borrower outreach

Making microcredit effective

Borrowers who avail microcredit typically face a host of problems that prevent them from making the most of their loans. Access to fair market prices, a lack of dependable assets which will serve as security in times of trouble are just a couple of them. Milaap seeks to address these challenges by helping fulfill three key requirements for the borrowers:

• 1Creating assets :– A toilet and a source of water right at home are essential assets for any household. It saves time spent in walking miles to fetch water, or in going to the fields to relieve oneself. This means increased productivity and hence an improved standard of living in the long run.
• 2Creating access to markets :– Often, small-scale artisans and farmers need more than just monetary help. Milaap works with field partners who provide end-to-end support by linking them to markets where their goods can be sold at fair prices. With links to assured buyers, the artisans and farmers have the added advantage of secure incomes.
• 3Creating jobs :– Loans for vocational training help the unemployed youth become more employable and get access to stable wages. Typically, youngsters from rural parts of India with very little education or skills benefit from this the most. Apart from education loans, enterprise loans also have the potential to create more jobs. When an entrepreneur takes a loan to expand his/her business, it creates employment opportunities for people in the local community.

Borrowers reap the benefits

Milaap focuses on creating loan programs that are unique to the needs and abilities of the borrower. The programs are designed bearing in mind the borrower’s ability to pay and the regularity in his/her cash flow. For example, for students who avail education loans, there is a four-month moratorium after the loan is disbursed. This means that once they finish training, they have time to find a job before the repayment cycle begins.

Also, to help borrowers get value for money, the loans are disbursed using vouchers for buying products or hiring services from assured vendors. The vendors in turn receive payment from the field partners when they produce the vouchers. This ensures rightful utilization of loans.

Milaap and its field partners have successfully achieved a 100% repayment rate so far, through meticulous screening of borrowers, encouraging a culture of saving, and lending to groups for shared responsibility. On their part, borrowers are motivated to create cash reserves and focus on improving their living conditions too.