Kuleana Kids

We had a table at the Women's Veterans Conference to spread the word about Kuleana Micro-Lending. We handed out twenty-five Kuleana T-shirts, along with numerous brochures and applications, and business cards. We'll see what happens!

Meeting with Kina Mahi, Hawai'i Community Foundation

Kina Mahi from HCF/Island Innovation Fund and formerly of Hawai'i Community Loan Fund was very gracious to attend one of our Kuleana meetings (along with her three-month old daughter) to share her knowledge of micro-lending.

Kina shared with us how the Hawai'i Community Loan Fund existed for approximately ten years from the mid-to-late 90's to the early 2000's. They specialized in non-bankable loans to individuals and families to start businesses. They serviced about 30-45 active loans ranging from $15,000 to $100,000. (Although an article from the Advertiser puts the top range at $250,000. Either way, that's way higher than we propose.) Some of the enterprises that received loans were Ho'ala School and a restaurant on the North Shore that is still around (I forgot the name). The staff consisted of some very talented people who did loan servicing, accounting, and technical assistance that helped to customize the payback route for each loan.

They started off with $1.5 million in seed money from local banks and OHA. The interest rate charged was usually about 12-14% and was used to fund their revolving loan fund. Ultimately they ran out of operating capital to pay the salaries of the staff members and they were reluctant to charge much higher interest rates in order to be more financially sound.

One of the challenges they faced, as expected, was getting people to pay back their loans, one of the many arguments skeptics make about micro-lending in Hawai'i or any other first world economy. Some borrowers would say things like "you're a non-profit so we don;t need to pay you back." Kina said they also found a direct linear relationship between borrowers' credit scores and repayment/delinquency rates. One of their problems is that they didn't have a cut off for a minimum credit score for applicants. (We don't plan to either, but we're hoping that the referral process from our partner agencies will help us avoid some of those pitfalls.)

Other areas that she said we should be aware of or look to implement:
— a standardized program to train borrowers. (We can hopefully look to Maui Economic Opportunity or even Grameen America for workable models in that area.)
— collateralization. Rebecca Soon mentioned that this is very difficult with low-income borrowers but is still a good idea, especially if the money borrowed is used to buy inventory of some kind.
— technical assistance is important, but mentoring could possibly make up for a lack of quantifiable metrics
— board representation by the banks can be good or bad, depending on mission. She mentioned that we should look to the credit unions as well.
— reporting to credit agencies could also be a good idea
— engendering a professional environment is important to create a higher level of expectation from the borrower
— private donors tend to be better over the long term versus foundations or even banks (who expect their money to be paid back)
— Loan Loss Reserve— 20% of loans outstanding— crucial!

One idea that came out of the discussions was to create steps in the loan implementation process that reinforce the idea of success for the borrower. For example, finishing the basic financial education course should be celebrated with a formal occasion; making eleven consecutive payments could then allow the borrower to skip the twelfth. We could even time it around Christmas time so that if the borrower makes a minimum of six consecutive payments on time then s/he could skip the payment in December or January to offset holiday bills.

All in all it was a great conversation about what is possible, what to look out for, and how difficult micro-lending can be.

Meeting with Dana Tokioka and Keith Emerson from Tradewind Capital Group

Dana Tokioka and Keith Emerson were very gracious to take me to lunch to offer feedback on the Kuleana business plan.

They encouraged us to emphasize the mentoring component along with loan payback/accountability and life skills as features of our program that will distinguish us from other micro-lending ventures. It's also crucial to highlight the true impact of the money donors will contribute so that people don't feel they are throwing their funding at an abstract goal. How we measure success, both tangibly and intangibly, are important message to convey.


Scale was another area that they wondered about. It's not the first time we've heard that concern and certainly won;t be the last. It's a question we will confront for the foreseeable future: how will we be able to serve more and more people, especially if our program proves to be successful.

Other helpful questions:

Is $5,000 enough to really cover start-up costs of a viable business?
What are the legal implications or restrictions of what we're proposing?
How do you make winners out of the people who's businesses fail (and many, if not most, of them will)?

Kuleana minutes— June 13, 2011

Meeting called to order at 4:40pm
Present
Jessica Horiuchi
Rona Fukumoto
Lorene Yap
John Cheever
Kevin Kawahara
Kimberly Horan
Rachel James

Reviewed 1st draft MOU and Partnership Proposal from PGC (drafted by PGC, no edits by Kuleana).
Boilerplate agreement - Kuleana specifics to be reviewed, requested/added
** No action until we draft mentorship model to determine what it is we will commit to doing

Discussed need to start documenting engagement process, both front end (up to delivery of applicant/application) and through the life of a loan.
** Rona to deliver sample engagement doc/program design doc

Still need insurance - no quotes available yet for pricing. Fundraising required to buy insurance once quoted.
** Cheever to follow up on quote

Went around the table to affirm support for the PGC partnership in principle, connecting back to original vision and proposal to IIF. Unanimous support to pursue PGC partnership given their higher lending standards with intent to gain knowledge and understanding. Attempt to include less attractive candidates in the future via Kuleana credibility attached, or via a Kuleana fund (original plan).
** Check dependencies: bandwidth of part time board, commitment to PGC loans in progress

GE Tax/Exemption application question - does sub-contractor payment belong on exemption app? Jessica believes so. Cheever added to income list.
** Cheever to complete GE app
** Cheever to open bank account

Group from Shidler (2 grad students 1 prof) scheduled to come July 11
Students went to India to observe Grameen bank in action. Professor is from Bangladesh(?) and is familiar with Grameen and its impact.
** Cheever confirm switch to July 12 (tuesday) or reschedule meeting back to monday (July 11)

Given conflicting schedules (Morales) and availability (Gendrano), meeting will move to Tuesdays starting 6\28\2011

Meeting adjourned 6:00 pm

Kuleana minutes— May 31, 2011

Kuleana Project MEETING SUMMARY Micro-Lending/Support Team
Date Time Location
Tuesday May 31, 2011 4:40pm – 6:10pm Catholic Charities, 1822 Keeamoku St.
Leads Attendees
▪ Fran Gendrano (Absent)
▪ John Cheever ▪ Rona Fukumoto (Absent)
▪ Jessica Horiuchi
▪ Kevin Kawahara
▪ Rachael ▪ Michael Morales
▪ Ben Ancheta (Absent)
▪ Lorene Yap
▪ Rachel James ▪ Yvette Maskrey (Absent)
▪ Kim Horan (Absent)
▪ Char Dote (Absent)
TODAY’S AGENDA

1. Meeting was called to order at 4:40pm

2. Kuleana Discussion Summary:
a. Potential Partnerships
i. Rachael James is an HPU Grad student and will begin participating in the Kuleana meetings!
1. Jessica provided background that the Kuleana team is struggling with the process of how to support client based and what is the defined objective to align and balance appropriately.
a. Action - Next steps to define the process. (John C.)
ii. Pacific Gateway Center with Rebecca Soon
1. Reviewed proposal from previous meeting.
2. Decision: John C to send an email out to the group. Attendees all thought it would be good to move forward with the PGC partnership.
3. Team agreed that when we do go down this path that the Kuleana’s pursuit of funding once we get our 501c3 will become a lower priority so we can focus on delivering mentoring support and obtain experience on PGC’s loan process. Follow up with team.
a. Action: John C. to speak with Rebecca S. on next steps such as:
i. Need MOU.. (Rebecca S.and Jessica H.)
1. Review PGCs best practices/standards.
2. Utilize and review applications/forms and policies.
b. We need to continue to solidify the up-front mentoring program and choose a lead mentor or mentoring group structure. Discuss with Kim H. (John C.)
i. Lead Mentor support – Identify someone like Kim H. to assist on providing lead support.
OR
ii. Mentoring Group – Crowd sourcing to support client. Also could leverage grad student support. For example, HPU grad students could provide this support. Rachael to find out how much support can be provided from HPU Grad Students. (Rachael)
iii. This could potentially be an internship.
c. Other open questions to PGC (John C.):
i. Most likely need a Non-Disclosure Agreement created. Action: Ask Rebecca S. if they have something for us to sign. (John C. and Jessica H.)
ii. How much would we meet with Rebecca S.? She would be available to answer questions and will be on the loan review committee. Rebecca can help with providing support from a structure.
iii. What is the default rate for PGC? Did not have specific numbers from PGC.
iv. Clarify the type of oversight PGC will provide during the process. It is assumed that PGC will not change their model and will be part of the process to provide mentoring support.
v. How does PGC fund the loans? Not all at once. It is a phased lending successed based approach. Review the PGC lending schedule. (John C.)

b. Funding/Client Discussion
i. Decision: This will be placed on hold as we focus on the PGC partnership.


