FAQ: How eMicrocredit Lending Works

Loans made through eMicrocredit's website may or may not earn any interest. eMicrocredit's loans are not an investment and are not recommended as an investment.

eMicrocredit does not charge any interest or fees to our Partners. However, our Partners are free to charge interest to the entrepreneurs.

No, eMicrocredit loan is not considered a donation because it is possible you will receive your money back. eMicrocredit cannot assure, however, that your loan will be repaid or that you will recover any of your principal.

eMicrocredit’s repayment system is designed to accurately reflect the way that our Partners collect funds from the entrepreneurs that you have supported with loans.

When one of eMicrocredit’s Partners uploads an entrepreneur’s loan request to eMicrocredit, they set the anticipated repayment dates for the loan and the date that the loan is set to be disbursed to the entrepreneur. This repayment schedule can be monthly, quarterly, once at the end of the loan term, or whatever most accurately reflects the way that the entrepreneur will be making repayments.

Our Partner Companies have until the end of the month that each anticipated repayment is due to let eMicrocredit know whether or not they actually collected the repayment. Once we have all of this information, we use it to generate a bill to charge our Partners for all of the repayments they collected that month.

Once the repayment is made into your eMicrocredit account, you can re-lend the funds, donate them to eMicrocredit’s operating expenses, or withdraw them into a PayPal account.

In microfinance, it is common to try to reschedule loans in delinquency and default in order to accommodate the eventual repayment of the loan. At eMicrocredit, we define default (non-repayment) as 6 months after the official due date of the loan. At that point, we "write-off" the loan, and it is moved from delinquency to default on the balance sheet. When eMicrocredit loan defaults, we notify all contributing lenders by email.

Our Partner Companies choose the entrepreneurs whose business loans are posted on our website. Each Partner uses their own application vetting process, reviewed by eMicrocredit to confirm that the organization has the ability to handle eMicrocredit's funds responsibly. Each business loan is reviewed by us before going live to the site to ensure appropriate content.

As repayments are made on your loan, you will receive an email notifying you that funds were deposited into your account. Then you can re-lend your funds, donate them to eMicrocredit, or withdraw them.

Loan funds received by eMicrocredit are forwarded, to the respective Partner Company on a monthly basis. The Partner Company then distributes the funds to the entrepreneur.

Some of our Partner Companies have working capital, which they forward to an entrepreneur when they see the business has been fully funded online, before the payment arrives from eMicrocredit. This allows the business to start operating sooner.

eMicrocredit receives new loan requests from our Partner Companies every day, so if you don't see a business that matches your preferences, check back tomorrow. eMicrocredit operates in real time, so we receive loan applications and post them on as they come in from the field.

Loan requests are funded quickly, so if you see a business you like, make a loan, or it just might be gone next time you try to lend.

We are not in a position to provide tax advice. Therefore, please consult with your tax counsel regarding the deductibility rules that apply to you.

eMicrocredit does not send loan funds directly to the entrepreneurs. Each loan is managed by eMicrocredit Partner Company. Before an entrepreneur appears on eMicrocredit they have first been vetted by our Partner Company for loan application approval. Each of our Partner Companies uses their own application procedures, which eMicrocredit has reviewed and approved.

eMicrocredit sends 100 percent of each loan contribution to the entrepreneur that you select.

You can diversify your loan portfolio by lending to multiple entrepreneurs. For example, you can make a $20 loan to five entrepreneurs (e.g. loan diversification) or a single $100 loan to one entrepreneur (non loan diversification). If one of the five entrepreneurs defaults and the others do not, you may still get $80 back whereas if the single entrepreneur defaults you may not get any of your money back.

Lending at eMicrocredit involves risk and eMicrocredit does not guarantee lenders that their loans will be repaid. You can find eMicrocredit's repayment rate to date on www.emicrocredit.net. However, past repayment rates may not necessarily reflect future repayment rates or the likelihood of repayment by any particular entrepreneur.

By lending to multiple entrepreneurs, rather than simply lending to one entrepreneur, you may be able to increase the likelihood of repayment. We call this "loan diversification."

Yes, in fact, there are two. The first is eMicrocredit. When you lend through eMicrocredit, the funds are sent to eMicrocredit via PayPal. From eMicrocredit, the funds are sent to the second middle man, our Partner Company, who will manage the loan including distributing funds and collecting repayments. When the Partner Company receives the funds, they are then distributed to the entrepreneur.

Repayments are made from the entrepreneur to the Partner Company on a schedule determined by the Partner Company. As each repayment is collected, the Partner Company enters the repayment amount into our software over the internet, notifying eMicrocredit and the lenders that a repayment has been made. eMicrocredit invoices Partner Companies monthly, and all funds collected on the loans you've made are repaid into your eMicrocredit account.

