MEET THE BOSS: Interview with Elissa McCarter, Director of the Office of Development Finance for NGO, CHF International (Part two of a three part series)

Founded in 1952, CHF International (CHF) has worked in over 100 countries and currently operates in more than 25 nations. CHF’s mission is to serve as a catalyst for long-lasting positive change in low- and moderate-income communities around the world, helping people improve their social, economic, and environmental conditions. One component of fulfilling that mission has been improving access to financial services. In the last five years, CHF International has disbursed over 200,000 loans totaling more than USD 482 million and has a particular niche in establishing microfinance programs in conflict, post-conflict, and post-disaster settings. CHF currently oversees lending operations in 11 countries across Africa, Asia, Europe, Latin America, and the Middle East. As of June 2009, CHF International had assets under management of over USD 200 million (microfinance portfolio outstanding of USD 107.6 million plus middle market portfolio outstanding of USD 93.5 million).

Elissa McCarter, Director of the Office of Development Finance that oversees Microfinance, SME and Housing Finance Initiatives at CHF International (CHF)

MC: Please tell me more about the various markets you currently serve.

Elissa McCarter: Presently, CHF International works in 26 countries around the world. Historically we have worked in 20 to 40 countries in any given year. In terms of our lending activities, where we are a direct provider of credit, we work in 11 countries (largely through subsidiaries that we own and operate). Almost all of these subsidiaries are for-profit entities or are in the process of transforming into for-profit entities as part of a global strategy to raise the funding needed to grow to scale.

MC: Can you provide detail as to the challenges (if any) involved in targeting and providing services to the middle market?

Elissa McCarter: Lending to larger businesses obviously requires a more sophisticated approach because of the risks involved and the detailed analysis needed to analyze business cashflow and properly underwrite a loan. We don’t just look at collateral requirements that banks typically look at. We analyze the business plan, the industry sector, look at cash flow projections, historical financial statements, the character of the borrower, and flexible forms of collateral for this type of enterprise. We also look more consciously of how we are targeting our funds to enterprises that have the ability to grow, create jobs and contribute to local economic growth. That is why we are in this space. We feel very strongly that the small and growing businesses, which are a rank above the typical microenterprise, have more potential to build economies and create jobs. That is one of the reasons that we are a direct lender in this space, largely in places where the banking system is very weak or simply is just not feasible. For example, the West Bank, Iraq and Liberia are three countries where we operate middle market lending programs. One of our objectives is to create demonstration models. We have had some problem loans, but by and large, we have been very successful in designing models that serve the medium enterprise and again, in bringing banks with us. In the long run, our goal is to get the banking sector to be serving these enterprises.

MC: With regards to problem loans, how do you work out these problem loans?

Elissa McCarter: Like any credit methodology, we have policies and procedures in place. Typically we don’t restructure loans unless there is a war or other extraordinary circumstance. What has proven important is the underwriting criteria and looking more specifically at how the business intends to utilize the credit. If a business requests a loan for fixed assets purchases and working capital, for example, it is not prudent to bundle together in one. Rather we try to tailor the loan product to fit the cashflow cycle of the business itself. This was one of the lessons we learned early on (such as in Iraq). Some loans were approved for use in several different purposes and the fixed repayment schedule caused problems for the borrower when, for example, a construction plan took longer that we thought. Thus, we had to work with the borrower around a new schedule that took into account business cycle and certain aspects relevant to the business sector.

MC: Are there any target markets in terms of a country that you have decided to not pursue at this time? If so, please elaborate.

Elissa McCarter: No. We typically follow U.S. guidelines on what countries U.S. businesses should do business with abroad. We don’t have a particular defined approach. We look for opportunities where there is a funding possibility (to attract investment), where there is a need, and where we could provide value in that market.

By Zoran Stanisljevic

Part one of the interview: https://www.microcapital.org/meet-the-boss-interview-with-elissa-mccarter-director-of-the-office-of-development-finance-for-ngo-chf-international-part-one-of-a-three-part-series/#more-3622

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