The Individual Lending Booklet is the fifth publication under the Optimising Performance and Efficiency (OPE) Series. The OPE Series brings together key insights and ideas on specific topics, with clear objective of providing microfinance practitioners with practical and actionable advice.
Most MFIs have started to realise the importance of introducing individual lending, however because it requires a paradigm shift many MFIs struggle to initiate IL programmes. Thus individual lending is in its infancy in many markets worldwide, and institutions are still learning to cope with the challenges and risks of operationalising this product. Some significant issues in introducing individual lending are: increased information asymmetry; absence of group-based guarantees; comparatively higher-value loans; and the resulting higher credit risk. Individual lending requires different processes and systems such as: sophisticated and flexible MIS to gather and analyse client information; and highly skilled staff with ability to conduct detailed due-diligence (to assess the market, management, suppliers, customers of the business to be financed) and prepare realistic cash flow analyses and assess collateral.
This booklet brings together a set of brief publications which extract key lessons from MicroSave’s rich expertise and experience, combining these with the views and opinions of leading practitioners.