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PRISTAV leads roundtable discussion of Banks and Microfinance Organizations

The roundtable, held on 28 June 2011, was arranged by the Russia Association jointly with the Russian Microfinance Centre Fund. Its purpose was to discuss how collection agencies can help banks and microfinance organizations that provide various microfinance products.Dmitrakov’s presentation provided data on the dynamics of microfinancing between 2003 and 2011. The volume of issued microloans on 1 July 2010 amounted to 23 bln Rub. of which 45% was for business development, and 55% was for consumer needs. There were 250,000 borrowers as of 31 December 2010. About 20% of these borrowers are first-time businessmen. Dmitrakov noted that 70% of microloans are made in small towns and villages.According to the data of NAUMIR, delinquencies of more than 30 days in Q4 2010 decreased from 7.4% to 6.6%. In the banking sector, the volume of overdue delinquency was 5.3% for legal entities and 6.9% for individuals. Past due loans of microfinance institutions remain high compared to the 2.3% level of the pre-crisis period.Dmitrakov emphasized that when microfinance organizations work with collection agencies they benefit from: (1) reduced costs working with problem debtors; (2) increased opportunities to concentrate on their core business; (3) lower reputation risks; and (4) decreased volume of overdue delinquencies. According to Dmitrakov, working with a collection agency is the best solution if there is no longer any contact with the debtor, or if there are doubts that a debtor will meet his financial obligations. Outsourced agencies are not competitors to existing bank departments working on overdue debts. Cooperating with an external agency often provides: (1) an opportunity to evaluate the efficiency of the internal collection department; and (2) ways to improve results.