One of the key missions of TLF is to empower the poor by providing funds, resources, guidance and support in an Islamically compliant manner so that they become financially strong. At TLF, we offer micro-loans in the range of Rs 4,000 to Rs. 8,000 to women living in slums in order to finance their micro-business activities. TLF has a unique model of intervention that combines the features of several winning models.
In terms of lending methodology, we replicate the group lending or “joint liability” concept, pioneered by Nobel Peace Prize winner Mohamed Yunus of Bangladesh and founder of the Grameen Bank. Similar to the Grameen method we structure groups with five members in each, with one of them being a leader. All women have to have (or start) a business of their own, and be micro-entrepreneurs. The groups are formed after interviews, and loans are also preceded by a loan assessment process. During the interview done by trustees & volunteers, we assess the purpose, requirement and benefit from the loan to the borrower in detail. We also educate the borrower with each interaction, on how to put the funds to best use. We encourage women who are indulging in hazardous /detrimental activities (such as, beedi rolling) to start new activities. Loans are given without any collateral/surety, and it is based on trust and mutual cooperation, using moral obligation and group dynamics to facilitate payback. The borrowing member commits to a loan tenure that is comfortable to her (subject to a maximum period of 6 months). Loan amount is collected back in equal installments through weekly meetings at a fixed time and place within the slum. Loans are currently restricted to women groups only, though in the coming year, we intend to experiment with loans to men also.
Unlike Grameen however, the Lifeline model offers credit to the poorest of the poor at zero cost. Its loans are interest-free (based on the concept of Qard al-Hasan in Islam). This is the key discerning feature of the Lifeline model.
Another distinct feature of Lifeline model is institutionalization of voluntarism and philanthropy. It works with a skeleton full-time staff, relying heavily on volunteers. To ensure sustainability of the operations, a nominal membership fee Rs 10 per week is collected from the members (with outstanding loans only), which goes directly to pay the honorarium of the loan and accounts officers at each branch. It is ensured that the fee collected is less than the expenses incurred, and the rest is subsidized by the foundation. The administrative overheads including salary of the full-time employees is covered through recurring donations (based on the concept of Sadaqa Jariya in Islam) raised specifically for this purpose.