This article is part of the MGSN Global Opportunities series.
MGSN is covering the entrepreneurial solution to the generational debt crisis. In Part One of the two part series “NEW CURRENCIES FOR A NEW GENERATION” MGSN documented a global debt crisis that threatened the economic viability of the next generation.
As regional banks are being acquired by large “too big to fail” banks, the ability to obtain financing for Millennials and Gen Z will be challenged.
However as documented in Part One of this article, the big traditional banks ignored the vast informal economy across the African continent and Tech provides the means for the average worker and entrepreneur across the AfCTA markets to operate digital accounts with even qualifying for bank accounts. The young unbanked in the informal economy of Africa, long ignored by the established financial institutions, jumped on the opportunity that tech brought to the market place.The original crowdfunding concept was generated from the innovative youth who used text messenger to raise funds and loans through an informal network of friends, businesses and potential informal investors through M-Pesa.
As global debt clashes against contracting economies, investors are pressuring Startups and Enterprises to increase profits by significant layoffs. Amazon released 2023 quarterly statements on its Investment Relations site. “Net income was $3.2 billion in the first quarter, or $0.31 per diluted share, compared with net loss of $3.8 billion, or $0.38 per diluted share, in the first quarter of 2022. All share and per share information for comparable prior year periods throughout this release have been retroactively adjusted to reflect the 20-for-1 stock split effected on May 27, 2022.”
The difference between last year and this year, massive layoffs.
Convincing investors to forgo immediate profits while investing into a long strategy of developing expansive consumer bases has not successfully been achieved over varied periods of history.
Government solutions have proved to be feckless. Although the dysfunction of the global governments vacillates over decades depending how much control powerful special interests have at a particular moment over governing structures, history bears testimony to its limits.
However the Millennial and Gen Z generation have embraced Tech and Not For Profits as the means for change. As debt is hoisted on these young generations to fuel the insatiable appetite for profits of a relatively small group of investors,Tech and youthful innovation can provide a way out of the debt load.
Innovative Tech and Disproportionate debt loads imposed on the young can be the acute market need that drives change. An example of this market assessment can be discerned from the Euro crisis of 2009. Italy had assumed a significant amount of sovereign debt, similar to several countries within the AfCTA market. Local governments in Italy were confronted with huge budget issues as investors were pressing the IMF for tight restructuring terms. Complicating the negotiations was the devaluation of the Euro.
The bucolic Italian island of Sardinia was placed in a difficult position as the Italian sovereign debt placed the island in projected long-term economic contraction.
As the Euro crisis started to erode incomes in 2010, four young Sardinian entrepreneurs saw through the priorities of the IMF debt crisis solution and concluded that the small businesses that were not too big to fail, were not priorities.They knew the special small businesses that contributed to the lifestyle of Sardinia were in trouble.
The Entrepreneurs did everything right in launching its Fintech Startup.They conducted significant Research & Development into the history of Peer to Peer alternative currency models.
The interesting point in the entrepreneurial development from Concept Generation through the R&D stage to the Fintech product/service deployment stage is that the four founders did not have a finance background.
Undaunted the Founders chose a regional digital currency within a B2B SME model.
The Founders chose a complementary currency, as the digital asset. A complementary currency is not a regulatory based legal tender. However complementary currencies are often contractual legal tender within a peer to peer network. It is usually marked to the local regulated currency.
The Founder launched Sardex within Sardinia as the regional base for the SME sector. Although the Sardex is not a purely barter based currency, the credit and debit ratio is tied into the sales cycle of B2B. The metric that members agree to is one Sardex equals one Euro. The metric base established a credit line for each business. The businesses exchange their products and services in a barter-like manner but tied into the digital credit floated by the Sardex Exchange, which is run by the Founders. The Sardex allowed the businesses to thrive during the crisis. The Sardex also allowed the businesses to save their Euros while shifting some operating expenses over to the credit based Sardex. The growth of Sardex matched the market need for credit when the banks would not provide the needed business capital.
The popularity and success of Sardex expanded to employees of member companies. Many employees of these companies requested some of their wages in Sardex.
The Sardex digital currency did tie into the tax regulations. Complementary currencies often tie into varied government regulations. Sardex had grown into a multi-euro business that provided the ability to provide resources to consumers when the banks closed the door of opportunity.
There are several important takeaways from the success of Sardex. First, the fact that the Founders of Sardex did not have any experience in finance, Second, when drafting models for a Startup in the Concept Generation stage always generate ideas that are address a solution to a market need.Third in addressing a social need, it is important to recognize the injustice that caused the societal need and yet not bind your talents to a one stop solution that involves implacable vested interest.
