How Do Our Guarantees Work?
Shared Interest utilizes capital from investors as collateral to guarantee loans made by Southern African ﬁnancial institutions to underwrite traditionally high-risk borrowers.
Shared Interest guarantees each loan using a standby letter of credit (SBLC), a mechanism that oﬀers a high level of security to Southern African lenders who are extending credit to entrepreneurs, farmers, cooperatives, and other borrowers. An SBLC, which is issued by Shared Interest’s partner ﬁnancial institution on our behalf, enables a lender to receive compensation quickly if a borrower defaults on his or her loan. If the conditions laid out in an SBLC are met, the issuer will be obligated to pay if a claim is made. As a result, ﬁnancial institutions will only issue an SBLC on behalf of a party that has suﬃcient collateral to cover the value of that SBLC. These characteristics, as well as the reputation of the issuer (in our case, Citibank), mean our guarantees oﬀer a high degree of credibility, increasing lenders’ willingness to work with borrowers that otherwise would not qualify for credit.
Our guarantees cover up to 75% of the risk of high-impact loans to Black entrepreneurs, farmers, women, and others traditionally excluded from access to credit.