Story of Microfinance Borrower: Meet Daniel
Meet Daniel...
Daniel borrowed his first loan in order to expand his charcoal business. He was able to pay half of his loan amount until his business was burned in a fire. Daniel was relieved when he remembered that he paid for loan insurance, thus he expected that his lender would forgive his debt.
When the loan officer told Daniel that his debt would not be forgiven, Daniel asked why he had paid an insurance fee. The loan officer explained to Daniel that the insurance only pays the loan balances of borrowers who die.
With this news, Daniel left the lending program because he thought that his lender was lying to him. He is now a defaulter, but he states that he cannot pay the rest of the loan as he must use all his income to start a new business.
What can the microfinance industry learn from this story?
Often, the lack of preparedness of borrowers and the lack of transparency of lenders puts both parties at a disadvantage.
Daniel was not able to pay his loan and rebuild his business like he expected, and the lender lost a client and did not recover the rest of the loan amount.
How did this story contribute to the manual?
Daniel did not have the correct information about his loan insurance before applying and borrowing a loan. If he knew this information, he might have joined another microfinance program or planned differently.
To prevent such a situation in the future, the manual will contain a list of information that every borrower should obtain, including information about loan insurance, when searching for a lender and before signing a loan agreement.
This portion of the manual will help to increase transparency of microfinance practices by helping borrowers to analyze what information to obtain about their loan.
No comments:
Post a Comment