FAQ: Our Partner Companies

eMicrocredit does not process loan applications directly from entrepreneurs. If you would like to apply for a loan please contact the eMicrocredit Partner Company in your local area.

eMicrocredit currently works with Partner Companies in over 50 countries. A list of eMicrocredit's current Partner Companies can be found on www.emicrocredit.net. We are working hard to expand our partnerships to all regions across the globe at a pace that is healthy for both our current partners and for eMicrocredit.

eMicrocredit does not process loan applications from entrepreneurs. If your friend would like to apply for a loan please have him contact the eMicrocredit Partner Company in his local area. A list of eMicrocredit's Partner Companies can be found on www.emicrocredit.net.

Please visit our How to Become a Partner page (www.emicrocredit.com) for complete information about becoming eMicrocredit Partner Company.

Briefly, in order to become an Partner Company, an organization must, at a minimum:

• Have a history of serving the poor, excluded, and/or vulnerable people for the purpose of alleviating poverty or reducing vulnerability
• Be registered as a legal entity in its region of operation
• Have at least 1-2 years of financial audits

Please note -- eMicrocredit is unable to work with start-ups or organizations that do not provide microfinance services.

Additionally, eMicrocredit does not provide funding in the form of grants or donations to any organization.

Self-sustainability is critical to creating long-term solutions to poverty, and charging interest to entrepreneurs is necessary for microfinance institutions to achieve this.

Our Partner Companies are free to charge interest, but eMicrocredit will not partner with an organization that charges exorbitant interest rates.

We also require Partner Companies to fully disclose their interest rates. Microfinance is an expensive business, which is essentially the reason small loans are not provided by large banks.

While eMicrocredit's Partner Companies do not bear the cost of capital or the cost of default, they do bear transaction costs and some currency risk.

Charging interest to entrepreneurs enables our Partner Companies to bear these costs and achieve self-sustainability.

You can find the average interest rates that our Partner Companies charge on our project website (www.emicrocredit.net).

The interest rate charged by a Partner Company goes towards the high operational cost of facilitating microloans. Because our Partner Companies don’t have to pay interest to eMicrocredit for the loans that they administer, eMicrocredit loans help Partner Companies reach communities and populations that may not otherwise be served.

As many of our Partner Companies serve communities in rural areas, the labor of distributing and collecting loan payments add to the organization’s operational costs. It is also important to remember that comparisons of interest rates charged by commercial banks in underdeveloped countries, and with rates charged in developed countries are not good comparisons. A developed banking system can provide capital at lower rates, and larger loans means a lower proportion of costs going towards transactional expenses.

Quoting CGAP (Consultative Group to Assist the Poor), the nature of microcredit "small loans” is such that interest rates are necessarily high to return the cost of the loan:

"There are three kinds of costs the MFI has to cover when it makes microloans. The first two, the cost of the money that it lends and the cost of loan defaults, are proportional to the amount lent. For instance, if the cost paid by the MFI for the money it lends is 10%, and it experiences defaults of 1% of the amount lent, then these two costs will total $11 for a loan of $100, and $55 for a loan of $500. An interest rate of 11% of the loan amount thus covers both these costs for either loan.

The third type of cost, transaction costs, is not proportional to the amount lent. The transaction cost of the $500 loan is not much different from the transaction cost of the $100 loan. Both loans require roughly the same amount of staff time for meeting with the borrower to appraise the loan, processing the loan disbursement and repayments, and follow-up monitoring. Suppose that the transaction cost is $25 per loan and that the loans are for one year. To break even on the $500 loan, the MFI would need to collect interest of $50 + 5 + $25 = $80, which represents an annual interest rate of 16%. To break even on the $100 loan, the MFI would need to collect interest of $10 + 1 + $25 = $36, which is an interest rate of 36%. At first glance, a rate this high looks abusive to many people, especially when the clients are poor. But in fact, this interest rate simply reflects the basic reality that when loan sizes get very small, transaction costs loom larger because these costs can't be cut below certain minimums."

eMicrocredit only partners with microfinance institutions that have a social mission of lending to the poor; to obtain more information about how eMicrocredit evaluates and selects its Partner Companies, please see our project website (www.emicrocredit.net).

