Group crediting is applied since Kyrgyzstan gained independence. The most brave and committed people of the country initiated formation of groups in regions to get small credit for private business development. Initial groups of joint responsibility were composed of 12 members; today the group should be composed of three people.
Entrepreneurs, who did not have real estate, were able to get collateral-free credits under group warranty. People understood that they could get the first and further credits for development of private business only in case if every participant of the group:
– will follow payment discipline;
– will understand that he/she undertakes responsibility of other participant of the group for repayment of credited funds;
– will striving to comply with all conditions, identified in the contract;
– each participant should have small business brining income for whole group.
Thus, the low-income groups of the population got access to credits. It allowed them to start their own business, improve their financial situation and stand strongly on their own feet.
Group crediting as business was launched from the programmes, which have being proposed by the countries-donors for our country after collapse of the Soviet Union. This innovation was successfully adapted and replicated by people with entrepreneurship spirit.
Later, the citizens of the country who managed to use credits effectively provided jobs not only for themselves but also for other citizens. These people – users of credit resources faced with new needs, which were beyond amounts of group-based crediting. They started from small business and later they reached other level of development.
In this situation, new types of products were developed by the creditors – individual credits. This type of product supposes provision of medium and big amounts required for business development. Depending on policy of financial institution and areas of activity it prefers to develop, individual approach can be considered under identification of interest rates on credits, and other conditions, which the financial institution can offer to the client.