Case study

Facing Over-Indebtedness at Partner Microcredit Foundation

How can clients and institutions avoid over-indebtedness?
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This Smart Note No. 3 states that responsibility for avoiding over-indebtedness rests with both clients and institutions. For clients this means making prudent decisions and judging their repayment capacity. For institutions this means carefully assessing a client’s ability to repay.

Lending in a highly competitive microcredit market Partner Microcredit Foundation avoids client over-indebtedness by recognizing that a risk for the client is a risk for the institution. To mitigate these risks Partner performs rigorous credit analysis of its clients before issuing a loan and follows up with audits to verify proper staff behavior and discover why clients are not able to meet their obligations. Proactive measures like financial-literacy programs and client-loyalty efforts complement analysis and audits to create a robust system to avoid client over-indebtedness.