Credit Management For Cooperatives

Credit Management for
Cooperatives
10/19/15
merlene quiba flores. panabo city
Credit Coop Business: PINOY Style
Member puts in share capital because he intends to borrow.

Share capital as source of funds.
Acquisition of land and building not regulated.
External credit is used to fill up the gap of low repayment and
weak internal capital mobilization.
Interest rates on loans not reasonably designed to meet cops
income needs.
Lending policy is not clear.
10/19/15
Loan limit is based on capital share.

What is credit?
Latin base credo meaning faith or trust.

The ability of the debtor to obtain goods or
services without an actual tender of
payment.
The transmittal of economic value now, on
faith in return for an expected equivalent
economic value in the future- (J. Allen
10/19/15 Walker)
Purpose of Credit
Productive purposes - to finance production
activities of its member-borrower. (crop
prodn. livestock prodn. & breeding)
Providential purposes Intended for nonproductive purposes but provides for the
emergency and providential needs.
(health/medical
services, educational)
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Credit terms
Short term the borrower must pay the loan
within one year or less.
Medium or intermediate term Loans payable
in one year up to five years.
10/19/15
Long term loan payable for more than five

years. merlene quiba flores. panabo city
Credit repayment schemes

Amortized loans the principal and interest (fixed
principal + interest payments)will be paid regularly
weekly, monthly, etc.
Single payment loans principal and interest will be
paid at one time and in full on the last day of the
loan term.
Discounted interest automatic deduction of the full
amount of interest from the total loan, principal is
either paid in lump sum or installment during the
loan
term.
10/19/15
Why do we give credit?

Because borrower had
signed documents,
promising to pay at
designated amount and
time.
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What are the elements of credit?
Trust or confidence
Risks
Period or term of payment
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What are the basis of credit?

Character
Capital
Capacity
Condition
Collateral
(Connection)
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Basic considerations in granting

loans
Borrowers background - done through

credit & background investigation with
focus on the following factors: character,
capacity, collateral, capital, conditions
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Basic considerations in granting

loans
Co-makers background equally important
to be investigated. Some basic factors to
consider are:
- Status of the co-maker: a co-maker must
have good credit standing with the coop.
- Capacity to guarantee loans: a co-maker
must have sufficient assets.
Thoroughly evaluate co-makers capacity to
10/19/15 guarantee loans.
Important lending
processes/transactions
Loan Analysis/credit Initiation
Disbursements and documentation
Collections/credit administration
10/19/15
Monitoring and reporting/remedial management

Loan Analysis/credit Initiation

The first step in credit
process.
Credit and background
investigation is done.
Written CIBI report
should be complete and
updated every six
months.
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Evaluation and
analysis of loan
applications.
Evaluation of
credit/project
proposals.
Credit committee
validation.
Loan approval
Disbursements and documentation

Necessary documents
supporting transactions
are complete.
Documents that
provide basis for loan
grant:
Loan agreements signed.
-Loan proposal
Loan release-in
accordance with
disbursement procedures.
-Loan agreement
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-Promissory note
-Collateral/securities
documents
Collections/credit administration
After loan release- coop
to administer close
monitoring of the
borrower.
Formulation &
installation of
Innovative collection
scheme.
Installation and
maintenance of credit
files.
Loan Supervision
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Monitoring and reporting/remedial

management
Coop institutes remedial
measures to minimize
loss & restore weak
credits.
Major activities:
- Remedial measures
-Monitoring the
implementation of
remedial measures.
- Problem identification
and recognition
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Functions of key staff in credit

management
Board of Directors
-has over all
responsibility of
maintaining safe
productive lending
operations.
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Loan
approval,formulation
of policies.

management
CRECOM critical
unit responsible for
protecting the quality
of coop loan portfolio.
Evaluate, approve,
recommend for
approval.
Recommend remedial
actions to the manager.
10/19/15

management
MANAGER
responsible for the
day to day
management of the
coop operations.
Organize and assign
responsibilities to key
management staff.
10/19/15

management
LOAN OFFICER
responsible for
undertaking the
details of credit
operations.
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Promotes coop
services, analyzes and
recommends for loan
approval, maintains
merlene quiba flores. panabo city credit files.
Preventing Delinquent Loans

