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How We Operate

Microfinance Institution (MFI) Due Diligence Process

Our microfinance institutions (MFIs) partners are an integral part of our operations. They are responsible for vetting potential borrowers, for posting loans onto the MicroWorld website, for disbursing the money, and for collecting repayments. For this reason, we take the selection of MFIs very seriously.

The objective of the due diligence process is to evaluate the risks existing in an MFI in order to make an informed investment proposal. The process, therefore, is mandatory for each MFI with which we consider signing a partnership agreement. Different kind of partnerships will be established according to the selection process stage and to the credit risk of the MFI evaluated by the risk committee.

Our Operation team proceed to all due diligence, using the expertise of PlaNet Finance, and the particular analysis experience of Planet Rating.

There are several stages to the MFI selection process:

  1. On Desk Analysis- MicroWorld requests relevant data from the MFI. A strong analysis of the documents collected about the MFI and the country will be made by the operations department of MicroWorld with the assistance of Planet Rating (the specialized microfinance rating agency of PlaNet Finance Group) in order to write a Pre-Investment Memorandum with a recommendation to the Investment Committee, based on the analysis of specific criteria.

  2. First Investment and Risk Committee - will validate (or reject) the partnership application. Loans from validated MFIs will start to be published on the website. According to the credit risk evaluated, different status of partnership will be established with limitations on the amount of funding. The lender will be also clearly informed on the loan page with specific warning messages.

  3. On-site Due Diligence - To confirm the status of each MFI, a due diligence on-site will be conducted for most of them. It consists in 2 or 3 days analysis conducting interviews and investigating all pre-identified topics plus any additional issues identified by the investment and risk committee. They use a set book of procedures to analyze risk areas. Following the on-site due diligence, the MicroWorld operation team produces an investment memorandum that summarizes the on-site Due Diligence.

  4. Supervision by PlaNet Rating Notation Committee - Planet Rating is bringing its expertise in the new due diligence process of MicroWorld. Each report and grade will be submitted to a Notation Committee involving expert and senior analysts from PlaNet Rating. The aim of the Notation Committee is to give its opinion on MicroWorld’s analysis. The Notation committee introduces an iterative process in which MicroWorld may pursue the data collection and analysis until the notation committee agrees with MicroWorld’s conclusions.

  5. Final Partnership decision - After conducting the due diligence, the Investment Committee is requested to decide upon the establishment of a final partnership and define the final “risk profile” of the MFI.

  6. Quarterly Investment Committee meeting - A quarterly Investment Committee will be organized by MicroWorld to update on-going MFI partnerships and current statuses with potential future partners. These Quarterly Investment Committee should involve a meeting and physical presence of all Committee members as much as possible.

MFI Integration

Once an MFI has been selected and contracts agreed between MicroWorld and the MFI, the operations department is responsible for making it possible for the MFI to post loans on the website. A member of the operations department visits the MFI for an extended period in order to conduct detailed training of the MFI team. Back at MicroWorld headquarters, the operations team begins setting up the MFI on the internal MicroWorld systems, ready to post their loans.

MicroWorld believes in minimizing its impact on the MFIs, therefore it tries to be as flexible as possible when implementing its processes to the MFI.

The MicroWorld Correspondent

MicroWorld ensures that its procedures are performed to the highest standard by asking each MFI to employ a local agent, otherwise known as a MicroWorld correspondent, who will be responsible for all MicroWorld loan postings for that MFI. We cover the cost of the local agent’s salary, the cost of his/her computer, and mobile camera-phones for the loan officers, in order to reduce the cost burden on the MFI.

The MicroWorld correspondent uses their local knowledge and experience to conduct any necessary training of loan officers, to act as an intermediary between the MFI and MicroWorld, to post engaging loans on the website, and to perform regular audit checks on our behalf. They also write articles about their country and the MFI, which can give MicroWorld members a deep and unique insight into microfinance in the field. These articles can be found on our blog From The Field.

Seyni - the MicroWorld Correspondent for MicroCred Sénégal in Dakar

The Loan Process

Once an MFI has been selected and integrated on MicroWorld.org, it will be possible to post some loans on the website. To minimize the impact on the MFI, we are committed to remain flexible and able to adapt our processes to suit the MFI. For this reason, actual processes may vary from MFI to MFI.

1.     Loan application

A prospective borrower applies for a loan with one of our MFIs partners. The person may already be a client of the MFI who is applying for a new loan, or may be applying for their first loan.

2.     Application evaluation

A loan officer, employed by the MFI, visits the client to assess their application. This will involve an assessment of the client’s wealth, character, business plan, and credit history. The loan officer explains to the client about MicroWorld and asks if they would like to be a MicroWorld borrower. If they agree, in addition to normal requirements, the loan officer will ask some additional questions for the website, and take a photograph of the client using provided cameras or even their mobile phone if it is easier.

3.     Loan approval

Back at the branch, the loan officer submits the loan application to the branch manager. Small loans can be approved by another loan officer, or sometimes by the branch manager. Larger loans must be approved by the head office. At the same time as submitting the application, the loan officer uploads the client photo, and a photo of their application form, to the MicroWorld system.

4.     Disbursal and Loan Posting on the MicroWorld Website

If the loan is approved, the loan is disbursed to the client within 48 hours. The process is fast to enable the MFI to remain competitive among rival MFIs. Once the loan has been approved, the MicroWorld correspondent uses the information sent by the loan officer to create a loan profile in the MicroWorld system. This can then be published on the website, ready to be funded.

5.     Funding

Once the loan has been published on the website, it can be funded by MicroWorld members. Although the loan has been pre-disbursed, a contractual agreement is entered between the lender and the MFI that their money will be used to backfill the account of the borrower. The loan will remain on the website for a limited period which will vary between MFIs. If a loan reaches expiry before it has been fully funded, we will send the amount that has been raised to the MFI.

6.     Fund transfer

To reduce transaction costs, payments between the platform and the MFI take place monthly on a net billing system, meaning that the net of loans less loan repayments will be transferred between the two parties.

7.     Repayment

The loan officer visits the client on a regular basis, weekly or monthly, to collect repayments. Once the loan is completely repaid, the full amount will be transferred back to us and will show in the lenders' MicroWorld accounts.


The Investment And Risk Committee

The primary responsiblity of the Investment And Risk Committee is to choose MFI partners for MicroWorld, and to decide on a maximum outstanding balance for each MFI partner. The Committee also approves MicroWorld’s risk and audit policies.

The committee consists of five members:

•    Alexandre Allard (President of Allard Group, representing shareholders)

•    Emmanuelle Javoy (General Director of Planet Rating, an MFI rating agency)

•   Minh-Huy Lai(Associate Director of Degree Programs of HEC Exeducative Education and former General Manager of SPBD, a Samoa-based MFI)

•   Sebastien Duquet (General Director of PlaNis responsAbility)

•   Arnaud Ventura (Vice-President of PlaNet Finance Group)