Frequently Asked Questions

You may have heard the press criticizing microcredit, or you may simply have questions about how it all works. We’ve heard your questions, and Whole Planet Foundation is providing the following information to assist in responding to Whole Foods Market Team Member, customer questions or concerns from the public.

The mission of Whole Planet Foundation is to provide financial support to microfinance institutions (MFI) to alleviate poverty through expansion of microcredit services in communities that supply Whole Foods Market with product.  100% of the Foundation’s overhead costs are covered by Whole Foods Market and thus 100% of donations go to microlending programs effective at alleviating poverty.

Do microcredit clients sell product in Whole Foods Market?

We help people in countries where Whole Foods Market sources product lift themselves out of poverty, but Whole Foods Market does not source product from microloan recipients. Microcredit loans typically support very small, home-based businesses.

How do you calculate impact?

Dashboard Statement

The Whole Planet Foundation Dashboard is a report that measures the foundation's overall impact since inception. The dashboard is updated quarterly. The figures presented include Whole Planet Foundation's contributions as well as reporting data from WPF's microfinance partners through the end of the reporting period.

People

Approx. Number of Loans Made to Entrepreneur Families Due to WPF Support of Microfinance Partners

First, to find how many loans WPF programs have funded, we use the Average First Loan Size reported by our partners and divide it over the funds that have been disbursed to the MFI. Next, we find how many times those funds have been distributed and repaid back to the MFI since their disbursement. Finally, we incorporate the repayment rate reported by the MFI to account for any funds that have been defaulted. This is applied to every disbursement WPF has made to its partners since inception. Total Loans Made to Entrepreneur Families Due to WPF Support = SUM{(([AmountDisbursed] / [AvgFirstLoanSize]) X [Turn]) X [RepaymentRate]} Turn = (Reporting Period –Disbursement Date) / AverageLoanTerm

Approx. Number of Opportunities for Entrepreneurs and Their Families (Loans Disbursed X Average Family Size, Including Multiple Loan Recipients & Their Families)

Every loan provides a unique opportunity for the supported client and their family members. To estimate total opportunities first we gather the fertility rate to determine the average family size in each country. We add 1.75 to the average fertility rate to include parents or other relatives that live in the household. As of June 2016, the average family size across WPF’s portfolio is about 5.4 people. Next we factor in the number of loans supported. Opportunities for WPF- Supported Clients = Total Loans Made to Borrower-Families Due to WPF Support X Average Family Size

Current Active Entrepreneurs

Active clients reported by MFI partners in each quarter to WPF.

Current Active Entrepreneurs & Their Families

Active clients reported in WPF communities including their family members.

% Women Clients

This is a weighted average of the figures reported by the MFIs across WPF’s portfolio.

Places

Eligible Countries

Total of Authorized Countries and Program Countries in Development where both a Whole Foods Market product connection and viable microfinance industry have been identified.

Total Projects

Total count of projects approved to receive funding.

Authorized Program Countries

Countries which funding has been approved by WPF’s Board of Directors.

Active Countries

Countries which funding has been approved by WPF’s Board of Directors and funds have been disbursed.

Authorized U.S. Cities

Total U.S. cities in which funding has been approved by WPF’s Board of Directors.

Active U.S. Cities

Total U.S. cities in which funding has been approved by WPF’s Board of Directors and funds have been disbursed.

WFM Products

Unique number of products sold in WFM stores that are sourced from WPF countries around the world.

Microfinance Partners

Total number of unique partners funded by WPF.

Funding & Loans

First Loan Disbursed

Date in which WPF began funding loans.

Authorized Disbursements

Total amount of funding approved for WPF projects by the foundation’s Board of Directors.

Disbursed to Microfinance Partners

Total amount of funds disbursed by Whole Planet Foundation to its MFI partners for on-lending capital.

Avg. First Loan Size

Weighted average across the portfolio reported by MFI partners.

