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For low-income enterprises, group financing is a unique financial service. To qualify for such a loan, you must create a group of three or more people that own and operate enterprises that generate money and have been in operation for at least three months. Because group members guarantee each other’s loan repayment, collateral is not required. The loan payback rate of samlelån is around 99 percent. This reveals that group members, who are generally business partners, neighbors, or relatives, try their best not to let each other down when it comes to loan payback. There are groups that have been working together for almost 10 to 15 years and have seen their businesses thrive owing to group financing.
In general, group lending is common in microfinance institutions’ lines of credit products. In Tajikistan, banks almost never engage in this form of loan.
Advantages of group lending:
- The other members of the group act as guarantors.
- A method to business analysis that is more straightforward.
- There are no collateral obligations.
It should also be noted that, thanks to group financing, the poorest parts of the population have access to loans in a timely manner. They were able to establish their business and better their financial status as a result of this. As banks and other financial and credit institutions (FCI) offers unsecured loans within the context of individual lending, this sort of lending is losing favour. The necessity to locate other members of the club, as well as the threat of debt payback in the event of non-payment, vanished.
The group’s members’ reliance on each other. If one or more members of the group are from the group, and the group has broken the minimum, you will need to find new members in order to acquire the loan. As a result, loan issuing takes a long time, and new members of the group are frequently untested individuals who might cause difficulties for the rest of the group.
There is a good chance you will find yourself in a circumstance where you will have to pay for another group member. Unfortunately, there are many instances where members of a group are unaware of one other’s financial circumstances. As a result, group members may be required to pay the loans of other members in addition to their own if they are unable to return the loan.
The Bottom Line
Take just those from the group who you know well and are convinced will be able to return the loan, and you will not be responsible for repayment. Despite the fact that each member of the group obtains a loan for themselves in the amount permitted by the FCI, each member of the group is responsible for the whole amount of the loan group. If the credit expert will refer you to their friends or members of the group, do not compromise. Remember that you must build a group and enlist the help of trustworthy individuals.
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