GENERAL LENDING POLICIES

ACCESS TO CREDIT SERVICES

The cooperative offered credit services to regular members who fulfill the following minimum requirements: has the minimum share capital deposit of P500, has paid the membership fee of P100, and has completed the Pre-membership Education Seminar (PMES). For new members, a minimum savings deposit of P100 and a payment of P300 for Mortuary registration shall be required in addition to the above.
The cooperative may grant credit only to those members who have a good reputation and are creditworthy with good payment history at the cooperative. The credit applicant is required to provide information and references to establish these qualities.
The cooperative may also grant loans/credit to joint venture with associations accredited by the BOD.
The OCCCI provides productive and providential loans to members. The following loan purposes are considered productive credit: small and micro-industry, commerce, livestock industry, service industry and agriculture. Providential credit includes loans for appliances, vehicles, home improvements, emergency, education and hospitalization.

BASIS FOR GRANTING CREDIT

The cooperative’s credit portfolio shall in its entirety, be demandable, so that its recovery should be either in cash or in its cash equivalent. This means credit shall be based on the member’s ability to repay and not solely on the quality of the guaranty offered by the borrower. Cash recovery should be sought by all means possible, before resorting to foreclosing on real property or repossessing other collateral.
The member’s ability to repay will be determined through:.

• An analysis of the member’s business,
• The credit investigation which involves verifying income and expenses,
• Asking neighbours and credit references about the borrower, his repayment habits, and future earnings capacity.
• Reviewing the past payment history at the cooperative, other financial institutions, and moneylenders.
• Determining if after the new loan payment is included in monthly expenses, the borrower still has enough income left over to provide for all of the dependents and pay school fees, or 50% of the monthly income will be considered to determine.

The Loan/Account Officer and the Management must determine if the borrower has enough income left over to support the family and to take care of the new loan payment after deducting the current expenses. This can be done by verifying all income used to qualify for the loan through tax returns, cancelled checks, pay checks, contacting the employer, talking to others in the same business etc. The gross income will be reduced by the taxes paid prior to comparing it to monthly expenses. All monthly expenses are to be obtained and verified where possible. A monthly contingency of 15% will be added to current expenses to insure that the borrower has enough to support the family throughout the month. The number of dependents must also be considered in determining that the family has enough disposable income to support all dependent family members.
The income of a self-employed borrower is often difficult to verify because of the lack of accounting records. The cooperative shall verify the accuracy of the income disclosed on the application.

• Review past payment history at the cooperative and other financial institutions.
• Visit the business – review the level of activity, the quality of the business assets or merchandise, the competence of the employees and the potential borrower.
• Ask others in the same line of work what their average income is and how they think the potential borrower operates their business.
• Review applications of other cooperative borrowers in the same line of work to compare the stated income.
• Require all borrowers with business purpose loans to save at the cooperative so that their deposit and withdrawal pattern can be analyzed to determine average income.

BALANCING RISK AND EFFICIENCY

OCCCI shall exercise due diligence in balancing risk and efficiency through a process of profound the analysis of its credit portfolio. The greater the credit requested the more profound the analysis required. OCCCI shall require duly signed credit investigation report which shall be prepared by the Loan Officer/Credit Analyst and must be duly noted by the Manager. It must be forwarded to the Credit Committee for its further analysis that will be used as basis for the approval or denial of the loan application.

OFFICIAL RESPONSIBILITIES AND APPROVAL SYSTEM

A constant analysis of the member’s real needs shall be made, and new credit products shall be developed or modified in order to ensure a timely and adequate response to the individual situation of each member. The cooperative will be the financial advisor of each and every one of the members, always keeping in mind the principles of sound and safe credit.
The cooperative’s Board of Directors will be responsible for formulating, reviewing and adjusting the credit policy. Any action taken by officers and/or committees resulting from such policy shall only take place with express delegation of the Board of Directors. The Board shall review this policy at least annually and revise it as necessary so that it is reflective of current operations.
The Audit and Inventory Committee (AIC) shall be responsible for ensuring that the loan policy is carried out adequately and that it achieves the goals for which it was created. The committee shall determine if the policy is being complied with by periodically (no less than quarterly) reviewing a sample of loans granted and denied during the period.

There are four authority levels for credit approval:

• Board of Directors – acts on loans outside of the existing policy for new policy formulation purposes (and approves all loans for the credit committee, officers & staff, and P50T above).
• Credit Committee – checks all loan processes and approval if it conforms to the existing policies and procedures. (Acts on all loans except for the above and emergency loans, instant loans with amount above P20T to a maximum of P50T.)
• General Manager - acts on all loans (P20T and below except instant and emergency loans.)
• Management – As authorized by the General Manager, acts on emergency loans and instant loans and all loans fully secured with either CBU or savings or both.
  

Real property, chattel and cooperative deposits (CBU/Savings) may be used to secure a loan.

1. Real Property:

• The maximum loan to value is 70% of the appraised value.
• The current value of the property shall be used to determine the appraised value.
• If the borrower does not have fire or hazard insurance on commercial or residential real state in which a structure is located then the value of the structure can not be used to secure the loan. The loan value can not exceed 70% of the value of the land.
• The deed is registered at the Register of Deeds.

  Only the original owner’s copy of the title is acceptable, not photocopy.
• Management must determine that a duplicate title has not been issued and is not issued through the life of the loan.

2. Chattel

• Acceptable Chattel – new appliances, new and used (in good running condition w/ market value) vehicles, jewelry, tricycles, motorcycles, jeepneys.
• Loan to appraised value maximum; appliances – 50%, vehicles and other forms of transportation – 50%, jewelry – 50% of the appraised value.
• Evidence of Ownership; appliances – certificate of ownership, vehicles – certificate of registration.
• A site inspection to value the chattel is performed for all types of chattel.
• Only original certificate of registration and certificates of ownership are acceptable.
• Management must ensure that the duplicate certificates of registration and certificate of ownership has not been issued and is not issued throughout the life of the loan.
• Owners must have insurance on all the vehicles at least TPL/OD.
• Jewelry – Only gold is acceptable. The jewelry will be kept in the cooperative’s vault for the life of the loan. The jewelry shall be appraised by an expert or someone who has experience determining the value of gold, maybe appraised by a pawnshop with written appraisal report.

3. Capital Build-Up

• Equity or CBU retention is 2.5% on loan amount for old members or multi-timer borrower but for first timer 20% of loan granted.