Module 4: Fund utilization and management
Topic 1: Fund utilization and management in women's groups
Activity 1: Importance of savings mobilization and utilization
Activity 2: Group financial records
Activity 3: Monitoring of group savings and loans operations
Topic 2: Policies and procedures in project revolving fund management
Activity: Policies and procedures of project revolving fund
Activity 2: Planning disbursement of loans to women's groups
Activity 3: Preparation and procedures of loan applications.
Annex 1. Visual Aid 4-1: Savings and loans build up capital
Annex 1. Visual Aid 4-2: Policies and procedures for loans to women's groups
Annex 1. Visual Aid 4-3: Sample project loan payments
Annex 1. Visual Aid 4-4: Loan application forms and agreements
Annex 2. Case 4-1: Savings and loan operations in women's groups
Annex 2. Case 4-2: Planning number of groups to be organized
INTRODUCTION
The previous modules focused primarily on the skills in micro-enterprise development needed for field workers to provide adequate assistance to women's groups and micro-entrepreneurs in micro-enterprise development. Women's groups have two kind of funds available to engage in micro-enterprises, the group savings fund and the project revolving fund loan. Field workers play an important role in assisting women's groups in utilizing both funds successfully. Project officers also have a second important role, viz. to prepare and implement decisions by the Governing Body on the use of the project revolving fund and in management of the revolving fund.
Module 4 focuses on the relationship between group savings, project revolving fund and group capital and on the Important elements in fund management.
OUTPUT OBJECTIVES
At the end of Module 4, participants will be able to:
1. Understand the importance of group capital build up through appropriate use of group savings and project loan.
2. Understand the relationship between the group savings fund and the project revolving fund.
3. Introduce the records women's groups need in managing their fund.
4. Apply the policies and procedures for project loan.;) to women's groups.
5. Understand the important elements and procedures in management of the project revolving fund.
Background and Rationale
Savings mobilization and utilization are the foundation for women's groups to become self-reliant through capital build up. At the start of a group, member incomes are low and hence savings are small. Once the group has some savings, members can borrow for investment in micro-enterprises and increase their income and hence their savings. The project loan augments the group's fund so that members can increase their incomes faster, which also means that the group can build up capital faster and can continue loan operations with their own funds.
In this topic participants review the importance of savings mobilization and utilization for sustainability of women's groups, the records that groups need for financial management, and the major issues in monitoring and technical assistance by project officers.
Output Objectives
At the end of the topic, participants will be able to:
1. Understand the importance of savings mobilization and utilization for building up the group's capital and the role of the project revolving fund loans as a catalyst in this process.
2. Assist the groups in setting up a proper financial recording system for savings and loan operations.
3. Identify the major issues involved in monitoring of group savings and loan operations by project officers.
Materials
Newsprint, adhesive tape, felt tip pen
Time: 1.5 hour
Steps:
1. Facilitator tells that field workers play an important role in assisting both Women's Groups and the Governing Body in adequate utilization of the available funds for micro-enterprise development. In this topic we will refresh our memory on the importance of savings mobilization and utilization, and on the relationship between savings fund and project loan.
2. Facilitator asks participants to discuss the following questions in sub-groups of 45 persons for 10 minutes and to write the conclusions on newsprint. a. What is the importance of saving for individual members? b. What are the advantages of saving as a group?
3. Facilitator asks each sub-group to present. After the presentations, facilitator uses the group outputs in summarizing and highlighting the important points below.
Important Points · Savings are important for the members: a. to be able to invest in micro-enterprises and b. to be prepared for future expenditures, such as children's education, old age security, emergencies. · By saving as a group it is easier to make savings a habit based on the concept "Income minus Savings is Expenditures". · In the beginning individual saving amounts may be rather small, but the group can accumulate more capital. Through borrowing from the group, members can avail of sufficient capital for investment in micro-enterprises. · In the group, members get ideas and can exchange experiences, which helps them to improve their business skills and self-confidence. · Through saving group members start to gain, control over their own resources and a sense of self-reliance develops. |
4. Facilitator hands out Case 4-1 and asks participants to perform the tasks in subgroups of 5 persons. Sub-groups are asked to write their findings on newsprint per aspect of the output of Case 4-1 (savings mobilization, savings utilization, project loan utilization, fund management and status of women). (Give 20 minutes)
Case 4-1 Savings and Loan Operations in Women's Groups Task |
Case 4-1 Savings and Loan Operations in Women's Groups Output |
Visual Aid 4-1 Savings and Loans build up Group Capita |
5. Facilitator asks each sub-group to present their findings. After the presentations facilitator summarizes using the output of Case 4-1 and Visual Aid 4-1 and emphasizes the important points below.
