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How It Works

This section lists all the questions that are frequently asked by internet users. Click on one of the subjects below to go directly to the answers.

What is microfinance?

What is microcredit?

What is an online micro-credit platform?

Why set up an account with ENGIE - MicroWorld?

How do I set up a ENGIE - MicroWorld account?

How do I evaluate my lending capacity on projects?

How do I lend money to a project?

How to lend on projects with another currency?

How do I lend money to a project with a MicroWorld Pass?

How do I track my loans?

What are the investment and withdrawal limits set on ENGIE - MicroWorld?

How do I withdraw my money?

How do I create a group?

How do I join a group?

How can I be a group facilitor?

What is MangoPay?

Are my funds safe with MangoPay?

How does ENGIE - MicroWorld select its MFI partners in the countries concerned?

Does ENGIE - MicroWorld choose the micro-entrepreneurs and the projects?

Does my money really go to the borrower(s) I select?

What is the procedure for repayment of loans?

Why lend at 0% instead of simply donating funds?

Does the micro-entrepreneur pay interest?

What is an average loan for a micro-entrepreneur?

Are there any risks involved?

How does ENGIE - MicroWorld cover its operating costs?

Why isn’t MicroWorld an NGO? / What is a social business?

How to close an account on ENGIE - MicroWorld?

What is micro-finance?

Micro-finance first started in Bangladesh at the start of the 1970s. It is an effective means of fighting poverty and offering basic financial services to poor populations who are excluded from traditional banking systems. Typical services offered include loans, savings accounts, money-transfers, and insurance. In just a few decades, micro-finance has become a tremendous economic tool for creating jobs and wealth, as well as a social and political ferment enabling the most poverty stricken to create activities which generate income. In 2006, over 80 million people in the world had access to micro-finance services, assisted by over 10,000 Micro-finance Institutions (cooperatives, NGOs, micro-finance banks) or commercial banks. There are still an estimated 500 million people with projects pending funding. For further information, please see the section concerning Positive Planet.

What is micro-credit?

The principle of micro-credit is to offer small loans to entrepreneurs and artisans who do not have access to traditional bank loans. With these micro-loans, they are able to execute micro-projects, thus providing employment and assisting local economic development. Micro-credit is developing mainly in emerging countries. Micro-credit is one of the services offered by micro-finance institutions. To learn more, please see the section on micro-credit.

What is an online micro-credit platform?

Online peer-to-peer (P2P) micro-credit is a new development in micro-finance. With P2P micro-finance, internet users can select micro-entrepreneurs’ projects from all over the world and finance them directly by lending money via an internet platform. Internet users can then track the progress of their projects on line right up until total repayment has been made. On line micro-credit platforms provide new sources of financing to micro-finance institutions, enabling them to support new projects, and also allow new types of lenders (internet users) to take concrete action in the struggle against poverty. ENGIE - MicroWorld is the new online micro-credit platform aimed at individuals, companies and foundations.

Why set up a ENGIE - MicroWorld account?

When you create an account with ENGIE - MicroWorld, you become a member of the ENGIE - MicroWorld community. This is an essential step before you can lend to micro-entrepreneurs and participate in events organised by the community. Once you have set up an account, you can follow your loans online, create groups of lenders who share the same interests and associate your friends with your projects to encourage them to become lenders themselves and alert them to the issues you feel strongly about.

How do I set up a ENGIE - MicroWorld account?

Go to the Home page of the site and click on “Log In” at the top right of the page. Then, in the “Not a member yet?” section, fill in the required fields and click on “Create a new account”. The information you will be asked to provide is a valid e-mail address, a user name or pseudo which will be visible on the site, a password, choice of your investment currency...
A confirmation e-mail will be sent to you confirming your registration with a link to click on to activate your account. Before you can make your first loan you are also required to complete your profile and provide the following information: name, first name, address and date of birth.

When you register on ENGIE - MicroWorld, you can choose to lend on projects in multiple currencies. The choice of your investment currency is final and cannot be changed later.

How do I evaluate my lending capacity on projects?