Repayment Rate

Weighted average across the portfolio reported by MFI partners.

Approx. Value of Loans Supported by WPF

Funds to MFI partners continue to grow over time. To find the total leveraged amount takes each disbursement and calculates the turn to find out how many times those funds have been distributed and repaid to the MFI. Then we factor in the MFI’s Repayment Rate to account for any defaulted % of their portfolio. Sum{ ([AmountDisbursed]+( [AmountDisbursed] X [Turn] X [RepaymentRate]))}

Total Loans Supported by WPF Funding (Purchasing Power Parity basis)

Approx. Value of Loans Supported by WPF adjusted for the exchange rate in each countries’ local currency. The Economist: The Big Mac index.

What is microcredit?

Microfinance encapsulates a wide array of products and services from credit to savings that are designed to meet the needs of the World’s un- and underbanked. Whole Planet Foundation focuses on the credit component of microfinance and seeks partners that have a mission to and a methodology that is able to reach the most marginalized groups of micro-entrepreneurs. Some of the key characteristics of microcredit supported by Whole Planet Foundation:
  • Focus on the poorest microentrepreneurs possible, especially women
  • No collateral or guarantees will be required
  • The banking services will be provided to the people as close to their doorstep as possible
  • Loan transactions are transparent at all levels
  • Loan sizes will grow with each loan cycle
  • The borrowers will be free to choose to participate
  • Repayments will be designed in a way that meets the needs of the borrower
  • There will be the fewest barriers to entry as possible for people with little to no assets

Does microcredit really work?

In a word, yes, microcredit is a tool to alleviate poverty but it is not a silver bullet. A poor woman and her family do not escape poverty after receiving a single loan. Without jobs, the poor are left to their own devices to provide for their families and credit is a way for microentrepreneurs to start or grow their businesses. For those that choose to borrow, they are investing in their own potential to change her and her family’s lives. Whole Planet Foundation believes in the power of the poor, and is committed to supporting new, more, and better opportunities to alleviating poverty.

What is an MFI?

An MFI is a microfinance institution that provides microfinance services. We partner with local MFI's that have developed an approach to serve microentrepreneurs in a way that is aligned with their reality. We refer to this as a pro-poor approach to microfinance.

Why give credit to the poor?

In communities void of jobs and based on the informal economy, credit is a a direct means for the poor to improve their family’s lives. Whole Planet Foundation focuses on supporting access to more opportunities in the form of microcredit with world-class organizations that deliver much more than a loan. Our partners provide a multitude of services from literacy workshops, to business training, to critical health services all which are not possible without first investing in the poor's own personal capacity with microcredit.

Does Whole Planet Foundation set interest rates?

Whole Planet Foundation does not set interest rates. Interest Rates charged by Whole Planet Foundation microfinance partners in the field are impacted by a number of factors and vary by country.  We work with MFIs that have agreed to keep the interest as low as possible while covering inflation, cost of capital, MFI overhead and other associated health, savings, insurance and education services, (when these service are offered) and profit.

But the interest rates seem high...

Sometimes interest rates seem very high by Western standards, but the highest rates inevitably come from moneylenders who are traditionally the only ones willing to lend to the poor. Risks can be substantial, but the microentrepreneurs are usually good at repaying loans that are appropriately sized for their capacity. Whole Planet Foundation partners are committed to pricing transparency that clearly informs clients the cost of the loan. The borrowers make informed decisions to invest capital and grow their businesses. Here is a recent study by CGAP and MIX that goes into greater detail on the role of interest rates and profit, read more here.

What are the main factors in determining interest rates?

