Table of Contents

1.1 Understanding of delinquency and default 6
1.2 Causes of delinquency and some of their solutions 7
1.3 Impact of delinquency and default on microfinance institutions 16
2.1 Loan portfolio quality 24
2.2 General criteria of the loan performance 24
2.2.1 Portfolio at risk or delinquency rate 25
2.2.2 Aged balance 26
2.2.3 Loan loss provisioning 26
2.2.4 Write-offs 29
3.1 Delinquency prevention 35
3.2 Delinquency detection 36
3.3 Delinquency corrections 38
3.4 The stages of recovery 39
Annex 1: Assignment on managing delinquency crisis 44
Annex 2: Participant Action Plan 47


There is very often a tendency to assimilate the delinquency of credit to any form of non-reimbursement. Indeed, when a client fails to meet a deadline, this constitutes a breach of a commitment and can therefore be treated as delinquency. But in the logic of consumer protection principles, and more specifically of the microfinance client, it is necessary to distinguish between the one who does not repay while he/she has the capacity and the one who is failing for reasons beyond his/her control. It is this orientation that is followed by CGAP and reduces the notion of delinquency to anyone who does not reimburse because of bad faith. It is this type of failure that we analyze here.
Delinquency is one of the major problems dealt by banks and Microfinance Institutions. Dealing with that problem, it requires particular skills among the loan officers, recovery officers and others directly concerned by the credit as they are the ones responsible for delinquency prevention and are able to handle delinquency problem in case it happens. Therefore, loan delinquency is the largest factor in the bankruptcy of institutions providing financial services. Delinquency must therefore be addressed as the interest on loans represent the means through which MFIs cover all their cost including loan losses to become sustainable.
The present module of Delinquency Management herein articulates the two concepts and their relationship which have a great impact on MFI sustainability. Those concepts are namely loan delinquency and interest rates on loans. As in many banks and MFIs, the manager, loan officer, recovery officer and credit committee are concerned by the product of loan, they are highly encouraged to follow this training for a better portfolio quality in their respective financial institutions.


Loan delinquency is probably the largest single factor in the downfall of institutions involved in the provision of financial services. Delinquency must therefore be addressed as the interest rates on loans represent the means through which MFIs cover all their costs including loan losses to become sustainable.

It is much easier to prevent loan delinquency than to resolve it! Hence RICEM has thought of this course of Delinquency Management which includes understanding the causes and the impact of delinquency on MFI, measuring delinquency and lastly controlling delinquency. Those chapters are enhanced by practical case studies and role play as part of the learning methodology.

Before starting those chapters, 7 questions have been prepared as pre-assessment skills to the concerned participants so as to allow RICEM to know the level of participants which in turn will result to better conducting the training. At the end of every chapter, there are questions for testing the participant’s competences which will have to be worked on and be submitted back to RICEM for correction and feedback as another way of interacting with participants.

Apart from that, there is a compulsory assignment that the participants will have to work on and be submitted on the date that will be communicated. Together with that assignment, the participants will also work on the action plan for a better implementation of knowledge and skills acquired throughout the training.

Therefore, the course is intended to be trained to credit committee members plus loan officers and recovery officers as well as managers as they are in a way concerned by the matter.

By the end of this module, the participants should be able to:
• Identify and analyze the causes of delinquency
• identify the impact of delinquency
• Learn how to measure delinquency
• Learn how to control delinquency
• Learn how to professionally deal with defaulters
• Develop an institutional action plan to address loan delinquency