The two middle men, eMicrocredit and the Partner Company, are crucial to enabling this loan process to operate as efficiently and as cheaply as it does. We leverage the skills we each have to provide loans at much cheaper rates than alternative sources of debt capital.

At eMicrocredit, we do not handle your financial information. Instead, PayPal provides us with payment processing on all financial transactions. This means that regardless of whether you use funds from a credit card or a PayPal account to make your loan, PayPal will process your payment. This partnership helps us to keep our operational expenses low.

When you checkout, you can pay with funds from a credit card or a PayPal account. Regardless of which option you choose, PayPal will process your payment and send you a receipt. PayPal provides eMicrocredit with payment processing, which helps us to keep our operational expenses low. Please note that you will need a PayPal account if you withdraw funds from eMicrocredit.

eMicrocredit currently sends 100% of your loan amount to the borrowers in need. We support our operations through optional fees and donations from our lender community. Donations to eMicrocredit's operational expenses are optional, so you can choose to donate 0% when you lend.

At eMicrocredit, we see micro-lending as part of a sustainable solution to global poverty, so we focus all of our resources on facilitating loans to entrepreneurs. We do not facilitate donations to entrepreneurs or Partner Companies.

You may receive emails throughout the loan term updating you on the progress of the entrepreneurs you've supported. We encourage our Partner Companies to write blog entries on a regular basis.

Also, you can log into your account at any time and view the entrepreneurs that you have supported. Click on the name of an entrepreneur to view the entrepreneur's profile page. You may comment on the updates by entering a comment below the blog entry.

Entrepreneurs can take out one eMicrocredit loan at a time. However, some entrepreneurs do take out multiple eMicrocredit loans in succession. It is typically difficult for eMicrocredit lenders to support an entrepreneur more than once, as loan requests are fulfilled very quickly on the eMicrocredit site. However, you can utilize our support function to receive a notification when a specific entrepreneur posts a new loan request.

eMicrocredit's lending process is designed to accommodate loans and not donations, so all funding requests on the eMicrocredit site are considered loans. You cannot request that an entrepreneur not be required to repay your portion of the loan he or she received. If an entrepreneur defaults on his or her loan, the outstanding payments must be forgiven by all lenders. eMicrocredit does not facilitate taking action against an entrepreneur whose loan has defaulted, so all default costs are borne by lenders.

eMicrocredit’s repayment system is designed to accurately reflect the way that our Partner Companies collect funds from the entrepreneurs that you’ve supported with loans.

When one of eMicrocredit’s Partner Companies uploads an entrepreneur’s loan request to eMicrocredit, they set the anticipated repayment dates for the loan and the date that the loan is set to be disbursed to the entrepreneur. This repayment schedule can be monthly, quarterly, once at the end of the loan term, or whatever most accurately reflects the way that the entrepreneur will be making repayments.

Our Partner Companies have until the end of the month that each anticipated repayment is due to let eMicrocredit know whether or not they actually collected the repayment. Once we have all of this information, we use it to generate a bill to charge our Partner Companies for all of the repayments they collected that month.

To speed things up and to minimize the number of wire transfers being sent overseas, eMicrocredit works on a net billing system. This means that, for any given month, we subtract the amount of repayments that a Partner Company owes to eMicrocredit lenders from the amount that a Partner Company fund raises for entrepreneurs on eMicrocredit.

If the balance is positive, that means that the Partner Company has raised more than they need to repay, and we use those funds to credit your lender account with the repayments due to you.

If the balance is negative, then the Partner Company has 30 days to send us a payment for the balance. As soon as we receive that payment, we use those funds to credit your lender account with the repayments due to you.

Once the repayment is made into your account, you can re-lend the funds, donate them to eMicrocredit’s operating expenses, or withdraw them into a PayPal account.

For privacy reasons, we can’t provide the address or personal information of any eMicrocredit entrepreneur.

We cannot facilitate the purchase of goods produced by entrepreneurs at this time. We do not have the infrastructure in place to manage this process.

For privacy reasons we can’t provide the exact location or contact information for any entrepreneur posted on eMicrocredit’s site. It is the job of the Partner Company to collect on a delinquent payment, and eMicrocredit lenders assume the risk if a loan defaults.

When lending funds across national boundaries, an implicit risk exists with currencies changing relative to one another. The local currency in the Partner Company's country of operation may, for many reasons, lose some of its value relative to the USD, thus requiring the Partner Company to use more of its local currency to reimburse eMicrocredit (eMicrocredit’s working currency is the U.S. dollar).