Lending can involve a risk of non repayment, so it is important to make sure that the amount you wish to invest on MicroWorld is consistent with your financial situation.
To do so, MicroWorld has implemented a tool to allow you evaluate your lending capacity on projects in function of your annual income, your annual charges and your available savings : Evaluate now my lending capacity.

How do I lend money to a project?

Choosing a project

In the main menu at the top of the page, click on “Projects”. This will take you to the Projects page, where all the projects available on ENGIE - MicroWorld, pending funding or repayment, are displayed. They are classified by country, activity, status (pending funding or repayment) and beneficiary. You can use the filters on the left hand side of the page to select a specific project or click on one of the countries on the map in the centre of the page to go directly to all the projects available in that country. Next select your project and click on the “Add to my selection” button below the project description. You can select several projects by clicking on them one at a time. If you want to find out more about a project or a borrower, click on the borrower’s photo to go directly to their project page. There you will find information about the related country and its economic context, the borrower and the terms of the loan. On this page, you can also select the amount you wish to lend (minimum €20), then click on the “Lend” button to add the loan to your basket.

Confirming your loan commitment

To view the loans you have chosen, click on “My selection” in the top right hand corner of any page on the site. From here you can review your chosen projects and change the amounts you wish to lend. Confirm your loans by clicking on “Continue”. You can then either use the funds available in your MicroWorld account to finance these projects or pay with a bank card via our payment partner MangoPay. NB: Funding is accepted in multiples of €20. You can therefore invest €20, €40, €60, €80, etc., with a minimum requirement of €20.

By clicking on "PAY", you confirm a loan commitment that will become firm and final after 7 calendar days corresponding to a period of right of withdrawal.

In case of withdrawal, the amount lent will be fully repaid to the lender within 30 calendar days following the date of withdrawal.

Your loan contract

After the period of right of withdrawal, your loan commitment becomes firm and final. The loan contract is made available to you at the time of disbursement of the funds in the "My Account" section.

Financing your projects with MangoPay

MicroWorld.org has chosen MangoPay for its secure online payment system for financing micro-entrepreneurs’ projects.

To finalize your loan commitment, click on "PAY NOW” on the payment page – you will then be automatically transferred to a MangoPay page.

After payment, you will receive an email from MicroWorld confirming your loan commitment that will become firm and final after 7 calendar days corresponding to a period of right of withdrawal.

In case of withdrawal, the amount lent will be fully repaid to the lender within 30 calendar days following the date of withdrawal.

For more information about MangoPay, click on this link.

How to lend on projects with another currency?

When you register on ENGIE - MicroWorld, you can choose to lend on projects in multiple currencies. By default, the investment currency of your account will be in Euro.

If you want to change the default currency, select the investment currency of your choice in the corresponding top drop-down menu. On the registration page, you will see in the corresponding field the investment currency that you have chosen for your ENGIE - MicroWorld account. If you change the default currency with the currency switcher, all projects in your "Selection" will be deleted.

The choice of your investment currency is final and cannot be changed later.

How can I lend money to a project with a MicroWorld Pass?

If a member so wishes, he/she may suggest to another member or any other person, on condition that this person becomes a member first, that he/she participate, in part or in full, in the funding of a project of his/her choice on the site. This is called sponsoring.

In this way, the sponsor may make the sum of his choice available to the sponsoree via his/her ENGIE - MicroWorld account or send him/her a “MicroWorld Pass" so that he/she can invest in one or several projects in his/her name.

With a MicroWorld Pass a sponsor can send a sponsoree, by means of an alphanumeric code composed of 10 characters, multiples of €20 totalling a maximum of 1000.

There are 2 types of MicroWorld Passes available

  • Gift Pass: Give a Gift Pass of €20 or more, valid for 1 month. The amount will be repaid to the MW Pass recipient once the project duration is completed.
  • Discovery Pass: Give a Discovery Pass of €20 or more, valid for 1 month. The money will be invested by the recipient of the MW Pass on your behalf. Once the project duration is completed, your account will be refunded.

The sponsoree then has 1 months from the date of issue to activate his/her MicroWorld Pass by entering the alphanumeric code on the “My Selection” page in order to finance one or several projects. After this date, the code will be automatically cancelled.

