CREDIT FIRST MODULE

CREDIT MANAGEMENT

deals with the scientific planning, organizing and controlling the manifold activities of credit transactions.

CREDIT MANAGEMENT

It is identified as special group of people whose job is to direct or redirect the efforts and activities of other people toward the proper movement of credit.

CREDIT MANAGEMENT

It also refers to a system that will insure close collaboration between the grant of credit and the collection of credit.

CREDIT DEPARTMENT

is that unit of the whole organizational set up which is responsible in the conduct of credit transaction.

CREDIT DEPARTMENT

It is responsible for the gathering of all credit information about the applicant & assembling them as guide for the loan officer in his assessment and analysis in order to establish credit rating.

CREDIT MANAGER

refers to a person responsible in supervising all the works of the credit department.

CREDIT MANAGER

It is a man who occupies a very important position in the structure of credit.

CREDIT MANAGER

His decision spells the success or failure of a credit granting.

CREDIT INVESTIGATOR

is a person who is responsible in gathering information regarding the applicant.

CREDIT INVESTIGATION

the exhaustive study & evaluation of the credit risk as well as information and supporting papers related to the applicant.

SUPERVISOR

he handles the over-all supervision of his section or department;

SUPERVISOR

he receives request for Credit Investigation Report/Appraisal Report;

SUPERVISOR

he assigns senior credit investigators/appraisers for completion and submission of CIR/AR on a certain date;

SUPERVISOR

he answers credit inquiries from banks, trade firms, bank clients and other financial institutions;

SUPERVISOR

he implement procedures and ascertains that all matters of importance are given top priority;

SUPERVISOR

he supervises the preparation of monthly reports on output,

SENIOR CREDIT ANALYST

he assumes responsibility of the supervisor in his/her absence;

SENIOR CREDIT ANALYST

he evaluation of Cash Flow Projections based on the projected financial statements and feasibility studies of various companies;

SENIOR CREDIT ANALYST

he works continuously on the revision of present and future credit rating sheets of credit evaluation reports.

JUNIOR CREDIT ANALYST

he assist senior credit analyst;

JUNIOR CREDIT ANALYST

he studies financial statements and other documents submitted by the client;

JUNIOR CREDIT ANALYST

he prepare the following reports: credit analysis and rating, financial analysis, cash flow evaluation, and project evaluation

CREDIT ANALYSIS AND RATING

an evaluation of the financial status of the client for evaluating the credit worthiness of the client

FINANCIAL ANALYSIS

a study of the post-operating performance of the client.

CASH FLOW EVALUATION

an analysis and projection of cash generation capacity and future cash requirement of the client.

PROJECT EVALUATION

a complete study of the technical, financial, marketing and management aspects of the client’s project proposal.

APPRAISER

he conducts ocular inspection of properties offered as collaterals;

APPRAISER

he sketches the vicinity and location of the property under appraisal;

APPRAISER

he verifies the authenticity of original/transfer certificates of titles with the Register of Deeds;

APPRAISER

he summarizes in a report form findings on the ocular inspection made,

CREDIT INVESTIGATOR

he conducts checking and evaluation of applicants for credit accommodations

CREDIT INVESTIGATOR

he interviews co-makers and employers of applicants/clients to verify data gathered;

CREDIT INVESTIGATOR

he prepares credit investigation report and other correspondence;

CREDIT INVESTIGATOR

he assist collection group in locating the whereabouts of clients with past- due obligations and real properties registered in their names.

ESTIMATION

all available sources of credit information must be tapped and utilized so that a proper estimation of the credit risk can be obtained.

ENFORCEMENT

collection of accounts should start from the moment they become due.

EVALUATION

the results must be evaluated against company policies and procedures and records must be periodically reviewed and kept up to date.

ADAPTABILITY

the credit man must be able to adjust to circumstances.

ADAPTABILITY

He must be prepared to react to different personalities without losing his correct or balanced disposition.

TACTFULNESS

the credit man must be courteous tempered with sound judgment.

TACTFULNESS

He must be able to listen patiently to details and try to appreciate the views of others and place himself in the shoes of others.

TACTFULNESS

A credit man may reject a customer’s application for credit but still he can retain his goodwill if the rejection is done tactfully.\*

ANALYTICAL ABILITY

the credit man must be able to discern the important parts of the facts gathered and must be able to keep an eye for details and weigh facts objectively and he must be able to arrive at a quick and wise decision.

DECISIVENESS

a credit man must make a decision promptly and with conviction based on facts.

DECISIVENESS

He must be ready to give judgment right away.

FIRMNESS

the credit man must stand with his decisions when made and he must be able to support these with reasonable facts.

ACCOUNTING

is the recording, interpreting and analyzing of financial records.

ACCOUNTING

A credit man must have knowledge of accounting so as to be able to read, interpret and analyze financial statements.E

ECONOMICS

the credit man must be acquainted with basic economics so as to appreciate the movements of business activity such as price changes, banking policies, tax measures, etc.

FINANCE

the credit man must be equipped with a good knowledge of finance because it covers the principles and practice of credit and collection.

BUSINESS LAW

the credit man must have knowledge about legislation related to business such as law on sales, negotiable instruments,

MARKETING

the credit man must have knowledge about new methods, techniques and practices of marketing for this has relations to the credit work of maximizing sales.

OTHERS

the credit man must also have knowledge and understanding of the (a) management principles and practices; and (b) oral and written communication skills.

SUPERVISION OF THE CREDIT DEPARTMENTS OPERATION

To supervise the works of the credit department.

GATHERING AND SORTING OF CREDIT INFORMATION

The credit department, through the credit investigator, gathers and sorts out information about the applicant from internal and external sources.

