The management of the Bank commits to provide microenterprises with quick access to affordable, non-collateralized loans. With this commitment in mind, I will be discussing to you the following simplified Lending Process & Procedures which the Microfinance Unit diligently follows in processing new loans.
The Microfinance Unit follows a standard flow in processing new loans. This process usually takes one week. It will start with a: READ THE SLIDE… Client Orientation then the Pre-application, followed by: The Credit and Background Investigation, then the Loan Approval. A Credit Committee Meeting is being held every Loan Approval. Then, Loan Processing Loan Disbursement, and finally, Loan Collection I will discuss each activity in detail.
ALL prospective clients who intend should attend a Client Orientation. Loan applications will not be entertained if a client fails to attend an orientation. The main reason why the MFU conducts Client Orientations is basically to inform the prospective clients of the policies and procedures of the Microfinance Loan. There are two types of Client Orientation – the Group and Individual Client Orientation. Group Client Orientation is usually done in the bank particularly in the Microfinance Office. On the other hand, Individual Client Orientations are conducted for prospective clients whose residence/business is located far from the bank. This is the procedure when clients attend the Client Orientation. READ THE SLIDE…
After the orientation, clients are required to fill out and sign the Pre-application Form. READ THE SLIDE.
As I have said earlier, Credit and Background Investigations are administered to eligible clients. READ THE SLIDE…. The CI/BI procedures will be discussed in a separate session so that we can fully understand and appreciate this important process.
It is important that preparations are made before the Credit Committee Meeting so that all important pieces of information are gathered, filtered and summarized in order to have a good loan recommendation. READ THE SLIDE….
This is the procedure when we deliberate loan applications. READ: CREDIT COMMITTEE convenes every week…… THEN READ: PREPARATIONS, AO PRESENTS…. During the Credit Committee meeting, the AO must explain the reasons behind his/her recommendations on the basis of his/her overall objective observations/impressions about the client, their character, reputation in the community, capacity to repay a loan, credit worthiness as well as the importance as to why the client should be given a loan. The Credit Committee members are expected to ask several questions based on the submitted documents including the CI/BI report. This is also an opportunity for the other AO to actively participate - ask questions about the client’s residence, business, character, cash flow analysis, and share their opinions or ideas about the loan application. After the deliberation of the loan application, the Credit Committee decides whether to approve, disapprove or defer the approval of the loan application.
There are at least three (3) key important results after the Credit Committee meeting. READ…. If loan is disapproved….. READ…. If loan is deferred…. READ…. If loan is approved…..
READ THE TWO TEXT BOXES, THEN READ THE THIRD BOX…. This is also a crucial part of the Loan Process. In this step, the policies and procedures are again explained to the client particularly their obligations as Borrower, Co-Borrower or Co-Signer of the Microfinance Loan. This is to make sure each fully understands the product policies as well as the procedures. (Note: Revise the last box if your bank follows a different procedure for disbursing loan proceeds.)
It is important that all clients realize the importance of making their payments on time. The AO must monitor his/her portfolio closely, particularly with new clients, to ensure that they do not become delinquent in making payments. Once a collection schedule is established, the AO should STRICTLY ENFORCE IT!!! Borrowers tend to test the bank to see how serious it is about late payments. THE AO SHOULD LEAVE NO ROOM FOR LAX OR INTERMITTENT COLLECTION AS THIS REDUCES THE SERIOUSNESS WITH WHICH CLIENTS VIEW THEIR OBLIGATIONS. READ THE SLIDE….. (Note: Revise this slide if your bank follows a different loan collection procedure.)
Applicant comes to bank to attend the group client orientation AO conducts individual client orientation Attendance Sheet Welcome and introduction of prospective clients CLIENT ORIENTATION Question and Answer Client Logbook
Application Applicant fills out the application form The applicant may choose to sign the form at the bank or bring the form to his/her house AO determines applicant’s eligibility If eligible, the AO schedules a CI/BI appointment If not eligible, AO proposes a savings plan
Credit and Background Investigation AO conducts CI/BI to assess the applicant AO brings along the loan application form to validate information contained in the form AO visits references: suppliers, previous and present creditors, business neighbors, and residence If necessary, credit verification letters are sent to the applicants creditors If there are adverse findings, application is disapproved If CI is positive, AO evaluates the applicant’s debt repayment capacity
Preparations before the Credit Committee Meeting AO summarizes and prepares the loan recommendation sheet AO organizes the applicant’s credit folder Loan Recommendation Sheet, Loan Application Completed CI/BI Form Co-signer’s profile, Proof of payments, and other documents Supervisor reviews applicants credit folder Checks and reviews for inconsistencies Loan application is endorsed to the Credit Committee
Loan Review and Approval (Credit Committee Meeting) PREPARATION AO presents CI/BI Results to Credit Committee DELIBERATION RECOMMENDATION AND APPROVAL CREDIT COMMITTEE: 1) Convenes every week to review loan applications recommended for approval 2) Composed of: GM/BM, Loans Supervisor and AOs 1 2 3 4 5
Loan Processing (After the Credit Committee) Supervisor informs the AO to prepare loan documents If loan is disapproved, AO visits the applicant and informs the reasons for disapproval If loan is deferred, AO informs the applicant and obtains addt’l. info If loan is approved, AO visits the applicant and gives a list of requirements for his/her compliance. AO prepares loan documents. Supervisor checks completeness of the credit folders a) Credit Memo/CC b) Signature Cards c) Promissory Note d) Co-Signer’s Statement e) Disclosure Statement f) Deed of Assign. of Dep. h) Security Agreement
Loan Disbursement Supervisor gives copy of credit ticket/cashier’s check to Teller for disbursement/posting Borrower together with spouse /Co-Signers, come to the bank to sign the loan documents Before signing, the BM or supervisor explains to the group their obligations as Borrower(s) and Co-Signer(s) Supervisor gives the client a copy of the Loan Amortization Schedule and Discount Statement Client signs a withdrawal slip to withdraw the loan proceeds from Savings Account or encashes Cashier’s Check through Teller
Loan Collection Supervisor generates weekly payments due/Collection Sheet for the week every Monday Cashier issues pre-numbered PRs to AOs for collection AO collects payment from client Records pymts and gives original PR AO retains other copies which will be used to batch the total collections Batches collections for the day Auditor accounts for all PRs issued vs. report Forwards cash to Teller Supervisor updates accounts