Publications -

What happens to clients who default?

This study was carried out between 2013 and 2014 and published in February 2015 by the “Smart Campaign”, an international consumer protection group that monitors the culture and practices of the microfinance sector.

The aim of the research was to analyse possible situations that a customer unable to repay a debt may have to face. It sets out to investigate the treatment that borrowers in arrears receive from microcredit institutions. To do so, it studied three countries with radically different legislation, supervisors and socio-economic and cultural characteristics: Peru, India and Uganda.

The study shows that the quality of the treatment such customers receive largely depends on the practices in each financial institution. It measures the human approach in terms of key recommendations: “Do not shame or humiliate people. Talk to them privately and with respect. Do not deprive them of their basic survival needs or tools of work”. It points out that where there is good regulation, efficient supervisory bodies and credit bureaux, and a culture of respect towards debt repayment, the collection systems tends to be more humane.


This is a significant comparative analysis, which comes up with important recommendations on how customers can be protected, in order to improve collection practices for performing and non-performing loans.