How do I track my loan(s)?

In the main menu at the top of the page, click on the “My Account” section to view the history of your loan portfolio and the balance remaining in your ENGIE - MicroWorld account. On this page, you can also view your personal profile, investment profile and keep in contact with the MicroWold community.

What are the investment and withdrawal limits set on ENGIE - MicroWorld?

Maximum investment per project

To protect your investments and to be in compliance with the changing regulatory framework of crowdfunding (1st October 2014), MicroWorld had decided to limit the investment by lender to € 1,000 on the same project. Beyond this limit, you will be asked to reduce the amount of your investment or to report it on another project.

In-depth customer knowledge procedure (KYC)

In the context of the new French regulation, MicroWorld has implemented thresholds of bank movements beyond which an in-depth customer knowledge procedure (KYC) is implemented.

Those thresholds are:

  • - The sum of incoming flows over the last 12 months superior or equal to 2 500 €
  • - The sum of outgoing flows over the last 12 months superior or equal to 1 000 €

Once one of these thresholds is reached, the lender will need to send a number of documents via My Account section > Personal Information.
The movements on the account will be blocked until this information is transmitted and validated.

To avoid a possible blockage, you may at any time decide to anticipate this procedure by providing the following documents.

Documents to transmit if you are a private individual:

  • - Photocopy front / back of a valid ID card or passport*
  • - Proof of address less than three months old (eg: water/electricity/gas/telephone bill, tax certificate, householder insurance, confirmation of real estate ownership)*.

For people accommodated freely, provide also a handwritten statement from the host and an identity proof of the host.

Documents to transmit if you are a business or an organization:

  • - Copy of articles of association*
  • - Registration proof of less than 3 months old*
  • - Proof of address of the individual duly empowered to act on behalf of the legal entity (Photocopy front / back of a valid ID card or passport*
  • - If appropriate, shareholder declaration to fill in*. Download the declaration here.

*File formats supported: PDF, JPEG, PNG.

MicroWorld has the right to request additional documents and information as part of this customer knowledge procedure.

You will be informed by mail when your documents are validated. You will then be allowed to make new investments and withdrawals from your MicroWorld account. You can track the status of the documents sent (under validation, validated, refused) in My Account section > Personal information.

How do I withdraw my money?

When the loans you have made reach the end of their term, MicroWorld credits your MicroWorld account with the amount repaid. You can lend these funds again, or request to withdraw part or all of your balance.

To do so, go in “My Account” section > Home, enter your the IBAN of your bank account and choose the amount you wish to withdraw (which must be less or equal to the balance available on your account) then validate.

NB: Funds used for financing a project may not be withdrawn before the loan maturity date of the project.

How do I create a group?

  • Go to the "Community"page
  • Click on “Create a group” at the top right of the page.
  • Choose a name for your group, its description, category (family, company) and a catchphrase to encourage users to join it. Also, upload a picture that illustrates your group.
  • Once you have created the group, you can change it at any time and, most of all, invite friends.

How do I join a group?

If, while surfing on the site, you find a group that interests you, click on the group’s picture or name. Once you are on the its homepage, click on the “Join this group” button. If the group is a public one, you will be accepted as a member immediately; if it is private, you will have to wait for the administrator to accept you. You can also look for a group using well-defined criteria on the page Community>Groups.

How can I be a group facilitor?

Share your group and communicate about your activity on social networks (Facebook, Twitter, LinkedIn, Viadeo, etc.) by clicking on the desired social network’s icon. A sharing bar is displayed at the top of each group’s homepage.

By being a group’s facilitator you can promote its activity and publicise microcredit and microfinance, as well as help reduce poverty in the world.

Extend your group by inviting a friend to join it, by clicking on the tab “Invite a friend”.

Be your group’s facilitator by posting comments on it about the group’s activity, in the “Actions” inset situated under the list of projects financed by the group.

What is MangoPay?

MangoPay is the Payment Service Provider (PSP) edited by Leetchi Corp SA, subsidiary of Leetchi SA. MangoPay has an e-money license valid in Europe.

