Table of Contents

Introduction............................................................................................................. 1

I.

Objective of the Study.................................................................................................... 5

Conceptual Framework.................................................................................................. 6
Methodology............................................................................................................ 7

II.

Research Design........................................................................................................... 7
Methods of Data Collection............................................................................................. 7
Data Analysis.............................................................................................................. 7
Statistical Treatment...................................................................................................... 7
III. Results and Discussion............................................................................................... 8
Table 1.1. Total Non-Performing Assets (2010-2015).............................................................8
Table 1.2. Total Non-Performing Assets from Loans (2010-2015)..............................................8
Figure 1. Proportionate Share of Net Non-Performing Loans to the Total Net Non-Performing Assets
(2010-2015)................................................................................................................ 7
Table 1.3. Trend Percentage of Non-Performing Assets in LTVTP-MPC (2010-2015).....................7
Figure 2. Trend Percentage of Net Non-Performing Assets (2010-2015)......................................8
A.

Credit Assessment.................................................................................................. 9

B.

Property Valuation................................................................................................ 11

C.

Insider Lending.................................................................................................... 12

D.

Seizing and Disposal of Collateral.............................................................................13

E. Adhering to Lending Policies................................................................................... 14

F.

Follow-up Measures or Communication.....................................................................15

IV. Conclusion............................................................................................................. 16
V. Recommendation..................................................................................................... 17
VI. References............................................................................................................ 18
VII. Authors Biography................................................................................................. 19
VIII. Appendix............................................................................................................. 20

I. Introduction
The banking sector has always been the resort of
those in need of funds in various areas such as
fishing, mining, construction, manufacturing, and
agriculture. However, cooperatives also contribute to
the economic development of a country. They
supplement the gaps left by the public, private and

commercial banking sector, especially the needs of

small and medium income earners.
A cooperative is a duly registered association of
persons with a common bond of interest, who have
voluntarily joined together to achieve a lawful
common social or economic end, making equitable to
contribution to the capital required and accepting a

fair share of the risks and benefits of the undertaking in

accordance with universally accepted cooperative
principle. (Republic Act 6938)
One of the types of cooperative is a multi-purpose
cooperative. The multipurpose co-operative society has a
large number of functions to discharge such as making
arrangement for credit, marketing and business, helping
members to increase their standard of living, encouraging
the member for saving, and many more. As the name
indicates its responsibility for different purposes for
which it has been set up.

are treated as past due after 30 days and classified as nonperforming after 90 days.
According to several studies of Non-Performing Assets,
there are a lot of factors that cause the increase in NPAs
and are segregated into internal and external factors.
They are the following:
A) Internal Factors
1.
I.1

Extension of credit facilities is one of the major activities

of La Trinidad Vegetable Trading Post Multi-Purpose
Cooperative (LTVTP-MPC) which was established in
1992 and had been in existence for 24 years since its
inception. As of March 2016, they have a total
membership of 4, 967 (1,824 Regular members and 3,143
Associate members) with paid-up common and preferred
share capital contribution of Php 58, 779, 650.09 and a
total assets of Php 268, 204, 047.07. They provide three
services:
1.
2.
3.

Appraisal factors
Poor credit assessment skills of managers
At times, the credit appraisal or the loan application
review might not be prudent. The managers might not be
competent enough to appraise the loan. For the industry,
overall bad management practices are manifested not
only in excess expenditures, but also subpar underwriting
and monitoring practices and eventually lead to nonperforming loans (Berger et al., 1997).
The work of credit analysts is crucial to the success of
banks and other financial institutions. These
professionals help financial institutions minimize debt
risk and maximize income by determining the risk
involved in authorizing loans or credit lines.

Loans (Emergency, Production, Commercial)

Social Services (Educational Assistance Fund,
Health Aid Fund, Mutual Aid Fund)
Deposits (Savings, time, fixed/share)

Credit analysts might find work with an associate's

degree in a business field and some related work
experience, although employers typically prefer a
bachelor's degree. Additionally, a master's degree might
make a credit analyst more competitive in the job market.
Depending on one's employer, industry certification
might be required. (Morah, 2014)

Nowadays, according to International Journal of

Commerce, Business and Management, Non-Performing
Asset is one of the biggest problems being faced by the
cooperative society. There is a direct link between
nonperforming assets and profitability of the cooperative.

Education can help through a number of things; however,

work experience allows individual to reveal things about
the job that education cant. (Lee, 2016)

LTVTP-MPC defines non-performing assets as assets

that do not give revenues to the cooperative. The
cooperative considers the following as non-performing
assets: Other receivables, unused office supplies, prepaid
expenses, total property and equipment and other noncurrent assets.

The following Five Cs of Credit Analysis is what most

lenders consider. Before going to the lender it would be a
good idea to make an inventory and itemize the qualities
in the areas listed below.

The main business of the cooperative is to receive

deposits and lend money to people. A major portion of
the money lent comes from the deposits received from
the members. The risk involved in lending money is very
important because it involves deciding whether or not the
debtor will be able to pay the amount loaned. The
cooperative should consider several factors before
lending because it may lead to the non-repayment of
loans and advances. The non-repayment of loans caused
the non-performing assets from loans of LTVTP-MPC to
increase for the past six years.

The Capacity to repay is the most critical of the five

factors. The prospective lender will want to know exactly
how you intend to repay the loan. The lender will
consider the cash flow from the business, the timing of
the repayment, and the probability of successful
repayment of the loan. Payment history of existing credit
relationships personal or commercial is considered
an indicator of future payment performance. Prospective
lenders also will want to know about your contingent
sources of repayment. (USAIDs Lending to the
Agriculture Sector Toolkit December 2012)

The cooperative defines non-performing assets from

loans as loans with collaterals which ceases to generate
income due to non-repayment. Delayed payment of loans

Capital is the money you have personally invested in the

business and is an indication of how much you have at

risk should the business fail. Prospective lenders and

investors will expect you to have contributed from your
own assets and taken on personal financial risk to
establish the business before asking them to commit any
funding. (USAIDs Lending to the Agriculture Sector
Toolkit December 2012)

approximately fifteen minutes to several hours,

depending upon the size and complexity involved. After
the initial inspection of the property the appraiser spends
time touring through the neighborhood or area. The
purpose of this tour is to search for comparable sales
(other properties that are similar to the property being
appraised) that have sold within the last six months to a
year or so. When the field work is finished, the appraiser
completes the report at his office. The report can consist
of a short form report (typically under ten pages) to a
long narrative report which can sometimes exceed a
hundred pages. A short form report usually takes between
three to six hours to complete. A narrative report can take
weeks or sometimes even months, depending upon the
complexity of the assignment. (Diaz, J. 1990)

Collateral or guarantees are additional forms of security

you can provide the lender. Giving a lender collateral
means that you pledge an asset you own, such as your
home, to the lender with the agreement that it will be the
repayment source in case you cant repay the loan. A
guarantee, on the other hand, is just that someone else
signs a guarantee document promising to repay the loan
if you cant. Some lenders may require such a guarantee
in addition to collateral as security for a loan. (USAIDs
Lending to the Agriculture Sector Toolkit December
2012)

Quantitative overload is defined as having a lot of work

which cannot be comfortably done. Qualitative overload
is defined as work which is difficult to do. A work of an
appraiser needs at all times, accuracy and precision. Both
type of overload can be experienced by the appraiser
when he is given numerous jobs to do and will hamper
his competencies to submit timely reports and provide
quality judgements. (Marson, D., 2001)

Conditions focus on the intended purpose of the loan.

