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SENDFiNGO
MICROFINANCE WITH CREDIT UNIONS PROJECT
TRAINING GUIDE
FOR MICROFINANCE OFFICERS
SENDFiNGO FACILITATED COMMUNITY CO-OP. CREDIT UNIONS IMPLEMENTING THE PROJECT
Kete-krachi, Borae, Banda, Kpandai, Bimbilla, Chamba, Salaga, Tamale, Saboba, Chereponi, Tatale, and Nalerigu
IMPLEMENTATION PARTNERS
CORDAID OF THE NETHERLANDS: SEND-GHANA
Revised and Prepared by Habib Haruna
Ag. General Manager
SENDFiGO
November2010
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Introduction& Acknowledgement:
This manual has been prepared as a guide to the implementation of the microfinance project introduced
into the credit unions by the SENDFiNGO. It is intended to guide the loan officers, Accounts officers,
managers, Board of Directors, committees, beneficiaries of the project and their leadership on the
implementation of the project.
SENDFiNGO wishes to acknowledge SEND Ghana previously called SEND FOUNDATION as the
organization which first introduced in Northern Ghana and practically implemented with great success
this innovative microfinance methodology into the credit unions it formally facilitated normally referred
to as credit unions with microfinance orientation. The content of this manual is a modification of the
previous manual prepared by Mr. Mohammed Osman the immediate past Microfinance project officer of
SEND Ghana who is now the head of the Serra Leone programme of SEND Serra Leone. His effort is
greatly acknowledged. We also acknowledge the support of Cordaid a Catholic development and relief
organization of the Netherlands and SEND Ghana’s continuous technical support in the implementation
of this project.
The purpose of this manual is to:
Build the capacities of loan officers, management of the participating credit unions in this project to understand the basic principles of the project
Equip loans officers and accounts officers with effective mobilization and group formation skills.
Enhance the capacities and understanding of loan officers and accounts officers on the financial records documentation of the project.
The concept of Micro finance
Methodology
Background to Microfinance
The concept of micro finance is not new to many countries of the world though operated in
different forms and methodologies. Example of micro finance that have operated for centuries
are the Susu’s of Ghana, Chit fund in India, tandas in Mexico etc Formal credit and savings
associations institutions for the poor has been around for decades, providing varied financial
services to the poor traditionally neglected by commercial banks. One of the earlier and long
lived micro credit organizations providing loans to the poor without collateral was the Irish loan
fund system initiated in the early 1700s by the author and Nationalist Jonathan Swift.
Short Lecture
Discussion
Questioning
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In Bangladesh, Professor Mohammed Yunus initiated a micro credit programme for the poor in
1976 through the support of banks he was able to disbursed loans($27) to many poor women
with a very good loan recovery. The beneficiaries were clustered into solidarity groups for
members to co-guarantee their loans. The banks however refused to take over the programme
for fear of non-payment of loans. Through the support of donor organization the programme was
further developed culminating into the establishment of the Grameen bank in 1983 which now
serves millions of poor people in Bangladesh.
In the 1900s, saw a growing enthusiasm for promoting Microfinance as a strategy for poverty
alleviation. The Microfinance sector blossomed in many countries leading to a multiple financial
services firms serving the needs of microenterpreneurs and poor households. These services
include loans, savings, insurance, money transfer among others. This process led to the
establishment of the first commercial bank in the world in 1992 dedicated solely to Microfinance
(The Bank is called Bancosol.The processes were facilitated by ACCION)
Micro finance
What is micro finance and how important it is to household and communities?
Methodology
Micro finance:
ls the provision of financial services to low income earners to engage in income generating
activities. Financial services provided under this project include: Loans, Savings, insurance and
Business Development services
Micro credit is the provision of credit services to people. Only loans are given. Education and
business counseling or coaching is not covered under micro credit.
Discussion
Brainstorming
Questions
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Some Basic Principles of micro finance
1. Wide range of financial services is essential for poverty reduction. The poor need a wide range of financial services and not just loans for poverty alleviation. Financial services to the poor should be convenient, flexible and reasonably priced.
2. Micro finance is a key instrument for poverty reduction: Micro finance services allows and enables the poor to have access to resources that helps them to build their incomes, assets and reduce vulnerability to external shocks.
