United Nations Capital Development Fund

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"MicroStart: A Guide for Planning, Starting and Managing a Microfinance Programme" :
Table of Contents

Purchase a hard copy of this guide (at Pact Publications).

Chapter Two

F. Making Loans

1. Loan Processing Steps
2. Loan Processing
3. Loan Disbursal

1. Loan Processing Steps

Once Credit Groups are certified, the Field Agent brings loans to a weekly staff review meeting to:

share information
seek advice on difficult situations
review completeness of paperwork
exchange ideas.

After the meetings, the Manager signs off on approved loans and submits them to the Bookkeeper who prepares:

Promissory Notes
Passbooks

The Field Agent visits the Credit Group, issues the loans, and has each borrower sign the prepared Promissory Note.

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2. Loan Processing

Field Agents should bring Group Files to weekly staff meetings with the Loan Manager so they may discuss Credit Groups ready for certification. Meetings are an opportunity for Field Agents to openly express their reservations about a group and ask for advice. The staff meetings also provide an opportunity to review paperwork and discuss problems.

If problems are cleared and the paperwork is in order, the Bookkeeper can begin the process of issuing loans. Loans should be processed promptly within a few days of receipt of the application. For each borrower, the Bookkeeper prepares a Promissory Note.

The Promissory Note is a legally binding document that holds the borrower and the group responsible for repayment of the loan. Make sure you keep these documents in a locked, metal, fireproof container or cabinet. All Promissory Notes should be filed by group name. Once a loan is paid back in full, the Promissory Note should be stamped accordingly and returned to the client.

Sample Promissory Note
By signing below, I,	Maylin Ton
agree to pay MicroStart Riceland the sum of	$100
at a monthly rate of interest of	4%
payable in bi-weekly installments of	$12
the first due on	January 8, 1997
and the last due on	May 21, 1997
I understand that my payments will total	$120
of which the total interest collected will be	$20
If any installment is not paid on the date due, the whole balance of the amount loaned yet unpaid shall become due and payable with interest at the above rate from the date of default.
Applicant's Signature _______________ Group Member Signatures _______________	Date: ____________________ Date: ____________________

Please see attachment V of the Tool Kit.

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3. Loan Disbursal

0nce all the processing of documents is completed, the Loan Disbursal Meeting takes place in the borrowers' community. Do not make the borrowers come to your office unless it is very close. A note on handling money: We strongly recommend that disbursement be made by cheque if possible, using the local banking system. In situations where this I's not possible, please refer to section C.3, Handling Cash, in Chapter Three: Managing.

Sample Agenda
Welcome:	Group Leader welcomes the Field Agent.
Signatures:	The Field Agent asks borrowers to sign promissory notes or sign with a thumb print. All group members also sign.
Disbursement:	The Field Agent disburses loans emphasizing repayment.
Celebration:	Members may want to honour each recipient and may want to share some food and drink.

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