Important Points · The important elements in group policies regarding savings and loans are: - The group starts lending to members for micro-enterprise development as soon as it has a few hundred rmb in savings - The group regularly reviews and increases the monthly savings amount - The group charges interest on loans to members. which is added to the group capital - Loan duration is as short as possible and based on the requirements of the enterprise and entrepreneur · These policies result in: - faster capital build up of the group - more benefits for the households (more, bigger loans) - efficient use of savings fund and project loan - faster improvements in members' business skills and self-reliance |
6. Facilitator ends the activity by pointing at the differences between policies for loans from the group to members and loans from the project to the group:
a. Ratio savings and loan
The project loan to the group depends on the savings (loan is maximum eight times the group's savings). Within the group the ratio savings to loan is not relevant, loans should be based on the requirements and payback ability of the enterprise and the entrepreneur.
b. Duration of loan
Groups repay the loan to the project in three years. Within the group loan duration should be as short as possible, depending on the enterprise and entrepreneurs ability . Loans from the group to members should never be longer than 1 year.
c. Number of loans
Groups can only once avail of a project loan. There is no limit to the number of times that members can borrow from the group.
d. Interest
Besides 4 % per year for the social development fund, no interest is charged on project loans to women's groups. A higher interest on loans from the group to members is advisable for faster capital build up of the group and as incentive for early repayment.
Time: 1 hour
Steps:
1. FaciIitator introduces this activity by saying that when groups are in savings and loan operations they need a good financial record keeping system for their fund management. The records are not only important to keep track of the funds, but also to maintain trust among the members. All members have their savings in the group and hence all members should participate in decision-making on the use of the funds.
2. Facilitator then tells that at the start groups will need assistance from project officers in setting' up the record system. In this activity we will therefore discuss the basic records of groups.
3. Facilitator then asks participants to list what kind of information and records are needed. Give 15 minutes for discussion and ask to present the outputs on newsprint.
4. After presentation and discussion of the outputs. facilitator hands out the sample set of Group Financial Records. Facilitator then writes the list of records below on the black board and checks with participants outputs.
GROUP FINANCIAL RECORDS
GMF1 |
Individual Savings Record |
GMF2 |
Individual Loan Record |
GF1 |
Group Savings Record |
GF2 |
Group Loan Record |
GF3 |
Group Repayment Record |
GF4 |
Group Cash Record |
GF5 |
Group Statement Savings and Loans Operations |
5. Facilitator then explains the forms one by one, using the points below. Facilitator should be aware that for some participants this is the first time they see these records. Prepare newsprints with the complete record and explain slowly and clearly, fill in examples, and check whether participants understand.
GMF1 Individual Savings Record
Each member has a record like this as evidence of her savings in the group. After depositing her monthly savings the treasurer signs for receipt on this record.
GMF2 Individual Loan Record
This record contains all the details about loans. Both the group accountant and the member have this record, so that no misunderstanding can occur on the conditions of the loan. See the attached Sample GMF2 for an example on how to fill in this record. Note that these forms are countersigned. After each payment, the accountant signs the member's record as the member's evidence that she has paid. The member signs the accountant's record to certify that her payment is recorded properly by the accountant.
GF1 Group Savings Record
From the group savings record the group at all times knows exactly how much the total savings is. It also is a tool to review the members' performance in that it shows clearly whether the pledged amount has been deposited on time. Groups should be encouraged to post this record in their activity room as a token of their progress. All members have a right to know the group's financial status and members can check whether their deposits have been recorded properly.
GF2 Group Loan Record
Transparency of decision making on loans to members is important to maintain trust among the members. This record therefore should be public for review by the members at all times, ea. by posting it on the wall in the activity room. For the project officer this form can be the basis to discuss the groups policies, ea. with regard to duration of loans. amount of loans and interest rate. It also can be used for planning of technical skills training and advisory services to the group.
GF3 Group Repayment Record
The group accountant needs to keep track of timely repayment of loans. In addition to GMF2, the Individual Loan Record, she makes a monthly summary of the payments due and the actual performance. Note that this is a rather complicated record. Give participants time to study the attached Sample on how to fill in this record. In every meeting this record should be presented for each month with a balance overdue.
GF4 Group Income and Expenditure Record
By keeping an Income and Expenditure Record, the treasurer will always know exactly how much cash is available. The Cash Balance plus the Balance on the Groups Bank Account together are the amount of money which the group has available for loans to members. In the montly meeting the treasurer reports.
