Microfinance Practice: Re: [MFP] blog post on client default inspired in part by you all

Thanks very much Mingyee. The inspiration for this research is in part from you, thus I especially appreciate your insight.

Yes, 300+ respondents does not necessarily indicate that all providers behave in that manner, and we may in fact be attracting those who have better, or different practices in place than the norm (after all only Smart Campaign signatories were surveyed).

That is why we are going to do a 'deeper dive' in 3 countries (Peru, Uganda and India) conducting interviews and gathering data from 10 or more providers in each country, talking to regulators, consumer organizations and also hopefully to consumers directly to have other perspectives. We will also try to do interviewing in 3 other countries, but not an in country visit and not as primary focus countries (due to time constraints etc.)

And, your email is particularly timely because I am developing a more detailed questionnaire now for those more detailed interviews.

So, thanks for these thoughts; I will definitely integrate them into the survey questions and approach.

I am most interested in point 2 that you raise -- what are the criteria at issue for more sympathetic vs. less likely to be offered a restructuring (and do group dynamics or collateral seizures impact whether borrowers in difficulty take advantage of this option - in short, how real an opportunity is it?).

And, who makes the decision, and at what point precisely are clients informed that restructuring may be an option--at beginning of the relationship? Or at the end?

Point 3 is also of interest: and what continual collections actions occur? A regular visit by a collections officer? Calls for years? And what level of supervision do MFIs have over third party collections agents (including group pressure)?

Thanks again and I look forward to more dialogue on this issue as we progress.

Kind regards,

Jami

On Fri, Oct 11, 2013 at 7:08 AM, Hsu Ming-Yee <mingyee0706@yahoo.fr> wrote:

Dear Jami,

I applaud this initiative from the Smart Campaign. Unfortunately I have not managed to participate in the survey, but I have read your blog. The panoply of research possibilities you describe is exciting and I look forward to read more from you. I have three quick thoughts to share with you after reading your blog:

1. 331 MFIs is a significant sample, but I would be cautious in interpreting the percentages. I would think that the MFIs with very strict practices will tend not to reply and wait to see how the aggregate result looks like. The true percentages are likely to be stricter to the defaulting clients.

2. How MFIs apply penalty to defaulting clients and whether they differentiate between more or less "sympathetic" causes would be worth exploring.

3. In your sample, the majority of MFIs close the loan file after some years. I would be interested to know if they close the file
quietly without telling the client (which has been the practice at my MFI until recently) or if they inform the client transparently.

It is not so difficult to follow the client protection principles as long as the clients are regular and pay back on time, I think; the real test comes when clients default.

Mingyee

On Tuesday, October 1, 2013 3:42 AM, Jami Solli <jamisolli@gmail.com> wrote:

http://cfi-blog.org/2013/09/26/d-is-for-default/

Looking forward to your lively input and guidance on the ongoing research :)

Best,

Jami Solli