3. Microfinance is about building permanent local structures. These structures (eg Credit Unions) would be responsible for mobilizing and recycled domestic savings extend credit and provide a range of financial services to the poor on a sustainable and permanent basis.
4. It is a business. Micro finance institutions or schemes are operated to make profit. That is why interest is charged on the loan. The interest charged should be realistic and able to cover all cost related to the operation of the enterprise or the scheme
5. Micro finance is given to those in the low-income brackets 6. It is for income generating activities. Loans or credit provided is meant to used to generate income 7. Amount is small. Loans provided by micro finance schemes is usually small 8. It is also extended to the entrepreneurial poor and not the rich or lazy persons in society 9. Repayment of micro credit is short and frequent eg weekly, bi weekly or monthly 10. Loans are gradually increased for good borrowers 11. Capacity building for stakeholders is a key component of micro finance. Micro finance institutions
combine banking with social goals hence the need for all stakeholders to have ample knowledge and skills to manage the scheme successfully.
Misconception of micro credit The Micro finance project or scheme is basically not:
Not a church or a mosque or religious program
Not international relief program
Not a government service
Not for men. Men must form a farmer based co-operative group to access the farmer’s business support credit scheme.
Not for political party
What the scheme is all about
Credit for women in productive venture
Loan amount is usually small
Repayment is frequent
Liabilities of members are joint
Credit and savings for small businesses
Problem-solving information and ideas for improving family wellbeing
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THE GOAL OF THE PROJECT
the goal of the microfinance project is to provide credit and savings opportunity to the rural commercial
women to be able to build up their savings and become full members of the community credit unions in the
eastern corridor.
Credit with education
SENDFiNGO belief in a holistic and integrated development of the individual. The methodology adopted
under this scheme, is to provide financial services to poor women and follow this up with educational
programmes and various relevant topics such as HIV/AIDS education, better business management
practices, education on public policies and programmes among others.
Who is eligible for micro finance loan?
Resident women in the Eastern corridor from Kete-krachi through to Nalerigu and beyond.
One must be at least 18 years
Low income earners
Persons whose loans request is approved by her solidarity group
People who are prepared to attend credit and savings association meetings, makes regular savings, makes loans repayments, attend CSA training and be prepared to abide by CSA by-laws
Beneficiaries and Organization
Women are the main beneficiaries of MFL product. Women wishing to access the micro-finance loan
would first have to be clustered into small loan groups (Solidarity groups) of between 5-7. A cluster of 5-7
solidarity groups then comes to form a credit and savings association.
Members of the solidarity groups apply for loan amounts individually but must co-guarantee for each
other. Payment of this loan is weekly to be supervised by the Community Loan Officers. Each member of
the association brings her loan repayment amount at the meeting so that the leader collects and instantly
account to the Loan Officer. If any member is not able to raise the weekly amount, the colleagues would
have to pay for her and then compel her to pay them later
*Let participants demonstrate this processes described above by forming solidarity groups and
subsequently credit association.
Credit policy
Loans are extended to organized women groups
Group members co-guarantees each members loan
Loans are small and repayments is frequent (weekly)
Loan repayment should be done at a weekly meetings
The interest charged on loan is 10% per loans cycle (16 weeks)
New loans are given upon full payment of previous loans
Weekly meetings, loans repayments and savings are compulsory for all loans beneficiaries.
Women are the beneficiaries of the project
Partial installment payment is not acceptable
Loans are progressively increased as beneficiaries promptly pay their loans
Additional interest is charged on loan balance that is overdue (See details in loan application form)
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The role of the loan officer and management of the credit unions in ensuring the success of the
project
Mobilize group members for project activities:
1. Loan repayment 2. Attend meetings 3. Payment of dues 4. investigate the loan activities or business of members 5. Participate in educational programmes 6. Protect the interest of members 7. Access some goods and services to members 8. Discipline errand members benefits 9. Organize and conduct education programmes for other members of the group 10. Help loan officers to keep records of the association
Field/loan officers’ responsibilities
Methodology The field agent or loans officers are critical stakeholders in this programme. Loan officers are primarily responsible for the overall management and development of credit associations. The loan officer plays six main duties in this programme. 1. Investigation and community entry 2. Education and motivation of members of Susu or solidarity groups and CSA 3. Credit and savings management 4. Organization and training of CSA 5. Loan disbursement, monitoring and recovering 6. Records keeping and reports writing
Discussion
Short lecture
Brainstorming
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Investigation and community entry Field officers has the responsibility of investigating about the socio-economic set up of the community through feasibility studies This can be done through interviews, observation transect walk etc After the investigation make an assessment of the following?
attitude of the people-whether it is one of hope or despair
Is it one of open, informative and collaborative or
that of reserve and hostile Community Entry activities:
Zone the community as sections and set your target for each section.
