COOP-PESOS

Performance Standards for Credit and Other

types of Cooperatives with Credit Services
 Introduction
• Memorandum Circular 2003-04
COOP-PESOS
– requires the adoption of COOP-PESOS in the
assessment/evaluation of their performance to
ensure the protection of members,
cooperatives and the sustainability of the
latter’s operations.

• A series of workshops, consultations and

validations with the cooperative sector and
concerned institutions/agencies resulted to the
COOP-PESOS.
 Attributes of an Effective and
Transparent Cooperative Accounting and
Financial Information System
– Transparent information should be clear.
COOP-PESOS
– Transparent information is fairly stated.
– Transparent information should be timely.
– Transparent information should be accessible
and usable.
– Transparent information should be
comparable.
 Purposes of COOP-PESOS
• Supervisory and regulatory tool
COOP-PESOS
• Management tool
 COOP-PESOS:
A Supervisory and Regulatory Tool

• To ensure the safety of contributions of

COOP-PESOS
cooperative members who typically belong to
the low income segment of the community.
• To guarantee the soundness of the credit
cooperative’s operations,
• To infuse the necessary operational and
financial discipline.
• To evaluate and assess cooperative
performance and allow for comparison over
time and with other cooperatives.
 COOP-PESOS:
A Management Tool

• Provide management the necessary information

COOP-PESOS
on how its cooperative is performing vis-à-vis
other cooperatives.

• Management shall use the standards in making

sure that the cooperative is operating effectively
and efficiently.

• Allow management of the cooperative to

determine troubled areas and make the
necessary adjustments to its policies and/or the
way the cooperative’s operations are handled.
 Performance Standards for Philippine Credit
Cooperatives and other Types of Cooperatives with
Credit Services

C - Compliance (20%)
COOP-PESOS
O – Organization (26%)
O - Operations and Governance (40%)
P – Plans/Programs and Performance (14%)

P - Portfolio Quality (25%)

E – Efficiency (20%)
S – Stability (30%)
O – Operations (10%)
S - Structure of Assets (15%)
 COOP Indicators
Information on Compliance to Requirements

• Information on the cooperative’s compliance

COOP-PESOS
with the necessary administrative
requirements.

• Information on the governance, management,

and organizational structure of the coop.

• Look at whether the cooperatives have

adequate system policies and procedures to
ensure efficient operations and effective
service to members.
 C - Compliance
• This includes questions which look on
COOP-PESOS
whether the cooperative complies with the
various legal requirements imposed by
various institutions (e.g. Cooperative
Development Authority, Bureau of Internal
Revenue, Local Government Unit and the
Department of Labor and Employment, etc.).

• The cooperative gets the maximum raw score

for every positive answer and zero points for
every negative answer.
 C - Compliance
Compliance with Administrative and Legal 9
COOP-PESOS
Requirements of Cooperative Development
Authority (CDA)

• Are the Bonds of accountable officers 1

current?
• Are the Articles of Cooperation and By-Laws 2
updated? If yes, was it amended and
registered?
• Are Share Capital Certificates/Passbooks
issued to members and regularly updated 1
whenever necessary?
• Are CDA required reports accomplished in 5
the prescribed format and submitted within
the prescribed period?
 C - Compliance
Compliance with BIR Requirements 5
COOP-PESOS
a) Have annual registration requirements of 2
the BIR been submitted?
b) Are appropriate taxes, if any, withheld or 1
remitted?
c) Is the cooperative knowledgeable and 1
clarified as to its tax exemption privileges
and tax obligations with BIR?
d) Are the Books of Accounts registered? 1
 C - Compliance
Compliance with LGU Requirements 1
COOP-PESOS
a) Has the local business permit/license been 1
required?
 C - Compliance
Compliance with DOLE Requirements 5
COOP-PESOS
a) Are the legal minimum wage and 13th 1
month pay to employees complied with?
b) Have the mandatory insurance premiums to
the following agencies been remitted?
• SSS 1
• PhilHealth 1
• HDMF (Pag-IBIG) 1
c) Are employees provided additional 0.5
retirement plans other than those provided
by law?
d) Upon retirement, are employees paid? 0.5
 O - Organization
• This includes questions on the cooperative’s
COOP-PESOS
membership structure and participation.

