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A majority of MFIs in India use group based models of lending called joint
liability group model used by Grammen Bank
MFI raises funds from various sources (donors, equity investors and lenders)
Lends directly to low income sources (typically women) who form themselves
into groups usually with those in the same neighborhood
Groups 6-8 people
Loans are given to individuals, the group as a whole is jointly responsible for
repayment of the members loans
The MFI has a team of field officers who help in the formation of groups and
later provide them training.
Each group has a leader who helps in the formation of group later provides
them training
After training of groups, there is an assessment of the group by the MFi
branch manager
Group Recognition test (GRT)
Group member regularly on a weekly basis in the neighborhood where the
members reside
Led by MFI field officers who to ensure discipline
Primarily offer credit since only registered banks or cooperatives are not
permitted to collect saving of members
Doesnt solve all the risk issues but does help mitigate
http://www.bgvb.co.in/JointLiabilityGroup.aspx
BGVB . (2016). Bgvb.co.in. Retrieved 10 October 2016, from
http://www.bgvb.co.in/JointLiabilityGroup.aspx
PACS, other cooperatives, Govt. Depts., Individuals, Input dealers, and Document
writers (in cooperative banks), MFIs / MFOs, etc
Criteria for membership
Model A
Finance as individuals
All members would jointly execute a loan document, making each one jointly
and severally liable for repayment for all loans taken by all individuals
belonging to the group
Model B
Finance as a group
Operates as one borrowing unit
All members would jointly execute the document and own the debit liability
jointly
Grocery Stores
Loans catered to small businesses
How to transfer very big loans: loans clearance
Training procedures
Loan for individual versus loan for small businesses
What is and how does it happen during training for MFIs?
Brining up weather or not there is demand for small businesses
loans
https://www.cgap.org/sites/default/files/CGAP-Focus-Note-Financing-SmallEnterprises-What-Role-for-Microfinance-Jul-2012.pdf
Research 10/13/2016
http://ac.els-cdn.com/S1879933713000158/1-s2.0-S1879933713000158main.pdf?_tid=cbf3a43c-91ae-11e6-8fa4-
00000aacb360&acdnat=1476409241_f9dd4b55e706f92fe54b6d454997601
9
Loan Appraisal
Initial Screening
o The screening criteria can initially be basic. Helps ensure that
any decline decision is obtained on their basic eligibility for the
loan
Field-Level Verification
o Credit Officers must confirm the loan applicants business
activities and collect as much ground-level information as
necessary
o Credit Officer should verify accuracy of information on the
business situation and prospects provided by the client
through other sources
Cash Flow Analysis
o Credit Officer looks at the cash generated from the business
and household by taking into account all the inflows and
outflows so as to arrive at repayment capacity
o Important to not just consider business cash flow but also
house hold cash flow
o New inflows from other household enterprises may increase
the certainty of loan repayment
Loan Approval
Loan Disbursement