Interest rates are determined locally by five main factors.  Here they are:
  • Rate of inflation in the country
    • Double digit inflation is not uncommon in developing countries.  Interest rates have to cover inflation.
  • Cost of capital
    • This refers to cash in the capital market (banks etc) that they use to relend to poor borrowers. Hundreds of billions of dollars will be needed to fund the billions of potential poor borrowers.
    • Cost of capital (COC) is often well into double digits 15-20% in developing countries.  Interest rates now must cover inflation + cost of capital (COC usually does cover some of the inflation, but often not all.)
  • Cost of providing the loan (MFI’s Overhead) is very high
    • This is due to the fact that the most successful operations usually visit borrowers 25-50 times a year at locations near the borrower’s homes and this takes an army of field loan officers, motorcycles and other support.
    • Traditional banks can’t do this.  Interest rates now must cover inflation + cost of capital + MFI overhead
  • Other associated services, such as health, savings, insurance and education services.
    • Some MFIs believe it is imperative that they extend other crucial services to the poor along with the loan.  These can include:
    • Health exams and other medical services such as family planning and reproductive and parenting education
    • Business advice and education/training
    • Marketing advice and assistance for their crops or products
    • Mandatory savings (often cited as necessary to escape poverty)
    • Health and/or life insurance
  • Profits or excess capital at year end
    • Profit, or for the non-profit “excess capital” is important to keep the MFI operating so that it can continue working to help the poor. Either way, the MFI must end up the year in the black or face going out of business.

How does Whole Planet Foundation select MFI partners?

Whole Planet Foundation has developed our own quality standards for our microfinance partners which are based on industry best practices. We proactively search for like-minded MFIs that are able to grow and serve more microentrepreneurs. Our Field Team first conducts desk due diligence to identify potential partners. After reviewing relevant information, a short list of potential partners is visited in person by our Regional Directors. The field visit is done to see first-hand the approach and practices of an MFI. The field team reviews the nuances of how the program works to assure a potential partner aligns with our view on pro-poor microfinance. We are looking for organizations that have as few barriers to entry as possible while operating on a financially self-sufficient basis.

What happens when a microcredit client cannot pay back a loan?

The strength of microcredit is avoiding repayment problems in the first place. The system is designed in such a way that risks are mitigated throughout the process. Key elements from some of the most effective organizations include:
  • Selecting clients that are investing in a business, not used for personal consumption
  • Assessing the clients capacity to take-on a loan
  • Assuring clients are committed to the program and understand the expectations of them
  • Repaying loans frequently, even weekly over a longer period of time making payments small
  • Lending in peer groups that can act as a safety net in times of struggle
  • Refinancing loans when microentrepreneurs continue to struggle
During our due diligence phase of selection a new MFI partner, WPF will review these as well as all policies of a potential WPF grant recipient to make sure their policies are acceptable. However, we are not in the MFI incubator or improvement business; i.e. our mission is to get business development funds into the hands of the very poor. We look for MFIs who have a proven track record for doing just that. We have staff to monitor and evaluate how well our grants funds are spent, but no staff for MFI training development.  

At what rate is microlending growing throughout the world?

Mixmarket.org has an extensive amount of information on MFIs. Following that, we can see Whole Planet Foundation historical compared to yearly disbursement totals from about 1900 MFIs worldwide. We can see that not only is Whole Planet Foundation in line with the market, but that MFIs on a global scale have experienced accelerated growth over the past eight years.

What about the poor living idyllic lives on peaceful small farms?

  • Life on the poverty factory (i.e. the subsistence and so-called peaceful farms) is actually gut wrenchingly difficult
  • 16+ hours of backbreaking work per day for both the very young and old is not uncommon during planting and harvest seasons
  • At the best of times, these farms breed little more than child labor, chronic malnutrition, over population and ignorant illiterate people who will never be able to escape poverty.  During the worst of times, they breed famine and even an early death
  • The farms get smaller with each new generation trying to farm the same plot of land.  The rest flee to the city, but are ill prepared to do much except manual labor
  • These farms and farmers are actually some of the worst environmental stewards, destroying forests, over using chemicals and depleting the soil

What are some of the dangers associated with living in poverty?

