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CREDIT
MANAGEMENT
M A Y 2 6 , 2 0 2 3
COOPERATIVEDEVELOPMENTAUTHORITY
ELENA PINEDA – DELA CRUZ
Certified Public Accountant
WHAT IS CREDIT MANAGEMENT?
Refers to the process of overseeing and controlling the credit policies and
practices of a business or institution. It involves the strategic management of
credit risk, which is potential for financial loss due to a borrower’s failure to
repay a loan or fulfill other credit obligation. It encompasses various activities
and strategies to ensure the efficient and effective utilization of credit.
THE NATURE OF THE CREDIT AND SAVING COOPERATIVE
• Cooperatives are member-owned and member-controlled organizations,
thus, thru savings and credit, cooperative members can utilize and tap
the potential of these wealth-generating activities. However, unlike other
business organizations, cooperative has sets of principles which must be
adhered to.
CONCEPT AND PRINCIPLES
OF SAVINGS AND CREDIT
Cooperative encourages its members to
save money and enables them to obtain
loans they may require for various
purposes from their accumulated
savings. Savings, when utilize generate
wealth.
Cooperative encourages its members to
obtain credit and enables them to
generate more products and services
thus accumulating wealth for themselves
and which helps run the economy of the
country.
THE SAVING ASPECT THE CREDIT ASPECT
CONCEPT AND PRINCIPLES OF SAVINGS
AND CREDIT
Anyone who meets the criteria for
membership can benefit from the
cooperative’s savings and credit
services.
Members can exercise the right to
participate in cooperative affairs,
including savings and credit
policies, thru one-member, one-vote
system.
OPEN MEMBERSHIP DEMOCRATIC CONTROL
CONCEPT AND PRINCIPLES OF SAVINGS
AND CREDIT
Member’s active participation thru
pooling of savings and in turn have
access to credit facilities based on
their need.
Cooperative governs and acts
independently. Policies can be
formulated, revised, and or amend
to cater to the needs of its
members. These policies then are
executed and governs the credit
activities of the coops.
Member’s Economic
Participation
Autonomy and
Independence
CONCEPT AND PRINCIPLES OF SAVINGS
AND CREDIT
By promoting financial literacy,
cooperatives empowers members
on savings, credit and other related
topics.
Shared knowledge and support
amongst the cooperative effectively
progress the good credit and
lending practice in the industry.
Education, Training and
Information
Cooperation among
Cooperatives
CONCEPT AND PRINCIPLES OF SAVINGS
AND CREDIT
Cooperatives generate wealth thru savings and credit, the
general public are not only benefited directly thru CDF but
also as the member’s needs are being met, communities can
become healthier.
Concern for the Community
CONCEPT AND PRINCIPLES OF SAVINGS
AND CREDIT
Key Elements of Credit /
Lending Policy
The OBJECTIVE
• Stated objective outline the goals and may include
financial inclusion, managing risk, supporting the
economic growth, and meeting the needs of the
general membership.
Key Elements of Credit /
Lending Policy
Risk Management
• Focus on managing risk. The determination of the
level of risk the cooperative is willing to accept,
establishing strategies to mitigate and control risk to
acceptable level.
Key Elements of Credit /
Lending Policy
Loan Types and Eligibility
• The policy should define the types of loans and credit
products being offered. Eligibility of borrowers
should be outline, includes the basic info
requirements as to age, employment status, income,
credit history. It also specifies loan terms, interest
rates, credit limit, repayment periods and other
applicable information.
Key Elements of Credit /
Lending Policy
Loan Approval Process
• Details the procedures and criteria for evaluating loan
applications. The required documents, the process of
verifying information, and the roles and
responsibilities of those involved in the process.
Key Elements of Credit /
Lending Policy
Collateral and Security
• The policy defines the types of acceptable collaterals
to provide security to the loans. It specify the
valuation method, documentation requirements, and
procedures. It should also establish the loan – to –
value – ratios.
Key Elements of Credit /
Lending Policy
Interest Rates and Fees
• The policy addresses the method of pricing of loans
and credit products. Factors such as credit risk,
market conditions, operating expenses are all
considered when applying rates and fees.
Key Elements of Credit /
Lending Policy
Loan Monitoring and Collections
• Provisions for monitoring and managing loans, from
disbursement (release) to collecting payments to
defaults. Guidelines should be establish for early
warning system, loan restructuring, collection
processes, and when the necessary, the use of
external collecting agencies.
Key Elements of Credit /
Lending Policy
Compliance and Regulatory
Requirements
• The policy should include compliance to applicable
laws, regulations and industry standard. It should
outline the procedures in adhering with AMLA,
consumer protection laws, privacy regulations and
other pertinent laws.
