LENDING METHODOLOGY

Buksh Foundation has built its lending methodology focusing on small groups, thus ensuring discipline combined with speed, whereas all screening and due diligence is carried out individually; deserving clients with a sound or high potential business and an honest, credible character are advanced loans.

Buksh Foundation aims to make its operations more transparent and efficient by developing an innovative model that brings principles of business, psychology and development together to create a sustainable, cost effective and scalable financial services institution serving the ‘un-banked’ Pakistan.

The component that makes us innovative in our approach towards microfinance and shows our commitment to social and financial transparency is the client evaluation part of the due diligence process, which has two components; a household and business cash flow analysis along with a character analysis; The cash flow analysis is based on the principles of financial discipline of the client and profitability of the business to determine the credit worthiness of client and economic sense of his/her business for advancing the productive loan. The character analysis is a ‘global innovation’ introduced and implemented by Buksh Foundation, to gauge the character and willingness to pay of our clients. It has been developed in collaboration with consultant psychologists having almost 25 years of experience in working with poor, low-income households in Pakistan, organizational psychometric evaluation and individual psychological analysis and is based on the principles of ‘Industrial Organizational Psychology’.

These tools have helped us develop a streamlined system for client evaluation and ensure the transparency of the credit worthiness of un-collaterized clients. Moving away from the group solidarity model, this innovation in due diligence has helped Buksh Foundation make a professional credit decision, considering individual evaluations. Selected candidates are then clustered into small flexible groups just to ensure a certain degree of social support in repayments
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With our application form being an exhaustive piece of document, we try capturing maximum data about our clients in order to make a sound lending decision and advocate that others MFPs too should undertake a thorough client evaluation to maintain portfolio quality.