A key element of Capax World’s outreach is making capital, responsible credit and capital management available to the poor – a crucial element to breaking the chains of poverty. For example, a poor, rural community cannot afford the up front cost of installing a solar microgrid, but that project can be financed to create a recurring payment or “pay-as-you-go” system.
Another tool for small business development is microfinance, providing financial services to clients living in poverty (hence the “micro” scale) in developing countries. The most familiar element of microfinance is microcredit, in which funds are lent to individuals and groups for the establishment and expansion of small businesses. Of the US$250 billion estimated worldwide microcredit need, only US$25 billion currently is being met. Since the beginning of the international microfinance movement in the 1970s, much has been learned about how the poor may best be served with financial tools. Key elements of modern microfinance are:
- Microfinance: Loaning to individuals and small groups for the establishment and expansion of small businesses,despite the cost of administering small accounts and the lack of collateral to secure loans.
- Savings Accounts: The poor are accustomed to saving money, as a person earning less than US$1 or $2 per day must even out earning periods with nonearning periods, and try to prepare for greater financial demands such as education of children and healthcare expenses. Institutional savings accounts keep their funds safe from theft. Microcredit has been demonstrated to increase savings, thereby providing a more solid financial footing for microfinance clients.
- Financial Training: Financial training has been proven to increase business profitability among microcredit clients.
- Ease of Access: Ease of access to traditional financial tools is particularly beneficial to those in rural areas, many of whom remain out of the reach of for-profit institutions.
- Additional Financial Tools: Access to other financial tools such as insurance and funds transfers helps people manage their finances effectively.
- Professional Management: Professional staff respond to clients’ needs and nurture their financial growth, while adhering to international financial accounting standards and independent audit procedures.
- Sustainability: Programs are designed to be sustainable. As borrower loans are repaid, the effectiveness of the capital is multiplied as it is then lent out to the next borrower.
Capax World integrates responsible credit with agriculture, education, energy, healthcare, water and housing initiatives, recognizing the role of responsible capital administration in the developmental ecosystem.