Key Elements of Credit /
Lending Policy
Review and Revision
• Provisions for regular review and revision to adapt to
changing market conditions, regulatory requirements
and internal strategies (challenges). This ensures that
the lending and credit policies remain relevant,
effective and aligned with the cooperative’s
objectives.
Credit-Management seminar for cooperative power point presentation
Effective Credit/Lending
Process
Application and Documentation
• Only complete, current and correct required
documents should be accepted. Guide the client-
member on accomplishing needed forms. Having a
readily list of requirements will be less time
consuming for both parties. Avoid confusion and
delays.
Effective Credit/Lending
Process
Credit Evaluation and Underwriting
• This involves assessing the credit-worthiness of
borrowers. The financial stability, status of
employment, income, credit history and debt
obligation are crucial information in deciding whether
to extend credit or not.
Effective Credit/Lending
Process
Loan Approval
• Approve loans only if credit evaluation was
completed.
• Determine levels of approving authority.
• Formulate controls to be complied by the credit
committee, loan officers, managers and the BOD.
Effective Credit/Lending
Process
Loan Terms and Condition
• Once loan is approved, terms and condition must be
clearly understood by the borrower. This is to
prevent confusion that might result to borrower’s
default and unnecessary penalties.
Effective Credit/Lending
Process
Loan Disbursement
• Before releasing loan, review the completeness of
supporting documents attached to disbursement
vouchers. Documents should be properly signed,
voucher certified and approved. Check should be
named to the borrower.
Effective Credit/Lending
Process
Loan System Monitoring
• Once the loan is released, monitor the adherence to
policy on credit collection. Procedure should be put
in place and payment behavior should be
documented in individual files of borrowers.
Effective Credit/Lending
Process
Default Management
• There must be a proactive communication with the
borrower in default.
• Establish realistic repayment plans.
• Recover outstanding balance thru appropriate
actions.
Effective Credit/Lending
Process
Regular Review and Evaluation
• Continuous review and evaluation can identify areas
of improvements that can prevent future losses.
• Document and analyze data, loan performance, rates,
customer feedback and industry trends.
Effective Credit/Lending
Process
Compliance and Risk
Management
• Stay updated to regulatory requirements, data
privacy regulations, anti-money laundering guidelines
and consumer protection laws.
• Strong risk management should be place to identify,
assess and mitigate credit risks associated with the
lending activities.
Monthly and accurate reporting of
delinquent loan to the board;
Timely and consistent follow-up
actions;
Utilization of outside collection sources
when internal efforts fail to produce
results; and
Maintenance of collection records.
A
B
C
D
REMINDERS
That’s it! Thank
you!

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Credit-Management seminar for cooperative power point presentation

  • 1. CREDIT MANAGEMENT M A Y 2 6 , 2 0 2 3 COOPERATIVEDEVELOPMENTAUTHORITY ELENA PINEDA – DELA CRUZ Certified Public Accountant
  • 2. WHAT IS CREDIT MANAGEMENT? Refers to the process of overseeing and controlling the credit policies and practices of a business or institution. It involves the strategic management of credit risk, which is potential for financial loss due to a borrower’s failure to repay a loan or fulfill other credit obligation. It encompasses various activities and strategies to ensure the efficient and effective utilization of credit.
  • 3. THE NATURE OF THE CREDIT AND SAVING COOPERATIVE • Cooperatives are member-owned and member-controlled organizations, thus, thru savings and credit, cooperative members can utilize and tap the potential of these wealth-generating activities. However, unlike other business organizations, cooperative has sets of principles which must be adhered to. CONCEPT AND PRINCIPLES OF SAVINGS AND CREDIT
  • 4. Cooperative encourages its members to save money and enables them to obtain loans they may require for various purposes from their accumulated savings. Savings, when utilize generate wealth. Cooperative encourages its members to obtain credit and enables them to generate more products and services thus accumulating wealth for themselves and which helps run the economy of the country. THE SAVING ASPECT THE CREDIT ASPECT CONCEPT AND PRINCIPLES OF SAVINGS AND CREDIT
  • 5. Anyone who meets the criteria for membership can benefit from the cooperative’s savings and credit services. Members can exercise the right to participate in cooperative affairs, including savings and credit policies, thru one-member, one-vote system. OPEN MEMBERSHIP DEMOCRATIC CONTROL CONCEPT AND PRINCIPLES OF SAVINGS AND CREDIT
  • 6. Member’s active participation thru pooling of savings and in turn have access to credit facilities based on their need. Cooperative governs and acts independently. Policies can be formulated, revised, and or amend to cater to the needs of its members. These policies then are executed and governs the credit activities of the coops. Member’s Economic Participation Autonomy and Independence CONCEPT AND PRINCIPLES OF SAVINGS AND CREDIT
  • 7. By promoting financial literacy, cooperatives empowers members on savings, credit and other related topics. Shared knowledge and support amongst the cooperative effectively progress the good credit and lending practice in the industry. Education, Training and Information Cooperation among Cooperatives CONCEPT AND PRINCIPLES OF SAVINGS AND CREDIT
  • 8. Cooperatives generate wealth thru savings and credit, the general public are not only benefited directly thru CDF but also as the member’s needs are being met, communities can become healthier. Concern for the Community CONCEPT AND PRINCIPLES OF SAVINGS AND CREDIT
  • 9. Key Elements of Credit / Lending Policy The OBJECTIVE • Stated objective outline the goals and may include financial inclusion, managing risk, supporting the economic growth, and meeting the needs of the general membership.
