Client protection principles Principle #3 in practice

1. Principle #3 – Appropriate Collections PracticesThis presentation is made possible by the Smart Campaignwww.smartcampaign.org

2. Agenda Client protection principles Principle #3 in practice How inappropriate practices affect clients and institutions Participant feedback Practitioner lessons and good practices Conclusion and call to action

3. 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

4. Agenda Client protection principles Principle #3 in practice How inappropriate practices affect clients and institutions Participant feedback Practitioner lessons and good practices Conclusion and call to action

5. Appropriate Collections Practices: Principle in Practice The institution treats clients with dignity even when they fail to meet their contractual commitments. Debt collection practices are neither abusive nor coercive.

6. Examples of Inappropriate Collections Practices Offensive language and threats Unethical seizure of property • 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. Subcontracting to unethical businesses • The institution subcontracts collections to businesses that are not subject to the same ethical standards as the institution. Careless debt extension • The institution issues automatic debt extensions. • Credit staff uses offensive or abusive language. • Collections agents threaten clients or harass them at work, home, or their place of worship.

7. Agenda Client protection principles Principle #3 in practice How inappropriate practices affect clients and institutions Participant feedback Practitioner lessons and good practices Conclusion and call to action

8. Clients mistrust the institution, and tell others. How Inappropriate Practices Affect Clients and the Institution Inappropriate Collections Practices • What affects have YOU seen? • To avoid humiliation, clients go to extremes to repay their loans. • Staff rely on coercion for repayment, rather than good portfolio management.

9. Agenda Client protection principles Principle #3 in practice How inappropriate practices affect clients and institutions Participant feedback Practitioner lessons and good practices Conclusion and call to action

10. Feedback from Participants What kinds of collections practices have you seen at your own (or other) MFIs? What are the positive consequences of appropriate collections practices (e.g., client retention, portfolio quality) ? 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? Do institutions tend to keep the collections function in-house or outsource it?

11. Agenda Client protection principles Principle #3 in practice How inappropriate practices affect clients and institutions Participant feedback Practitioner lessons and good practices Conclusion and call to action

12. Lessons from Practitioners • [Write your points for the presentation here:] • Points • Points • Points • Points

13. Indicators of Good Practice: Appropriate Collections (1 of 2)

14. Indicators of Good Practice: Appropriate Collections (2 of 2)

15. Example: Elements of a Collections Manual Source: Financiera El Comercio

16. Example: Collections Timeline Source: BanGente

17. Example: Ensuring that Staff Model Appropriate Collections Source: Financiera El Comercio

18. Example: Helping Clients Get Back on Track Source: Adapted from Financiera El Comercio

19. Agenda Client protection principles Principle #3 in practice How inappropriate practices affect clients and institutions Participant feedback Practitioner lessons and good practices Conclusion and call to action

20. Conclusion • 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. • What next steps can your institution take (e.g., developing a collections timeline, sanctioning inappropriate practices by staff)? Call to action

21. Join the Campaign and Endorse the Principles of Client ProtectionHave questions? Want more information?Contact the Smart CampaignEmail: info@smartcampaign.org Thank you!