Phakamani Foundation is modelled on the Grameen Bank’s solidarity borrowing principles which rely on no-collateral group micro-loans. This approach brings both accountability and support to the lending process and to the development of micro-businesses.
To start, Phakamani targets rural and peri-urban areas with very high unemployment. The neediest people within these communities are then identified by using a household index, an asset test and a basic interview. Women who may be interested in starting their own micro-businesses are invited to learn about the Phakamani program. If they are interested and have a business idea, they may form a solidarity borrowing group with four other women entrepreneurs whom they know and trust. At this time, all Phakamani clients are women because research shows that they have the greatest influence on the well-being of the household.
Phakamani branches are set up with a branch manager and a number of Development Loan Officers (DLOs) covering an area of 15 to 20 villages. All administration takes place centrally at the head office in White River. We use a cashless system.
Assessment and Training Before Any Loans Take Place:
- Phakamani evaluates the level of poverty in the home and carries out a base-line impact analysis.
- Phakamani evaluates the present business of a potential borrower (if she has one) and we assist in forming a basic business plan.
- Selected applicants form solidarity/accountability groups of five borrowers each, and these are affiliated into "Centres" of up to 40 women. The borrowers themselves lead and control the groups, with coaching and assistance from Phakamani.
- Each group is trained in basic business concepts and group management for 10 hours over four days.
- A group bank account is opened at a local bank.
Special Loan Conditions for Micro-Businesses:
- No collateral required except that each group of five entrepreneurs guarantees the payments of all members.
- Repayable in monthly instalments over a period of 4 or 6 months.
- Given in escalating amounts depending on the repayment discipline and growing value of each business.
- Loans are only given for self-chosen, income-generating activities that can earn immediate returns and that employ skills already possessed by the borrowers.
- Structured to stress both credit discipline and collective borrower responsibility.
After Loans Are Disbursed, Phakamani DLOs:
- Monitor the use of borrowed capital within 3-5 days of making a loan.
- Set up a regular instalment and savings plan for each group.
- Coach and encourage each woman on a regular basis through site visits and group meetings.
- Provide regular business and life skills training to the entrepreneurs at monthly "Centre" meetings .
