For cooperatives who face a lot of risks, financial shields to delinquency must always be in place. Remedial management must also be employed to prevent the occurrence of, and bring about prompt and satisfactory conclusions to problem accounts.
The final sessions of the credit competency training with seven credit cooperatives from Northern Luzon were handled by SEDPI president and microfinance expert Vince Rapisura. The training was held in Northview Hotel, Laoag City, Ilocos Norte on February 21, 2020. The training aims to reduce delinquency and improve collection to ensure financial sustainability.
Participants were able to learn about financial shields to delinquency, remedial management and growth strategies, and the SEDPI microfinance model.
Sir Vince discussed the financial shields to delinquency, mainly insurance, savings as collateral, share capital as collateral, and loan loss reserve. The participants learned about the best practices of SEDPI such as using savings as collateral and making clients save 20% of their loan amount.
He also shared that SEDPI writes off loans annually but encourages its financial inclusion officers to keep collecting written off amounts by making 50% of these collections included in their bonuses. In this way, SEDPI is hitting two birds in one stone: still able to collect written off loans while its staff remains high in morale.
The next discussion was concerned on the remedial management and growth strategies. Sir Vince discussed default events: payment, covenant, representation, insolvency, and seizure defaults. The participants were trained on major remedial management strategies including restructured loans, refinanced loans, and other workout remedial strategies including compromise settlement, assignment of receivables, penalties or other charges, liquidation, and litigation.
SEDPI does not restructure loans since this gives additional interest for the clients. He also emphasized that in refinancing loans, where you will give more loans for the business to continue, a thorough reinvestigation is necessary since this might indicate that there was an error in your previous analysis on the amount needed for the business of the client.
Participants learned that the remedial strategy for portfolio-at-risk is reduction of arrears and growth of portfolio.
Sir Vince shared the SEDPI microfinance model and elaborated on SEDPI’s partnership with SSS and Pag-IBIG. He said that, “We partnered with Pag-IBIG and SSS because we believe that we need to collaborate with these institutions to eradicate poverty; we partnered with them to provide services to poor populations.”
Social Enterprise Development Partnerships, Inc. (SEDPI) was the successful bidder for this project under the Department of Agriculture’s Agricultural Credit Policy Council (ACPC). This was the first of six batches that were also held in Cagayan de Oro, Davao, Iloilo, Koronadal and Laguna.
The trainings were successful with several good feedback from the participants. SEDPI puts lots of its hopes in these trainings as it is not only equipping the cooperatives with necessary knowledge and skills, it also serves as an avenue where the cooperatives, together with SEDPI, strengthen their commitment in the vision of eradicating poverty and ultimately, in increasing the quality of life for the farmers.
