How ECLOF Works

NATIONAL ECLOF COMMITTEES

The cornerstone of the ECLOF structure are the National ECLOF Committees (NECs).

Each NEC has its own board of directors and lending operations. The NECs are responsible for managing ECLOF capital in a revolving fund in the currency of their country. They also have to develop appropriate lending strategies or loan products based on local conditions and in accordance with policies and guidelines as defined by the ECLOF International Board.

All loans to clients are made through the NECs in local currencies, except in economies that are highly influenced by the U.S. dollar. NECs themselves decide what interest rates they will charge, taking into account the local inflation rate and operational expenses within agreed guidelines.

The ECLOF International Board gives NECs lending authority based on their portfolio performance over time and their adherence to ECLOF's lending principles and policies. NECs can grant loans up to the amount permitted by the International Board without prior ratification from the ECLOF International secretariat. Loan amounts exceeding the authority of the NECs must be submitted to the ECLOF International secretariat for review. Capital transfer to NECs is on the basis of approved loans. Over 80% of the loans are granted by NECs without the need for prior ratification by the International Board.

Partner agencies of the international secretariat contribute funds that are then used for lending capital. Capital is allocated and distributed to NECs in the form of long-term loans on the basis of need and the ability of the NECs to manage the money. Partner agencies generally designate their contributions for one of two loan funds, viz. the General Capital Fund or the Development Capital Fund. NECs manage funds from the ECLOF family on the basis of trust and are obliged to return their capital funds in the event of dissolution. The constitution of NECs and supplementary agreements provide for this.

The local autonomy of NECs allows them to design products appropriate to their national environment, while adhering to a global standard of accountability and management. This gives NECs the flexibility and initiative to develop innovative loan strategies.

GENERAL CAPITAL FUND

The General Capital Fund is used to make loans for church buildings, community projects for nursery, primary and secondary schools, vocational training and similar services.

This reflects the original mandate of ECLOF and remains a very important aspect of ECLOF's work, particularly for churches with limited resources. The harsh economic situation in the majority of countries where ECLOF operates gives the fund an even greater significance because of the pressure on national governments to make budget adjustments and reduce spending on social services and education.

With the increased attention given in recent years to loans for micro-entrepreneurs, contributions to General Capital Fund have fallen. However, its work is as important as ever. Social programmes face the same, or more, difficulties in obtaining credit as do individuals. In fact, most other microcredit programmes will not consider lending to such projects.

DEVELOPMENT CAPITAL FUND

The Development Capital Fund is used to promote the advancement of communities either through direct financing for services, such as the provision of water and health facilities, or indirectly through loans to groups involved in income generating activities such as agriculture, fishing, small-scale industries and trade. These programmes have had a significant impact on socio-economically marginalised rural and urban communities, and have become a major aspect of ECLOF's work. Development capital loans make up the bulk of ECLOF's lending activities.

REVOLVING LOAN FUND

Each committee has a local currency revolving loan fund. This fund recycles all incoming monies back into loans. When loans are repaid into the fund, the money is, in turn, lent out again and again. The lending capital therefore remains both in the fund itself and also in the country. Effective management of the revolving fund is critical as a source of new capital to continue with the programme.

ECLOF Revolving loan fund

As a matter of policy, the ECLOF Secretariat in Geneva does not process loan applications or projects directly from applicants but rather works through National ECLOF Committees (NECs). ECLOF therefore cannot consider loan requests from countries without a NEC. To see if there is a NEC in your country, please consult the list of NEC addresses.