1. Managing Delinquency Training Different Strokes for Different Delinquency Phase Session 3

2. Zero Tolerance Against Delinquency Alarm Signal System What to do at the Onset of Delinquency

3. Objectives on Session: Different Strokes for Different Delinquency Phase  Discuss indicators or “alarm signals” of delinquency  Review strategies to respond timely and effectively to these alarm signals to prevent delinquency from escalating At the end of the session, account officers should be able to better detect causes of delinquency and have a “toolkit” of measures to apply to respond to and address delinquency

4. Zero Tolerance against Delinquency  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 clients with missed payment, whatever the cost, to establish and maintain zero loan delinquency.

5. Delinquency is not acceptable? Why Delinquency is 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.

6. Delinquency Alarm Signals What to do at the Onset of Delinquency

7. Workshop re Topic on Different Strokes for Different Delinquency Phase Group participants into 6. List down bank’s specific action for the following: I. Delinquency Alarm Signal 1 II. Delinquency Alarm Signal 2 III. Delinquency Alarm Signal 3 IV. Delinquency Alarm Signal 4 V. Delinquency Alarm Signal 5 VI. Delinquency Alarm Signal 6 VII. Hardened Accounts

8. Delinquency Alarm Signals : Alarm Signal No. 1 - Payment is delayed one (1) day (so on & so forth) Actions to be Taken Account OfficerMFU SupervisorBranch ManagerCredit Committee.

9. Delinquency Alarm Signals : Alarm Signal No. 1 - Payment is delayed one (1) day Actions to be Taken Account OfficerMFU SupervisorBranch ManagerCredit Committee Determine cause of non-payment and informs Supervisor and BM Monitor & follow up action taken by AO to effect loan payment. Collect from spouse or co-maker Follows up loan payment within 24 hours of default and asks borrower to pay penalty fee

10. Delinquency Alarm Signals : Alarm Signal No. 2 - Payment is delayed three (3) days Actions to be Taken Account OfficerMFU SupervisorBranch ManagerCredit Committee Speak with spouse/co- maker and arrange payment Supervisor accompanies AO during visit to client Monitors progress of actions taken by MFU re: clients with delayed payments Withdraws funds from client’s mandatory savings to cover loan payment ? Reports clients with delayed payments during weekly CreCom meeting

11. Delinquency Alarm Signals : Alarm Signal No. 3 - Payment is delayed one (1) week Actions to be Taken Account OfficerMFU SupervisorBranch ManagerCredit Committee AO (together with Supervisor & BM) deliver 1 st Warning Letter Supervisor signs 1 st Warning Letter; accompanies AO in delivering letter BM signs 1 st Warning Letter Monitors action taken by MFU and BM on delinquent accounts Demand payment of delinquent installment AO validates reason for default BM considers re- scheduling payment, based on AO verification of reason for default.

12. Delinquency Alarm Signals : Alarm Signal No. 4 - Payment is delayed two (2) weeks Actions to be Taken Account OfficerMFU SupervisorBranch ManagerCredit Committee AO delivers 2 nd Warning Letter Supervisor signs 2 nd Warning Letter BM signs 2 nd Warning Letter Monitors action taken by MFU and BM on delinquent accounts Demand payment of delinquent installment Provides CreCom weekly update on PAR collection efforts BM goes with AO to visit client BM informs client of drastic measures that the bank will take (blacklist client, file case in Barangay court, enforce Security Agreement/CM)

13. Delinquency Alarm Signals : Alarm Signal No. 5 - Payment is delayed three (3) weeks Actions to be Taken Account OfficerMFU SupervisorBranch ManagerCredit Committee AO delivers 3 rd /Final Warning Letter signed by Branch Manager Implement “drastic measures” indicated in Signal #4. Monitors implementation of “drastic measures” indicated in Signal #4 Advise client to talk to bank management to avoid legal action, other client losses option to re-schedule payments Implement “drastic measures” indicated in Signal #4.

14. Delinquency Alarm Signals : Alarm Signal No. 6 - Payment is delayed four (4) weeks Actions to be Taken Account OfficerMFU SupervisorBranch ManagerCredit Committee File a legal complaint at the barangay court. Accompany the AO in the barangay and monitors the legal action, if any. Monitor the action taken in the barangay or with corporate lawyer If client refuses to appear in the barangay court, endorse the account to the bank’s legal counsel for collection or filing of appropriate action

15. Classify the accounts as to probability of collection Account Officers prepare Status Report Supervisors validate contents of report. -Visit the client. -Check if all alarm signal actions were taken on time. -Recommend next action to manager. NameDate Disbursed Maturity Date Loan Amt Loan Outstandin g Reason for Default Willingness to Pay Actions Already Taken Date of last visit

16. WILLINGNESS TO PAY CAPACITY TO PAY RECOMMENDED ACTION Yes Same as Cashflow upon application Pursue collection Less than the Cashflow upon application Supportive Measures: 1.Extension of payment 2.Payment arrangement schemes 3.Shared payment with co-makers YesNoWrite-off No Write-off NoYesLitigate

17. WILLINGNESS TO PAY CAPACITY TO PAY RECOMMENDED ACTION Yes Same as Cashflow upon application Pursue collection Less than the Cashflow upon application Supportive Measures: 1.Extension of payment 2.Payment arrangement schemes 3.Shared payment with co-makers YesNoWrite-off No Write-off NoYesLitigate

18. WILLINGNESS TO PAY CAPACITY TO PAY RECOMMENDED ACTION Yes Same as Cashflow upon application Pursue collection Less than the Cashflow upon application Supportive Measures: 1.Extension of payment 2.Payment arrangement schemes 3.Shared payment with co-makers YesNoWrite-off No Write-off NoYesLitigate

19. WILLINGNESS TO PAY CAPACITY TO PAY RECOMMENDED ACTION Yes Same as Cashflow upon application Pursue collection Less than the Cashflow upon application Supportive Measures: 1.Extension of payment 2.Payment arrangement schemes 3.Shared payment with co-makers YesNoWrite-off No Write-off NoYesLitigate

20. WILLINGNESS TO PAY CAPACITY TO PAY RECOMMENDED ACTION Yes Same as Cashflow upon application Pursue collection Less than the Cashflow upon application Supportive Measures: 1.Extension of payment 2.Payment arrangement schemes 3.Shared payment with co-makers YesNoWrite-off No Write-off NoYesLitigate/ Legal Actions

21. Different Strokes for Different Delinquency Phase End of Session 3 Thank You!!!