Continuous orientation and education of
members
Installation of credit management systems
prior to credit delivery
Conduct of hones-to-goodness CIBI
Close monitoring of loans/establish
relationship with the borrower
Provision for insurance
quiba flores. panabo city
Loan approvalsmerlene
and releases
10/19/15
The CREDIT FILES (Importance)

Provide Crecom, Manger and key
management staff with critical info
regarding the borrower.
Reference in support of the extension of
credit to borrowers.
Ensure smooth turn-over of functions.
Professionalize lending operations in
accordance with formal banking procedures
10/19/15 and practices.merlene quiba flores. panabo city
The CREDIT FILES (Contents)

Record of coops past experience with
the borrower,
Credit facility proposal
Background information
Credit investigation report
Titles on properties offered as collateral
Project inspection reports
Promissory notes
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Other relevant information such as

business permits, registration
merlene quiba
flores. panabo city
documents
LOAN SUPERVISION
Monitor progress of the project
implementation that will enable the coop to
determine potential problem/s arising from
such accounts.
Ensure that the terms and conditions of the
loans are being complied with.
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LOAN SUPERVISION
Develop a credit relationship with memberborrower to bridge the information gap for
future credit decisions.
Ensure prompt payment at maturity of the
principal, accrued interest and other charges
or expenses associated with the transaction.
10/19/15
LOAN SUPERVISION
Ensure that the mechanism to generate
available management options in improving
collection of loan accounts includes legal
deposition and execution of alternative plan
of action including restructuring and
refinancing in some cases.
10/19/15
MEASURING LOAN
PORTFOLIO
LOAN PORTFOLIO largest asset
in a cooperative
10/19/15
Importance of portfolio
management
Enables financial institution to
continue to provide a needed
service
Critical to the survival of a credit
union
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There is always RISK in

lending money
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3 critical challenges of Loan

Portfolio Management
1.
Measure and monitor the amount of risk

in the portfolio
2. Understand the way the quality of the
portfolio affects the institutions

INCOME
3. Find ways to manage the credit

10/19/15
operations to minimize risk of the

portfolio
The LOAN PORTFOLIO
Principal makes up the loan portfolio;

part of the cooperatives asset
Interest contributes to the cooperatives

income and cash flow
10/19/15
3 measures to describe
quality of loan portfolio
DELINQUENCY
REPAYMENT
10/19/15
LOAN LOSS PROVISIONS

LOANS:
The Lifeblood of Credit Cooperatives
Loan delinquency one of the most common
and most serious problems a coop may have.
Weakens the operations of the cooperative.
Slows down the delivery of services to
cooperative members.
10/19/15
How to make Coop Members

responsible borrowers
Proper education through PMES.
Should have a basic knowledge about the
cooperative principles.
Should have adequate information about the
products and services of the cooperative.
Should have thorough information about the
duties & responsibilities of a cooperative
member.
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High, Rising or Uncontrolled Delinquency
One of the most common

problem that can quickly
destroy a cooperative if
management does not
locate the cause &
remedy the problem
10/19/15
Delinquency definitions
If a members fails to pay the loan as promised or as per
agreement
Any type of loan which is not paid when due
Delinquent by installment
Delinquent by maturity
Portfolio at risk
o Mode of repayments and due dates
o Amount of installment
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o Term of maturity
How to monitor & measure delinquency
Aging of accounts
Loan status monitor (LSM)
attached to the individual loan
ledger (ILL)
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Aids in Monitoring Delinquency

Number & Amount of Delinquent loans
by age
Number of delinquent loans by purpose
Number & amount of delinquent loans by
economic activity & sex
Number of delinquent loans by amount
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Causes of DELINQUENCY
Personal Problems
Financial Management
Difficulties
Unexpected circumstances
Cooperative Shortcomings
Policies & Procedures
10/19/15
Causes of Loan Delinquency

Organizational (Internal Factors)
Laxity in screening/recruiting possible
members
Poor/Inefficient processing of loan
applications by cooperative staff/officers
Poor monitoring, recording and reporting
system
Weak collection system and procedures
10/19/15

Organizational (Internal Factors)
Irrelevant, Un-disseminated and unwritten
Lending policies & guidelines
Poor staff services
Poor leadership example/bad management
Officers poor attitude toward training
10/19/15

Personal (Member factors)
Inadequate paying capacity
Mis-use of funds
Misunderstanding of the
coops objectives
10/19/15

