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Microfinance FAQs
How are loans effective at fighting poverty?
Because the people we lend to know they will have to pay the loan back, they know that they must work hard to make their business succeed and they are careful with their cash. Handouts have been shown to be ineffective at fighting poverty because invariably they are only a short term fix. With micro loans, there is both a short term benefit and an investment in the future of their families as the mother’s business will support the children to eat well and go to school.
Why do you only lend to women?
Experience shows that because it is the women who feel a responsibility to provide for their children and are therefore keen to succeed in business. The average MicroLoan client has on average dependents (including her own children and any orphaned from HIV/AIDS) to provide for. The women use the money we lend to them more responsibly for this reason – if they can increase their income they feed their children better and send them to school.
How much is the typical loan?
€40
What is the typical group size that you loan to?
15 min – 22 max
What areas of business do typical clients venture into?
Buying and selling provisions, food and hardware. Running small tea shops and restaurants, and selling fish from the lake.
| | What is the duration of the loan cycle
The loan is usually paid back after 4 months, after which the client can apply for another loan to help the business grow.
Is there any interest payable on the loan?
Yes. We employ salaried staff in Africa and the interest goes to the cost of doing this. Importantly, this means that our African operations are self-sustaining and any donations to the charity can go directly to fund new loans.
Does Microloan have creditors or debts?
No. In that sense we run like a traditional charity because all the money is gifted to us.
Do you lend money to people who can’t afford to repay it?
Yes. The idea is that over the course of the loan cycle (4 months) the returns from the business that has been set up means that the loan is repaid in full 99% of cases. Microfinance is sometimes dubbed the ultimate sub-prime loan and this makes some people apprehensive. We have found it is effective at fighting poverty and assisting a country’s development.
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