An examination of the evidence of the sovereign debt crisis in Europe and contentious debate over student debt relief in the US reveals the divided loyalties of governmental entities. The Founders of Sardex recognized that the solutions to the crushing debt, that the young would bear and the harshest effects, was not going to be resolved by governmental and international institutions. The driving goal of the crisis discussions was the means to protect the investor base.
The Sardex case study is encouraging to the debt crisis in the US and several countries across the African continent. The Founders of Sardex did not have half of the Tech resources that the youthful creditors have today. Although the complementary currency was the solution at that time, it is just one of many solutions that are available to tackle two apparent disparate problems, the student debt crisis in the US and the sovereign debt issue affecting the large millennial and GenZ populations in several African nations.
The Social Entrepreneurs model would be most effective in deploying tech solutions to grow a deregulated currency that is not volatile as the cryptocurrencies. A currency rooted in a pure barter system, as opposed to the derivative barter system in the Sardex, has potential.
The good news is that unlike the Sardinian entrepreneurs, today’s social entrepreneurs do not have to study and modernize ancient business models and create the advocacy platform to achieve consumer buy-in.
Although the Sardex founders opted for a For Profits Startup, the Not-For-Profit model is the best solution for leveraging aggregation- based Tech. Utilizing an aggregation based tech allows the proposed solution of a Social Enterprise Startup. A Startup that can appeal to a large community base is able to build a brand to a receptive audience. The sales process is not hampered by consumer education and advocacy which is timely, filled with rejection and present debilitating days at the office.
Further, it is important to note community branding is the go to marketing strategy. Respected R&D firm McKinsey & Company provides a significant study on the effectiveness of community branding.
The next step in the Concept Generation of a proposed transactional solution to the debt crisis is to identify the scope of the community. The following are snapshot of the potential community:
- Cancel Student Debt: Reform Advocacy Groups
- According to a Harvard University poll 85% of young Americans favor some form of student debt relief.
- According to a study by the NASDAG, “Millennials already played a significant role in ESG investing having contributed $51.1 billion to sustainable funds in 2020 compared with less than $5 billion in 2015“.
- Corporate ESG see the value in easing the global sovereign debt burden and incentivizing the development of sustainable environmental practices with an innovative debt for nature ESG program.
- Euro Money presented the impact the consumers are having in pushing the boundaries on reducing the debt burden of the large younger populations in global communities that are threatened by sovereign debt.
The community around a Startup with a brand that provides debt reduction solutions and sustainable development is in high growth mode.
Once the market need is identified the next entrepreneurial task is to identify business models that provide peer-to-peer currency in exchange for services and products.
This phase of the Startup stage is dedicated to a competitive analysis in the marketplace. The purpose of the competitive analysis is to identify how existing entities are performing in meeting the market need. A robust competitive analysis will identify potential partnerships, supply chains, or idea generation on building your Startup. It can also identify flaws in the market players in meeting the market need. Identifying flaws in the competition allows you the opportunity to build productive and service lines that solve the flaws.
MGSN has conducted an initiation of Competitive analysis to help Founders that want to make a difference with Tech to battle the debt crisis.
One of the leaders in this Not For Profit mode is Simbi. This San Francisco Not For Profit Startup offers two means of barter based transactions. The first is a traditional barter. An example, a dentist provides a check up and cleaning in exchange for a Digital Developer and Marketer building out a more robust landing page. The other means this Startup provides is a new currency, Simbi Cash.
Simbi cash is an alternative currency that is decentralized from regulated state currencies in the same manner as crypto currencies. The difference is the volatility is removed. Another attractive aspect for a debt-burdened young worker is that the currency allows the consumer to directly control the risk, unlike regulated currencies and crypto.
Here are the steps on how Simbi barter cash works:
- Create an account on Simbi.
- Offer one or more services and set your price in Simbi Cash. The Seller and Buyer can correlate the Simbi cash to any currency, even Crypto. By way of an example, One Simbi Cash is equal to one Euro
- Browse the listings and request a service.
- If the request is accepted, exchange contact information and arrange a time to complete the service.
- Once the service is complete, the requester will rate the provider and the provider will receive Simbi credits.Use Simbi credits to purchase other services from other users.
The buyer is able to procure the product or service with either Simbi cash or a service / product line barter-based exchange.
The champions of regulatory based currencies or crypto will denigrate the Barter based currency as being constrained by scalability. The first retort is the same arguments were proffered against complementary currencies such as the Sardex. Second, the development of Aggregation Tech to enhance scalability has not been lost on Y Combinator. The Silicon Valley Startup Accelerator that helped scale Reddit, Airbnb and Instacart to name a few well known Enterprises had admitted Simbi into its Mountain View campus.It also invested into the 1.2 million funding round.