Will the money be used for working capital, additional
equipment, or inventory? The lender also will consider
the local economic climate and conditions both within
your industry and in other industries that could affect
your business. (USAIDs Lending to the Agriculture
Sector Toolkit December 2012)

According to a study conducted to reduce credit risk, a

risk related to non repayment of the credit obtained by
the customer of a bank, appraisal of the collateral should
be made to cover the amount of the loan. Thus, it should
always be made before approving any loan to increase
security. (Arora, N., 2013)

Character is the general impression you make on the

potential lender or investor. The lender will form a
subjective opinion as to whether you are sufficiently
trustworthy to repay the loan or generate a return on
funds invested in your company. Your educational
background and experience in business and in your
industry will be reviewed. The quality of your references
and the background and experience of your employees
also will be taken into consideration. (USAIDs Lending
to the Agriculture Sector Toolkit December 2012)

All states require appraisers to be state licensed or

certified in order to provide appraisals to federally
regulated lenders. Some states require appraisers to be
licensed or certified to provide appraisals for other
parties as well. (Schultze, R., 2007)
To become licensed or certified in the Philippines, you
must pass the real estate appraiser licensure examination.
There are five different categories of real estate appraiser
namely real estate consultant, real estate appraiser, real
estate assessor, real estate broker, and real estate sales
person. (R.A. No. 9646)

1.2 Property Valuation

A study conducted on why banks ask for collateral
reveals that there is a positive relationship with reduction
of loan loss and observed-risk hypothesis. The value of
the collateral serves as guarantee for the loan. It is
important that differences among types of collaterals in
terms of the recovered value for a given initial value
should be noted. However, appraising does not come
easy especially when different types of collateral are
considered for the appraiser will need to apply varying
strategies for each type Thus, types of collaterals have
significant impacts on the loan and should be properly
assessed. (Blazy and Weill, 2005)

1.3 Weak loan portfolio by the staff of the entity,

especially weak credit assessment and analysis at the
application stage of the loan (32 percent). (Richard, E.,
2011)
2.

Monitoring and Controlling factors - have more than

medium influence and has been suggested the need for
immediate and greater attention.
2.1 Insider lending; this occurs when loan is given out to
employees such managers, directors among others
without following proper lending procedures. (Hwandi
and Gama, 2015)

A study on how appraisers do their work, states the stages

of the appraisal process. That the physical inspection of
the real property being appraised can take from

Regulation O governs any extension of credit by a

member bank to an executive officer, director, or
principal shareholder of that bank, of a bank holding
company of which the member bank is a subsidiary, and
of any other subsidiary of that bank holding company.
The regulation also applies to any extension of credit by
a member bank to a company controlled by a bank
official and to a political or campaign committee that
benefits or is controlled by an executive of the financial
institution. (Federal Reserve, 2013)

least 90% should be seized. 90% percent of that should

be disposed of at least 90% of their market value. (Song,
2002)
2.3 Failure to adhere to set out lending policies
This whereby a lending officer grants a loan to a
borrower without the full considerations agreed in the
lending policy of the institution may be because of past
experience and relationship. The economic conditions are
dynamic as such granting a loan basing on past
experience may result in loan delinquency. (Hwandi and
Gama, 2015)

Dealings of a bank with any of its Directors, Officers,

Stockholders and their Related Interests (DOSRI) should
be in the regular course of business and upon terms not
less favorable to the bank than those offered to others.
(Circular No. 423, Series of 2004)

Lending policies and non-performing assets are related.

Lending policies help govern the lending or credit
activities of an organization. Lending policies, helps the
banks lend prudently and lowers the risk level to the
banks. Strict adherence to lending policies therefore has
led to reduced levels of non-performing loans. (Owino,
2012)

Under existing regulations, loans extended by a

cooperative bank to its primary cooperative stockholders
are considered as loans to DOSRI. These loans are
subject to the prudential regulations of the grant of loans
(e.g. general guidelines in the grant of loans, requirement
that these be made upon terms not less favorable to the
bank than those offered to others, procedural
requirements, as well as reporting to the BSP). Loans to
these primary stockholders, are, however, exempt from
the individual ceiling on loans to DOSRI which puts a
cap on the amount of loan that a DOSRI may avail of,
which is the amount of the DOSRIs deposit plus the
book value of his paid in capital contribution in the
coop bank as prescribed in Subsection X330.1 of the
Manual of Regulations for Banks (MORB). (MB
Resolution No. 177, 2013)

There are different types of credit policies which can

affect the efficiency and cash flow of an organization.
Tight credit policies refer to conservative or restrictive
guidelines in the extension of credit.
Indicators of tight credit policies are as follows:
The policy should be written down and kept up to date
with current creditworthiness of specific customers,
especially ones with large lines of credit or that increase
their orders, plus warnings or notes of current poor
experience. The policy should be disseminated to all
sales staff, the financial controller and the board.
Loose policies allow for more freedom or flexibility. A
given business, for example, may focus more on debt
collection instead of credit investigations and analysis.
(Chartered Institute of Management Accountants:
Improving Cash Flow Using Credit Management)

2.2 Seizing and disposing off the collateral

The study observed that in practice, the collateral may
not realize the value previously estimated; also, it might
be totally obsolete at the time of sale. Loans having land
as collateral have been more successful in realizing
higher values compared to those with plant and
machinery and inventory.

2.4 Lack of follow-up measures or communication

Proper follow-up is also not taken by the bank. In such
situation the bank does not get the installments regularly
and sometimes such loan is converted into NPA.
Due to failure of giving notice to the borrowers of their
due date of payment, this leads to the non collection of
receivables.

It is important to review the terms of the credit contract

before exercising rights on the collateral to ensure that
one has the rights to said collateral (Andreyev, 2016)

After the initial contact with the delinquent customer, it is

important to keep additional contacts on a strict schedule.
A follow-up is essential; otherwise the collection effort
will become ineffective.

