In a previous blog post I explored how domestic microfinance in
Today, Project Enterprise offers clients a variety of loan options. Its three basic programs are listed below:
1.) Peer Classic. The Peer Classic program is designed to serve entrepreneurs who have been in business for a year or less and lack the sufficient credit histories and/or collateral necessary to receive a traditional bank loan. Lending occurs on a group-basis, with groups being composed of four to six entrepreneurs. Initial loans start at $1,500, and can gradually increase to $12,000. In addition to loans, the Peer Classic program provides entrepreneurs with ongoing support and technical assistance.
2.) Fast Track. Fast Track loans are designed to provide capital to entrepreneurs who have been in business for one year or longer. With a group-based lending scheme, clients can initially borrow $3,000, and can subsequently borrow up to $12,000. The Fast Track program also provides clients with ongoing technical assistance, as well as networking opportunities.
While the Direct Loan Program is similar to the individual-based lending programs provided by many other MFIs operating in
Although they service different groups of entrepreneurs (Peer Classic loans are for less experienced entrepreneurs), the two programs are fundamentally similar. Individuals interested in either program must first register for a six-week training course that instructs them about PE’s lending process and imparts basic knowledge about how to start-up and run a business. About half-way through the course, participants form self-selected groups (of four to six members in the Peer Classic program, and six to ten members in the Fast Track program). Ten or so groups are then joined together to form a Center. A Center holds biweekly meetings to issue loans, collect repayments, review loan applications, and generally monitor the financial wellbeing of group members.
The formation of the group and the Center is an integral part of Project Enterprise’s Lending scheme. Group and Center members serve a variety of functions: Firstly, they behave as friends and advisors. They provide their peers with emotional support as well as financial advice, often assisting fellow group members with the development of a loan application or business plan. Secondly, group members function as loan officers. A completed loan request is initially submitted to the entire group for review. Group members must decide whether their peer is in a financially suitable position to receive a loan, and if so, whether the money requested is the optimal amount. Only after the entire group approves the loan request does the application get passed along to Project Enterprise staff members for review.
Thirdly, and most importantly, group members act as loan guarantees that replace the need for collateral. By making a group, rather than an individual, responsible for repayments, material collateral is rendered unnecessary because social pressure acts as the loan guarantee. Let me explain: Project
By adapting the Grameen-style group lending scheme, Project Enterprise has succeeded in reaching out to low-income residents of