Posts tagged ‘group loans’

Group Loans: Filling a Particular Niche

By Marion Walls, KF19, Tanzania

There’s a buzz about Group Loans here in Dar Es Salaam!  And now that I see them in action every day, I’m sold too!  I’m volunteering as a Kiva Fellow at Tujijenge Tanzania where all Kiva loans are Group loans, so I’ve learned considerably more about them in the last six weeks.  It’s become clear why Group Loans are a mainstay of microcredit: they fill a particular niche for borrowers.

Let me show you what I’ve learned…

Borrower groups at Tujijenge are made up of around fourteen members who know each other, though there may be as many as twenty or as few as eight.  Groups choose their own names – and names run the gamut from the practical “Mt Rungwe”, to the motivational “Breakthrough”, and confident “Top Class”.  Their names are just the first indication that each group is unique…  It’s been immediately apparent when I’ve met them that each group has it’s own personality: some are shy and quiet, others cheerful and full of energy!

Group members don’t necessarily operate the same type of business as each other.  One may have a fruit stall in a market;

another may own a general store;

while a third raises (inquisitive) ducks!

Group members don’t all borrow the same amount as one another either – each member’s loan amount is dictated by both the amount they requested and their personal loan history at Tujijenge.

I’ve participated in a number of Group loan disbursements at Tujijenge’s main branch.  I’ve been delighted to meet members on their tenth loan cycle, borrowing Tsh 1,800,000 (about US$ 1125), because it confirms for me that the loans provide genuine benefit.  I’ve been equally happy to meet members who’ve only recently joined a group and are on their first loan cycle, borrowing Tsh 80,000 (about US$ 50).  Wait a minute…. surely that can’t be right?  $ 50!   I’ve never seen an Individual loan for $ 50 on Kiva.  And this is precisely the point: Group Loans are special.  They enable borrowers to start borrowing.

This thrills me – I’m here, seeing borrowers stepping onto the first rung of a ladder that could lead upward out of poverty!  New group members are borrowing $ 50 to boost their fledgling business, or to make a lump sum payment on an item such as school fees.  The main reason these borrowers join a Group is that members guarantee each others’ repayments, so small loan amounts are accessible to those who don’t yet have physical collateral.  (Tied to this fact, too, is that members don’t need spousal approval for participation in a Group loan – an important consideration in a culture where gender equality has not been the traditional norm.)

Group loans also provide a good environment for nurturing new borrowers.  Established group members can help new borrowers learn the skills and discipline associated with repaying a loan, all within the safety-net of the group guarantee.  And, I was fascinated to learn, a Group is a self-regulating mechanism against the scourge of over-indebtedness.  Group members actively discourage each other from taking out simultaneous loans from multiple organizations because they know they’ll personally be on the hook for paying back the Group loan if a fellow member cannot.

Then there are the intangible benefits to a Group loan that I’ve discovered while attending Group meetings!

Groups meet on a weekly or bi-weekly basis in a location convenient to them (but that entails several hours’ journey on a hot and supremely overcrowded dalla dalla for the Tujijenge loan officer and Kiva Fellow…), to register repayments with their loan officer.  At one meeting, I ask the Group Chairman if hers is a tough job and she sighs: “Yes, following up with members who haven’t repaid is the hardest part.”  I ask her why she’s persevered in the role for five years, and she answers without hesitation: “Leadership!”  She’s referring to leadership within her group, as well as within her community.  It’s her very practical way of bettering the community in which she lives.

Likewise, the young Treasurer is demonstrating her accounting skills and acting as a role model to new borrowers within the group, whilst also developing her status outside it.

And another group member, (an irrepressible character who offered me a two-week home stay to get my Swahili vocabulary up to scratch!), has the opportunity for the group interaction she so obviously thrives on.  It’s a big part of the reason she was a founding member of the group five years ago…

But it’s not just idle chit chat at a Group meeting; the support members gain from one another is so highly valued that many well-established borrowers choose to stay in a Group long after they are eligible for “graduation” to an Individual loan.  In this case – and in a nice paradox – the Group loan enables borrowers to access some of the largest loan amounts on offer.  So chalk up one more winning attribute: Group loans empower the borrowers that started with them to keep moving upward!