Collaterals are important to cover unpaid debts and must

be seized and disposed in accordance to laws and
regulations as to not commit any illegal act. (North Shore
Bank, 2013)
Ideally, loan should only be extended up to at least 70%
of the collaterals market value. Of all the collaterals, at

Systematic follow-up of accounts, even those which

cannot pay immediately, reinforces the serious nature of

the outstanding debt and emphasizes the importance

attached to it by the creditor.
A number of collection techniques, ranging from letters
to legal action, are employed by firms in order to provide
efficiency in the collection process. This also includes
collections by text messages, e-mail telephone calls,
personal visits, and collection agencies. As an account
becomes more and more overdue, the collection efforts
become more personal and more intense.(Gitman, 2009)

6.

According to Ross, 2005, the firm usually employs the

following step-by-step procedures for customers that are
overdue: First, the entity must send delinquency letter
information to customers past overdue accounts. Second,
call the customer through telephone. Third, employ
collection agency to collect the receivable. Lastly, if no
response is received from the customer after exhausting
the prior ways, the entity must take legal actions against
the customer.

7. State of the economy

Business cycles (boom, depression and recovery) affect
delinquency in several ways. In a depressed economy, the
probability of late repayment is relatively high as
compared to an economy at boom or recovery stages of
business cycle. This is mainly because economies in
depressed state face liquidity challenges hence the
expected returns from borrowers projects will be
negatively affected leading to delinquency. (Hwandi and
Gama, 2015)

B) External Factors the influence is medium or higher

compared to internal factors.
1. Economic downturns
The study revealed that 40.5% of the respondents tighten
credits in view of future economic downturn. The study
also cited that default problems tend to appear during
economic downturns, with an estimated lag of
approximately three years in the case of Spain (Lis et al.,
2000)

8. Transaction costs of the loan

Many transactions costs associated with the borrower
may end up reducing the amount left on hand even before
the execution of the project, for example a borrower
needs $5 000.00 to finance his or her project of which
$500.00 will be associated with transaction costs hence
the project will be funded with $4 500.00 which is less
than the required amount. If the project is not fully
capitalised, the feasibility of the project compromised or
the borrower will find other sources to sufficiently fund
the project. Thus, the repayment of the loan will be
delayed. (Hwandi and Gama, 2015)

2. Willful default of borrowers

The study clearly showed that wilful default by
borrowers is a major factor. Where 48.65% of the
respondents indicated that they do not have any
information sharing mechanism about defaulters with
other banks that causes defaulters to be regarded as
potential customers.
3. Allocation
Borrowers allocate the funds to other purpose/s rather
than the agreed one (61 percent) and borrowers integrity
or lack of transparency (27 percent) (Richard, E., 2011)

Objective of the Study

The main objective of the study is to determine the
probable cause/s of Non- Performing Assets of LTVTPMPC. The research aims to answer the specific problems:

4. Changes in government policies

The government may negatively interfere with the
operations the borrower from which cash flows for the
repayments of the loans are expected to be generated, for
instance increase in corporate taxes. Increase in taxes will
lead to high costs burden resulting in thin retained profit
margin. Thus, the repayment may not be made in
accordance with the agreed terms leading to loan
delinquency. (Hwandi and Gama, 2015)
5.

Unpredicted individual crisis may led to loan

delinquency. The crisis may include death of a near
relative, fired from work, salary reduction among others.
This will lead to the profits generated or the amount
borrowed being used to cater for those unanticipated
commitments hence failure to meet loan repayment
deadlines. (Hwandi and Gama, 2015)
Natural disasters
Natural disasters such as floods, drought and earthquakes
may hinder the monitoring the progress of the project, for
example appraisal visits may thwarted by such disasters.
This may also affect the infrastructure of where the
borrower s project is geographically located. For
instance if the borrower was in agriculture and has been
affected by one or more of the disasters, his or her yields
will be suppressed hence the borrower may look for other
secondary sources of repayment which requires
considerable amount of time, thus delayed repayment.
(Hwandi and Gama, 2015)

1.

Individual crisis

What is the profile of LTVTP-MPC in terms of:

A. Total Non-performing assets from 2010-2015.
B. Total Non-performing assets from loans from
2010-2015.
C. Proportionate Share of Non-performing assets
from loans toTotal Non-performing assets 20102015.

2.

D. Trend of Non-performing assets from 20102015.

What is the profile of LTVTP-MPC in terms of
probable factors causing Non-performing assets and
how does it measure against ideal benchmarks:
A. Credit Assessment
i.
Qualifications of loan officer
ii.
Performance of loan officer

B. Property Valuation
i.
Qualifications of loan appraiser
ii.
Performance of loan appraiser
C. Insider Lending
D. Seizing and disposing of collateral
E. Adhering to lending policies
F. Follow-up measures or communication

Conceptual Framework
Profile of LTVTP-MPC
Financial Statements (2010-2015)
Policies/Regulations on Loans
Profile of Loan Appraiser and Loan Officer

Independent
Variable

Established Internal Factors of NPA

Poor credit assessment skills of managers

Property valuation

Weak loan portfolio of staff

Insider lending
Seizing and disposing off collateral
Failure to adhere lending policies
Lack of Follow-up measures or communication

Probable Causes of the increase in Non-Performing Assets from Loans of LTVTP-MPC

Dependent
Variable
Expected
Outcome

The study was mainly planned to study the causes that

increase NPA from loans. The study could suggest
measures for the LTVTP-MPC to avoid future NPAs
from loans and to reduce existing NPAs from loans.

suggestive of what may be found in similar

organizations but additional research would be
needed to verify whether findings from one study
would generalize elsewhere.

The study is limited to the following:

1.

2.

Access to and availability/completeness of

information as not much research has been done with
regards to LTVTP-MPC. This constraint was dealt
with by relying on published annual reports and
financial statements, assuring the respondents that
the information was mainly for academic purposes
and that their identity is considered confidential
information and will not be disclosed anywhere.

3.

Data and criteria subjected to analysis are internal to

the organization only. It was limited to those the
cooperative has more control over and can address
materially.

LTVTP-MPCs NPA have been rising over the years

which mean that they have a high probability of large
number of credit defaults that may affect the profitability
and liquidity of the cooperative. This study will help the
cooperative oversee the probable reasons why there has
been an increase in their NPA for the past years, which

A case study involves the behavior of one person,

group, or organization. This may not reflect the
behavior of similar entities. Case studies may be

6
Profile of LTVTP-MPC

Financial Statements (2010-2015)

Policies/Regulations on Loans

Profile of Loan Appraiser and Loan Officer

can help them make remedies or changes to overcome the

problems of NPA.