Personal (Member factors)
The borrower cannot be contacted
Lack of technical skills in
business
Poor savings habit
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Effects of delinquency
Demoralization among cooperative
members
Resignation of staff & Officers
Loss or dormancy leading to bankruptcy
Coops role in the community ends
Loss of goodwill in the cooperative
movement
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Costs of Delinquency
Delinquency plays a critical role in
cooperatives cost, structure, income and
financial situation.
Delinquent loans imply postponed interest
income from loans with payments past due.
Delays in income can have serious,
detrimental effects on the cooperatives cash
flow and self sufficiency.
10/19/15
Delinquency slows down the rotation of the
loan portfolio.
Allowing members to miss payments even
though they eventually repay, allows the
institution to lose vital income needed to
cover the costs.
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De-capitalize the portfolio
Decrease the cooperative assets
Provisions for defaults have direct
effects on the cooperatives income
and assets
10/19/15
Calculating Cost of Default Considering Variable Costs

Intial Loan Amount
Interest (15% flat)
Loan Term (weeks)
Weekly Repayment of Principal
Weekly Repayment of Interest
Total Weekly Repayment
Payments Received
Payments Lost
75,000.00
25
15
10
Lost Interest Income

Lost Principal
Total Lost Interest and Principal
Expected Revenue earned (75,000 loans for 25 weeks)
Cost per Loan
Net Revenue per Loan
Number of Loans Required to Earn Lost Principal

( taking into account variable costs of disbursing and managing loans)
7,500.00
Loans of 75,000
Lost Principal/Net Revenue per 75,000 loan
Number of Loans Required to Earn Lost Interest and Principal
10/19/15
Lost Interest and Principal/Net Revenue per Loan
Loans of 75,000
Calculating Cost of Default Considering Variable Costs

Intial Loan Amount
Interest (15% flat)
Loan Term (weeks)
Weekly Repayment of Principal
Weekly Repayment of Interest
Total Weekly Repayment
Payments Received
Payments Lost
75,000.00
25
none
25
Lost Interest Income

Lost Principal
Total Lost Interest and Principal
Expected Revenue earned (75,000 loans for 25 weeks)
Cost per Loan
Net Revenue per Loan
Number of Loans Required to Earn Lost Principal

7,500.00
Loans of 75,000
Lost Principal/Net Revenue per 75,000 loan
Number of Loans Required to Earn Lost Interest and Principal
10/19/15
Lost Interest and Principal/Net Revenue per Loan
Loans of 75,000
Preventive & Curative Measures for

Delinquency
Prevention
Formulation, Review and Improvement
of Lending Policies and Guidelines
Proper Implementation of upgraded
Lending policies & guidelines
Setting up/improving the loan
monitoring & collection system
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Delinquency
Prevention
Incentive & reward system for nondelinquent borrowers
Training & Education for coop
members
10/19/15

Delinquency
Curative
Off-setting members share & savings
Applying the obligation of co-makers
Accepting payments in kind
House calls on delinquent borrowers
Condonation of penalties
Authorizing collection agents
Legal action
10/19/15
Methods for Delinquency Control

Coop image and Philosophy dole-out
mentality of the members.
Methodology /Credit process not clear lending
and collection policies.

Information systems / Internal Management
Information not clear; data not updated.
10/19/15
Coop image and Philosophy

Members should understand that in accepting
loan, they agree to a financial contract.
Coop should create an institutional repayment
culture.
Culture should start at coop level.
10/19/15
Methodology / Credit Process

Accepted loan analysis and evaluation
methods.
Design incentives for members who pay loans
on time.
Immediate follow-up after one day missed
payments.
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Information systems / Internal

Management
Up to date information for field workers.
Regular review and analysis of the loan
portfolio.
Planning geographic routes to maximize
collection.
Follow-up.
Fast loan processing.
10/19/15
Identifying the cause of rising

delinquency
When were the delinquent loans granted?
Were a majority of the delinquent loans
granted by the credit committee or one
particular loan officer?
Have there been any employee changes that
would affect the quality of loan underwriting
or collection efforts?
10/19/15
Are the loan officers or credit committee

adequately trained to grant quality loans?
Do the delinquent borrowers have anything in
common? Are they related? Do they live in the
same area? Do they work together? Do they
have similar occupations?
Have the loan underwriting standards
decreased as of late in order to increase loans
outstanding?
10/19/15
Continuation
Do the loan officers or credit committee
effectively analyze the borrowers ability to
repay the loan granted?
Are the loan and collection policies &
procedures adequate?
When do collection efforts begin once a loan
becomes delinquent? Is this quick enough?
10/19/15
Continuation
Are collection efforts effective?
Is the collection department adequately staffed
and focused to meet the challenges of high or
increasing delinquency?
Has anyone manipulated the delinquency
information in the past to hide delinquency?
Has there been a major event that is beyond
the cooperatives control?
10/19/15
There is always RISK in

lending money
10/19/15
Delinquency the most

important test of
institutional strength of a
cooperatives.
10/19/15
Problem Resolutions for High

