{"id":41032,"date":"2023-08-17T11:51:12","date_gmt":"2023-08-17T11:51:12","guid":{"rendered":"https:\/\/www.smeraonline.com\/newweb\/?p=41032"},"modified":"2023-12-07T13:07:54","modified_gmt":"2023-12-07T13:07:54","slug":"how-coca-grading-improves-lending-processes","status":"publish","type":"post","link":"https:\/\/www.smeraonline.com\/newweb\/index.php\/2023\/08\/17\/how-coca-grading-improves-lending-processes\/","title":{"rendered":"How COCA grading improves lending processes"},"content":{"rendered":"\t\t
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How COCA grading improves lending processes <\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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Over the years, lenders and investors have been concerned about the gaps in loan appraisals. Stringent loan recovery methods, unreasonable interest rates, bypassing regulations, accepting savings from members, and a lack of a proper customer-grievance system were the concerns.\u00a0\u00a0<\/p>

Micro Finance Institutions (MFIs) had to be educated to adhere to a lending system that encouraged transparent client relationships and feedback mechanisms. It must be reiterated that MFIs play a crucial role in promoting financial inclusion and the economic empowerment of unprivileged micro borrowers. They bridge the financial gaps by reaching to the most rural, far-flung areas. They provide small loans to people who do not have any access to banking facilities.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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Their services include:<\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\"\"Microcredit<\/h3>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t
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\"\" Microsavings<\/h3>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t
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\"\" Microinsurance<\/h3>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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Finally, a robust tool had been established to address the loan-appraisal concerns. COCA (Code of Conduct Assessment) is a tool to review various norms for ethical microfinance. These included RBI\u2019s fair practices code guidelines for Non-Banking Financial Companies, Industry Code of Conduct guidelines (Sa-dhan and Microfinance Institution Network-MFIN) and Smart Campaign\u2019s Client Protection Principles (CPP).\u00a0<\/p>

These codes promote responsible lending practices and protect the interests of both MFIs and their clients.<\/span><\/p>

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COCA, in essence, establish ethical standards for credit officers, ensuring that they demonstrate integrity while dealing with clients. This strengthens trust between MFIs and their clients, fostering strong long-term relationships.<\/span><\/p>

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Tracing the\u00a0<\/span>history<\/span><\/a>\u00a0of the COCA tool, SMERA, India\u2019s first SME rating agency, notes:<\/span><\/span><\/p>

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\u201cThe Code of Conduct Assessment (COCA) tool was developed as a response to the need expressed in a meeting of stakeholders in Indian microfinance led by Small Industries Development Bank of India (SIDBI) and World Bank in December 2009. The Code of Conduct dimensions were identified by reviewing the various norms for ethical finance. These included RBI\u2019s fair practices guidelines for Non-Banking Financial Companies, industry Code of Conduct (Sa-Dhan-MFIN) and Smart Campaign\u2019s Client Protection Principles (CPP).\u00a0<\/span><\/p>

\u00a0<\/p>

\u201cIn 2016, a need was felt to harmonise COCA to the most recent industry Code of Conduct and standardise COCA tools of different rating\/assessment agencies. In the harmonised COCA tool, the dimensions were classified into three categories: highest order, higher order and building blocks.\u201d<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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SMERA\u2019s harmonised tool is based on:<\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\"\"
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Sensitive<\/h3>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t
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\"\"
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Integrity & Ethical Behaviour<\/h3>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t
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\"\"
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Transparency<\/h3>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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\"\"
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Client Protection<\/h3>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t
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\"\"<\/h3>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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Governance<\/h3>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t
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\"\"
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Recruitment<\/h3>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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Client Education<\/h3>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t
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\"\"<\/h3>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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Feedback & Grievance Redressal<\/h3>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t
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\"\"
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Data Sharing<\/h3>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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SMERA\u2019s COCA assessment exercise includes:<\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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Where COCA gradings for MFIs are concerned, SMERA follows a three-tiered approach to consolidate the reports. Each tier is based on the number of clients managed by MFIs:<\/span><\/p>

\u00a0<\/span><\/p>