Financial institutions should network
Apr 06, 2009
I write this piece for all credit institutions ranging from commercial banks, micro finances, savings and credit cooperative societies (SACCOS), village banks, money lenders plus the public which borrow and use money from these institutions in form of loa
By Jude Ssenteeza
I write this piece for all credit institutions ranging from commercial banks, micro finances, savings and credit cooperative societies (SACCOS), village banks, money lenders plus the public which borrow and use money from these institutions in form of loans.
Multi-borrowing is when a client borrows money/loans from more than one lending institution, say from a commercial bank, microfinance and from a SACCOs. This kind of situation causes an overload to a client who not only fails to meet his/her loan obligation of repaying back these loans but also hinders the cash flow of the lending institutions thus leaving them with little money to lend.
Multi-borrowing, therefore, is associated with a number of negative effects which include; overload to a client due to many loans which put him in a difficult situation to service the loans.
Other effects are failure to repay the loans in time, loss of securities pledged by the client to secure those loans while to credit institutions the scenario limits its cash flow and leads to bad debts. Some maybe recovered while others can be written off. But Most of all, multi-borrowing may tarnish the institutions’ image when selling off the securities pledged in a bid to recover their loans.
However, multi-borrowing can be limited by the key players in the money-lending business right from the local councils to the credit lending institutions. For example, LC chairpersons of different localities should not recommend clients to more than one credit institution at ago.
If done, a similar security should not be pledged to more than one credit institution, appraising officers/credit/loans officers should do a thorough appraisal and in a professional manner. They should not take bribes to recommend huge loan amounts to be approved for non-qualifying clients, pre-credit and post-credit training should be done by the credit institutions. Quick loan monitoring should be emphasised and also loan departments of different credit institutions should network as-far-as lending is concerned. Thus this can serve to reduce on multi-borrowing.
The writer is a credit/ loans officer and works with Pearl Microfinance Ltd.
I write this piece for all credit institutions ranging from commercial banks, micro finances, savings and credit cooperative societies (SACCOS), village banks, money lenders plus the public which borrow and use money from these institutions in form of loans.
Multi-borrowing is when a client borrows money/loans from more than one lending institution, say from a commercial bank, microfinance and from a SACCOs. This kind of situation causes an overload to a client who not only fails to meet his/her loan obligation of repaying back these loans but also hinders the cash flow of the lending institutions thus leaving them with little money to lend.
Multi-borrowing, therefore, is associated with a number of negative effects which include; overload to a client due to many loans which put him in a difficult situation to service the loans.
Other effects are failure to repay the loans in time, loss of securities pledged by the client to secure those loans while to credit institutions the scenario limits its cash flow and leads to bad debts. Some maybe recovered while others can be written off. But Most of all, multi-borrowing may tarnish the institutions’ image when selling off the securities pledged in a bid to recover their loans.
However, multi-borrowing can be limited by the key players in the money-lending business right from the local councils to the credit lending institutions. For example, LC chairpersons of different localities should not recommend clients to more than one credit institution at ago.
If done, a similar security should not be pledged to more than one credit institution, appraising officers/credit/loans officers should do a thorough appraisal and in a professional manner. They should not take bribes to recommend huge loan amounts to be approved for non-qualifying clients, pre-credit and post-credit training should be done by the credit institutions. Quick loan monitoring should be emphasised and also loan departments of different credit institutions should network as-far-as lending is concerned. Thus this can serve to reduce on multi-borrowing.
The writer is a credit/ loans officer and works with Pearl Microfinance Ltd.