Dear Jami,
Thank you for your admirable comment. I can sense how genuinely indignant you are about the fate of these poor clients. I have not read your report, but the examples you give are partly even more outrageous than what is documented by the two Cambodian NGOs. I will read your report in preparation of the internal reflection I want to conduct at the MFI I work for.
I concur with you that, if regulators won't act, the poor are powerless to act, then investors and donors of MFIs should take the lead. Although many international investors claim to be socially responsible and do ask their MFIs to fulfil some social criteria, I suspect that they still give financial criteria a higher priority. Many for example ask their MFIs to keep PAR30 below a certain percentage, otherwise they will not invest. This incentivises MFIs, and thus their credit officers, to keep PAR30 as low as possible. Unsurprisingly, credit officers in turn put pressure on their clients not to default, and this is how many sorry tales unfold. Perhaps these investors could ask their MFIs to respect not only a maximum PAR30, but a minimum too. I imagine that this would be simple to implement, and it would signal to MFIs that they do not need to strive for perfection and that a bit of PAR is normal.
Another possibility to bring about improvement would be to "name and shame" the offenders. If you could name the responsible investor in your comment who has invested in the MFI despite your concerns, I (and I guess many in this discussion group) would be curious to know.
"Name and shame" is in fact what the Cambodian NGOs have done with their report. The report's seven case studies identify the involved MFIs explicitly. They include practically all the biggest MFIs in Cambodia plus Acleda Bank and Sathapana Bank. Disappointingly, the few reactions I have seen so far, from Cambodia Microfinance Association and from Acleda Bank, are dismissive of the report. What is more, the Cambodian government has even tried to push the NGOs to retract their report! Most of the MFIs and banks identified in the report have a client protection certification by Smart Campaign however. I wonder what the position of Smart Campaign is towards the behaviour of MFIs documented in this report. Jami, as you are involved in Smart Campaign, perhaps you could draw the attention of Smart Campaign to this? The MFIs may dismiss the opinion of NGOs, but they probably care enough about the renewal of their Smart certification to take an opinion of Smart Campaign seriously.
After conducting the internal reflection at my MFI, perhaps I can report to this group again.
With kind greetings,
Mingyee
在 2019年9月25日 星期三 下午10:02:13 [GMT+7]， Jami Solli<jamisolli@gmail.com> 寫道：
Thanks for sharing this report Mingyee.
Unfortunately, as you are aware (bc we have e-discussed this before) the problem is not new; but abuse collection practices and what happens to those who cannot repay is widely under researched and undocumented. Then, there is even less done to protect the rights of those who become over indebted through illness, business failure or just the sad fact that they are poor. Debts live on forever even when clients die.
In an industry that claims to be about poverty alleviation; I have often wondered how much financial exclusion has actually been created by the financial inclusion movement.
I researched what happens to MF clients who default in Uganda, India and Peru in 2013-14 and the report and answer to that question can be summarized in a few words: clients are jailed, they lose land that has been in the family for years, and they are physically held hostage and/or harassed by unregulated collection agents/thugs (sometimes the police are hired to do collections).
Here is the full report:
Also, in another separate research for a responsible investor client, I found evidence of MF clients being held hostage in the offices of an industry leader/MFI. There were 8 open human rights cases in the courts v. this MFI for abusing clients. So, imagine that most of the poor cannot afford to retain lawyers or pay court fees, thus I deduced there were probably many more victims. The CFO was informed of this and he told me the numbers were insignificant. I told him yes in fact, even one case is significant when we are discussing abuse of human rights. The responsible investor client still chose to invest in this MFI.
Here's what needs to change: investors/donors of these MFIs (and now digital lenders) need to shut down the abusive behavior. Regulators won't/can't.
But, this is not happening.
But, this is not happening.
What else can alter the status quo whereby poor consumers can be abused with impunity? The poor certainly do not have access to official debt restructuring or rehabilitation procedures through bankruptcy laws. Many legal systems were set up with the protection of creditors' rights in mind. 1.4 bn poor per the UN lack access to justice.
And, it seems the only country who may recognize this is a powder keg is the South African legislature which has implemented debt counseling (though imperfect) and has made another recent legal change allowing for actual debt relief. Again, tbd how this will be implemented, but what other developing country is even trying to address the problem?
I am all in Mingyee if you want to try to do something about these problems in Cambodia and happy to offer any assistance you think can be useful.
What do you propose?
Best regards,
Jami
On Wed, Sep 25, 2019 at 9:13 AM Hsu Ming-Yee mingyee0706@yahoo.fr [MicrofinancePractice] <MicrofinancePractice@yahoogroups.com> wrote:
Dear all,I would like to inform you about a newly published report by two Cambodian NGOs about what happens to some microfinance clients who are in difficulty of repayment. You may not agree with all their recommendations nor all the wordings in their report, but their documentation of what has happened to these clients and the role played by MFIs is, I believe, worth reflecting on. The report relates to Cambodia, but I am sure that similar cases happen in other countries too.I myself intend to launch an internal reflection at the MFI I work for. Any thought about what is acceptable and what is unacceptable practice is welcome.The report is freely downloadable at either one of these two websites:Best regards,Mingyee
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Posted by: Hsu Ming-Yee <mingyee0706@yahoo.fr>
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