Steps for Micro Credit Lending
Group lending approach A training officer in Bangladesh
helps village women to improve their income-generating abilities
by making sarees to sell in the local market - FAO/17552
The provision of a typical microcredit loan would involve the following steps: 1. Eligible poor borrowers are identified according to the target criteria and procedures.
2. A small group (five to eight people of common gender) of eligible borrowers is formed and rules are explained and agreed to.
3. Each member carries out compulsory saving.
4. One or two group members borrow the initial maximum amount.
5. The group meets weekly with other groups to discuss business and make instalment payments.
6. Financial management and other training is provided on a voluntary or mandatory basis to all members of the group.
7. When the initial loans are repaid, the next members of the group may borrow.
8. If a loan is not repaid on schedule, no member of the group may borrow until the loan is repaid by the borrower, or by other members of the group.
9. Eventually the repaid loans and group savings provide sufficient capital to maintain the revolving loan pool for all members.
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