To manage the financial flows and the electronic money generated by the use of the platform, MicroWorld has decided to partner with MangoPay.

Know more about Mangopay.

Are my funds safe with MangoPay?

The new crowdfunding law in 2014 requires the segregation of funds that are channeling through crowdfunding platforms to ensure a greater safety for users.

The funds that you invest on MicroWorld transit on segregated bank accounts held by MangoPay in a bank under the guarantee of bank deposits set up in Europe.

Know more about Mangopay.

How does ENGIE - MicroWorld select its MFI partners in the countries concerned?

ENGIE - MicroWorld has chosen to work with Planet Rating, subsidiary of Positive Planet Group, specialized in the MFIs rating. As such, we perform a rigorous analysis of pre- selected MFI for their financial strength and the social character of their mission. An Investment and Risk Committee of microfinance experts is studying partnership proposals with each pre- selected MFIs. Once approved by the Investment Committee, an MFI has a status called "Pilot" which is the first step in our integration process. During this initial period, the money that can be collected by the institution will be limited. This step lasts over a period of about 3 months and provides a definitive view on the quality of the partner. During this phase, an operational audit on the ground is also conducted. If the MFI meets the defined criteria to collect more money on the platform, it is again presented to the Investment and Risk Committee to get the "confirmed" status. For more information on our integration process, see the "selection of MFIs» section.

Does ENGIE - MicroWorld choose the micro-entrepreneurs and the projects?

The various micro-entrepreneurs and their projects are selected by our local investment partners, the Micro Finance Institutions (MFIs). These MFIs are all highly-reputed and firmly established with a wealth of experience in the field of micro-credit. They have the expertise and resources required to assess entrepreneurs’ potential projects and the adequate infrastructures to support, training and accompany micro-entrepreneurs. It is the MFIs, in agreement with ENGIE - MicroWorld, who select the projects to be published and offered on the site.

Does my money really go to the borrower I selected?

Unlike humanitarian donations, solidarity loans guarantee lenders that 100% of the sum loaned will be paid to the selected micro-entrepreneur. However, since the procedure for financing a project and transferring funds can be quite lengthy, it is possible in some cases that the MFI will advance financing for the project from its own funds, so that the micro-entrepreneur doesn’t have to wait. When the MFI receives the funds sent by the ENGIE - MicroWorld lenders, it is then in a position to free up the funds it had advanced and reinvest them in a new project. This refinancing technique is common practice in online micro-credit. This procedure is in fact similar to making a purchase on a credit card – when you purchase goods, the credit card company advances the money to the retailer on the understanding that it will recuperate the amount from your account at the end of the month if you use the deferred debit system. Here, the MFI advances the loan to the borrower and the advance is then reimbursed to the MFI via the ENGIE - MicroWorld lenders.

What is the repayment procedure?

The micro-entrepreneur repays his loan according to a precise schedule established with the MFI. When all the repayments have been completed, the MFI transfers the funds to ENGIE - MicroWorld who then makes the amount in question available to the lenders. The transfer of the funds from the MFI to ENGIE - MicroWorld is made in one single payment to limit the number of money transfers and to guarantee the MFI partner a minimum level of stability with regard to its outstanding liabilities.

Why lend at 0% instead of simply donating?

In order to fight against poverty and help local economies to develop, ENGIE - MicroWorld offers to finance entrepreneurs’ projects with interest free loans. This gesture of solidarity is very different from a donation because it is based on a concept of economic sustainability rather than emergency humanitarian aid. Furthermore, 100% of the sums lent go to helping the micro-entrepreneurs and not to financing ENGIE - MicroWorld’s operating expenses. These sums are then paid back to the lender once the loan has been repaid. However, at the moment, for economic reasons and legislation we cannot organise the payment of interest on loans. We are looking into this subject but we believe that bringing support by financing projects with interest free loans is a unique opportunity today.

Does the micro-entrepreneur pay interest?

