Fully appreciate the appeal and the opportunity to explore the best possible responses.
Here are my 2 cents why I believe a staged approach to deal with clients that require a restructuring is preferable.
1. It’s in nobody’ interest to push all the MFIs we lend to into comprehensive work-out (WO) procedure
• As in the healthcare system, we try to avoid sending all patients to the ICU (Intensive Care Unit) –in our case the Risk department- immediately. COVID health measures by hospitals also use separate stations to filter the patients before they go to ICU.
• MIV!’s Risk departments have limited capacity, and would quickly be overwhelmed.
• Hence we aim to “flatten the curve” of the number of cases reaching the ICU-stage and keep that workload manageable.
2. It’s key consider the inherent strength of the MFI to avoid pushing healthy clients into ICU-treatment.
• It would require much (wasted) time for both a healthy MFI and for its lenders (including us) to immediately move into a full WO process
• By using the approach of different stages, we aim to serve many clients on shorter timelines. Less critical cases get ‘light” restructuring, not full-blown WO.
• This will allow stronger MFIs to focus on their operations instead of dealing for too long with their lenders.
• Lighter restructuring also allows the strongest MFIs continue to receive new funding which several lenders – including ourselves – are still willing to provide.
3. Providing a quick solution to hopefully many of our clients
• In order to restore trust with the MFI that is having a good basis to weather the crisis
• In order to send a strong signal to other lenders and stakeholders of that MFI.
So in summary, not agreeing with the idea that a global moratorium on principal repayments would be a suitable response. Rather we are preferring to apply a more diferentiated approach, and are in consultation with many other sector playerss to get aligned on the way forward.
I’m confident that in the near future we can arrive at a coordinated response, meanwhile stay healthy!
Geert Peetermans
Managing Partner & CIO of Incofin Investment Management
Dear Paul and Ira,
Fully appreciate the appeal and the opportunity to explore the best possible responses.
Here are my 2 cents why I believe a staged approach to deal with clients that require a restructuring is preferable.
1. It’s in nobody’ interest to push all the MFIs we lend to into comprehensive work-out (WO) procedure
• As in the healthcare system, we try to avoid sending all patients to the ICU (Intensive Care Unit) –in our case the Risk department- immediately. COVID health measures by hospitals also use separate stations to filter the patients before they go to ICU.
• MIV!’s Risk departments have limited capacity, and would quickly be overwhelmed.
• Hence we aim to “flatten the curve” of the number of cases reaching the ICU-stage and keep that workload manageable.
2. It’s key consider the inherent strength of the MFI to avoid pushing healthy clients into ICU-treatment.
• It would require much (wasted) time for both a healthy MFI and for its lenders (including us) to immediately move into a full WO process
• By using the approach of different stages, we aim to serve many clients on shorter timelines. Less critical cases get ‘light” restructuring, not full-blown WO.
• This will allow stronger MFIs to focus on their operations instead of dealing for too long with their lenders.
• Lighter restructuring also allows the strongest MFIs continue to receive new funding which several lenders – including ourselves – are still willing to provide.
3. Providing a quick solution to hopefully many of our clients
• In order to restore trust with the MFI that is having a good basis to weather the crisis
• In order to send a strong signal to other lenders and stakeholders of that MFI.
So in summary, not agreeing with the idea that a global moratorium on principal repayments would be a suitable response. Rather we are preferring to apply a more diferentiated approach, and are in consultation with many other sector playerss to get aligned on the way forward.
I’m confident that in the near future we can arrive at a coordinated response, meanwhile stay healthy!
Geert Peetermans
Managing Partner & CIO of Incofin Investment Management