Delinquency
10/19/15
Workshop
10/19/15
Using the result of the fishbone analysis,

develop possible solutions for the identified
causes of delinquency
Problem Resolution
Management &
Officers should
ensure that
delinquency is
correctly
calculated &
disclosed
10/19/15
Problem Resolution
Management should ensure that the
delinquency report is useful.
Employees working with delinquent loans
should perform a review of each loan to
determine their collectivity.
All charged-off loans and loans that are in
need of legal action should be given to lawyers
or collection agencies.
10/19/15
Problem Resolution
All charged-off loans and loans that are in
need of legal action should be given to lawyers
or collection agencies.
Management should ensure that interest on
loans is not accrued when loans become
delinquent.
10/19/15
Problem Resolution
Management should determine that the
allowance for loan loss account is adequate for
all potential losses.
The use of loan extension and refinances
should be strictly limited.
If loan underwriting appears to be the source
of problem, the credit policies and procedures
should be revised.
10/19/15
Problem Resolution
If delinquency is high or increasing due to the
actions of one specific employee, that
individual should be terminated, removed
from the position or placed in another position
or adequately trained.
Loan application forms should be reviewed so
as to collect necessary information.
10/19/15
Problem Resolution
If loan collection practices appear to be at
fault, the policies and procedures should be
reviewed.
In the cooperatives, collection activity is an
afterthought and the collection work is given
to an employee who has some extra time.
10/19/15
Loan Analysis & Evaluation
10/19/15
CREDIT EVALUATIONS
Key to Credit Union Success

Bigger financial risk in credit union operations lies in
loans
Credit union financial strength come from profits
generated by the loan portfolio
Profitability of the loan portfolio is high when
delinquency is low.
The best place to stop bad loans is in credit
evaluations- before they happen!
10/19/15
How does the cooperative

determine the borrowers
capacity to pay?
10/19/15
Every decision to lend money is a

judgment about whether a person
will repay the loan or not. That
judgment is based on the analysis of
the data that cooperative has about
the borrower.
Tools in Determining
Creditworthiness..
Additional sources for credit information:
Credit Union files - to check the members
various accounts, frequency of loan application,
previous loan decisions, repayment records
Employers files - to verify the members length
of employment,salary & loans from the
company
Personal knowledge - to reinforce information
obtained from other sources
10/19/15
Creditworthiness...
LOAN APPLICATION -when
evaluating the loan application,

one should consider the following:
length of residence of applicant
amount of loan
employment of the applicant and

the employment length
purpose of loan
collateral offered, if any, the value
and its condition
(CU employee should do a physical
inspection)
total monthly obligations of
applicant
monthly income of the applicant

(stable and sufficient)
credit and savings history at
credit union
personal and credit references
number of dependents
10/19/15
Creditworthiness...
LOAN INTERVIEW -should be conducted for any loan that poses a
risk to the credit unions capital. It is helpful to:
Elaborate information in the application--know the borrower
Provide credit counseling about the wise use of credit-- borrowing your
neighbors money, not donor funds.
Determine the reliability of the applicant according to their personal history
and references
Establish a personal relationship-- make them understand that this is also
their credit union
Sell other credit union services and educate the member about the CUs
philosophy--use this personal time wisely--IMPRESS THE BORROWER.
10/19/15
Creditworthiness...
LOAN WORK-UP SHEETS - This worksheet
brings all the most important information

together and helps the credit committee or
the loan officer make a timely and effective
credit decisions. Useful elements include:
Verified income and debts
Verified value and condition of collateral
10/19/15
Creditworthiness...
COLLATERAL INSPECTION FORM - This form is used by credit
union personnel to document the condition of the collateral. Important
information includes:
Description of the collateral offered
Identification or serial number
What is the value of equipment included with collateral
Over-all condition of the collateral
Estimated value
Any noticeable damage
Can collateral be legally possessed?
10/19/15
If possessed, can it be easily sold?

