|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|
The lessons learnt differ from one programme to another. These are discussed under each programme below:
Juhudi-Eldoret; Clients initially resisted guarantee beyond the smaller groups of five. This was soon overcome and groups accepted the system.
It also emerged that the four-week interval between first lot of loanees and the last was too short a period in which to learn about clients in untested Kiwas. The branch further discovered that group-pressure on individual clients to observe obligations to the programme was high because groups were prepared to take action to safeguard their interests.
Programme staff were faced with a moral dilemma when it became necessary to withhold loans to members who had not accessed credit because of the conduct of initial beneficiaries.
Clients resented use of their savings to recover bad loans. This was more pronounced in the less integrated Kiwas.
Kisii Diocese: This faced similar experiences. Specifically, clients resent the idea of having to contribute towards repayment of delinquent loans.
NCCK-Kisumu and NCCK-Kakamega: Group guarantee was not effected until very recently. The Head Office was for along time reluctant to authorize seizure of savings to recover delinquent loans.
The joint savings were initially pooled into one account. This made it very difficult to make transfers between Kiwa and NCCK accounts.
The programme ignored its disbursement sequence because of delays beyond the nine weeks lead time. As a result of this, a lot of money was exposed to risks with untested Kiwas.
Initially, disbursements were sometimes made at the office rather than at Kiwa meetings. This encouraged the indiscipline among members, as reflected in absenteeism, and lateness in attending the weekly meetings. In a way, this may have contributed to the collapse of some Kiwas.
ActionAid/Kenya: Outstanding lessons include the fact that, as a result of lack of a guarantee mechanism and fast-paced disbursement, it was not uncommon to find a whole Watano becoming delinquent soon after disbursement.
Secondly, the absence of a guarantee mechanism introduced indiscipline and apathy in whatever was happening to the programme. In most cases, those getting loans earlier were village elders, close friends, or relatives who would have otherwise pressurized the rest if they had got the loans later.
Even though Action Aid/Kenya had access to members joint savings, they could not use it to recover delinquent loans because there was no policy regarding this.
Juhudi-Kibera: Due to the mode of formation of the first Kiwas, group-pressure was minimal. The Kiwa had difficulties relating Watano problems to their joint responsibility and vice versa.
Programme staff were initially reluctant to recover bad loans from savings because they wanted to avoid upsetting clients. The first Kiwa to suffer recovery of delinquent loans from their savings promptly suspended savings. Savings proved inadequate to recover delinquent loans.
From initial experience, clients realized that the group-pressure and guarantee based on savings only was inadequate to motivate loan repayment. The introduction of other forms of collateral at the group level reflect their search for complementary guarantee mechanisms.
As Kiwa leaders were the ones who signed individual applications on behalf of members, some of them misinterpreted this to mean that they were absolved from the responsibility of recovering delinquent loans.