Project Everest

Proposed Experiment

[Proposed Experiment]: SoCon Malawi - Tapping into the potential of Education program and Microfinancing model run by NAYO in Malawi (2/2) - July 2018

Riddhima | Jul 24, 2018 | in Knowledge Base

PEV as a potential investor

The following idea is the second part of the test experiment on the microfinancing model with NAYO. The first part which establishes the background knowledge on the model is available here. It is clear from all the research done by the Social Consulting Team in Malawi that a major influence on the microfinancing systems in Nancholi region of Malawi are the Village Banks providing individual loans (more prominent and outreaching in the villages) and NAYO that provides small group loans to its volunteers. NAYO loans are more of a goodwill system set up to assist its volunteers and strictly given to groups on the condition that they start a business with the help of the money.

The next question that we should ask ourselves is that if PEV wishes to invest some capital in a microloan system to obtain precise data points, what is the best way/organization to do it with. What I will be concentrating on this post is understanding the viability of potential investment in the microfinancing model of NAYO.


We aim to provide an investment to NAYO for them to further loan that money out to two types of village groups. This will lead to better access and involvement of PEV in the running of the whole model. PEV can provide the loan to NAYO for an interest rate of 10% and NAYO can further keep giving the loans out for 15% (what is their current rate of interest), providing NAYO with the extra incentive to work with PEV.

Proposed Method

We invest an amount of MK 100,000 (140 USD) to loan out to two groups of people. NAYO has 12 people in one group currently. Due to this being a test experiment and managing 12 people in a group can be less effective, we can have 2 groups of 5 people (MK 10,000 per person and MK 50,000 per group). One group will follow the group guarantor system and each member will provide guarantee for each other in the group. The other group can move away from the group guarantor system and have their family/close relatives providing guarantee for their loans. NAYO can further loan out the amount of MK 100,000 (MK 50,000 per group) to the two groups at an interest rate of 15%. They would get a return of MK 115,000 after the repayments. PEV would receive an amount of MK 110,000 after NAYO has paid back the principal amount with an interest of 10%.

This would mean that PEV would get a return of MK 10,000 for its investment and NAYO would make MK 5,000 for assisting and management of the loans.


The model can be set for the months of December, January and February in which the project operates in Malawi. In the first month, the team can test the validity of education program (as mentioned in the first post) and henceforth invest in a group of candidates interested in taking the loan and eager to make the repayments in the coming 3 months. This would help as we will have operating teams in country to closely monitor the group, record their business growth curve and also keep track of the default rates and the reasons for default. Advise can be provided regarding business during the 3 months of the repayments.

What we will learn from this experiment

The following are the insights that are expected from the test experiment:

-          Education program

Through this experiment we can form a correlation between the education program and the way in which people perform in their businesses. We need to validate if the education program actually improves the method used by the people to conduct their businesses and through this experiment we can closely monitor the direct impact of the program.

-          Default Rates

We can gauge the rate of people defaulting from the loan and the major causes behind it. We can think of mitigating strategies to ensure we have a stronger business model.

-          How business is conducted

This experiment would provide us the opportunity to work closely with the candidates and understand how they work and wish to conduct their business. We can understand the effectiveness of the businesses run by the candidates and identify gaps which need improvement (to further enhance the effectiveness of the education program).

-          Group guarantor vs Family guarantor

We currently believe that the group system of providing guarantors is more efficient as it ensures that people in the group take responsibility for each other and reduce the risk of default. However, family members providing guarantee for the candidates could be an optimum model if worked around carefully. This method can provide a clearer understanding of the family guarantor system and methods through which it can be implemented effectively.  


The following things are assumed for the experiment:

-          Since NAYO has been following only the group loan system, it is an assumption that NAYO will be keen on having an individual loan for 6 people.

-          NAYO is comfortable with the interest rate of 10% charged.

-          NAYO assists with the monitoring and controlling of the loans for the 3 months of test experiment run.

-          Customers are interested in running their business in groups/ individually and are keen to adapt to this experiment to expand their businesses.

-          Customers are interested in the education program and see the benefits of going through the training. 

Things we need to keep in mind

-          Relationship with NAYO

We should ensure that the experiment doesn’t strain the relationship that exists with NAYO and PEV makes as little disruption in the existing microfinancing system as possible. We must ensure that we work in collaboration with NAYO and consider their perspective at every stage.


If all the required learning is obtained through the test experiment, we can continue collaborating with NAYO on larger microfinancing loans and also with other organizations like NAYO in rural districts of Malawi. Providing loans in collaboration with these organization help provides us with the social backing to expand the business.






edited on 5th September 2018, 23:09 by Justin Hakeem

Rose Martin Jul 24, 2018

Hello Riddhima!

This is a super interesting idea and a really cool experiment!

Just to get my head around everything; could you clarify some things for me.
For the educational experiment, would you be doing this to observe whether or not to get into the educational space yourselves? Or to see whether or not partnering with an educator would be the way to go?

If it is the former, have you considered what types of things you would be looking at in terms of the content provided by the workshops at NAYO? I know from your previous post they seem to be involved in a couple of areas; but as we discussed it is important to think about how measurable these elements are for you guys in a three-month test time-space.

But I think it will be really interesting to get insights into how to better the education program by looking at how businesses are currently being run. Although this will be probably time consuming; it will provide you guys with lots of very interesting insights that you could then test on a mass scale!

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Seif Zakri Stacey Jul 25, 2018

Hi Riddhima!

This is great stuff. You have touched a lot on the groups that would like a loan. I was just wondering what specific data points you are trying to gather from this experiment by injecting such a large amount into the NAYO micro financing system? For example are you going to test whether they increase the size of the loans they issue or the frequency and keep the average loan size the same? I think you could also focus on the record keeping, delivery and tracking systems in place as well as this could shed some light on the gaps in knowledge you discussed.

I think all these could be related back to your education program as well. Keep up the good stuff ヽ(´▽`)/

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Andrew Vild Aug 13, 2018

Status label added: Proposed Experiment

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asmakhannnas 4 months ago

We aim to offer an asset to NAYO for them to advance loan that money out to two kinds of village groups. Tell us regarding This will lead to better admission and participation of PEV in the running of the complete model. PEV can give the loan to NAYO for an interest ratio of 10%.

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