2. 2 1.Client protection principles 2.Principle #3 in practice 3.How inappropriate practices affect clients and institutions 4.Participant feedback 5.Practitioner lessons and good practices 6.Conclusion and call to action Agenda

3. 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. 4 1.Client protection principles 2.Principle #3 in practice 3.How inappropriate practices affect clients and institutions 4.Participant feedback 5.Practitioner lessons and good practices 6.Conclusion and call to action Agenda

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

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

7. 7 1.Client protection principles 2.Principle #3 in practice 3.How inappropriate practices affect clients and institutions 4.Participant feedback 5.Practitioner lessons and good practices 6.Conclusion and call to action Agenda

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

9. 9 1.Client protection principles 2.Principle #3 in practice 3.How inappropriate practices affect clients and institutions 4.Participant feedback 5.Practitioner lessons and good practices 6.Conclusion and call to action Agenda

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

11. 11 1.Client protection principles 2.Principle #3 in practice 3.How inappropriate practices affect clients and institutions 4.Participant feedback 5.Practitioner lessons and good practices 6.Conclusion and call to action Agenda

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

13. 13 Acceptable and unacceptable debt collection practices are clearly spelled out in a code of ethics, book of staff rules, or debt collection manual. Clear Collections Guidelines Collections staff receive training in acceptable debt collections practices and loan recovery procedures. In-house and third- party collections staff are expected to follow the same practices. Training for Collections Staff is informed in advance of penalties for non-compliance with collections policies and violations are sanctioned. Staff Know Penalties Indicators of Good Practice: Appropriate Collections (1 of 2)

14. 14 The institution uses a policy on acceptable pledges of collateral, including not accepting collateral that will deprive borrowers of their basic survival capacity. Acceptable Pledges of Collateral Rescheduling policies prevent automatic debt extensions, and rescheduling procedures follow written protocol. Rescheduling Policies Indicators of Good Practice: Appropriate Collections (2 of 2)

15. 15 Source: Financiera El Comercio Outlines the stages of the collections process and the procedures at each stage Collections Process Establishes the minimum job qualifications that collections agents should meet Agent Qualifications Describes what the agents should do and when they should do it Roles & Responsibilities Sets collections training standards and outlines the training process Training Methodology Establishes the monetary and non- monetary incentives agents receive for strong portfolios Incentive Structure Example: Elements of a Collections Manual

16. 16 Source: BanGente Standard CollectionsBusiness AdvisorCall Center Business Supervisor (after 30 days) Specialized Collections Collections Agents Collections Supervisor External CollectionsJudicial CollectionsThird-party agents 0-45 days46-120 days>120 days Payment reminders, Financial analysis, Consider other options Require payment, Remind clients of costs, Evaluate restructuring, Draft legal documents Require payment, Remind client of costs, Discuss consequences, Accept collateral as payment Example: Collections Timeline

17. 17 Source: Financiera El Comercio Sanctions Code of Conduct establishes penalties for violations Determined according to the seriousness of the violation Warnings Formal notification of a violation Repeated violations result in separation from the company Oversight Internal Audit department checks for violations Clients have a way to report abusive collections practices to the MFI Example: Ensuring that Staff Model Appropriate Collections

18. 18 Source: Adapted from Financiera El Comercio Telephone Agents Call delinquent clients Past due loans assigned to agents automatically Field Agents Field visits to clients who cannot be reached via phone Collect payment from clients who have already been contacted Text Messaging Reminders to clients with past due accounts Sent at 5, 12, 19, 26, 30, and 45 days overdue Example: Helping Clients Get Back on Track

19. 19 1.Client protection principles 2.Principle #3 in practice 3.How inappropriate practices affect clients and institutions 4.Participant feedback 5.Practitioner lessons and good practices 6.Conclusion and call to action Agenda

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

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