Develop your work-plan
Identify community opinion leaders relevant to your goal especial women group leaders
Visit community institutions such as churches, mosques, associations and explain the programme to them.
Avoid partisan approach to your entry activities. Formation of Group: A group is formed when two or more people come to work towards achieving a specific goal. Groups go through a number of stages in their formation and development processes. Loan officers need
to be aware of this in order to have successful groups. Stages of group formation and Development: No. Stage Group Behavior or Characteristics Loan officer’s Action
1st
Forming
Potential members are cautious and treading carefully, asking questions, seeking clarification, seeking information about the scheme.
Be patient, watchful and ready to answer their questions politely and clearly to allay their fears. Be a good listener.
2nd
Storming
Group experiences tension, conflict, competition over objectives and roles. Coalitions based on tribe, religions affiliation etc is formed.
Show leadership. Be neutral. Emphasize peaceful co-existence and acceptance among the group. Guide the group to clarify roles. Encourage diversity.
3rd
Norming Initial integration stage after settling their role conflicts. Group establishes itself as a working unit. Members begin to accept one another and to work together.
Reinforcement. Encourage them on the principle of unity is strength.
4th
Performing
Group reaches total integration stage handling and analyzing problems and issues together. They recognize that the sum of their collective effort is greater than their individual effort. Group members know and understand each other and make use of this to achieve their objectives.
Reinforcement. Encourage them on the principle of unity is strength.
5th
Adjourning Preparation towards dissolution. Find out reasons for the dissolution.
Are they to graduate into credit union?
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Formation of Susu or solidarity groups (SGs) Potential beneficiaries will be sensitized to form a Susu group or a solidarity group. The minimum number for the group should be five and the maximum seven. The rational for this group is
To bring likeminded people together
For members to co-guarantees each members loan
Share experiences and discuss issues pertaining to their development
To enhance easy coordination of the project activities Susu groups should therefore be formed based on 1. Trust for each other 2. Friendship 3. Respect for each other 4. People engaged in similar or same economic activities Five of the members are expected to benefit during the 1
st cycle and the rest (2) in the 2nd cycle
A cluster of four or five Susu group comes together to form an association. Credit and Savings Association (CSA) The credit and savings association is the cluster of solidarity groups or Susu groups. Four or five solidarity groups could come together to form a CSA.The number of people who should form a CSA should not exceed twenty five as in the case of Ghana but should not be less that eighteen. This is because the communities are in a transition of resettling after the war so they may not be familiar with each other and purging the number high may lead to people unwilling to guarantee the loans of others in the larger groups. The loan will be extended to the CSA who then disbursed the money to individual members of the group. The group in a meeting ground and time agreed by the CSA will do the loan or interest repayment. In case a member is unable to make the loan repayment, the liability first falls on the Susu group of the person and to the whole association if the solidarity group is unable to pay.
Structure of CSA
SGs =7 or 5
members
SGs (1) +SGs (2) +
SG(3) SG(4)+SGs (5)
=CSA
+ SGs (5)+
SGs (5)+ SGs (5)
CSA1 +CSA2+CSA3 etc =
Rural Commercial Women Association (RCWA)
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Education and motivation of credit association Loan officers should encourage and motivate potential beneficiaries on the need to see themselves as capable of overcoming their economic difficulties and work towards improving their socio economic lives and that of their communities. The officers need to indicate the benefit of the scheme to them as individuals and the local economy such as:
they will be Less dependent on humanitarian aid
they will Increased their incomes and living conditions
they will be able to Create job opportunities
they will be contributing to the gross domestic product (GDP) of the country etc
Organization and Training of Credit and Savings Association
The loan officers have the responsibility to assist community members to form CSA by educating them on the credit policy and operation of the scheme. The minimum number of members for a CSA should be clearly spelt out, types of business activities covered and the target group. Officers must desist from registering people. He/she should facilitate the process. The loan officers also have the responsibility to train the women on the basic principles of the scheme. This can take a maximum of six weeks or meetings and a minimum of four weeks or meetings. Training of the groups should be systematic and not rushed because of pressure by the women for loans.
