Interview: A New Model for Microfinance: An Interview with Jonathan Lewis
Jonathan Lewis is Chair of the Board of MicroCredit Enterprises (MCE), a microfinance organization that works on a slightly different model than most: instead of working with donations or grant money, MCE uses guarantors to provide the capital needed for the loans. They have a total of 41 guarantors, each of which on average can back up to about 5,000 individual loans; in total, the organization has about $20 million currently out in loans. Planet Green had the chance to talk with Jonathan Lewis more about their approach.
Planet Green: How is MCE different from most microfinance organizations?
Johnathan Lewis: We have 41 guarantors to guarantee our loans. We might provide an overseas partner, our Bolivian partner, for example, with a $1 million loan, and their job is to divide that into individual loans. So it's Bolivia for the Bolivians. And if they were to have an earthquake and we lost a million dollars, our guarantors are responsible for repaying that loan on a prorated basis. Someday we'll have a loss, but so far in four years we have not had a loss.
That's what makes us unique—most of our guarantors are very socially conscious.
We focus intensively on rural, impoverished women earning $1 a day. We have $20 million in loans out to over 150,000 women in 15 countries on 4 continents. In many of the areas where we have projects, the land has been extremely degraded, it's been overfarmed. They're out in the rural areas, and probably not on the electric grid.
PG: Why does MCE focus on women?
JL: Women have a higher repayment rate. There's a hundred reasons why, but in a nutshell, they have a higher repayment rate. The worldwide average is 97 percent—that's better than American credit card holders.
The other reason is social. It is best when microfinance is combined with health education, family planning and nutrition, and other social services. Educating women in a community is the fastest way to educate the whole community. We are trying to take advantage of the natural communication systems around the world—we don't exclude men, but we put the emphasis on women.
PG: You've written about "microloan sharks." What do you mean by that, and is it common?
JL: No, I wouldn't say it's common. It's a small minority, but it's indefensible.
The interest rates by American standards are high—but that's defensible, because the transaction costs are extremely high. What's not defensible is when the interest rates exceed the costs of growing the microfinance organization in a sustainable and healthy way.
PG: Is there any pattern to or similarities between the kinds of projects that MCE has funded around the world?
JL: Surprisingly, no. It's quite diverse—it's quite heartwarming. For example, a woman in Guatemala got a blender with her small loan, bought fruits and vegetables and started a smoothie factory in the market—like a rural Jamba Juice. She sells drinks for just pennies to kids after school in little Dixie cups.
And a woman who knits sweaters, she couldn't afford to buy yarn until she had a customer. So with her loan, she went out and bought yarn—this was a big deal for her because she could buy in bulk and get a better price. Then she could knit, sell sweaters and have bigger profit margin.
Some cook and sell food to other villagers. At the level of poverty that our group supports, the programs tend not to be the businesses that tourists see, because they're too far from tourist areas.