Addressing challenges
Oikocredit sought to be better informed on the present situation of overindebtedness and invited partner MFIs, microfinance investors (known as MIVs) and microfinance networks to share what they are doing and seeing in the field.
The survey also asked for recommendations on how the issue might be addressed. With over 250 responses including 236 MFIs spread across 39 countries, this is an issue many in the industry are keen to act on. Initiatives or approaches MFI project partners found most effective in preventing over-indebtedness include improved credit analysis, adaptation of loan products and the addition of other financial products such as insurance and savings.
The establishment of industry codes of conduct and the use of information sharing through credit bureaus (or informal information sharing) were highly regarded and desired by the respondents. Building good client relationships with regular contact and feedback mechanisms were also identified as sound strategies to minimize over-indebtedness. MFIs warned MIVs against flooding markets with too much debt, which increases competition levels and fuels irresponsible lending.
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