II. Methodology
This chapter contains the research design. It presents the
following: method of data collection, data analysis and
statistical treatment of data.
Research Design
This research used a case study under descriptive
method. A case study is defined as doing research which
involves an empirical investigation of a particular
contemporary phenomenon within its real life context
using multiple sources of evidence. The aim is to
identify causal factors to some abnormality or deficiency
and to find and recommend a solution, a treatment, or
development procedures. A case study strategy is mostly
used in exploratory and explanatory research. This study
focused on explanatory research which is referred to as
analytical study. The main aim of explanatory research is
to identify any causal links between the factors or
variables that pertain to the research problem. Such
research is also very structured in nature.
Methods of Data Collection
Data collection consists of gathering and measuring
information on variables of interest, in an established
systematic fashion that enables one to answer stated
research question hypotheses, and evaluate outcomes.
The study used both primary and secondary data. The
types and methods used on how to collect the data are
discussed below.

The study used an interview and questionnaire as its

primary data. It is a research instrument consisting of a
series of questions for the purpose of gathering
information from respondents. The respondents of this
research were persons who hold a certain position in the
cooperativenamely, the manager, payment collectors,
credit committee and audit committee. They are persons
knowledgeable of the processes for approving loans and
the ones who assess the performance of the person
responsible for the tasks. The researchers formulated the
questions based on the established causes of NPAs which
was previously discussed. The secondary data, on the
other hand, were derived from the published documents
and literatures related to the research problem. Also, the
financial statements of the cooperative were used to
obtain numerical findings.
Data Analysis
The study used both qualitative and quantitative
approaches. The quantitative approach focused on
obtaining percentage increases or decreases based on the
statement of financial position for the past 6 years (20102015) of LTVTP-MPC. The interview and questionnaire,
on the other hand, made up the qualitative approach of

the study as this focused on answering the probable

causes of the increase of NPA. This study employed the
combined approach so as to overcome the limitations of
both approaches.

Statistical Treatment
The statement of financial position of the cooperative
was used to compute for the increase or decrease of the
non-performing assets as a whole and non-performing
asset coming from the loans itself. The researchers used
the trend analysis to compute for the percentage change
for the past six years using 2010 as the base year. The
formula is:

Trend % =

Comparison Year
100
Base Year

The total net NPA is computed by adding all assets that

do not generate income. According to the cooperatives
total NPA, this consists of other receivables, unused
office supplies, prepaid expenses, total property and
equipment, and total other non-current assets.
To get the percentage change of the total net NPA of the
cooperative, the formula is:

Trend% =

Net NPA(comparison year)

100
Net NPA(base year)

The total net NPA coming from loans is computed by:

Real and Other Properties Acquired
Less: Unearned Income
Total Net NPA(loans)
The percentage change of NPA from loans to NPA as a
whole is computed by:

Trend% =

Total Net NPA from loans

100
Total Net NPA

The percentage change of NPA from loans is computed

by:

Trend% =

Net NPA from loans (comparison year)

100
Net NPA from loans(base year)

III.

Results and Discussion

The following figures and tables below present the profile of the cooperative based on the financial statements of LTVTPMPC, in terms of the total non-performing assets, total non-performing assets from loans, proportionate share of nonperforming assets from loans to total non-performing assets, and trend percentage of non-performing assets. The values
were lifted from the books of the company, specifically the statement of financial position of the said cooperative.
Item/Year

2010

2011

2012

2013

2014

2015

Other
Receivables

3,949,732.86

3,508,742.35

11,248,587.01

20,273,348.46

11,621,766.61

9,912,744.90

Unused Office
Supplies

122,033.00

141,966.00

124,717.00

119,608.50

218,590.34

211,807.84

57,900.31

118,683.50

202,914.85

2,940,083.00

935,737.00

575,241.00

162,888.85

165,603.34

232,595.45

684,961.93

477,285.24

249,051.08

10,771,891.49

11,931,745.42

11,502,623.63

18,403,062.87

10,934,165.72

18,488,137.87

15,064,446.51

15,866,740.61

23,311,437.94

42,421,064.76

24,187,544.91

29,436,982.69

Prepaid
Expenses
Total Property
and
Equipment
Total Other
Non- Current
Assets
Total Net
NonPerforming
Asset

Table 1.1. Total Non-Performing Assets (2010-2015)

Table 1.1 reveals that total other non-current assets contribute most to the total non-performing assets followed by other
receivables, prepaid expenses, total property and equipment with unused office supplies contributing the least. The NPA of
the cooperative increased from Php15,064,446.51 as of 2010 and almost doubled in the next 5 years to Php29,436,982.69.
Items

2010

2011

2012

2013

2014

2015

Net Real and

Other
Properties
Acquired

3,951,831.30

5,455,208.80

6,512,321.55

9,164,152.01

9,794,317.22

15,301,447.45

Unearned
Income

(686,383.96)

(1,169,824.47)

(1,635,954.23)

(1,899,243.23)

(1,951,745.17)

(2,674,003.62)

Total Net
NonPerforming
Loan

3,265,447.34

4,285,384.33

4,876,367.32

7,264,908.78

7,842,572.05

12,627,443.83

Table 1.2. Total Non-Performing Assets from Loans (2010-2015)

Table 1.2 shows the continuous increase of the total net NPA from the loans with collateral granted every year starting from
Php3, 265,447.34 in the year 2010 to Php12, 627,443.83 in the year 2015. The net real and other properties acquired is part
of the total other non-current assets in Table 1.1.

10

Figure 1. Proportionate Share of Net Non-Performing Loans to the Total Net Non-Performing Assets (2010-2015)

Percentage of NPL to NPA

45.00%
40.00%
35.00%
30.00%
Percentage of NPL to NPA

25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
2010

2011

2012

2013

2014

2015

Figure 1 above shows the increase of NPA from loans in relation to total NPA. With the NPA from loans having the most
contribution in 2014 (32.42%) and 2015 (42.90%). Although the year 2013 (17.13%) shows a decrease in percentage, it
does not necessarily mean a decrease in amount which is shown on Table 1.2 that the total NPA made a boom in 2013,
showing that the cooperative started to have difficulties in handling NPA, and so the percentage of NPA from loans to total
NPA decreased.

11

Table 1.3. Trend Percentage of Non-Performing Assets in LTVTP-MPC (2010-2015)

Item/Year
Net NonPerforming
Asset
Trend
Percentage
(Year 2010 as
the base)

2010

2011

2012

2013

2014

2015

15,064,446.51

15,866,740.61

23,311,437.94

42,421,064.76

24,187,544.91

29,436,982.69

100.00%

105.33%

154.74%

281.60%

160.56%

195.41%

Table 1.3 shows the increase in NPA both in peso amount and in percentage, 2010 being the base year. The NPA made a
boom in the year 2013 which approximately reached 181.60% increase from the base year. In year 2015, the company
managed to lessen NPAs to 95.41% increase.