Loan disbursement, monitoring and recovering The loan officer plays a very critical role in loan disbursement. The loan officer has the responsibility to collect information with regards to the loan amount requested and approved to make such money available on the day of disbursement. The signatory to the account of the scheme must be informed in advanced so that they would be available to sign for the withdrawal. Loans disbursed to people must be effectively monitored to ensure that they are properly used. Secondly monitoring also serves as an avenue for the loan officer to understand and appreciate the business difficulties faced by some of the women and so give business advice to such people to improve upon their performance. The loan officer must make sure that he recovers all loans due at the appointed time and place.
Reporting and monitoring The field officers have the responsibility to monitor the progress of work of the project. This can be done at different levels
Monitoring of the utilization of the loan
Monitoring of the profit or losses of beneficiaries
Monitoring of the changes in businesses
Monitoring Individual clients and group savings
Monitoring of rate of graduation of clients into credit union
Monitoring of drop-out rate of clients from the scheme
Monitoring of rate of default and portfolio quality
Monitoring of the impact on beneficiaries and positive transformations etc The field officers also need to write and keep report of the project. Some of the reports that would be kept by the officers are:
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Forms of record to be kept The field agents is expected to keep records of the following
1. Solidarity and credit associations’ registration forms 2. Attendance register 3. Repayment Books 4. Ledger book 5. Profit or loss records book 6. Loan disbursement forms 7. Monthly financial reports 8. Receipt books and payment vouchers 9. Group savings records.
10. Graduation registers.
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Solidarity Registration Form CREDIT UNION /SENDFiNGO
MICRO FINANCE PROJECT
………………..COMMUNITY COOPERATIVE CREDIT UNION
SOLIDARITY/CSA REGISTRATION FORM: CSA Category:……….
SG No.
NAME OF MEMBERS BUSINESS ACTIVITY LOAN AMOUNT
GH¢
SG1
Solidarity Group:
1
2
3
4
5
SG2
Solidarity Group:
1
2
3
4
5
SG3
Solidarity Group:
1
2
3
4
5
SG4
Solidarity Group:
1
2
3
4
5
SG5
Solidarity Group:
1
2
3
4
5
SG6
Solidarity Group:
1
2
3
4
5
SG7
Solidarity Group:
1
2
3
4
5 Official: Each form should be stamped with the official stamp of the credit union and registered before it is issued out.
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Calculation of Weekly Clients Repayments: To minimize the challenges of getting change in the field during weekly repayment sessions, the weekly amount to be paid by each client has structured such that the weekly payments a client from week one to week Fifteen (wk1 to wk 15) is a little higher than the last payment on the 16
th week. This method is
referred to as the High and Low member of repayment.
Steps in Calculating weekly repayment under High and Low Method in a 16 week repayment term. Step1: Calculate Total amount Due/Expected
Calculate the total amount expected to be paid which is loosely referred to amount due. The
amount expected is total principal loan disbursed plus to interest expected. Step2: Calculate the client weekly and total repayments from wk1 to wk15.
Divide the total amount due or expected by the 16 weeks. Divide the results by the number of members in the group who actually took the loan. Round off your answer to to decimal places. This gives you the expected week repayment per each member for the first 15 weeks of the 16 weeks repayment. Multiply the weekly expected repayment by each client to get the total weekly repayment expected from the group from week 1 to week15.
Step3: Calculate the last or 16th week repayments.
To calculate the last repayments by each client find the total amount to be outstanding in the 16
th week and divide the result by the number of women who took the loan. Do as follows; i. Multiply the total expected weekly repayment for week1 to 15 by 15 weeks. ii. Subtract your answer from the total amount due calculated in step1 above.
iii. Divide the result by the members who took the loan. This gives you the last repayment by
each client. Illustration:
Saboba cccu give a loan of GH¢ 2,800.00 to 35 members of a who all received GH¢80.00 each. The loan is paid over a 16 week period. The programme interest is 10% and CSA interest is 1%. Calculate the
weekly repayment by clients for w1 to w15 and the last repayment on week 16.
