Islamic Microfinance Group Liability Lending Mechanism

Microfinance UnitCentral Bank of Sudan

Target Clients

• The entrepreneurial poor in urban and slum districts

Loan application procedures

1) Formulation of liability group :

Interested micro enterprises asked to form a five-person group

Loan application procedures

2) Submission of loan application:

Group members submit loan application with the support of the microfinance program officer

Loan application procedures

3) Collaterals:

Group members sign a guarantee form indicating their agreement to vouch for one another

Loan application procedures

4) Business appraisal :

MF officer does simple business appraisal and submit for approval

Implementation First Step:

Request for documents

Sign of contracts or loan agreement ,

Implementation

Second Step:Purchase of goods and resell to borrows in case of Murabaha or relase of funds in case of profit-sharing modes (Musharaka, Mudaraba…)

Implementation

Third Step:

Open an account for each borrower ; size of installment and due date

ImplementationFourth Step:

MF officer issues receipts to borrowers when collecting loan installments

ImplementationFifth Step:

Collect certain amount weekly from each group member for the insurance fund to cater for emergencies.

Monitoring

MF officer conduct close follow up :

• Random field visits

• Prepare monthly progress report

• Provide technical support if needed

• Prepare final reports

• Lessons learnt and best practices

What Next?

Evaluating the experience

Scaling up of the business