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Peer Lending Program
MOSAIC and Vancity have launched a Peer Lending Program that
aims to provide low-income earners and newly arrived immigrants with the capital
to start their own home-based businesses. The program is based on the peer
lending process, where groups of participants who have not been able to get
traditional loans form. While traditional loans require applicants to possess
personal guarantees or assets, peer lending – also known as microcredit – sees
the group itself acting as the guarantee for the loan. Group members all agree
to share responsibility for any other member who can’t repay his or her loan.
What is Microcredit?
Microcredit is the extension of small loans to entrepreneurs who
are unemployed, lack verifiable credit or collateral, or do not meet the minimum
financial requirements to qualify for a traditional loan.
How do groups form? How many members per group?
Peer lending groups consist of three to seven members. Anyone
can start a group and anyone can join: friends, relatives, neighbours,
colleagues, etc. Think carefully before inviting new members to join your group;
if someone isn’t able to repay his or her loan, the entire group assumes the
responsibility.
How much is each loan worth?
The program works like a ladder; each rung represents
eligibility for a larger loan. Initially, every group member receives $2,000 and
the chance to qualify for future loans. When all group members are in good
financial standing, any member that repays his or her loan without delinquency
becomes eligible for a $3,000 loan. Similarly, a member may qualify for a larger
loan if his or her home business is provably successful. Members that remain in
good financial standing can get more and more credit – up to $5,000 – and
eventually become eligible for the Self Reliance Program, which lends between
$5,000 and $35,000 to those with established credit and solid business plans.
What are the terms of the
loans?
After good credit has been established through the Peer Lending
Program, group members may qualify for Self Reliance Loans worth up to $35,000.
The terms of all these loans range from three to 24 months; interest rates are
based on prime plus 3 per cent.
|
Stage |
Amount |
Maximum Term |
Monthly Payment |
|
1 |
$2,000 |
18 Months |
$125 |
|
2 |
$3,000 |
18 Months |
$185 |
|
3 |
$4,000 |
18 Months |
$185 |
|
4 |
$5,000 |
24 Months |
$230 |
|
5 |
$5,000-$35,000 |
24 Months |
Self
Reliance |
Can payments be deferred?
Each group member may defer up to two monthly payments per loan
period, with a $25 fee per deferment. Administrative fees can be arranged at
your Vancity branch. While there is no penalty for early repayment, the minimum
term for early repayment is three months.
Does everyone need a business plan?
While a business plan is not required, individuals who wish to
join the program should be able to articulate their ideas. Collectively, the
group must feel comfortable with each business idea in order to proceed.
Do individuals on social assistance qualify?
Individuals on social assistance can qualify for the program;
however, every dollar earned means one dollar of social assistance lost. It’s
important to speak with your case worker to put a personal transition plan in
place. Or, call MOSAIC at 604.537.1592 to speak with Fatima.
How does one qualify for a loan through this program?
|
Step 1 |
Section 1: Get Started
Learn and understand the basics of the Peer Lending Program. |
|
Step 2 |
Section 2: Form a Strong Group
Invite trustworthy individuals that you feel comfortable
with to join your group. |
|
Step 3 |
Meet with MOSAIC Staff
Complete Section 2 of the Peer Lending Workbook. |
|
Step 4 |
Section 3: Complete Your Loan Application
Complete Appendix 1 > Loan Application at the back of the
workbook |
|
Step 5 |
Section 4: Assess Each Others’ Businesses
Complete Section 4 of the workbook; hand in one Case Studies
Page and one Business Assessment Grid. |
|
Step 6 |
Section 5: Group Approval
Complete Section 5 of the workbook, as well as Appendix 2 at
the back of the workbook. |
|
Step 7 |
Section 6: Final Review
Make sure you understand the program policies and payment
terms. |
|
Step 8 |
Section 7: Checklist and Meet with MOSAIC/Vancity
|
What are the responsibilities of
each group?
For the initial loan and every subsequent loan applied for, each
member of the group, as well as the group as a whole, must adhere to the
following:
-
The group will hold regular monthly meetings and report the
minutes from each meeting to MOSAIC.
-
The group will devote time to peer support and group-initiated
training.
-
The group undertakes collective responsibility for the timely
repayment of all its loans.
How are groups managed?
Each group must choose a chairperson to facilitate meetings. As
a rotating role, all group members will have the chance to develop the following
set of skills:
Retain all documentation in the Group Application
Package during Orientation.
Contact members and arrange monthly group meetings.
Maintain the group binder and keep regular notes on
meetings (or appoint a secretary).
Act as the main contact between the Peer Lending
Program and the group, including faxing or mailing the minutes of each group
meeting to MOSAIC.
Immediately communicate repayment problems to the
microcredit specialist, and inform the specialist how the group plans to deal
with repayment issues.
Receive all correspondence for the group from
MOSAIC/Vancity.
What are the responsibilities
of each group member?
Attend monthly group meetings.
Provide business support, advice and feedback to other group
members.
Ensure the timely repayment of every member’s loan by
assisting each other and/or making payments on behalf of others.
To continue with the Peer Lending Program and be eligible for
future loans, the group may have to pay the outstanding balance of any member
who defaults. As a group, come up with a strategy to deal with this situation,
such as setting aside money that can be used to repay an outstanding loan.
Inform other group members of any impending repayment
problems, and follow up to ensure delinquent members catch up on their missed
payments.
All members must respect the confidentiality of the personal,
business and financial information provided by other members of their group.
What is the difference between the Peer Lending Program and
the Immigrant Loan Program?
The Immigrant Loan Program provides loans to internationally
trained professionals and trades people attempting to certify their skills in
Canada. These can be used to help pay for skills evaluations, education and
short-term training/upgrading.
The Peer Lending Program is open to anyone who wishes to start a
home-based business, but doesn’t qualify for a traditional loan.
A unique microcredit program offered in partnership with
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