3. 501(c)3 Application Review
a. John C. called the IRS agent and confirmed they received the updates. Update: 501c3 has been granted!


4. Other/New Kuleana Business
a. Kuleana meetings may be rescheduled to Tuesdays based on conflicts. Discussion to occur.
b. May not focus on transitional shelter folks and pursue people that are in a more stable status.

5. Meeting adjourned at 6:10pm

UPCOMING MEETINGS/KEY EVENTS
• Next meeting is scheduled for Monday, June 13th, 4:30pm at Catholic Charities, 1822 Keeamoku Street, Room TBD.

Rebecca Soon, Solutions Pacific

On Monday we met with Rebecca Soon, CEO of Soultions Pacific. She is by far the most knowledgeable person I have encountered with respect to micro-lending in Hawaii. She used to be in charge of Economic Development programs at Pacific Gateway Center. She's also been contracted to provide Technical Assistance (TA) for the Office of Hawaiian Affairs Malama Loan Program. She mentioned that the OHA Loan program has very subjective criteria that look for five key attributes: FICO score, number of credit inquiries, amount of credit on each account, debt to equity ratio, and one other.

PGC, by contrast, will fund people who have no credit rating due to their refugee status. They have a community review board— usually two lenders and one business person— which assesses each loan application.

Ms. Soon highlighted that there is a direct correlation between the amount of technical assistance received by a borrower and their success in repaying the loan. The higher the risk of the client, the higher the amount of technical assistance needed.

She also told us about Individual Development Accounts that incentivize saving for low income borrowers. The money can be used for business, education, and home ownership, and all funds saved will be matched by participating banks.

A potential partnership for us could be the Maui Economic Opportunity Business Development Corporation. They make loans as low as $500 and as high as $10,000 for similar goals that we are proposing. They offer business planning classes, taught by the MEO BDC CEO Susie Thieman who was named Minority Small Business Champion of the Year for Maui County in 2006 by the U.S. Small Business Administration (SBA), and in 2009 the SBA named her the Financial Services Champion for Maui County. Quite a model for us to follow.

Kuleana minutes— April 19, 2011

Kuleana Project MEETING SUMMARY Micro-Lending/Support Team
Date Time Location
Monday April 19, 2011 4:45pm – 5:55pm Catholic Charities, 1822 Keeamoku St.
Leads Attendees
▪ Fran Gendrano
▪ John Cheever ▪ Rona Fukumoto
▪ Jessica Horiuchi
▪ Kevin Kawahara ▪ Michael Morales
▪ Ben Ancheta (Absent)
▪ Lorene Yap ▪ Yvette Maskrey (Absent)
▪ Kim Horan
▪ Char Dote (Absent)
TODAY’S AGENDA

1. Meeting was called to order at 4:45pm
2. Kuleana Options Discussion:
a. John C. Meeting Summary
i. John C. met with Ho’ala Greevy and advised on the process for the Malama loans.
ii. John C. noted from the April 4th meeting proposed creating 5 (1) hour training classes as opposed to a semester long KCC entrepreneurship class.
1. John C. met with Susan Dick, KCC professor who runs the Entrepreneurs class. Susan advised that since her class is a semester long she does see high dropout rate. Suggested to bring a “box” that contains all their receipts, etc. to help organize.
iii. Small business development consortium(?) (SBDC) provides students/clients more academic structure and may not be appropriate for prospective Kuleana clients.
iv. Jessica H. noted that the clients of SBDC may have some experience and are not new to the small business process. Also noted that SBDC contracts out 3rd party support for those who are new and may be at a high risk to fail.
1. Kevin K. asked what is the criteria to make an assessment/evaluation of those that fit into the high risk category.
2. Schedule a meeting to review with 3rd party contractor their processes. (Jessica H.)
v. John Rapoon?, Executive Director of the Key Project advised they could potentially be our fiscal sponsor for AUW. Ask Norm Baker if this is acceptable during April 26th meeting, (John C.)
1. Meeting is scheduled for April 26 from 9:30 to 11:30am with Norm Baker. (John C.)
vi. Kim H. noted that if there other funding entities that are similar then we should look at aligning with them, since we do not have a proven track record at this time.
b. Funding/Client Discussion
i. Aloha United Way
1. Application deadline is May 14th.
ii. Gift Foundation
1. Application deadline is May 1st.

3. By-laws Review
a. Noted that we have 11 Board members and we should only have 10. John C. to determine one person to be removed from the Board.

4. Kuleana Document Review
a. Reviewed the Kuleana worthy verses credit worthy comparison. John C. created a document that the team reviewed. Updates were noted in the meeting. John to repost after it is edited.
b. Discussed whether we should provide confidential information to the potential client. Team agreed that we should provide general feedback from the form.
i. Rona F. noted that we should create a check box to allow the reference provider the ability to share their comments with the potential client if they would like to do so.
ii. John noted that we should check box to opt out of sharing information. (John C.)
c. Team agreed to ask for at least 3 references: case worker, landlord and personal (not a family member).
d. Team agreed to change the name from reference to recommendation form.
e. Noted that we need to have a process that ensures we are approving the appropriate pool of applicants.
f. Clients will need to meet with an interview panel and provide a presentation. Create a less intimidating name for the process. (John C.)



5. 501(c)3 Application Review
a. No update.

6. Kuleana Networking/Outreach List
i. Goodwill
ii. Aloha United Way
iii. UH
iv. PCF Alumni
v. Young Presidents
vi. Gift Foundation
vii. Iolani Entrepreneur’s Club

b. Beta Applicant Form Review
i. No updates at this time.

7. Other/New Kuleana Business
a. Team agreed to use Bancoh for account. Set up account. (John C.)
b. Call Alison at PID and advise her that we did not get the Innovation Fund funding. (John C.)
c. Follow up with Tom on creating a logo for Kuleana and possibly dinner. (Jessica H.)
d. Initial fundraising goal is to get $5K. Kim H. noted that we should expected donations to be realized once we hit certain milestones. Board is committed to funding the initial goal. Reach out to PCF classmates. (John C.)

8. Meeting adjourned at 6:10pm

UPCOMING MEETINGS/KEY EVENTS
• Next meeting is scheduled for Monday, May 2nd, 4:30pm at Catholic Charities, 1822 Keeamoku Street, Room TBD.