GF5 Group Statement Savings and Loans Operations
The Group Statement of Savings and Loan Operations summarizes the performance of the group as recorded in the previous Group Financial Records. Groups should discuss this and submit quarterly to the county project office through the township officer. This Statement facilitates timely detection of problems by the field worker, such as low savings discipline, little activity in loans, bad repayment performance, etc. so that action can be taken.
6. Facilitator ends the activity by saying that the records that were discussed are samples that can be used to assist group financial officers in setting up their own system. If they prefer another format, they can adjust.
Time: 1 hour
Steps:
1. Facilitator tells that in this training we have identified that project officers need to assist women's groups to get started with developing their policies and procedures for savings and loans, business planning, loan applications and the financial recording system. These activities will contribute to successful utilization of the project revolving fund loan. In addition to this initial assistance, regular monitoring of group performance regarding savings mobilization, credit operations and micro-enterprise development will further strengthen implementation of the project.
2. Monitoring and assistance at group level is needed to ensure that group members benefit from the loan as planned. and with good result. Facilitator asks participants to discuss in sub-groups of about 5 persons what they need to monitor at group level and to write the output on newsprint (give 15 minutes).
3. After presentation by each sub-group, facilitator summarizes, using the group outputs and highlighting the questions listed belong.
a. Has the group loan been disbursed and utilized as per the agreement?
b. Are the group financial records up to date and correct?
c. Do the designated officers regularly submit an overview of the group's financial status to the group members and the field worker?
d. Does the group regularly review (increase) the monthly savings amount and interest rate on loans?
e. Does the group use its capital funds (savings and project loan) effectively: short loan duration, high percentage of capital in use by members for micro-enterprise development?
f Is the group able to make business plans and to assess loan applications?
g. Is the repayment rate 100 %?
h. Is there a mutual support system in the group (study together, exchange experiences, joint activities)?
i. Have micro-entrepreneurs started keeping records and making regular income statements, do they make a profit?
j. Does the group get the agreed upon assistance, eg. training, advisory service, market information, facilities, etc.?
k. What problems do the group and individual micro-entrepreneurs encounter. what can be done about it
4. Facilitator notes that monitoring aims at identifying weaknesses and constraints in order to take action for improvement. During monthly visits, the field worker can use Worksheet 4 to record the problems identified and the action taken or recommended. For more detailed assistance in micro-enterprise development Worksheet 1, 2 and 3 (Business Viability Assessment, C ash Record and Income Statement) arc useful tools.
Worksheet 4 Monthly Monitoring Report Savings Mobilization Credit Operations Micro-Enterprise Development |
5. Facilitator then explains that increased income, Improved entrepreneurial skills and increased control over resources are Important objectives of the project and indications of achievement of the overall goal of the project: improved status of women. Hence, the Government and the United Nations are interested in the results of the women's groups in these areas. This is why the project monitoring system includes two sets of forms on group's progress in these areas. Once a year the forms have to be prepared for the annual project review. The first set of forms is about group savings and loan operations. group's financial status and income change of the members. The second set is about the purpose of loans and innovative income generating activities.
6. Facilitator explains the forms one by one, using the points below.
For all of the forms the reporting year is from 1 August last year until 31 July in the current year. Township officers prepare the forms together with the women's groups and submit to the county project office around 20 August. The county project office verifies. consolidates and analyses the data and submits to the Governing Body with recommendations for next years workplan. The county submits to DOFTEC no later than 15 September.
Form 8 (T) Group's Financial Status
Form 8(T) is a record per group. The township officer together with the group financial officers prepare this form for each group. Note that all the group financial records are needed in completing this forms. This is a good opportunity for a thorough analysis of the group records and a review of the group policies and procedures regarding savings and loans with the whole group. Good performance will be a further encouragement for the group. The result of group discussions including recommended action is submitted with the forms to the county project office.
Form 8 (T)-A Income Change Group Members
If groups do not keep record of the member's income, a survey needs to be undertaken. The survey sample should be prepared before the township officer goes to visit the group to fill up form 8(T). The county project office draws three to five members from each group randomly (is by chance) from the name list. These members should be asked what the change has been in her contribution to household income. E.g. before she joined the group, she made 300 rmb per year and now 1200 rmb; the change thus is 1200 minus 300 is 900 rmb. Township officers submit form 8 (T)-A to the county project office. The county project computes the average for the groups formed in a particular year.
Form 8 (C) Consolidated Report of Group's Financial Status
Form 8(C) is a consolidation of the 8(T) and 8 (T)-A forms by the year groups are formed' thus showing the difference in performance between older and younger groups. Facilitator explains with an example how to do the consolidation by year that the groups were formed.
