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Prevention of over-indebtedness

Smart Campaign Tools Training

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The Smart Campaign has developed dozens of tools to assist microfinance institutions (MFIs), investors, and networks/associations in the implementation of client protection. This PowerPoint training introduces participants to the client protection tools available from the Smart Campaign.

The training discusses two “entry points” for using Smart Campaign tools: 1) As part of a client protection strategy, and 2) As a solution to a specific problem. Participants review examples of each entry point, and learn about tools that can assist them during any step of client protection implementation.

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Over-indebtedness of Microborrowers in Ghana

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To give guidance on how to live up to the standard of responsible finance, the Smart Campaign developed the Client Protection Principles with widespread industry participation. Prevention of over-indebtedness is one of these principles. However, commitment is not sufficient to put a principle into practice. This report makes an important contribution to deepening knowledge on this elusive topic.

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Avoidance of Over-indebtedness: Guidelines for Financial and Non-financial Evaluation

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This tool is for financial service providers that want to incorporate good client protection practices into their evaluation processes for individual loan clients. Specifically, the tool provides guidelines for determining a loan applicant’s capacity and willingness to repay a loan.

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Loan Agreement for Small Business Clients (JSC MFO Crystal)

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JSC Microfinance Organization Crystal, Georgia shared its plain language loan contract with The Smart Campaign.  This contract is used with clients seeking small businesses credit. The contract is succinct, written in plain language, and uses very little jargon.

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Loan Contract Summary Handout (Mibanco)

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Mibanco also provides clients with a loan contract summary so that clients can easily and efficiently understand the most pertinent points of their full loan contracts. Mibanco uses this tool to verbally review the contract highlights, including the loan information, insurance costs/benefits, early repayment fees, and obligations of the guarantors.

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Responsible Pricing: The State of the Practice

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This discussion paper examines the full range of approaches to responsible pricing of loans, from promoting competition, to return on equity limitations, to interest rate caps, to comparative transparency.

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Smart Note: Facing Over-indebtedness at Partner Microcredit Foundation

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Partner Microcredit Foundation avoids client over-indebtedness by recognizing that a risk for the client is a risk for the institution. Partner performs rigorous credit analysis of its clients before issuing a loan and follows up with audits to verify proper staff behavior and discover why clients are not able to meet their obligations.

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Opportunity Bank Serbia: Loan Calculator

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Opportunity Bank Serbia shared with the Campaign their Loan Calculator Toolkit for determining the appropriate loan size for a potential client. Based heavily on information gathered from the national credit bureau, this Excel-based tool requires a thorough evaluation of the client’s business, family income, and existing debt.

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KazMicroFinance: How to Assess Client Businesses

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KazMicroFinance shared with the Campaign their PowerPoint training for loan officers, “How to Assess Client Businesses.” This short presentation trains loan officers in how to thoroughly evaluate a potential client.

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Debt Management Guide

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The National Credit Regulator (NCR) of South Africa publishes a debt management guide that provides basic information about how to identify over-indebtedness, tips on how to avoid and deal with over-indebtedness, consumers’ rights, how to access a debt counselor and tips on how to avoid and deal with money-scams, repossessions and surrenders.

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Smart Note: Transparent and Responsible Pricing at Mi-Bospo

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New SmartNote Now Available! Read an interview with Mi-Bospo Executive Director Nejira Nalic on how her institution puts Principle 2—Transparent and Responsible Pricing—into practice.

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