Trend Percentage of Net NPA

Net Non-Performing Asset (%)

281.60%

300%
250%

195.41%

200%
150%
100.00%
100%

160.56%

154.74%

105.33%

50%
0%
2010

2011

2012

2013

2014

2015

total net npa

Figure
2. Trend Percentage of Net Non-Performing Assets (2010-2015)
Figure 2 shows a graphical presentation of the increase in NPA from 2010 to 2014, reiterating that 2013 having the highest
increase of 181.60%.

12

The following data presents the responses of the cooperative based on the questionnaire given to the manager, collectors,
credit committee, and audit committee in terms of the probable internal causes of the increase in the NPA:
A. Credit Assessment
A.

QUALIFICATIONS OF LOAN OFFICER

A.1 Does the loan officer have any educational background in the business field?

i.

If yes, which degree has he attained in such business field?

Associate
___ Bachelor
___ Master
___ Doctorate

ii.

If no, what course has he attained? ______________________

Yes ___No

A.2 Does the loan officer have any credit or financial risk-related certification? __Yes No
a.

If yes, which certification do they have?

___ Financial Risk Manager (FRM)
___ Certified Risk Analyst (CRA)
___ Professional Risk Manager (PRM)
___ Chartered Financial Analyst (CFA)
___ Certificate in Quantitative Finance (CQF)
Others: Please specify With Experience

A.3 Does the loan officer have any related experience in assessing credit risk of debtors?
NO
___YES, please fill up the table below.
Corresponding Period of Experience in
years

Organization/Activity
1.
2.
3.

A.4 Has the loan officer attended any recent seminars or trainings regarding credit risk assessment?
NO

13

___YES, please fill up the table below.

Event Title

Year

1.
2.
3.

B.

PERFORMANCE OF LOAN OFFICER

B.1 How does the loan officer assess the credit rating of borrowers?
Always
a.

b.

c.
d.

e.

By checking payment
history on existing
credit relationships
and the probability of
successful repayment
Checking how much
the owner has
invested
Asking for additional
forms of security
Focusing on the
intended purpose of
the loan
Using subjective
opinion/impression
(education,
experience references
and trust) of the
borrower

Often

Sometimes

Seldom

Never

Analysis

Checking how much the owner has invested relates to the

capital. This is a good practice since it will serve as an
additional means to repay the debt obligation should
income or revenue be interrupted while the loan is still in
repayment.

From the data gathered, it shows that the loan officer has
no credit risk-related certifications but practices through
experience only. He attained an associate degree in
finance. However, he does not have any official related
experience in assessing credit risk other than his
experience in the cooperative. The loan officer has not
attended any recent seminars or trainings regarding credit
risk assessment.

Asking for additional forms of security relates to the

collateral. The cooperative can take something and sell it
to get their money back if the borrowers fail to repay the
loan.

The credit analyst always applies all the Five Cs of

Credit analysis. Checking the payment history on
existing credit relationships relates to the capacity of the
borrower to repay. It means that before the loan officer
grants credit, a background check is being conducted to
ensure payment.

Focusing on the intended purpose of the loan relates to

conditions. The size of loan in relation to the specific use
will help the credit analyst to evaluate the loan request.
Using subjective opinion/impression of the borrower
relates to the character. Since there is not an accurate way

14

to judge character, the credit analyst will decide

subjectively whether or not the borrower is sufficiently
trustworthy to repay the loan.

B. Property Valuation
A.

QUALIFICATIONS OF LOAN APPRAISER

A.1 Which of the following real estate practices has the appraiser experienced. Check the box beside your answer. The respondent
can choose more than one.
Corresponding
Years in Practice

Real Estate Practice

B.

1. Real estate consultant

2. Real estate appraiser

6 years

3. Real estate assessor (for LGUs-taxation purposes)

4. Real estate broker
5. Real estate salesperson
PERFORMANCE OF LOAN APPRAISER
B.1 In average, how many loan transactions, with collateral, are handled by the appraiser every month? Choose one.
___ 1-5
6-10
___ 11-15
___ 15-20
___ 20-25
Others: Please Specify _____
B.2 What types of security or collateral are usually offered by the borrowers to secure loans?
Always
a.

Real Estate
(such as Land
and Building)

b.

Marketable
Securities
(such as
Stocks and
Bonds)
Inventories
(Such as
Vehicle and
other movable
property)

c.

Often

Sometimes

Others: Please specify

1.

15

Seldom

Never

2.
3.
B.3 How frequent does the appraiser inspect the collateral?
Always
__Often
__Sometimes

__Seldom

__Never

quality work overload can affect the performance of the

appraiser. Also, different types of collaterals are
appraised with varying strategies. Only

land and buildings are given as collaterals which cannot

be easily appraised for a very short period of time
depending on the complexity and the type of reports to be
issuedin the cooperatives caseshort form reports.
The appraisal process consists of inspecting the property
considering its size, location and other external factors
that in average could take minutes to several hours. This
could be treated as the quality work overload.

Analysis
Under the Philippine laws, it is a requisite to pass the real
estate licensure examination as every real estate practice
needs to be licensed. The appraiser of the cooperative
attained a bachelors degree in real estate management
and has been practicing as a real estate appraiser for 6
years.

Data gathered shows that loan transactions with

collaterals given to the appraiser every month ranges
from six to ten (6-10). This could be treated as quantity
work overload.

The work of an appraiser needs at all times, accuracy and

precision. It has been discussed earlier that quantity and
C. Insider Lending
A.

Which of the following are instances when loan is given out to employees?
Always
Often
Sometimes
1. Commercial Loan
2. Loan with collaterals
3.

Medical Emergency
Loan
4. Special Loans
Others, please specify:

B.

Seldom

Never

Does the cooperative treat loans from members and employees alike?
___Yes
No
If NO, what are controls or policies unique to the loans given to employees?
a. Lower interest rate = 7% per annum
b. Longer grace period for repayment = maximum of 15 years
c. No collateral needed = direct payroll deduction

There is no need to give collateral for security of

payment and the allowable loan amount for each
employee depends on their salary whether or

Analysis
Based on the data gathered, the cooperative gives
medical emergency loans to their employees more often
than the other types. Loans with collaterals are never
given to the employees because the cooperative treats the
employees loan as a direct deduction to their payroll.

not they are capable of paying the debt within the given
period for repayment. The employees are given a

16

maximum of 15 years for repayment of their debt and

have a lower interest rate of 7% per annum as compared
to the 12% interest rate given to the other members. This
is inconsistent with Circular No. 423 which states that

D.

dealings of a bank with any of its Directors, Officers,

Stockholders and their Related Interests should be in the
regular course of business and upon terms not less
favorable to the bank than those offered to others.

Seizing and Disposal of Collateral

A.

