Microfinance steadily has been increasing in popularity and plenty of microfinance organizations are cropped for providing Group Loan in South 24 Parganas. Most microfinance organizations are based on two platforms namely- group loan or group lending and individual loan or individual lending. This post will discuss the pros of group lending.
Group lending rationale
Since micro-financing primarily benefits the poor, most of them don’t have any guarantee. It is very hard to lend them money. This is a lack of guarantee. In addition to a severe lack of financial and personal information relating to each potential client put the lender in the impossible situation of figuring out who is going to return and who will default or run away with the money. Bank uses this level for determining the interest rate for each loan but with a lack of information, this is not possible to do so.
Group loan or group lending resolves this problem. In this model, if one member of the group is not able to pay back the loan, the other group members must pay back that individual’s share. This provides a form of insurance to the bank as they will get back the amount even if a single person defaults or fails to pay the money.
Also, group loan addresses the bank’s lack of information by making the members of the community form their groups. Since each one of the communities is having more in-depth knowledge of who is possibly to repay on time and who is riskier, all of the less risky people will group leaving all riskier people.
This means that a more responsible group will very rarely have to pay for one another, whereas the riskier group will have to pay from someone else often. The group lending model is a resourceful way of overcoming some of the challenges.
Pros
Financially helping - By having a group loan model =, the group is liable to pay for the loan of someone who is undergoing severe financial strains because of unemployment, illness, and numerous other aspects.
Helping their business - By meeting with a big group of small business owners each week, there are instances when one business owner share a business idea or give opinions to another regarding how to enhance their venture. This is beneficial for the whole group as they can learn from one another.
Conclusion
These are the pros associated with getting Group Loan in South 24 Parganas.