14760_Credit Lending Models

8/7/2019 14760_Credit Lending Models

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B Y :

B HA VD EE P S K O CH AR

Microfinance


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Credit Lending Models

y Association Model

y Bank Guarantee Model

y Community Banking

y Cooperative Model

y Credit Union Model

y Grameen JLG

y SHG


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Contd.

y Rotating Saving and credit association

y Village Banking Model


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Association Model

y where the target community forms an 'association'through which various microfinance (and other)activities are initiated

Like savings can be composed of youth, or women

can form around political/religious/cultural issues


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Association Model (Contd.)

y Distinction is made between associations,community groups, peoples organizations, etc. onone hand (which are mass, community based) and

NGOs, etc. which are essentially externalorganizations

In some countries, an 'association' can be a legal body that hascertain advantages such as collection of fees, insurance, tax

breaks and other protective measures

Example: SHG in India


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Bank Guarantee

y a bank guarantee is used to obtain a loan from acommercial bank

y May be arranged externally (through a

donor/donation, government agency etc.) orinternally (using member savings)

y Guaranteed funds may be used for various purposes,including loan recovery and insurance claims


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y NGOs can subscribe to these funds

y Eg: Bellwether Microfinance Fund (India);Microfinance Credit Guarantee Facility


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Community Banking

y Community Banks/Village Banks are formal versionsof associations and are created by members of atarget community who wish to improve their living

standards and to generate employmenty By offering microfinance services, these banks seek

to develop their communities


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y Guarantees are provided by social collateral (peer-pressure)

y each members eligibility for loans is based on

his/her peers performance.y Usually NGOs and other similar organizations take it

upon themselves to form such institutions, and alsoeducate the community members in diverse financial

activitiesy Eg: Grameen Bank


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Cooperative

y much like associations and Community Banksexcept that their ownership structure does notinclude the poor

y A group of middle or upper class individuals mayform a co-op to offer microfinance services to thepoor.


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Cooperative (Contd.)

y An autonomous association of persons unitedvoluntarily to meet their common economic, social,and cultural needs and aspirations through a jointly-

owned and democratically-controlled enterprisey Some cooperatives include member-financing and

savings activities in their mandate

y Eg: Co-operative Bank; Cooperative Rural Bank of

Bulacan


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Credit Unions

y members of a target community gather their moneyand make loans to one another at low interest rates

y Compared to community banks, credit unions are

smaller and non-profit orientedy charging interest rates that merely allow

sustainability

yExample: Vancity Credit Union


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Thank You

Documents

14760_Credit Lending Models