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Seed Capital Basics: the creation of a committee to promote income generation and job creation at the community level. This committee manages a small revolving loan fund that is accompanied by training and basic oversight, and helps poor people to use productive economic activity to provide for themselves. The revolving fund is provided by donors with NO overhead cost, as funds are channeled through the remittance system.

The Seed Capital program resides in churches or non-profit associations, and the “Seed Capital” committee is a church committee. The purpose is to help people through promoting productive economic activity, and in the cases so far this has been targeted at church members, but could become evangelistic. In Colombia and other developing countries many people, out of desperation, have opted to take loan funding from the “daily payment” loan sharks that charge as much as 10% per month, and collect using physical violence, so the Seed Capital project is also a way to free people from a virtual slavery.

Step #1 – Before you start, please download the “Kingdom Principles” document found here.

Step #2 – The next step is to recruit the credit committee. This is organized for churches, but some organizations can substitute for a church in this context. The church (your organization)  identifies at least 3 people, in addition to the pastor (i.e. yourself), who will volunteer to provide input and oversight. They cannot be loan candidates, and must accept that the record for lending will be public, as the peer-pressure from the church community will be the basic incentive for prompt payback of loans, and also adequate supervision of who gets the loan funds. The general profile of a committee member is a person in good standing with the church, with business experience, who does not need a loan themselves. Seed Capital reports must be copied to this group, or if they do not have emails, documentation such aa meeting minutes must be presented that demonstrates that they have participated in client recommendations.  Please share the “Kingdom Principles” with them from the beginning.

Step #3 – The basic training module on “The Sustainable Cycle” (copy attached) is offered first to prospective clients, especially to explain the development aspect of the lending program, and the desire to capitalize only viable economic enterprises. An application form (copy attached) is also presented as part of this training, where businesses must define their margin and their prospective investment plan. Every client must first take the training and submit an application form.

It is important to note that only viable business projects are accepted, as this is a loan program, NOT a donation program. What happens with the training and the application process is that many economic activities are shown to be NOT viable, i.e. they do not make a sufficient return to qualify for a loan. These should NOT be funded, as the resulting inability to pay will be very unhappy for the committee and the church.

The training module and the application form are shared with the committee so that they can revise the materials as they wish. The important outcome is that the training be provided, and the applications collected.

Step #4 – The committee reviews the application forms, and assigns funds for the first cycle, which is $1000, presenting a recommendation for disbursement. Disbursement and payment records are public, used to determine the plan for lending, and also sent to donors. To obtain a first disbursement, a display must be presented that shows the client name, describes the business, loan amount, and payback plan. This same report is updated as clients pay, and used for subsequent requests for Seed Capital. The committee must also create a payment document, usually involving a promissory note of some type, to promote a clear understanding that the loan must be paid back. The money is sent to be used for the Seed Capital, which is donated, but for loans from a revolving loan fund managed by the church committee. After the funds for the first cycle have been received and disbursed, pictures of all clients receiving loans which match the initial loan disbursement report, which also include the timetable for payback.

Step #5 – For subsequent funding, these phases are repeated. For a second cycle of $1000, documentation must be presented documenting loan payback of existing clients for at least two months, and plans for recycling of loan payback, applied prior to new money sent to the group. The same is true for additional cycles. It may be necessary to provide additional loans to successful small businesses, or in other cases the existing amount of capital may be sufficient, without requesting additional cycles. Documentation on the existing “cycles” of donations to the Seed Capital fund must therefore be presented before new funds are requested, specifically to demonstrate that clients are paying the loans, and that the loan capital is being collected and recycled to others.

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Application Form (MS Word format)

Basic Training Materials  (MS Word format)