Form 9(C) Report of Purpose of Loans
The Group Loan Record (GF2) is the basis for this form. The township officer together with the women's group fills up this form. The results can be presented to the whole group. Innovations will be an encouragement to the members, new ideas 'can be discussed and members can be given an opportunity to express their satisfaction or dissatisfaction with technical training and advisory services as well as their priority needs for future assistance.
Form 9 (T) Report of Purpose of Loans
The township officer consolidates the data of Form 9(G) on Form 9(T) by the year the groups were formed. This could for instance show that order groups undertake more new kinds of business and or are more active in certain types of business. Township officers submit this form with a report of the outcome of their discussion with the group. including recommended action to the township leading group. After review in the township leading group' it is submitted to the county project office.
Form 9(C) Consolidated Report of Purpose of Loans
On this form, the d al a of forms 9( 1 ) are consolidated.
Background and Rationale
In the previous modules and topics it was assumed that participants are familiar with the project policies and procedures for the revolving fund. This may not always be the case. This module therefore provides facilitators with training materials on the major elements and procedures in revolving fund management.
The activities in this topic cover the policies and procedures for project loans to women's groups, the planning of the number of groups and women that need to be organized to avail of funds and what procedures and documentation for processing of loan applications are needed.
Output Objectives
At the end of this topic, participants will be able to:
1. Understand the project policies and procedures for loans to women's groups.
2. Understand and apply the system of planning and preparation of loan applications and agreements.
Materials
Newsprint, adhesive tape, felt tip pen
Time: 30 minutes
Steps:
1. Facilitator asks several participants why the project provides a loan to the women's groups and not a grant.
Project assistance comes in the form of a loan in the belief that this is the best way to achieve self-reliance. By providing a loan in stead of a grant project management shows their belief that women have capabilities and can be accountable for their commitments. Another reason for operating the project fund as a loan is that the assistance can be used by more women. When the loans are repaid the funds can be used for other groups. Women's groups therefore have a responsibility to the other women who are waiting to be able to use the funds as well. Project management are "trustees" of the funds, meaning that they are responsible to the real owners of the fund, namely all the women who want to use these funds.
Visual Aid 4-2 Policies and Procedures for Project Loans to Women's Groups |
2. The facilitator explains the policies and procedures for the project revolving fund loans to women's groups, using Visual Aid 4-2. Facilitator especially emphasizes the following notes:
Note 1 Make sure there is no misunderstanding about group loan and individual loans:
· Group loan is for three years, individual loans can not be for more than one year.
· For group loans the 1:8 ratio between savings and loan applies: for individual loans this ratio is not relevant groups define their own policy for individual loans.
Note 2: The women's group savings fund is a condition as well as the basis for computing what will be made available to the group.
3. Facilitator presents the example in Visual Aid 4-3 to illustrate the repayment and social development payment scheme.
Visual Aid 4-3 Sample Project Loan Payments |
Time: 30 minutes
Steps:
1. Facilitator explains that there are 3 important elements for successful management of the project revolving fund and writes these on the blackboards
a. Planning of the number of groups and women that have to be organized to avail of the next repayments.
b. Preparation and decision-making on loan applications.
e. Monitoring of the use of loans and repayments.
2. Facilitator tells that the Project Monitoring System includes records for Disbursement and Payment of the Revolving Fund and Social Development Fund. In Activity 3 of Topic 1 of Module 4. other major issues in monitoring were discussed.
3. In the next two activities we will therefore focus on the first step, the planning of the number of women and women's groups that can avail of the next repayments and on procedures for loan applications.
4. Since groups are required to save at least 6 months before the loan can be released, it is necessary to plan well ahead of time and to incorporate this in the county work plan. If this is not planned well, there will be delay in disbursements.
5. Case 4-2 is handed out or presented on newsprint and the participants are asked to carry out the task individually (give 10 minutes).
Case 4-2 Planning Number of Groups to be Organized Task |
6. Ask one participant to present the output, ask others to comment or correct.
Case 4-2 Planning Number of Groups to be Organized Output |
7. Facilitator ends this activity by summarizing that the planning depends on the following factors:
a. The amount of revolving fund that is available for loans to women's groups at a certain date
b. The estimated monthly savings of the women members
c. The average number of members per group
d. The requirement that loans to women's groups are maximum 8 times the group savings
e. The requirement of minimum 6 months savings before release of loans to groups, which means that groups have to be organized at least 6 months before the repayments are scheduled.