Yes, micro-entrepreneurs pay interest on the sums borrowed from MFIs. One of the principal objectives of micro-financing is to create a model of sustainable development. In this way, the assistance provided to populations traditionally excluded from financial services can take place in a context where all the participants in the chain benefit in some way and can cover their costs and envisage developing their activity on a long term basis. The MFIs therefore bear the significant operating and refinancing costs which have to be covered, resulting in interest rates which are often equivalent to 3% per month rather than per year. This may seem very high when compared to the rates charged by banks in developed countries, but this comparison is misleading because the economic context is very different, even if, as in all sectors, there are cases of abuse which must be tackled. To find out more, go to the chapter devoted to this subject: Micro-credit interest rates. There is also a special report about it.

What is an average loan for a micro entrepreneur?

The amount of a microfinance loan can vary depending on the region. In India, for example, an average loan would be around €120, whereas in Eastern Europe it would be more like €1,800 euros (Source: MixMarket 2009).

Are there any risks involved?

As for any loan, there is a risk of non repayment of which the lender must be aware when deciding on the amount to loan. However, with ENGIE - MicroWorld, in the case of non repayment by the micro-entrepreneur, the MFI partner takes the place of the borrower for the reimbursement of the sums in question. That is why the contract validated when the loan is made is drawn up between the lender and the MFI. There then remains the risk of bankruptcy on the part of the MFI. In order to limit this risk, ENGIE - MicroWorld has created meticulous procedures and established strict criteria for entering into a relationship with an MFI. Detailed financial and operational audits are conducted on all MFI partners before they are accepted. We then regularly monitor the financial soundness of our partners to anticipate risk. However, it is important to note that our MFI partners are located in countries where the economic and political environment is often fragile or where the risks may be significant.

In case of a dispute, and especially in case of payment default of the microfinance institution, the parties commit themselves to first look for an amicable solution through MicroWorld acting here as an arbitrator.
To read more on the subject, see "Risk Management".
To know more about the repayment default rate of the projects on MicroWorld, see the page Default rate.

How does ENGIE - MicroWorld cover its operating costs?

ENGIE - MicroWorld receives a commission of around 5% from its microfinance institution (MFI) partners in exchange for publishing its projects on the site. This cost for the MFI remains lower than the normal cost of financing, which means it can access capital at an improved rate. ENGIE - MicroWorld is also remunerated by its corporate partners for the organisation of space provided and for visibility on the site. Finally, ENGIE - MicroWorld is also supported by the private investors who have made a commitment to finance its activity until it reaches breakeven.

Moreover, in order to support ENGIE - MicroWorld’s activities and participate in costs associated with lending, including foreign currency exchange and bank transfers, the user may decide to add an amount of their choice as a contribution to ENGIE - MicroWorld. This contribution is not tax deductible.

Why isn’t MicroWorld an NGO? What is a social business?

A social business works toward creating social advantages rather than maximizing profits and unlike, an NGO, it is a financially, viable business. Shareholders accept that they will not be remunerated in the traditional manner in order to increase the range and impact of the social business' actions.

By developing a genuine economic model, two worlds which would traditionally be in opposition are brought together:
  • associations and NGOs which are financed by grants and donations
  • business structures which enable a sustainable economic model to develop without making co-development their core objective.

  • By adopting this philosophy, we are able to envision developing our activity without having to deduct a part of the loans made via the site to finance it. Furthermore, MicroWorld's investors have chosen to go even further by making Positive Planet the major economic beneficiary of the project.

    How to close an account on ENGIE - MicroWorld?

    I am a member non lender on ENGIE - MicroWorld

    It is possible to close your ENGIE - MicroWorld account by sending your request to contact.engie@microworld.org. If you are the administrator of a group, you must give your administrator rights to another member of the group or decide to close the group.

    I am lender on GFD SUEZ - MicroWorld and I do not have ongoing loan repayment

    It is possible to close your MicroWorld account by sending your request to contact.engie@microworld.org. If you still have money available on your MicroWorld account, we invite you to withdraw your money via MangoPay (see section: How do I withdraw my money? ). If you are the administrator of a group, you must give your administrator rights to another member of the group or decide to close the group.

