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Visit to the Agricultural Development Association of Yilong (ARDY)

 

March 13th-16th 2006

 

1. Introduction to ARDY

 

a.       Background

 

ARDY was established in 1995 as a UNDP funded project. In 1999 they registered as a local NGO and today ARDY is a locally run organization mainly providing microfinance services to 6 townships and towns in Yilong county, north-western Sichuan province. ARDY has gone through many changes over the last decades and is still continuously changing and adapting its work methods. It began as a Grameen Bank replication and has since developed its own county-specific work methods with individual loans through branch offices and farmers associations.

 

b. Organizational structure

 

ARDY is led by its executive director Ms.GaoXiangjun, a government cadre seconded from the county government. Ms. Gao leads a team of twenty staff members, of whom 9 have been working there ever since it started 11 years ago. All ARDY staff including Ms. Gao are from Yilong.

 

                            Board of directors

 

                     Ms. GaoXiangjun, Executive Director

 

 


Office Officer      Operations Department   Development Officer    Finance officer

 

 


5 Branch offices

 

 


President  Credit officer              Cashier

 

 

c. Staff incentives and internal controls

 

Having experienced problems with fraud in its early years, ARDY now has strict internal controls in place. Every repayment needs to be recorded four times by the branch (on the client’s card, on clients overall records, on the record of daily payments and on the banking records). Daily repayments and loans dispersed must be reported to the county association office by the end of the day where they are input into the MIS system (SMAP)[1]. Repayments must be paid into the RCC at the end of the day.

All branch staff are required to deposit money with ARDY as a gurantee. The amount required is 20,000Y from the President, 8,000Y from the Operations Officer and 12,000Y from the Cashier. They earn interest on this money depending on the performance of the branch; if the branch looses money so do they. They are able to take back their savings with interest or deductions depending on the quality of the branch’s portfolio when they leave their jobs. This policy has had a positive impact on staff motivation and performance.

 

 

2. ARDY Branches

 

Currently most microfinance operations are conducted through the six branches. Five of these branches are located in townships and make loans for animal husbandry, agriculture and off farm businesses, while the sixth is located in a town and provides business loans.

 

 

Picture: ARDY branch in Zhouhe township

 

 

 

a. Borrowing conditions

 

All residents living in the township branch’s district who are aged between 18-65, married and who are engaged in business or agricultural production are eligible to borrow. Loans are based in personal credit rating, no group guarantee is used and no collateral is taken. For loans over 5,000Y, physical collateral is registered, although ARDY staffs say that ARDY would not seize collateral.

 

b. Loans

 

Clients can choose from a loan term of 3 months, 6 months or 12 months. Repayments must be made every 10 days, 2 weeks or ones month. Interest is charged at 8% flat on all loans.  The maximum loan is 10,000Y and the average loan is about 5,000Y in most branches, and 8,000Y in the Fuxing branch (see below). Clients come to the branch to apply for loans and make their repayments.

 

 

 

 

c. Borrowing process

 

  1. Clients come to the branch to apply for a loan; they need to bring their identity card and fill out a simple one-page loan application form.

  2. ARDY staffs then pay a visit to the business or home of the client (sometimes both), to get a better understanding of their situation. For loans over 5,000Y they also check on the availability of physical collateral.

  3. The credit committee (Branch President, Operations Officer and Cashier) approve loans, and work out a maximum borrowing amount for each household.

  4. Clients are contacted and come to the branch to complete formalities and pick up the loan. This is done in small groups with whoever has come to borrow on that day; groups should meet on repayment days and support each other[2].

  5. Clients come to the branch at regular intervals to make repayments.

  6. Clients who repay on time are able to take out another loan after 3 months (6 months for first time borrowers), and can keep re-loaning up to the maximum amount calculated as the household’s limit.