Time: 1.5 hour
Steps:
1. Facilitator introduces the activity as follows. As soon as groups have undergone the training group formation and started saving, the group can start with preparing the application for the project loan. Already during the training group formation the members have developed initial ideas and acquired some basic skills in preparing business plans. Earlier in this training, we have identified that at this stage most groups need our assistance, especially in the following areas:
- building up business consciousness and skills in business planning
- provide market information
- arrangements for technical training and advisory services
In this activity, we will focus on the procedures and required documentation for processing of loan applications.
2. Facilitator puts Visual Aid 4-4 on the wall and hands out the set of Loan Application Forms and Loan Agreements. Facilitator points out that the forms should be considered a sample and can be adjusted according to the actual situation and policies of a group, township or county. In this set of forms it is assumed that the township plays an active role in preparing and processing of loan applications and provision of assistance to groups. Facilitator explains the steps one by one.
Visual Aid 4-4 Loan Application Forms and Agreements |
3. Step 1: Preparation by the women's group.
The first step is the preparation of the loan application by the women's groups with assistance of the field worker. The group prepares the following documentation for submission to the township or county project office
Group Application Form:
Part 1: Application Summary
Part 2. Allocation of Loans to Members
Part 3: Summary Purpose of Loans
Part 4: Areas for Improvement
Attachments to Group Application Form:
Individual Application Summary
Individual Business Plans or Basic Information
Draft Loan Agreement (for loans to group members)
Facilitator reviews the documents one by one. Below some key notes are listed for each of the forms.
Key Notes on Documentation Loan Application
Group Loan Application Part 1
· Four lines are available in the payment schedule. This is to make it clear that social development fund is deducted upon release.
· If there are any guarantee arrangements, these can be added on this sheet.
Group Loan Application Part 2
· The 1:8 ratio of savings and loan only applies to group loans. not to individual loans. Groups can decide that part of the members take loans directly after release and others wait for the first repayments. Of course, group consensus on such a decision is needed.
· Duration of loan to indivuals can not be more than 12 months.
Group Loan Application Part 3
· For each type of business, a description of the kind of enterprise can be given, e.g. if 12 members are involved in production, the number of members in the second column after Production is 12. In the first column a further specification then follows ea.: sheep raising (3), tobacco growing (7). silk worm raising (2). This listing can be used by both the group and the project office to determine priorities for technical training, advisory service and other assistance.
Group Loan Application Part 4
· Considering the areas for improvement when preparing the application will help the group in preparing for the implementation stage, and is useful for the project office and Governing Body in planning inputs from relevant bureaus.
· Ideas in this form may consist of training needs or other activities or assistance, such as provision of books, drying or storage facilities in the village, etc.
Individual Loan Application
· The repayment schedule has mans lines, so that payment in installments (ea. monthly. quarterly) can be registered.
· Any guarantee arrangement can be added to this sheet.
Loan Agreement (for loans to group members)
· Guarantors can be added as signatories, other agreements can be added.
Most essential in preparing the documentation is that all members participate in the decision-making process.
5. Step 2: Preparation by the township project office and leading group
The township project office/leading group has the following responsibilities in processing the loan applications:
a. Assessment of the loan applications (Tools: Worksheet 2)
b. Planning and coordination of needed assistance
c. Preparation of required documentation
d. Timely submission of the required documentation to the county project office
Usually, the field worker will have been very much involved in the preparations at group level, so that assessment of the business plans already has been done before the group submits its formal application. Hence the field worker can use Worksheet 2 as well as Part 3 and 4 of the Group Application Form for preparation of the Township Evaluation Report for decision making in the township leading group.
The following documentation is submitted to the county project office:
Township Evaluation Report on Loan Application
Attachments to the Township Evaluation Report:
Draft Loan Agreement (for loans to women's groups)
Complete documentation of the group's application
Facilitator reviews the Township Evaluation Report and the Draft Loan Agreement with the participants. Facilitator emphasizes that the Evaluation Report has two major components:
a. Recommendation on approval of the loan application
b. Decisions of township leading group on follow through action in assistance of the groups in implementation of the business plans, and suggestions for the Governing Body for additional action.
6. Step 3: Preparation by county project office
The county project office has the following responsibilities in preparing the decision-making in the Governing Body:
a. Verify and assess the loan applications and documentation submitted by the township
b. Prepare the documentation for decision making in the Governing Body
c. Timely submission of the required documentation to the county Governing Body
The time needed for verification and assessment of loan applications by the county project office will depend on the skills, experience and performance of the township project office and leading group.
The following documentation is submitted to the county Governing Body:
Evaluation Report on Loan Applications
Attachments to the Evaluation Report
Summary of Applications for Approval Governing Body
Summary of Purpose of Loans
Draft Loan Agreements per group (township)
Township Evaluation Reports
Facilitator reviews the documents with the participants using the key notes below.
