http://blogs.cgdev.org/o...it-a-repayment-snag.php

There are significant differences between Grameen Bank (the original micro-lender that went big) and Equity Bank...

BUT... it makes me wonder what would happen if entire chamas/groups decided (or could not) pay back their loans to Equity...

You mean equity has a founder other than "man jamo"? Nkt. On the other hand if kcb did not go down in the triton debacle, then equity is "default proof" as it were. from those chamas. Its a solid bank.

Equity bank today supply:754000000 vs demand of 500k...???

I think the issue of loans to the bottom of the pyramid is not Equity specific at all. Infact, I'd add Family Bank, Co-op (a lot of saccos having huge issues) and K-Rep to the list that would be affected by any percieved increase in default rates among this class.

Is it an error? Rich is showing supply for equity at 784 million shares! That will be significant if it is executed.

Ayaaaya, growing levels of loan arrears portend serious trouble for any financial institution, esp. the high delinquency rates for Grameen manifest in Q4 2009. They paint a bleak picture of a rapidly deteriorating asset quality - the same well-trodden path that has led countless banks globally down the road to a hardcore non-performing lending portfolio and eventual collapse.

Grameen is too important as it is both the cradle and epitome of microfinance lending for the developing world - anything happening to this institution will reverberate across the microfinance world in emerging economies with far-reaching and grave implications, affecting access to credit and thereby stifling national soci-economic devleopment of poor nations. That is how vital Grameen is, and its invicibility must be protected.

I like Grameen's dynamism (read Grameen 11)and they look quick to adapt to changing circumstances. My quick two cents to Yunus to explore...

- Improve credit monitoring immediately; pursue loan delinquents
from day one of the repayment instalment being missed,
- Start adequate provisioning of bad debts after say 90 days so
that by the time its declared bad, it is fully provided for and
can be written off,
- Introduce a system of branch assessment with national rankings
where managers of Grameen Bank Branches with lowest default rates
are given generous bonuses,and poor performing ones penalized,
- Grameen hones its predatory instincts and makes a hostile
takeover of its 2 leading microfinance rivals to maintain its
market share and stranglehold on the industry in Bangladesh!

- The 3 major players push for legislation establishing a national
credit reference system. That way even if a group defaults, its
individual members will still be unable able to access credit
anywhere in Bangladesh if theu have ever defaulted. Changing
groups won't help so long as their names are on this national
black list of shame,
- Bangladesh (its new name is Myanmar)is always being hit by
cyclones all the time the way Kenya is being hit with scandals.
Liaise with insur. companies to insure the debts and load the
very small premium on the loan amt. but handle this in a better
fashion than they did with their ill-fated 'group fund.'

Internal controls and strong Internal Audit, Compliance and Risk Depts are a must and I hope to dear God Equity here at home has all these in place.

Militant borrowers? That's a new one for me!

@VVS, you are right, asantefor the correction - pewa tusker blackcurrant!

The biggest problem equity and other MFIs are facing is high default rate caused by failure to adhere to KYC procedures at the individual level.

My wife is in one of these chamas she was given 100,000/= without even the institution verifying whether she has a business or not even they dont know her current residence address.They based their lending on the strength of the groups savings which I think is inadequate.as we are speaking 1/4 of the group has failed to service their loans.the good thing is part of it will be recovered from the savings but if it continues like this the institution will face a massive debt burden that might cripple its operations.

The most sure way of limitting this risks is have a great referencing bureau as well as adhere to the KYC at individual level.

@vvs
Most MFI would collapse if they pegged their lending to collateral this is because most of their clients dont have any .The best thing is to understand the nature and form of business these individuals in the chamas operate Train them on book keeping and employ enough officer to oversee their businesses from time to time.

Furthermore If you look at the interest rate of this MFIs you will realise its about 20-22%p.a Which is way above the prevailing bank rates.If this MFIs were to reduce the interest rates alittle bit and concentrate in understanding the needs as well as the risks faced by their clients they would achieve more growth than its the case.

Based on what @intelligentsia is saying:
- Has Equity (or other MFIs) taken adequate steps to verify the cashflow of most of it loanees (loans)...
- What is the fallback or safety if the loanees' cashflow stumbles due to outliers like PEV?
- How does a MFI deal with fraud?