    I am lender on ENGIE - MicroWorld and I do have one or several ongoing loans repayments

    We cannot close your ENGIE - MicroWorld account because the repayment of your loan(s) would fail. We invite you to reiterate your request when you will no longer have ongoing loan repayment. If you wish, we can nevertheless unsubscribe you from our mailing lists. To do so, please contact us at contact.engie@microworld.org.

    Microfinance Institution (MFI) Selection

    The microfinance institutions (MFIs) partners are an integral part of our operations. They are responsible for the review and evaluation of the project of each micro-entrepreneur, for publishing the profile of the borrower and the project on the MicroWorld website, and of course the payment to the micro-entrepreneur and collecting repayments. For this reason, the selection of MFI partners is a crucial point of our organization.

    The selection process permits to assess the risk of each institution. It is mandatory and the same for each institution. The Investment Committee of MicroWorld decides the status of a potential MFI partner

    MicroWorld is assisted by the expertise of Planet Finance Group and particularly the experience of Planet Rating to assess the risk.

    Quality, not quantity

    Our goal is to form long-term relationships with a few carefully selected microfinance institutions. We usually select one partner by country, financially strong and effective institutions, especially the MFIs with a strong social commitment. Our collaboration must be part of the mutual interest of both parties: financial support of the growth of our MFI partners in exchange for maximum guarantees for our lenders.

    There are several steps in the selection process of MFIs:

    1.     MFI pre-selection

    With the help of Planet Rating, a subsidiary of Planet Finance specialized in rating MFIs, MicroWorld selects trusted institutions. An institution must first have a strong social dimension and be financially strong. At this stage, the MicroWorld Operations Team relies on financial documents sent by a preselected institution and PlaNet Rating reports on country risk to draft a first study of risk.

    2.     Validation of the Investment Committee and Risk: pilot phase

    Based on the study of risk written in the pre-selection phase of the IMFs, the Investment Committee validates or not the partnership. Once validated, the institution enters a first phase of the partnership called 'pilot'. This pilot phase has a limited duration. The Investment Committee also identifies the risk associated with a partner institution. Lenders will clearly be informed via notifications on the website when an institution is considered more risky than average institutions on the website. In all cases, we recommend our members to diversify their loan portfolio between different MFIs and regions available on the website to reduce their exposure to risk.

    3.     Operational audit

    Before publishing loans on the platform, a field audit is performed. This audit takes 2 or 3 days and permits to analyze the functioning of the IMF and to identify the various issues raised by the Investment Committee and Risk. The audit follows a set of procedures to analyze risk areas. Following this audit, the Operations team prepares an investment memorandum that completes the first study of risk with the data collected on the field. At this stage, the institution is in a pilot phase of the partnership and some loans are available on the platform.

    4.     Final Decision: confirmed phase

    Once the investment memorandum reviewed and validated by the direction of Planet Rating, the Investment and Risk Committee meets to review the conclusions of the audit and determines the final collaboration with the selected MFI. The committee decides on the conditions of the final partnership and defines the MFI risk profile. The MFI then becomes a "confirmed" partner.

    5.     Monitoring of ongoing partnerships

    Each quarter, the Investment Committee meets to analyze the development of partnerships and the different status of potential partners.

     

    MFI Integration

    Once the MFI is selected and the partnership is approved and signed, a member of the MicroWorld Operations team visits the MFI for an extended period in order to conduct training of the MFI team on an online loan tool and on publication of information on projects. MicroWorld believes in minimizing its impact on the work of its partners, and try to be as flexible as possible in the implementation of its procedures.

    The MicroWorld Correspondent

    MicroWorld ensures that the publication procedures and monitoring loans will be applied in the most serious way with the help of a local agent recruited by the MFI as a MicroWorld correspondent. MicroWorld covers the costs of the collaboration, such as salary, computer and telephone equipment and / or camera, useful for to make live projects of micro-entrepreneurs on the MicroWorld platform.

    The MicroWorld correspondent is the link, the main contact between the MFI, loan officers and MicroWorld. In addition to being responsible for the publication and monitoring of loans, the correspondent is actively involved in the creation of media content (articles, pictures…) about the country and the reality of microfinance in the region. Refer to the "News" section of our website and the "on the ground" blog section. You will find portraits of micro-entrepreneurs and reports on the countries and regions in which partnerships are established.

