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.
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.