Jaime has received the Credit Regulation from the Microfinance Institution - IMF where he works. The aforementioned Manual indicates, among other aspects:
Minimum time a business must have to be a subject of credit, Essential documentation to request a credit, Maximum number of credit institutions that the potential debtor can register,
Maximum classification allowed in Risk Centers, Maximum amount that can be granted with non-preferred guarantees (personal assets), Maximum percentage that can be offered on the realization value of the furniture and / or real estate left in mortgage and / or pledge (real guarantees), Conditions to be able to access a renewal, reprogramming or refinancing.
Maximum percentages to be financed for working capital or fixed asset loans, People forced to sign the promissory notes, among others.
However, it has also received another document: the Exceptions Manual, which details how many of the points indicated in the Credit Regulations can be ignored.
After reviewing the aforementioned Manual, he finds that:
The minimum time of existence of a business can be ignored, with which a tool that allows to measure the debtor's management capacity is overlooked.
Some of the indispensable documents can be dispensed with, with the condition of attaching them later, which almost never happens.
There can be debt with more than five credit institutions (including the MFI), thereby violating the internal regulations on over-indebtedness.
It can be classified into high risk categories, ignoring a sign of the customer's character.
Amounts higher than the maximum allowed without collateral can be granted, increasing the moral risk of the debtor, as he may be motivated not to pay in the absence of collateral.
It can be lent up to above the commercial value, with the argument that "only the ability to pay must be measured, but not the guarantee."
If a client does not want to pay off their debt, they can renew it. "The important thing is not to reclassify the customer to a higher risk category and have to provision affecting the business profits." No matter the lousy signal that is given to customers.
Up to 100% of the value of fixed assets can be financed, despite the fact that the Regulation requires a minimum contribution of 20%. The client does not assume any risk. All the risk is assumed by the MFI and, in some cases, with preferential rates.
The signatures of the spouses of the holders or joint guarantors can be excepted, affecting the subsequent recovery, in case of default.
The explanation given to all this is that "you could not stop placing, due to formalities."
What Jaime tells us, although it seems strange, is typical of many MFIs, who because they focus on the short term ignore the consequences of their questionable behavior. Unfortunately, the invoice arrives sooner or later, through the increase in their backlog or, worse still, with the penalties of the Risk Rating Agencies or the observations of the Regulatory Body. Let's not forget that doing the right thing, whatever the consequences, will always be the best alternative.
