In continuing to introduce the entrepreneurs Mansueto Ventures has loaned to through Kiva, I thought I'd write about one of the more unique loans in the bunch. We contributed to a group of five women (pictured below), who live in Uganda and each have their own business. However, instead of each of the woman applying for an individual loan, they are receiving a group loan, meaning the money that they request (in this case the total loan amount was $1,650) goes to fund all five of the businesses they are involved with.
Each entrepreneur can apply for a different amount of money, but each borrower is accountable to the others in the group when it comes to meeting repayment deadlines. Some of the microfinance institutions that Kiva partners with only disburse group loans because the format is often more successful (or desirable) than individual lending on a number of levels.
For the MFIs, group loans take less time and money to manage -- the format not only allows the institutions to disburse several loans at once, but also to collect the repayments all together. Additionally, group lending makes it possible for the MFIs to reach a greater number of entrepreneurs in need. For the borrowers, being part of a group loan creates a kind of community among the participating entrepreneurs. These women not only learn from each other, but they become each other's support network. If one member of the group defaults on a loan, the entire group is liable for paying that money back. Group loans have an extremely low default rate because each individual knows that his or her reputation is on the line.
Pictured here is the group that calls themselves Lugoba A. The five women are: Christine Namwalo, Betty Mirembe, Amina Nanyonga, Gorette Nantume, and Ruth Nankya. Ruth and Gorette have retail businesses, Amina is in charcoal sales, Betty runs a canteen selling snacks, and Christine runs a restaurant in their village of Nansana. I was curious about the pink papers in their hands and I was told that a document is given to each entrepreneur by the microfinance institution as a formal acknowledgment that they have received the loan. The form also represents their pledge to pay back their loan on time.
For more information about the Mansueto Ventures Kiva lending project, click here.