Delinquent is a situation where a borrower is late or overdue on a payment, such as income taxes, a loan,a mortgage, an automobile loan, or a credit card account.
There have been traditional thinking of what could be the causes of loan delinquency, on this traditional way of thinking, people think loan delinquencies are caused by external factors. Some of the factors that they consider are illness or death in the family, calamities, weather conditions, poor economic conditions, price fluctuation and poor business practice of the client.
For the institution that has this way of thinking, they believe they can’t do anything about it since they are out of their control. And for them, loan delinquency becomes the big challenge in the business and to some lead to business failure.
Any business in any context is usually determined to grow and bring out positive results to its own operations, stakeholders, and clients, beneficiary as well nation at large. It is always a dream of every businessman to make sure that his business grows and his brands expands to reaching many people across the field of his business operations even further.
It is even more aware these results take time to become reality especially when the business is new, time is an important aspect that with it the business grow and endure the success that it was expected to earn.
However, it is not only time that determines the growth of a business from the scratch to the paramount level but there are some other leading factors that needs to be handled with care to enhance the growth of the business.
In the Microfinance field, so as in any field there are governing laws that monitor and regulate the operation of its entities and agencies. These laws establish bodies, promote conducts, prohibit misconducts, so as encourage and grant relies or remedy in its various operations of its entities and agencies herein known as the Microfinance service providers. These entities and agencies are what run the day to day operation of the microfinance business. The Laws solely focus on making sure that the setup procedures are adhered to and followed in accordance to the requirements of the Laws so as to avoid the contradiction amongst the entities and agencies or between the service provides/clients and the regulatory bodies.
The increase of non-performing loans (NPL) is one of the critical challenges that banks and financial institutions face nowadays. The benchmark of non-performing loans for bank industry is set to 5 per cent but in the third quarter of the year 2017, unaudited accounts for 19 banks and financial institutions indicated that NPLs ranged between 4 per cent and 51 per cent which is very high from the benchmark. Higher per cent of NPL will mean lower in collecting of repayments, no return of expected interests and even the borrowed principal. This reason could lead to institution bankruptcy.
One of the strategies that BOT recommended to banks and financial institution on reducing NPLs is to establish NPLs policies, some of them are arrears management policy, debt recovery policy, collateral management, valuation and reporting policy and early warning policy. Also, some of the banks have started to provide a group loan on their way of reducing NPLs as group are easy to make follow up.