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How the Microcredit Process Works & What is an MFI?
Category: Microcredit | By BChinnery, 1-Feb-2014 | Viewed 2696  Comments 0
Hillside Trust Group & Project Team - Honduras
The idea behind an ongoing microcredit project, is that the funds are loaned out, often in amounts as small as $100 to $500, paid back with interest within a short time period (often 3 to 6 months), and loaned out again, creating the successful, sustainable cycle.

A portion of the loan interest is used to cover small loan losses and the costs of training and educational materials, with the remainder added into the growing loan pool.

Statistics show that most microcredit borrowers are women. In the absence of collateral, the borrowers cross-guarantee each other in what is known as a 'trust group', like the group of Honduran women shown here who we had the pleasure to meet during our trip there in January 2013.

Within this trust group for example, one lady sold clothing, another sold jewellry, another skin products and another sold specialty food products. They are supportive of each other in their community and learn as a group, building success and confidence along the way.

The 'trust group' participates in weekly training sessions arranged by the microfinance institution (MFI) that is handling the loan portfolio under the direction of the Host Rotary Club.

It's important for each Rotarian involved in the project to work hard to build strong relationships within the team, to generate good communications and ongoing discussions, and to gain a solid understanding of the commitments made in the Foundation Grant application.

It's also important to understand that solid teamwork makes all the difference in the success of your project. All parties, including the Rotary Clubs and the MFI principals and staff who must monitor and report on a regular basis, are responsible for the ongoing sustainability and success of the project.

Our team's diligence enabled us to succeed in securing the microcredit Global Grant we applied for and we are now well underway in dispersing funds to local Hondurans. The total project is $135,000.

Bev Chinnery
RC Airdrie, Canada

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