financial Aid program that would offer student loans and that Mexican banks don't offer student loans, an acceptable interest rate is hard to calculate. As a team we have decided to charge 8% for the loans. We decided on this amount by looking at student loans in the U.S. and averaging them out.
• Is there any data from the US or any other country on the rate of repayment of student loans. No, not for Mexico.
• How much do you make for each student?
• How will you charge a lower interest rate than banks? Unfortunately banks in Mexico don't even provide loans for students so we aren't really competing with their interest rates. Thus as mentioned before we are only charging an 8% interest rate for the money that is lent. However, we also charging a 2% percent interest rate to cover the "cost of loan defaults" (www.kiva.org/about/microfinance/) and will save and use this money in the case that a student can't repay a loan.
• kiva is using local organizations to validate who gets loans.
• Are you going to have something similar, or are you just having people sign up? We'll be teaming up with non-profit organizations, that promote education amongst the poorer communities in Mexico, to help us screen and select serious students who need the loans. We are worried that people will take advantage of our program but with the help of local organizations we'll develop a selective criteria so as to select Mexican students who will benefit and repay the loan.
• How do we control loan repayment?

See above question. * What are your advertising costs? We are planning to follow Kiva's footsteps and team up corporations such as google, yahoo, and youtube to help us subsidize our advertising cost. Another advertising outlet that we plan to us are the public universities that potential student borrowers attend. We'll contact academic and financial aid advisor's, explain our program to them, and send them information about our program that they can give out to students. * What are your sign up costs per student? We are planning on charging the students an annual fee of 5 dollars, roughly 50 Mexican pesos, for the up keeping of the website. * Collection costs? * How do you lower the risk to people loaning money? By teaming up with local non-profit organizations that will aid in the screening of potential student borrowers. * How much money do you need to start? We need initial funding for advertisement; we'll be doing this in local newspapers and via emails to advisor's in public universities in Mexico. This is assuming that we would be part of Charity Focus which would provide us with out internet page. Also,we would need three airplane tickets to Mexico so that the team members can do a presentation about the program at UNAM, one of the biggest universities in Mexico City with 200,00 students. We estimate that we can do this with $3500.

• Someone to build your website? Charity Focus
• Is there an all electronic way to reach students in Mexico? We tried chat rooms to obtain student feedback on our project, so we would use this medium again to advertise and outreach to students.
• How do they get the money on the other end?
• Does it go into their bank? One of the requisites that the student borrower would need is to have a student savings account with Santander Serfin, a bank with branches in Mexico, who does transactions with Bank of America customers. This way lenders could deposit the money at a Bank of America branch and the student can easily withdraw money from their account.
• Is it by VISA or paypal, or direct bank transfer or what?