MANAGING DELINQUENT CLIENTS FOR SOLAR LENDING

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MANAGING DELINQUENT CLIENTS FOR SOLAR LENDING
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What is the cause of delinquency

• It is important that MFIS should realize that
  delinquency is not a result of borrowers who
  cannot pay
• More often it is the result of borrowers who will
  not pay
• Who is at fault ? Who could correct this?

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GOLDEN RULE

• Field staff and
• the clients should be made to understand
  that late payments
• are not acceptable

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What is the effect of delinquency ?

• Additional expenditure
• Reduced cash flow
• Lost revenue
• Depleted profitability
• Waste of valuable time and resources
• Less access to new borrowers
• Slower turnover of loan portfolio
• Limits expansion
• Loss of credibility and access to credit lines
  and other funding

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SOLAR LOANS PRACTICAL PROCEDURE

• The reason for non payment is established and
  checked
• Genuine problems which were unforeseen previously
  the Client is given redress by restructuring,
  rescheduling i.e. Crop failure, Floods, Drought
  Sickness, Accident

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Non payment due to technical reasons or any other
reason which could be corrected.

• Negotiate with the supplier company to correct
  the mistakes and restore service where there are
  correctable technical faults
• Keep a very good relationship with local solar
  company office
• Financial assistance for purchase of batteries
• Client dissatisfied with the SHS due to
  limitation of power . Loans on easy terms for
  upgrades

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Willful defaulters

• Close monitoring. Repeat visits
• Extended time allowed
• If no progress is revealed -
• Inform the guarantors to exercise peer
• pressure .Still no effect -
• Persuade through the supplier
• Last resort DE - INSTALL

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PROCEDURE TO ACQUIRE THE EQUIPMENT

• Give a dead line in writing -
  
• If arrears are not paid before the specific
  date mentioned the SHS will be removed Which
  means loss of the equipment, loss of all funds
  paid from the beginning
• Make arrangements with the supplier company to
  provide the services of a technical person to
  remove the SHS

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Assistance of law enforcing authority

• If the client is likely to challenge or protest
  lodge a complaint in the local police station
  that the SHS will be removed in terms of the
  agreement executed by the client
• The agreement provides power to enter into the
  premises of the client and this power could be
  exercised

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System of de- installing

• With minimum inconvenience to the client and the
  family
• As far as possible this is a situation to be
  avoided
• Only if all avenues fails
• the last resort is removal

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Consideration - Customer care

• In de installing wiring is not removed as it
  will damage the walls
• This is a considerable loss in monetary value.
  Value the goodwill than money

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WHAT NEXT ?

• Removal too is a cost as the MFI has to pay the
  costs
• Quick realization is the best
• Responsibility The branch specially the person
  evaluated the defaulted loan is responsible
  primarily
• They should find a new client to sell the used
  panel - For cash or as a loan

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CASH SALE OR CREDIT SALE?

• Selling price Outstanding capital balance of
  the loan
• New client is expected to invest for
• cost of wiring, replacement of components,
• fixing cost etc.
• As a market promotion strategy a commission can
  be paid to the successful negotiator of the new
  client . This is a cost to the MFI

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Speed of recovery-

• In a cash sale existing bad loan is
• recovered -Immediate cash
• Credit sale has little more to do
• Loans are numbered differently to identify as
  they are not considered as new loan
  disbursements but as adjustments of the existing
  balances

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Change of the client in the records of the
supplier company

• This is facilitated by the MFI in order to offer
  the balance period of warrantees
• Closer monitoring of the after sales service is
  done to keep these loans alive without much
  trouble

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Importance of removal

• This has a bearing on the balance borrower
  community
• IT IS A SOCIAL DISGRACE TO WITNESS THE LENDER
  REMOVING EQUIPMENT THAT GIVES LIGHT TO THE HOUSE
• Even if someone is in half a mind to postpone
  payment he/she will fear of loosing credibility
  among the neighborhood

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Alternate action

• Seek the assistance of law enforcing authorities
• Complain to the police and have an inquiry
• Complain to the local mediation board
• Seek legal assistance by filing action
• All these may not work well at times

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BEST PRACTICE

• PREVENT LOANS FALLING INTO DEFAULTED CATEGORY
• MAINTAIN THE CUSTOMER RELATIONS IN THE BEST FORM