One of the ways financial institutions/organizations, such as banks and savings groups, generate income is through the issuance of loans. This is because for every loan that is given, there is a certain sum of money to be paid by the individual/group who took the loan in addition to the principal sum borrowed. This sum of money over the principal loan amount is called “interest.”
There are processes to follow before a loan can be given. First, an individual/group must indicate interest for a loan by applying for it, after which, the financial institution/organization would have to put some factors into consideration while reviewing the loan application before the loan can be approved or declined.
Note: The financial institution/organization is not under any obligation to approve the loan. The loan can only be approved if the individual/group meets the requirements for the loan and if the institution/organization is confident that the loan has a chance of being repaid with the required interest.
This article will focus on what needs to be done in a savings group meeting where a loan has been requested, and we have a SAWBO animated video below that carefully explains these steps. You can learn more about savings groups by reviewing previous blogs on this topic.
Note: Because the coronavirus has changed how we do many things, which includes in-person meetings, it is advisable to consider if there are ways to hold a meeting while adhering to all local COVID-19 guidelines and regulations to keep everyone safe. Until the virus is managed and guidelines and restrictions are lifted, in-person meetings are not advised. So please keep this information close as you read the rest of this post and view the animations.
What is a Loan?
A loan can be defined as a sum of money borrowed by either an individual or group from a money lender, bank, savings group or other financial institutions with the intent of future repayment at a certain interest rate.
Importance of Loan Evaluation Process
It is very important for savings groups to evaluate loan requests before approval in order to avoid bankruptcy.
This evaluation is important because:
- It will help to determine if the individual/group is qualified forthe amount requested.
- It helps to determine if the individual or group will be able to repay the said amount within a stipulated period of time.
- It helps to determine how the loan will be repaid.
- It also helps to identify the purpose of the loan.
The SAWBO animated video
This animated video you are about to watch was put together by the renowned team of researchers known as Scientific Animations Without Borders (SAWBO), after thorough research. The video is also available in other language variants, so you can watch in your preferred language for free if you click the “select a language” button.
If you want it translated into your local language, please feel free to contact the SAWBO team via email on contact@sawbo-animations.org.
Importance of this video
One of the significant things about the SAWBO videos is that their illustrations are clear and easy to understand.
This video clearly explains the step-by-step process in every savings group meeting where a loan is requested.
Click to watch, download or share video in English language below:
Or click HERE to watch, download or share video in your preferred language:
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As stated earlier, the savings group is not under any obligation to approve a loan. The loan can only be approved if the individual/group meets the requirements for the loan and if the institution/organization is confident that the loan has a chance of being repaid with the required interest. If your loan request has been declined, it is because, either you didn’t meet the requirements or you didn’t repay a previous loan by the approved time.
Remember:
“Timely return of loan makes it easier to borrow a second” – Unknown
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