MCE Social Capital: Pooling Risk and Resources to Support Microfinance Institutions

Gary Ford learned early in life that finance “done with values” can be a force for good. The grandson of a small-town banker in southern Oklahoma, Ford had been told as a child that his grandfather continued to lend money to farmers during the Great Depression rather than foreclose on their properties. Their collateral was their character, his grandfather had explained.

Now the president and CEO of MCE Social Capital (, Ford is applying that lesson to international development, presiding over an organization that uses financing tools to generate economic opportunities for hundreds of thousands of people living in poverty throughout the world. Since 2006, MCE has disbursed more than $95 million in loans to microfinance institutions (MFIs) that, in turn, have made more than 400,000 loans totaling $160 million.

Ford traces his interest in international development to a trip to Africa after he finished college at Harvard. “My now-wife and I traveled for close to a year ... overland from Tanzania to Cairo.” Spending one or two months in each country, they took buses, hitchhiked and camped along the eastern side of the continent, spending time with villagers and learning how they live. “It made an enormous impression on me. Not just the poverty, but the hope and determination, and how kind and protective they were of us.”

When he returned, Ford practiced law at a prestigious national law firm, ran a statewide presidential primary campaign and helped raise two sons. “That’s where my energy went for the next 15 or 20 years. When I looked up, I wanted to get involved in international development. ... I was interested in finance, specifically in providing capital for the poor,” he said.

Through a friend, he met Jonathan Lewis, the founder of MCE. “I made one call, liked the idea, liked Jonathan, got involved and I have been involved ever since,” Ford said. He joined MCE as pro bono general counsel in 2007, and became head of the organization in 2010.

Ford became CEO at a point when MCE was moving from a start-up to a growth phase. He had helped other businesses manage this type of transition, and the organization had “reached a point where the things I’m best at would be helpful to it,” he said.

He liked the idea of contributing to MCE’s growth and strategic direction, and particularly enjoyed helping guide it through global financial complexities. “MCE is basically an international financial organization,” Ford explained. Fluctuations in the price of oil, the condition of the Russian economy and its effect on developing countries around it, commodity prices in Latin America, the cost of hedging currencies in Africa - “all of those directly affect our business. It’s very intellectually interesting and challenging.”

In 2013, Ford and his wife were looking to focus more on their own philanthropy and became involved with the Synergos Institute and the Global Philanthropists Circle (GPC). That summer, they attended a GPC retreat in Montana that Ford described as “a life-changing experience.”

“It was an opportunity to just pause and reflect on where I was in my own journey and where I wanted to go,” Ford said. The result has been “an enormous, almost physical sense of gratitude.”

Pooling risk

MCE Social Capital uses loan guarantees from wealthy individuals and foundations (guarantors) to unlock investments by financial institutions. The guarantees currently total about $106 million, and MCE plans to increase that to $130 million in the next three years. While MCE is not the only entity that employs this approach, “the combination of the guarantee and what we do with the money we raise is probably unique,”? Ford noted.

MCE pools pledges from the guarantors and uses them as collateral to borrow from US and European financial institutions. Those institutions are comfortable making loans to MCE to put to work in villages in Bolivia or Ghana, for projects they would not be willing to invest in themselves. It’s a way of diverting capital to the developing world that otherwise would probably go to much safer investments. MCE augments these funds with loans from mission-aligned impact investors.

Most of the guarantors are high-net-worth individuals. Making pledges rather than outright contributions enables them to retain their capital and continue to earn returns on it, while making a positive social impact. “MCE provides a way for one to leverage one’s balance sheet to make a difference in the world, without writing an upfront check,” Ford explained.

MCE lends the borrowed funds to MFIs, most of which serve rural women in developing countries and offer credit as well as services. As those loans are paid back, the pledges from guarantors are recycled over and over. If an MFI fails to repay a loan, the guarantors make a tax-deductible contribution to MCE to cover the loan. The default rate is extremely small (.03%) and the risk is distributed across all of the guarantors.

Ford sees the MCE approach as relatively conservative. “MCE is a means for philanthropists to work together and pool risk. ...It’s a way for people who care about international development and poverty to band together and do something about it - and the power of doing it collectively greatly magnifies the effect any one of us could have.”

He cites his personal experience as a guarantor as an example. “My guarantee mobilizes a half million dollars, recycling at a regular interval over the last 10 years in the developing world, and it cost me about $6,000. This approach provides enormous philanthropic leverage. If I’d written a $500,000 check it would be gone. Instead, I’ve been able to invest that $500,000 and earn a return on it for a decade.”

Growth plans

MCE is piloting an initiative to make tailored loans of $100,000 to $400,000 to small and medium-sized enterprises in sub-Saharan Africa and elsewhere. To date, MCE has made loans to three organizations: one in Kenya that helps rural farmers plant, raise and sell eucalyptus trees; one in Ghana that connects women who produce shea nuts with support, training and access to international markets; and one in Mauritania that provides electricity and safe water opportunities to people living in remote communities.

MCE is always looking for partner organizations. For example it joined forces with California-based Freedom from Hunger to implement a pilot program in Ecuador. MCE provides capital at a discounted rate to a microfinance institution, while Freedom from Hunger provides training and technical assistance to develop sustainable health services for poor families.

Ford believes there is room for more intermediaries similar to MCE. “We’re open source. We’ll share with anyone who wants to replicate what we’re doing and we will be happy to help them get set up,” he said.

There is no single magic solution or panacea to address global poverty, Ford said. “If we’re waiting for the Uber of international development, it’s never going to arrive. That too often results in people being paralyzed and not doing anything.”

He added that people who have means and a concern for those beyond their own borders need to act now. “People are suffering now. They’re not suffering in the abstract, or five years from now - they’re suffering today.

“I’ve learned that by doing things together, it’s not only more fun, it is more effective.”

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