Good Magazine, a US-based media platform that reports on social causes, recently argued that guarantees offered by wealthy individuals to microlenders could assist microfinance institutions (MFIs) in accessing funding during a difficult time for the industry, following claims of “loansharking” by some Indian microlenders.
As an example of the guarantee program, Good Magazine cites US-based MicroCredit Enterprises (MCE), through which a group of 51 wealthy individuals commit a minimum of USD 1 million each as a guarantee, thereby facilitating funding to MFIs in regions with high country-specific risks that are thus unappealing to many other investors. Ayesha Wagle, senior vice president in charge of lending at MCE said, “This type of capital is more patient than the for-profit capital, so we are able to go into areas that other MFIs aren’t” [1]. MCE attempts to ensure that it only supports lenders that are committed to alleviating poverty.
As of 2010, MCE manages total assets of USD 17 million.
By Medha Ravi, Research Associate
About MicroCredit Enterprises (MCE):
Established in 2005, MicroCredit Enterprises is a US-based nonprofit microfinance fund manager. MCE’s principal financial partners are guarantors. Wealthy individuals, who each commit a minimum of USD 1 million, provide financial backing to MCE in the form of a guarantee of a line of credit or note. MCE then borrows money against this guarantee in order to lend to microfinance institutions in developing countries. As of 2010, MCE manages total assets of USD 17 million.
Source and Resources:
[1] Good Business news article, “As Microfinance Struggles, Simple ‘Guarantees’ Bring Hope”, http://www.good.is/post/as-microfinance-struggles-simple-guarantees-keep-the-system-working/
MicroCapital.org story, April 19, 2011, “MICROCAPITAL BRIEF: Indian Banks Seek Personal Guarantees from Microfinance Institution (MFI) Executives As Condition of Debt Restructuring”, https://www.microcapital.org/microcapital-brief-indian-banks-seek-personal-guarantees-from-microfinance-institution-mfi-executives-as-condition-of-debt-restructuring/
MicroCapital.org story, March 28, 2011, “MICROCAPITAL BRIEF: Asian Development Bank (ADB) Refuses to Back Loans to Microfinance Institutions (MFIs) in Indian State of Andhra Pradesh, Reportedly Earmarks $75m of $250m Guarantee Fund for Standard Chartered”, https://www.microcapital.org/microcapital-brief-asian-development-bank-adb-refuses-to-back-loans-to-microfinance-institutions-mfis-in-indian-state-of-andhra-pradesh-reportedly-earmarks-75m-of-250m-guarantee-fund-for-stand/
MicroCapital Universe Profile: MicroCredit Enterprises (MCE), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=MicroCredit+Enterprises+%28MCE%29
Browse the MicroCapital Universe and add your entry to the wiki at: https://www.microcapital.org/microfinanceuniverse/
Similar Posts:
- MICROCAPITAL BRIEF: AFI Invests $5m in Microfinance Institution AFK of Kosovo from Invest in Visions (IIV)
- MICROCAPITAL BRIEF: Agents for Impact Disburses $8m from Invest in Visions (IIV) to Microfinance Institutions Digamber of India, Imon of Tajikistan
- MICROCAPITAL BRIEF: Global Partnerships, Goodwell, Oikocredit Invest $8.5m in Equity in Good Nature Agro to Boost Profits of Small Farms in Southern Africa
- MICROFINANCE EVENT: 5th Annual CLIIQ Nexus Latam; September 26-28, 2023; Cuenca, Ecuador
- MICROCAPITAL BRIEF: Microfinance Institution 4 de Octubre Borrows $1.5m from Aequitas Fund for Onlending in Ecuador
