In the Grameen Methodology, savings and credit services are offered to individuals who are members of sub-groups which are then aggregated into a larger group. The standard Grameen Group consists of 10 groups of 5 members each, making an overall group of 50 members. There are many variations of this grouping arrangement, but the core ingredient of all Grameen Groups is the cross-guarantee mechanism, where each member guarantees the savings and loan payments of each of the other group members. In plain words, if a group member does not or cannot make a scheduled payment of savings and/or loan repayment, then each of the other members of his/her group are required to contribute to ensure that the payment is made on time.
The Grameen Methodology requires weekly loan security savings deposits from each member. At the beginning of the process there is only savings mobilization for a number of weeks (e.g. 4 weeks), after which short term loans (e.g. 4 - 12 week tenures) are made available to the members on a “staggered rotation” basis. Loans to individuals are normally a 2 – 4 multiple (i.e. leverage) of their individual loan security savings balance. The total of the security deposits plus interest is reimbursed to each of the members at the end of the group tenure.
The Chairperson of the group is responsible for overall group cohesion and discipline, and he/she always gets their loan in the last sub-group to ensure that they have been monitoring the performance of their group members before accessing their own loan. They normally get certain benefits and incentives such as lower loan interest rates, higher savings interest rates, higher leverage factor, gifts, and networking and training opportunities.
Grameen Groups normally disband after an agreed upon tenure, typically annually. The group members may then decide to regroup or to join other groups. This annual voluntary transformation of group membership allows for members to find a group of people that they are willing to work with over time.
The Chama Mobile Software Application (CMSA) automates the savings collection and loan disbursement process of the Grameen Methodology, which has proven to be very successful internationally as a mass market savings and credit methodology over the years.