Ujjivan has launched a pilot of “Mera Loan” using a revised group lending model. It is an adaptation of the Grameen-II model of 2001.
The fundamental pillar in Micro-Loans – social pressure through group guarantee, turned out to be a huge burden on customers in the later years. Ujjivan’s study of distressed customers in higher loan cycles revealed that it is the group which creates tremendous pressure on a defaulting member.
This is because it is very difficult for the group to take on the additional burden of servicing loans of defaulting members when the loan sizes are large. This creates tension within the group, aggressive behaviour, and humiliation in front of society for the defaulter. This sometimes leads the defaulting customers to take recourse to drastic measures such as suicides and lot of good customers dropping out.
To address this issue, in the ‘Mera Loan’ program, group guarantee is limited only to the group ensuring that member customers attend centre meetings and assisting in case the customers absconds or deliberately default. The financial liability of defaulting customer is not borne by other group members. Customers are responsible for their own repayments. The loan is offered to customers in the 3rd loan cycle and above with good credit history.
The pilot kicked off in 12 branches in urban and semi-urban locations around the country and the response was encouraging. Customers who availed of the loan under this model were extremely delighted as there is no peer pressure to repay on behalf of others and since it also actively involves their family members. (The spouse is required to guarantee ‘Mera loan’, though not mandatory.)
The customer’s family can now take an informed decision about their borrowing limits in accordance with their earning capacity. This initiative is also expected to curtail bad practices of benami loans. It is expected that this could be a stepping stone for customers moving up the ladder to Individual Loans.