Step1: Calculate Total amount Due/Expected
Amount Due: Principal + total interest on loan.
= 2,800.00 + [ (11/100x)2,800.00] = 2,800.00+308.00 = 3,108.00
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Step2: Calculate the client weekly and total repayments from wk1 to wk15. (i) Divide: 3,108/16 weeks= 194.25 (ii) Divide: 194.25/35 members= GH¢ 5.55 (iii) Round off to nearest to decimal places=GH¢ 5.60 Therefore, each client will pay GH¢ 5.60 per week from wk1 to wk15. Since they all took the same amount. Multiply this amount by the 35 members and by 15 weeks to get the total repayment for w1 to w15. Ie GH¢5.60 x 35 members x 15 weeks= GH¢ 2,940.00 Deduct: GH¢ 3,108 – GH¢ 2,940.00= GH¢ 168.00 GH¢ 168.00 is total amount to be paid by the group in the 16th week. Divide this amount by the group to get payment per client in the 16th week. Client last payment = GH¢ 168/35 members = GH¢ 4.80. Give participants examples to try.
Assignment/Class work 1.
Question: Tijotorb group is a group of microfinance women of Chamba Community Co-operative credit union. There are 22 members in the group who all took a loan of GH¢80.00 each for a 16 week
cycle. The credit unions interest on the microfinance loan is 10% while the CSA interest is 3%. The group successfully paid the loan with the interest for the cycle.
a. What is the amount due? b. What is the total loan amount granted to the women? c. How much interest was earned by the credit union? d. How much interest was earned by the group? e. What is the weekly repayment of the group? f. What is the weekly repayment of each member?
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Assignment 2.
25 women of the maltiti CSA applied for the microfinance loan of Bcccu. 10 requested for GH¢ 40.00. 12 requested for GH¢50 and 3 requested for GH¢100.00. If programme interest is 10% and the CSA interest is 1% calculates the following;
a. Calculate the total loan granted to the women. b. How much is the total interest per woman. c. How much will be paid by each woman per week from week 1 to week 15 if loan period
is 16 weeks. d. What will the last repayment amount of each member on the 16th week?
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Attendance register
January February March April May June July
No Name 1 2 1 2 1 2 1 2 1 2 1 2 1 2
1
2
3
4
5
6
Key
Excused Absences X =Present S=Sick
=Late SC=Sick Child T=Travel/Trip =Absent
F=Funeral
Discuss the importance of marking the attendance register
1. To know people who are punctual to meetings 2. To know the level of commitment 3. For decision making as to who get what 4. For increased in loan sizes 5. To know the loan repayment patterns of beneficiaries
x
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CSA PASSBOOK: 35 members
+ + + =
Loan principal and interest payments Savings record Balance ¢15
Meeting No Date Payment Balance Signature Deposit Withdrawal Balance Signature
1 1/7/06 Loan 111.00 - 15.00
2 7/7/06 7.00 104.00 0.50 15.50
3 14/7/06 7.00 97.00 0.50 16.00
4 21/7/06 _ 97.00 0.50 16.50
5 28/7/06 14.00 83.00 0.50 17.00
6 5/8/06 7.00 76.00 0.50 17.50
7 12/8/06 4.00 13.50
8 19/8/06 0.50 14.00
9
10
11
12
13
14
15
16
Give participants exercises to do by completing the table above
Loan
GH¢100.00
Org. Int.
10%=
GH¢10.00
15 regular payments GH¢ 7.00
CSA int=
1%
GH¢1.00
Total Due= GH¢ 111.00
No. of payments
16
Cycle No.