Does the cooperative find it difficult to seize the collateral?

Yes
___No
If yes, what are the reasons?
a. No takers or buyers
b. High cost

Please put a check mark to your corresponding answer.

0% to
20%

20% to
40%

40% to
60%

60% to
80%

How much of the collaterals are you able to seize?

How much of the seized collaterals are you able to dispose of?
How much of the disposed collaterals market value do you
receive as payment?

80% to
100%

If you dispose the collateral, which of the following ways do you dispose the collateral?
Always

Often

Sometimes

Sell the collateral, either by

private sale or public auction

Lease the collateral (if the

Security Agreement permits)

License the collateral if it is

intellectual property

Seldom

Never

Others, please specify:

Priority of borrower

B.

If the cooperative cannot dispose the collateral even with reasonable diligence, what are the reasons?
a. High cost due to high appraisal
b. So far, not within the business center
c. Not properly inspected

Analysis

collaterals but are only able to dispose them at most 20%

of their value because

Based on the data gathered, the cooperative only accepts

land and/or building as collateral. The disposal of the
collateral is either through selling the collateral by
private or public sale or leasing the collateral or
depending on what the borrower and the cooperative
agreed upon. . The cooperative is able to seize at most
80% of its collaterals and dispose at least 80% of these

most of these collaterals are located away from business

center. This means the cooperative only recovers at most
16% of the total collaterals value. Also, disposing the

17

collaterals are usually very costly and due to its high

appraisal cost, making it difficult to find bidders.
E. Adhering to Lending Policies
A.

Do the terms and conditions in availing loans strictly implemented?

__always
__often
sometimes

B.

Does the cooperative update the lending policies and procedures?

Yes
__No
only for the past year

C.

Are there instances when some procedures are being skipped?

Yes
__No

__seldom

__never

If yes, how frequent:

___ Always
___ Often
Sometimes
___ Seldom
___ Never
If yes, why?
Because of the past experience and relationship with the borrower
To implement faster procedure
D.

Are the lending policies well disseminated to officers and members of the cooperative?
__Yes
No

E. Analysis
F.

considerations agreed in the policy, he is risking

the collectability of the loan.

The terms and conditions in availing loans are

important because it acts as a legally binding
contract between the lender and the borrower.
Based on the data gathered, the cooperative does
not always implement tight credit policies in the
terms and conditions of loans. In this case, it can
significantly affect the efficiency and cash flow
of the cooperative. Though it is often a crucial
tool for attracting customers, not being able to
implement the credit policies very well would
lead to problem in credit collection. On the
positive side, the cooperative update their
lending policies and procedures. Having welldeveloped policies and procedures in place can
help loan appraisers, loan officers and collectors
know what is expected of them with respect to
standards of behaviour and performance.

H.
I.

Accordingly, they tend to skip procedures

because of the past experience and relationship
with the borrower and to implement faster
procedure. This action is not reasonable because
the health of loan is being sacrificed which may
lead to the non-repayment of the loan.

J.

Another factor is that the lending policies are

not well disseminated to officers and members
of the cooperative.
Their roles and
responsibilities within the cooperative might be
misunderstood. It can also lead to ineffective
management and monitoring of loans.

K.

G. However, there are times when lending

procedures are being skipped. Even the most
well-intended and well-thought-out policies may
have
an
impact
if
they
are not
implemented properly. When a loan officer
grants a loan to a borrower without the full

L.
M.
N.
O.

18

P.

Q.
R.
S.

T. F.

Follow-up Measures or Communication

U.
a.

Do you give notice to the borrowers before their due date of payment?
V.
Yes
__No

W.
1.

X.
If yes:
Notice is given through
Y.
Z.

AE. Text
AK. Call
AQ. E-mail
AW. Letter

Al
w
ay
s

AF.
AL.

AR.
AX.

AA. O
ft
en

AB. Som
etim
es

AC. Se
ld
o
m

AD. N
ev
er

AG.
AM.

AH.
AN.

AI.
AO.

AJ.
AP.

AS.
AY.

AT.
AZ.

AU.
BA.

AV.
BB.

BC.
2.

Notice is given
BD.

BJ. When half of the

payment period has
already elapsed
BP. One (1) month
before the due date
BV. On the due date
CB. One (1) day after
the due date
CH. Five (5) days after
the due date
CN. Others, please specify:

BE. A
l
w
a
y
s
BK.

BI.
Ne

BM.

BH. S
e
l
d
o
m
BN.

BR.

BS.

BT.

BU.

BW.

BX.

BY.

BZ.

CA.

CC.

CD.

CE.

CF.

CG.

CI.

CJ.

CK.

CL.

CM.

BQ.

BF.
Oft

BG. Som
etime
s

BL.

BO.

CO.
CP.
a.

a.

Do borrowers respond to you after giving proper notice?

CQ. __always __often sometimes
__seldom __never
CR.
CS.
Do you give grace period whenever the borrowers fail to pay?
CT. Yes
__No
CU.
CV.
CW.
If yes, how long? 15 to 30 days

CX.
CY. Analysis

CZ. According to the data gathered, LTVTP-MPC is

giving notice to the borrowers before due date of

19

payment through text, call or letter. However,

notice is given one (1) month only before the
due date and no more subsequent follow-up
measure. If that is the case, the communication
or friendly reminder to the borrowers may not
be really effective to encourage timely payment.
Aside from that, borrowers do not always
respond to them after giving proper notice. As
an account becomes more and more overdue,
their collection efforts are not that strong.

DA.
DB.
DC.
DD.
DE.

DF.
DG.
DH.

IV.

Conclusion
DI.
DJ. From the findings of the study as provided
above, the following conclusions can be drawn:

1.

DL.
DM.

The profile of the cooperative in terms of NPA:

1.1 Within the period of 2010-2015 financial
statements of the cooperative, the NPA of LTVTPMPC has continuously increased starting with
Php15,064,446.51 as of 2010. Year 2011 having a
total NPA of Php15,866,740.61. Year 2012 having
Php23,311,437.94;
year
2013
with
Php42,421,064.76;
year
2014
with
Php24,187,544.91 and year 2015 having the
highest total NPA of Php29,436,982.69.
1.2 There has been a continuous increase of the total
net NPA from the loans with collateral starting
from Php3, 265,447.34 in the year 2010.
Php4,285,384.33 for 2011; Php4,876,367.32 for
2012; Php7,264,908.78 for 2013; Php7,842,572.05
for 2014; and Php12, 627,443.83 in the year 2015.
1.3 The percentage of NPA from loans to total NPA
started with 21.68% in 2010 and 27.01% for 2011.
Year 2012 and 2013 shows a percentage of
20.92% and 17.13%, respectively. This does not
necessarily mean that the cooperatives NPA
decreased in amount as seen in the findings above.
Years 2014 and 2015 have the highest percentage
of NPA from loans with 32.42% for 2014 and
42.90% for 2015.
1.4 The trend of NPA of the cooperative in 2011
reached a 5.33% increase from the base year 2010.
In the year 2012, an increase of 54.74% occurred;
followed by an increase of approximately
181.60% in 2013 from the base year 2010. By
2014, the company managed to lessen NPA to
60.56% increase; however, in the year 2015, there
was an increase of 95.41%.
DK.

