We support the poor
Real people in need of microcredits
1x1Microcredit works through microfinance institutions that offer financial services to entrepreneurs living in poverty all around the world, starting in a few countries in Africa. Our partners are solid and reliable institutions needing capital to lend to their clients, who live in rural and urban areas and are in need of a loan to try and escape poverty.
Uploading each case on our web
Once they have properly scrutinised demands from entrepreneurs, our partner microcredit institutions upload the profiles of the selected entrepreneurs to 1x1Microcredit so that investors can lend to them directly.
The process
1. Lending: lenders browse profiles of selected entrepreneurs in poverty on 1x1microcredit.org. They select the projects they want to invest in. The funds invested are then sent to the microfinance institutions, which provides the loan directly to the entrepreneur.
2. Repaying: over time, the entrepreneur returns the loan to the microfinance institution with an interest. This interest is kept by the microfinance institution to cover its costs. The principal is sent back to 1x1microcredit and is returned to the account of the social investor.
3. Reinvesting: investors get their capital back, so that they can re-invest it to someone else, donate it, gift it or withdraw it altogether.
Interest rate
Entrepreneurs are charged with an interest rate defined with the microfinance institution. The global average interest rate is in the range of 35 %to 40%, with some countries having averages of 20% (Sri Lanka) and others above 60% (Mexico). This is higher than normal bank rates, and it is due mainly to their national inflation and to the small size of loans that provide little margins even if the amount of work is as high as banks giving big loans. A big and a small loan require the same amount of working hours, for meeting with the borrower to appraise the loan, processing the loan disbursement and repayments, and follow-up monitoring.
Risks
1x1microcredit doesn't guarantee the repayment of loans. It works as an effective intermediary between microfinance institutions (and their clients, the borrowers) and investors. Social investors risk loosing the amount they lent in the following cases:
Risks of lending through 1x1Microcredit:
(a) Risk related to the microfinance institutions: Our partner microfinance institutions are essential to providing useful microcredits to people living in poverty. This is why they are carefully selected. However, there are always risks of bankruptcy, fraud or mismanagement. These risks could generate a loss of the amounts invested by social investors.
(b) Risk related to the country: there are political, economic, financial and environmental risks that are difficult to predict and that can jeopardize the total or partial repayment of a loan. A big currency depreciation (over 30%), an earthquake like the one in Haiti in 2010, or a conflict such as Syria could prevent microfinance institutions to recover their loans.
When selecting the microcredits, social inverstors should consider these risks. It is recommended to diversify social investments.
The risks related to the entrepreneur (defaults related to health problems, robbery, mismanagement, fraud, bad harvest, etc.) are covered by the our partner microfinance institution.
Microfinance Institutions
A microfinance institution (MFI) is an organization that provides financial services targeted to the poor. While every MFI is different, all share the common characteristic of providing financial services to a clientele poorer and more vulnerable than traditional bank clients. 1x1microcredit partners with MFI to allow lenders to support entrepreneurs living in poverty.
The role of MFI in 1x1microcredit is to:
• Gather and analyse the demands for credit from people living in poverty in their areas;
• Examine the viability of each demand and upload the loan details including a photo of the entrepreneur and a description of the business;
• Manage the loan, including distributing loan funds, collecting repayments and providing support to entrepreneurs;
• Provide updates on the progress of the business;
• Forward repayments back to 1x1microcredit.