How do you ensure that the entrepreneur gets their original loan request given that exchange rates move daily?
CARE works with Microfinance Institutions in US Dollars who then lend to entrepreneurs in local currencies. Loans to entrepreneurs therefore have to be translated from GB Pounds and this is done using a GB Pounds to US Dollar rate that moves daily. To cover any exchange differences between when the loan is put on the site and then sent abroad, and to ensure that the MFI and then the entrepreneur receives their full loan request, there is a 10% buffer on the loan to cover exchange rate fluctuations. Any part of the buffer that is not absorbed by the exchange rate fluctuations between the loan being raised and the loan being sent abroad is repaid to you. This is the first repayment on the repayment schedule. Because exchange rates can go up or down, this repayment may be larger or smaller than the scheduled amount.
