INTEREST-FREE COMMUNITY LENDING
Low-income families sometime borrow from licensed and unlicensed money lenders for needs like paying rent, children’s education and medical fees. Sometimes such 'payday' loans trap them into a cycle of debt and deplete their already low assets.
We hope to establish an interest-free community lending initiative, intended to meet the short-term credit needs (urgent loans) of residents in low-income neighbourhoods and displace the need for licensed or unlicensed moneylenders.
The objective of the lending is not financial assistance or subvention (expected to pay back); nor is it microcredit for starting small businesses. The loans will not charge interest or require collateral (unlike moneylenders or pawnshops).
WHY DO IT?
Preventing Insolvency and Debt Cycles
​​Our solution reduces the need for vulnerable groups to borrow from predatory lenders, helping them meet short-term urgent credit needs and avoid insolvency and debt cycles.
Low Operational Costs
The community fund leverages existing capabilities, such as those of a credit co-op, to disburse loans. Operational costs are minimal, and the fund can continue to exist even with low loan defaults, as funds are not used for manpower or operations.
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Strengthening Community
By addressing a problem based on the community's own design and decisions, the project strengthens community bonds and resilience, empowering residents to sustain positive change in their neighborhoods.