Aldona Micė has been with farmers through many floods and droughts. She was recently appointed as a new Head of Risk and Recovery at HeavyFinance. Aldona joined the company after more than a decade of managing credits and debt at Agrochema, one of the largest agricultural companies in the Baltic states. Having extensive experience in recoveries in the agricultural sector, she successfully manoeuvred through many challenging seasons that caused struggles with loan repayments among farmers.
Now, Aldona is overseeing a rapidly growing HeavyFinance agricultural loan portfolio to ensure a rigorous risk management and smooth recovery process, as well as paying extra attention to ad hoc cases. I invited her for a cup of coffee to better understand what it takes to push the loan through the whole cycle when difficulties of repayment arise.
Q: Can you tell us a bit about your own experience?
Aldona Micė: Prior to joining HeavyFinance, I spent over a decade working in Lithuania’s leading agribusiness companies. My expertise spans across debt collection and credit granting within the agricultural sector. Over the years, I’ve encountered various debt recovery scenarios, each unique in its challenges and solutions.
One key takeaway from my experience is the absence of a one-size-fits-all approach in debt recovery. Every case demands a tailored strategy, a perspective that I deeply value. It’s this aspect of addressing each debt recovery issue individually, analysing its nuances, and crafting specific solutions that I find most engaging and rewarding in this role.
Q: What circumstances lead to lack of repayments from the borrowers?
Aldona Micė: In the agricultural sector, the answer is multifaceted. Primarily, farmers’ cash flows are closely tied to their crop yields, which are significantly impacted by weather and climate conditions. A poor harvest inevitably leads to reduced income, making it more difficult for farmers to meet their repayment obligations.
It’s also crucial to recognize the unique financial structure of the agricultural industry. Unlike regular monthly salaries, farmers’ incomes are largely seasonal. Their financial stability hinges on the timing of the harvest and the subsequent sale of their crops. This irregular income pattern can pose challenges in maintaining consistent loan repayments, especially in times of unexpected yield fluctuations.
Having these difficulties in mind, agriculture is a sector of strategic importance. We are all dependent of local food production and therefore, we see little bankruptcies in this sector. It means, even with financial constraints caused by climate change, the vast majority of farmers in default eventually manage to successfully repay their debt.
Q: At what point are the legal proceedings initiated?
Aldona Micė: The decision to initiate hard recovery is not taken lightly and varies with each case. Key factors prompting this action include:
- Lack of Communication: When a client ceases to communicate or cooperate with the company, it hinders our ability to maintain transparency with our investors, a core value at HeavyFinance.
- Inconsistent Repayments: If a client is making only partial repayments or none at all, it raises concerns about their commitment and ability to fulfil their financial obligations.
- No Feasible Repayment Plan: In situations where there is no viable plan for the debt to be fully repaid within an acceptable timeframe for both parties, more stringent measures become necessary.
In essence, the initiation of legal proceedings is a response to a breakdown in communication and cooperation, coupled with an inability to adhere to agreed repayment schedules. At HeavyFinance, we prioritise open dialogue and flexibility in repayment plans, but when these avenues are exhausted without resolution, we must resort to more decisive actions to protect the interests of our investors.
Q: Can you outline the recovery process?
Aldona Micė: The recovery process at HeavyFinance can be divided into two main stages: pre-trial and legal.
Pre-Trial Proceedings: This initial phase is managed by our recovery team and operates outside the judicial system. It involves direct engagement with the debtor, primarily focusing on finding non-litigious solutions. During this stage, the debtor is encouraged to secure alternative financing, either through other financial institutions or by liquidating assets. Often, farmers prefer refinancing options over selling their land or equipment, as these are crucial for their livelihood.
Legal Proceedings: If the pre-trial efforts do not yield results, the process advances to the judicial stage. This involves formal legal proceedings, where the case may be presented in court or handled through notaries, eventually leading to the involvement of bailiffs. The bailiff’s role is critical at this stage, overseeing the auction of the debtor’s property. The proceeds from the auction are then allocated and disbursed to the creditor, thereby fulfilling the debt recovery process.
Throughout both stages, our focus remains on achieving a resolution that is fair and effective, ensuring that the interests of all parties are considered and respected.
Q: How long do these proceedings take?
Aldona Micė: The recovery process at HeavyFinance varies in duration, with pre-trial recovery typically taking between two weeks to six months, and judicial recovery potentially extending up to several years. Our strategy at HeavyFinance is to prioritise pre-trial settlements whenever feasible. This approach not only accelerates the recovery process but also allows us to maintain a greater degree of control over the outcomes, ultimately benefiting all parties involved.
Q: What can be done to prevent it?
Aldona Micė: To prevent repayment issues, effective cash flow planning is essential. Proper management of income and expenditure can significantly reduce the risk of financial difficulties. Additionally, maintaining healthy communication is vital for efficiently addressing and resolving any delayed repayments. This proactive approach helps in ensuring smooth financial operations and minimises the need for recovery actions.
Overall, my primary responsibility as the leader of HeavyFinance’s recovery team is to oversee and tailor recovery proceedings specifically for the agricultural sector. This involves proactive monitoring and, when required, initiating the recovery process. Our objective is to avoid legal proceedings, which tend to be lengthier and less controllable. Additionally, understanding and addressing the root causes of payment delays is crucial to developing strategies that prevent such issues in the future, ensuring timely payments to our investors.