FAQ

FAQ 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?

Microfinance 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 Microfinance 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 PlaNet Finance.

What is microcredit?

The principle of microcredit 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 microfinance institutions. To learn more, please see the section on microcredit.

What is an online micro-credit platform?

Online peer-to-peer (P2P) micro-credit is a new development in microfinance. With P2P microfinance, 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 microfinance 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. MicroWorld is the new online micro-credit platform aimed at individuals, companies and foundations.

Why set up a MicroWorld account?

When you create an account with MicroWorld, you become a member of the 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 on line, 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 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 screen name, which will be visible on the site, and a password. A confirmation e-mail will be sent 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, date of birth.

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 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 loans

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 by clicking on “Recalculate”. This will update the total amount you are financing. Confirm your loans by clicking on “Finalize my investment”. You can then either use the funds available in your MicroWorld account to finance these projects or transfer money into your account with a bank card or via a PayPal account. NB: Funding is accepted in multiples of 20€. You can therefore invest 20, 40, 60, 80 etc euros, with a minimum requirement of 20€.

financing your projects

MicroWorld.org has chosen PayPal for its secure online payment system for financing microentrepreneurs’ projects.

To finalise the financing of your projects, click on “finalize my investment” on the payment page – you will then be automatically transferred to a PayPal page.

If you have a PayPal account, log in to your account with your username and password.

If you do not have a PayPal account, finance your investment directly by bank card, selecting the card of your choice.

By signing with PayPal as an exclusive partner, MicroWorld guarantees its borrowers the confidentiality of their personal banking information.

For more information about creating a PayPal account, click on this link.

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

If a member so wishes, he may suggest to another member or any other person, on condition that this person becomes a member first, that he participate, in part or in full, in the funding of a project of his choosing 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 MICROWORLD account or send him a “MicroWorld Pass" so that he can invest in one or several projects in his 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. The Sponsoree then has 3 months from the date of issue to activate his 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. Once the MicroWorld Pass has been activated, the Sponsoree then has three (3) months to use the total sum made available and finance one or several projects. At the end of this period, the sum which has not been used by the Sponsoree will be debited from his account and re-credited to his Sponsor’s account. NB: The sum made available by the Sponsor does not constitute a donation made by the Sponsor to the Sponsoree. Hence when the project expires, the sum made available by the Sponsor will be automatically re-credited to him, the Sponsoree having no rights of any kind to this sum.

How do I track my loans?

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

Once a project has been funded, the MicroWorld website allows you to follow its developments on a monthly basis. Our local partners are regularly in touch with the entrepreneurs during the loan period, and receive regular repayments from them. MicroWorld receives monthly updates on the repayment status of each loan, and displays this information on for lenders to see.

The green dots mean that the entrepreneur’s repayments are on-time and up-to-date for a given month. The most recent dot indicates the current status of the entrepreneur. Therefore, even in the case of repayment delays in previous months (marked with a red dot), a green dot in the latest month indicates that the entrepreneur is now up-to-date on their loan repayment.

How do I withdraw my money?

Click on “My MicroWorld” in the main menu and then click on “My Investments”. Depending on the balance in your account you may withdraw money from your MicroWorld account and transfer it to a PayPal account previously set up in your name. To do this, enter the e-mail address of your PayPal account, choose the amount you wish to be reimbursed (which must be less or equal to the balance available on your account) and click on “Register Repayment” to validate.

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

For security reasons, the transfer will arrive in your PayPal account within 15 days, to prevent MicroWorld from requiring your bank details. You simply need to specify the e-mail address associated with the PayPal account on which you wish to receive the funds. If you do not have a PayPal account, you can create one for free, and then withdraw the money from your PayPal account to your bank account.

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

How to 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 to 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 to 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.

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

MicroWorld works with PlaNIS, a subsidiary of the PlaNet Finance Group which specialises in financing MFIs. All the MFIs we have pre-selected are rigorously examined to ensure they are financially sound and that the social character of their missions is appropriate. An investment and risk board is responsible for carrying out due diligence checks and an operational audit before validating or not a maximum sum of outstanding loans for the MFI. For more information, see “Selection of MFIs.

What is the PlaNIS GIPSIE rating?

PlaNIS is an investment subsidiary of PlaNet Finance. One of their tasks is to provide comprehensive reports for investment funds planning to invest in microfinance. They conduct audits on the MFIs, in which their partners wish to invest and perform comprehensive risk analyses to help investors to make their decisions.

They follow a strict method of assessment known as GIPSIE, analysing the following factors: Governance, Information System, Portfolio Risk Management, Sustainability, Internal and external controls and the political and economic Environment. PlaNIS conducts an audit on each of our partners. We determine our financial and institutional assessment based on their report and the GIPSIE rating they have attributed to our partner. A rating below 2.5 corresponds to a significant short term risk, a rating between 2.5 and 3.9 corresponds to a medium term risk and a rating above 4 means that the risk is minimal.

Does 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 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 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 on line 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 MicroWorld lenders.

What is the procedure for repayment?

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 MicroWorld who then makes the amount in question available to the lenders. The transfer of the funds from the MFI to 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, 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 MicroWorld’s operating expenses. These sums are then paid back to the lender once the loan has been repaid. However, for 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 this subject: Microcredit interest rates. There is also a special dossier on.

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 euros, 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 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, MicroWorld has created meticulous procedures and established strict criteria for entering into a relationship with an MFI and relies on the expertise of PlaNet Finance’s investment specialist, PlaNIS. With PLaNIS, 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, is it 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. To read more on the subject, see “Risk Management”.

How does MicroWorld cover its operating costs?

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. MicroWorld is also remunerated by its corporate partners for the organisation of space provided and for visibility on the site. Finally, MicroWorld is also supported by the private investors who have made a commitment to financing its activity until it reaches breakeven.

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

A social business works toward creating social advantages rather than maximazing 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 envisage developing our activity without having to deduct a part of the loans made via the site to finance it. Furthermore, MicroWorld investors have chosen to go even further by making PlaNet Finance the major economic beneficiary of the project.