1. MF Policy Compliance Review Rural Bankers Association of the Philippines- Microenterprise Access to Banking Services (RBAP-MABS) Supervisors Training Course

2. Earlier it was mentioned that two (2) of the most important functions of a supervisor were: B Supervising and monitoring daily AO’s activities and ensuring 100% on time payments by clients I Strictly enforce among account officers operational policies

3. Why does PAR still happen?

4. CAUSES OF PAR  In 98% of the cases, PAR is due to internal causes.  Lack of compliance with and deviations from credit policies – Excessive amounts for repeat loans – Poor CIBI: character and reference checks – Poor monitoring and collection

5. CAUSES OF PAR  Poor internal controls (resulting in fraud)  Poor MIS  Poor Staff training

6. Most of the causes of PAR can be prevented with effective AO supervision from Supervisors and Branch Managers

7. Supervision of AOs There are two main tools in effective supervision: 1.Compliance with Policies Review 2.Portfolio Analysis

8. Documentation Review Objectives and Importance of Loan Documentation 1.Promissory Note 2.Application Form 3.Disclosure Statement (Discount Statement) 4.Co-maker Statement 5.CIBI/Cash Flow 6.Security Agreement 7.Deed of Assignment of Deposits

9. 1.Are AOs complying with the credit policies?If not, what policies are AOs not complying with? 2.How homogeneously are credit policies applied across AOs? Is the lack of compliance the same across AOs?Across branches? 3.Is the lack of compliance the result of bad or inappropriate credit policies? Or policies are appropriate but there are no enforcing mechanisms? Compliance with Policies

10.  If policies are inappropriate they must be modified  But if they are appropriate, the Supervisors and Branch Managers must make sure credit policies are complied with.

11. Compliance with policies (using Supervisor Checklist)  One easy way to check compliance to policies is through the use of a checklist.  The checklist contains the product policies and procedures.  On regular basis, the Supervisor should take sample files at random to check on compliance with policies and procedures.

12. SAMPLE CHECKLIST

14. STEPS IN DOING POLICY COMPLIANCE REVIEW

15. STEP 1: Select 5 client files for AO with PAR 7 >3% and 3 files for AO with PAR 7 <3%. STEP 2: Review each file for compliance following the order in the checklist. Check (√ ) those policies AO is complying with and mark (X) those policies AO is not complying with. STEP 3: Write comments only if necessary STEP 4: In the summary table, map out the lack of compliance and look for consistencies STEPS FOR ANALYZING COMPLIANCE

16. SUMMARY OF COMPLIANCE

17. Compliance with policies (using Supervisor Checklist) LOOK FOR CONSISTENCIES Complied with OR NOT COMPLIED WITH among account officers? Is the non compliance related to the same policies across AOs? Is the non compliance related to the same policies across branches? How homogeneously are policies Is there any co-relation between non compliance by AO and high PAR? What policies may need to be reviewed for quality and effectiveness

18. Compliance with policies (using Supervisor Checklist) IF all or most AOs do not comply consistently with the same policy, the problem may not be with the AOs, but with the policy or with lack of proper supervision from Supervisor, Branch Manager and CRECOM. IF three AOs have different compliance practices, the policies may be good, the problem may be with the AOs not complying or the Supervisor not checking.

19. “If you have all the facts and you do your job well, you don’t need to be a genius to make the right decisions.”

20. Session Exercise Loan Review and Evaluation Process