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Principle #3 – Appropriate
Collections Practices
This presentation is made possible by the Smart
Campaign
www.smartcampaign.org
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1. Client protection principles
2. Principle #3 in practice
3. How inappropriate practices affect clients and institutions
4. Participant feedback
5. Practitioner lessons and good practices
6. Conclusion and call to action
Agenda
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1. Avoidance of over-indebtedness
2. Transparent and responsible pricing
3. Appropriate collections practices
4. Ethical staff behavior
5. Mechanisms for redress of grievances
6. Privacy of client data
Client Protection Principles
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1. Client protection principles
2. Principle #3 in practice
3. How inappropriate practices affect clients and institutions
4. Participant feedback
5. Practitioner lessons and good practices
6. Conclusion and call to action
Agenda
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Debt collection practices are neither abusive nor coercive.
The institution treats clients with dignity even when they fail to
meet their contractual commitments.
Appropriate Collections Practices: Principle in Practice
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• Credit staff uses offensive or abusive language.
• Collections agents threaten clients or harass them at work, home, or their place of worship.
Examples of Inappropriate Collections Practices
Offensive language and
threats
• Collections agents enter a client’s home and/or seize property without a judicial order.
• The institution accepts collateral that may deprive borrowers of their basic survival capacity.
Unethical seizure of property
• The institution subcontracts collections to businesses that are not subject to the same ethical standards as the institution.
Subcontracting to unethical businesses
Careless debt extension
• The institution issues automatic debt extensions.
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1. Client protection principles
2. Principle #3 in practice
3. How inappropriate practices affect clients and institutions
4. Participant feedback
5. Practitioner lessons and good practices
6. Conclusion and call to action
Agenda
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How Inappropriate Practices Affect Clients and the Institution
Inappropriate Collections Practices
Clients mistrust the institution,
and tell others.
To avoid humiliation, clients go to extremes to repay their
loans.
Staff rely on coercion for repayment, rather than
good portfolio
management.
What affects have YOU seen?
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1. Client protection principles
2. Principle #3 in practice
3. How inappropriate practices affect clients and institutions
4. Participant feedback
5. Practitioner lessons and good practices
6. Conclusion and call to action
Agenda
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Feedback from ParticipantsWhat kinds of collections practices have you seen at your own (or other) MFIs?
Have you received training at your institution that highlights appropriate collections practices?
How do institutions collect on-time payments? How do institutions collect late payments?
What are the positive consequences of appropriate collections practices (e.g., client retention, portfolio quality) ?
Do institutions tend to keep the collections function in-house or outsource it?
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1. Client protection principles
2. Principle #3 in practice
3. How inappropriate practices affect clients and institutions
4. Participant feedback
5. Practitioner lessons and good practices
6. Conclusion and call to action
Agenda
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[Write your points for the presentation here:]• Points• Points• Points• Points
Lessons from Practitioners
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Indicators of Good Practice: Appropriate Collections (1 of 2)
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Indicators of Good Practice: Appropriate Collections (2 of 2)
15Source: Financiera El Comercio
Example: Elements of a Collections Manual
16Source: BanGente
Example: Collections Timeline
17Source: Financiera El Comercio
Example: Ensuring that Staff Model Appropriate Collections
18Source: Adapted from Financiera El Comercio
Example: Helping Clients Get Back on Track
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1. Client protection principles
2. Principle #3 in practice
3. How inappropriate practices affect clients and institutions
4. Participant feedback
5. Practitioner lessons and good practices
6. Conclusion and call to action
Agenda
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Summary:
• The Smart Campaign has developed six principles of client protection, one of which is appropriate collections practices.
• Clients must be treated with dignity at all times, and collection efforts should never be abusive or coercive.
• Inappropriate collections practices are bad for business and can lead clients to act in ways that put them at risk.
• Good practices are available to help institutions achieve a collections system that is both effective and ethical.
Conclusion
Call to action
• What next steps can your institution take (e.g., developing a collections timeline, sanctioning inappropriate practices by staff)?
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Join the Campaign and Endorse the Principles of Client Protection
Have questions? Want more information?Contact the Smart Campaign
Email: [email protected]
Thank you!
