(1) General Principles
Non-payment is the most damaging
threat to the health and survival of
any microfinance organization.
Ensuring that payments are on
time is one of the most important
jobs of your field staff. The entire
office staff must support this effort.
These are the principles that
discourage delinquencies and
reinforce borrower responsibility:
Exercise discipline
Repayment must be governed by
consistent standards and
practices. Once a schedule of
collections is established, it
must be followed without fail.
Lax or intermittent collections
will seriously diminish the
seriousness with which
borrowers view their obligations.
Circulate information
Late
payments are a matter of
concern to everyone. If any
payments are missing from the
regular group collection, the
Group Treasurer must tell the
other group members and the
Field Agent as soon as
possible.
Act immediately
A payment is late the first day
after it was due. The Field Agent
must address the problem
without delay. The sooner you
tackle a late payment, the
easier it will be to collect.
Pass the test
Borrowers will
always test an organization to
see how serious it is about late
payments. Instantaneous
action shows you mean
business. Address each and
every default no matter how
minor.
Cement relationships
The more
time Field Agents spend in the
field, the lower the delinquency.
Frequent visits to borrowers
nurture loyalty to the programme
and act as constant reminders
that borrowers must honour their
promises to pay on time.
Demonstrate respect
Always treat borrowers with
courtesy and respect.
Regardless of a borrower's
behaviour, respond with a
professional approach. Be firm
but never explosive;
compassionate but always
diligent.
(2) Remedial Steps
When preparing for collection
visits, Field Agents should know
the total due in a group's regular
installment. Any shortfall should
be discussed with the group.
Frequently, late payment results
from a poor attitude, not the
inability to pay. Pressure from the
group can prompt a borrower to
reorder spending priorities and
make the delinquent payment.
The Field Agent must schedule a
group meeting within two days of
the late payment. During the
meeting, the delinquent borrower
will be asked by the Group Leader
to explain why payment is late. The
Field Agent will act as facilitator to
guide the group in arriving at a
solution.
Since the group has agreed to
guarantee repayment by each
member, it is up to them to decide
on a course of action. They may
make suggestions to the borrower
for ways to reduce expenses,
increase revenue or resolve
conflicting demands on income.
Depending upon the na~ ture of the
delinquency, the group may extend
a grace period, exert pressure or employ
sanctions. They may decide to
cover the delinquency from
group funds set aside as
reserves.
Regardless of the outcome, a loan
default by a single borrower is a
default by the group. The group
must resolve it according to its
established bylaws. The role of the
Field Agent is to facilitate problem-
solving, monitor adherence to the
bylaws where appropriate, and
report the outcomes to the Loan
Manager.
(3) Non-payment Report
At the regular collection visit the Field Agent enters the amount of
payments due but not received on the Non-payment Report. This is
submitted to the Loan Manager along with other field reports. As past due
payments are made, the Field Agent updates the report.
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