Managing Individual Lending
MicroSave's Briefing Note No. 85 discusses individual lending (IL) by MFIs, its various steps and their importance.
Despite the hype surrounding IL by MFIs, the market is still in its infancy. This is due to the relative inexperience of MFIs with IL. MFI systems and procedures are primarily geared towards group lending and need to be adapted if they are to meet IL needs. MFIs that want to venture into IL should be aware of the need for customization, and put in place adequate structures to meet IL needs. MFIs need to balance all the steps of the lending cycle to achieve successful lending. They include:
- Client Selection;
- Loan Appraisal;
- Loan Approval;
- Loan Disbursement;
- Monitoring and Client Relationship Management.
An important determinant of success in implementing IL is availability of adequate liquidity. Well designed steps of the IL cycle help MFIs to manage their IL and expand their outreach and portfolio successfully. Finally, IL implementation critically hinges on institutional capacity and a systematic product development process.
