While conventional banks do offer services useful to the consumer such as savings, loans, and lines of credit, they often see these services as opportunities to generate profit. Banks often do their work as a business, even though it is true that more banks are now moving into microfinance to serve social purpose. ECLOF, for its part, always keeps the social perspective firmly in mind in its work. Our main concern is to help jump-start initiatives that our clients have through financial assistance. The people we help often have a great business idea that could radically improve their lives and those of their families but need that first influx of money that gets the ball rolling.
How does ECLOF differ from a conventional bank?
What about interest rates? Are there any?
All money comes with a cost. This translates into the amount of interest that is charged. ECLOF programs have to borrow in order to serve their clients. What is important for us is that we do not overcharge. So interest will always be part of our work because the cost of funds is always something that we have to deal with. At ECLOF, however, we make every effort to ensure that interest is kept to a minimum so that we do not burden our clients further.
The good thing is that our clients are mostly not looking for free money. They want to be treated how they would be treated in a bank. Our responsibility is to ensure that we do not exploit them.
Finally, we work in very challenging areas where we have to deal with serious challenges like geographic isolation, less than ideal conditions for farming and the like, or political and social instability. Getting help to people in these difficult situations definitely costs more for us. All this explains why interest rates can sometimes escalate when working with microfinance organizations.
How do you locate and choose your clients?
We've worked with the churches since our origins, in line with our ecumenical identity. In the most isolated, rural areas you won't often come across a school or a health facility, but you can be sure to find a church.
Churches play a central role in the life of the community. While the spiritual well-being of the individual is an important concern, the growth and strengthening of the social units from individual to family to community at large is just as significant for the church.
Our church network that allows us to reach even more isolated areas is what makes ECLOF’s strength. That we’ve made such good use of this network and thus successfully brought help to many is an aspect of our work I’m especially proud of.
We also rely strongly on community and opinion leaders to identify the people and communities that need us most. It’s very important to work closely with the leaders in the community, who otherwise could delay or even stop our action if they haven't been consulted.
We scout the general areas where we operate to find where there is real need. We must also find out if an organization is already providing similar services, so as to be as useful as possible.
Finally, it is absolutely essential to have the local knowledge on the ground provided by our loan officers.
Describe the evaluation process before a loan is approved.
The evaluation process is a system whereby the loan officer assesses whether the client falls within the category that makes them qualified to borrow. In our case, since we are a microfinance institution, this means belonging to the low income bracket or the poor. After this is satisfied, the next objective is to find out what is the purpose of the loan. The purpose must be one that will improve the income generating capacity of our clients.
In bigger NECs, there are also loan programs that allow valued clients to have consumer loans, emergency loans, and other type of loans and services to meet the temporary cash flow problem of the client so that the cash flow of the business is not affected.
The next step is the most important part, the loan officer must assess, through probing questions, credit investigation, and character, whether or not the client has capacity to pay the loan. Only if the answer the all these is in the affirmative should a loan officer recommend approval of the loan.
What happens if a client defaults on a loan?
Client default is the worse thing that can happen to a loan officer. But this is a reality that has to be accepted. There are rules and procedures to be followed when a client defaults.
The first information a loan officer needs to know is the reason for the default. Only by finding out will the next course of action be determined. For example, if the reason for the default is sickness, then it is possible that the loan will be restructured to give some time to be able to engage in business again.
If the reason is loss of business due to no fault of the borrower, the loan may be written-off, assuming there is enough provisioning.
But if the reason for the default is the refusal to pay or through the fault of the client, different steps are available to enforce payment, these may include having the other group members pay for the loan. Or if this is an individual loan, foreclose a collateral, if any. These remedies are available in the loan product and operations manual.
You’re an ecumenical microfinance organization, how does this set you apart from other such organizations?
We are the practical arm of the ecumenical community that focuses on financing the economic development of people who have been economically and socially marginalized. As such, we enjoy a close and special relationship with the member churches of the ecumenical movement, while I must emphasize that our services are not restricted to the ecumenical community.
One of the great missions of the churches in the movement has been to reach out and minister to these communities in dire need. Over the years, the churches have come to know intimately the needs of communities they serve. Because we too are an ecumenical organization, we can draw upon that fund of local knowledge to connect with the extremely poor and offer them the financial assistance that is our specialty.
Moreover, the churches have often been the first to establish links between the most isolated communities and the rest of the world. By working closely with them, we can also be among the first to provide economic aid to those who need it most. In brief, concrete terms, being ecumenical means that we have a network that allows us to reach far beyond other microfinance organizations.
It’s also crucial to keep in mind here is that being ecumenical makes a huge difference for us, morally or ethically speaking. Our main concern is to help those in need, not to exploit need in the name of profit. As such, charity and pragmatism are the guiding lights of our work, and indeed we are always mindful of the ethical angle to everything that we do, rooted in our commitment to the values at the heart of our ecumenical identity.
Do you give loans only? Or do you provide training, etc. that might help your clients use their loan funds more effectively?
In most instances, we do provide client training. These trainings are informal. The objective of the training is to teach them values to allow them to succeed. Values such as hard work, living within their means, and savings are taught to them.
Apart from these values formation, other training involve skills enhancement. This may include simple bookkeeping, budgeting, and other simple business skills. In NECs that are engaged in agricultural microfinancing, more specialized training are given to the farmer clients, i.e. farm management, crop rotation, organic farming.
As an ecumenical microfinance organization, do you only fund Christians?
No, absolutely not.Our ecumenical identity informs greatly our ethics and the way we run our operations, but in no way does it influence the way we choose our clients.
In the countries where we operate, besides Christians we notably give loans to Muslims, Hindus, and Buddhists.
As stated in the mission of our colleagues from ACT Alliance: we work with and for people of all faiths and none.