Microfinance Bill, 2012 H.B. 2, 2012 Pledged security 3.(1) Every borrower shall pledge as security property that is not more than twice the value of the amount borrowed from the microfinancier, which security shall⎯ (a) not be used by the institution; and (b) not be pledged by the institution as security if the borrower has defaulted; and (c) be kept in safe custody by the microfinancier. (2) A borrower who has pledged security whose value is more than twice the value of the amount borrowed can substitute a new security that is more commensurate to the value borrowed. (3) Where a borrowers pledges security is more than the value of the money borrowed, the microfinancier must ensure, in the event that the borrower default, the return of the balance after subtracting the amount due to them. (4) Pledged security held by the microfinance institution shall be at the microfinancier’s risk unless the microfinancier can satisfy the Registrar or a court, as the case may be that ⎯ (a) the pledged security was held in a safe place of custody; and (b) the loss or destruction of the pledged security was not attributable to any negligence on the part of the microfinancier. Transparency 4. There must be full disclosure to clients and potential clients of all terms and conditions (including any changes) attaching to any of the financial services offered by the microfinancier in plain and simple language understood by the client, including in particular the following in respect to its loan and credit services⎯ (a) the microfinancier must provide to every client documents clearly indicating the rate of interest, terms of repayment, collateral required from the client and details of all charges other than interest (if any); (b) the microfinancier must provide to every client at his or her request without delay written periodical statements setting out all the charges levied upon the client, all the payments made by him or her, and the outstanding balance owed by him or her under the loan agreement. Avoiding overindebtedness 5.(1) All microfinanciers must take reasonable steps to ensure that the credit services offered by them is based on the need and repayment capacity of each client and that this service will not put the borrowing client at significant risk of over-indebtedness. (2) Before advancing a loan to a client or potential client a microfinance institution shall diligently investigate and consider the client’s creditworthiness, debt history, sources of income, and the nature of the collateral that may be reasonably expected from him or her. (3) All microfinanciers must avoid demanding collateral whose value exceeds the value of the loan, and in any case must not accept collateral exceeding twice the value of the loan. Appropriate interaction and collection practices 6.(1) Every microfinancier shall behave in a dignified manner towards clients, that is to say, in a way that does not humiliate or degrade them. - 36 -