  • 10. Key Elements of Credit / Lending Policy Risk Management • Focus on managing risk. The determination of the level of risk the cooperative is willing to accept, establishing strategies to mitigate and control risk to acceptable level.
  • 11. Key Elements of Credit / Lending Policy Loan Types and Eligibility • The policy should define the types of loans and credit products being offered. Eligibility of borrowers should be outline, includes the basic info requirements as to age, employment status, income, credit history. It also specifies loan terms, interest rates, credit limit, repayment periods and other applicable information.
  • 12. Key Elements of Credit / Lending Policy Loan Approval Process • Details the procedures and criteria for evaluating loan applications. The required documents, the process of verifying information, and the roles and responsibilities of those involved in the process.
  • 13. Key Elements of Credit / Lending Policy Collateral and Security • The policy defines the types of acceptable collaterals to provide security to the loans. It specify the valuation method, documentation requirements, and procedures. It should also establish the loan – to – value – ratios.
  • 14. Key Elements of Credit / Lending Policy Interest Rates and Fees • The policy addresses the method of pricing of loans and credit products. Factors such as credit risk, market conditions, operating expenses are all considered when applying rates and fees.
  • 15. Key Elements of Credit / Lending Policy Loan Monitoring and Collections • Provisions for monitoring and managing loans, from disbursement (release) to collecting payments to defaults. Guidelines should be establish for early warning system, loan restructuring, collection processes, and when the necessary, the use of external collecting agencies.
  • 16. Key Elements of Credit / Lending Policy Compliance and Regulatory Requirements • The policy should include compliance to applicable laws, regulations and industry standard. It should outline the procedures in adhering with AMLA, consumer protection laws, privacy regulations and other pertinent laws.
  • 17. Key Elements of Credit / Lending Policy Review and Revision • Provisions for regular review and revision to adapt to changing market conditions, regulatory requirements and internal strategies (challenges). This ensures that the lending and credit policies remain relevant, effective and aligned with the cooperative’s objectives.
  • 19. Effective Credit/Lending Process Application and Documentation • Only complete, current and correct required documents should be accepted. Guide the client- member on accomplishing needed forms. Having a readily list of requirements will be less time consuming for both parties. Avoid confusion and delays.
  • 20. Effective Credit/Lending Process Credit Evaluation and Underwriting • This involves assessing the credit-worthiness of borrowers. The financial stability, status of employment, income, credit history and debt obligation are crucial information in deciding whether to extend credit or not.
  • 21. Effective Credit/Lending Process Loan Approval • Approve loans only if credit evaluation was completed. • Determine levels of approving authority. • Formulate controls to be complied by the credit committee, loan officers, managers and the BOD.
  • 22. Effective Credit/Lending Process Loan Terms and Condition • Once loan is approved, terms and condition must be clearly understood by the borrower. This is to prevent confusion that might result to borrower’s default and unnecessary penalties.
  • 23. Effective Credit/Lending Process Loan Disbursement • Before releasing loan, review the completeness of supporting documents attached to disbursement vouchers. Documents should be properly signed, voucher certified and approved. Check should be named to the borrower.
  • 24. Effective Credit/Lending Process Loan System Monitoring • Once the loan is released, monitor the adherence to policy on credit collection. Procedure should be put in place and payment behavior should be documented in individual files of borrowers.
  • 25. Effective Credit/Lending Process Default Management • There must be a proactive communication with the borrower in default. • Establish realistic repayment plans. • Recover outstanding balance thru appropriate actions.
  • 26. Effective Credit/Lending Process Regular Review and Evaluation • Continuous review and evaluation can identify areas of improvements that can prevent future losses. • Document and analyze data, loan performance, rates, customer feedback and industry trends.
  • 27. Effective Credit/Lending Process Compliance and Risk Management • Stay updated to regulatory requirements, data privacy regulations, anti-money laundering guidelines and consumer protection laws. • Strong risk management should be place to identify, assess and mitigate credit risks associated with the lending activities.
  • 28. Monthly and accurate reporting of delinquent loan to the board; Timely and consistent follow-up actions; Utilization of outside collection sources when internal efforts fail to produce results; and Maintenance of collection records. A B C D REMINDERS