Archive of news for 2010 |
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| January , 15 2010 |
| Avoiding over-indebtedness as one of the core six principles of client's protection |
In recent years, number of institutions engaged in microfinance had been promptly growing. Some loan providers manage to succeed, actively developing and increasing the client’s base, others do not receive any profit at all. Still all microfinance service providers actively work on the implementation of various management systems for self-improvement and betterment of services quality.
More and more often investors and representatives of microfinance institutions (hereinafter “MFIs”) raise a question of the six principles of client protection. However, conversations, discussions and endorsement of the principles do not solve the everyday acute problems that MFIs face. Mol Bulak Finance conducts an active work on the introduction of the six principles of clients’ protection in its organizational culture and considers them as basis for successful socially-focused activity in the market of microfinance.
Over-indebtedness is one of the most tangible problems of the microfinance market of Kyrgyzstan. Borrowers have got an opportunity of receiving loans at several institutions at once, presenting the same business-plan. This is unbeneficial for both MFIs at which the credit risk increases dramatically, and borrowers who actually do not need such a big sum of money.
Example: Akram Akramov received 1000 dollars for his business at one MFI, and 1000 dollars at each of two other MFIs. His total indebtedness is 3000 dollars whereas each creditor confidently disbursed 1000 dollars, not knowing that Akram received loans for the same business at two other MFIs.
All of us understand, that business which has profit to pay an interest for 1000 dollars, cannot pay it for 3000 dollars. This is where a problem arises! Because of the inaccurate and/or false information borrowers trap themselves in a debt hole which is not easy to get out of. Cumulative indebtedness of the borrower exceeds his/her capacity to pay off loans; therefore, creditors have to build various schemes and systems to manage the credit risks.
Creation of a Credit Bureau is one of the most effective ways of decreasing the undesirable credit risks and over-indebtedness of borrowers. The main task of a Bureau is not only gathering full and up to day information on credit applications and borrowers from credit institutions, but also providing broad audiences with access to information on the concrete person. Existence of such information base allows members of a Credit Bureau to make effective credit decisions.
MFIs, in turn, have to carry out their duties as members of a Credit Bureau and provide the information in full on a daily basis. As the minimum we can begin with disclosing of what information MFIs provide, and what they do not. This will be a demonstration of respect to both the Credit Bureau, and its members which provide the information in timely manner. It is necessary to undertake the obligation that in certain reasonable time MFI will start carrying out its responsibility to provide the data to the Credit Bureau.
However, completeness of data does not fully solve the problem. The problem of excessive debts in many cases depends on a strategy, moral and ethical values of the companies and on management approaches.
It is simple to imagine a situation; the market is represented by five MFIs and according to the contract with the Credit Bureau, each MFI should provide the information in full. If the complete information is not available, the probability that creditors will take incorrect and uninformed lending decisions is very high. Plus the information costs money.
Mol Bulak Finance should check credit history of 5000 people monthly. This costs quite a lot. If the information is not full, it isn’t worth paying the price. Many of us probably were disappointed when you bought a meat pie, and discovered that there was very little or no meat inside. The same here - why should MFIs pay money if the information in the Credit Bureau is not complete? It is even worth to shift a burden of paying for the information to borrowers.
Mol Bulak Finance became a member of the Credit Bureau after reaching the client base of 1 500 people. For today, the company is on the third place among microfinance institutions by number of clients -- 27 thousand people.
Mol Bulak Finance carries out its obligation as a member of the Credit Bureau by providing data in real time mode, whereas some MFIs don’t do it in full and in due time. At present, Mol Bulak Finance is the only organization among members of the Credit Bureau, which together with the personnel of the Credit Bureau has achieved an automation of data checking, that saves the time and allows to check the client by entering him/her in the data base. Unfortunately, this co-created possibility of checking customers is not used by Mol Bulak Finance, as there is no sense to pay for information that is not presented in full. Majority of MFIs enter the information on clients twice; once in their own system, and second time in the system of the Credit Bureau, others do not provide the information at all. Regarding this fact, Mol Bulak Finance does not check all clients through CIB as does not see any sense to pay money for pie where there is no “meat”. In fact these are missed opportunities for CIB that could have been used for the increase of the income.
In conclusion, Mol Bulak Finance approaches management, Board of directors of CIB and members of the Bureau to pay attention to this issue and send a written notice to all members of CIB, stating the necessity of provision of the information in full and in due time (at least once every three days). If members of CIB do not take this issue serious and no actions will be taken, appropriate sanctions should be applied. The Board of the Credit Bureau should be represented only by those companies that fully fulfill their obligations. Let’s work together so that efforts of all interested parties ultimately reflect on the well-being of our borrowers.
This letter is one more attempt to bring attention of all parties to the essence of the problem.
Thanks for attention! |
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| January , 21 2010 | |
Interview with Altynay Kozubekova, HR Manager of Mol Bulak Finance |
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| January , 13 2010 | |
Corporate oath - new steps to strengthen the corporate culture of the company |
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| January , 11 2010 | |
An active status on the KIVA platform awarded to Mol Bulak Finance |
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| January , 05 2010 | |
Helping good people |
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