• Also includes questions on affiliation and

linkages with cooperative federations/unions
and other organizations involved in the
promotion and development of cooperatives.
 O - Organization
Membership Participation 15
COOP-PESOS
a) Has the quorum requirement as indicated 4
in the cooperative’s by-laws been achieved
during the conduct of the recent General
Assembly Meeting?
b) Is the authorized capital of the cooperative
fully subscribed? 2
c) If the cooperative’s authorized capital is not
fully subscribed, does the cooperative 2
have a Capital Build-up program where
70% of members (regular and associate)
participate?
 O - Organization
Membership Participation 15
COOP-PESOS
a) Do 70% of the members have savings 4
deposits with the cooperative?
b) Does the cooperative have an Annual 3
Program and Development/Strategic Plan
that was approved by the General
Assembly?
 O - Organization
Membership Education 2
COOP-PESOS
a) Are pre-membership education seminars 1
for new members regularly conducted?
b) Is the cooperative education regularly 1
conducted for current members?
 O - Organization
Affiliation/Linkages 9
COOP-PESOS
a) Does the cooperative have depositors 1
that are below 18 years old? If yes, has
the cooperative established a Laboratory
Cooperative?
b) Was the cooperative involved in
community service? 4
c) Did the cooperative pay annual dues,
CETF, loans and other accounts to the 2
federation/union of their choice?
d) Did the cooperative have business 1
alliance with federations/unions?
e) Did the cooperative have business 1
alliance with other cooperatives?
 O – Operations and Governance
• Includes indicators that determine presence or
COOP-PESOS
absence of the necessary system, policies and
procedures for efficient and effective
management of the cooperative.

• Questions related to the Board of Directors and

the cooperative’s management are included in
this portion.
 O – Operations and Governance
Does the cooperative have written Manual 24
COOP-PESOS
of Policies and Procedures with specific
provisions on the following:

a) Membership 2
b) Loaning 4
c) Savings Deposits 2
d) Time Deposits 2
e) Financial Management
– Asset/Liability Management 2
– Accounting 3
– Internal Control and Audit 4
 O – Operations and Governance
Maximum
COOP-PESOS
Raw Score
f) Human Resource Development
– Hiring, Promotion and Firing 1
– Staff Development 1
– Compensation/Benefits 1
– Performance Appraisal 1
– Job Description 1
 O – Operations and Governance
Governance and Management 16
COOP-PESOS
a) Does the cooperative have a Code of 1
Governance and Ethical Standards?
b) Are the Board of Directors and Committee 1
Members elected in accordance with the
cooperative by-laws and election
procedures/guidelines?
c) Does the Board of Directors meet on a 1
regular basis (at least once a month)?
d) Do all the committees meet on a regular 1
basis (at least once a month)
e) Does the Board of Directors conduct a 2
periodic review of policies?
 O – Operations and Governance
Governance and Management 16
COOP-PESOS
f) Are all the meetings of the Board of 1
Directors properly recorded and updated?
g) Are all the meetings of the committees 1
properly recorded?
h) Is there a full-time and qualified manager 3
in the cooperative?
i) Is there a policy on succession of the
manager and other key top positions? 3
j) Do all the employees have individual
personnel file? 1
k) Does the cooperative have an
organizational structure? 1
 P – Plans/Programs and Performance

• Whether the cooperative has a development

COOP-PESOS
plan and an approved plan and annual
budget.

