Hello fellows! I finally release my first face-to-face interview with an investing platform! Yay! It took place the afternoon of the 17th of January in the Microwd offices of Madrid. I was welcomed by the CEO of the company, Alejandro De León (the photogenic guy of the picture, lol), and by Álvaro Chocano, the Sales Manager.
If you want to join Microwd investing platform, use my referral link to make an extra 1% in your first investment. Note that despite the web is in Spanish, there are welcomed all investors around the glove!
What is Microwd’s philosophy and what is behind its name?
The first thing to say about the company is that it is not an idea which came from nowhere. First off, I gave scholarships to some children in Nicaragua, and the mothers began to ask for microcredits. Suddenly, I realised that I was facing a potential business. I started seven years ago, first lending 10, then the next year 20, and the next one 40.
Then, as we realised that it worked and was sustainable, we planned to start a company. Microwd is a microcredit company that connects women entrepreneurs in Latin America with investors interested in obtaining an economic return and a social impact with their savings. The crowd thing is obviously to highlight that collaborative part.
What differentiates Microwd from other investment alternatives?
Our main advantage would be the social impact. For example, each of our loans generates 2.45 jobs on average, in the country. By now, Microwd has raised 4,000 credits, and more than 10,000 jobs have been created. We are currently planning to launch an investment fund that we hope will generate 100,000 jobs. It is a radical change in those communities.
If we compare Microwd with a microfinance fund, the main difference is that we take end-to-end control of all the stages. From the investor transferring the money, until they receive the interest back, all the employees are ours. Few companies on the world do this, and as far as I know, they’re not in the countries we’re working in.
In terms of profit, our goal is to compete with the stock market. For instance, the historic return of the American stock market is 7%, and currently, our portfolios have an average return of 6.90%. We are hard-working, and we believe we can still improve those numbers.
In which countries of South America are you operating?
By now we operate in Mexico, Peru and Nicaragua. The Mexican banks usually lend at 100% interest for the borrowers, which is insane. We lend there at 50% because that is already reasonable according to the country specifics, their default rates, and other inefficiencies that may occur, as the eventual devaluation of the currency. In Peru and Nicaragua, we lend at 27% while the competitors offer 70%.
Why don’t you lend money in Spain?
The first reason would be that we can’t legally do it as we don’t have a bank license here. However, Microwd does have a registered license in all the Latino American countries where we are working in.
Secondly, Spain is no longer made for a platform like ours. We have to move to places where there is less banking influence. There are huge opportunities out there, which allows us to offer higher interest rates with a good diversification ratio. That said, we are considering starting a pilot project more social than the usual to lend in Spain too.
Who can invest in Microwd?
Any investor, from anywhere in the world, can invest in Microwd.
Who is the team behind Microwd?
There are a total of about 35 people working in Microwd, of which only 8 are based in Madrid. Álvaro and I constitute the sale management team. Besides, I am also involved in strategy, and I am the CEO of the company.
We have three people in operations, one per country and two people in finance, and then we subcontract a company from our business group. Anima company manages all the technological stuff. Three programmers in total: 2 backends and 1 frontend. There is also a consultant designer that helps us part-time.
Outside Spain, we have a team of 27 staff members, so they are either administrative or collectors looking for women with ambitious projects. Our model is that there always has to be one administrator for every three collectors and one collector for every 300 women. We are currently in a period of growth with the fund that we are about to raise, and the offer is higher than the demand. But obviously, that’s because they are looking for future borrowers; thinking in the long-term. Microwd it’s a handmade, but profitable, investing opportunity.
What are the selection criteria of the loans and its assignment of interest?
The interest rate is always the same for everyone living in the same community. Microwd tends to sell one product per community. We might change our criteria depending on the countries or the regions, though. We do not want the ladies to argue about why we lend lower or higher, because that could cause defaults, and conflicts, especially in small populations.
On the other hand, for the selection of women, they have to meet a series of requirements in the credit bureau of each country. We rely on the ability of our collectors, as our interest are aligned. Microwd gives them salary incentives to find the best 300 women in the region.
We also schedule a control meeting every month we have every Friday. We have a lot of rotation because there are collectors who don’t work as expected, but by now, only that two or three people have left us in four years of existence. That means that the system works and all the people involved in the process are satisfied.
Do the women have to present a business plan?
According to the borrower situation and the small loans, we ask more for a solid idea rather than a business plan. The business plan is required for bigger loans. Still, we try to make the debt collector and his banker filter them. Obviously, the woman cannot have to be over-indebted in a credit bureau and needs a good reputation in the community.
If I had to choose between having an app which uses AI algorithms to decide the lady will pay or not, and our current collector system, I would choose the second option. We’ll still use it as a reference, but in the end, you must have good workers.
In every case, the great woman also receives a series of advantages over what other microfinance institutions. Our approach is very impactful, that is, facilities for you to pay well. So, if she doesn’t pay well, in the end, we negotiate with her, we restructure her credit. If that doesn’t work either, she will not be able to issue a loan with Microwd again, so we end up working with the best entrepreneurs.
What is your current default rate? What are their terms?
If, for example, one of these ladies cannot cope with pending payments, she can delay it up to one year. We give annual loans and consider default only those that have passed two years. Why? Because our challenge is to look for women who want to pay. We bet on them, so our challenge, it’s not to have no delays: delays are natural when you want to create jobs and radically change the community. About 30% of our loans are delayed. The main point is that the product is profitable and sustainable.
Let’s suppose that a woman eventually buys wheat, but does not sow it yet. Afterwards, suddenly her cow dies. Then how will she be able to sell the calf within the initial loan terms? I mean, the delay is part of our nature, but the key is, obviously, that it does not become defaults.
What is the average profile of a Microwd investor and borrower?
We mainly have two kind of customers: the customer A would be a retail customer of about 4000€, which invests between 10 and 15 credits per year. And then we have the big ones, which are willing to invest more than 100,000€.
Regarding the profile of the borrower, they are usually women who usually ask for less than 1000 euros in their first credit. They live in a central house located in small villages of South America. We aim to find ambitious women, willing to learn, and able to perform basic maths operations to calculate cost margins and to think in the long-term with an entrepreneur mentality which can lead to the employment of other members of the community as well.
What are Microwd’s short and long-term goals?
In the short-term, as we already pointed out during this interview, we’re planning to launch a fund of 10 millions of euros raised by 15 participants interested in Microwd‘s project. In the long-term, the company will also provide micro-insurance services for South American women, namely, family health or child’s education insurances. We’re also launching our first promotion of social housing, building a block of 30 houses. Finally, Microwd will promote the use of its own debit card, so the borrowers have more control over their loans in term of security and spend tracking. The main goal of this measure will be to encourage a savings mentality among our women entrepreneurs.
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