Client Focused Lending: The Art of Individual Lending

This publication describes how five institutions managed the costs and risks of providing small loans to self-employed persons' without group assurances used by other microlenders, or extensive asset and documentation requirements of traditional financial institutions.

This study also explored the market that these institutions were able to serve with this type of microcredit product. Individual microlending is client-focused because the credit service is tailored to the needs of individual clients. This benefits the borrower and the lender. For the lender, it reduces risk as the client's cash flow mimics the repayment pattern. For the borrower, it results in improved service, particularly regarding loan sizes, guarantor requirements, and streamlined application and repayment transactions.

In the absence of group guarantors, product design and character assessment are particularly important. With group lending, the group creates a protective layer between the borrower and lender that allows the lender with greater latitude with product design. Individual lenders do not have this cushion, but they compensate with creative solutions.

[Adapted from author's abstract]