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Rotary program requirements - microcredit program operated by microfinance institution
Category: Microcredit | By RAGM, 17-Mar-2013 | Viewed 2892  Comments 0
Handmade goods for sale at the market in Antigua, Guatemala. The city is a World Heritage site and the location of the 2010 Uniendo America Project Fair.

Guidelines for Rotary-funded Microcredit projects

Produced by the RAGM Global Grants Committee

Rotary clubs and Districts are encouraged to partner with established and reputable microfinance institutions (MFIs) to conduct microcredit projects.  The Rotary project sponsors will need to affirm that the Microfinance Institution is reputable and responsible and acts within all governing laws of the project country.  The MFI should provide its legal organizational credentials to Rotary.

All parties must affirm that Rotary grant funds will not be used as a donation to the Microfinance Institution.   Instead, under the supervision and active participation of the local Rotary Club, the MFI will administer the micro credit capital provided that:
  • it remains a clearly-identifiable Rotary project;
  • Rotary funds are tracked separately in the organization's accounting system;  and
  • In the event the project is terminated, the microcredit capital is returned to The Rotary Foundation (TRF).

All parties must affirm that the Rotary Foundation Global Grant will be initiated, controlled, and managed by the Rotary clubs and/or districts involved in the project.  The Global Grant, if approved, will be awarded to the sponsoring Rotary Clubs/Districts, and not to the MFI.

Microcredit projects funded by The Rotary Foundation should use a multidimensional approach to microfinance by incorporating training and educational activities. 

Rotary does not fund loan guarantee systems (i.e., funds may not be placed on deposit with an institution as collateral for loans the institution makes from other funds). 

For the project application to The Rotary Foundation, the MFI will need to provide its annual reports and most recent audited financial statement.  It will also need to provide information about its current program (collection rate, delinquency rate, age of delinquent loans, training provided, reports used for donors).

The Microfinance Institution and its involvement in the Rotary project may be subject to financial and operational review/audit by The Rotary Foundation.

The Rotary Foundation considers a microcredit grant complete when the total amount of budgeted loan capital has been lent out, repaid, and lent out a second time, and all other budgeted items have been expended.  However local Rotary club involvement may continue in the project after the TRF grant has been closed.

The MFI needs to agree to continue using Rotary Foundation funds as loan capital after the grant has been closed.  Funds may not be diverted to other uses.

What the MFI will need to do in managing a Rotary funded microcredit project

Receive and manage Rotary funds as the operating agency for the Rotary microcredit loan program

Form new borrowing groups to receive Rotary funds

Provide training to borrowers as provided in the grant application to The Rotary Foundation.

Disburse Rotary funds to borrowers for income-generating activities, and collect repayments of Rotary principal and interest.

Maintain clear and separate accounting of Rotary funds

Provide quarterly progress reports until the Global Grant project is closed.   Send the local Rotary club a report annually on project status after the Global Grant is closed.

Maintain records and statistics sufficient to complete Progress and Final Reports to The Rotary Foundation.

Agree to cooperate in any Rotary financial review of the project.

The program will be conducted in accord with a Revolving Loan Supplement Agreement prepared for the project, and a signed Memorandum of Understanding between the MFI and the Rotary sponsors.
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