According to Newton, ethanol is added to liquid soaps to serve as a germicide. Ethanol is considered to be insoluble when mixed into a solid soap.
Since water and oil are unable to mix, ethanol has the ability to dissolve on a partial level in water and oil. This process assists the reaction of fatty acid and sodium hydroxide to produce water, soap, salt and fatty acids. In essence, ethanol allows for the water and the oil to have better contact. The process of making soap has generally remained unchanged over the years, however, there are various stories as to how soap was originally created.