  • Chronic childhood malnutrition is very common and reduces a child’s IQ by up to 20%
  • Almost uncountable parasites and diseases such as malaria, dengue, Rotavirus and seemingly countless others kill millions of poor every year.
  • Life expectancy can easily half of ours

What about suicides associated with microcredit loans?

  • Suicides have always been high among the poor.  Before microcredit, there were moneylenders – loan sharks.  Many so-called “microfinance” lenders today are just loan sharks in new clothes that use brutal techniques to collect delinquent loans.
  • There are many causes for suicides among the poor, just like with the wealthy, such as:
    1. Release from the burden of a dull, stifling life of hard labor
    2. Escape from the responsibility of supporting a large family created as a sort of social security for “old age” (sometime after 30)  and to provide free labor for the family farm
    3. Escape from illness, including chronic depression and other mental illnesses where there is no money for medical care, or no medical care even if a little money could be found
    4. Old age itself is an additional burden on the poor family and is often accompanied by painful physical conditions from decades of working the farms. Suicide is what you do when medicine and hospice are not available

What happens when governments ban microloans to the poor or heavily regulate interest rates?

  • When governments ban microloans to the poor or heavily regulate interest rates this only deprives the poor of access to capital that could help them live better lives and drives them into the hands of the local moneylenders whose interest rates can run into the thousands.
  • Loan sharks use brutal techniques to collect on delinquent loans and confiscate meager property.
  • These local moneylenders are often the same government bureaucrat who is outlawing the competition.
  • Slum landlords in many cities are actually bureaucrats who build shanties and rent them out to the poor. Property rights and microlending give the poor weapons to use against these corrupt bureaucrats who are often trying to kill any legislature that would impinge on their side businesses.

What are some of the ways that local governments and moneylenders exploit the poor?

  • Local moneylenders, government bureaucrats and other local plutocrats abuse and steal from the poor who have no power or rights to stop them.
  • Property rights are almost non-existent. Peruvian economist Hernando de Soto’s studies show that wealth creation is almost impossible without some way of storing wealth in real assets
  • Judicial systems are corrupt and favor the landowners and wealthy.
  • Police frequently brutalize the poor, especially with the urban slum dwellers.

Why doesn't Whole Planet Foundation work with government-run microfinance institutions?

Whole Planet Foundation does not work with government-run MFIs (microfinance institutions), as we’ve found these can be poorly run and corrupt. We've found great success by working with MFIs with no government affiliation.

How has Whole Planet Foundation grown over the years?

Latest Whole Planet Foundation metrics show phenomenal growth since our first country project (Costa Rica) and loan in 2006. We have now committed $58 million helping 1.5 million microcredit clients lift themselves out of poverty. Because a microloan for one woman helps an average of five people as she invests in her family, these microloans have impacted 8.4 million people. The other indirect beneficiaries from re-lending the loan money over and over to ever more borrowers, plus the positive economic impact from all these new businesses to the communities is incalculable, but surely it must be in the millions of beneficiaries. Whole Planet Foundation now funds microcredit in 68 countries around the world! We are so grateful for everyone who has helped us along the way.    

What has your team learned while doing this work?

One microcredit loan is not a silver bullet that ends poverty immediately. It will, however, along with subsequent business expansion loans, help her to provide better nutrition, healthcare, housing, education and schooling to her kids, who will then be better prepared to escape poverty. Ending poverty is a generational endeavor. Sometimes, although not very often, there is an economic middle-class level attained by a first generation microloan recipient.

How can I get involved in Whole Planet Foundation?

There are many ways to join us! Learn about the cause: We invite you to visit our Library and read any of the books reviewed by our team. Banker to the Poor by Muhammad Yunus and other books recommended on our website   Follow our social channels: Share our posts and invite your friends to learn more about microfinance. We welcome your comments on any of our posts. If you're a Whole Foods Market Team Member: Participate in the Whole Foods Market Team Member Volunteer Program, set up donations in Workday via payroll deduction, and raise awareness of poverty alleviation!