Group loans work a little differently than individual loans. They ask for a large sum of money that is divided between them according to their business needs. The chair person of the group requests the loan, but each person is responsible for paying back their portion. Every now and then, the group gets together and discusses how their business situation is going. If one person is struggling to pay their loan back, the other members step up and cover it for them so they will be able to keep a high repayment rate and request more loans in the future.
The “Aba Ndiaya” solidarity group formed over two years ago. They asked for $2,950, collectively. A portion of the loan will go to help the chairwoman, Mrs. Fatou (first name not given), to buy palm oil and lemon juice. Mrs. Fatou, 53, has sold these products for several years, but wants to increase her inventory to improve the standard of living for herself, her husband, her five children, and four other children she cares for.
Senegal is located on the northwest coast of Africa, along the same latitude as Nicaragua. The average annual income per capita is USD$1,759. The microfinance institution administrating the loan is charging 17.5% interest. Remember, the interest stays with the institution, and is not transferred back to the loaner.
So far, the loan is 52% funded. The group still needs $1,400 in order to reach their requested amount of $2,950. By the end of the day the loan should be raised to the full amount. I will keep you posted….