Collections with Dignity at FinComún

This Smart Note No.1 describes the steps one MFI took to address rising default rates. Appropriate Collections Practices demonstrate respect for borrowers while emphasizing the need for clients to honor their commitments to lenders. An institution shows appropriate practices when staff treat clients with dignity even when they fail to meet their repayment commitments.

In 2008, FinComún, a regulated MFI in Mexico, took action to combat rising default rates through the implementation of a new collections philosophy. The institution’s new Collections with Dignity philosophy was designed to support clients facing the global financial crisis and improve both collections rates and portfolio quality. The new approach is based on the belief that collections agents should treat clients how they themselves would like to be treated. To accomplish this certain practices were implemented including retraining staff, creation of a series of Payment Solutions, and more personalized attention to clients. By focusing on client outcomes as well as loan recovery, FinComún was able to strengthen relationships with clients, increase on-time payments, and mitigate some of the effects of the global financial crisis on the institution’s portfolio.