INTERNAL SOURCES

can be obtained from internal records (data which are in files of the creditor) and from the applicant’s information which could be obtained from personal interview, ocular inspection, mailed questionnaire and analyses of financial statements of the business of the applicants.

EXTERNAL SOURCES

can be obtained from mercantile agencies, trade references, banks, newspaper clippings, court cases, report of competitors, etc.

ANALYZING CREDIT INFORMATION

All information gathered is sent to the credit analyst for him to apply the standard test and measurement for performance.

ANALYZING CREDIT INFORMATION

Here, the non-financial and financial data are critically subjected to analytical tools to determine the credit worthiness of the applicant.

CREDIT CHECKING AND AUTHORIZATION

Verification is made of the applicant’s papers and the authorized officer gives proper authorization/ approval for credit.

RECORD AND FILING

A record of the transaction is made and the credit folder of the applicant is prepared and filed which are from time to time up- dated.

CREDIT ADJUSTMENTS

Adjustments are made in accordance with discount or net credit period.

CREDIT ADJUSTMENTS

This pertains to increasing or decreasing the credit line or extension.

CREDIT FOLLOW UPS AND COLLECTION

When credit is granted, follow-ups, reminders are sent to the debtors on or before the maturity date.

CREDIT FOLLOW UPS AND COLLECTION

Here, payments made are credited and debtors are classified as to their paying habits.

CREDIT OPERATIONS FLOW

In a normal process of loan approval, the cooperative generally observes the following steps:

PRESENCE OF KEY STAFF AND FUNCTIONING CREDIT MANAGEMENT UNITS

To successfully run and manage the credit operations of a cooperative, the following persons and units are greatly needed and must be functioning:

BOARD OF DIRECTORS

he is responsible of maintaining safe productive lending operations in order to protect the funds of the cooperative.

BOARD OF DIRECTORS

he is responsible for the approval of loan policies.

BOARD OF DIRECTORS

he Setting up of operating standards.

BOARD OF DIRECTORS

he Granting lending authority

CREDIT COMMITTEE

he is Responsible for protecting the quality of the coops' loan portfolio.

CREDIT COMMITTEE

he evaluate and approve loan applications.

CREDIT COMMITTEE

he Review all delinquent & problem loans.

CREDIT COMMITTEE

he Recommend appropriate collection/and or remedial actions to the Manager.

MANAGER

Responsible for the day to day management of the coops' lending operations which includes:

LOAN OFFICER

he Responsible for undertaking the details of credit operations

LOAN OFFICER

he Promotes coops' credit facilities/services

LOAN OFFICER

he Analyses and recommends approval of loan applications

LOAN OFFICER

he Obtain all required loan documentation.

LOAN OFFICER

he maintains credit files

CONTINUOUS ORIENTATION AND EDUCATION OF MEMBERS

Enhance the credit worthiness of the members through continuous education by inculcating the value of banking/cooperativism and the importance of credit in banking/coop operations, highlighting its positive and negative effects.

INSTALLATION OF CREDIT MANAGEMENT SYSTEM PRIOR TO CREDIT DELIVERY

Appropriate credit policies and trained personnel prior to actual extension of credit to members will help minimize the occurrence of bad loans/accounts. Institute fines, penalties such as surcharges, foreclosure of collateral,

CONDUCT OF HONEST TO GOODNESS CIBI

This will give a good assessment of the borrowers' loan repayment performance and provide the bank/coop a sound basis for credit decisions.

CLOSER MONITORING OF LOANS AND ESTABLISHING RELATIONSHIP WITH THE BORROWER

Frequent visits and interactions with the borrower will have a two-pronged effect, to wit:

PROVISION FOR INSURANCE

This will help minimize losses for the bank/coop and provide a buffer fund to bank/coop-funded projects which are damaged by natural calamities.

APPROPRIATE LOAN RELEASES

The bank/coop should match or equate the total amount of loan to be granted with the members' past credit performance, and the budgetary requirements of the project, as well as their capacity to pay and staggered disbursement of loan based on the farm plan and budget.

EFFICIENT COLLECTION SYSTEMS

In designing an effective collection system, one must remember the objective of credit management.

CREDIT POLICIES

are formulated by the credit department and these should be approved by the Board of Directors, who in turn may delegate this function to a credit committee or the company president.

GENERAL POLICIES ON CREDIT

Some of the areas where general policies have to be designated are:

APPROVAL AUTHORITY

The decision as to who will approve the loan application will require practical & common sense consideration.

APPROVAL AUTHORITY

This could either be geographical or be based on rank or title.

CREDIT LIMITS

is the maximum amount of credit that could be granted to one borrower.

LOAN TO MARKET VALUE RATIOS

This represents the maximum loan that could be granted to a borrower based on the property’s market value (which is usually 60% to 80%.

PAST DUE LIMITS

This limit is imposed as a performance measurement tool of branches or of the credit & collection department.

TERRITORIAL LIMITS

Areas where credit could be granted are clearly identified based on geographical limits:

LOAN PAYMENT TERMS

should be considered in different aspects such as: pay on demand, payment required immediately after the sale; payments with specific due dates-30, 60, 90 days, interest payments only and balloon payments at the end of the term, amortized payments of equal amounts, etc.

ARTICLE 1956 OF THE CIVIL CODE

“That no interest shall be due unless it has been expressly stipulated in writing”,

ARTICLE 1959 OF THE CIVIL CODE

“That interest due and unpaid shall not earn interest, hence the payment of interest on unpaid interest should be provided in writing in the promissory note, otherwise the unpaid interest is not entitled to more interest.

PAYMENT OF INTEREST

interest is the heart and core of the concept of compound interest.