• Whether the cooperative conduct reviews and

assessment of its actual performance in
relation to its targets.
 P – Plans/Programs and Performance

Does the cooperative have defined

COOP-PESOS
objectives, plans and programs particularly
on the following:
a) Vision, Statement of Mission and 2
Goals
b) Developmental or Strategic Plan 2
c) Approved Annual Plan and Budget 3
 P – Plans/Programs and Performance
COOP-PESOS
Do the BOD and Management conduct 7
monthly review and assessment of the
cooperative’s actual performance in
relation to its targets?
 PESOS Indicators
COOP-PESOS Financial Performance

• This component is comprised of indicators that look at

the financial performance of the SCC.
 P – Portfolio Quality
• Provides the manager and the board of directors of
COOP-PESOS
SCCs appropriate tools in monitoring the quality of the
portfolio of the cooperatives.
– loan portfolio accounts constitute the bulk of the
SCC’s assets.
• Compares adequacy of the provisions for loan losses
against the amount of delinquent loans.
• The status of the health portfolio of the cooperative will
either propel the cooperative to grow more or imperil
the whole sustainability program of the cooperative.
 P – Portfolio Quality
Portfolio Quality (25%) Score Equiv
COOP-PESOS
alent
Points
Portfolio at Risk 5% or less 15
STANDARD: 5% or less > 5% to 10% 12
– measures the risk of default in > 10% to 15% 9
the portfolio > 15% to 20% 6
Balance of loans with 1 day missed > 20% to 25% 3
payments > 25% 0
Total loans outstanding
 P – Portfolio Quality
Portfolio Quality (25%) Score Equivale
nt Points
COOP-PESOS
APLL (over 12 months past due) APLL (100%)*
STANDARD: 100%
– If total amount of allowance > total 100% 5
outstanding balance of loans over 12 80% to < 100% 4
months past due using PAR = 100% 60% to < 80% 3
–If total amount of allowance < total 35% to < 60% 2
outstanding balance of loans over 12 10% to < 35% 1
months past due using PAR then: < 10% 0

Total Amount of Allowance

Total Outstanding balance of loans
over 12 months past due using PAR

* Coops without loans over 12 months past due will automatically be given 5 points
 P – Portfolio Quality
Portfolio Quality (25%) Score Equiv
COOP-PESOS
alent
Point
s
APLL (1 to 12 months past due) APLL (100%)*
STANDARD: 35%
35% 5
Total Amount of Allowance – Required
25% to < 35% 4
Amount of Allowance for Loans over
12 months past due using PAR 17% to < 25% 3
Total Outstanding balance of loans 1 9% to < 17% 2
to 12 months past due using PAR 1% to <9% 1
< 1% 0
* Coops without loans 1 to 12 months past
due will automatically be given 5 points
 E – Efficiency
• Focuses on the operation and administrative
COOP-PESOS
efficiency of the delivery of financial services,
i,e., loans and savings products to its
members.
• Determine the ability of the credit cooperative
to generate sufficient income to cover
expenses on operations.
– affects the loan profitability of the SCC’s
portfolio and the return on members’
shares.
 E – Efficiency
Efficiency (20%) Score Equivalent
COOP-PESOS
Points
Asset Yield o At least 4
inflation rate
STANDARD: At least Inflation Rate o 1 to 2
– measures the ability of the percentage 3
points below
coop’s assets to generate income inflation rate
o 3 to4
percentage
Undivided Net Surplus points below
2
inflation rate
Average Total Assets o More than
1
4 percentage
points below
inflation rate
o 0 or
negative
asset yield
 E – Efficiency
Efficiency (20%) Score Equival
ent
COOP-PESOS
Points
Operational Self Sufficiency 120% and above 4
110% to < 120% 3
STANDARD: 100% 100% to < 110% 2
– measures the ability of the 100% 1
cooperatives to sustain its < 100% 0
operations
Interest Income from Loans +
Service Fees + Filing Fees + Fines,
Penalties, Surcharges
Financing Costs + Admin. Costs
 E – Efficiency
Efficiency (20%) Score Equivalent
Points
COOP-PESOS
Rate of Return of Members Share o Higher than
inflation
4

