5 How to Conduct a CIBI 07.17.12

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ACCOUNT OFFICER’S
BASIC TRAINING
How to Conduct CI/BI
Credit Investigation/
Background Investigation :
An Important Tool in Client Selection
What is CIBI?
• CI/BI is a tool used by the bank to gather relevant
information to determine whether an applicant will
qualify for a loan or not.
• The CIBI is a very important step in the lending
process as this helps the bank determine high-risk
loan applicants or the potentially bad borrowers
from getting loans.
3
The Importance of CIBI

A thorough CIBI can prevent loan delinquency
problems and ensure profits.
4
A poorly done CIBI ….
…
“Guess-timates”
“Sleeping on the
job”
can lead to …..
5
Hiding information
loss of income
due to non-collection
of loan installments
… suspension of loan
operations due to
slow rotation of
loanable funds.
6
…. serious loan delinquency can end up
meaning banks must resort to measures
like small claims proceedings.
7
So, why should we conduct a CIBI?
We should conduct a CIBI because we
want to:



Verify if information provided by client in the
loan application are true
Determine character of the applicant, particularly
reputation as a borrower
Determine the applicant’s capacity to pay
8
The CIBI Steps
The following steps are undertaken when
doing the CIBI:
1.
2.
3.
4.
Loan Application
Character/Risk Analysis
Cash Flow Preparation/Analysis
Prepare/Finalize CIBI Report
9
Conducting the CIBI
1st Step : Loan application


The AO interviews the applicant and helps fill out
the Loan Application form
Based on the loan application, the Account Officer
establishes if the applicant meets the bank’s client
eligibility criteria
10
I’m 56 years old
INTERVIEW WITH APPLICANT
What kind of
business do you
have and how long
has it been
operating?
I have a tailoring
shop in the
market. I have
been a tailor for
10 years
Are you
married or
Single?
I am married
My wife is not
employed, but
she has a small
store in front of
our house
We have 3 children,
they all study in
public elementary
school
How old are
you?
Is your wife
working?
How many
children do you
have? Do they
go to school?
I have 2 hectares rice farm
and several chicken
11
What are your agricultural
activities?
Conducting the CIBI
1 – Loan
Application
2 – Client
Selection
2nd Step : Character/Risk
Analysis
AO gathers information from references
to assess character /reputation using
the four indicators of:

Stability
Entrepreneurship
Reputation

Repayment Behavior


12
Sources of Information
1 – Loan
Application
2 – Client
Selection
The AO gathers information by
interviewing:
a) Other microfinance institutions
b)
c)
d)
e)
f)
Suppliers
Co-makers
Landlords
Business & residential neighbors
Barangay officials
13
CREDIT CHECKING WITH
OTHER INSTITUTIONS
BANK VERIFICATION LETTER
Sir/Madam:
Please furnish us with the following information regarding the
borrower’s credit standing. The information shall be treated with
utmost confidentiality.
Name of Borrower _____________________________________
Address : _____________________________________________
1. Type of Loan  Agricultural Loan
 Commercial Loan
 Industrial Loan
 Salary Loan
 Other Loans
2. Date Granted __________________________
3. Maturity Date __________________________
4. Principal Amount _______________________
5. Balance of Loan ________________________
6. Term of Loan __________________________
7. Securities Offered  REM
 Chattel Mortgage
 Deposit Hold-out
 Unsecured Loan
8. How would you describe the paying performance of the borrower?
 All amortizations paid on time
 90% of amortizations paid on time
 Less than 90% of amortizations paid on time
________________________________
Authorized Signature over printed name
Thank you for your attention on this matter.
Very truly yours,
____________________
Loan Supervisor
14
INTERVIEW WITH SUPPLIER
We have been
supplying cloth to Mr.
Cruz for the past four
years
Establish
Establish
if the
frequency
applicantofhas
purchase
a business
Establish
credit
standing
with
supplier;
relationship with the supplier
(input
purchase
frequency
in the Cash
creditforterms
could
indicate
goodFlow)
repayment behavior
He used to buy cloth
once a month but
lately, he’s been
How long has Mr. Cruz
been buying stocks
from your company?
How often does he
buy stocks from
you?
ordering twice
every month
He used to pay in
cash but with his
increased purchases,
we gave him a 45day credit. He pays
Does he purchase in
cash or credit?
us on time.
15
15
INTERVIEW WITH CO-MAKER
Do you know why
he’s applying fo a
loan?
Establish willingness to co-make the loan
Mr. Cruz, the tailor, is
applying for a loan with
our bank and has
named you his comaker
Yes, he told me that he
just got a contract to
make office uniforms and
needed more capital
Yes, Pareng Maning
requested me to comake his loan
He is one of the
oldest tailors in
town and he has
many permanent
customers
How is his tailoring
business doing
Yes, Pareng Maning explained
what acting as a Co-maker
would mean, and I am willing
to help him with his loan
payment if he has any
problems.
If you act as Co-maker, are
you aware that you will have
the responsibility of paying
the loan of Mr. Cruz if he is
unable to make payment?
16
INTERVIEW WITH RESIDENTIAL
NEIGHBOR Maning is my kumpare - he is
I don’t know if Maning has
the godfather of my baby…
he is a very generous person
a loan, but I did notice a
collector from an appliance
store going to their house
every month
Maning has been our
neighbor for more than
15 years. He and his
family are well-liked in
the neighborhood.
Do you know
Manuel Cruz the
tailor?
Would you know
if Mang Maning
has any loans?
17
INTERVIEW WITH BARANGAY OFFICIALS
Based on our records, no complaint has been filed
against Mr. Cruz with respect to collection of debts.
18
Based on the tools and procedures available,
the Account Officer should decide during the
loan application process – whether to
recommend the the applicant for a loan or not.
NOTE:
The CI/BI is discontinued and the loan application rejected, if at any
point in the CI/BI process it is validated that the applicant does not
meet the minimum loan criteria.
19
Conducting the CIBI
1 – Loan
Application
2 – Client
Selection
3rd Step : Repayment Capacity
Analysis
Character/Risk
Analysis

3 – Cash Flow
AO uses the Cash Flow Analysis
to determine the maximum loan
entitlement an applicant can
afford to pay.
20
Is this the
business
approaching a
lean or peak
season?
What is the general
business condition
in the area?
Does the applicant
have a lot of
customers?
What do business
neighbors say
about the
applicant’s
reputation?
21
CHECK BUSINESS AND HOUSEHOLD BILLS
Electric
Bill
Water Bill
Telephone /
Cellphone
Bill
22
Conducting the CI/BI
1 – Loan
Application
2 – Client
Selection
Character/Risk
Analysis
4th Step : Prepare / Finalize CI/BI
Report
3 – Cash Flow
4 – Finalize CI/BI
23
Client Selection Process Flow
Loan Application
NO
STOP PROCESS
YES
Does the client
meet the
loan criteria?
CIBI
YES
Character & Repayment
Capacity Analysis
Does the client
meet the
loan criteria?
NO
Finalize CIBI
Report 24
STOP PROCESS
TO SUMMARIZE  Character is the primary basis for evaluating loan
applications and establishes whether the applicant
deserves a loan
 Repayment Capacity establishes the maximum loan
entitlement an applicant can afford to pay
25
Thank you
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