The Not For Profit model of Simbi makes it an attractive candidate for ESG investing.
In order to leverage this resource and keep to the mission, the goal of the MGSN Concept Generation for a new Startup that will alleviate the debilitating effects of consumer debt, should be to enhance the societal benefit and empower the consumer with confidence and growth.
Another example of alternatives to regulated currencies is Time Bank. Time banking is a system of exchanging services without using money. It is based on the idea that everyone has something to offer, and that everyone can benefit from helping others.
To participate in time banking, you join a time bank. Time banks are usually local organizations, but there are also online time banks. Once you join a time bank, you can start offering your services to others. You can offer to help with anything from yard work to computer repair to babysitting, legal advice, digital health services. The sky can be the limit.
When you help someone, you earn time credits. One hour of service equals one time credit. You can then use your time credits to get help from others. For example, if you need help with your taxes, you can use your time credits to get help from someone who is a tax preparer.
Time banking is a great way to help others and to get help from others. It is also a great way to meet new people and to build communities. This alternative currency is very fungible, unlike NFT’S.
The fungibility of the Time Credit currency is similar to national regulated currency in that it can be:
- Donated to a charity or nonprofit organization.
- Used to fund a community project.
- Invested in a time bank savings account.
- Saved them for the special offering to come online.
- As assets for the estate that can be passed on in estate planning to whomever or whatever cause.
The possibilities are endless! Although the IRS does not have an aggressive tax policy on Time Credits compared to Simbi Cash, certain exchanges which may be ordinary taxable could generate a taxable event, ie Doctor gains Time Credits for digital consulting and pays Contractor to install porch and paint living room in Time Credits.
The Task for the Entrepreneurs out there in MGSN land is to take up the passion that the Sardex Founders had to help their generation thrive by taking the solution out of the bank’s hands and putting it into the next generation’s hands.
The Preliminary Concept Generation that MGSN has provided has identified the wide market need of debt relief from US student debt to African sovereign debt. The temptation is to treat the market need as too disparate to provide the vulnerable a viable offering. However the ability to empower a new generation with new currencies and the creation of new markets is viable.
The next step is to test the concept against the ability to develop product and service lines. The centerpiece of establishing a Not-For-Profit that will attract buyers and sellers of diverse products and services to the Startup Platform with varied currency options, is to deploy a solid aggregation tech.
Aggregation technology is the process of collecting data from multiple sources and combining it into a single, cohesive dataset. This can be done for a variety of purposes, such as:
- To gain insights into customer behavior
- To improve decision-making
- To identify trends
- To comply with regulations
There are a number of different aggregation technologies available, each with its own strengths and weaknesses. Some of the most common types of aggregation technologies include:
- Data warehouses
- Data lakes
- Data marts
- Data aggregators
Data warehouses are centralized repositories of data that are designed for analysis. They typically contain data from a variety of sources, which is cleaned and normalized before it is stored. Data warehouses are often used by businesses to gain insights into customer behavior and to improve decision-making.
Data lakes are similar to data warehouses, but they are not designed for analysis. Data lakes are designed to store large amounts of data in its raw form, without any cleaning or normalization. This makes them ideal for storing data that is not yet ready for analysis, such as data from new sources or data that is still being collected.
Data marts are smaller, specialized versions of data warehouses. They are typically used by departments or teams within a business to store and analyze data that is specific to their needs.
Data aggregators are software tools that collect data from multiple sources and combine it into a single dataset. They are often used by businesses to collect data from social media, websites, and other online sources.
The best aggregation technology for a particular use case will depend on a number of factors, such as the size and complexity of the data, the needs of the users, and the budget.
Once the right data aggregation tech is set the next step is apply the tech to the mission of the Not-For-Profit.
The proposed Founder would guide the development of the aggregation technology to help collect data on the needs of the Not For Profit target population.
The data aggregation should collect data on the types of debt that US students and young consumers in Africa are facing, the amount of debt they owe, and the impact that debt is having on their lives. This data could then be used to develop products and services that can help them to manage their debt by isolating it from a consumer activity that improve their financial situation through the acquisition of the new currencies to their purchasing power.
A solid aggregation technology can help connect with market providers, ESG donors, and ethical investors who are interested in supporting the Startup work. By collecting data on the impact of your work, you can demonstrate to potential donors and investors the value of your organization and the difference that you are making in the lives of young US workers stuck with student debt and young consumers in Africa.
