Business or Charity?
Whilst there are already a number of opportunities to donate or lend to microfinance institutions, Microfinance UK is different because it offers the opportunity to receive attractive rates of interest on the money you lend - up to 5% in most cases
Charity certainly has its place - but we believe that Microfinance can have a far, far greater impact once it has gained the same cultural acceptance.
The case for Commercial Lending vs Charity
Surely it’s better to give rather than demand interest payments from poor people?
Well actually - NO, not really...
Let’s consider the impact on a small, remote community of 44 families of you giving £50 to one of their number.
That gift may well give one individual the opportunity to establish a small business which helps that person to become self-sufficient and provide for their family.
So why is lending a better option?
Firstly, most microfinance borrowers are proud people - they don’t want charity, just a chance to earn an honest living for themselves.
True, they will initially have to work a little bit harder to make their first profit.
Importantly though, once they have repaid the loan, they will have established a positive credit history - they will be more likely to be able to borrow again to expand the business further and they will also be more likely to be able to borrow a larger amount of capital if they need it.
In other words there are real benefits to the borrower in being able to prove that they can and will pay their way.
In addition, once your loan has been repaid, you can choose to lend the money again!
- and if you have received interest on your loan, then you will have MORE money to lend the second time around.
Then lets us consider how much you might be prepared either to donate or lend.
How much do you feel you can afford to give away - £10, £50, £100?
- and how much do you have in your bank/building society account, which could be earning a better rate of interest?
Most people have a lot more in their savings accounts
£500? - perhaps £5,000 ? - or even £50,000 ?
So you can choose either to GIVE say £50, which will be used once
Or you can LEND say £1,000 and earn £100 every year.
Not only will this help 20 people this year but, once you have your £1,000 back you can, if you wish, lend it again the next year - and help another 20 people.
You can spend your £100 interest yourself, or you can choose to lend that as well - and help an extra 2 people - a total of 44 so far, helping the whole village after only 2 years.
Even if you were prepared to give £50 a year it would take 44 years before you could help everyone in the village.
By lending a larger amount up front you are helping a far greater number to escape from poverty NOW.