DN.
DO.
2.

The profile of the cooperative in terms of probable

factors causing NPAs to increase:
2.1 Credit Assessment is not considered a probable
factor that increases NPA from loans because the
loan officer mitigates the risk of lending to
unworthy borrowers by performing a credit
analysis on individuals and businesses applying
for a new credit account.
2.2 Property Valuation. The loan appraiser has the
ideal qualifications of an appraiser and therefore,
not a possible reason that could increase NPA. The
data also revealed that quantity and quality
overload is low; therefore, the performance of the
appraiser is not affected.
2.3 Insider lending is not considered as a probable
cause of the increase in NPA from loans because
only loans with collaterals are classified as NPA
by the cooperative. And based from the data
gathered, loans given out to employees does not
consist those with collaterals, in fact, it is a direct
deduction from their salary.
2.4 Difficulty in seizing and disposing collaterals is a
probable cause of increase in NPA since amounts
recovered from the loan is minimal upon disposal.
2.5 Failure to adhere to some lending policies is
another probable factor of increase in NPA
because the cooperative do not always implement

20

tight credit policies in the terms and conditions of

loans.

DQ.
DR.
DS.
DT.

2.6 Lack of follow-up measures and communication is

a probable factor of increase in NPA because
notice to the borrowers is only given one month
before the due date and no further effort after the
loan becomes due.

DU.
DV.
DW.

DP.
DX.

collection system for effective monitoring.

Aside from that, loan has to be regularly
monitored and appraise so that reports would be
sent to the heads office to provide overview
information required to track vital progress
indicator. The loan officer should also attend
seminars and training to increase his
competence in assessing credit risks and should
also try to obtain certification.

DY. .
DZ.
EA.
EB.
EC.

V.

EE. If all this effective strategies will be followed,

the cooperative will be able to generate a
substantial cash flow and minimize the NPA.

Recommendation
ED. Based on the data gathered and analysed, the
researchers, recommend that: LTVTP-MPC
should have clear and effective credit or lending
policies and procedures and must not be
skipped. It should be noted that policies and
procedures are to be followed and the
cooperative must respond quickly to solve the
problem. Follow-up measures should be
conducted days before and after the due date to
remind the borrowers improve the cash

EF. It is also recommended to the future researchers

that additional studies be undertaken to further
examine the other factors that affect the increase
of NPA in the cooperative of the same industry.
Since this study already tackled the internal
causes, it is best to conduct study related to the
external factors.

EG.

21

References
Addae-Korankye, A. (December 2014). Causes and Control of Loan Default/Delinquency in Microfinance Institutions in
Ghana. American International Journal of Contemporary Research. p.38-39. Retrieved from:
http://www.aijcrnet.com/journals/Vol_4_No_12_December_2014/5.pdf
Andreyev, A. (July 12, 2016). How do I enforce my
http://andreyev.com.au/blog/2015/03/12/how-do-i-enforce-my-ppsr-interest/

PPSR

interest?.

Retrieved

from:

Arko, S. (2012). Determining the causes and impact of non performing loans on the operations of microfinance institutions:
A CASE OF SINAPI ABA TRUST. Retrieved from: http://ir.knust.edu.gh/bitstream/123456789/4958/1/FINAL
%20THESISSAMUEL%20KOFI%20ARKO.pdf
Lee, G. (March 2, 2016). Why Experience Is More Important Than Your Education. Retrieved from:
http://aiesec.ca/blog/why-experience-is-more-important-than-your-education/
Morah,
C.
(June
11,
2014).
Analyzing
A
Career
In
Credit
Analysis.
http://www.investopedia.com/articles/financial-careers/09/career-credit-analysis-analyst.asp

Retrieved

from:

North Shore Bank (August 19, 2013). What is Collateral and Why is It Important? Discover how collateral; can be an
important part of the loan process. Retrieved from: https://www.northeastshorebank.com/what-is-collateral-and-why-isit-important.aspx
Owino, E. (2012). The effect of the lending policies on the levels of non-performing loans of commercial banks in Kenya.
Retrieved
from:
https://www.google.com.ph/?
gfe_rd=cr&ei=ZjcxWNyJPKLK8geyiaV4&gws_rd=ssl#q=The+effect+of+the+lending+policies+on+the+levels+of+non
+performing+loans+of+commercial+banks+in+Kenya
Republic Act (R.A.) No. 6938: Cooperative Code of the Philippines
Republic Act (R.A.) No. 9646: The Real Estate Service Act of the Philippines
Richard, E. (2011). Factors That Cause Non-Performing Loans in Commercial Banks in Tanzania and Strategies to Resolve
Them. Journal of Management Policy & Practice. 2011, Vol. 12 Issue 7, p50-58. 9p. Retrieved from:
http://web.a.ebscohost.com/ehost/detail/detail?sid=4ec4c431-0ef74925b3369b445659294d
%40sessionmgr4008&vid=0&hid=4109&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#AN=71665972&db=bth
Sanjeev, G. (2007). Bankers' Perceptions on Causes of Bad Loans in Banks. Journal of Management Research (09725814).
Vol. 7 Issue 1, p40-46. 7p. Retrieved from: http://web.b.ebscohost.com/ehost/pdfviewer/pdfviewer?sid=dc3bb93a-24d14815-ab3d-4c9dd796734c%40sessionmgr105&vid=1&hid=118
Song, I. (2002). Collateral in Loan Classification and Provisioning WP/02/112. IMF Working Paper, Monetary and
Exchange Affairs Department. p. 4.Woo, D. (2000). Two Approaches to Resolving Nonperforming Assets During
Financial Crises. IMF Working Paper. p. 3. Retrieved from: https://books.google.com.ph/books?id=zCGWdPGI2YC&printsec=frontcover#v=onepage&q&f=false
Vivek Rajbahadur Singh (2016).A Study of Non-Performing Assets of Commercial Banks and its recovery in India. Annual
Research Journal of Symbiosis Centre for Management Studies, Pune Vol. 4. Retrieved from:
http://www.scmspune.ac.in/chapter/2016/Chapter%209.pdf

22

VII.

