The primary goal of the fund is to develop, attract, expand and maintain better economic and employment opportunities within its partner institutions and to assist the small business units in the rural sector to formalize, professionalize and expand its capacity to create employment and make the enterprises economically sustainable. Revolving Loan Fund (RLF) is an economic development tool to assist in reaching the said goal.
The development goal of partner institutions is to bring forth un-bankable poor to access formal but simplified lending and saving facilities, so as to resolve the causes and effects of poverty. This goal will be achieved through RLF services.
The proposed RLF project is a gap financing measure, primarily used for development and expansion of small businesses. It is a self-replenishing pool of money, utilizing interest and principal payments on old loans to issue new ones. Its focus is to assist poor families striving to overcome poverty, yet unable to access formal lending sources.
Establishing a RLF aims to create access to an acquiescent source of capital that can be used in combination with the investment of own resources such as labor, skills etc. RLF will serve as a bridge between the amount the borrower can invest and the loan to be obtained from the RLF. The poor do not possess access to formal lending institutions. Their only option is to obtain loans from private money lenders at exorbitant interest rates which puts them in a vicious cycle of poverty.
The main purpose of RLF is to provide financial services to those who are excluded, but require resources to improve their small enterprises. Hence, the RLF would be a great source for the poor to access financial services at reasonable rates.
Leave a Reply