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BUILDING A CREDIT ORGANIZATION
by Phil Bartle, PhD
Workshop Handout
This describes the organization that is your goal to build
The Structure:
The credit organization has two parts to it. One part is the Umbrella Group, which is composed of several (five to seven) Trust Groups. The other part is the Trust Group which is composed of five to seven individuals, all of whom must trust each other with their money.
No individual may belong to the Umbrella group unless they belong to one of the Trust Groups that form it.
The Functions of the Trust Group:
Each Trust Group meets on a regular basis (like a traditional credit rotation group) and pools money that each contributes to it.
At first the money will be used to make deposits, through the Umbrella group, to a designated bank, credit union or licensed financial institution. Later, when the Umbrella Group obtains a loan from the bank, it splits that loan into parts for each Trust Group, and the Trust Group splits its share of the loan to the individual members of the Trust Group.
All the members of a Trust Group are responsible for all its members' credit, and will collectively repay any owed money that is defaulted (not paid back) by any member of the group. After that, the Trust Group continues to collect its regular contributions, but uses those in the repayment of the loan, through the Umbrella Group, back to the bank.
The Functions of the Umbrella Group:
The Umbrella Group meets on a regular basis. Its first set of functions are in credit brokering. It determines the amounts of loans needed by all individuals, after they have made an assessment of how much credit they can afford and put to the best use for starting a small profitable business. It then negotiates a loan from the bank on behalf of all members. When obtained, that loan will be split up to be distributed to each of the Trust Groups.
The Umbrella Group is the interface with the bank, and its officers or executive sign with the bank on behalf of all its members in Trust Groups. The Umbrella Group as a whole is responsible for all of the Trust Groups, and if any Trust Group, as a whole, defaults on a repayment, the Umbrella Group, as a whole, is liable for repayment.
A second set of functions of the Umbrella Group is as a conduit for the necessary training, in credit management, and in micro business management, that the facilitator will arrange in co-operation with the Umbrella Group.
The Umbrella Group is also the interface between the participants and the donor agency which provides the credit, the facilitation and organizing, and the training.
The Facilitator:
The Facilitator is a staff employee of the agency (government, non-government, whatever) that funds the scheme of assistance, organizes the participants and arranges the training.
The Facilitator may NOT be a member of the Umbrella Group (including its executive and its constituent Trust Groups) and may NOT sign (eg loan agreements) on behalf of the participants (Umbrella or Trust).
The Facilitator is a conduit for the arranging of loans, organization and training from the contributing agency and the participants.
The Overall Structure:
The overall structure, including the arrangement between the Umbrella Group and its Trust Groups, is a special kind of a co-operative association. It needs a constitution and a name. It needs an active and functioning executive or small "board."
It is not a co-operative engaged in production or distribution, and is not a financial institution like a credit union.
Its two main purposes are in the acting as an organized customer for a licensed bank on behalf of its members, and as a means of grouping those members for providing management training in credit and business skills.
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Working With a Trust Group:
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