For example, you could collect data on the number of students and young consumers who have been able to access transactional debt relief through your organization, the amount of debt that they have been able to repay, and or void, the impact that the new currencies and the trading platform has had on their lives. This data could then be used to create compelling case studies that can be used to attract funding and support from potential donors and investors.
The aggregation tech will also need a transactional clearing and reconciliation built in to provide consumer and donor transparency.
The new Not-For-Profit will need to have its Digital Development and Marketing Firm involved with the infrastructure development group. In order to conserve development capital, research and select a Digital Marketing Team that provides the development of Sales for the Trading Platform.
An innovative Digital Marketing company can transform the SME market into ESG powerhouses that will enhance and empower the donor profile. A Digital Marketing company that has the experience of developing marketing campaigns with eclectic sales cadences, can build SME partners. Innovative Digital Marketing Firms will be able to leverage the aggregation tech to create a network of SMEs in varied sectors that allows the SME to build a ESG platform without a direct cost the the SME. An example of this offering is the Digital Marketing Firm builds a campaign with the goal to create a network of coffee cafes that will offer the customers to add on a dollar donation to the beverage and food order.
According to Los Angeles based IBISWorld, a leading market and industry research firm, there are over 72,000 Coffee styled Cafes in the US. The average customer base is 100 customers per day. If the Digital Marketing Firm is able to secure 15,000 Cafes who agree to be part of the Startup community and Tag on an offer of $1.00 per offer to each customer and only 10 customers of each cafe accept that offer, the potential yearly donations are $46,800,000.
In order to enhance the offering of the Startup Not-For-Profit there are two platforms a solid Digital Marketing Firm can build out in addition to the new currencies and marketplace to purchase goods and services with the new stable currencies.
- Direct Debt Relief – If the “Coffee Cafe” campaign meets its goal of raising $46,800,000.00 per year, the Startup can use these campaigns funds to buy student loans on the secondary market from the investors. The transfer of debt from the investor to Not For Profit allows for a viable forgiveness offering. The purchase of troubled debt is usually at a discount of 40-60%. As of the end of 2022, the total student loan debt in the United States is $1.76 trillion. Half of that is $880 billion. Discounted at 40%, that would be $528 billion. If Not For Profit paid $46,800,000 per year, it would take you 11.3 years to pay off the loan. The Not For Profit can use the campaign funds to forgive the loans it is able to purchase. There is a model for purchase and forgive.
- Advocacy-As can be deducted from the Social Entrepreneur Model, the hard work of debt relief is being plowed by the Not For Profit because the US federal government could not deliver relief. The dysfunctional relationship between Republican and Democrats have reduced the governance and delivery system to the “bare minimum” The Not For Profit can join the network of advocates that are seeking a debt relief solution from the government.However this issue is stuck in political parties muck. The one success that the Not -For-Profit could achieve is the reform of the IRS tax policy on Barter. This goal has potential bipartisanship. The Republicans are always looking to curtail the scope or the IRS authority and the Democrats are keyed into debt relief. Not only should Barter based currencies and transactions be excluded from the IRS regulations but all transactions from the sale to the buy on the Startup Platform should result in a charitable deduction for the seller and the buyer. The Startup advocacy platform can gain support for these goals.The Not For Profit is doing what the government should.
The issue of African Sovereign debt is less problematic for this proposed Startup. The young population is being victimized by governmental dysfunction. The government’s across the continent have varied debt instruments with varied terms. Restructuring discussions, if history is a benchmark, will lead to restructuring the sovereign debt with some debt forgiveness. This will lead to a reduction of services and support to the residents. By definition this will drive down hard on the large Millennial and Gen Z population. The capricious “ask” that the government officials will state is the usual “ we have to tighten our belts” to get through these hard times. But that doesn’t work if you don’t have a belt. It only fuels the migration crisis and social disorder. Although the scope of the debt crisis, poverty and corruption is significant and one proposed Startup will not solve the problem, if successful it will create a model for duplication.
There are two significant facts of hope in the African sovereign debt crisis. One the debt is not a personal debt for the most part. Although business owners that are operating on lines of credit could face problems. The sovereign debt crisis could cause the banks to roll back credit, which could lead to lay-offs and business failings. In a wide application and dominant position that a national regulated currency holds in society, the risk of widespread contagion is significant. The bank’s problems become society’s problem.
However, as documented in Part One of this series[ insert link] the vast majority of the youthful population across the continent work in the unbanked informal economy. Entrepreneurialism is embedded in the vast informal economy and a viable Aggregation Fintech has demonstrated phenomenal economic success as demonstrated in the M-PESA model. Since this proposed Startup is deploying diverse aggregation tech, the Startup can offer the coffee cafe model as a start to provide resources to the young generations across the AfCTA market.
