Micro-Finance Loan

Posted on: 29 September 2022

Micro-Finance Loan

1.      MICRO-FINANCE LOANS

13.1 Definition: Micro finance loan refers to the provision of micro-credit to low income potential clients, usually self-employed and engaged in income generating activities or micro-enterprise on sustainable basis.  So long as the Bank is concerned, this excludes farmers.

13.2 Aims and Objectives: Micro-Finance Programmes aim at:

• Improving the living standards of the rural and urban poor folks who are engaged in income generating activities.
• Assist in the creation and training of savings and credit groups.
• Inculcating banking habit in micro-entrepreneurs both in the rural and urban centres
• Expanding the Banks outreach.
• Interest Rate for Micro-Finance loan is 20%-24% per semi annum

13.3 Qualification to Access Micro-Finance Credit: Potential clients:

• Shall already be engaged in income generating activities.
• Shall be in a group.
• Shall be prepared to go through eight (8) weeks training.
• Shall be prepared to make periodic savings and attend weekly meetings.
• Shall agree to be jointly and severally liable to the facility they enjoy.
• Shall operate group account with the Bank.
• Individual craftsmen shall provide two (2) guarantors, preferably salaried workers.

13.4 Target Clients:

The micro-finance products will focus mainly on women (about 80%) in income generating activities who are prepared to make contributions as their savings/ deposit to either qualify for credit consideration or repay their loans. The micro-finance product shall consider micro-enterprise entrepreneurs operating under:

·               Agro-Processing

·               Primary Fabrication and Repairs (Artisan)

·               Traditional Crafts (Rural Craftsmen)

·        Service Sector

·        Traders

13.5 Group Size: Maximum group size shall not be more than twenty (20)

13.6 Group Accounts: Groups shall operate savings/current accounts and three (3) of the executives shall be signatories to the account.  Groups mandate shall however be provided by the Bank. The said mandate shall have blank spaces to be filled by the group.

13.6.0 LOANS

13.6.1 Loan Appraisal: Activities of individuals within a group shall be inspected, assessed and certified before credit shall be advanced to the group.

13.6.2 Loan Size:

Minimum loan size per individual within a group shall be GH? 500.00 and maximum of GH? 5,000.00 in the 1^st cycle. Loan size in the second and subsequent cycles shall be dependent on improvement and for that matter expansion in business (i.e. state of the business).

13.6.3 Duration:

Maximum duration for loan repayment shall be 24 weeks or 6 months with two (2) weeks grace period for all groups.

13.6.4 Repayments: 

Repayments shall be weekly and at most fortnightly, monthly repayment will not be considered for group loans. The maximum repayment period for artisans shall be twelve months.

13.7.0 SECURITY

13.7.1 Group

ü  Group members shall provide one recent passport size photograph each.

ü  10% of the loan amount shall be maintained as cash lien in the group’s savings account

ü  Joint and several guarantees for individual groups.

13.7.2 Artisans

ü  Two personal/salaried workers as guarantors (. i.e. for individuals)

ü  20% lien in account

ü  One passport sized photograph and a valid means of identification.

13.8. Charges/Interest

Interest rate shall be charged and shall be subject to review.

13.9. GROUP TRAINING:

New groups shall be taken through eight (8) weeks of intensive training in group dynamics, group training and banking, there after there shall be training for existing groups on banking practices, family life education. 

13.9.1 Artisans Training

Training topics shall include:

Ø  Records Keeping

Ø  Savings Mobilization

Ø  Risk Management

Ø  Loan disbursement procedures

 Artisans shall be taken through these topics before loan disbursement for the eight weeks        

I. Definition and role of a group.

II. Records keeping

III. Savings mobilization

IV. Conflict resolution

V. Group leadership responsibilities.

VI. Credit risk management

VII. Loan disbursement procedures (appraisal, processing, disbursement and repayment).

13.10. MANAGEMENT OF MICRO-CREDIT PROGRAMME

The Micro-Finance credit shall be managed by the Micro-Finance and Business Development Unit of the Banks Credit and Marketing Department and the Unit shall be responsible for;

• Management of Micro-Finance group credit
• Micro-Enterprises credit
• Business Advisory Services
• Animation, Training and Development.

The unit shall be semi-autonomous and shall be managed by the Micro-Finance Coordinator with credit officers and assistants. 

13.11. MONTHLY REPORT

Progress report on Micro-Finance activities shall be submitted to the Board monthly.

13.12 MONITORING/ASSESSMENT:

The following shall constitute the monitoring team:

a.      Personnel from Credit Department

b.      Micro-Credit Coordinator and his Assistants

c.       Group Executives