HopeCore’s microlending program follows these six steps:
- Group Formation A group of 12 motivated and dedicated individuals form a support group. This group participates in a “merry-go-round” in preparation for the VHI microcredit program.
- “Merry-Go-Round” Each member of the group contributes a small amount of personal funds monthly. One member of the group receives the monthly contribution in a rotating manner until all 12 have been helped. The funds are used to enable the participant to start or sustain a business. How long a group of Hopecore Associates remains in this status depends on their proven ability to work together and the availability of funding for group training, funding loans, and adequate funds to cover staffing and other support expenses for an expanding operation.
- “Soft Loan” Distribution Upon successful completion of the “merry-go-round” phase, the group receives a 30,000 Kenya Shilling (approximately $350) loan to be repaid over 6 months at the 4.5% interest rate. The group may divide this loan between members at their discretion. This phase of funding allows the group to practice repaying loans and enables HopeCore to assess their ability to work as a group and make timely repayments.
- Distribution of “Normal Loans” Once the group successfully repays their “soft loan”, they become eligible to receive “normal loans” or 30,000 Kenya Shillings (approximately $350) per member. These loans are repaid over 24 months at 9% interest. Before receiving this loan, group members must attend a weeklong business and health training and complete a business plan. A second loan will be considered (at 12% interest) if the group fully repays all money borrowed plus interest due on the loan.
- Insuring Full Replayment. All members of the group pledge to pay the loans of all members of the group by contributing to a group loan security fund that can be used to cover the underpayment of any group member who defaults. If this occurs, defaulting members are not eligible for a second loan unless they reimburse the money “borrowed” from the group loan security fund.
- Support and Sustainability For the entire length of the 24 month loan period, the group is required to meet at least once a month to collect payments, provide business advice, maintain accountability, and lend support to one another. They are also required to keep financial records of their businesses. VHI staff monitor monthly payments and offer counseling and additional training to individuals who appear to be struggling.
We always have groups waiting to receive Normal Loans who are going through the Merry-Go-Round and Soft-Loan processes. Groups are able to receive normal loans only when funds are made available through donations from our generous donors.