Ok... so your MIL has a problem, which is that she can't budget, and that's not YOUR problem.
But your DH has a problem, which is that he can't say no to his mom, and that does become a problem for you, too.
We came up against something similar. The ILs didn't exactly borrow money from us; they borrowed credit. They asked DH to cosign a loan against his grandmother's house. I was against it, but let it be up to him, and he did it.
Then one day, a payment was late, and we found out that the balance was still $410k (HELOC, so they had just been paying the interest). This was after DH had talked to his dad, and gotten an agreement that the ENTIRE loan would be paid off less than a year from that date. Needless to say, their annual income and all their assets are less than the loan balance.
We had a big pow-wow, and insisted on seeing their budget. It was clear they couldn't get this paid off in anything like a reasonable amount of time. So FIL talked his mom into selling her house. The one she had lived in for 60 years, yeah, that one. I have no idea what happened to the $222k left over after paying off the loan and closing costs. I've wondered if we should ask FIL's brother and sister if they ever saw a share of it (GMIL died less than a year after the sale of the house).
When that was all sorted out, we told them, flat-out, we would NOT get involved in their finances ever again.
Flash-forward a few years. MIL's pay schedule changed, and somehow, that meant they were having trouble making rent that month. I guess they were still managing the lease payment on FIL's BMW just fine... but what's confusing is they needed $3,300, when their rent is less than $2,000.
We told them nope, sorry, we don't do that anymore, remember? DH did cave enough to offer to call my mom and ask her if she'd loan the money. She, bless her heart, insisted on hearing it from them. ;-) And she did lend them the money, and the check they gave her to pay it back did clear, and they haven't asked us or her again since then.
I'm a professional grant writer. When our organization asks for money, we provide our most recent 990 return and audited financials, a budget of the proposed project, etc. etc. When you go to a bank for a loan, they want the last three years of tax returns, and proof of income. If she keeps coming to you guys for money, it is PERFECTLY REASONABLE to say "Hey, mom, you seem to be having trouble keeping your finances straight. Let's sit down with your budget and figure out exactly what you need." But it is *not* reasonable for her to expect her son to give her money without explanation. I have a feeling that in cultures where the son is expected to take care of his mother to that extent, he's *also* expected to make certain economic decisions for her... so he'd know, anyway.