Access to Capital
Capital is the engine that makes it possible for enterprises to grow, expand, and flourish. Connecting marketplace leaders to resources that are not readily accessible to them -- due to economic, social, or cultural barriers -- is a primary tenet of our work at Partners Worldwide. The Chinese proverb says “Give a man a fish, feed him for a day; teach a man to fish, feed him for a lifetime.” This is good wisdom in some instances, but often we encounter entrepreneurs who are brilliant and talented fishers, but simply lack access to the pond!
Providing access to affordable capital is one of the primary ways in which we build up permanent and resilient local capacity to catalyze entrepreneurs and jobs creators.
Partners Worldwide’s network consists of many LCIs that manage lending portfolios and many other LCIs who do not. Some manage millions of US dollars, while others manage only a few small loans. Cumulatively, our global network reports a total of $28 million managed in outstanding loans, fueling the dreams of thousands of entrepreneurs.
The massive flow of funds throughout the PW network is a key reason why our network supports over 120,000 jobs annually. But capital does not and should not stand alone. Our capital strategy is augmented by our business training and mentoring strategies; we always seek to diffuse capital in such a way that the dreams of entrepreneurs do not turn into nightmares.
A few best practices from the global network:
- Develop clear expectations and guidelines regarding repayment, accountability, reporting, metrics, and an ongoing process for future access to capital.
- Strong relationships and trust are the most essential element in facilitating access to capital. Keep in mind that introducing money always adds complexity to relationships.
- Keep clear boundaries between lending programs and “ministry.” Unless a pastor/church leader has skills and experience in financial lending, he should not take on the role of a banker (just as a banker does not usually deliver sermons).
- Local sustainability matters! Loan portfolios that are dependent upon funds from external sources do not generally survive more than five years, and rarely reach a point of thriving. Build your business plan based strongly on revenue interest obtained from local loans.
Just getting started?
- Capital is complex. There are many types of capital beyond just money. In this excellent article from Inc.com, Maureen Kline describes The 6 Kinds of Capital Your Business Can’t Survive Without
- This 4 minute video on Microfinance 101 from our friends at PovertyCure is a good introduction to how and why microfinance can be an effective way to end poverty.
- If your LCI is not currently managing loans, but would like to explore working in the lending arena, please contact your Partnership Manager to discuss ways to make access to affordable capital a reality for the clients you serve.
Want to go deeper?
- Fore questions about Partners Worldwide’s internal lending mechanisms, refer to:
- The PW Loan Fund Underwriting Guidelines
- A brief overview called “What is Partners Worldwide Entrepreneurs (PWE)?)
- Jim Yong Kim, President of the World Bank, writes: End Extreme Poverty? Let’s Start With Financial Access For All
- For those seeking to raise capital, we recommend the best-selling book Get Backed, by Evan Loomis and Evan Baehr.
- Nobel Peace Prize winner Muhammad Yunus’ classic book Banker to the Poor should be on the reading list of any professional working in the microfinance sector.
- For advanced study on the topic of access to capital, we recommend these esteemed organizations and the outstanding libraries of information available through their websites:
- MicroFinance Transparency: mftransparency.org
- Seep Network: seepnetwork.org
- The Consultative Group to Assist the Poor (CGAP): cgap.org
- CGAP’s Microfinance Gateway has thousands of papers, case studies, and toolkits on financial inclusion, all searchable by specific topic and country. Available at microfinancegateway.org/library
Please email firstname.lastname@example.org if you have any questions.