Kuleana minutes— April 4, 2011

Kuleana Project MEETING SUMMARY Micro-Lending/Support Team
Date Time Location
Monday April 4, 2011 4:50pm – 5:55pm Catholic Charities, 1822 Keeamoku St.
Leads Attendees
▪ Fran Gendrano (Absent)
▪ John Cheever ▪ Rona Fukumoto
▪ Jessica Horiuchi (Absent)
▪ Kevin Kawahara ▪ Michael Morales
▪ Ben Ancheta
▪ Lorene Yap ▪ Yvette Maskrey (Absent)
▪ Kim Horan
▪ Char Dote (Absent)
TODAY’S AGENDA

1. Meeting was called to order at 4:50pm
2. Kuleana Options Discussion:
a. OHA Meeting with Quinton Flores (John C. and Kim H.)
i. $28M funds for their Malama loans.
1. Emergency loans up to $7500 and Malama loans are up to $75K.
ii. Tier 1 and 2 are high FICA scores at least 650 credit scores and probably why they have not been able to get many loans approved.
iii. Could we tie into OHA and get the borrower’s credit worthy for Malama loans.
iv. Kim H. described the Malama process and that it is still a traditional loan process. The Kuleana model is a bit different since it is promoting mentorship and guidance.
v. CFO of OHA is a major proponent of microlending. Kim H. advised that we should put something together and send to the CFO of OHA and schedule meeting. (John C.)
vi. OHA needs a vehicle to get the money disbursed.
vii. Explore issues and risks that OHA is having with obtaining qualified borrowers and understand how the Kuleana model can be aligned. (John C.)
b. Hawaii Angels
i. Do we want to review and look at a potential partnership with Hawaii Angels?
ii. Invite Chenoa Farnsworth to our next meeting. (John C.)
c. Bancoh Loans
i. Danny Kim has offered a person to service loans.
ii. Do we want to follow up with Danny Kim?
iii. Noted that we need to document the process further.
d. Funding/Client Discussion
i. We should wait to begin fund raising until after we obtain our 501c3 approval.
ii. Have the potential client come and meet with us to explain what the barriers to entry have been and what Kuleana should focus on. Client to come in on April 19th.
iii. Noted to obtain more stories.
iv. Kim H. asked on whether or not we have formalized documentation of our partnerships. Kevin K. noted that we expected our noted officials would be doing the work and we formalized a banking partnership for the loan process piece.
e. Aloha United Way
i. Need to have a 501c3 to apply for funds.
ii. We could apply through the breakthrough category, which is related to financial stability. Should find out if PID is applying in the breakthrough category and if not then it may not be a conflict of interests. Follow with PID. (John C. and Jessica H.)
1. Meeting is scheduled for April 26 from 9:30 to 11:30am with Norm Baker. (John C. and Kim H.)
2. Fill out application form. (John C. and Lorene Y.)
3. By-laws Review
a. None.

4. 501(c)3 Application Review
a. IRS has received application and we will be receiving a letter as to the determination of our application.
b. John C. noted that we could set up 5 (1) hour training classes as opposed to a 4 month KCC entrepreneurship class.



5. Other Kuleana Business
a. Other promotional business
b. Kuleana Networking/Outreach Listing
i. Goodwill
ii. Aloha United Way
iii. UH
iv. PCF Alumni
v. Young Presidents
vi. Gift Foundation
vii. Iolani Entrepreneur’s Club

c. Beta Applicant Form Review
i. No updates at this time.

6. New Kuleana Business
a. Need to sure up process for providing loans and then maintain and support the loans.
b. Ask Danny for best practice information on loans and servicing loans. (Ben A.)
c. Mike M. noted that David T. from Hawaii Business Magazine is interested in writing a story about Kuleana when we are ready.
d. John C. is scheduled to speak at the Exchange club in July.
e. Ben A. noted Tom may be a person we should engage to help with branding and logo work.
f. Kim H. noted that we may want to speak to Pia Chock from SBDC. Schedule meeting with Pia and John. (Kim H.)

7. Meeting adjourned at 5:55pm

UPCOMING MEETINGS/KEY EVENTS
• Next meeting is scheduled for Tuesday, April 19th, 4:30pm at Catholic Charities, 1822 Keeamoku Street, Room TBD.

Kuleana minutes— March 21, 2011

Kuleana Project MEETING SUMMARY Micro-Lending/Support Team
Date Time Location
Monday March 21, 2011 4:45pm – 5:30pm Catholic Charities, 1822 Keeamoku St.
Leads Attendees
▪ Fran Gendrano (Absent)
▪ John Cheever ▪ Rona Fukumoto
▪ Jessica Horiuchi (Absent)
▪ Kevin Kawahara (Absent)
▪ Michael Morales
▪ Ben Ancheta (Absent)
▪ Lorene Yap ▪ Yvette Maskrey (Absent)
▪ Kim Horan (Absent)
▪ Char Dote (Absent)
TODAY’S AGENDA

1. Meeting was called to order at 4:45pm
2. Kuleana Discussion.
a. Meryll Lynch and Small Business Development Center
i. Kim H. and John C. had a meeting with Glen Fukushima from Meryll Lynch and Pia from Small Business Development Center. They provide business mentoring resource. We would refer people to them since they are federally funded.
ii. Glen advised that he will want to contribute and Meryl Lynch will match once we become a 501(c)3.
iii. Glen advised that we should go to every bank and solicit them and they will also be on the funding committee.
iv. Go to the chamber of commerce and work
v. Have quick books set up on our website loans information. Timeline to set up. (Kevin K.)
vi. John C. noted that when your 501(c)3 application is pending we could solicit funds, however if we do not get the status then the funds would not be tax deductible.

b. Hawaii Angels
i. Kim Farnsworth noted there is an investor on the Big Island looking to do a community bank project. We could potentially piggy back on this for the micro-loan portion.
ii. Kim also noted that we would need a loan officer. Solicit Danny K. during Bancoh luncheon this week. (John C.)
iii. Economic Development, Enterprise Hono Shin and Economic Development Agency are other groups that worked on micro-loans.
c. John noted that we should continue to form partnerships with other folks who are looking at potentially getting into this type of loan process.
d. Could potentially reach out to Goodwill as a fiscal sponsor. (Rona F.)
e. A conference call has been scheduled on Wednesday at 2pm to review with Kina from IIF and review our application.
f. Rona F. brought up a proposal that would provide a loan to a group that helps provide work training for developmentally challenged folks.

3. By-laws Review
a. None.

4. 501(c)3 Application Review
a. John C. provided amendments to the articles of organization to DCCA per lawyers; however it was noted by DCCA that it is not needed.
b. Application to take at least 2 months for approval. We are targeting end of May to receive approval.
c. If we do not receive approval by the end of May, then we could potentially reach out to Senator Akaka’s office to help push approval. (John C.)

5. Island Innovation Fund Update
a. Application submitted.
b. No other updates.

6. Other Kuleana Business
a. Kuleana Networking/Outreach Listing
i. Goodwill (noted in today’s meeting)
ii. Aloha United Way
iii. UH
iv. PCF Alumni
v. Young Presidents
vi. Gift Foundation
vii. Iolani Entrepreneur’s Club


b. Beta Applicant Form Review
i. No updates at this time.

7. New Kuleana Business
a. Kim H. and John C. are meeting with Norm from Aloha United Way April 1st.
b. Noted that AUW could potentially be unrestricted funds since they are for the funding insurance.

8. Meeting adjourned at 5:30pm

UPCOMING MEETINGS/KEY EVENTS
• Next meeting is scheduled for April 4th, 4:30pm at Catholic Charities, 1822 Keeamoku Street, Room TBD.

