Building Sustainable Programs

TCP Global builds locally sustainable programs

A key difference between TCP Global and other micro-finance institutions is that TCP Global builds sustainable loan programs to serve communities in perpetuity. These programs do not need outside resources to pay overhead and over a three to four year period the loan pool is gradually increased to a level that the grassroots partner identifies as optimum.

Start Small

TCP starts slowly, providing sufficient funds for 5-10 loans, allowing the partner the opportunity to learn valuable lessons when there is time to make corrections. We encourage them to start with the people who have the most experience and the best chance of success so they can serve as examples for others. If the first borrowers fail and do not repay the loans, this sets a bad precedent and the program may become blocked from expansion.

Successful Programs Usually Max Out at 30-45 Open Loans

Experience shows that follow-up with the borrowers is important to program success. Since micro-loans are in addition to the primary mission of the local organization, TCP Global finds most partners are able to successfully manage no more than 35-45 open loans. The decision on how large to grow, like all program management decisions, are at the discretion of the local organization.  

TCP Global Funds Stay In the Local Community

Repayments on loans remain in the local community rather than returning to the funding entity. All repayments go into a revolving loan pool, but a portion of those repayments can be withdrawn at some point to fund community development projects. Once the revolving loan pool is sufficient to meet the community’s microloan needs, no additional outside funds are needed. The grassroots organization then uses the loan interest to cover program costs and TCP Global moves on to assist other communities.

Partner Earnings

After funds received from TCP Global have been invested twice with a repayment rate of at least 95%, the grassroots partner has the right to withdraw up to 50% of the amount received from TCP Global. This 50% plus all of the interest earnings can be used to buy equipment, pay salaries, or fund a community project. Partners have used funds for electronic equipment, to purchase land, complete construction projects, repair facilities, stockpile grain for food security, establish a women’s sewing cooperative, purchase rehabilitative equipment for handicapped programs, complete a reforestation project to guard against landslides.

Steady Revenue Stream for Loan Administrators

Initially, when the learning curve is steepest, partners earn funds rapidly by accepting more funds to expand the program. Once the program reaches capacity, the partner has typically learned to manage the program efficiently and to make sound lending decisions. At that point there is sufficient capital so that the interest earnings on that capital provide a reliable revenue stream. In Colombia and Guatemala, on average, partners have earned over $2000 each year and over $4000 in Peru where the loan amounts are higher.

Interest no Higher Than Bank Interest

Partners are not allowed to charge more than local banks would charge for similar loans as TCP Global loans are meant to be an affordable alternative to the daily lenders, who have been known to charge in excess of 10% per month. In essence, TCP Global loans divert a small portion of the revenue stream from the daily lenders to organizations that will charge reasonable interest and use the interest earnings to benefit the community.

Multi-Pronged Attack on Poverty

By incorporating loans funded by TCP Global loans into existing development programs – whether that be education, health, community organization, etc.-- loan recipients gain access to the grassroots organizations’ broad range of support services for a multi-pronged attack on poverty.

What it takes to build a sustainable loan program

It generally takes surprisingly little money (~$4k-$18k USD) and just two to four years to build a sustainable loan program that can meet the micro-credit needs of its community for many years.

See the document at the following link for more detail on the typical timeline and financial requirements for building a fully developed, self-sustaining loan program. 

Reporting

Program expansion depends on accurate reporting. Repeat donations follow when there is documentation that previous funds were invested wisely and had the desired impact. Grassroots non-profits are reluctant to take on new responsibility until they see proof that the numbers justify the additional effort. 

For grassroots loan administrators, accurate reporting means simply keeping track of payments due on open loans but TCP Global needs to track partner earnings, impact of donated dollars, delinquency rates and earnings withdrawals. Initial efforts to glean that information from partner reports were frustrating, but we have made significant progress in streamlining our processes to reduce the burden on our partners. Moreover, these monthly reports help TCP Global make funding allocation decisions and they help site administrators identify/solve potential problems.

For more information on our reporting processes, please see this detailed document.