Performance monitoring for microfinance banks in different countries are designed to ensure soundness of risk management and to ensure compliance with prudential guidelines laid down by regulatory authorities.
Apart from the regulatory authorities expectation, microfinance banks designs their own operating policies and procedure which gives a guideline to achieving their own organizational goals, aims and objectives. The designed operating credit policy clearly spells out the risk management mechanism, required information and control activities.
Credit monitoring is not subjected to one person or process alone but to every MFB staff, department, top managers and boards of directors.
With this, we examine some loan monitoring procedure as it relates to each stakeholder in the microfinance sector;
MFB Operating Credit Policy Items
Items in the Operating credit policy of a microfinance bank usually contain but not limited to the following information;
- MFB organizational set-up, purpose, mission and objectives
- Eligible borrowers and Target Market
- Applicable documentation, process flow and lending operations
- Lending principles
- Acceptable and eligible borrowers
- Credit Administration process and procedure
- Acceptable lending, Sectors and industries
- Acceptable documentation process and procedure
- Acceptable collateral
- Delinquency and arrears management process and procedure
- Compliance and credit control functions
- Product types and passports
- Recovery and legal process
- Decision making and reporting requirements and system
Maintaining Portfolio Quality
In other to enhance portfolio quality. There is need to do the following;
- Start by providing services that client’s value and makes an impact to their well-being.
- Establish a clear policy to account for portfolio management.
- Embark on follow up for immediate and effective delinquency management.
- Ensure proper loan assessment to determine the capacity and willingness of the client to repay his loan.
- Introduce appropriate recovery strategy and also train staff for productivity.
Steps to Enhance Recovery
Faciilities granted to clients would be effectively recovered if;
- Staff conduct a thorough background check on the customer before granting the facility
- Staff do regular monitoring on customers facilities
- Staff do not compromise their position with fraudulent customers
- Staff do not portray nonchalant attitude towards the facility because it is not their personal money
- Staff do not divert repayment proceeds temporary or permanently.
- Management policies should be tailored towards the specific needs of clients and staff which in turn beneficial to the MFB.