Kuleana minutes— Feb. 22, 2011

Kuleana Project MEETING SUMMARY Micro-Lending/Support Team
Date Time Location
Tuesday, February 22, 2011 4:45pm – 6:05pm Catholic Charities, 1822 Keeamoku St.
Leads Attendees
▪ Fran Gendrano
▪ John Cheever ▪ Rona Fukumoto (Out)
▪ Jessica Horiuchi
▪ Kevin Kawahara ▪ Michael Morales
▪ Ben Ancheta (Out)
▪ Lorene Yap ▪ Yvette Maskrey (Out)
▪ Kim Horan
▪ Char Dote
TODAY’S AGENDA

1. Meeting was called to order at 4:45pm
2. Kuleana Discussion.
a. Meeting notes were not submitted on 2/7. Meeting was classified as a working session.
b. John C. welcomed and approved 2 new board members to the group: Kim Horan and Char Dote.
c. Hale Takazawa sent a very positive email regarding the initiative.
d. Paul Brewbaker has not responded to the concept plan information that was submitted by John C.
e. Honolulu Committee Fund forgave $792K in loans. Kuleana is learning from t
f. Good response from Young Presidents and Gift foundation. Request to be submitted to their Boards.
g. Women’s fund application is in progress. (John C.)
i. Need to clarify how the overhead is addressed based on allocation of funds for women? Review application. (John C.)
h. PID is the fiscal sponsor for IIF only. If we get funded from IIF then we need to provide the MOA.
i. Group agrees to keep from keep
j. Provide John with other money sources.
k. Kim H. advised that Aloha United Way may also be looking to accept applications. Follow to confirm. (Kim H.)
l. Revolusun may also be an option. Follow up. (John C)
m. Char D. advised that maybe we should ping the more of the PCF alumni.

3. By-laws Review
a. Upon dissolution of your organization where does the funding/assets go? Must be specified in by-law after reviewed by legal counsel. (Mike M.)
b. Articles of organization test should limit the purposes to one or more of the examples provided. Kuleana falls under example 5. Use charitable purposes and relief of the pure. Add to the by-laws. Obtain information from John C.. (Mike M.)
c. Send John C. updated By-laws. (Mike M.)

4. 501(c)3 Application Review
a. Noted that Jeff Pieper advised that we need to identify which schedule should be submitted and a narrative. Also need to note relief of the board. (John C.)
i. Schedule A – H are not applicable to Kuleana. Need to confirm which schedule we need to fill out. Check with Jeff Pieper and/or Trevor Asam. (John C. and Fran G.)
1. Identify where the majority of the funds?
2. Confirm schedule information. (John C.)
a. Per Jessica H. Kuleana most likely falls under the “other” category, does not appear that we need to fill out a schedule.
3. Upon dissolution of your organization where does the funding/assets go?
b. Review the by-laws and update for verbiage on elected officials. (Mike M.)
c. Noted that we have filed Articles of incorporation with the DCCA.
d. John C. reviewed the 501(C)3 application in detail and answered the questions. The following are some highlights of a few of the notable items during the question review.
i. Articles of organization are not developed. We should draft and include Board terms, number of members. Provide to John C. before next meeting. (Fran G.)
ii. Noted we are a public charity with eventual broad public support.
iii. Describe the fund raising activities to obtain donations/funds: Email, personal, foundation, grant, website, government grant. (
iv. We will accept donations from outside of the Hawaii.
v. Noted that Rona is not a Board Member due to potential conflict of interests with Catholic Charities.
vi. Kevin provided an update for an application for insurance liabilities and the E&O is $1500 and D&O is $7500.
vii. We do not have close connections at this time.
viii. Clarification and need a request for definitive rulings.
ix. Noted that, Gross receipts are the total amounts the organization received from all sources during its annual accounting period, without subtracting any costs or expenses.

5. Island Innovation Fund Update
a. Application submitted.
b. No other updates.

6. Other Kuleana Business
a. Kuleana Networking/Outreach Listing
i. Women’s Fund
ii. Aloha United Way
iii. UH
iv. PCF Alumni
v. Young Presidents
vi. Gift Foundation
vii. Iolani Entrepreneur’s Club


b. Beta Applicant Form Review
i. No updates at this time.

7. New Kuleana Business
a. No Updates at this time.

8. Meeting Updates
a. Meeting notes were not submitted on 2/7. Meeting was classified as a working session.

9. Meeting adjourned at 6:05pm

UPCOMING MEETINGS/KEY EVENTS
• Next meeting is scheduled for March 7th, 4:30pm at Catholic Charities, 1822 Keeamoku Street, Room TBD.

Kuleana minutes— Jan. 24, 2011

Kuleana Project MEETING SUMMARY Micro-Lending/Support Team
Date Time Location
Tuesday, January 24, 2011 4:45pm – 6:15pm Catholic Charities, 1822 Keeamoku St.
Leads Attendees
▪ Fran Gendrano (Out)
▪ John Cheever ▪ Rona Fukumoto
▪ Jessica Horiuchi
▪ Kevin Kawahara ▪ Michael Morales
▪ Ben Ancheta
▪ Lorene Yap Yvette Maskrey
TODAY’S AGENDA

1) Meeting was called to order at 4:45pm
2) Agenda
1. By-laws Review
1. People
a. Confirmed appointed Officers as noted in the By-laws:
i. President – John Cheever
ii. Vice President – Fran Gendrano
iii. Secretary – Michael Morales
iv. Treasurer – Ben Ancheta - confirmed with Ben during today’s meeting.
b. Noted by that attendees listed on this document are all Board members.
c. By-laws were updated and agreed upon by the Board.
d. Send out By-laws to Board members. (Mike M.)
e. Post By-laws to Google Share site. (Kevin K.)
2. Innovation Fund Update
1. Selected to provide a full proposal to Island Innovation Fund. Send information out to the Board. (John C.)
a. Post information to Google Share site. (Kevin K.)
2. Arrange a follow up meeting with PID and send out agenda with clear requests/requirements to obtain the following information due to the submission deadline. (John C. and Jessica H.)
a. Description of the organization
b. Audited financial information
3. Actions for Kuleana Team:
a. Budget
i. Create a budget narrative (John C. and Ben A.)
ii. Create a full Project Budget (Kuleana Board Members were identified to begin work) Kevin K. to post on the Google Share site all documentation.
1. Build out the budget. What will it cost us to run the Kuleana for the year. Begin list. (Kevin K.)
a. Once items are listed begin to categorize items as part of the Operating or Capital budget. (Ben A.)
2. Board agreed to review and further document the full micro-lending process to assist in the budget narrative and line item documentation.
iii. John C. agreed to work at Catholic Charities to begin most of the critical work.
iv. Call Bancoh to set up an account for Kuleana. (Rona F.)
v. Review Credit check and line impacts for prospective clients. (Yvette M.)
b. Process/Systems
i. Build out process requirements and processes for the following (Fran Gendrano):
1. Intake Request – PID and Catholic Charities example started:
a. Call in to PID and Catholic Charities
b. All calls should then be directed to John Cheever
2. Decision making process to approve loans
3. Support process of approved loans.
4. Sustainability of this foundation.
3. Other Kuleana Business
a. Kuleana Networking/Outreach Meetings
i. Update from the President’s meeting with the House Rep Jessica Wooley. (John C.)
1. Could potentially set up another meeting with Rep Jessica and others.
2. Jessica H. advised to first focus on metrics before moving forward with other potential partnerships.
3. Contact the student and professor at Shidler for assistance. (John C.)
b. 501(c)3 Update
i. Meeting has been scheduled with Nate Nelson on 1/25. (John C.)
c. Beta Applicant Form Review
a. Check if the applicants are native and after confirmation we may have 1 or 2 people fill out application fill out the form and review to review on 1/24. (Rona F.)
i. Reviewed application form for completeness and accuracy.
ii. Application shows definite value and will be good measurement to baseline other applications.
iii. Request is $7K for 36 months is a $221 per month at 8.5% loan.
iv. Per Lorene Y. repayment period should be shorter and amount of the loan should be smaller.
a. Future – Ben A. noted we could establish a venture capitalist type of process where if a loan applicant hits certain milestones they would be eligible for additional funds.
v. Ben A. noted that the application is a perfect application for the type of loan we are looking to lend out.
4. New Kuleana Business
a. Board agreed to submit grants for other non-profits such as OHA, US Vets, Woman’s Funds after 501(c)3 is approved and in parallel to Island Innovation Funding. (John C.).

