The highly touted Grameen Bank group style of micro-lending that originated in Bangladesh has reached Jamaica through the Churches Co-operative Credit Union (CCCU).

Churches Micro Enterprise Unit (CMEU) is using the “Combo Business Loan” concept, in which funds are made to self-selected groups of borrowers who number between two and seven persons – with loans being accessible to individuals within the group, but with the whole group being responsible, individually and jointly, for repayment of each member’s loan.

Waldon Wright, manager of the CCCU Micro Enterprise Unit, said the fact that people tend to form “borrowing groups” only with those who they know and trust was behind Churches’ offer.

In combination with an instrument of joint liability, the concept helped the credit union to screen out bad loan risks, said Wright.

“In turn, that allows the credit union to offer loans with greater confidence to persons who would normally find it difficult to get a foot in the door of a formal, traditional lending institution,” he added.

Wright admitted that because this loan style is novel to Jamaica, the take-up had not been as rapid as for the two individual loan products that were also on offer in his Micro Enterprise Unit. But he was convinced that savvy community interests would soon begin to see the merits of taking up the “Combo”.

“You can’t get any better than the fact that no security is required or that members of the group do not have to belong to any social organisation,” Wright argued.

Under that “Combo Business Loan” offer, the maximum amount that can be loaned to each person in a group is $100,000. Initial disbursements may be as low as $6,000 per person, “but because we are aware of the impact of inflation on the cost of inputs, we examine, on a case-by-case basis, the extent to which we can increase that initial disbursement. The highest we have gone to date for an initial disbursement is $20,000 per person”, Wright discloses.

Wright touted the other two loans in the trio of micro business loans that Churches Credit Union currently has on offer – an unsecured facility called the “Express Business Loan” and a secured/collateral-required facility called the “Quick Line Business Loan”.

“In each instance, loans are disbursed on a tiered basis, starting with lower amounts and increasing to the maximum amounts, over time, as borrowers prove their ability to service the loans properly,” he said.

The unsecured “Express Business Loan” comes with a proviso – that the borrower be a member of a “social” organisation such as a citizens association or service club, must have between two and three guarantors and must present three utility bills in order to access a minimum of $75,000 up to a maximum of $150,000.

The secured “Quick Line Business Loan” starts with a minimum loan of $20,000 and goes up to a maximum $100,000 for first-time borrowers under the CCCU’s Micro Enterprise programme, but increases to a maximum of $200,000 for other borrowers.

Part of the attraction of individual loans, Wright suggested, might be the fact that borrowers can choose to pay off a loan in three months and apply for a larger amount.

For example, he noted, one customer who first borrowed to purchase stylish and classy hats for the high end of the market utilised this facility and had since used her expanded loan facility to add an up-scale line of clothing to the merchandise she now imports for resale locally.

Since the CCCU’s Micro Enterprise Unit began operations fully in May/June of this year, the Unit has approved 73 loans, valued at J$4.935 million. Just over J$4.53 million of that amount for 67 loans have already been disbursed.

“…We will, by year end, have achieved the targeted approved and disbursement level of J$5 million in loans,” Wright said, making a point that the majority of the loans had been made to women who “seem focused on empowering themselves…to become independent”.

Wright is convinced that “quite a sizeable and untapped market” for micro business loans still existed and he believed that once persons became aware that there were many benefits to be gained from operating their own business, they would gravitate toward loan products that offered them the opportunity to take the “entrepreneurial leap”.

“It makes rational and economic sense and is an incredible opportunity, especially for those persons who are below a certain skills or education level and would not normally have access to financing to run a business, however small,” Wright added.