MAUSWAGON PLUS LOAN PRODUCT
•DAY 4
1
KPI AND STANDARD CASE LOAD OF MPLUS TS
KPI AND
STANDARD CASE
LOAD
TOUCHING
PEOPLE
SHAPING THE
FUTURE
LOOKING BACK MOVING FORWARD
Key Performance Indicator
Target
# of Approaches
2/day; 40 per month
# of New Loans
5
Conversion Rate
12.5%
Number of New Loans per Month
5
Loan Release Size – NL
80,000
Loan Release Size
80,000
Loan Release Size – RL
100,000
Average Term
12 months
Caseload to Breakeven
50
Staffing
1 MPlus TS; 1 CE
Collection Efficiency
98%
Minimum Caseload
60
Loan Loss Provisioning
2%
Maximum Caseload
120
Operating Expenses
Fin Cost:
Breakeven Loan Portfolio
P2,501,404
Average Loan Portfolio Size
P50,028
Minimum Loan Portfolio
P3,000,000
Maximum Loan Portfolio
P5,000,000
Collection Efficiency
98%
PAR
2%
08/04/2022
Break Even Assumptions
Interest on CBU,RemCo
Admin:
Gasoline, Supplies
Motorcycle Permits/Ins
Documentary Stamps
Repairs, Miscellaneous
Capex
Laptop for CE, Phablet for TS,
Motorcycles, Helmet, Chairs
Branch Indirect Cost
Main Office Indirect Cost
15% (DH, AH, BM supervision)
Assumed at 0% as, incorporated in
Branch Allocation
CONTENT
09:00-10:00-Introduction/Refresher on Day 3
10:00-10:10-Ice Breaker
10:10-12:00-Understanding on Loan Deliquency
12:00-01:00-Lunch
01:00-01:10-Ice Breaker
01:10-02:00-Mauswagon Plus Form Discussion
02:00-03:00- Review
03:00-03:10- Ice Breaker
03:10-04:00-Review
04:00-04:30-Exam
4
Understanding Loan
Delinquency
Session Objectives
• Understand the basic concepts of zero tolerance
and delinquency
• Know the costs and causes associated with
delinquency
6
What is Loan Delinquency?
Any loan with a missed
amortization of even
one day is a delinquent
account.
7
What is Zero Tolerance?
• Zero tolerance means NO LEVEL OF DELINQUENCY IS
ACCEPTABLE
• It is the attitude of the bank management & staff towards
loan delinquency – no level of late payment is acceptable.
It is an institutional culture in which late payments are
totally unacceptable
• The bank will aggressively pursue past due clients,
whatever the cost, to establish and maintain zero
tolerance against loan delinquency.
Effects of Delinquency
• Loan delinquency can weaken and ruin a lending
institution
• Unless aggressively controlled, delinquency can
spread and worsen – leading to high levels of
default
• Pursuing the collection of delinquent loans swiftly
and aggressively facilitates the development of a
strong credit discipline among the clients
9
Characteristics of Delinquency
• Delinquencies should be seen as direct costs to the
bank
• Delinquency and loan losses imply postponed
income, lost income and lost portfolio to the bank
• Measures aimed at reducing delinquency are
costly.
10
What makes loan delinquency distinct from other
problems?
• Cost of delinquency is hidden
• Lenders tend to attribute delinquency to
external factors
• Delinquency is contagious
11
What are the costs of delinquency to
the bank?
12
The Costs of Delinquency
• Quantifiable Costs
• Non-quantifiable Costs
13
Quantifiable Costs
Impact on Bank
Impact on Borrower
Cost Structure
Additional cost
• Collection cost
• Loan Loss Provision
• Legal Fees
• Penalties & surcharge
• Legal Fees
• Increased interest rates
Income
• Delayed Income
• Slower portfolio rotation
• Slower portfolio expansion
Financial Condition
• Decrease in bank’s resources
• Impacts on bank’s liquidity
14
Non-quantifiable Costs
Impact on Bank
• Deterioration in Staff
morale
• Inability to access
funds for portfolio
expansion from
external sources
Impact on Community
• Breakdown of credit
discipline among
clients, thus, delaying
the development
process


Impact on Microentrepreneurs
Less access to
formal credit –
banks will be
reluctant to lend
Damage to
delinquent
borrower’s
reputation and
business
• Reluctance to lend to
the microenterprise
sector
15
Why is delinquency not acceptable?
 It reduces profitability
 It reduces the bank’s competitiveness
 It negatively affects the bank’s image in
the community
 It can lead to bank failure
16
What causes
delinquency?
17
2 Views on Delinquency
• Traditional View (Delinquency is caused by
uncontrollable factors)
• Modern View (Delinquency is caused by
controllable factors)
18
Traditional View
• Uncontrollable Events:
Natural Disasters
Government Policies
Illness/death in the
family
Slowdown in the
growth of the local
economy
• Mitigating Measures:
Emergency grace period
on outstanding loans
Emergency or insurance
funds
Smaller loans sizes &
shorter terms
Client’s deposit
Restructuring &
refinancing (only when
absolutely necessary)
19
Modern View
• Factors within the control of the bank that
contribute to loan delinquency:
 Poor product design
 Poor service delivery
 Poor client selection
 Poor loan management
 Poor credit discipline
20
Causes of Delinquency
Factors
1. Poor Product
Design
Characteristics
• Automatic step-up increases in loan
amount
• Loan term and payment schedule do
not match the borrower’s cash
pattern
• Lack of enforcement of penalty
sanctions for late payments
21
Causes of Delinquency
Factors
2. Poor Service
Delivery
Characteristics
• Delays in loan releases, especially
repeat loans
• Account officers lack training on
how to market, evaluate, and
manage loan account
22
Causes of Delinquency
Factors
3. Poor Client
Selection
Characteristics
• Lack of information, or improper
CIBI which lead to incomplete or
misleading information
• Accommodations – giving special
treatment to friends or preferred
clients
• Erroneous or lack of cash flow
analysis
• Business risk not properly analyzed
23
Causes of Delinquency
Factors
4. Poor Loan
Management
Characteristics
• Lack of, or inaccurate MIS to track
reports on installments due,
outstanding balance, aging of
delinquent loans, and portfolio-atrisk
• Lack of compliance to policies
• Lack of follow-up of delinquent
accounts
24
Causes of Delinquency
Factors
4. Poor Loan
Management
Characteristics
• Infrequent client visits to detect
early signs of delinquency
• Lack of supervision of the account
officer
25
Causes of Delinquency
Factors
5. Poor credit
discipline
Characteristics
• Bank management and staff are
tolerant of past due loans due to a
false notion that:
- Large spreads give allowance for
past due
- Past due means outstanding loans
that are past maturity
26
Summary
• High levels of delinquency should not be blamed
entirely on the borrower group, but on the credit
institution itself.
• To mitigate the effects of uncontrollable factors, the
bank should be able to adjust its methodology, and
quickly identify and resolve the factors on a caseto-case basis.
• Perception of the costs and benefits of timely
repayment affect borrower repayment behavior.
27
Summary
• Controllable factors should be firmly established
within the bank’s organizational structure.
• The refinancing and re-scheduling of delinquent
loans should be used sparingly in specific,
justifiable cases.
• Creating a culture of zero tolerance for delinquent
loans within your bank starts with YOU.
28
“Credit is charity, but charity in the name of credit
without discipline will destroy poor and will never
help them!”
29
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