MCE does not make loans to MFIs in either India or Bangladesh—markets it considers saturated. Instead, it focuses on MFIs in rural areas that serve mostly women.
Since its inception in 2006, MCE has mobilized micro-loans totaling over $121 million. The organization claims that each $1 million guarantee, which lasts for a period of 18 months, has permitted MFIs to make roughly 2,000 loans averaging $500 to $600.
“I have mobilized millions of dollars in my time with the organization in the developing world at a minimal cost to myself,” says MCE's pro-bono CEO Gary Ford, who is himself a guarantor.
When there is a default by an MFI, guarantors split the cost on a pro-rata basis, and if they are individuals, any payment they make is treated as a donation and so is tax-deductible. There have been two defaults since 2006—one by an MFI in Azerbaijan for $348,000 where 46 guarantors each contributed $7,600 and the other by an MFI in Mexico late last year where 70 guarantors each contributed $4,540.
But MCE's model is not just about leveraging financial assets. It's also about leveraging micro-finance institutions as a conduit for social change. And micro-finance, Hall points out, is remarkably similar in feel as well as in form in all of the countries where it is practiced around the world.
“Groups of 10 or 20 village women gather in a room, and when women gather, they are like women everywhere,” she says. “But when they settle down to business, they are very serious. They record everything; it's quite rigorous. Of all the MFI's I've seen, it doesn't vary. It's almost ceremonial.”
These meetings, she says, are not just a time and place to collect payments, but also an opportunity to conduct financial literacy classes or deliver health information. So MCE seeks MFIs that engage in what she calls “credit-plus.”
Last year, MCE took its' “credit-plus” strategy to the next level by partnering with Vittana, a Seattle-based nonprofit launched in 2009 that provides post-secondary educational micro-loans in the developing world. For a pilot project, the two groups chose an MFI in the Philippines. The idea is that Vittana will provide training and technical assistance to teach the MFI how to make successful educational loans to clients and children of clients. To finance the training and loans, funds were raised backed by the MCE guarantee.
“We are a hell of a good credit risk,” Ford says. “The investors get 2%, which is not a bad return in this interest rate environment. And then we pass along that interest rate savings to the MFI.”
In this case, MCE was able to lend the capital at 5 percent (“well below the market rate,” Ford says), meaning the MFI can make educational loans at 12 percent—substantially below the 24 percent to 36 percent it charges on other micro-loans.