Microfinance BDT Products: Loans and Insurance

Details of Loan and Insurance Products

The objective of these products is to enable people to generate income, build assets and become self-reliant. The group, then the village center, and then the staff approve loan proposals. The members of the group collectively serve as guarantors in case of default of any member and the village Center serves as a guarantor for a defaulting group. Income-Generating Loans: IGL

• IGL is BDT’s primary group-based loan product. It helps the women members & their family members fulfilling their working capital needs for their micro enterprise.
• Group has to mandatorily save Rs.10 per week for four weeks to become eligible for loan.
• Loan will be given for existing business only.
• Asset financing like rickshaw, cows, buffalo will be preferred in case of new income generating activities.
• The loan duration is 52 weeks
• Minimum loan amount is Rs.5000
• Maximum Loan amount is Rs.8000 in first cycle, Rs.12000 in second cycle & Rs.16000 in third cycle.
• The interest rate charged is 18% per annum.
• Processing fees @ 2% of loan amount is payable for this loan.
• The repayment begins on 7th day of disbursement.
• The repayment frequency is weekly.
• 2% processing fees is charged for sanctioning of loan
• The group gets a saving box and a register to maintain group savings & attendance records.
• Life insurance cover of loanee and Her husband or nominee is mandatory for the loan.
• Advance loan repayment @ 12.5% of loan installment will be collected with each installment.

Emergency Loan (EL)

• Emergency Loan helps members survive during times of emergencies, such as illness, funeral expenses or maternal and health care.
• Very limited applicability: reserved for only the most desperate situations. Level of need may be determined by seeing if member is willing to sell or pledge her jewels for money.
• The members will get loan after 10 week of mandatorily savings by group.
• Minimum amount granted is Rs.1000.
• Maximum is Rs.2000.
• Interest charged is 18% per annum.
• The loan duration is 20 weeks.

Small Enterprise Loan: Individual Loan Product

• The Individual Loan Product is for microenterprise owners like kirana shops, manihari shop, clothe shop owners etc who have visible repayment capacity for larger loan amounts and more flexible repayment terms.
• The shop should have running history of at least 5 years.
• The borrowers have to submit annual turnover and profit details of at least last three years of existence.
• There should be turnover of at least Rs.50000 for last three year of existence.
• There is 2% processing fees of the loan amount.
• Life insurance cover & general insurance cover is mandatory for the borrower.
• No group liability is in this product. 10% refundable cash security will be deposited by the borrower.
• Advance loan repayment @ 12.5% of loan installment will be collected with each installment.
• The minimum loan is of Rs.10,000.
• The maximum loan size is Rs.20, 000 with 50% increment for next cycle.
• The interest rate is 18% per annum.
• Individual loan is for purpose of working capital of running enterprise.

Festival Loan

• The Festival Loan Product is for existing BDT clients that have been in the group lending system for at least one year and have demonstrated good return on investment.
• Loan will be disbursed in month of September before dushera Puja.
• Loan will be period for 60 days.
• Minimum loan amount is Rs.5000
• Maximum Loan amount is Rs.8000
• The interest rate charged is 18% per annum.
• Processing fees @ 2% of loan amount is payable for this loan.
• Life insurance cover is mandatory for the borrower.
• 10% refundable cash security will be deposited by the borrower.
• Bullet repayment will be accepted.
• The whole loan amount with interest will be accepted at one go at the end of 60 days period.

Loan Cover Insurance

• Loan cover insurance offers total loan forgiveness and re-disbursement of repaid funds in the event of the borrower’s or spouse’s death. It is intended to protect the member from the financial burden of a family death.
• BDT has started taking Insurance to cover the life of its members and their spouses since June, 2008. Under the program, the insurance division has partnered with life insurance companies—Birla Sun Life Insurance.
  Features:
  • Covers the principal loan amount in case of death of members.
  • Insurance cover for member’s husband/nominee is also mandatory. Premium is dependent on age of husband or nominee.
  • Premium is 1% of the principal loan amount.
  • Covers the member from the date the loan amount is disbursed and ceases as soon as she repays the loan amount.
  • All types of death are covered under this policy.
  • Term policy - premium is charged on annual basis and this premium is not returned
  • In the event of death, the insurance company pays BDT the principal amount of the loan. BDT waives the loan balance and refunds borrower the principal amount already paid.