Designing loan products was challenging as it always involves balancing the demands of the target market with lending agency’s concern for risk management and attaining financial sustainability.
We have experienced that the interests of the borrower and the lender are often in conflict while offering any lending services. Borrowers prefer no or low interest rates, loans with large amounts and for longer period, which if offered makes impossible for the lender to attain financial sustainability as well as maintaining the loan portfolio in a good shape.
The products on offer are designed in a manner that it takes into account a member weekly savings capacity. Women members of the group apply for the loan against the group guarantee. Group size ranges from 3-5 members in urban while 15-20 members in rural groups. All loan products entail a fixed loan-processing fee (irrespective of the loan size). Except Emergency Loan, which is designed to save a member from the sale of a productive asset in case of an income shock, the rest of the loan products are offered with a mark-up of one percent per month charged on flat rate method. Loan period varies from 10 to 32 months. Loan graduation to higher ceilings is offered against all loans based on a client outstanding repayment behaviour and capacity. With the beginning of 2006, three new loan products were added to the product list.
The eligibility requirement for receiving loan encompasses the following requirements:
- The perspective client has to locally reside;
- She shall be in good health and her age shall fall between 18 – 60 years.
- Availability of National Identity Card is must;
- She shall be willing to stand as guarantor for her group members;
- She shall allow staff members to carry out her household and business (if any) appraisals;
- She shall regularly attend and save in weekly meetings if she is a member to a Saving Group.
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Loan Products Details
Emergency Loan: (ceiling Rs. 10,000/-)
EL is designed to save a member from the sale of a productive asset in case of a sudden emergency or income shock. Since the asset base of our target group is very thin (being poor and poorest of the poor) thus women members also access the facility for purchase of household assets against the weekly savings that they make. .
Business Loan: (ceiling Rs. 20,000/-)
BL enable the members to respond to an economic opportunity.
Agriculture Loan: (ceiling Rs. 10,000/-)
AL aims at addressing the financing needs of small farmers for purchase of agri-inputs. Since the loan is repayable in lump-sum thus women also use the proceeds for livestock trading.
Talimi Loan: (ceiling Rs. 10,000/-)
TL is designed to cater the need of young members of community organization who wants to either continue with their studies or to invest in some technical course such as gaining computer literacy. Loan is repayable in easy monthly installments, which a student can comfortably pay out of his/her pocket money.
Enterprise Development Loan: (ceiling Rs. 50,000/-)
EDL is specifically designed to develop the rural as well as urban micro-enterprises, which often exhibit a need for continuous financing. The product ensures a continuous injection of funds to the promising enterprises based on entrepreneurs outstanding repayment behavior.
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