In turn, each gulu is a guarantor of the sanos . If a sano fails to repay the loan, then the gulu would be required to do so. This mechanism creates two levels of peer pressure to ensure high repayment rates. A loan guarantee form is signed by all members of the gulu , jointly with the elected committee of the gulu . The participants use the loans as working capital in street vending, small manufacturing and food processing.
Loans are repayable in twenty-five weeks for first loans and fifty weeks for the second.
The repayment frequency is weekly for first loans and bi-weekly for the second. The change was initiated by the clients themselves upon realizing the inadequacy of character reference and LIF as collateral. The yearly average amount collected increased from ZK94 million in March 1996 to over ZK122 million in December 1996. The number of group savers rose from 2,021 in March 1996 to 3,340 in December 1996. Total group savings was equivalent to 72 percent of the total volume of loans outstanding as at December 31, 1996.