Encouraging Timely Debt Payments

14th Apr 2021, Industry Insights

Are your borrowers often delaying payments? Are your delinquency buckets always reaching their threshold limits? It is important for lenders to provide knowledge on credit control techniques for borrowers. It is human nature that some borrowers will always delay repayments and will not pay unless reminded. Similarly, some individuals are often short of cashflows or are overleveraged. Some borrowers delay for no reason at all. While the reasons for non-timely debt servicing can be many, the end result is the same. It leads to increased delinquencies and portfolio at risk figures for lenders making their risk matrix appear troubled. However, there are ways of tackling and encouraging discipline among borrowers so that they pay timely. These are:

Borrowing and credit growth is important for the expansion of financial markets and economies.  The progress of financial markets is generally hampered by the lack of basic financial infrastructure such as functioning credit bureaus, uniform disclosure rules, lack of financial literacy among borrowers or delayed and late payments from customers.

These limitations can substantially increase the cost of lending for banks and financial institutions since there is a price involved for a delayed payment. Educating the borrowers, proper disclosures, financial literacy programs and a well-organized credit market is of utmost important to ensure timely repayments and thus enable economic development.