    Seyni – MicroWorld correspondent in Microcred Senegal

    The Loan Process

    OOnce the MFI partner is chosen and "integrated", it is ready to publish loans on the website.

    1.     Loan application

    A potential borrower applies for a loan at one of our MFIs partner. A loan officer employed by the MFI, visit the potential borrower to assess his/her demand. This assessment includes an analysis of the economic and financial situation of the micro-entrepreneur, his/her "business plan" (revenues and expenditures expected ...), his/her personality and temperament and possibly the credit history. The loan officer then explains how works MicroWorld and asks if the borrower agrees to be a "MicroWorld entrepreneur." With his/her agreement, the loan officer collects his/her testimony, and takes the picture that will then be published on the website.

    2.     Loan approval

    Back to the branch of the MFI, the loan officer submits the loan application to the Credit Committee, usually composed of the director of the branch and possibly another loan officer. For larger loans, validation must be made by the head of the IMF. The loan finally approved, the loan officer downloads the picture and the details of the project of the borrower in MicroWorld system.

    3.     Disbursal and Loan Posting on the MicroWorld Website

    When the loan is approved, it is usually disbursed to the borrower within 48 hours. The loan is then published on the website, to be financed by MicroWorld lenders. This rapid procedure is explained by the requirements of quality and reliability that we have vis-à-vis our micro-entrepreneurs customers.

    4.     Funding

    Once posted on the website, the loan can be financed by MicroWorld lenders. Although the loan was pre-disbursed in the vast majority of cases, a contractual agreement is agreed between the lender and the IMF. This ensures that the money will be used to repay the pre-disbursed money (technically put on the same bank account). The loan will remain on the website for a limited period which can vary with MFIs. If a loan expires before it has been fully funded, MicroWorld will send the amount collected to the MFI.

    5.     Fund transfer

    To reduce transaction costs, transactions between MFIs and MicroWorld are made each month on the basis of net metering, the reimbursements of completed loans are subtracted to the funds raised for published loans during the month. One transaction can be done.

    6.     Repayment

    The loan officer visits the borrower regularly to collect loan repayments. Once the loan is fully repaid, the loan amount will be included in the net metering balance described above, and MicroWorld lenders will receive their funds in their MicroWorld account. If the borrower has only partially repaid his loan, the MFI partner agrees to cover the funds it has not (or will not) get. The MFI is indeed the sole authority to evaluate and validate credits for micro-entrepreneurs.

    Awareness of the existence of risks in the microcredit sector is a first step towards controlling and reducing these risks. This section describes the three main risks facing MicroWorld lenders: the risk level of the entrepreneur, the risk level of the MFI and the country risk. It also describes the measures taken by MicroWorld to mitigate the level of risk. Some advices are also listed to limit your exposure.

    Risk of Entrepreneur Default

    Entrepreneurs may not be able to repay their loans for a number of reasons, ranging from personal problems or business problems to political or environmental reasons. Most microfinance borrowers are unable to provide guarantees for their loans, removing one of the main tools used by traditional financial institutions to mitigate credit risk.

    Our partner microfinance institutions (MFIs) are experienced in providing credit to the communities they serve, and conduct extensive research before approving a loan. These assessments are typically used to examine the nature of the potential customer, project or existing businesses, their level of poverty and their immediate environment. These analyzes are supplemented by the knowledge of the field of loan officers.

    Often MFIs prefer to structure their loans in the form of solidarity groups, whether for a simple moral support, or to form a group whose members guarantee the payment of the group debt in case one of the members defaults.

    The default rate in microfinance has been particularly low, but past performance do not guarantee future trends. The global recession has undoubtedly influenced the micro-entrepreneurs to some extent, which makes it even more important the rigorous processes for credit assessments by MFIs.

    What does it mean for MicroWorld members?

    MicroWorld members are protected from entrepreneur default. In fact, lenders do not have access to sufficiently complete information to assess the risk for each entrepreneur, so it seems logical that MicroWorld lenders not assume the risk of an entrepreneur defaulting.

