Games Loan Clients Play

This MicroSave briefing note argues that clients are much smarter than institutions may realize and take ingenious actions to improve their access to services, particularly loans.The note:

• Uses the term, ‘games to refer to the ways in which clients either test controls, exploit weaknesses in the financial service providers system or test the institutions capacity to live up to its promises;
• Presents a summary of observations, or “games” that loan clients play and some possible solutions for financial service providers;
• Organizes these “games” by the loan methodology and/or individual.

Some of these games and their respective solutions include:

• Game: Mobilization of ghost clients to meet required group size to access loans;
• Solution: Internal audit checks and supervision visits to verify the existence of group members;
• Game: Borrowing from each other to manage repayments;
• Solution: Ensuring manageable loan sizes flexible repayment periods.
• Game: Servicing loans of dropouts;
• Solution: Monitoring the performance of individual members;
• Game: Borrowing other peoples stock during appraisal and pledging collateral that is not in their names;
• Solution: Requiring proof of ownership documents and trade licenses.