How does 1x1M Work
1. 1x1Microcredit and its partner microfinance Institutions
1x1microcredit partners with existing microfinance institutions around the world (the local partner). These organizations that have expertise in microfinance and a mission to alleviate poverty facilitate loans in the field. These local partners know the needs and the ways in which they can better support and accompany entrepreneurs on their way out of poverty.
1x1microcredit selects very carefully its local partners (learn more about the Selection criteria for local partners).
2. Local partners offer microcredit to entrepreneurs living in poverty
Entrepreneurs living in poverty can request microcredits to our local partners. Their demands are carefully analyzed by the local partner to check viability. This is not a grant. The entrepreneur is expected to return the microcredit. This is why the local partner makes sure there is a capacity or a plan to return the loan.
3. Local partners disburse loans and upload stories Local partners disburse loans when needed.
In some cases, it disburses funds before the loan request is uploaded on the web. In other cases, they wait until 1x1Microcredit send the funds for the credit. (Learn more on Refinancing)
Local partners interview the entrepreneurs and write the stories of their clients and take the pictures to upload them on the 1x1Microcredit web site. Each local partner requires different conditions (interest rate, compulsory saving…).
The entrepreneur implements his/her project and returns the loan to the local partner with the agreed interest rate (an interest used to cover the local partner management costs) and conditions (learn more on interest rates applied to entrepreneurs).
4. Social investors browse profiles and lend Social investors browse loan requests and select which ones they'd like to fund.
Social investors can fund from 25€ and as much as the entire amount of the loan. 1x1Microcredit aggregates funds from social investors and provides them to the local partner on a monthly basis.
5. 1x1Microcredit disburses social investors funds to the local partner
The local partner uses the funds to refinance the loan they've already made to the entrepreneur. 1x1Microcredit provides these funds on a monthly basis. (Learn more on Monthly conciliation)
6. Entrepreneurs repay their loans
The local partner collects repayments from borrowers with the established conditions and inform 1x1Microcredit if a repayment was not made as scheduled. Interest rates are set by the local partners, and that interest is used to cover its operating costs (learn more about the interest rate applied to entrepreneurs). 1x1Microcredit charges a small commission to the local partner to cover part its operating costs (learn more about how 1x1microcredit covers its expenses). The local partner will cover small fluctuations in the exchange rate of currencies; the social investor covers only the risk of a big local currency devaluation superior to 30% (Learn more about Risks).
To minimize the expense and maximize the efficiency of money transfers, 1x1Micorcredit works on a net billing system. This means that, for any given month, we subtract the amount of local Partner repayments from the amount of loans made by 1x1M social investor. 1x1Microcredit only asks our local Partners to send payments for the difference.
7. 1x1Microcredit evaluates impact and shares it with social investors
1x1Microcredit utilizes the Progress Out of Poverty Index to evaluate the impact of the loans. This is implemented by our local partners and communicated to social investors. This is essential to understand the changing needs of people living in poverty and the effectiveness of the services provided. It is also the real return-on-investment (ROI) that social investors get out of their loans.
8. 1x1Microcredit provides repayments to social investors
1x1Microcredit returns the capital to the Social Investor. Social Investors can re-lend the amount to fund another entrepreneur, donate them to 1x1Microcredit, gift them to a friend or a family member inviting them to join in, or withdraw them.