According to Hamburg based Market Research firm Statista, there are approximately 890,000 cafes in the European Union (EU). The cafe culture in Europe is also tied into the NGO sector. Cafe consumers are offered donation options on purchases on a consistent basis. There is a large diaspora from various African nations in several European countries. The African Union(AU) is actively seeking to build infrastructure into these communities. The AU issues it’s policy goals as, “The African Union Commission (AUC) envisions “an integrated continent that is politically united based on the ideals of Pan Africanism and the vision of Africa’s Renaissance”. Through its Citizens and Diaspora Organization (CIDO) the AUC seeks to nurture strategic relationships between the continent’s diaspora and Member States of the African Union. Initiatives to this end will be implemented under the Diaspora Engagement Project.”
The European Union also has the makings of infrastructures that could help facilitate the means of the proposed Startup.
The enticing aspect of the work the Startup Not For Profit/NGO can provide in addressing the debt issue for the young entrepreneurs in varied African nations is that they do not hold personal debt, as do their American counterparts. The funds raised by campaigns developed and launched by the Digital Marketing Partner will directly by-pass the governments and go directly to the digital wallet of the recipient looking for a loan to build the business. By way of an example, if we take the same approach of “Cafe Funding” and reduce the response to just 20,000 cafes that each only close 5 donations a day of one Euro each. If 20,000 cafes in Europe raise 5 Euros a day on a five day week, the total donations in one year would be 26,000,000 Euros. The potential effect on the most vulnerable in the informal economy is intense.
If we examine Nairobi as a projection, young entrepreneurs with no formal education can make a living to support a family of 4 by opening up a street food vendor business selling Mandazi, a popular donut breakfast and snack food in Kenya. In order to provide the needed Angel Investment into the Mandazi business the entrepreneur would need 100,000 Kenyan Shillings, about 800 Euros.
The Aggregation Tech would be built to document the direct application from the Entrepreneur, derived from the reach out achieved with targeted campaigns by the Digital Marketing Plan or through an NGO partner.
An example of NGO Partner that would comport with the proposed Mission Statement of the proposed Startup is ActionAid Kenya. This NGO is an international development organization that works to fight poverty and injustice. ActionAid Kenya, offers a variety of programs and services to single mothers, including training for home-based businesses, access to microfinance, and support groups.
Here are some of the challenges that ActionAid Kenya faces:
- Lack of funding: ActionAid Kenya is a non-profit organization and relies on donations to fund its work. The organization is often faced with a lack of funding, which limits its ability to reach more people and to implement its programs effectively.
- Corruption: Corruption is a major problem in Kenya and can undermine the work of organizations like ActionAid Kenya. The organization has to be vigilant in its efforts to prevent corruption and to ensure that its funds are used effectively.
- Violence: Violence is another major problem in Kenya and can make it difficult for ActionAid Kenya to reach people in need. The organization has to take steps to protect its staff and to ensure that its programs are not disrupted by violence.
Despite these challenges, ActionAid Kenya continues to work tirelessly to fight poverty and injustice in Kenya. The organization is a valuable resource for the people of Kenya and its work is making a difference in the lives of millions of people. ActionAid Kenya has helped over 100,000 women open businesses since 2000. This potential has helped women to start and grow their businesses, which has improved their incomes and their ability to support their families. The NGO could provide significant scalability.
ActionAid Kenya’s work has had a significant impact on the lives of women in Kenya. The organization has helped women to become more economically independent, and it has also helped to break down the barriers that prevent women from starting and running businesses. ActionAid Kenya’s work is an example of how organizations can make a difference in the lives of women and girls. The organization’s work is helping to empower women and to create a more just and equitable society. The market need is strong. The benefits are even stronger.
While we are examining proposed partnerships, the Digital Development Team is the obvious crucial part of the proposed Startup. As can be noted in this Article, the market need for debt relief is expansive and has strong global interrelationships. Entrepreneurs before us with just a fraction of the Tech that we have, stepped up and frankly saved the beneficiaries of their innovation from the devastating effects of cancerous debt.
In choosing the Digital Development and Marketing team, make sure it has the sales offering. Sales(Donations) are the lifeblood of a Startup and an established Enterprise. The sales offering will be crucial in building out each offering of the Not For Profit, the sales/buys of the consumer platform; the established corporate ESG investors and the innovative SME ESG donors to retire debt in the US and provide desperately needed funding for business opportunities in the informal economy; and the advocacy for debt relief and tax reform.
MGSN.net is proud to bring the New Business News for the New Generation. As convention slugs along, dynamic Tech and Not For Profits are soaring with solutions and MGSN will be here to cover the solutions.