3) Meeting Updates
1. Previous meeting’s Minutes were accepted into record.
2. Additional meeting is scheduled for 1/31 at 4:30pm due to the critical timeliness of completing the Island Innovation Fund proposal. Send out meeting request. (Mike M.)
3. Mike M. will be late to the meeting and requests the Treasurer or VP to take notes in his place.
4) Meeting adjourned at 6:15pm

UPCOMING MEETINGS/KEY EVENTS
• Next meeting is scheduled for January 31st, 4:30pm at Catholic Charities, 1822 Keeamoku Street, Room 2.

Kuleana minutes— Jan. 11, 2011

Kuleana Project MEETING SUMMARY Micro-Lending/Support Team
Date Time Location
Tuesday, November 29, 2010 4:15pm – 6:15pm Catholic Charities, 1822 Keeamoku St.
Leads Attendees
▪ Fran Gendrano
▪ John Cheever ▪ Rona Fukumoto
▪ Jessica Horiuchi
▪ Kevin Kawahara ▪ Michael Morales
▪ Ben Ancheta
▪ Lorene Yap
TODAY’S AGENDA

1) Key Decisions/Updates
1. PID meeting. Jessica H. and John C. met with Allison and agreed to be our Fiscal Sponsor for the Hawaii Innovation Fund application. John C. provided a copy of the fund concept application to PID for review.
2. Assumptions – we are currently not asking for any resource support from P.I.D..
2) HCF Application review
1. Review and confirm HCF fiscal sponsor requirements. (Jessica H.)
2. Validate if P.I.D. has a processing fee for providing fiscal sponsorship. (Jessica H.)
3. Verbal agreement is in place and a Memorandum of Agreement (MOA) is contingent upon HCF approval process.
4. Per Kevin K. a 501c3 is not required for HCF submission.
5. Reviewed and updated HCF application. Provide the updated document to the group. (John C.)
6. Lorene spoke with Grameen America in NY. They advised that their initial concept request is 1 sheet and no business plan. Loan review is also only 1 sheet. There are groups of 5 that meet once a week and vet proposal requests. If approved the entire group has to sign off.

3) Next Steps
1. Submit HCF application. (John H.)
4) Action Items
1. Provide loan application template for review next meeting. (Fran G.)
2. Distribute to the team a preliminary project schedule/task list after P.I.D. update. (Mike M.)
3. Review and confirm HCF fiscal sponsor requirements. (Jessica H.)
4. Validate if P.I.D. has a processing fee for providing fiscal sponsorship. (Jessica H.)
5. Reviewed and updated HCF application. Provide the updated document to the group. (John C.)
UPCOMING MEETINGS/KEY EVENTS
• Next meeting is scheduled for December 13th, 4:30pm at Catholic Charities, 1822 Keeamoku Street.

Kuleana minutes— Nov. 29, 2010

Kuleana Project MEETING SUMMARY Micro-Lending/Support Team
Date Time Location
Tuesday, November 29, 2010 4:15pm – 6:15pm Catholic Charities, 1822 Keeamoku St.
Leads Attendees
▪ Fran Gendrano
▪ John Cheever ▪ Rona Fukumoto
▪ Jessica Horiuchi
▪ Kevin Kawahara ▪ Michael Morales
▪ Ben Ancheta
▪ Lorene Yap
TODAY’S AGENDA

1) Key Decisions/Updates
1. PID meeting. Jessica H. and John C. met with Allison and agreed to be our Fiscal Sponsor for the Hawaii Innovation Fund application. John C. provided a copy of the fund concept application to PID for review.
2. Assumptions – we are currently not asking for any resource support from P.I.D..
2) HCF Application review
1. Review and confirm HCF fiscal sponsor requirements. (Jessica H.)
2. Validate if P.I.D. has a processing fee for providing fiscal sponsorship. (Jessica H.)
3. Verbal agreement is in place and a Memorandum of Agreement (MOA) is contingent upon HCF approval process.
4. Per Kevin K. a 501c3 is not required for HCF submission.
5. Reviewed and updated HCF application. Provide the updated document to the group. (John C.)
6. Lorene spoke with Grameen America in NY. They advised that their initial concept request is 1 sheet and no business plan. Loan review is also only 1 sheet. There are groups of 5 that meet once a week and vet proposal requests. If approved the entire group has to sign off.

3) Next Steps
1. Submit HCF application. (John H.)
4) Action Items
1. Provide loan application template for review next meeting. (Fran G.)
2. Distribute to the team a preliminary project schedule/task list after P.I.D. update. (Mike M.)
3. Review and confirm HCF fiscal sponsor requirements. (Jessica H.)
4. Validate if P.I.D. has a processing fee for providing fiscal sponsorship. (Jessica H.)
5. Reviewed and updated HCF application. Provide the updated document to the group. (John C.)
UPCOMING MEETINGS/KEY EVENTS
• Next meeting is scheduled for December 13th, 4:30pm at Catholic Charities, 1822 Keeamoku Street.

Kuleana minutes— Nov. 16, 2010

Kuleana Project MEETING SUMMARY Micro-Lending/Support Team
Date Time Location
Tuesday, November 16, 2010 4:00pm – 5:30pm Catholic Charities, 1822 Keeamoku St.
Leads Attendees
▪ Fran Gendrano
▪ John Cheever ▪ Rona Fukumoto
▪ Jessica Horiuchi
▪ Kevin Kawahara ▪ Michael Morales
▪ Ben Ancheta
▪ Lorene Yap
TODAY’S AGENDA

1) Key Decisions/Updates
1. Jessica and Cheever provided a summary of the recent meeting with Partners in Development.
2. Jessica noted it will take 6 to 9 months to obtain 501c3 status.
3. Kuleana Concept
o Fran presented the Kuleana Concept. See the attached PDF.
o Noted that in order to be a 501c3, donors will not be able to cash out.
o Ben noted that we should charge interest to provide a clear real life understanding of the valuation of repayment.
o Kevin noted that we should review the loan template next meeting.
o Rona stated that we could approach Catholic Charities as a potential fiscal sponsor.
4. SWOT analysis – PID
o Strengths
• Existing infrastructure
• Fiscal means for pilot program
• Operational Infrastructure
• Credibility & Legitimacy
• Access to potential borrower
• Scalability
• Wealth of knowledge to manage and grow
• Network
o Weakness
• Potential culture conflicts
• Less opportunity for individual
• Brand tied to PID
o Opportunities
• Allowed to focus on mission of lending
• Fill gaps in PID organization
• Connect PID w/ other organizations?
• PID - risk taker
• Large Federal Grants
o Threats
• Live in PID culture
• No individual identity
• PID has a polarizing effect
• May not be amenable to future spin-out of Kuleana
• Potential Limits on client selection
• Internal competition for grants


5. SWOT analysis – Kuleana
o Strengths
• Control & Autonomy
• Personal connections
• Potential funding sources
o Weakness
• Need to build infrastructure
• 18 - 24 Month timeframe
• Less likely to get funding
o Opportunities
• Personal & professional growth
o Threats
• Higher risk of failure
• SWOT conclusion
a) The team agreed that Kuleana is the favorable approach, however if PID may be a viable alternative if it can provide support and allow this team to have the necessary latitude to make its own choices.
2) Action Items
1. Plan A - Follow up conversation with PID and communicate our position. Report back to the team. (J. Horiuchi, J. Cheever)
2. Plan B - pursue Catholic Charities as a fiscal sponsor. (R. Fukumoto)
3. Plan C - pursue Pacific Gateway as a fiscal sponsor. (F. Gendrano)
4. Update Business case proposal and incorporate concept. (J. Cheever)
5. Find other fiscal sponsors. (Team)
6. Provide loan application template for review next meeting. (F. Gendrano)
7. Distribute to the team a preliminary project schedule/task list after Plan A response. (M. Morales)
UPCOMING MEETINGS/KEY EVENTS
• Next meeting is scheduled for November 29th, 4:30pm at Catholic Charities, 1822 Keeamoku Street.

