Investing in 13 emerging and frontier markets

 

Socially responsible lender committed to financial inclusion 

The average disbursement of the bulk of the loans (six to twelve-month loans) is USD 289. The Company prevents its clients from over-borrowing by evaluating the loan amount based on each individual borrower’s capacity to repay. The Company regularly benchmarks loan interest rates against equivalent providers and currently charges in a range from 23% to 50% per annum, depending on the country, product and loan term. The interest rates offered are generally similar to those offered by other lending institutions for the same duration and loan sizes.

The Company’s lending methodology is without joint-liability. Borrowers receive individual loans. The Company incorporates the benefits of a group, while preserving each group member’s personal aspirations, by making the group co-responsible only for non financial obligations, such as proposing and screening of potential new clients. In addition, group members help foster financial discipline by encouraging each other to repay loans on a timely basis through social cohesion. Clients who comply with the terms of their loans and involvement within the group are never penalised for the poor performance of defaulting clients.

The Company provides collateral free loans and offers a moratorium on loan repayments in emergency situations (e.g. lockdowns, natural disasters, death of family member etc.). Where it is customary and allowed under the current licence, the Company takes a security deposit.

The Company only offers loans to start or grow businesses, rather than for general consumption purposes. To ensure compliance with this policy, loan officers visit a client’s business as part of the initial loan application process, and review the use of prior loans when considering applications for future loans.

Only when a loan is repaid, clients will be eligible to apply for a new, often larger, loan to further develop their businesses, based on an assessment of client needs and business potential. This ensures that clients do not become over-leveraged, and therefore unable to repay an existing loan.

There is a maximum increment and loan limit for each loan cycle, including follow-on loans, without the possibility of increasing the amount of existing loans before they are repaid in full. Follow-on loans are tailored to local conditions and take into account local inflation rates, as well as the earning capacity of the client’s business. These follow-on loans are, on average, 20% to 50% larger than the previous loan.

Local staff are well trained and work alongside highly-skilled senior managers. Almost all of the field staff have been trained in-house and are eligible for promotion to more senior positions over time.

"We know our clients very well."

The client selection and assessment process is thorough, based on physical visits to the client’s house, business, neighbours, and family members and takes 14 days for a first-cycle loan. These mechanisms help in preventing ‘ghost’ or fake loans and ensure that clients are not over-leveraged. Experience over the years has taught that in collateral-free lending situations, one of the key factors influencing timely repayment is the relationship between the clients and the institution.