STANDARD: Higher than Inflation Rate o Inflation rate 3

– measures the earning power o 1 to 2 2
of member’s share capital percentage
points below
inflation rate
Interest on Share Capital o More than 2
percentage 1
Average Member’s Share points below
inflation rate
o 0 or negative 0
ROR
 E – Efficiency
Efficiency (20%) Score Equivalent
Points
COOP-PESOS
Loan Portfolio Profitability 20% and above 4
15% to < 20% 3
STANDARD: More than 20%
10% to < 15% 2
– measures how profitable the
5% to < 10% 1
loan portfolio is
< 5% or 0
negative
Interest Income from Loans + surplus ratio
Service Fees + Filing Fees +
Fines, Penalties, Surcharges
Average Total Loans
Outstanding
 E – Efficiency
Efficiency (20%) Score Equivale
nt
COOP-PESOS
Points
Cost Per Peso Loan 0.10 and below 2
>0.10 and 0.15 1.5
STANDARD: Php 0.10 per Php 1.00 loan
>0.15 to 0.20 1
– measures the efficiency in
managing the coop’s loan portfolio. Above 0.20 0

Financing Costs + (Admin

Costs – Member’s Benefit
Expense)
Average Total Loans
Outstanding
 E – Efficiency
Efficiency (20%) Score Equival
ent
COOP-PESOS
Points
Administrative Efficiency 10% and below 2
>10% to 15% 1.5
STANDARD: 3 to 10%
>15% to 20% 1
– measures the cost of
Above 20% 0
managing the coop’s assets
Administrative Costs
Average Total Assets
 S – Stability
• Indicators determine if financial services are delivered to
its members in a sustained manner.
COOP-PESOS
– One way to do this is to increase the institutional
capital of the cooperative instead of purely relying on
the share capital of members.

• Determines if SCC can maintain sufficient liquidity to

meet the financial needs of its members.
– Stability is important as the cooperative leadership
commits itself to ascertain sustainability in the
cooperative structure, the membership of the
cooperative will also be serious in strongly
supporting their own cooperatives.
 S – Stability
Stability (30%) Score Equiv
alent
COOP-PESOS
Points
Solvency 110% and above 10
STANDARD: At least 110% 100% to < 110% 8
– measures the degree of protection 90% to < 100% 6
that the coop has for member 80% to < 90% 4
savings and shares in the event of 70% to < 80% 2
liquidation of the coop’s assets and Below 70% 0
liabilities
(Assets + Allowances) – (Total
Liabilities – Deposits + Past Due
Loans + Loans Restructured +
Loans Under Litigation)
Deposits + Share Capital
 S – Stability
Stability (30%) Score Equivale
nt
COOP-PESOS
Points
Liquidity 15% and above 10
12% to < 15% 8
STANDARD: Not less than 15% 9% to < 12% 6
– measures the coop’s ability to 6% to < 9% 4
service its member’s deposits on 1% to < 6% 2
time Below 1 % 0

Liquid Assets – Short Term

Payables
Total Deposits
 S – Stability
Stability (30%) Score Equivalent
Points
COOP-PESOS
Net Institutional Capital 10% and above 10
7% to < 10% 8
STANDARD: At least 10%
5% to < 7% 6
– measures the level of
3% to < 5% 4
institutional capital after
subtracting the losses 1% to < 3% 2
Below 1 % 0
(Reserves + Allowance from
Probable Losses on Loans) –
(Past Due Loans + Loans
Under Litigation)
Total Assets
 O – Operations
• Indicators and standards calls for the
COOP-PESOS
implementation of a new thrust in the
operations of SCC,
– decreasing dependence on external
borrowings and
– greater emphasis on mobilizing voluntary
savings from its members since it is
considered more accessible for members
and therefore is more beneficial.
• Emphasis on savings mobilization will result in
the SCC’s less dependence on external
borrowings and lower financial costs.
 O – Operations
Operations (10%) Score Equivalent
Points
COOP-PESOS
Growth in Membership o 75% and <
100% of target
5

STANDARD: Target Set in the Development o 50% to < 75% of 4

Plan target
– determines the performance o 25% to < 50% of 4
of change in membership vis- target
à-vis target o 1% to < 25% of
target 2
o Status quo 1
Actual Increase in the
Number of Members o Decreasing or
without 0
Target Increase in the Development
Plan
Number of Members
 O – Operations
Operations (10%) Score Equivalent
Points
COOP-PESOS
Trend in External Borrowings o No external
borrowings
5