Creditworthiness...
OTHER DOCUMENTS NEEDED:
Written verification of income
Savings and credit history at the credit union
Collateral agreement
Proof of insurance on collateral
Appraisal (in addition to the physical inspection for
specific cases)
All of the same information for the co-makers/co-signors .
10/19/15
CREDIT ANALYSIS
Credit analysis is not
examining facts
separately but
establishing a
relationship between
all the components
that affect
CRECOMs
decisions.
10/19/15
Purposes of Credit Analysis
Credit analysis is for

evaluation of
information about the
member
To determine the
credit worthiness, so
that sound loan
decisions can be made
To avoid bad loans

(delinquent loans)
10/19/15
Components of Credit Analysis

Loan application
Loan interview
Verifications
These components
should:
Reveal members identity
Show stability, capacity
to repay and credit
history
Be consistent
Credit Score
10/19/15
Credit Profile
Should be evaluated
thoroughly and
objectively
Tools for determining

creditworthiness
The five Cs of credit:
CAPACITY TO PAY
CHARACTER
CAPITAL
CONDITION
COLLATERAL
Loan Application
Loan Interview
10/19/15
How Does the Credit Union

Determine the Borrowers
Capacity to Pay?
Using the 5Cs of CREDIT
capital
character
capacity
conditions
10/19/15
collateral
What is Capacity Based

Lending?
Is a non-traditional lending
practice in the cooperatives that
gives loans based on the capacity
of the members to pay.
10/19/15
What are the Principles of CBL?
Security first
- members savings
- cooperatives
Loan Quality first
before quantity
10/19/15
Evaluation of
risk
- set the limit of
manageable risk
10/19/15
Grant loans to
members with
good standing &
capacity to pay
10/19/15
Thorough
credit
investigation
10/19/15
Loan is a
privilege rather
than a right
inherent to
membership
10/19/15
No loan will be
extended to
member with
delinquent
account
10/19/15
Balance
between risk,
diversification
and
profitability
10/19/15
Limiting loan
exposures to
certain
geographical
area
10/19/15
Collateral for
commercial,
real estate and
agricultural
loans
10/19/15
70% financing
for viable
project
30% member
participation
10/19/15
5 Cs of Credit
Capacity This refers
to the memberborrowers proven
capability to repay the
loan on the agreed
terms
10/19/15
5 Cs of Credit
Character
- integrity, credibility,
trustworthiness of the
member-borrower and or
the co-borrower
10/19/15
5 Cs of Credit
3
Capital
regular, consistent amount
of savings or
contributions to the buildup of financial, material
resources
10/19/15
5 Cs of Credit
Collateral
Real, personal and deposit
certificates that can be
offered as security to the
loans
10/19/15
5 Cs of Credit
5
Condition
External factors affecting the socioeconomic
condition of the loan and the borrower
10/19/15
Collections
10/19/15
Collection ..a big challenge

Between effectiveness ,
relationship, social involvement ,
and education
10/19/15
Because cooperative must

Be efficient
Other time ..coops must create relationship
Other time .it needs social involvement
Other timecoops must do education with the
members
The problem is that coops cannot be all of that .at the
same time so coops must choose what to do and when
.
10/19/15
Be efficient .why ???

Because the cooperative invest money in collection
and wants to recuperate the money of the borrowers
for the depositors
A collector paid Php 7,000 pesos a month plus fringe
benefits plus motorcycle could cost up to Php 10,000
pesos a month
How much revenue will a cooperative need to cover
the investment on a collector ?
10/19/15
How much per day ??

So 10,000 pesos per month divided by a rate
of interest of :
2% means 500,000 or more than 25,000 a day
1% means 1,000,000 or more than 50,000 a day
Assuming: visiting 20 persons per day means

that collectors should collect between 1,250 to
2,500 per borrower
10/19/15
So it is important to plan your intervention

to become efficient .
How to plan :
Have the list of the borrowers to visit during the week and
the amount to collect
Select with the loan monitoring officer the ones to prioritise
based on amount to collect and the capacity to collect
Organise your collection for the day based on the route ,
your constraints and the planning of the rest of the week
( Pay day,remittances from OWF)
Review your day ( done ,not done ,posponed )
Rescheduled the ones
not done
10/19/15
How to organise and do your day ?