1
Final Payment GH¢ 6.00
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Loan terms and savings balance for a 16 week cycle Figures in Ghana Cedis 2nd meeting 3rd meeting
No Name Loan
Amount
Loan
Interest
CSA
Interest
Total
Amount
Total
beginning
Savings
1st meeting
Savings
Repayment Savings Repayments Savings
1 Abu Fuseini 60.00 6.00 0.60 66.60 1.50 0.50 4.20 0.50 4.20 1.00
2 Fati Bello 60.00 6.00 0.60 66.60 1.50 0.50 4.20 0.50 4.20 0.50
3 Rams Ibrahim 60.00 6.00 0.60 66.60 1.50 1.00 4.20 0.70 4.20 1.00
4 Osman Munira 60.00 6.00 0.60 66.60 1.50 0.30 4.20 0.30 4.20 1.00
5 Janet kodjo 60.00 6.00 0.60 66.60 1.50 0.70 4.20 0.30 4.20 1.00
6
7
8
9
10
11
12
13
14
15
16
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Total Pay $ Savings 30.00 30.00 3.00 333.00 7.50 3.00 16.80 2.30 16.80 4.50
Cum.Pay’t
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The Accounting Journal
Meeting No Date
Description
Cash-In
Cash -Out
Balance
Training 1 10/6/06 Savings 5.00 5.00
Training 2 17/6/06 Savings 4.5 9.50
Training 3 24/6/06 Savings 6.00 15.50
Training 4 30/6/06 Savings 12.00 27.50
Training 5 7/7/06 Savings 3.00 30.50
7/7/06 Passbooks 14.00 44.50
14/7/06 Zelia Savings withdrawal 10.00 34.50
End of incubation training –cycle one
1 21/7/06 Loan from KKCCCU 2,100.00 2,134.50
21/7/06 Loan disbursement to members 21,000,000 34.50
21/7/06 Savings 6.00 40.50
2 28/7/06 Repayment 147.00 187.50
28/7/06 Savings 10.00 197.50
3 5/8/06 Repayment 147.00 344.50
5/8/06 Savings 7.00 351.50
4 12/8/06 Repayment 147.00 498.50
12/8/06 Savings 15.00 513.50
12/8/06 Savings withdrawal 7.50 506.00
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Incubation Training for Credit and Savings Associations
Methodology
All new association that wishes to benefit from the scheme must undergo a training of at least four weeks or meetings and at most six weeks or meetings before they could be considered for loans:
The objectives of the incubation training are: 1. To introduce the scheme to participants 2. To identify potential applicants for training 3. To enhance and deepened understanding of participants of the scheme 4. To develop by laws for the group and 5. Define the role of potential beneficiaries especially the executives in the project. First week’s training or meeting
The first meeting is basically to provide an orientation to potential beneficiaries on the scheme. The following are basically discussed during this meeting:
1. Conduct an interview or an observation to ascertain the extent to which participants know each other that is names, where they come from, the businesses they do and the level of cooperation among them
2. Discuss the importance of Microfinance to the individual and local economy 3. Find out the expectation of participants 4. Explain to the participants the credit system with regards to the cardinal
principles,goal,objectives philosophy and overview of the project 5. Schedule the next meeting with them
NB Remember that as this is the first encounter you need to introduce yourself to them and the vise viser
Demonstration, Short lecture, Role plays, Dramatization,
Question & answer, Discussion. Group work
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Second week’s training or Meeting
1. Mark attendance register 2. Recap the issues discussed during the first meeting 3. Explain to members in detail the concept of solidarity and its implication for members of the
group 4. Select name for the association 5. Explain to participants the need to have a leadership and assist them to select such leaders 6. Conduct basic group dynamics training. 7. Help members to define the role of executives eg the chairperson, secretary, organizer etc 8. Conduct interview for at least 12 clients to complete the initial client membership
form 9. Schedule the next meeting with them
Third week’s training or Meeting
1. Mark attendance register 2. Recap the issues discussed during the first meeting 3. Help the group to design by laws for the group. Take the following into account when
formulating the bylaws: attendance to meetings, loan /interest repayment, sanctions for errand members, commitment in general among others
4. Conduct interview for at least 12 clients to complete the initial client membership form
5. Schedule the next meeting
Forth week’s training or meeting 1. Mark attendance register 2. Recap issues discussed in the last meeting and the general policy of the scheme 3. At this point if you are satisfied on the understanding and commitment of the group, then
allow members of the CSA to make their loan request and approval. Loan officers should guide members to use the following in approving loans (WEMRIP)
Weather: Will the weather condition affect the performance of the enterprise
Expertise: Has the member (s) got the requisite knowledge and skills to do the business she has proposed
Market Is there a market or demand for the proposed business
Realistic In the proposed business realistic. Can the amount be able to do carry out the proposed business
Inputs-Are there inputs and materials for the business proposed
Profit Is the business proposed profitable to enable the beneficiaries to pay the loan and interest at the stipulated times.
