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Self-Help Group, Micro-Credit and Income-Generation Programme (IGP)

Prayas Micro Finance – Credit Products / SHGs Product and Process : Self Help Group is a group of 10-20 persons (generally female) who come together for financial co-operation through regular savings and lending internally SHG model focuses the capacity building of women clients. It is not essential for every member in SHG to take a loan. The formation of SHGs and their capacity building is one of the important activities in different projects of Prayas. The credit needs of the members of the group are met mainly from three sources:

Articles of Agreement for financing Self Help Groups (SHGs)

  1. Inter-lending
  2. Loan from  banks under SHGs bank linkage program of NABARD
  3. Loan from Prayas Micro Credit

Terms & Condition for loan to be sanctioned to SHGs from Prayas Micro Credit

  • SHGs should be more than 6 months old and should have its saving bank account for at least three months at the time of applying for loan.
  • Group as well as Member/Applicant should have 75% of the expected savings in the group.
  • A Group can be sanctioned loan upto three times the amount of their group corpus (Bank Balance + Loan Balance + Cash in Group) and member / applicant can avail of loan as may be decided by the group subject to maximum of Rs. 15,000/- for individual member of the group for first cycle of loan, Rs.20000/- for second cycle of loan and Rs.25000/- for third cycle of loan.
  • Interest rate 12% flat.
  • Loan Processing fee 1% of loan amount.
  • Insurance charges 1% of loan amount from applicant member.
  • Membership fee Rs. 50/- pa
  • Loan term 12 to 18 months.
  • Purpose of loan – mainly for income generating activities. The percentage of loan for consumption should not exceed 25% of the total loan disbursed in the Project area. Loan to be sanctioned to ultimate SHG member for consumption would be on recommendations of group and on merit of the case.
  •  Member / Applicant should have ‘no dues’ amount of previous loan from SHG or any other Institution.
  • No Collateral Security is stipulated for the micro credit to be availed.  Peer pressure to ensure recovery. However Post dated cheques to be taken from the group at the time of disbursement of credit and a loan agreement to be executed. (Annexure-III) 

Documents required by Prayas Micro Credit

  • Filled Loan Application form that has inter-se agreement and other declarations (Specimen Attached)
  • A copy of resolution to avail of the loan amount duly signed by all members.
  • ID proof of all the three authorized signatories of the SHG group and of the member
  • Photograph (along with Husband or legal guardian) of the loan applicant
  • Joint account sheet of the SHGs.
  • Loan recovery statement of the SHG.
  • Rs. 10/- stamp paper in the name of the group and signed by the office bearers.
  • Post dated cheques of the group bank account duly signed by the office bearers.

Process

    • Loan Application to be collected by community mobiliser in the weekly group meeting.
    • Application to be appraised by community mobiliser and put up to project Manager of the project for recommendation.
    • The Project Manager to recommend the application to SHG coordinator through community mobiliser of their project.
    • The SHG coordinators to scrutinize the application from the point of view of Joint A/c of the group and other documentation and forward the application to Prayas Micro Credit for sanction by competent authority.  
    • The officials at Micro Credit department checks all the documents and put up to competent authority designated by Head Office for sanction.
    • After sanction note is put up to Accounts officer Micro Finance for issue of cheques.
    • Cheque to be issued in the name of group and handed over to community mobiliser of the project.
    • A copy of the disbursement note is marked to MIS department Micro Finance. Data is fed in the software and ledger card detailing the recovery date and amount is generated and handed over to community mobiliser along with the cheques for disbursed amount.
    • Cheque is deposited in the group savings a/c and amount further disbursed to the individual applicants of the group in group weekly meetings.
    • Loan utilization to be discussed and checked by community mobilizers in the group weekly meetings.
    • Amount due for loan recovery must be maintained at each level i.e. Group Level, Mobiliser level, SHG coordinator level, Project In-charge level, H. O. Level (Jahangir Puri) and should be regularly followed up. Recovery to be made by community mobiliser and deposited with the Micro Credit department. SHG coordinator must monitor the recovery position. Any delay along with the reason be immediately brought to the notice of higher authority.
12. On due date amount to be collected by community mobiliser from the group and  deposited with Micro Credit.

13. In case amount collected is less than the amount due, delinquency process to be followed.

JLG Product

  • Group of 5 persons (generally female) who take each other’s responsibility for their loans from the lending organisation (Prayas-Micro credit)
  • JLG model targets to address the credit demand of clients.
  • All the members in a JLG take loans of equal amounts.
  • The details of JLG product & process have already been furnished with the previous note on portfolio, product & process analysis.

Features of JLG Product

1. Loan Size:   1st loan cycle: Rs.10000
2nd loan cycle: Max.Rs.15,000
3rd loan cycle: Max Rs.20,000
4th loan cycle an above: Max Rs.25,000
Thus the credit range under this product is Rs.10,000- Rs.25,000

2. Loan Term: Rs.10000 à 10 months
Rs.15000 à 15 months
Maximum loan term period 18 months

3. Pricing:   Interest rate: 15% flat
Loan Processing Fee: 2% of the loan amount
Membership Fee- Rs.50
Loan Cover Fee- 1% of the loan amount

4. Purpose of Loan: Mainly for income generating activities.

5. Documents Required:

  • Residence Proof
  • ID Proof
  • Copy of Bank Statement/ Passbook
  • Photograph (along with Husband or legal guardian)
  • Rs. 10/- stamp paper in the name of the loan applicant
  • Post dated cheques duly signed
  • Group Recognition Test duly signed by the Manager
  • Compulsory Group Training by the Credit Officer/ Community Mobilisor
  • Loan Agreement between the organisation and the loan applicants

Process: Pre Disbursement
Identification of Area
Urban Slums of Delhi- where Prayas is already having its development projects.

How we move
Informal discussions with the community to understand the demands for MF, current providers etc. Detailed process how to conduct the mtg. (page 31 operation manual)

Door to door survey of 50-60 members of the community. (In prescribed survey form)
Branch Manager and Operations Manager discuss the findings of the survey and take decision about formation of SHGs or JLGs in the area.
Informal follow up meetings in smaller groups.

Group formation Process
Target group-Poor people having limited access to financial services

Membership Criteria: Women preferably married. However, widows, divorcee, spinsters and women deserted by their husbands are allowed if they can get a guarantor (Group clients should be Guarantor)

  • Men may also be clients however the major focus will be on women clients
  • Poverty criteria (based upon the housing survey during CGT)
  • Residing in the neighborhood
  • No blood relationship among the clients
  • Not more than two tenants will be allowed in the JLG
  • Clean credit history should be prudent
  • The group must be self chosen for the concept of Joint liability to work.

Compulsory Group Training
Three consecutive three days training for one hr each. CGT have to be on   three consecutive days to avoid any gaps in the client education. This is to educate the clients about the loan features of Prayas Micro Finance Programme and sensitize them about the Zero Arrear Policy and the Joint Responsibility concept. Detailed CGT schedule given in the Manual (page 36 to page 45 OM)