Banking on the rural poor

The Projek Ikhtiar(PI)is a rural credit scheme which follows an adapted version of the Grameen Bank Approach(GBA)in Bangladesh. PI provides credit on reasonable terms to very poor small farm households with the aim of reducing poverty.

PI followed the Grameen Bank model of credit delivery for the poor with its own changes to suit its target groups.

One such change was done to the GBA method of staggered disbursement of loans. The GBA groups prospective loanees into groups of five and the poorest two in the group receive the first loans. The next two receive loans only after the first two loannees have made successful repayments for 6 weeks. The group leader receives the loan last upon the successful repayment for 6 weeks by the two loanees who received loans second.

PI changed this method slightly but with drastic results in that it determined the creditworthiness of the entire group upon the rapyment records of the first two loanees. When the first two loanees repaid successfully for 6 weeks, the other 3 group members, including the leader were given loans.

In addition, upon the repayment of the first loan, far larger second loans (sometimes four times the first loan)were given.

This resulted in certain members being unable to pay the bigger weekly installments of the second loan amd of certain loanees taking a much bigger second loan and absconding.

This "loose" system of giving loans prompted loanees to take additional funds from the Group Fund created as an insurance for emergencies. Claiming diverse ’emergencies’, loans were taken from the Fund and it was experienced that at times one loanees would have taken 2 or 3 loans making repayment difficult due to the heavy combined burden.

This required that PI kept loans small and manageable, giving out one loan only after the previous is settled fully.

PI also created a system by which adequate evidence of creditworthiness of the prospective loanees was obtained and this system was followed before loans were given out to target groups.