Stanford competition benefits microfinance

posted November 19, 2007

by Jillian Liu of Campanile

Michela Fossati-Bellani

The Gumball Challenge gives teams gumballs as inspiration to raise money to help aid small businesses in developing countries.

The Gumball Challenge began at Stanford University the week of Nov. 5. The competition was held among thirty Stanford students and was made up of eight teams. Each team received $27 and 27 gumballs as both a starting point and inspiration to raise as much money as possible. The funds and profits raised by the teams will be loans through Kiva Microfunds to small businesses in the developing world.

This year, teams had plans ranging from penny wars to penny towers; from gumball jewelry to ping-pong tournaments; from bake sales to delivering In-n-Out to giving haircuts to raise the most money.

Gumball Capital, the organization that is hosting the Gumball Challenge, was inspired to host the competition by Stanford's Entrepreneurship Week Challenge last February, during which students had to raise money with Post-Its. Gumball Capital's founding group decided to raise awareness of microfinance and used their Post-Its as pledge notes to pitch their ideas to their fellow students. They raised over $3,300 and lent the collected money to 76 entrepreneurs in developing countries.

"It was through this competition [that] the idea of Gumball Capital was born," Stanford junior Bilal Mahmood said. "We decided to hold a similar competition [the Gumball Challenge] to inspire like-minded students to raise awareness and funds for microfinance."

The founders of the Gumball Challenge have a number of goals for the competition. One of the goals is simply to raise awareness and funds for microfinance by engaging participating student-competitors in a small-loan fiscal model.

"By loaning each competitor $27," Mahmood said, "[students] get a sense of the innovative ideas and possibilities available to the working poor in similar low-cost, low-time activities."

They also hope to engage students in entrepreneurship for social impact. According to Mahmood, there is rising support for innovation in the for-profit sector. On the other hand, the public non-profit sector is lacking enthusiasm.

"We hope to inspire students to think creatively while tackling social issues and addressing domestic or even international problems," Mahmood said. "At the same time, focusing on microfinance would offer students a great stepping-stone into the world of social-entrepreneurship and provide a bridge between domestic and world entrepreneurs. This would allow student-entrepreneurs to realize their ambitions while at the same time support the working poor around the world."

Gumball Capital also gives competitors a guidebook, which explains the key aspects, terms and figures of microfinance to peak the competitor's interest in the global issue.

This year the Gumball Challenge will be held hosted at five chapters across the nation at Stanford University, University of California Berkeley, Yale University, St. Olaf College and Sewanee University.

Gumball Capital expects to raise a total of $10,000. Stanford, St. Olaf and Berkeley will redirect their funds through Kiva, while Sewanee will use funds from Grameen Bank for individual entrepreneurs and Yale will send funds to local businesses around the United States.

Microfinance is the practice of making small loans to low-income entrepreneurs. Gumball Capital believes that each entrepreneur is interconnected with others. The business that is lifted up would be able to provide jobs, services, and goods to the rest. The entrepreneurs' increased capital would also allow them to provide better education and health services for their families.

The metaphor of gumballs for microfinance arose from the idea that inserting a small coin (loans) into a gumball machine would allow gumballs (small businesses) to move towards the exit tunnel (out of poverty) and at the same time bring the remaining gumballs a little closer to the tunnel.