Solidarity Group Lending
• Description: This model is based on groups of borrowers (typically 3-10) who mutually guarantee each other’s loans. The microfinance institution lends to the group rather than individuals, relying on social cohesion to ensure repayment.
• Success Story: BRAC (Bangladesh Rural Advancement Committee) has used this model effectively, combining it with education and healthcare programs to lift millions out of poverty.
• Key Features:
• Peer support and pressure for loan repayment
• Higher loan amounts as trust builds within the group
• Typically used for business or income-generating activities
• Focus on financial literacy and entrepreneurship training
Each of these models emphasizes collective effort and mutual support to overcome financial barriers, making them highly effective in areas where formal banking systems are not easily accessible.