We are working hard to expand our partnerships to all regions across the globe at a pace that is healthy for both our current partners and for eMicrocredit. In fact, eMicrocredit is actively looking into partnering all over the world; however, before we are able to move forward, there are numerous financial and legal regulations that we must investigate. A list of eMicrocredit's current Partner Companies can be found on our project website (www.emicrocredit.net).

eMicrocredit posts new loans on its website every day, so if you don't see a loan that meets your criteria right now, please check back again soon.

If you know someone who fits eMicrocredit's criteria, please contact them and ask them to review our minimum criteria to ensure they are a good fit (www.emicrocredit.net).

eMicrocredit and its Partner Companies cannot facilitate visits at this time. If even a fraction of eMicrocredit's lenders visited the entrepreneurs they support, our field partners would be swamped and unable to proceed with their primary function of working with entrepreneurs in need.

eMicrocredit prefers that all lenders work through eMicrocredit to resolve any Partner Company related issues. Many of the Partner Companies that work with eMicrocredit have limited access to the internet, may not speak English, and have a very small number of staff members. For these reasons, it may be difficult for a partner to respond to your inquiry.

eMicrocredit has established contacts at the Partner Company and can work more quickly and efficiently to resolve any concerns that you may have.

eMicrocredit and its Partner Companies cannot facilitate direct communication between lenders and entrepreneurs at this time. Many entrepreneurs do not have access to the internet, they speak another language than you do, and eMicrocredit's Partner Companies do not have enough time to facilitate this kind of communication.

If you ever want to post a comment in response to a blog entry publicly on the eMicrocredit website, please know that you can click Comment link under a blog entry. eMicrocredit's field partner may see your comment, and possibly even share your words of encouragement with the entrepreneur.

Our Partner Companies are responsible for vetting loan applications to ensure that loans uploaded to the site have a high chance of being a successful business. The Partner Company uploads the loan details, including a photo of the entrepreneur and a description of the business, to eMicrocredit's website for approval and live posting.

Once a loan has been funded our Partner Companies are responsible for managing the loan on the ground, including distributing loan funds, collecting repayments and providing reasonable support to entrepreneurs to ensure the highest chance of business success. Partner Companies are responsible for providing updates on the progress of the business through eMicrocredit's software.

Finally, Partner Companies are responsible for forwarding repayments to eMicrocredit on a regular basis.
How does eMicrocredit choose its Partner Companies?

eMicrocredit partners with established microfinance institutions with a social mission of lending to the poor. We conduct extensive Due Diligence on each Partner Company. For more information, please visit our project website (www.emicrocredit.net).

eMicrocredit is based in New Delhi and partners with microfinance institutions across the globe. At this time, we are focusing our limited resources on developing additional partnerships and do not have plans to open field offices and/or eMicrocredit affiliates.

However, below are a few other ways you can become involved with eMicrocredit.

• Become eMicrocredit lender and support entrepreneurs as they lift themselves out of poverty.
• Keep an eye out for future positions and volunteer opportunities with eMicrocredit.

When we refer to our Partner Companies, we are referring to individuals and organizations that we have partnered with to manage and administer the individual loans.

eMicrocredit's Partner Companies are critical to our ability to provide loans efficiently. By partnering with microfinance institutions located on the ground, eMicrocredit leverages critical knowledge of the local population and years of experience managing loans. Were eMicrocredit to operate as a microfinance institution, it would enter the market decades behind many well-equipped organizations with documented success.

Partnering allows eMicrocredit to divide and conquer -- eMicrocredit collects and distributes loan funds through the website and Partner Companies manage the loans on the ground -- allowing maximum efficiency at the lowest cost.

In a group loan, each member of the group receives an individual loan but is part of a group of individuals bound by a 'group guarantee' (sometimes called 'joint liability'). Under this arrangement, each member of the group supports one another and is responsible for paying back the loans of their fellow group members if someone is delinquent or defaults.

Group loans are a powerful innovation in microfinance, because they are often less expensive for partners to manage in terms of time and resources. In a group, microfinance institutions can leverage the local knowledge of individuals to select good borrowers; disburse many loans at once; collect repayments in a group; and more easily follow up on delinquent loans, as group members have an incentive to work with each other to ensure on-time repayment. By using these efficient aspects of group lending, microfinance institutions can issue more loans in smaller amounts to the poorest.