If you’d like to loan to Tujijenge’s Group borrowers, you can do so here.

As we say in Tanzania: Karibu sana!  You are very welcome!

10 November 2012 at 18:00 2 comments

Update from the Field: Group Loans, Barriers to Microfinance + How to Visit a Borrower

Compiled by Chris Paci | KF16 & KF17 | Ukraine

A Kiva borrower in Barranquilla - Alex Connelly, Colombia

A Kiva borrower in Barranquilla with his family - Alex Connelly, Colombia

As regular readers of Kiva Stories from the Field will know, it’s not always easy to extend microfinance services to the people who need them most. Aside from the usual barriers – poor infrastructure that makes it difficult to connect borrowers with an MFI, the difficulty of disseminating information about available services, and the danger of over-indebtedness among those in greatest need – there are sometimes even more intractable political and regulatory challenges that make it very difficult for microfinance to be viable. This week, our fellows have investigated a few of these problems. Read on to learn about the unique challenges that come with owning a farm in the West Bank and the barriers that Turkish microfinance institutions face in trying to expand their services; then, get another window into the Kiva borrower verification process and learn how Kiva Fellows forge connections with the entrepreneurs they visit. (more…)

9 April 2012 at 09:00 1 comment

Barrier + Solution = Groups loans for Maya! + Challenges Remain.

By Kimberly Strathearn, KF 16/17, Turkey

No water = barrier for fish
(ran across this advertisement for a new aquarium one morning in Taksim Square on the way to work)

Maya has been a Kiva Field partner for 8 months.  Maya is a small program that was established under the Foundation for the Support of Women’s Work in 2002.  Maya’s target clients are low-income women with a primary school education that have limited chances of finding a job in the formal economy.  Turkey has a large informal economy, so most of Maya’s clients want to set up a small-scale business or enhance their existing small-scale business.  Many of their clients work from home but some have small shops, or work in market stalls. Most of these businesses are in the trade sector but some are in the manufacturing and service sectors. Since most of the businesses are unregistered, the women are unable to access regular financial services.

Have you been wondering why Maya has only posted 35 entrepreneur profiles on the Kiva website?  And that they all have been individuals?  You may know from my first post about Maya or Maya Field Partner Page, that Maya offers group loans—so why isn’t Maya posting any?

(more…)

7 April 2012 at 08:00 6 comments

Owe Money, Pay Money

By Mei-ing Cheok, KF14, Ghana
In Singapore, where I come from, if you were desperate enough to borrow from a loan shark (or “Ah Long” as they are not so affectionately known) and brave enough not to repay your debt on time, there are usually a few interesting messages sent to you before the heavies pay you a visit.
The name of the game is humiliation: there’s nothing like broadcasting your financial woes to your gossipy neighbours. First, you will find Chinese words painted in blood red on your door and walls, which directly translate into “Owe Money, Pay Money” (although these days, the Ah Longs have gone bilingual and sometimes paint “O$P$”). If that isn’t enough motivation for you, you might find a pig’s head at your doorstep. After that, it gets physical.

So when I met Evans, an employee of the Christian Rural Aid Network (a local microfinance institute that partners Kiva in Ghana), and he informed me that he was a Recovery Officer, I got a little nervous. (more…)

29 March 2011 at 15:00 9 comments

Video Blog: Francoise, A Kiva Borrower’s Story

Adam and Michelle went to Rwamagana, Rwanda to observe a borrowers’ group meeting. Each woman gave an update on their loan and the state of their business. One woman in the group really impressed us with her savvy and her long-term goals. Francoise took us to her shop and gave us the low-down on what she’s been up to. Take a look at the video to see her story.

Continue Reading 2 March 2011 at 12:54 6 comments

Demystified: Communal banking groups in Peru

by Sarah Benjamin, KF13, Peru

I have been in the field with EDAPROSPO for six weeks now, but I just now have completely understood how their “communal bank” system works with group loans. In Spanish, the term is “communal piggy bank” (alcancía comunal), which I think is more descriptive. When you see a group of borrowers from EDAPROSPO pictured on the Kiva website, you are actually seeing a self-governed group that has the ability to lend internally among its members. Let me explain.

Continue Reading 12 December 2010 at 08:43 5 comments

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