Key Notes on Documentation Loan Applications
· As in the township evaluation report, the county evaluation not only contains recommendations on approval/disapproval, but also is an action plan for follow through assistance.
· The summary of applications enables the Governing Body to judge whether the applications are in line with the project's policies and procedures for group loans as well as with the planning.
· The summary of purpose of loans is useful for the Governing Body to plan inputs from the relevant bureaus in assisting the women entrepreneurs and for policy making purposes, ea. strengthening of relevant bureaus, addressing constraints in certain sectors (e.g. marketing. processing, transportation, facilities).
Savings and loans up capital
I. Qualifying Criteria
Individual
1. Women must have undergone training group formation and must have participated in this training for at least 90% of the training time.
2. After training, women must have decided voluntarily to join the Group.
Group
3. Each member of the Group must have undertaken savings activities for a period of at least 6 months.
4. The Group must have an established bookkeeping and management system.
5. The Group must have a functioning loan committee with elected officers and clearly designated functions.
II. Procedures for Loans to Women's Groups
(A) Approval Procedures
6. Individuals and/or sub-groups submit a feasibility study to the Group loan committee.
7 The loan committee with assistance of the project office submits the Group proposal to the County Governing Body.
8. The County Governing Body assesses Group proposals and approves fund level for specific groups.
(B) Contract Signing Group and County Government
9. A contract is signed between the Group (with individuals signing) and the county Governor, with the township Governor as guarantor.
10. The contract will stipulate among other things the following:
(a) Group must repay in a 30%, 30%, 40% schedule in three years
(b) Penalties on default (10 % for every month of delay)
(C) Release of loan funds
11. Upon approval of the County Governing Body, the County Governor executes the decision by releasing the loan to the group president, treasurer and loan committee chairperson, who are jointly responsible.
12. The president, treasurer and loan committee chair person make sure that individual and/or sub-groups fund releases are made on the same day when funds are released from the county.
(D) Loan and Counterpart Proportion
13. For every one RMB beneficiaries can raise, a maximum of eight RMB can be borrowed from the project revolving fund.
III. Procedures for Loans to Individuals
These procedures apply to loans from both the project fund and the group's own savings fund.
(A) Approval procedures
14. Individuals or sub-groups submit a feasibility study to the group loan committee.
15. The loan committee and/or the group members assess the proposal and approve the fund level.
(B) Contract signing
16. A contract is signed between the individual or sub-group and the group president, treasurer and loan committee chair person.
17. The contract will stipulate among other things the following:
(a) the duration of the loan being less then I year.
(b) the interest rate, amount and date of payment.
(c) the repayment schedule with amounts and dates.
(d) penalties in case of default.
(C) Record of loans
18. The treasurer keeps record of al I loans and the terms of the loan.
19. The repayment schedule, including interest are copied by the treasurer to the individual's pass book.
IV. Social Development Fund
20. 4% of the group loan will be deducted upon fund release and collected on year 2 and 3 as the group's contribution to the social development fund (SDF), which is under the management of the County Governing Body.
21. The use of the 4% SDF is as follows:
· 2% for MCH/FP related activities and services for village women
· 2% for training and project-related activities of groups
Release in the year 1995 |
||
Group savings after 6 months: |
1250 Rmb | |
Loan is 8 times group savings |
10000 Rmb | |
After deduction of 4% Social the amount to be released is: |
9600 Rmb | |
Payment Social Development Fund: |
||
1995 (deducted at release) |
400 Rmb | |
1996 |
400 Rmb | |
1997 |
400 Rmb | |
Repayment Loan: |
||
1996 30% of 10000 Rmb |
3000 Rmb | |
1997 30% of 10000 Rmb |
3000 Rmb | |
1998 40% of 10000 Rmb |
4000 Rmb | |
Groups apply for project revolving fund loan by submitting the following documentation to the township project office:
Group Application Form:
part 1: Application Summary
part 2: Allocation of Loans to members
part 3. Summary of Purpose of Loans
part 4: Areas for Improvement
Attachments to Group Application Form.
Individual Loan Application
Individual Business Plan or Basic Information
Draft Loan Agreement (for loans to group members)
Township project office/leading group prepares and submits to the county project office:
Township Evaluation Report on Group Loan Application
Attachments to Township Evaluation Report.
