Abstract:
Industry observations denoted a contemporary issue in recovering the loans provided by Micro Finance Institutions (MFIs’). Thus, a comparative study has been conducted, focusing on
analysing and understanding the current strategies that are being used by MFIs’ to deal with
non-performing loans. Further, the study focus on suggesting suitable debt recovery strategies
that can be adopted by MFIs’. The data is gathered primarily based on in-depth interviews
and questioners. Seven MFIs’ were selected from the population based on the nature of the
ownership of MFIs’. The gathered data was dropped down and analysed by using thematic
analysis which direct with cross case synthesis, pattern of matching technique, and rival explanations and also according to four analytical techniques of Yin, R. (1984). The study revealed
that the debt recovery generates the major revenue for MFIs’ which assures the sustainability of the MFIs’, while allowing them to cater to another set of poor in that area. However,
the post bad-debt recovery strategies that are being used by MFIs’ currently such as recovery
from savings or guarantors’ income, reminders, promise register and legal actions are less result
oriented. Ultimately, the findings denoted that, pre-debt recovery strategies such as a high quality formal and informal pre-lending customer screening process, enhancement of skills of the
field officers, who’s given with the responsibility of assuring the feasibility of the customer and
portfolio tracking after the disbursement of the loan, enhancement of social capital among the
group network system by providing business development services, improving financial literacy
of customer can make a huge influence of the loan repayments which is possibly minimizes the
default risk of non-performing loans.
