The READA project staff conducted an assessment of all the Lotus funded projects. The assessment concluded that although the rice banks, farming, water, Self Help Groups (SHGs), activities were successful, the communities still had significant debts incurring high interest rates, often 30-40% per annum charged by micro-finance institutions, private banks or money lenders at village level. The SHGs within the Lotus projects have only a small ‘pot’ of money from which to make loans to members to support business group or individual small business activities.  Based on these findings Lotus decided to start a 1 year Small Loans project by funding a capital of US$10,000.

The concept of the Small Loans project is that SHGs submit a proposal to the READA staff for a loan in which they will have to stipulate that the loan will be used by the SHGs to fund only loans to individual members. The individual members will have to confirm in writing to the SHGs that they will only use these loans for agricultural, animal raising activities, or small business activities.  The maximum amount each SHG can borrow from the SSL project is US$500 with the loan term being 12 months. The maximum amount the SHGs will lend to individual members will be US$100 with the loan term also being 12 months.

At the end of the 1 year pilot Small Loans project the assessment report concluded that all groups reduced their debt with the local lenders by between 5%-10% per month, but that they still had some debt with the MFI and banks. Based on this Lotus, together with READA, decided to extend the SSL project for a further 3 years in order to help the existing 20 Self Help Groups (SHGs) to become debt free.

The Small Loans project will not only assist individuals to conduct agricultural and animal raising activities and/or small businesses activities, but it will also enable each of the SHGs to build up a capital amount enabling them to run loan schemes independently without the need of support from Lotus or any other third party, once the project ends.