While planning look at :
Logical schedule route A to B W
Identify the borrowers that MUST be done .and your
constraints ( Appointments from promises )
Respect your word : Will come back ..you come back exactly
as you promised .
Have time ( five minutes ) to review what has been done and
reorganize what you have to do for the rest of the day
Open your mind on opportunities to collect
BE DISCIPLINED.
10/19/15
How to do collection
Be polite ..
Be firm .
Be Strict
Be listening .without agreeing
If you do not get money .get a date and hour and go back
on due time
Be respectful
Leave your heart at home .and your problems at .the office
.
10/19/15
Relationship and social involvement

Purely professional relationship otherwise you lose
your credibility .
Friendship must be avoided when you want to collect
Ask someone else to do your friends and relatives
You can help sometimes in exceptional circumstances
but you have a job to do .do not forget that and
cannot be involved everywhere .
10/19/15
Education of the borrowers
start
With their payment on a disciplined way

And continue with a non delinquent account
with the primary
And the respect for the job of collection (not
escape neither hide when they hear you
around ) only criminals hide themself not
members. Are your borrowers criminal?
10/19/15
COLLECTION
STRATEGIES
10/19/15

(Effective Collection
Strategies)
Why do we need to collect

loans?
#
o
f
d
a
y
s
10/19/15
How Can Collectors

Improve Collection?
Using the Basic Tools:
10/19/15
Acceptable policies and

procedures
Know some habits and

characteristics of the
borrowers
Timely management
information system
The Solid Collection

Program
Written Collection Policies and Procedures-
implemented and administered by the management

and staff, reviewed (and updated) at least annually
Timely Management Information System

(MIS)-delinquency reports made available to
Management, Collection Staff and Board at ALL

times; used as basis in identifying corrective
actions
10/19/15
The Solid Collection

Program
Use of different collection strategies and
tools
Recognition of loan losses, providing for
loan losses, charge-off and continued
collection activities after charge-off
10/19/15
Monitoring Collections
(Establishing A Collection System)
A load made well, is a loan half collected
10/19/15
How & When to establish a collection

system
Recognition
Follow-up
Collection records
10/19/15
The Basics of Collection

There must be an automatic
daily system to locate
delinquent accounts.
There must be regular
charge-off or a referral
process for accounts the
collector cannot get action
on.
Collection work is selling.
10/19/15
Account Classification
In general, cooperatives should classify their
delinquent accounts according to age.
The most past due an account is, the less likely
the cooperative is to receive payments.
10/19/15
Written Collection Work
It consist of any written

communications between the
cooperative and the member
regarding missed payments.
10/19/15
Keys to a successful lending

program
Develop a long term banking relationship with
your members
Base loan decisions on repayment capacity
Obtain non-traditional loan security
Use the graduation principle
Develop a relationship with the client
Closely monitor loan repayments
10/19/15
Tools & Technique in Effective Loan

Supervision
Conduct a site inspection.
Project inspection/visit.
Problem recognition.
Officers familiarity with the borrowers.
Be proactive in dealing with the borrowers.
Proper documentation
10/19/15
Ways of Collecting Accounts

Offer the borrower a clear choice of
action
Get a reasonably short repayment
program
Look for vulnerable areas of target for
collection effort
Give the borrower a good reason to
weigh things clearly
10/19/15
Ways of Collecting Accounts

Plan and exert psychological collection efforts.
When drastic or legal action is finally decided
upon to enforce collection, proceed fast
because borrowers generally does things
damaging or unfavorable to the lenders
interest.
10/19/15
Considerations in Loan Restructuring

Require a reasonable amount of payment to be
assured of the borrowers sincerity and
commitment.
Validate sources of payments.
Obtain written plan for the borrower.
Make the borrower understand that lack of
amicable settlement will mean legal action by
the cooperative.
10/19/15
Condonation of penalties as incentive.
CONCLUSIONS
It is a fact that loan delinquency is a major
problem to many lending institutions in the
Philippines including cooperatives. The causes
of loan delinquency maybe due to unsystematized and passive collection of loan
repayments and members misunderstanding
on their role as cooperative members.
10/19/15
CONCLUSIONS
To deal with delinquency, the cooperative
should have a clear collection and lending
policies as part of financial management.
These policies should be properly
implemented and reviewed. This is the best
way to prevent delinquency to happen.
However, the strictness of such policies should
not hamper the good relationship that exist
between the officers/staff and the members.
10/19/15
Credit is like a
flame; use,
value, nurture,
and manage it
well.
10/19/15
Collection Process
10/19/15
Collection Procedures
Collection Starts on the First day of after
a non-payment of amortization.
Reminder letter should be sent within 15
days of delinquency.
A Demand letter shall be sent if no action
is made with reminder letter.
10/19/15
A-1 Client Call/Visit

