- 17 Mar 2022
- 3 Minutes To Read
Loans for Groups
- Updated On 17 Mar 2022
- 3 Minutes To Read
Solidarity groups, sometimes called hybrid groups, are a type of loan product often used for microcredit. It allows you to monitor the individual transactions of each individual in a group. So, when you disburse a certain loan amount you will be able to allocate different amounts to each member.
Different loan accounts with their own unique ID and repayment schedule will be created for a single Solidarity Loan Account as each member will have distinct amounts to repay.
There are some specific cases where you should consider choosing this method.
One of the advantages of this method is that knowing how much each member receives prevents risky situations for your organization, in which some members of the group get a much larger percentage of the loan than others, which could increase the risk of default.
In cases where the group loan is not fully paid, you might also want to allow some members to proceed to the next loan but not the ones who defaulted. If your organization follows this policy then the solidarity group method is the best option to consider.
In order to create a Loan Product targeted to Solidarity Groups, you will first need to make it unavailable to any other kind of client by unchecking Client and Groups in the Product Availability section.
Implications of writing-off a solidarity group's member
The member's account will be written off even if the other members are still active and the other members' repayments will still be logged.
The Pure Group type of product allows you to manage the group loans as a whole, with a single disbursement and maintaining the same repayment schedule for the entire group.
In this case, the group provides credit worthiness to all its members, so if a member misses a repayment, it's the other members responsibility to pay his/her amount to your organization. This type of loan is easier to manage than the solidarity groups, but there are also some trade-offs that you should consider when deciding which type of product to choose.
With this method Mambu won't keep track of which members defaulted and the entire group would then be considered delinquent.
Another disadvantage of this method is that you might not know how much each member received from the loan which may increase the risk of default in cases where some members receive a much larger allocation than others.
You could keep track of this information using notes in the group's profile, but you might want to consider this solution only in exceptional cases. Otherwise you should consider choosing the Solidarity Group type in which Mambu does that automatically.
Tracking individual loan cycles
Whether you choose the Pure Group or the Solidarity Group type of loans, Mambu will keep a record of how many loan cycles each member went through. This happens as soon as the account state is set to
Closed (with obligations met) and the information will then be available in the clients' profiles.
In pure groups the loan cycle will be increased by one to all group members as soon as the loan is closed with the obligations met, while in solidarity groups this will happen individually. So if a member makes his last repayment, there will be one more loan cycle in his profile even if the other members of the group still have outstanding repayments to make.