Group Lending vs Individual Lending: Experience of FINGOs

Date Published: 
Jan 2010
Micro Finance Association Nepal (MIFAN)

Paper presented at "Microfinance for Inclusive Economic Growth," Feb. 14-16, 2010, Kathmandu, Nepal

This paper covers experiences of financial intermediary non government organizations (FINGOs) in Nepal on group mechanism and types of credit they provide.

FINGOs follow the Grameen bank model to provide credit, fix repayment instalments and charge credit guarantee funds. The paper emphasizes that:

  • Group mechanisms make the poor and collateral-less people credit worthy;
  • Group decisions, supervision, pressure and responsibility are better than individual collateral;
  • Processing, disbursement and collection of credit are effectively done in groups;
  • Members discuss repayment schedule comfortably in group meetings, which is not possible with formal banks;
  • Training on groups, literacy and numeracy has empowered women;
  • Saving generation and mobilization in groups are core elements of microcredit to the poor.

Finally, public policy relating to women’s property rights and creating an environment for microenterprise development should be made forward looking. There should be diversification in saving products to better support the use and supply of credit to other poor people. Experiences of success and failure must be valued in order to improve credit and savings programs.

South Asia