Social Impact Assessment of Microfinance Programmes - weman

guarantees of two local entrepreneurs are given. The other steps of loan application are
elaborated above.
The loaning process constitutes simple steps summarized below:
• The loan application form issued by the office on request, is checked.
• Assessment of the loan application is carried out by the field supervisor
• The loan application is verified by the field supervisor.
• The loan committee then reviews the loan application and approves or
disapproves through consensus.
• After approval, an agreement is signed by the client. Two working witnesses are a
requirement of the agreement. These are usually the loaners from OCT with good
credit history.
• The loan is disbursed through cheque. The approved application is fed into the
computer.
• A ledger account is created and the balance regularly updated and reviewed.
• Instalments are paid at the office where an entry is immediately made in the
computers and a receipt issued.
4.1.6 Portfolio Performance and Loan Recovery Ratios
The recovery rates have not always been so stable and positive. Even before coming into
existence, OCT recognized the threats any credit programme in Pakistan was subjected
to: the corruption of financial institutions and the corruption of the borrower. The first
threat was internal which was managed by meticulous monitoring and relentless selfappraisals
and minute documentations. This in-depth scrutinizing of loans and recoveries
safe-guarded internal integrity of the microcredit programme, and there were no issues
created by staff performance.
However, more complex issue were to limit the cases of dishonesty, corruption and
blackmailing. The risk increased owing to the political influences and law and order
situation in Karachi, and Orangi in particular. Again, OPP’s founding principles
generated a firm belief amongst the staff that if they were honest and fair in their business
dealings, this will eventually be matched by the borrowers. OCT approached the issue
with an understanding that any delinquent loans reflects on organizational weakness and
not that of the borrowers. Therefore, it was hoped that OCT staff would learn to pick and
maintain a growing circle of honest clients. While this was seen as a rigorous route to
staff capacity building, the first two years were indeed patience testing. For instance, in
the first year 35 percent of clients defaulted causing 20 percent of amount loss.
Gradually, the trust in borrowers began to pay off and indeed, clients followed the
principles of fair business deals.
For microcredit given within Orangi, the total recovery is Rs. 170,994,150 where
recoveries in principal are 144,029,280 and recoveries as service charges are Rs. 26,964,
870. For loans issued outside Orangi through NGOs, total recovery made is equivalent to
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