1.    Do I lend money directly to the micro-entrepreneur of my choice?

    Your loan first passes through the Microfinance Institution that is in direct contact with the chosen micro-entrepreneur. That institution is obliged to transfer your money to the microcredit of the micro-entrepreneur that you have chosen to support, and we then request the corresponding statement or accounting certification.

    2.    Who is in charge of granting microcredit?

    Babyloan is an organisation that gathers different agents together, it is not in charge of granting a microcredit to micro-entrepreneurs and then recouping it. We work with field partners (microfinance institutions) that our team carefully selects. Babyloan is not tied into any partnerships with large-scale microfinance institutions financed by big international lenders. 

    3.    Why work with local partners?

    Our local partner, the microfinance institution, is a vital link out on the ground between your actions and the micro-entrepreneurs. It works with the micro-entrepreneurs, ensures that projects are viable and provides support in their execution. In this way, it increases the chances of success, both of the project and of your actions.

    It has a fundamental role to play: the microfinance institution signs the loan contracts, receives your loan funds and forwards them to the micro-entrepreneurs. It also sends the money back via bank transfer to your piggy bank!

    Please note: our partner guarantees repayment: the microfinance institution is committed to reimbursing you, even if the micro-entrepreneur does not make repayments. 

    4.    Does the micro-entrepreneur pay interest on the loan provided?

    Yes, the micro-entrepreneur pays rates of interest to the microfinance institution in charge of granting and recouping the loan. The average rate of interest on microcredit around the world is around 28%.

    5.    Why does the micro-entrepreneur pay so much interest?

    The interest rates may seem exorbitant, but they do have an explanation.

    In practice, microcredit involves high operational costs (social support, risk management, client visits, releasing liquidity, etc.) because – besides simply granting the credit – supporting and following up with the micro-entrepreneur is at the heart of the MFI-client relationship.

    The structure helps micro-entrepreneurs to manage their micro-businesses through training and the monitoring of repayments. The reality of these high operational costs engenders high interest rates for these services.

    >> Find out where your money goes

    6.    Is the micro-entrepreneur at risk of over-indebtedness?

    The phenomenon of over-indebtedness is endemic to the credit industry(in all its forms). It comes about regardless of how a credit organisation is run, and its causes may be economic, social or environmental.

    Cases exist, and issues with over-indebtedness emerge in certain areas where people have a weak understanding of financial issues, and where competition between microfinance bodies is severe. This said, the microfinance institutions that we work with demonstrate healthy commercial practices and their main priority is the solvency of the micro-entrepreneurs. These ethical practices are part of their social mission.

    7.    Why do I not recoup any of the interest that the micro-entrepreneur pays?

    We do not transfer you any profit for the loans that you make for two reasons:

    • Babyloan does not receive the interests paid by the micro-entrepreneurs: these interests are used to cover the operating costs of our local partners.

    Please note: very few of our partners make any profit from this activity.

    • This is not Babyloan’s vocation, nor is it part of its social mission. We support philanthropic activities that are not motivated by the financial interests of our contributors. This is the strength of our system.

    8. When does the microentrepreneur receive my money?

    Babyloan is a refinancing platform: when the MFIs publish profiles on the website, they have already financed the recipient as an advance: the entrepreneur has not to wait that the total amount of its microcredit has been collected on Babyloan by the internet users to receive the money.