EXUS Collections & Recovery Blog

Why Middle East Banks Need to Rethink Debt Collections and Debt Collection Software

Posted by Chris Maranis on Wed, Mar 02, 2016 @ 10:00 AM

dubai-727509_960_720.jpgThe Middle East faces a retail banking environment characterized by significant volumes of non-performing loans (NPLs) and robust technological change. Banks operating in this environment face increasing debt collection costs, growing bad debt writeoffs and the need for higher provisions against loan losses.

The good news is that opportunities abound both at home and abroad. Banks are growing and breaking into new markets. But higher profits are available only to banks that manage the consequences of growth. Managing credit loss is a key business driver for banks in the region, one that has a direct impact on profits and the bottom line. 

Smart banks are implementing strategies to minimize NPLs andmaximize debt collection efforts. The top players are adopting specialized debt collection software to capture more value from the business already on their books.

Why Debt Collection Software? Why Now?

Why is debt collection software so important to the success of banks in the Middle East? NPLs in the Middle East and North Africa stood at 7.9 percent in 2014, according to the World Bank. Loan appetites in the Middle East are large. Failing to manage both performing and NPLs is financially disastrous.

For every $100 million of loan loss provisions, a bank’s lending capacity is reduced by $6 to $7 billion. Banks may understand that better debt collection and loan management lead to success. But many don’t realize the credit landscape has changed, which is why they face serious difficulties executing a modern debt collection strategy.

Today’s customer carries multiple debt obligations with multiple providers. They use many different channels online to communicate, and they expect high levels of customized service when dealing with lenders.

Many banks, however, believe they can rely on simple phone calls to collect more from these complex new debtors. They also believe they can use basic spreadsheets and systems to monitor and control risk. These are dangerous assumptions.

That’s why debt collection software is so important. It provides end-to-end management of the debt cycle, from origination to litigation. It does so in an effective, realistic and coordinated way with smart tools, features and automation. And it has some advantages that are specifically helpful to Middle East banks that want to improve profits starting immediately.

 1. Balance High Growth and Future Risks

Middle East banks are growing at a clip. As they grow, these banks may attract different types of customers with different risk profiles. Failure to manage these risks impacts both growth and existing profits if the ratio of NPLs on the books grows.

The right debt collection software covers all stages, risk types, products and customers. It covers every type of debt, in-house and outsourced collections using customer, account-level and hybrid approaches over multiple contact channels. That means Middle East banks with ambitious growth goals can scale this software with their operations, no matter what business realities they face.

 2. Capture More Bottom Line Results

NPLs represent revenue that’s sitting on the table, right now, regardless of the competitors or market position of Middle East banks. It’s not always possible to identify these opportunities with outdated systems. However, debt collection software makes it possible to not only identify, but capitalize on, these opportunities at every stage thanks to the following features:

  • Hundreds of trackable important metrics reports. (Such as flow rate analysis, collector productivity and collections efficiency.)
  • Documentation of collector performance.
  • Workflows and queues.
  • Ways to settle and monitor better. (Such as self-service options, risk segmentation and multi-channel communication.)

3. Control Operational Costs

Capturing more value from current NPLs isn’t the only advantage Middle East banks can achieve with debt collection software. One of the highest costs for these organizations is operational costs. As Middle East banks grow, so does their staff. Controlling the price of personnel, labor and operations is a critical differentiator in the market.

Debt collection software controls operational costs by:

  • Automating many debt collection processes that would have traditionally been done manually.
  • Segmenting and distributing accounts to collectors.
  • Enabling faster operations with visual tools that collectors can learn without a vendor standing over their shoulders.
  • Speeding up reporting and document management.

Debt collection software allows you to fix operational costs as you grow, expanding your bottom line and margins.

 4. Adapt to Local Markets

Middle East banks have one eye on home markets and another on regional or international expansion. That means they need a debt collection solution backed by local experience that is also scalable to any geographic environment.

To do this, the best software solutions use universal best practices within a framework that adapts to local regulations. Solutions must be backed by implementation professionals who have extensive experience in the Middle East, proven success with customers like your bank, and high satisfaction rates.

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Image Source: Pixabay

Chris Maranis

Written by Chris Maranis

Topics: Islamic Banking