Tools & Resources Monitoring Individual Repayment in Group Guarantee Mechanism

Monitoring Individual Repayment in Group Guarantee Mechanism

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“Monitoring Individual Repayment in Group Guarantee Mechanism” shares the experiences and discussions on how best to track the exercises of group guarantees at the individual level in the sector comparing the structured approach of MBK in Indonesia and the more informal approach Utkarsh in India. The tool demonstrates two simple approaches of monitoring the implementation of group guarantees.

While the Grameen Bank has moved away from the concept of strictly implementing group guarantee mechanism, many microfinance institutions in India and Southeast Asia still implement the concept of joint liability, wherein if one group member defaults then the other members make payments on the member’s behalf. Defaults at the individual level may possibly camouflage serious issues for both defaulting clients as well as other members, and could have financial and nonfinancial implications. While stakeholders and MFIs in India recognize the importance of tracking exercise of group guarantee, there is very limited knowledge at this stage among MFIs on how to best track late payment and individual defaults within a group.

“Monitoring Individual Repayment in Group Guarantee Mechanism” shares the experiences and discussions on how best to track the exercises of group guarantees at the individual level in the sector comparing the structured approach of MBK in Indonesia and the more informal approach Utkarsh in India. The tool demonstrates two simple approaches of monitoring the implementation of group guarantees. Both these approaches have features that can be adapted or improved based on specific requirements of stakeholders of MFIs.

Using the three sub processes below, the tool maps up the actions of the MFI in monitoring the exercises of group guarantee mechanism when individual members fail to repay:

  • Tracking of individual late payments at the group level
  • Consolidation of information and analysis at MFI back end
  • MFI action at the field level

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