Social Impact Assessment of Microfinance Programmes - weman

Several flaws surfaced when the system was implemented in Orangi only. The
programme started in all areas of Orangi with a population of over 1 million. It was
humanly impossible for the supervisors to make informed decisions about all borrowers.
Therefore, a rise in bad clients, difficulties in loan recovery and weak supervision, were
the obvious outcomes of this system. Manual accounting made it impossible to check
status especially when roles and responsibilities of teams were also not defined or
distributed.
4.1.5.2 Phase 2: Loans through Extension (1993-95)
Addressing the flaws, the second phase had properly distributed sections and hence, roles
of supervisors. Four sections were formed separately dealing with loans, accounts,
recovery, and training and extension.
In this phase, maximum loan size was also defined along with the recovery period while
credit was only distributed in Orangi. Agents were selected amongst good clients who
helped in selecting new borrowers and credit recovery. Disbursement through checks was
introduced along with a computerized accounting system. These changes helped OCT in
improving the recovery rates, client selection, operational efficiency and information
based decisions. Moreover, a clear division of work strengthened the team’s collegiality
and job satisfaction.
In 1995, the programme was reviewed again and it was found that some of the extension
activities were not based on credible information. Also agents having active businesses
were not able to respond to all the loan requests directed to them. Moreover, the time for
payments and number of instalments were not feasible for clients or the organization.
4.1.5.3 Phase 3: Loans through Good Clients (1996-99)
To respond to the pressing logistical and HR constraints, the lending methodology was
reviewed again. This time, OCT approached all good clients with an opportunity for them
to identify two borrowers from their vicinity. The nature and frequency of meetings with
borrowers were changed extensively. Initially, monthly meetings didn’t get a positive
response; however, in 8-9 months, borrowers were more forthcoming. Loan decisions
were institutionalized by forming a loan committee which approved loans through
consensus. Most importantly, the number of instalments was reduced to ten for efficient
recovery while reduction in service charges was also offered with early repayments.
These changes made the process more streamlined and transparent. Also the circle of
trusted clients became stronger and more effective. However, in 2000 multiple
complaints were received that the number of instalments are too few and difficult to pay
for.
4.1.5.4 Phase 4: Re-verification of Loans (2000 onwards)
The loan recovery period was extended to fifteen months. Also, to meet the increased
demands for credit in local markets, it was decided that loans could be processed if
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