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Sunday, September 29, 2013

Microfinance Methodologies.

Today, I have read the different methodologies in microfinance. And I found the diagram on this site depicted in the Russian Microfinance Project Report and adopted from the care of " CARE savings and CREDIT sourcebook" to be very helpful my blogging project about microfinance. According to the site that, group lending in microfinance is broken-down into two major categories such as : Solidarity Groups (SG) and Community Based Organizations (CBO).  


Solidarity Groups

The solidarity group model became very famous in 1976 after it was adapted by Dr. Muhammad Yunus as a Grameen Bank Methodology. Later on this methodology was expanded to Latin America but with some adjustments. In Latin America solidarity model chose to retain loan approval and administration.
Philippines is one of the country adapted the Grameen Method. MFI's Operation in the Philippines is considered a center-based formation with a minimum of 25 members which is divided into groups with a maximum member of 5 and minimum of 3 person. The center has a center chief as an officer in-charge in the center and there's a group leader on each group.


Community Based Organizations

CBO is differ from solidarity group in that they assume eventual graduation of their borrowers from the lending institution. Therefore, the primary function of the CBO's is to develop the internal financial management capacity of the group in order to create a Rural Bank, independent of the lending institution owned and manage by the poor.