|It Did Not Happen Overnight: The History of Group-Based Credit Programmes in Kenya (K-REP, 1996, 54 p.)|
|CHAPTER 7. LOAN GUARANTEE MECHANISM AND DISBURSEMENT|
Juhudi-Kibera disbursed loans in the ninth week following a 3:2 sequence. This means that three members from each Watano would be financed at one time and the remaining two members per Watano later after four weeks. The decision to finance members piecemeal rather than all at once was to allow the programme to learn how members would behave after getting loans and thus to minimize risks of disbursing large sums of money to untested groups.
The following practice was basic. First, loans were guaranteed at the smaller groups of five, rather than at the Kiwa level. Secondly, in the event of a bad loan, the full amount was to be recovered entirely from the Watano members. Thirdly, the loans were guaranteed partly by joint savings of the Watano. There was no other guarantee beside the joint savings.
In the Action-Aid/Kenya programme, like in the Kibera programme where they got the concept, loans were disbursed in the ninth week, but instead following a shortened 50:50 sequence.
The reason for phased disbursement are similar to those espoused by Juhudi-Kibera, except that the pace is accelerated: the interval between the first lot of loanees and last was shorter than that of Juhudi-Kibera. However, unlike Juhudi-Kibera, there was no loan guarantee. The programme also did not state what would happen in the event of default.
Juhudi-Eldoret used the same disbursement sequence of 3:2; but the primary guarantee mechanism had, from the experience of Juhudi-Kibera, been changed to all the thirty members. In the event of default, however, recovery started with individual member; through the watano, before affecting the whole Kiwa. Lastly, guarantee was based on joint savings.
Kisii Dioceses disbursement and guarantee systems indicates an influence by Juhudi-Eldoret. The programme applied same disbursement pattern (3:2). It however differs in loan guarantee which is at the Watano level instead of at the Kiwa. Secondly, guarantee relies totally on group- pressure. Clients savings are not considered and cannot be used as collateral. In the event of a bad loan, members are expected to pay from their pockets.
The other programmes, NCCK-Kisumu and Kakamega, followed similar disbursement sequence and guarantee mechanism as that used by Juhudi-Kibera and Juhudi-Eldoret.