Tools & Resources Smart Lending: Client Protection in the Group Lending Process

Smart Lending: Client Protection in the Group Lending Process

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This guide is designed to help MFIs incorporate good client protection practices into their group lending policies and operations. The tool is applicable to a wide range of credit methodologies and can be adapted for use by various forms of group lending including village banking methodology and “group of groups” methodology.

Throughout the credit process there are service points (SPs)—points of interaction with the clients—at which microfinance institutions can implement good client protection practices. This guide is designed to help MFIs incorporate good client protection practices into their group lending policies and operations. The tool is applicable to a wide range of credit methodologies and can be adapted for use by various forms of group lending including village banking methodology and “group of groups” methodology.

Section I provides guidelines for FIs on group loan product design and staff training. Appropriate product design and adequate staff training do not apply to a specific phase of the group lending process, rather, they provide a foundation for client protection throughout the entire process.

Section II divides the group lending process into five key phases and identifies good client protection practice for each phase. The five phases are:  (1) Client Recruitment and Group Preparation, (2) Loan Application, (3) Evaluation and Loan Approval, (4) Disbursement, (5) Customer Service and Collections.

For each phase, the tool identifies distinct “service points”—points of interaction between the client and the institution. For each service point, the tool:

    • demonstrates how an FI can incorporate adequate effort in client protection in their policies, and practices; and
    • identifies which Client Protection Principles apply.

Download the Guide (English) »Version 2.0

Download the Guide (Spanish) »Version 2.0

Download the Guide (French) »Version 2.0

Download the Guide (Portuguese) »