Research has shown that MFI managers make much better decisions on the use of financial resources when they are working with borrowed capital rather than grants. Once an MFI has established a proven ability to handle debt, it can access more funds from the MicroCap or other international and local lenders. Given the scarcity of grant funding these days, MFIs ultimately have to make the transition to handling debt if they are to truly meet the demand for their micro loan products and achieve sufficient scale for their own long run sustainability.
The MicroCap is currently lending to MFIs in Sierra Leone, Liberia, Cambodia and Indonesia. The program in Sierra Leone is the biggest lender in the entire country in terms of people served, while the other programs continue to thrive as well. Overall the MicroCap is providing opportunities for more than 70,000 people worldwide.
In October 2008 the MicroCap issued LEAP (our Liberia MFI) its first loan. The MicroCap has now loaned to three MFIs, each for a principal value of $150,000, and as of December 2008 all three programs have made every one of their monthly repayments on time. The MicroCap completed due diligence work to issue a second loan for $225,000 to CREDIT (our Cambodia MFI) in early 2009.
We believe that microfinance is a superb way to lift individuals out of poverty, while at the same time stimulating local economies and businesses. Our method of loaning to groups, not individuals, leads to increased networking, partnerships and community-based decision making and problem solving. This inter-dependence and teamwork helps to reinforce sustainable economic development.