The LETTER from Galla is certainly apropos, and at first blush the criticism is valid. Certainly, when dealing with a bank, one must furnish adequate security including, in some instances, life insurance naming the bank in question as beneficiary.
However, it is important to differentiate the AMA-ERF guaranteed loan from the ordinary commercial bank transaction. It must be recognized that many, if not most, of the borrowers under the AMA-ERF program are financially deprived. They cannot obtain loans from banks without the AMA-ERF guarantee, and most of them find it very difficult to meet the interest obligations, especially during the training status. To require the borrowers to assume the cost of life insurance premiums would make the loan even more costly.
Consideration was given to the purchase by AMA-ERF of life insurance on all borrowers at group rates. This plan was rejected on the basis of actuarial studies which indicated