C. Loan Payments

1. Sample Passbook
2. Sample Transfer Report
3. Cash Handling
4. Posting Receipts

1. General Principles

Non-payment is the most damaging threat to the health and survival of any microfinance organization. Ensuring that payments are on time is one of the most important jobs of your field staff. The entire office staff must support this effort.

These are the principles that discourage delinquencies and reinforce borrower responsibility:

Exercise discipline

Repayment must be governed by consistent standards and practices. Once a schedule of collections is established, it must be followed without fail. Lax or intermittent collections will seriously diminish the seriousness with which borrowers view their obligations.

Circulate information

Late payments are a matter of concern to everyone. If any payments are missing from the regular group collection, the Group Treasurer must tell the other group members and the Field Agent as soon as possible.

Act immediately

A payment is late the first day after it was due. The Field Agent must address the problem without delay. The sooner you tackle a late payment, the easier it will be to collect.

Pass the test

Borrowers will always test an organization to see how serious it is about late payments. Instantaneous action shows you mean business. Address each and every default no matter how minor.

Cement relationships

The more time Field Agents spend in the field, the lower the delinquency. Frequent visits to borrowers nurture loyalty to the programme and act as constant reminders that borrowers must honour their promises to pay on time.

Demonstrate respect

Always treat borrowers with courtesy and respect. Regardless of a borrower's behaviour, respond with a professional approach. Be firm but never explosive; compassionate but always diligent.

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2. Remedial Steps

When preparing for collection visits, Field Agents should know the total due in a group's regular installment. Any shortfall should be discussed with the group.

Frequently, late payment results from a poor attitude, not the inability to pay. Pressure from the group can prompt a borrower to reorder spending priorities and make the delinquent payment.

The Field Agent must schedule a group meeting within two days of the late payment. During the meeting, the delinquent borrower will be asked by the Group Leader to explain why payment is late. The Field Agent will act as facilitator to guide the group in arriving at a solution.

Since the group has agreed to guarantee repayment by each member, it is up to them to decide on a course of action. They may make suggestions to the borrower for ways to reduce expenses, increase revenue or resolve conflicting demands on income. Depending upon the na~ ture of the delinquency, the group may extend a grace period, exert pressure or employ sanctions. They may decide to cover the delinquency from group funds set aside as reserves.

Regardless of the outcome, a loan default by a single borrower is a default by the group. The group must resolve it according to its established bylaws. The role of the Field Agent is to facilitate problem- solving, monitor adherence to the bylaws where appropriate, and report the outcomes to the Loan Manager.

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3. Non-payment Report

At the regular collection visit the Field Agent enters the amount of payments due but not received on the Non-payment Report. This is submitted to the Loan Manager along with other field reports. As past due payments are made, the Field Agent updates the report.

Please see attachment X of the Tool Kit for forms.

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4. Delinquency Detail

For problematic delinquencies, a summary of the Ledger is a useful tool. The Loan Manager can prepare a detail sheet to include this information:

Please see attachment Xl of the Tool Kit for forms.