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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.

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 MultiPurpose 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 non-performing 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, NonPerforming 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 non-current 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 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 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.

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

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 are treated as past due after 30 days and
classified as non-performing after 90 days.

Lending to the Agriculture Sector Toolkit December


2012)

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 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,

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)

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)
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)

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)

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.

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)

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)
2.4 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.

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.

Due to failure of giving notice to the borrowers of their


due date of payment, this leads to the non collection of
receivables.
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.

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)
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 least 90% should be seized. 90% percent
of that should be disposed of at least 90% of their
market value. (Song, 2002)

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

2.3 Failure to adhere to set out lending policies

collection efforts become more personal and more


intense.(Gitman, 2009)

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)

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)

1.

5. Individual crisis
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)
6.

2.

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

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
2010-2015.
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 can help them make remedies or
changes to overcome the problems of NPA.

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

This study employed the combined approach so as to


overcome the limitations of both approaches.

II. Methodology
This chapter contains the research design. It presents
the following: method of data collection, data analysis
and statistical treatment of data.

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:

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.

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.

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.

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:

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.

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% =

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
(2010-2015) 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.

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
LTVTP-MPC, in terms of the total non-performing assets, total non-performing assets from loans, proportionate share
of non-performing 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. The net real and other properties acquired represent the
collaterals of the borrowers which have been foreclosed.

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

2010

2011

2012

2013

2014

2015

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

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

Fig
ure 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%.

10

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
___YES, please fill up the table below.
Event Title

Year

1.
2.
3.

B.

PERFORMANCE OF LOAN OFFICER

11

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

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.

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.

Using subjective opinion/impression of the borrower


relates to the character. Since there is not an accurate
way to judge character, the credit analyst will decide
subjectively whether or not the borrower is sufficiently
trustworthy 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.
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.
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.

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.
Real Estate Practice

1. Real estate consultant


2. Real estate appraiser

12

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


4. Real estate broker
5. Real estate salesperson

Corresponding
Years in Practice
6 years

B.

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

Seldom

Never

Others: Please specify


1.
2.
3.
B.3 How frequent does the appraiser inspect the collateral?
Always
__Often
__Sometimes

__Seldom

__Never

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 quality work overload can affect the
C. Insider Lending
A.

Which of the following are instances when loan is given out to employees?

13

Always
1.
2.

Sometimes

Seldom

Never

3.

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

B.

Often

Commercial Loan
Loan with collaterals

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

Analysis

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

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. 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

D.

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?

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

Often

Sometimes

14

Seldom

Never

80% to
100%

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:


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
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
collaterals but are only able to dispose them at most
20% of their value because

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 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.

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.

The terms and conditions in availing loans are


important because it acts as a legally binding

15

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.

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 nonrepayment of the loan.
J.

K.

G. However, there are times when lending


procedures are being skipped. Even the most
well-intended
and
well-thoughtout policies may have an impact if they
are not implemented properly. When a loan
officer grants a loan to a borrower without the
full considerations agreed in the policy, he is
risking the collectability of the loan.

L.
M.
N.
O.
P.

H.
I.

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.

Q.

Accordingly, they tend to skip procedures


because of the past experience and
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

BE. A
l
w
a
y
s
BK.

BQ.
BW.

BF.
Oft

BG. Som
etime
s

BI.
Ne

BM.

BH. S
e
l
d
o
m
BN.

BL.
BR.

BS.

BT.

BU.

BX.

BY.

BZ.

CA.

16

BO.

CB. One (1) day after


the due date
CH. Five (5) days after
the due date
CN. Others, please specify:

CC.

CD.

CE.

CF.

CG.

CI.

CJ.

CK.

CL.

CM.

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

giving proper notice. As an account becomes


more and more overdue, their collection
efforts are not that strong.

CZ. According to the data gathered, LTVTP-MPC


is giving notice to the borrowers before due
date of 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

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.

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.

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
LTVTP-MPC 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;

17

DL.

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.

DM.
DN.
DO.
2.

2.5 Failure to adhere to some lending policies is


another probable factor of increase in NPA
because the cooperative do not always
implement tight credit policies in the terms and
conditions of loans.

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

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.
DP.
DQ.
DR.
DS.
DT.
DU.
DV.
DW.

DX.

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.

EE. If all this effective strategies will be followed,


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

EC.

V.

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
collection system for effective monitoring.

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.

18

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 PPSR
http://andreyev.com.au/blog/2015/03/12/how-do-i-enforce-my-ppsr-interest/

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-andwhy-is-it-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-24d1-4815-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

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,

19

Saint Louis University, Baguio City, Philippines, ERLINDA G. BIALNO, is their adviser in Accounting 403a,
Management Consultancy I (Thesis).

20

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
Multi-Purpose 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

21

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.

B. PERFORMANCE OF LOAN OFFICER


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

22

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

Corresponding
Years in
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


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

23

___ 20-25
Others: Please Specify _____
B.2 What types of security or collateral are usually offered by the borrowers to secure loans?

24

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

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