Microfinance Practice: Re: RE: [MFP] MFI Restructuring

Dear Howard,

Thanks. The major problem was a total collapse of over 60% of the major mfis in my state which led to lack of confidence in mfis. Out of over 51 registered mfi just about 3 are left & the remaining are struggling to win back peoples confidence in the system. The government is understaffed, in political turmoil and as such isnt helping at all. Income has dropped over 90% & most of the funds are trapped in non earning assets. loss is now put at 45% of members fund and most have requested for their funds back not to mention the several court cases against the institution. We were able to get the office to remain open but its taken a toll on both the portfolio and the staff. Currently the organisation only works 2 days a week due to growing tensions about upcoming elections in the country. Banks are not willing to assist and the general economy is on a downhill. Our analysis shows it will take 2-3 years to recover but most members are impatient. We want to keep the organisation open but are considering closing for a month or two to allow the elections to hold then keep our fingers crossed

THANKS. KABIR

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From:"humayun_kobir humayun_kobir@yahoo.com [MicrofinancePractice]" <MicrofinancePractice@yahoogroups.com>
Date:Fri, Mar 6, 2015 at 4:41
Subject:RE: [MFP] MFI Restructuring

Dear Howard,

Thank you for your resourceful writings, in Bangladesh we are facing major delinquency factors are given below.

1. Overindebtness of the clients.

2. Unskilled staffs.

3. Absence of credit information bureaus

4.compitition with MFI.

5. Monitoring and supervision gap.

6.Staff drop out.

7. Political unrest.

Regards

Humayun

Sent via the Samsung Galaxy S® 5 ACTIVE™, an AT&T 4G LTE smartphone

-------- Original message --------
From: "'Howard Brady' hbrady@mfiresources.org [MicrofinancePractice]" <MicrofinancePractice@yahoogroups.com>
Date:03/06/2015 5:11 AM (GMT+06:00)
To: MicrofinancePractice@yahoogroups.com
Cc:
Subject: RE: [MFP] MFI Restructuring

Hi Kabir,

I don't know if this is exactly what you had in mind, but I thought I'd share. I had the opportunity to help an MFI decrease PAR from 45% > 30 days to 2% > 30 days. Briefly what we did was:

1. Make it clear to staff that this was unacceptable

2. Stratify the loan portfolio in many different ways, looking for trends in why delinquency was so bad

a. By loan officer

b. By branch

c. By loan product

d. By activity

3. We took a look at the results and determined that certain branches and loan officers were the major contributing factors to the PAR being so high.

4. The best 5 performing loan officers were interviewed about what they were doing. "Caring about the client" appeared to be the one characteristic which was pulled out of the interview. Loan officers taught large groups of loan officers about this principle.

5. We looked at the lending methodology and reverted to a policy which didn't allow for "start-up" businesses and other loans which appeared more risky.

6. We created a cut-off date by which we were going to analyze the portfolio afresh. So one month from announcing the changes, loan officers were charged with making sure that the new loans which were disbursed were of high quality.

a. Loan officers knew that the "clean" portfolio was being analyzed every week by senior and middle management and the consultant (me)

b. Because we were operating under a smaller "clean" loan portfolio, a certain number of loan officers (about 25%) would need to be terminated, and eventually were terminated.

7. Simultaneously, the "old" portfolio was given attention on a couple of fronts

a. Loan officers were encouraged to recover what they could

b. "Collectors" were trained and went out in teams to try to recover some of the loans

i. Focusing on large balances with relatively short amount of delinquency

c. We pursued selling or factoring the portfolio but decided that the return was too little and the reputational damage might be too high.

8. Eventually some branches needed to be shut down and loan officers were terminated for policy violation. Some branch managers returned to loan officer duty. But over the long term, PAR has been maintained and the clean loan portfolio continues to grow.

I hope the formatting is maintained due to the outline nature of my response.

Later,

-howard

From: MicrofinancePractice@yahoogroups.com [mailto:MicrofinancePractice@yahoogroups.com]
Sent: Thursday, March 05, 2015 8:58 AM
To: MicrofinancePractice@yahoogroups.com
Subject: [MFP] MFI Restructuring

Hi, we will be pleased if anyone could assist with sample restructuring plan for a failed MFI or a success story of an MFI that came back from red to blue. Thanks

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Posted by: kbmadaki <kabirum2000@yahoo.com>

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