    We have established an agreement with partner microfinance institutions who have experience of credit risk on each client they serve. They guarantee the reimbursement of the loan, even in case of entrepreneur default. Each entrepreneur on the website MicroWorld has previously been met by our partners, and they have approved their request for credit.

    Microfinance Institution Risk

    MicroWorld partners with microfinance institutions (MFIs) in all countries we operate in. These partner organizations are responsible for evaluating loan applications, disbursing the amounts to borrowers after the loans are approved, publishing loan applications on MicroWorld website, and collecting payments from the borrowers. Our partners have the expertise, experience and local knowledge to carry out these functions the most efficient and safest way possible.

    However, like all businesses, our MFI partners are exposed to various types of risks, some of which may affect their ability to pay their debts to their creditors such as MicroWorld lenders.

    These include:

    -   Bankruptcy: that could be caused by poor operational control, poor risk management or external issues such as changes in the political or environmental context, or fluctuations in the financial markets.

    -   Fraud: as in all activities involving the management of large amounts of money, fraud is a constant risk.

    -   Portfolio risk: if suddenly a large number of borrowers could not repay their loans, following a severe drought for example, the MFI may find itself unable to pay its debt obligations.

    In case of a dispute, and especially in case of payment default of the microfinance institution, the parties commit themselves to first look for an amicable solution through MicroWorld acting here as an arbitrator.

    What does it mean for MicroWorld members?

    Here are the operational measures that allow us to reduce the risk level of MFIs:

    -   Each MFI is subject to a thorough audit, on both financial and institutional plans and on operational aspects and social performance. A microfinance expert independent investment committee decides to accept an MFI based on these audits. We consider only the MFIs recommended by Planet Rating, a subsidiary of PlaNet Finance, specializing in rating MFIs.

    -   Once approved by the Investment Committee, an MFI has a status called "Pilot" which is the first step in our integration process. During this initial period the money that may be collected by the institution will be limited. This step lasts over a period of about 3 months and provides a definitive view on the quality of the partner. During this phase, an operational audit on the ground is also conducted. If the MFI meets the criteria to collect more money on the platform, it is again presented to the Investment Committee and Risk to switch to "confirmed" status.

    -   The "Operations" department of MicroWorld and the MicroWorld correspondent, based at the IMF headquarters carry out regular checks and reconciliations to prevent any fraud or system errors.

    Despite these measures, it is impossible to eliminate all risks. The possibility that an MFI would not able to repay MicroWorld lenders exists. Therefore, we recommend our members to diversify their loan portfolio between different MFIs and regions available on the website to reduce their exposure to risk.

    Country Risk

    As well as being aware of the entrepreneur and MFI risks, it is important to assess the macro-economic risks, which may affect an entire country or region, or even the world as in the case of the recent financial crisis. Microfinance is a dynamic sector and highly connected to other economic sectors as well as local political and environmental contexts. Moreover, microfinance is by nature often located in countries with an history of instability.

    Potential risks include:

    -   Political risk: the national government can change laws or regulations relating to microfinance, or decide to prohibit the transfer of funds abroad. This happened several times in the past.

    -   Economic risk: a sharp increase in inflation or a devaluation of the local currency may pose a significant risk for an MFI in meeting their financial obligations if they are from foreign sources.

    -   Risk of natural disasters: extraordinary events such as the tsunami in Southeast Asia in late 2004 or the floods in Pakistan in 2010 can have devastating consequences on the microfinance sector. The poorest people (potentially clients of MFIs) are often the most severely affected by these disasters.

    What does it mean for MicroWorld members?

    MicroWorld and PlaNet Rating take into account and assess the "country risk" in their audit process and selection of partner MFIs. On the project and payment page, alert messages notify the lender if the risk is considered above average. Regular monitoring of macro-economic evolution in the countries in which we are engaged is done to prevent any increase of the risk. Our MFI partners have agreed to bear the risk of currency fluctuations as they have a strong experience as well as mechanisms to manage this risk.

    However, country risk is traditionally the most likely "uncontrollable". We advise MicroWorld lenders to diversify their loan portfolios in order to limit their exposure to a particular country or region.