Authors Biography

DATSUN C. MONTES, CHERRY MAE G. LIM, SIBLEY JANE B. GANASE AND KAREN B. PANINGBATAN,
are fourth year Accountancy Students of the School of Accountancy and Business Management, Saint Louis University,
Baguio City, Philippines, ERLINDA G. BIALNO, is their adviser in Accounting 403a, Management Consultancy I
(Thesis).

23

VIII. Appendix

Saint Louis University

School of Accountancy and Business Management
Department of Accountancy

Dear respondents,
We, the researchers, currently enrolled in Saint Louis University are conducting a study about the
Causes of the Increase in Non-Performing Asset (NPA) of La Trinidad Vegetable Trading Post MultiPurpose Cooperative (LTVTP-MPC): A Case Study in partial fulfillment of the requirements of the
degree of Bachelor of Science in Accountancy.
In line with this, may we ask for your support by answering the following questions objectively. Rest
assured that your answers will be used for academic purposes and will be treated with utmost
confidentiality.
Thank You!

Sincerely yours,
Montes, Datsun
Ganase, Sibley Jane B.

C.

Lim, Cherry Mae G.

Paningbatan, Karen B.

Noted by:
Erlinda G. Bialno
Adviser

24

TO ANYONE OF THE CREDIT COMMITTEE

INSTRUCTION: Put a check mark to your corresponding answer/s. Items not answerable by yes or no can have multiple
answers.
1. Credit Assessment
A. QUALIFICATIONS OF LOAN OFFICER
A.1 Does the loan officer have any educational background in the business field? __Yes __No
i. If yes, which degree has he attained in such business field?
___ Associate
___ Bachelor
___ Master
___ Doctorate
ii. If no, what course has he attained? ______________________
A.2 Does the loan officer have any credit or financial risk-related certification? __Yes __No
b.

If yes, which certification do they have?

___ Financial Risk Manager (FRM)
___ Certified Risk Analyst (CRA)
___ Professional Risk Manager (PRM)
___ Chartered Financial Analyst (CFA)
___ Certificate in Quantitative Finance (CQF)
Others: Please specify __________________

A.3 Does the loan officer have any related experience in assessing credit risk of debtors?
___ NO
___YES, please fill up the table below.
Corresponding Period of Experience
in years

Organization/Activity
1.
2.
3.

A.4 Has the loan officer attended any recent seminars or trainings regarding credit risk assessment?
___ NO
___YES, please fill up the table below.
Event Title

Year

1.
2.
3.

25

B. PERFORMANCE OF LOAN OFFICER

B.1 How does the loan officer assess the credit rating of borrowers?
Always

Often

Sometimes

Seldom

Never

By checking payment
history on existing credit
relationships and the
probability of successful
repayment
Checking how much the
owner has invested
Asking for additional
forms of security
Focusing on the intended
purpose of the loan
Using subjective
opinion/impression
(education, experience
references and trust) of
the borrower

2. Property Valuation
a.

QUALIFICATIONS OF LOAN APPRAISER

A.1 Which of the following real estate practices has the appraiser experienced. Check the box beside your answer. The
respondent can choose more than one.
Real Estate Practice
1. Real estate consultant
2. Real estate appraiser
3. Real estate assessor (for LGUs-taxation purposes)
4. Real estate broker
5. Real estate salesperson

b.

PERFORMANCE OF LOAN APPRAISER

26

Corresponding
Years in
Practice

B.1 In average, how many loan transactions with collateral are handled by the appraiser every month? Choose one.
___ 1-5
___ 6-10
___ 11-15
___ 15-20
___ 20-25
Others: Please Specify _____
B.2 What types of security or collateral are usually offered by the borrowers to secure loans?

27

Always

Often

Sometimes

Seldom

Real Estate (such

as Land and
Building)
Marketable
Securities (such as
Stocks and Bonds)
Inventories (Such
as Vehicle and
other movable
property)
Others: Please specify
1.
2.
3.
B.3 How frequent does the appraiser inspect the collateral?
__always __often
__sometimes
__seldom

__never

Never

TO THE MANAGER:
INSTRUCTION: Put a check mark to your corresponding answer/s. Items not answerable by yes or no can have
multiple answers.
1. Insider lending
i. Which of the following are instances when loan is given out to employees?
Always
Often
Sometimes
Seldom
Commercial Loan
Loan with collaterals
Medical Emergency
Loan
Special Loans
Others, please specify:

Never

ii. Does the cooperative treat loans from members and employees alike?
___Yes
___ No
If NO, what are controls or policies unique to the loans given to employees?
2. Seizing and disposing off the collateral
A. Does the cooperative find it difficult to seize the collateral?
___Yes
___No
If yes, what are the reasons?
Please put a check mark to your corresponding answer.
0% to
20%

20% to
40%

40% to
60%

How much of the collaterals are you able to seize?

How much of the seized collaterals are you able to
dispose of?
How much of the disposed collaterals market value
do you receive as payment?

If you dispose the collateral, which of the following ways do you dispose the collateral?

60% to
80%

80% to
100%

Always

Often

Sometimes

Seldom

Never

Sell the collateral, either by

private sale or public auction
Lease the collateral (if the
Security Agreement permits)
License the collateral if it is
intellectual property
Others, please specify:

If the cooperative cannot dispose the collateral even with reasonable diligence, what are the reasons?
a.
b.
c.

TO ANYONE OF THE AUDIT COMMITTEE

INSTRUCTION: Put a check mark to your corresponding answer/s. Items not answerable by yes or no can have
multiple answers.
1. Adhering to lending policies
a.

Do the terms and conditions in availing loans strictly implemented?

__always
__often __sometimes
__seldom

b.

Does the cooperative update the lending policies and procedures?

__Yes
__No

c.

Are there instances when some procedures are being skipped?

__Yes
__No

__never

If yes, how frequent:

___ Always
___ Often
___ Sometimes
___ Seldom
___ Never
If yes, why?
___Because of the past experience and relationship with the borrower
___To implement faster procedure
d.

Are the lending policies well disseminated to officers and members of the cooperative?
__Yes
__No

TO ANYONE OF THE COLLECTORS

INSTRUCTION: Put a check mark to your corresponding answer/s. Items not answerable by yes or no can have
multiple answers.
1. Follow-up measures or communication
Do you give notice to the borrowers before their due date of payment?
__Yes
__No
If yes:
Notice is given through
Always
Text
Call
E-mail
Letter

1.

2.

Often

Sometimes

Seldom

Never

Notice is given
Always

Often

Sometimes

Seldom

Do borrowers respond to you after giving proper notice?

__always
__often __sometimes
__seldom

__never

When half of the payment

period has already elapsed
One (1) month before the
due date
On the due date
One (1) day after the due
date
Five (5) days after the due
date
Others, please specify:

a.

b.

Do you give grace period whenever the borrowers fail to pay?

__Yes
__No
If yes, how long? ______________________

Never