Why a fund?
Microcredit for Mothers builds upon Yunus’s thoughts: everybody, even the poorest person, has a right to that first dollar needed to start making money. We believe micro economies are developed sustainably through economic activity (trade rather than donations). Women have been the driving force behind this for years. We believe microcredits are a first step towards stimulating economic activity. Moreover, microcredits also lead to economic independence, making it a sustainable method.
Our microcredits are average EUR 150 and are redistributed to benefit new female entrepreneurs immediately upon having been returned. The money circulates. To be able to provide these microcredits, we have established a fund in the Netherlands investing money accumulated through donations in female entrepreneurs.
The women are required to use the money from the fund for income generating activities: to buy a goat to start breeding, a sewing machine to make saris, a rice cooker to make and sell more meals etc. In some cases, a maximum of 10% of the revolving fund per partner is used for technical assistance. This way, studies are done to see, for instance, how to make honey of a better quality or how to produce clothes from batik fabric. In these cases, the money no longer circulates, but has become an investment to achieve a higher impact per microcredit for the women involved.
We do not charge any interest to our local partners, because we accumulate the money through donations from the Dutch market. However, the money does remain the property of Microcredit for Mothers to enable us to intervene promptly if necessary. Local partner organisations are allowed to charge the women a minor interest rate, which is agreed upon by us and comparable to the local market rate. The women are thus prepared for a future situation.
The fund is strictly monitored. Together with the local partners in Asia, the Finance Director and Program Managers monitor the fund’s progress and impact. We have meetings to discuss the current contract using modern-day telecommunication. Moreover, the KPIs are analysed every six months and, whenever necessary, appropriate action taken. At least once every year, we make physical visits and measure the fund’s impact using the Poverty Impact Assessment tool. This tool is recognised globally as a good standard to assess a project’s actual impact on the target group.
As Microcredit for Mothers focuses on the poorest of the poor, who are not accepted by other financial institutions, we run a larger risk than other funds. Our belief that these people have the same right to have access to credit and therefore accept this situation. The risk primarily consists of credits not being repaid. Our portfolio of partners is more liable to change and we run a higher currency risk as we are active in countries which others avoid. Despite all this, bad debt has proven to be hardly a risk at all. Our annual reports clearly describe the fund’s developments over the previous years.