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Group Financing & FAQ

‘Group lending’ was pioneered by Grameen Bank and its founder Dr Muhammad Yunus (considered the face of modern microfinance) in the 1970’s. Individual loans are disbursed to a group of 5 borrowers, mostly women, who may have different borrowing needs. On a weekly basis, borrowers meet with a representative from the bank and their weekly repayments are collected.

If one or more of the members of the group fail in their repayments, then it will negatively affect the whole group’s ability to request for more loans. Thus, other members of the group ensure that the individuals pay on time. This form of peer pressure or peer support has been successful and results in very low non-performing loans.

microLEAP has digitised certain aspects of the ‘Grameen model of Group Lending’ and have called it Group Financing. Under Group Financing, we may offer microfinancing to businesses that may not have a good credit history (due to usage of cash only) or may have only recently been SSM registered.

Requirements –

  1. Issuers (Borrowers) will need to be a business / enterprise as under SC Regulations, the platform may not be used for personal financing.
  2. Issuers will need to group together to form a group of 5 businesses, called an ‘Issuer Group’.
  3. Issuers will need to know the other members of the Group either as friends or acquaintances. This is crucial for group solidarity and peer pressure to work. microLEAP will check their business address and ensure they are in the same community or town.
  4. If an Issuer within the Group defaults on their payments, then all the other members will be negatively credit scored and this will effect their ability to raise more funds from microLEAP in the future.
What is Group Financing?

Based on the ‘Grameen model of Group Lending’, microLEAP has digitised certain aspects of the Grameen model and called it Group Financing.

It allows 5 Issuers to come together as a Group and if one of the Issuers within the Group defaults on their monthly payment, then we will negatively credit score all group members. This will effect their ability to raise further financing through microLEAP going forward.

How do I apply for Group Financing?

As an Issuer, go to your profile and start an application. Then:

  1. Choose ‘Yes’ for the question “Applying as part of a group?”
  2. Fill in the full name and the NRIC / Passport Number of all the other 4 decision makers of each business in your Group
  3. Follow all the steps to complete and submit your application
  4. Ensure the other members of your group individually apply and do the same thing above
May I apply for a different amount than the others in my group?

Yes, each Issuer has to apply individually so therefore you may request for different amounts of funding from the other group members, it doesn’t have to be the same amount

How am I credit scored?

Each group member will be individually credit scored as per our credit algorithm, then you will be credit scored as a group.

Depending on your group credit score, there may be a credit improvement. That is to say that you may get an improvement in your own individual credit score and so you may see a decrease in the interest rate (or profit rate for an Islamic Note) that you would have to pay if you were not part of a group.

Why are all women groups better credit scored?

The ‘Grameen Model of Group Lending’ has shown evidence that women have a better track record when it comes to repayment of their financing than men. We have incorporated this in our Group Financing model such that all women Issuer Groups have stronger credit improvement than others.

What is Peer Support?

As each member in your Group has to ensure that all monthly payments are done on time and that there are no defaults, you will find that there is ‘peer support’ in your Group. This is because no members in the Group will want to see another member default as this is will effect the ability of you, as an Issuer, to raise funds from microLEAP in the future.

How am I hosted on the platform?

Only until all Group members have signed up and submitted their application and been credit checked, will your individual Investment Note be hosted on the platform.

P2P Investors can invest individually in each Investment Note, we do not compress the Investment Note into one ‘Group’ Investment Note.

What happens if a member in my Group does not fulfil their monthly payments?

It is very important that the members in your Group are from the same community or town, or from people that know each other well. Peer Support will only work if there is a sense of community where you will ensure that everyone pays their obligations on time.

If a member within your Group defaults on their monthly payment, then all members will be negatively credit scored and this will effect their ability to raise more funds from microLEAP in the future.