Kuleana meetings

Met with Susan Dik, professor of Business at Kapi’olani Community College. She teaches the Basic Entrepreneurship course, so I sought her advice on the level of preparation needed for our borrowers at Kuleana Micro-Lending. She initially said that a certificate could work or even creating a booklet of handouts that helps applicants articulate their business idea, identify their customers, estimate revenue/cash flow (basically Peter Drucker’s principles). Essentially, though, she said the class she teaches could be a bit daunting to an incipient entrepreneur and that the drop out rate is very high even among her current students.

The bottom line we determined is that the business preparation should be simple and doable versus technical or overly academic. She thought it would make sense to give each borrower a box or a folder in which they would keep all receipts and everything else having to do with their business (ideas, brochures from other/related business, etc.). Then the mentor or business counselor would help the borrower organize everything at their regular meetings. They could also use Quick Books to enter all the information that related to revenue, costs, and cash flow. Bottom line, she maintained, is that the business support needs to be organic so that it can adjust according to the unique circumstances for each borrower.

A final idea that came out of our conversation is the idea of instead of just conducting workshops at various partner agencies we should turn it into a competition. That way we can generate some “sizzle” to get the people in the partner agencies excited and could possibly get more media coverage, thus generating additional interest from the public and potential donors. The judges could be the Loan Review Committee and various members of the community.

I also had a chance to speak with John Reppun from the Kaneohe Ecumenical Youth (KEY) Project. He expressed interest in micro-lending for some of the people they work with. Some of the projects he envisioned are a farmer’s market hosted at the KEY facilities that also had movies for kids and celebrations of various kinds. His grander vision for the area is to use the natural resources and the educational resources to create an alternative education for non-school hours. He wants people to “see the community as a campus.”

From this meeting Rep. Wooley and I explored the idea of convening a meeting to pull together various parties from the Kahalu’u/Kaneohe area to discuss:
— school garden program viability
— farmer’s market
— micro-lending
— land use (county and state)

Some of the people she proposed inviting are:
— a representative from the Lieutenant Governor’s office
— Kokua Foundation (Lydi Morgan)
— Dept. of Education (Glenna Owens, Director of School Food Services Branch)
— Feed the Hunger (Patti Chang, Denise Albano)
— Ulupono Initiative
— Punahou School (Eliza Lathrop)
— Reppun family
— Ho family
— Hakipu’u Learning Center
— Waiahole/Waikane Community Association

meeting with Quentin Flores, Bill Henry, and Howard Hodel

Met with Bill Henry, Howard Hodel (both formerly of Bank of Hawaii) and Quentin Flores from the Office of Hawaiian Affairs. Howard and Quentin had worked together to create the Malama Loan program that is a part of the Native Hawaiian Revolving Loan Fund. (This program is not to be confused with OHA's Consumer Micro-Loan Program that focuses mostly on emergency funds up to $7,500 at 5% interest up to 60 months for a death in the family, health crisis, home or auto repairs, or career development courses.) The Malama Loans can be up to $75,000 and they are to be used for education, business expansion, or home improvement.
OHA utilizes First Hawaiian Bank's application, underwriting, and servicing systems to manage the loans (although if you go their main site and plug in Malama Loan, or micro loan, or micro-lending into the Search function nothing comes up). The Native Hawaiian Revolving Fund apparently has close to $28 million in it, half from OHA and half from the federal government. According to to Howard and Quentin, the federal involvement has significantly undermined the efficiency of the program due to onerous guidelines— appointed committee to approve the loan, a committee to recommend processing, automated formula for underwriting— which cause a lot of duplication between OHA and FHB. FHB provides these service basically as a community service since the size of the loans do not make them very profitable for them.
One of the key challenges they mentioned is getting enough qualified borrowers for the money they have available. According to Quentin Flores they have approximately 140 outstanding loans totally about $700,000. The main reason they can't do more is that their underwriting is dependent on the applicants FICO score, which needs to be above 650 for a Tier One loan, and above 600 for a Tier Two loan. That right there will eliminate the vast majority of applicants and is also where an opportunity exists for something like what we're proposing at Kuleana Micro-Lending can step in. We will be utilizing a non-quantifiable underwriting process based on what has been called "character investing." Essentially that means that we will rely on the testimony of a case worker from one of our partner agencies to say that a particular candidate is worth the risk of receiving a loan.
This case makes me think of Dr. Daniel Kim's explanation of "stock and flows". The amount of micro-loans out there sounds sort of impressive but if people were made aware of the amount of waiting just sitting around waiting to be loaned they might react differently. We need to get more of that stock into the flow of credit being extended to low-income borrowers.
That leads to the next challenge— supporting the borrower in such a way that they can and do succeed. Quentin said many of their loans go delinquent around the holidays but then they get back on track by March. Bill and Howard also mentioned that mentoring/business training are crucial for the borrowers success, but there remains the question of whether a borrower will do the work in order to get such a small amount of money. The key is to establish a training program similar to the one utilized by Grameen Bank in their North American programs— 5 1-hour sessions. If those are weekly then hopefully the borrowers can take the classes while their application is being considered by the Application Review Committee and the Loan Review Committee. If the borrower drops out of the class then we probably didn't want to loan them the money in the first place.
Some possible partnerships we can explore for the training are: Bank of Hawaii, Pacific Gateway, SCORE, the Hogan Entrepreneurs program, the Akamai Foundation, and Empower Hawaii (several of which have micro-lending/enterprise program which we can learn from).
One of our goals will have to be helping our very incipient borrowers graduate up to more traditional, and therefore larger scale, lenders. That's the the the Credit Builders Alliance can help us and them as well.

Small Business Development Center

Kim Horan set up a meeting with Pia Chock from the Small Business Development Center about possibly partnering with them for business consulting/mentoring of for our loan recipients. The SBDC is federally funded resource that allows clients to meet with their mentors as often as they need and it would provide its services for free.

Also joining us was Len Fukushima from Merrill Lynch. Len had a nbunch of really interesting ideas to consider:
— go to banks and credit unions around town, ask for $5,000 to fund a micro-loan, and in return they get to place one person on the Loan Selection Committee to ensure accountability
— go to the respective Chambers of Commerce (Filipino, Chinese, Japanese) and ask them for free membership for the loan recipients
— centralized bookkeeping system: standardize the process by having a link from the central website to Quickbooks or other accounting software; each borrower would have her/his own password and account; the SBDC mentor could help with inputting the data (sales, receipts, etc.)

Ultimately, as Len and Pia pointed out, there needs to be accountability built into this program. How does the mentoring work after the loan is given out? How do encourage borrowers to work together with their peer groups to enable success? And when things go wrong, we need to be able to ask "Who is to Blame?" And then we need to know how to fix the problems and educate the people so that we can continue moving forward.

Hawaii Angels, Women's Fund

Met with Chenoa Farnsworth from Farnsworth Consulting, Hawaii Angels, and the Women's Fund.

She cited mentoring as the key component to making sure a micro-lending project could work. For reference she recommended Jump Start, "a nationally recognized non-profit transforming the economic impact of entrepreneurial ventures and the ecosystems supporting their growth." They key to having effective mentors is to 1) pay them a reasonable wage to ensure that they are 2) reasonably, if not highly, qualified. This makes me second guess my desire to partner with undergraduates from the Shidler School of Business. If we go that route then we should probably focus exclusively on graduate students.

Other resources we could pursue are:
— Hawaii Alliance of Non-Profit Organizations
— Economic Development Administration, Gail Fujita
— American Savings Bank, Kaulana Park
— Oahu Economic Development Board/Enterprise Honolulu, Pono Shim

Finally, one area we need extra help and expertise in is servicing of loans. To accomplish that we will probably need to get a loan officer from a local bank either to join our board or provide us with consultation on how best to achieve that goal.