Draft Loan Agreement (for loans to women's groups)
Complete Documentation of Group Application
County project office prepares and submits to the county Governing Body:
Evaluation Report on Loan Applications
Attachments to Evaluation Report:
Summary of Applications for Approval Governing Body
Summary of Purpose of Loans
Draft Loan Agreements per group (or township)
Township Evaluation Reports
Task
1. Xiao Cao Women's Group
Xiao Cao (Small Grass) Women's Group was formed two years ago. After the training group formation, the 20 members started saving 10 rmb per member per month and they still do so. The savings are collected every month and deposited on the group's bank account. The bank pays interest at an annual rate of 10 % at the end of each year. The group does not use their savings for loans to members.
After six months the group's total savings was 1200 rmb and they received a project loan, amounting to 8 times their savings (9600 rmb). All members received an equal amount of loan for micro-enterprise development from the project loan. Most members are engaged in traditional activities such as animal raising and crops. All members repaid after one year with interest of 0.5 °/0 per month ( 6 % for the year), and the group has repaid 30 % after the first year and 30 % alter the second year to the project office. including the 4 % social development fee. After the first and second repayment they divided the remaining balance of the loan equally among the members on the same conditions.
2. Hong Mei Gui Women's Group
Hong Mei Gui (Red Rose) Women's Group (20 members) was formed at the same time as the Xiao Cao group. They also saved 10 rmb during the first six months, but after six months, the group decided they could save 15 rmb per month, since they now had established/he habit of saving. After 3 months of saving, they decided that 3 members would borrow 200 rmb each from the total 600 rmb in the savings fund. These members had to repay after three months with interest of 2 % per month (total 12 rmb each). The group each month decides how the new savings and the repayments and interest will be used. Their policy is that no more than 10-20% of the savings fund should be in the bank.
Twice or three times a year. the members discuss the monthly savings amount, and they have regularly raised it: to 20 rmb per month after month 12 and to 30 rmb after month 18.
Since Hong Mei Gui Group after six months had 1200 rmb in savings, they received the same amount of project loan as the Xiao Cai Group (9600 rmb). The total amount was lent to members for a variety of income generating activities. Besides in traditional activities, members have started engaging in shop keeping, trade, hair dressing, etc. The amount of loan per member depends on the kind of enterprise and the member's financial position. Interest on loans is 2 % per month and the duration of loans usually is between I and 6 months.
Task
Compare the savings and loans policies of the two groups. What are the differences and which group is more successful/self-reliant? Why'?
Output
Differences |
|
1. Savings mobilization |
· Hong Mei Gui Croup has internalized the concept of "income minus savings is expenditures?. When the habit of savings was established and when incomes increased, they raised the monthly savings amount. |
· Because Hong Mei Gui Group regularly increased the monthly savings amount their total capital fund will be much higher than that of the Xiao Cao Group. | |
2. Savings utilization |
· Xiao Cao Group keeps the savings in the bank, Hong Mei Gui Group actively uses the savings for micro-enterprise development. This difference leads to the other differences below. |
· Because Xiao Cao Group does not use the savings for loans, the members do not see much of the benefits of saving and hence the concept of savings is not reinforced. Hong Mei Gui Group every month will discuss what to do with the savings. The benefits of savings then are very clear to the members and they develop more ideas and skills in micro-enterprise identification and planning. | |
· By using the savings fund for loans to members, more members in the Hong Mei Gui Group can avail of loans and loans can be bigger than in the Xiao Cai Group, so more households can increase their income and the increase can be higher. | |
Because Hong Mei Gui Group started loan operations as soon as they had some savings, they gained experience in decision-making on loan applications and the record keeping system. hey are better prepared for management of the bigger project loan. | |
3. Project Loan utilization |
· In Xiao Cao Group the project loan is equally divided among the members, loan duration is fixed at one year and loans are mainly used for traditional activities. In Hong Mei Gui Group the amount and duration of loan is based on the requirements of the micro-enterprise and the member's financial position. In Hong Mei Gui Group more members benefit, funds are used more efficiently and for a variety of enterprises. The dynamic approach improves the members entrepreurial skills and income much faster than in the Xiao Cao Group. |
4. Fund management |
· Hong Mei Gui Group regularly reviews and increases the monthly savings amount. This means that the group's own capital grows faster. |
A higher interest rate makes it more attractive to repay as soon as possible, which means more members can borrow sooner. Higher interest also means that the group's capital increases faster. | |
5. Status of women |
· Members of Hong Mei Gui Group develop their entrepreneurial skills, their self-confidence and income much faster and to a higher extent than in the Xiao Cao Group. Family members will appreciate their potentials. |
· The Hong Mei Gui Group will gain a stronger positive image in the community, because of their performance in fund raising, management, contribution to household and village economy and innovations. | |
· The positive image in the community, the higher group capital and more active group life of the Hong Mei Gui Group will also contribute to implementation of more social projects in the community, ea. establishment of kinder garden, improve health facilities, entertainment, etc. |
Group's own capital (savings plus interest) two years after group formation
Facilitator presents the following table to illustrate the difference in capital build up between the two groups (since interest computation is rather complicated, do not ask participants to compute).
