MANAGING DELINQUENT CLIENTS FOR SOLAR LENDING

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?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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