Speak pleasantly and clearly
Proper grooming
Greetings
Update of loan account/borrower
Get reasons for non-payment
10/19/15
A-1 Client Call/Visit

Know how he can make payment
Date & place of payment
RECAP
DONT FORGET TO
FOLLOW-UP
10/19/15
A-2 COLLECTION STRATEGY

AND TACTICS
STRATEGY a plan of action
developed to achieve a goal or
objective.
TACTIC the behavioral
maneuvering one undertakes to
carry out the strategy.
10/19/15
A-3 Application of
Payment
1. Miscellaneous Advances
(insurance, mortgage, legal)
2. Penalty
3. Interest
4. Principal
10/19/15
A-4 Debt Recovery Courses of

Action (non-legal)
Extension/rollover of loan
Restructuring
Charge-off
Collect from co-maker
Sale of mortgage property
Sale of other properties
10/19/15
Sale of business
A-5 Remedies Used in Litigation

Foreclosure process by w/c a
mortgage acquires an absolute title
to the property upon which he had
previously a lien or encumbrance.
10/19/15

Dacion en pago a juridical concept
whereby a debtor pays off his
obligation to the creditor by the
conveyance of the ownership of his
property as an accepted equivalent of
performance payment (payment in
kind).
10/19/15

Replevin a provisional remedy
which may be availed of whenever the
complaint in an action prays for the
recovery of the possession of personal
property (bond).
10/19/15

Attachment a provisional remedy by
which property of the defendant is
taken into custody of the law as a
security for the satisfaction of any
judgement w/c the plaintiff may
recover.
10/19/15

Garnishment a warning to a person
in whose hands the effects of another
are attached, not to pay the money or
deliver the property of the defendant
in his hands to him, but to appear &
answer the plaintiffs suit.
10/19/15

Writ of execution a judicial order
to enforce payment, satisfaction or
performance of a final judgment
against the defeated party in a case.
Valid only for 60 days.
10/19/15

Credit Management For Cooperatives

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Credit Management For Cooperatives

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Credit Management for

merlene quiba flores. panabo city

Credit Coop Business: PINOY Style

Member puts in share capital because he intends to borrow.

Loan limit is based on capital share.

Latin base credo meaning faith or trust.

Long term loan payable for more than five

Credit repayment schemes

Why do we give credit?

merlene quiba flores. panabo city

What are the elements of credit?

merlene quiba flores. panabo city

What are the basis of credit?

merlene quiba flores. panabo city

Basic considerations in granting

Borrowers background - done through

merlene quiba flores. panabo city

Basic considerations in granting

Disbursements and documentation

Monitoring and reporting/remedial management

Loan Analysis/credit Initiation

merlene quiba flores. panabo city

Disbursements and documentation

Loan agreements signed.

merlene quiba flores. panabo city

Monitoring and reporting/remedial

merlene quiba flores. panabo city

Functions of key staff in credit

merlene quiba flores. panabo city

Functions of key staff in credit

merlene quiba flores. panabo city

Functions of key staff in credit

merlene quiba flores. panabo city

Functions of key staff in credit

Preventing Delinquent Loans

The CREDIT FILES (Importance)

The CREDIT FILES (Contents)

Other relevant information such as

merlene quiba flores. panabo city

merlene quiba flores. panabo city

merlene quiba flores. panabo city

merlene quiba flores. panabo city

merlene quiba flores. panabo city

There is always RISK in

merlene quiba flores. panabo city

3 critical challenges of Loan

Measure and monitor the amount of risk

2. Understand the way the quality of the

portfolio affects the institutions

3. Find ways to manage the credit

operations to minimize risk of the

The LOAN PORTFOLIO

Principal makes up the loan portfolio;

Interest contributes to the cooperatives

merlene quiba flores. panabo city

LOAN LOSS PROVISIONS

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How to make Coop Members

merlene quiba flores. panabo city

High, Rising or Uncontrolled Delinquency

One of the most common

merlene quiba flores. panabo city