What is microfinance?
Microfinance is a category of financial services targeting individuals and small businesses who lack access to conventional banking and related products including checking/saving accounts, microloans, and microinsurance.
These individuals tend to be the world’s poor, so microloans fill a gap in the market by allowing people that do not qualify for traditional financial services to take on reasonable small business loans safely and in a manner that is consistent with ethical lending practices.
The goal of microfinance is to ultimately harness the power of business to give impoverished people an opportunity to become self-sufficient.
What is the typical size and repayment rate of microloans?
Microloans can range from $100 to $25,000. Lending institutions may offer financial and business education as well. Most of these operations happen in developing nations and many borrowers are women.
Even though many of the borrowers for microloans qualify as very poor, repayment rates on microloans can be higher than the average of more conventional forms of financing. Opportunity International, a microfinancing institution, reported repayment rates of approximately 99 percent in 2019.
What am I investing in?
You are purchasing the right to the cashflows that come from these microloans. These loans have already been originated, and you will be entitled to receive the principal and a portion of the interest payments.
Is this a bond?
No! With a bond, you receive the coupon (or interest) payments on a set schedule and then receive the face (or principal) at the end of the duration of the bond.
Since this investment is a group of loans, the investor gets paid back like a loan would. In a loan, the principal and interest amortize, or gradually pay off, over time. Therefore, with each payment, you are receiving a part of the principal you paid upfront back and interest.
What do I have to do if I list my loans?
Continue what you have been doing! Each microfinance institution will need to continue to service the loans that they list and remit the payments to Strategic Global Capital on an agreed upon schedule. We will handle the rest. We will work with you to help you integrate this into your processes.
What are the fees to invest?
You will be charged up to a 1% transaction fee on each investment (e.g., a $20,000 investment could cost up to $20,200). While you will receive most of the interest, a percentage (up to 30%) will be taken by SGC as part of our revenue.
What are the fees to list?
There is no fee to list each loan group, but there is an application fee to establish the relationship with the exchange and a monthly subscription fee to utilize the exchange features.
Can I exit my investment?
If you would like to exit your investment, please contact us via the contact form on our website, and we will help you relist your investment. You will only be able to exit the investment if another investor buys the loans you have relisted.
What are the ramifications if something occurs in one of the countries in which I have invested?
There is risk with every type of investment, and we have clearly laid out some of the major risks in our Offering Memorandum and Subscription Agreement. We do purchase political risk insurance on a portion of our portfolio to mitigate and prepare for some of the potential risks.
When do I get paid?
You will be paid once a quarter on the 15th of the month (e.g., January 15th, April 15th, July 15th, October 15th). If the 15th falls on a weekend or holiday, you will be paid the following business day.
What happens if there is a default on a loan?
There is risk with every type of investment, and the risk of default is laid out and accepted by the investor in our Offering Memorandum and Subscription Agreement. We require the microfinance institutions exert a reasonable amount of effort to recover as much as they can of the loan, but we cannot guarantee that the investor will receive the full amount of their anticipated returns.
If a microfinance institution defaults too many times on their listed loan groups, they may be removed from the exchange.
Will I always get paid/have to pay in US Dollars?
For the time being, all payments managed through the exchange will be settled in US Dollars. However, this practice could change in the future.