Island Innovation Fund

Jessica Horiuchi, Kevin Kawahara, and I had a good conference call conversation with Kina Mahi to get feedback about our IIF proposal.

On the positive side, they liked our connections to community partners and the level of in-kind contributions. She mentioned that to their knowledge no one else out in the community seems to be making loans at the $5,000 level so they found that attractive.

On the other end, they questioned the impact and scalability of our proposal (only 3-5 loans for an $85,000 grant) and our ability to sustain the effort over the long term. One factor that worked against us is that we don't have any cash at the moment or any other funding source to provide stability for our operations. They were also hoping to see a greater understanding of the loan processing and default procedures for the loans and a stronger connection to existing local micro-lending organizations.

Kuleana Micro-Lending formal proposal for Island Innovation Fund

Kuleana Micro-Lending

Executive Summary

By providing micro-loans up to $5,000 and creating an on-line network of “community resources” to support incipient entrepreneurs not served by traditional lending institutions, Kuleana Micro-Lending seeks to enhance income-generating opportunities and self-esteem for Hawai'i residents living in poverty.

The social networking component will be a dynamic entity that will communicate activity, engage individuals, and educate/transform the community. By sharing the stories of our clients, members of the community will be attracted to participate in the Kuleana experience.
The Kuleana experience begins with a unique application process that immediately introduces clients to behaviors and positive feedback aimed to reinforce their self perception – “I can do this.”

Micro-loans of up to $5,000 will be offered to clients not served by traditional lending institutions and who Kuleana has determined can make positive strides with this opportunity.
We will leverage clients' stories with an on-line platform, connecting to existing social networks to reach a broad and diverse audience, and create a ”service network” made up of members of the community to help clients start, grow, and maintain their businesses.

With social service funding on the decline, it is imperative to provide an alternatively funded and community-based means to assist those living in adverse financial circumstances. Access to credit is a fundamental tool that empowers individuals to improve their lives. Taking out a loan to start or expand a business is one way people can become less dependent on social services and become more productive, contributing citizens. Small business creation is a recognized pathway to self-sufficiency. People are able to utilize their skills, talents, and aptitudes when they start their own businesses and can fully realize the fruits of their work. The direct relationship between working hard and increasing income, the flexibility of creating one's own schedule, and the inherent enjoyment of working at a job they love sets the stage for becoming self-sufficient. Undertaking a small business can be done in place of or in conjunction with other traditional strategies for exiting poverty (i.e. work, education); therefore it is a powerful tool for Hawaii’s social sector which has seen limited effectiveness lately due to high unemployment, education costs, and child care constraints that affect a person’s ability to break out of poverty through traditional means.

The Kuleana Micro-Lending program intends to help coordinate and leverage as many existing services as possible. Our community partners— Partners in Development, Catholic Charities— will help identify potential clients and coach them through the initial application.

To implement the Kuleana experience we will form application and loan review committees which will focus on a set of non-traditional metrics. Loan terms will be customized for each particular client. We intend to keep the loan interest rate at 7.5% with a loan term of 24-36 months and a grace period of up to three months.
Existing service organizations with various specialties will be tapped for additional support where needed.

A website will be created to host client profiles and connect to existing social networks for the purpose of broadcasting activity and attracting community involvement. This net presence allows for participation by a broad community of people that does not have the constraints normally placed on individual service organizations and their limited staffs and budgets. This plan is essentially modeled on the teamwork concept of the ahupuaʻa —the responsibility of a community's well-being is dependent on all the members of the community supporting each other, regardless of what each individual's contribution may be.

As a client fulfills their obligations through the Kuleana experience, continued storytelling on the website and through the social networks will allow for the community to stay engaged, continue to attract new resources, mentor/coach the client, and provide ongoing inspiration.

Description of Organization/Mission

Kuleana Micro-Lending seeks to create empowered citizens who are increasingly productive and contributing members of society. To achieve this goal we will provide small loans up to $5,000 for incipient businesses that will generate income for borrowers generally living in poverty and who, therefore, are not served by traditional lending institutions. In addition, borrowers will receive mentoring and/or business support services from a network of resources connected by a central web presence. Borrowers will be referred to Kuleana by social service organizations with whom we will establish Memoranda of Agreements to delineate respective and reciprocal duties and responsibilities. Borrowers must have a household income below 150% of the poverty level, defined as $38,565 for a family of four, according to the Federal Register (Vol. 76, No. 13, January 20, 2011.)

Micro-lending is only one instrument for dealing with homelessness and/or poverty. This program emphasizes borrowers taking control of their lives and improving self image as much as raising their earnings potential. The program will also foster a better understanding of poverty by the general public and highlight how citizens can support the broader community.

We are establishing a new organization based on previous efforts at micro-lending both in Hawai’i and around the world. The first year is set up as a pilot program— a time to refine and adapt our approach and procedures as needed for maximum success based on our own experiences with the first year clients.

We expect to select three to five clients out of a pool of candidates indentified by our community partners for the pilot. We also expect the social networking component to be in place, in a simplified form, within 30 days of funding.

Significance of Innovation/Program

Our initial innovation is establishing a local micro-lending organization that understands the unique needs and cultures in Hawaiʻi. Operational capital will be acquired through on-going grant applications, modest interest rate charges on loans, and micro-donations from the service network. To identify potential borrowers we will work closely with our "community partners", (Partners in Development— our fiscal sponsor, and Catholic Charities) and small business support programs. These entities understand that income generation is key to stabilization for all individuals and families, especially for populations that have barriers to traditional employment.

The second innovation we offer is the loan application process itself. The Kuleana experience is structured as a multi-tiered process comprised of partner organizations, a “service network” of individual donors and contributors of services (lawyers, accountants, business people/students, graphic designers, etc.), and a four phase application process that connects the parts together.
Once referred by a partner agency, the first step will be to have the prospective borrower fill out the first part of the loan application (Phase I) to describe their basic business idea as well as to provide personal information and employment history. This will enable us to assess the soundness of their idea as well as gauge their basic level of interest and commitment. All applicants that complete this phase will continue on to Phase II.
• In Phase II, the Application Review Committee will require references and a basic business plan prepared with the help of an assigned mentor, if necessary. Advisors and mentors will come from the “service network” (see below). A profile will be established on the Kuleana website so that borrowers’ stories can be shared, and they can connect with the service network.
• Upon completing Phase II, the Loan Review Committee will determine the loan terms (Phase III) and the type of support the client will need in the short term, intermediate term, and long term to see their business through to success. Depending on the strength of the application we will reserve the option to divide the loan into sequential segments. We anticipate the time from initial referral to actual funding can be as short as six to eight weeks.
• If the borrower is successful in paying back the initial loan and fulfilling all of the obligations (attending meetings, communication with mentor, attendance at basic business classes, savings account etc.) they can then apply for another loan (Phase IV).
• If at any time a client fails to meet the terms of a Phase, they will be referred to an appropriate service organization, or the service network, for assistance in meeting the objectives of a Phase.

The third and perhaps most significant innovation of Kuleana Micro-Lending is the enabling of the community to participate in our 'service network'. Client profiles hosted on the Kuleana website will highlight stories, successes, and current needs that can be met by members of local and online communities.

By taking advantage of already available mechanisms to 'signal' existing online social networks (Facebook, Twitter, tumblr, etc.), a single person’s participation can serve as the catalyst to make their network of peers aware of opportunities and actions that can be taken to support other people in their communities. In these ways, our clients will also have access to a wider pool of support than is currently possible in traditional social service agencies and for a period that extends well beyond that of the loan itself.

