- Why is no interest charged on loans?
If interest is charged on the loans that makes it more difficult for the borrowers to repay, and might encourage them to approach “loan sharks” for money to pay off the initial loan. We want recipients to enter the more formal economy and make this as easy as possible.
- Why are loans preferred to grants?
We want to give a “hand up” not a “handout”, hence interest-free loans rather than grants. Loans restore dignity, acknowledge the worth of the recipient and serve as vehicle to train in financial management and cash flow, aspects that grants do not facilitate.
- How are beneficiaries identified?
We work with our Partner Organizations to identify those entrepreneurs that they have trained and set up in business by way of an initial grant and who need an additional injection of capital to take their enterprise to the next level. In addition we work within the target communities to identify existing business enterprises that we can assist in a similar manner. All applicants go through a careful screening process to ensure that they are reliable and that the enterprise has a strong likelihood of success, and each successfully funded borrower is linked to a mentor who provides assistance and the necessary support.
- How do you know this strategy works?
This model of financial assistance has been successfully implemented on a large scale internationally with organizations such as Grameen Bank, Kiva, Hope International and more locally with the Small Enterprise Foundation. Not only has the system of small loans assisted many in poverty to improve their living standard, but the repayment rate on these loans is generally well above 90%.
- What happens if a project is not fully funded?
If a particular project is not fully funded, the Steering Committee can exercise a number of options:
- They can recommend that the loan not be granted due to insufficient funds. In this case contributors will be asked if they wish to identify another project to which they would like to contribute.
- They can authorize a partial loan up to the amount that has been funded.
- They can top up the amount received using unallocated donations to Hermanus Siyakha.
- Does Hermanus Siyakha monitor and mentor borrowers?
Applicants who are successful in securing a loan are allocated to a mentor appointed by Hermanus Siyakha. The mentor provides assistance and guidance to the borrower, and will often have been involved in the formulation of the loan application. Regular contact is maintained between the borrower and the mentor, who is responsible for providing regular feedback to the Steering Committee on how well the project is progressing and to what extent the borrower is meeting his/her repayment commitments.
- Will HS provide feedback to contributors on the progress of each project?
Regular feedback on each project is provided via an updated newsfeed on the Hermanus Siyakha website and through an electronic newsletter to all contributors. At any stage a contributor may request an update on the particular project that they have funded. Contributors are also encouraged to make contact with the borrower, on the understanding that they may not interfere in the execution of the project, nor give advice to the borrower. All communications of this nature should be undertaken through the appointed mentor.