Five years ago, MicroCredit Enterprises was born. Simple in conception, difficult to birth, and now wonderfully successful at reducing poverty for some of the poorest people in the world.
Without a dime of donations, lifting a finger or leaving home, high net worth individuals, small family foundations and companies in the United States are at this very minute financing 112,000 small businesses, providing 560,000 people with basic food security. In countries like Indonesia, Peru, Mozambique, Tajikistan, Cambodia, and Ecuador -- 15 poor nations in all, located on four different continents -- local entrepreneurs are bootstrapping themselves to a better life.
"Some say nothing can be done about poverty... [MicroCredit Enterprises is] reducing poverty for thousands of the most impoverished women around the globe, ensuring food security for their children and sustainable futures for their families -- with a guarantee, not a check."
Here is how it works: A group of Americans voluntarily pool their good financial credit ratings to back small business loans for impoverished people, mostly women, in the developing world who then are able to feed their kids. Since the poor lack good credit and thus can't get loans to start businesses, these Americans have stepped up.
The incredible part, and it is truly amazing, is the poor women have a terrific repayment rate. They pay back 97 percent of the loans which beats commercial bank loans, housing mortgages, student college loans, just about every loan category that you can think of.
As result, the local programs which MicroCredit Enterprises finances are very solid. Indeed, a default to MicroCredit Enterprises almost never happens. When it does, the guarantors cover the loss on an equal "fair share" basis with a tax-deducible contribution.
In the words of MicroCredit Enterprises CEO Gary Ford, "Nothing down, no donation, no investment, simply signing a guarantee can make a world of difference."
MicroCredit Enterprises itself operates on a very modest expenditure budget -- just three percent of total loan portfolio -- and has been financially self-sustaining since its second year of operations. The trick? The organization employs a hybrid staffing model intermixing paid and unpaid professional executives, all of whom work in a virtual enterprise without the cost of rent or other unnecessary overhead.
MicroCredit Enterprises borrows the majority of funds which it lends overseas from First Republic Bank which provides financing at commercial rates. Because the entire social finance model is available without copyright protection, any poverty organization can download the legal documents, the structure and all the other supporting materials needed to understand the model and put it to work in the service of a economic opportunity.
Thanks to 46 Americans, who have taken "nothing" and made it into something, fewer less children and their moms are looking desperation in the face. As the MicroCredit Enterprises founder and board chair, please excuse my pride.
The capital finds ways to move in innovative forms, sometimes negative ( derivatives); sometimes positive ( micro loans).
For the past few years, my sons have chosen businesses from the kiva website to donate to at Christmas and birthdays. We've had a 100% repayment rate so far and each year, we put more money to work. We look at it as a donation so with each repayment, we can help more businesses on a very small scale.