Introduction to Building a Credit Organization
 by
Phil Bartle, PhD
Module Introduction

Documents Included in this Credit Module:

 Micro Enterprise Scheme, a brief overall description; 97k
 Building a Credit Organization, workshop handout; 21k
 Group Formation and Development, tips on organizing groups; 63k
 Forming Trust Groups, notes about trust groups for participants;
 31k
 Savings Mobilization, encouraging the group to save for building
 credit; 31k
 Some Forms, form models for making your own. 151k

When the community wants income generation, what is their
appropriate organization?

How to Set Up a Credit Organization for Micro Enterprise:

 So you have gathered the community members, started the healing
 process of unity organizing, and started to ask about their highest
 priority problems that they want to work in solving. Perhaps they do
 not want a latrine or school, or they have just built one and want
 to go on to new issues.

 "Poverty," they say, "is the biggest priority. We want to fight it
 with income generation."

 As you learned in other community mobilizing, you encourage
 community decision making, but do not automatically or passively
 accept their first suggestions. See Revealing Hidden Resources. Your
 challenges and dialogue are important in helping them clearly refine
 their objectives, and learn that there are alternative solutions
 which they can consider.

 Income generation is a sector that is cluttered with failures and
 disasters. Some well meaning charity agencies handed out hundreds of
 sewing machines to refugees, for example, and the only income that
 was generated was when the beneficiaries sold them.

 The "Principles" module explains why gifts and grants do not work,
 and why a combination of credit (loans) at available rates of
 interest, plus management training (in credit management and
 business) is the best approach. You do not dictate to them how to
 attack the problem of poverty but, armed with the knowledge of those
 principles, you discuss with them the principles of wealth
 generation (in contrast to mere transfer of cash) and how to
 organize to succeed.

 Co-ops, or co-operatives, throughout modern history, have had a
 mixed success rate. Productive co-operatives, where the organization
 is set up to engage in a productive activity, like a factory or
 farm, have not had a huge success rate.

 Like state farms and factories, in productive co-operatives
 there are many problems of management and efficiency. Private
 enterprise has had much greater
 success in productive organizations.

 Distribution co-operatives, like a dairy producers' associations, or
 farmers marketing unions, have had better success. Credit unions
 have had even more greater success and in many cases have become
 genuinely competitive with banks (when member involvement in
 management is minimised).

 Based upon these observations, you describe to your clients a
 community organization in which there is a co-operative, or
 organization similar to a co-operative, which can take credit in
 large packages from a bank, split that credit into smaller packages
 for its members, and where members, after some management and
 financial training, use those smaller packages of credit to set up
 very small. individual, private productive activities. This
 combination of private (productive) and co-operative (credit)
 activities in the organization, along with the training of its
 members, has had the most success in income generation schemes.

What is success?

 Real wealth has been generated, not just a transfer of cash;

 Loans have been repaid at a rate of 100 per cent, or close to it;

 The beneficiaries become independent and self reliant;

 They produce value added (wealth) and contribute to the economy
 and employment; and

 They become integrated into the mainstream formal capital market;
 (not relying only and dependent upon on unsustainable
 subsidised sources of credit).

 If the community group understands these principles, and the
 strategy for genuine poverty reduction, then your job as mobilizer,
 is to facilitate and encourage them to organize in the manner
 described in this scheme. The scheme, or programme, is described in
 the Scheme document, and the organization you will set up, and how
 to do it, is the topic of this module.

 The Micro Enterprise Scheme is a brief, overall description of the
 set-up, its structure, function of trust and umbrella groups, and
 the integration of training with the offering of credit. The
 Building a Credit Organization, is a two page workshop handout
 describing the organization that you will aim to set up.

 Group Formation and Development (from the handbook) includes tips on
 organizing groups for wealth generation. Forming Trust Groups is
 composed of notes for participants.

 The Savings Mobilization, document gives you the basic
 characteristics of saving, for you to encourage the group to save
 for building credit. The Forms, document provides you with some
 model forms that will guide you in making your own specific forms.

 Taken together, the documents in this module will help the
 facilitator and the participants to envisage, set
 up, organize, and run a credit organization for the creation and
 development of private micro enterprise.

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Updated: 2003 April 21