Conduct interview for at least 12 clients to complete the initial client membership form
Schedule next meeting .
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Firth week’s training or meeting 1. Mark attendance register 2. Recap the basic and fundamental principles of the scheme 3. Conduct Basic Business Skills Training: Marketing, Sales management, Basic bookkeeping,
Production & quality management, customer care etc. 4. Schedule next meeting
Sixth week meeting:
1. Recap rules regarding repayment, default etc
2. Disbursed loans 3. Schedule the time to meet for peer review and interest repayment
Note: The period of training may end on the forth, firth or the sixth week depending of the progress of understanding and commitment of the group
Principles of good lending To assist loan officers to conduct a good assessment of their potential loan beneficiaries it is important for them to know the basic principles of good lending so that loans are given to the right people with the rights attitude and skills. Below are some of the basic principles of good lending. 1. The borrowers should be honest and reliable. This information could be obtained through
interviews with community members and the business and family background of the applicant
2. The objective for which the borrower is applying for the loan should be clear and reliable 3. Repayment period should be short for loans that are revolving 4. The ability of the borrower to repay loan should be thoroughly investigated to ascertain his
or her capabilities of repaying the loan 5. The applicants proposed business should be bankable to reduce the risk of loan default.
This information can be obtained from the economic, social and cultural background of the location of the business
Monitoring guide lines of the scheme
A monitoring guideline is a very critical tool for the programme as it will provide the scheme with information on the units that are working well or otherwise. Choosing a proper indicator will help to “red flag” the unit in trouble for timely and appropriate intervention.
Considering the background of rural and peri-urban communities, attention should be focused on indicators of change in business and indicators of impact on community life.
Indicators of changes in business and community
1. Profitability and incomes of principals: What changes have occurred in terms of profit since the beneficiaries joined the project. Keeping simple records can revealed this.
2. Improvement in the management of businesses. Are the principals keeping records, what is their relationship with their customers
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3. Quality and range of goods and services; this measure the extent to which the level and quality of production or services has improved or increased. Has principals increased their line of production and has there been improvement in the quality of products or services
4. Increased in sales and purchases; has the principals turnover increased after joining the project and has this affected her purchases of goods and services
5. Number of apprentice: have principals engaged the services of others in their businesses 6. Payment of interest on loan. Are principals able to pay the interest on their loans from the
profit they make? How much profit do they make in a month? 7. Availability of goods and services in the community.
Social indicators for social changes in clients:
1. Increase contribution of clients to household expenditure: Educational fees, Food, Medicals, Accommodation.
2. Increase participation of clients in household decision making
3. Participation and appreciation of democratic values and leadership roles. Eg changes in leadership
4. Access to financial services.
5. Increased savings mobilized.
6. Acquisition of personal property. Eg houses, cloths, utensils, land, means of transport, etc.
For successful programme, microfinance officers must uphold high sense of integrity, loyalty, honesty, truthfulness, transparency, accountability, probity in the delivery of the microfinance and in their dealings with management and clients. This can be achieved through active adherence to Client Protection principles stated below;
Clients Protection Principles:
1. Avoid over-indebtedness of clients. Loan officers should take reasonable steps to ensure that credit is extended only if client have demonstrated an adequate ability to repay and the loan will not put borrowers at significant risk of over-indebtedness. .
2. Transparent Pricing: Clients must be adequately educated by the loan officer on loan, terms and conditions as well as pricing of the loan, interests and principal payment in the local dialect to enable clients understand clearly ad fully the loan terms.
3. Use of appropriate collection procedure; Debt collection practices used by the loan officers should not be abusive or coercive. Loan officers should be reasonably fair and firm in their debt collection activities.
4. Ethical Staff behavior; Loan officers must uphold high ethical behavior by avoiding corrupt practices and mistreatment of clients.
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5. Mechanism for Redress of Grievances. Loans officers should educate clients of the timely and responsive mechanisms of the credit union in resolving conflicts and concerns of clients.
6. Privacy of Clients Data. Under no circumstance should a loan officer disclose to a third part any information concerning a clients as far as her financial records in this relationship is concern. Any disclosure should be with the clients consent.
