M12 Group security with loans

Micro EnterpriseDebtFinancial Management
  • Taking out loans as a group has a lot to recommend it. Each group member is responsible for making sure other members help to repay the loan. If someone does not pay, other members will want to know why. Groups can usually obtain larger loans, making it possible to buy more expensive equipment or raw materials.
  • When problems arise, the group members can discuss them and are more likely to find solutions by working things out together. However, things may also go wrong and relationships become difficult.
  • If a member becomes ill, other members may be able to help cover their payments until they recover.

Discussion 
  • Encourage discussion of the advantages and disadvantages of individual loans and group loans. Do participants know of real examples?
  • How well should members of such a group know and trust each other?
  • What would people do if a person wanted to join but others were suspicious of them or didn’t like them?
  • What might happen if members argue or no longer want to work together?
  • Encourage participants to list the advantages of obtaining a group loan. These could include:
    • Ability to buy more expensive equipment than as individuals.
    • Working together is usually more enjoyable and more productive than working alone.
    • If one member cannot make their repayments for good reasons, other members may be able to help.
    • Successful repayments will give a group self confidence and encouragement for future plans.
    • Relationships within the group may develop into real friendship and trust.