Xiao Cai Group |
Hong Mei Gui Group | ||
Total Savings |
4,800 rmb |
Total Savings |
9,000 rmb |
Total Bank interest |
480 rmb |
Interest savings utilization |
2,000 rmb |
Interest on RF loans (2 %) |
259 rmb |
Interest on RF loans (20 %) |
2,590 rmb |
Total Group Capital |
5,539 rmb |
Total Group Capital |
13,590 rmb |
Note: Hong Mei Gui Group after two years already has generated own capital higher than the project loan of 9,600 rmb.
Task
Repayments are scheduled on the following dates: | ||
1996, |
January: |
100,000 Rmb |
1996, |
September: |
250,000 Rmb |
Groups on average have 20 members, who save 15 Rmb/month.
Task
Fill in the Planning Form below.
Repayments | ||
Year |
Month |
Amount repayments due |
1995 |
1 |
|
1995 |
2 |
|
1995 |
3 |
|
1995 |
4 |
|
1995 |
5 |
|
1995 |
6 |
|
1995 |
7 |
|
1995 |
8 |
|
1995 |
9 |
|
1995 |
10 |
|
1995 |
11 |
|
1995 |
12 |
|
1996 |
1 |
|
1996 |
2 |
|
1996 |
3 |
|
1996 |
4 |
|
1996 |
5 |
|
1996 |
6 |
|
1996 |
7 |
|
1996 |
8 |
|
1996 |
9 |
|
1996 |
10 |
|
1996 |
11 |
|
1996 |
12 |
|
Group Formation | ||||
Groups trained and saving |
Target numbers in next generation |
Output/Remarks | ||
Year |
Month |
Groups |
Women |
|
1994 |
7 |
|||
1994 |
8 |
|||
1994 |
9 |
|||
1994 |
10 |
|||
1994 |
11 |
|||
1994 |
12 |
|||
1995 |
1 |
|||
1995 |
2 |
|||
1995 |
3 |
|||
1995 |
4 |
|||
1995 |
5 |
|||
1995 |
6 |
|||
1995 |
7 |
|||
1995 |
8 |
|||
1995 |
9 |
|||
1995 |
10 |
|||
1995 |
11 |
|||
1995 |
12 |
|||
1996 |
1 |
|||
1996 |
2 |
|||
1996 |
3 |
|||
1996 |
4 |
|||
1996 |
5 |
|||
1996 |
6 |
|||
Output
Repayments | ||
Year |
Month |
Amount repayments due |
1995 |
1 |
|
1995 |
2 |
|
1995 |
3 |
|
1995 |
4 |
|
1995 |
5 |
|
1995 |
6 |
|
1995 |
7 |
|
1995 |
8 |
|
1995 |
9 |
|
1995 |
10 |
|
1995 |
11 |
|
1995 |
12 |
|
1996 |
1 |
100,000 |
1996 |
2 |
|
1996 |
3 |
|
1996 |
4 |
|
1996 |
5 |
|
1996 |
6 |
|
1996 |
7 |
|
1996 |
8 |
|
1996 |
9 |
250,000 |
1996 |
10 |
|
1996 |
11 |
|
1996 |
12 |
|
Group Formation | ||||
Groups trained and saving |
Target numbers in next generation |
Output/Remarks | ||
Year |
Month |
Groups |
Women |
|
1994 |
7 |
|||
1994 |
8 |
|||
1994 |
9 |
|||
1994 |
10 |
|||
1994 |
11 |
|||
1994 |
12 |
|||
1995 |
1 |
|||
1995 |
2 |
|||
1995 |
3 |
|||
1995 |
4 |
|||
1995 |
5 |
|||
1995 |
6 |
|||
1995 |
7 |
7 |
139 |
|
1995 |
8 |
|||
1995 |
9 |
|||
1995 |
10 |
|||
1995 |
11 |
|||
1995 |
12 |
|||
1996 |
1 |
|||
1996 |
2 |
|||
1996 |
3 |
17 |
347 |
|
1996 |
4 |
|||
1996 |
5 |
|||
1996 |
6 |
|||
Computation
On average each woman saves 15 rmb/month times 6 months is 90 rmb
On average each woman is entitled to a loan of 8 times 90 rmb is 720 rmb
100,000 rmb is available. This is for 100,000 divided by 720 is 139 women
On average groups have 20 members, so 139 divided by 20 is 7 groups have to be organized