STANDARD: Decreasing Towards Zero o Decreasing 3

compared to
– determines the percentage of previous
change in external borrowings. period
o Status quo 2
o Increasing
Ending External Borrowings – compared to 0
previous
Beginning External period
Borrowings
Beginning External
Borrowings
 S – Structure of Assets
• Determine the extent of the share of the
COOP-PESOS
cooperative’s various assets to its total
assets
• assess the effective use of these assets to
operate revenues.
 S – Structure of Assets
Structure of Assets (15%) Score Equivalent
Points
COOP-PESOS
Asset Quality 5% and below 5
> 6% to 8% 4
STANDARD: Not more than 5% > 8% to 12% 3
– measures the percentage of > 10% to 12% 2
total assets that are not > 12% to 14% 1
producing income 14% and 0
above
Non-earning assets
Total Assets
 S – Structure of Assets
Structure of Assets (15%) Score Equivalent
Points
COOP-PESOS
Asset Structure o > 55% to 65% 5
o > 45% to 55%, 3
STANDARD: 55 to 65% > 65% to 70%
– measures the percentage of o > 35% to 44%, 1
total assets financed by > 70% to 75%
deposits o 35% and 0
below, 75% and
Total Deposits above

Total Assets
 S – Structure of Assets
Structure of Assets (15%) Score Equivalent
Points
COOP-PESOS
Asset Structure o > 70% to 80% 2
o > 60% to 1.5
STANDARD: 70 to 80% 70%, > 80% to
– measures the percentage of 85%
total assets invested in the loan o > 50% to 1
60%, > 85% to
portfolio 90%
o > 40% to
Net Loans Receivables 50%, >90% to 0.5
Total Assets 95%
o 40% and
below, 95% 0
and above
 S – Structure of Assets
Structure of Assets (15%) Score Equivalent
Points
COOP-PESOS
Asset Structure o > 35% to 45% 3
o > 30% to 35%, 2
STANDARD: 35 to 45% > 45% to 55%
– measures the percentage of o > 25% to 30%, 1
total assets financed by above 55%
members’ share capital o > below 25% 0

Total Members’ Share Capital

Total Assets
 Over All Rating System
The credit cooperative has strong Rating 1
COOP-PESOS
performance that consistently provides
safe and sound operations. Credit EXCELLENT
cooperatives in this group comply with
cooperative rules and regulations and are (90 to 100)
resistant to external shocks and financial
disturbances. They are also able to
withstand unexpected adverse changes in
business environment. These institutions
do not need supervisory concern.
 Over All Rating System
The credit cooperative shows satisfactory Rating 2
performance that consistently provides safe and
COOP-PESOS
sound operations. Credit cooperatives in this
group are able to withstand business
fluctuations well. However, there are some VERY GOOD
areas of concern that require important (80 to less
attention and if unchecked, can potentially than 90)
develop into conditions of greater concern.
Supervisory response is limited to minor
adjustments to ensure that operations continue
to be satisfactory and sustainable.
 Over All Rating System
The credit cooperative’s performance is flawed Rating 3
to some degree and is of supervisory concern.
COOP-PESOS
Results of key performance measures indicate
that safe and sound operations may be
adversely affected. Credit cooperatives in this GOOD
group are only nominally resistant to adverse (70 to less
business conditions and may deteriorate if than 80)
identifiable areas of weakness are not corrected
immediately.
 Over All Rating System
The credit cooperative has poor Rating 4
COOP-PESOS
performance and is of serious supervisory
concern. The credit cooperative’s FAIR
performance if left unchecked would lead
to conditions that could threaten its (60 to less
viability. A high potential failure is present than 70)
but is not yet imminent. Credit
cooperatives in this group require very
close supervisory attention.
 Over All Rating System
The credit cooperative has unsatisfactory Rating 5
COOP-PESOS
performance and is in need of immediate
remedial attention. Credit cooperatives in POOR
this group have a very high probability of
failure and will likely require liquidation. (below 60)
COOP-PESOS
Thank you!