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An excellent way to help marginalised low-income people

Apply For Loan-fruit-shop As a non-profit Foundation providing wholesale loans, the NeoFin Foundation participates in the construction of a financial network within the Philippines. It is accessible to, amongst others, MFIs-Micro Finance Institutions, Co-operatives, and Rural Banks. In this way NeoFin is able to grant many small (micro) loans to entrepreneurial poor people through its NGO business partners.

As in venture capital, NeoFin takes an investment approach to determine the most appropriate tailored micro financing for each project. Depending on its own missions and the projects it chooses to support, NeoFin can operate across the spectrum of investment returns.

NeoFin’s partners are mainly leading and emerging Philippine institutions that have demonstrated their commitment to making financial services available to the marginalised and under-served people. Typically, these institutions are at the point of (or are already) becoming operationally self-sufficient with an aim to become financially self-sufficient in the near to medium-term, and are in the process of expanding their product ranges plus professionalising their systems and staff. NeoFin assists these organisations in the subsequent jump to becoming commercially and socially viable organisations, and supports them until they are firmly established in the next level of institutional development. The critical criterion for partner selection is the presence of sufficient potential to become a leading MFI, Co-operative or Rural Bank. This implies that our partners should be able to demonstrate a clear capacity and willingness to improve their systems, governance and products.

The goal for these organisations should be:
  • To improve the quality of life of the poor by providing access to financial and support services,
  • To be a viable financial institution developing sustainable communities,
  • To mobilise resources in order to provide financial and support services to the poor, particularly women, for viable productive income generation enterprises enabling them to reduce their poverty,
  • Learn and evaluate what helps people to move out of poverty faster,
  • To create opportunities for self employment for the underprivileged,
  • To train rural poor in simple skills and enable them to utilise the available resources and contribute to employment and income generation in rural areas.

High engagement

NeoFin has a close, hands-on relationship with the social entrepreneurs and ventures it supports, driving innovative and scalable models of social change. Sometimes it may take board places in organisations, thus it is then far more intimately involved at strategic and operational levels than are traditional non-profit micro credit funders.

Multi-year support

NeoFin can provide substantial and sustained financial support to a limited number of large projects and organisations. Support typically lasts at least one to three years, with the aim of helping the project or organisation to become financially self-sustaining by the end of the funding period.

Performance measurement

NeoFin investment is performance-based, placing emphasis on good business planning, measurable outcomes, achievement of milestones and high levels of transparency, financial accountability and management competence.

Lending conditions

The duration of the loan in general is from one to a maximum of three years. Investments are often recommended for renewal at maturity if the partner is performing well. Short-term credits (less than one year) for organisations’ projects are only granted in the context of a longer running business relationship.

Interest rate
The interest rate depends on the nature of the project, the loan, the currency in which the loan is granted, the risk degree of the financing, the guarantees provided and the situation in the financial market. For loans in Euros, the annual interest rates can vary from 7%-15% based on the outstanding balance, risk involved, and the situation of the international currency markets; the annual Peso interest rates are dependant on the volatility of international currency market.

Currency risk
When providing funds to a Borrower in the form of loans, three parties can take on the currency risk:
  • NeoFin if we lend Peso to the Borrower.
  • The MFI if it borrows in Euros and lends to a micro-entrepreneur in Peso.
  • The micro-entrepreneur him- or herself if he or she borrows in Euros to invest in an activity-generating Peso.

Of these three parties, the micro-entrepreneur is certainly in the worst position to manage currency risk. The MFIs, Cooperatives and Rural Banks we target have normally not yet developed sophisticated asset-liability risk management strategies in order to manage currency risks. Therefore NeoFin intends to provide loans in local currency whenever we are in a position to manage the associated risks; hedging is one of the options we will apply.

To sustain growth and protect clients, NeoFin’s Borrowers, like any other financial institution need to be appropriately capitalised. Raising equity from external investors is often a key challenge for smaller Borrowers, but vital to attract loans and eventually reach the capitalisation necessary to convert into a deposit-taking institution. NeoFin intends to invest a large part of its portfolio in the equity of such institutions.

Administrative costs
Upon realisation of the loan, a one time non-refundable administrative fee will be levied.

With the exception of some private individuals, NeoFin requires guarantees for the provided loan facility. This forms part of the negotiation process with the applicant. NeoFin accepts amongst others the following guarantees:
  • Bank guarantees
  • Pledging of deposits, bonds, etc.
  • Mortgage
  • Institutional guarantees

PdfFinancing application procedure, and application form