How does the Project work?

In the developing world, there are almost no sources for capital for the poor and absolutely none for the profoundly poor. It is the norm that very small businesses, such as the corner vegetable or fruit vendor, borrow money in the morning from street moneylenders to buy their inventory for the day, and then repay the loan at the end of the day, at rates exceeding 10% per day. This means that a huge portion of the daily profit goes to the moneylenders. In addition, such a vendor often must also rent the cart or stand from which to operate, and may end up paying a yearly rent equal to two or three times the value of a brand new cart or stand.

With a small amount of capital, this hard working entrepreneur could buy his own cart or stand, and have the resources to fund his own inventory, increasing his profits by 100% or even 200%. Doubling or tripling the family income means the children can go to and stay in school: the primary path to escape the cycle of multi-generational poverty.

To help fill this need, the Family-to-Family Project will facilitate unsecured personal micro-enterprise loans between families.

A family in the developed world can make a very small sacrifice of $100.00 or $150.00, representing the amount they might spend to take the family out for an evening or the cost of a single day at a ski resort, and through the Family-to-Family Project, loan that money directly to a poor family in the developing world to start or grow a micro-enterprise, a loan that will change the quality of their lives for generations.

The borrowing family not only benefits from the capital to start or grow their business, but builds confidence in their ability to be self-sufficient. The family maintains its dignity and self-worth by repaying the loan and building a credit history.

As the borrowing family is unlikely to have access to normal financial services, such as checking accounts, and even the small expense of buying and mailing an international money order to make loan payments could be onerous, the Family-to-Family Project will act as intermediary to receive and forward loan payments to the lenders. The interest portion of the loan payment will be retained by the Project to defray expenses, and the principal portion forwarded (electronically via the internet) directly to the lenders bank account.

It is envisioned that many lending families may feel it unnecessary or inconvenient to receive these small payments. These families may elect to automatically donate the payments, as received, back to the Project, and receive instead a receipt of donation at the end of each year for tax purposes.

UPDATE - March 2009 -  In practice, this turned out to be invariably true.  Donor families did not
wish to receive repayment, opting for the "re-cycling" plan.  So in effect, each donation
has become part of a larger revolving fund that gets lent out, repaid, and re-lent.