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Delinquency Primer

Delinquency Primer

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Delinquency Primer

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  1. Delinquency Primer Definitions and Instructions

  2. Loan Disbursement Stage-1 • Disbursement • Gross loan amount (principal) disbursed to a client • If service fees are collected up-front, the net loan amount disbursed will be smaller than the gross loan amount • On-time Due • Loan installment (principal) due in a given period, in accordance with the original loan sanction conditions IIMB Microfinance Group

  3. Loan Disbursement Stage-2 • Cumulative Due • Total Loan amount (principal) due at the end of a given period, in accordance with the original loan sanction conditions • Sum of all scheduled periodic installments till the end of a given period • Loan Outstanding [Scheduled] • Loan amount (principal) that should be outstanding the end of a given period, if all payments are made on time, in accordance with the original loan sanction conditions IIMB Microfinance Group

  4. Loan Recovery Stage-1 • Recovery • The loan principal actually paid in a given period • Recovery includes on-time payments, arrears and prepayments • Cumulative Recovery • The cumulative loan principal actually paid till the end of a given period • On-time Paid • The installment due amount (principal) paid, when it becomes due for the first time IIMB Microfinance Group

  5. Loan Recovery Stage-2 • Total Outstanding Loan Balance • The balance of loan amount (principal) outstanding at the end of a specified period • Outstanding Balance of Loans with Overdue Payments>0 days • The outstanding balance of loans (principal) with one or more installments overdue • Outstanding loan balance with overdue payments >30 days • The outstanding balance of loans (principal) with one or more installments overdue by more than 30 days IIMB Microfinance Group

  6. Delinquency Measures-1 • On-time Collection Rate • On-time Paid /On-time Due • Tracks success in collecting payments when installments first become due • Current Collection Rate • Recovery /On-time Due • Considers arrears, prepayments or amounts overdue from previous periods IIMB Microfinance Group

  7. Delinquency Measures-2 • Portfolio-at-Risk30 [PAR30] • Outstanding Balance of Loans with Overdue Payments >30 days/ Total Outstanding Loan Balance Similarly PAR0, PAR60 and so on IIMB Microfinance Group

  8. An Example • An MFI has a set of 11 clients • The Disbursement and the scheduled number of installments are given • The loan amount is expected to be repaid every month in equal installments (Details). • The actual Recovery may not be as scheduled • Clients may delay payments, miss payments or prepay • The On-time Paid amount is zero in case of missed payments and also if payments are delayed IIMB Microfinance Group

  9. Example, contd… • The Total Outstanding Balance of the clients paying regularly and recovering immediately are zero at the end of six months while it is not so for the ones with arrears remaining to be made up for. • This would be the same for the Outstanding Balance With Overdue Payments for greater than 0 days. IIMB Microfinance Group

  10. Example, contd… • The overdue payments>30 days would be counted after a months’ due and would come to zero once it is made up for. • The overdue payments>60 days has been for one client who has been defaulting from the third month and could not make it up later. This remains even after the 6 month due is over. IIMB Microfinance Group

  11. References • CGAP – Occasional Paper No.3 IIMB Microfinance Group