The culture of Hawai’i is highly networked and viral by nature. No matter the issue, someone knows someone else who can help, or has a friend with experience in this specific situation. Network participants can experience personal growth of their own by understanding the barriers to income generation, and they can participate directly or indirectly by offering their knowledge and expertise, or in the backfunding of loans (i.e. donating money to the site in order for more loans to be offered).

By tapping into traditional media outlets’ — radio, TV, newspapers, magazines— Kuleana will also be presented to interested individual citizens who view micro-lending, individual empowerment and broad community support as an extension of their values.

Testing Demand for Innovation/Program

It is estimated that global demand for micro-credit is upwards of $300 billion, of which less than 10% has been met. Organizations such as Grameen and Kiva have been pioneers in this field and have changed many people’s impressions of whether people living in poverty can handle money responsibly and then use it to significantly improve their standard of living. As documented in a recent Newsweek article, Grameen has started to provide individual loans of up to $1,500 to groups of women in Brooklyn with widespread success. In Kiva’s case, they encourage participation of donors by utilizing a central website to collect loan contributions via storytelling. Since October 2005 they have provided, through their field partners in fifty-eight countries, close to $200 million in loans to people living in adverse financial circumstances with a repayment rate of 98.93%.

According to the Honolulu Star Advertiser, more than 156,000 people lived below the poverty line in Hawaii in 2009. This is equivalent to about 40,000 families (assuming a family of four)— ample demand if even a small percentage were interested and/or qualified. While available to all individuals and families living in poverty, the Kuleana Micro-Lending program is expected to be particularly helpful to two important sub-groups— the working poor and those who have fallen into poverty from the middle class.

By improving a person’s or a family’s standard of living and subsequently their sense of self-sufficiency, we hope that it will also improve their self-image. When these stories of success are shared with the broader public, we also foresee the general perception of people living in poverty improving as well, as has been the case with both Kiva and Grameen.

Given the rapid growth and success of these two global organizations, as well as the increased number of inquiries to local programs provided by the Office of Hawaiian Affairs and Pacific Gateway, we feel the demand for this type of service in Hawai’i is significant, achievable, and in need of other players in the field. We would like to form symbiotic relationships with these organizations as we collectively address the goal of providing micro-loans to our respective and overlapping constituencies throughout O’ahu.

Growing the Impact of Innovation/Program

We will initially be working with our primary community partners— Partners in Development and Catholic Charities— but we hope to be able to take on clients from other social service organizations (such as KEY Project, US VETS, Ulu Ke Kukui, Honolulu Community Action Program, etc.) as long as they are willing to sign on to our Memorandum of Agreement regarding their responsibilities in this process as well.
We are in discussions with the Finance Club at the University of Hawai’i Shidler School of Business as well as with the Hogan Entrepreneurial Program to provide advisors and mentors to our organization and/or volunteers in counseling the entrepreneurs through the business plan development and implementation stages. We plan to contact the UH Pacific Asian Center for Entrepreneurship for these same purposes.

There are also many opportunities to create partnerships with public and private schools to encourage their students and teachers to get involved at various stages of the application and implementation process, whether it be assisting the mentor and borrower in developing the business plan, fundraising, telling the story of a borrower to prospective donors through video or writing, or helping to promote the business through various other social media. Hopefully this process will also connect the schools to each other in ways they may not have done so before.

To grow the social network, we will continue to do off-line promotions through traditional media; public relations and marketing; presentations at civic groups, schools, universities, and churches; and conversations with interested individuals. On-line promotions will rely on leveraging existing site members’ social networks.

Responsible Parties Comprising Program

While on sabbatical through August 20011, John Cheever will serve as the full time Executive Director of Kuleana Micro-Lending.

Other members of Kuleana Micro-Lending include:
• Benjamin Ancheta, Chief Operating Officer, ProService Hawaii;
• Rona Fukumoto, Director of Intake, Catholic Charities Hawaii;
• Fran Gendrano, Principal Broker, KFG Properties;
• Kimberly Horan, Human Resources Consultant, ALTRES;
• Jessica Horiuchi, Executive Director, Alaka’ina Foundation;
• Kevin Kawahara, Software Development Manager, Punahou School;
• Yvette Maskrey, District Manager, Honeywell International;
• Michael Morales, Executive Director of the Center of Excellence and Enterprise Program Management Office, Hawaiian Telcom;
• Lorene Yap, former manager of Country Economics Division for Bangladesh, Pakistan, and Sri Lanka, World Bank.

Our board of directors, with their diverse professional experiences and background, are capable of playing all key roles during this initial phase, (business development, legal, technical, social service expertise), and will continue to provide the main oversight and quality control to ensure Kuleana’s success.

All board members will serve on a strictly volunteer basis.

A program administrator will be hired prior to August 2011 to support the daily operations
Additional paid staff will be hired as required by the growth and success of the program.

Our fiscal sponsor, Partners in Development, will be available for consultation, and brings over 13 years of local non-profit and social service experience.

Sustainability of Innovation/Program

To maintain a capital base so that we can continue to make loans in a timely manner to worthy borrowers, we will continue to apply for grants from a wide variety of foundations and organizations and solicit donations from local and international civic organizations. Members of our service network will be able to backfund loans (i.e. donating money to the site for the purpose of making more loans), inspired by the success and progress of existing clients.
In one year we would like to have given out three to five loans in support of business plans that have been successfully implemented, and that none of the loans are delinquent, if not paid back entirely.

For the social networking component, we would like to see a steadily increasing number of members registering and taking action each month; and once registered, exhibiting repeated and more active participation. We also want to see a wide variety of members from different professions, of all ages, and both genders. Gauging the daily traffic to the site will determine whether this site has actually become a dynamic and viable asset to the community.

After one year, we expect to be able to constructively evaluate our pilot in order to have a sound working model for the future. By surveying the recipients of loans and community support we hope to be able to witness an improved self-image. The amount of traffic to the site and number of active and passive participants in the program will enable us to infer the changing perceptions of the broader public.

Appendix

A hypothetical Kuleana client/engagement:

The Honolulu Advertiser ran an article last year (“Can it do that?” 4/11/10) which profiled the Chong family. The husband had worked as a mechanic for his entire working career, including the previous five years with his most recent employer, when he was laid off. Unable to find new employment, and despite his wife’s salary working at a 7-11, they could not pay their rent and were subsequently evicted by their landlord. Faced with homelessness they had no choice but to move in with extended family.

The Chongs went to Catholic Charities for help finding more permanent housing and counseling on how to manage their finances more efficiently. These traditional services helped to stabilize their living arrangements and finances, but Mr. Chong’s employment status did not change. Had Kuleana Micro-Lending been a resource for Catholic Charities at that time, another option would have been available to help improve their situation.

With his skill set and experience, Mr. Chong has the makings to become a successful mobile mechanic. However, lacking current employment and credit, Mr. Chong would have been unable to secure a loan from a traditional bank. Having never run a business, he would not have known where to start. Catholic Charities could have referred this case to Kuleana Micro-Lending and helped him complete Phase I of the loan application process.

Kuleana’s application review committee would do some basic research to investigate the viability of this idea: mobile mechanics, according to Craigslist, charge approximately $50/hour, well above the living wage for Hawai’i ($35.95 for two adults and two children). An Internet search reveals that the start-up costs of a set of mechanic's tools (approx. $350 for a 302 pc. set of Craftsman mechanics tools), a multimeter ($250), a diagnostic scanner ($500), a vehicle to get to the jobs ($2,000-$3,500), a cellular phone ($100) so customers can call, and a flat-rate manual ($60) for determining job charges bring total start-up costs, including a car to between $3,260-$4,760; without the car = $1,260. A micro-loan of under $5000 could have meaningful impact to this family’s life.

Additional support from our service network, made up of potential customers, other mechanics, entrepreneurs, and community members interested in seeing a family succeed would be available to provide important advice on business practices, various insights, word of mouth marketing, and simply encouragement.