There are some risks, but we like our odds. For example, the average repayment rates of the microfinance industry is actually very high, often at 95% and above. We perform stringent due diligence on our beneficiaries to ensure that there is every chance of successfully getting the money that you lent repaid to you.
However, there are risks that we need you to be aware of. In some instances, the Borrowers are considered “high risk” for a variety of factors, including, but not limited to the Borrowers’ lack of credit history, the use of loans proceeds for entrepreneurial projects including investment in “start-up” business and the risk of financial instability. Hence there is no guarantee that you will be repaid in whole or in part, and the default risk lies with the lenders.
But don't forget why you are loaning in the first place! It is a philanthropic endeavour. Maybe you want to improve the livelihood of people who want to work their way out of poverty and achieve financial independence; or support local economic development and job creation; or fund social and environmental businesses that are striving to create sustainable and scalable impact. Your loans will make a difference!
Our advise - loan up to the amount that you are prepared to donate in the first place. Increase it bit by bit as you get repaid and become more confident with the beneficiaries that you are supporting.