Micro Credit Loan Repayment Round 1
We have been focusing on co-creation over the last two rotations. Co-creation was always a core part of what we wanted in the development of the Nuru model, but we have become more intentional in seeking to ensure that is truly how we are acting and developing our program models. Msingi wa KAPESA (MwaK), CED’s basic savings and credit program, was as intentional as it gets. When it came time to develop the loan service, from amounts to regulations to progress and transition to other services offered, the Kenyan staff took the reins in the designing process. We had long discussion over what our desired impact was, our values, our goal and the specific population we wished to offer credit choices to. After a discussion on how to set up a proposal and what needed to be included in the design of the service, I left the field for a month to go back to the US and train with FT7 and take some time before returning for my second rotation. When I came back, CED had a new service. The Kenyan staff had really taken to heart their community needs, both realized and unrealized, and developed a potentially sustainable, scalable program that would directly push for our desired impact. It was an amazing season for CED as last October we disbursed 213 loans to farmers in extreme poverty in three of our sub-locations under the new MwaK Loan Program.
This February 2nd and 3rd was the first moment of truth. The repayment rate wasn’t going to magically tell us we had reached our desired impact, but it was the first indicator of whether or not we had designed an accessible service that not only offered financial services, but put more emphasis on training money management and how to utilize financial services. On February 2nd there were only 11 clients with remaining balances, meaning 202 clients finished paying off their loans early. On the afternoon of February 3rd, we remained with two clients, each having one late payment and giving us an in arrears rate of .32%. As of February 11th, the two remaining clients cleared their balances giving the CED MwaK loan program a 100% repayment rate for the first round.
We know as we scale 100% is shooting for the moon, but it will continually be our aim. I met with the Kenyan staff last week to analyze and discuss the success of this first round and how we wanted to move forward, below are some of their reasons for our success:
- The amount of the first loan was small and based on savings. If people asked for too much, we were able to go back to them, show them their savings history and offer them a smaller loan. These small loans, matched with client capacity, made it easier for them to payback. The team said that by starting so small, the clients are eager to get to larger tiers and are therefore committed to going through the steps we have set before them. Because we are strict with the rules we have set forth, they know they have to adhere to them otherwise they won’t be able to reach the larger loan amounts.
- We explained the program well, including; services, regulations, requirements, roles and responsibilities, from the very beginning. We also maintained consistent messaging throughout the communities we were working in and those sharing the message, from Program Leader to Field Officer, were able to give an explanation if asked. Another part of this is the role of guarantor(s) and group. From the beginning we emphasized that loans would be given not only based off personal savings, but group savings. We also took extra pains to clarify the role and responsibility of a guarantor, should the client fall through on payments. The Kenyan team said that this emphasis encouraged the group to work together more closely and for guarantors to take an active role with their respective loan client in encouraging him/her to pay and checking in with them on the status of their loan.
- Client supervision was consistent. In the past, a lot of the responsibility to check in with clients was placed on the group representative, or Field Officers would check in with a client a few days after a problem arose. Because all clients attend a training meeting once a month for MwaK and we have pushed dealing with clients promptly and on a one on one basis, this first round of MwaK the clients received a lot of hands on attention and follow-up throughout the savings, loan application, and loan repayment periods. The client was given an updated balance after every payment directly from their Field Officer. The team believes that knowing exactly how much they owed, encouraged them to come up with as much as possible to pay off the loan, not just enough to make the next payment or enough to guess at what they should bring next meeting.
- The CED team also made MwaK a competition between areas. We were always sharing attendance scores, average savings per month, etc. between our Field Officers at the meetings; encouraging them to have the highest monthly savings or the highest attendance. The team believes this competition encouraged them to continually strive to do better, not just meet a requirement or follow the status quo. We are brainstorming how we can keep this up and incorporate this friendly competitive attitude into the model as we scale.
- Finally, one of the biggest revelations we had as a team about the MwaK loan program is about the timeframe. The way we set it up, the loan application season is only available for two weeks every 3.5 months. Once a loan cycle is completed we automatically issue applications, give two weeks for them to be filled out and returned, process them for two weeks and then disburse the next round of loans. If you miss the window, you have to wait until the next cycle to apply. In our old model, the loan worked on a continuous basis. You could apply anytime and be approved if you met the qualifications. If it took you a month to turn in your next application after you finished the loan, then it made no impact on whether or not you could receive a loan. Because the MwaK clients want to progress through the program, they are eager to reach the next tier. To do so, they have to make sure they pay off on time and two weeks is a rather small window. They know that if they are even a week late, we are already considering other loans to be disbursed and that theirs will fall to the bottom of the pile. It will be interesting to observe through future rounds if the mere timing of when loans are offered, really is a contributing factor to our repayment rate and clients commitment to advancing in the savings and credit program.
We have made a commitment to continue to analyze, compare, look back and look forward after every MwaK round of loans. We know that part of our continued success is dependent on us sticking to the model and the rules and requirements we have set up. We look forward to even future bumps in the road as we know they will only help us refine the model and get that much closer to making the lasting impact we desire. I look forward to telling you about the Mwak Loan Round 2 Review Process and sharing our discoveries, bumps, and successes with you.