I. Title: A Draft Policy On credit / Lending application of CSMPC
1. To generate funds and extend credit to the members for productive and provident purposes (Article 6 (2) of R.A. 9520); 2. To provide goods and services to its members to enable them to attain increased income, savings, investments, productivity and purchasing power, and promote among themselves equitable and distribution of net surplus through maximum utilization of economies of scale, cost-sharing and risk-sharing (Article 7 (a) Objectives and Goals of a Cooperative); 3. To provide optimum social and economic benefit to its members (Article 7 (b) of R. A. 9520) (Article 7 (b) Objectives And Goals of Cooperatives); 4. To insure against losses of the members (Article 6 (7) of R.A. 9520); 5. To ensure that all cash collections are deposited in accordance with the policies set by the Board of Directors (Article V, Section 7 (3) (a) of the Cooperative Bylaws); 6. To ensure that the Treasurer shall have the custody of all funds, securities, and documentations relating to all assets, liabilities, income and expenditures and such other functions as may be prescribed in the Bylaws or authorized by the General Assembly (Article V, Section 7 (3) (b-f) of the Cooperative Bylaws); 7. To provide assistance to members who shall avail the credit/loan and other financial assistance and services to its members for productive and provident purposes (Article 23 (a) of R.A. 9520).
A. Definition of Terms:
1. Share Capital refers to the unit of capital, the value of which is stated in the Articles of Cooperation (Article IX, Section 7 of the Cooperative Bylaws); 2. Capital Paid-Up shall refer to the money of a member deposited in the cooperative; 3. Time Deposits refer to the a fixed period of time for a fixed rate of interest may be accepted by the cooperative (Article IX, Section 3 (b) of the Cooperative Bylaws); 4. Members shall refer to the legally registered members of the cooperative as provided in Article III, Section 1 of the Articles of Cooperation of CSMPC); 5. Loan Officer refers to the assigned officer in Lending Division to process the Loan Application Form of members; 6. CRECOM shall refer to the committee to check and validate the share capital and accounts payable by the members; 7. Manager shall refer to the Chief Executive Officer of the entire operations of the cooperative (Article V, Section 14 of the Cooperative Bylaws; 8. BOD, Chairman shall refer to the head of the Board of Directors who formulates policies in the cooperative; 9. Collateral is a borrower’s pledge of specific property to a lender, to secure repayment of a loan. ( Wikipedia.) 10. Charges on loan shall refer to agreed upon interest rate, service charge, penalty, discount, and such other charges incidental to lending activity (R.A. 9474, Rule 2 (g)); 11. Debtor shall refer to a borrower or person granted a loan by a lending company (R.A. 9474, Rule 2 (h); 12. Co-Maker is a person, natural or juridical who binds himself jointly to just guarantee in the payment of loan of the primary debtor; 13. Social Audit refers to the Cooperative Committee to assess the cooperative social impact and ethical performance vis-à-vis stated mission, vision, goals and code of social responsibility.
B. IMPLEMENTING Guidelines and Procedures:
1. Only the regular members In Good Standing (MIGS) of CSMPC Consumer and at the same time a registered member of the Lending Division shall avail the lending program of the cooperative;
2. An applicant must sign the Lending Application Form (LAF) which will be provided by the Loan Officer as scheduled by the Lending Division. Prior to signing the said form, the applicant will be informed in the terms and conditions in the granting of loans e.g. three (3) month short-term loan up to 200% from the Fixed deposit, maximum amount is Php 4,000.00 that may be granted to a member, rate of interest is 2% per month, fines for payment in default shall be 5% to be computed from the member’s remaining balance after five (5) days Grace period and maximum period of repayment is four (4) months equivalent to twenty percent (20%).
3. The loanable amount if granted shall be deducted by 5% for the Retention set by the Board as a continuous Capital Build-Up (CBU) program of the cooperative, provided further, the principal shall also be deducted by 3% for the Surcharges;
4. If the loaner fully pays his/her loan within a period of one week, his/her principal amount to be paid shall be added by 0.005; 0.01 in 2 weeks; 0.015 in 3 weeks; 0.02 in 1 month; 0.025 in 1 month & 1 week; 0.03 in 1 month & 2 weeks; 0.035 in 1 month & 3 weeks; 0.04 in 2 months; 0.045 in 2 months & 1 week; 0.05 in 2 months & 2 weeks; 0.055 in 2 months & 3 weeks; and 0.06 in 3 months.
5. If the loaner pays his/her loan weeky in three (3) months, the computed rate of interest is set to 0.005 per week based from the remaining balance of the loaner;
6. If the loaner pays his/her loan every 15th and 30th in three months, the computed rate of interest is set to 0.015;
7. If the loaner pays his/her loan every month in three months, the computed rate of interest is set to 0.02;
8. In case of default payment, 0.05 rate of interest per month is added to the remaining balance of the loaner and if he/she promises to settle his or her default loan amount weekly, the computed rate of interest shall be 0.0125. This default payment shall be executed after 5 days of Grace period. And the maximum period of repayment is four (4) months equivalent to 20%;
9. In case the payment shall not be made at maturity, the loaner shall pay for the cost of collection e.g. the transportation expenses;
10. In case of judicial execution of his/her loan obligation, the debtor shall pay the attorney’s fee in the amount equal to twenty (20%) of the principal and interest due on his/her loan;
11. The loan clerk shall ask the loan applicant for any clarification before the form shall be forwarded to the Credit Committee;
12. The Loan Clerk shall forward the duly accomplished Lending Application Form (LAF) to the Credit Committee (CRECOM);
13. The Credit Committee (CRECOM) is in charge for the checking and validation of member’s Share Capital and or Capital Paid-Up, and Accounts Receivable (AR) both in Consumer and in Lending divisions. The CRECOM Chairman shall sign the form right after of his/her thorough evaluation of member’s share capital and liabilities in the previous and current fiscal years;
14. If the account liabilities of the loan applicant are of equal or even bigger than his/her Share Capital and Fixed Deposits, the said applicant can not apply for a loan but shall submit his/her reasons in letter forms to the Ethics Committee;
15. After a careful evaluation of member’s previous and current accounts and or liabilities, the member shall be informed by the CRECOM Chairman or any officer of the committee of whether he/she could avail the proposed loan and if he/she is qualified, therefore, a collateral is to be personally checked and shall be carefully evaluated by the Loan Officer (Article X, Section 3 of CSMPC Amended Bylaws). The Loan Officer shall sign the form and ask the member-applicant to look for any of the registered or regular members that would serve as a co-maker or guarantor of the said loan;
16. No director or committee member shall vote on a loan requested by a member of his or her family, natural or by affinity to the third degree; or on loan requested by a person who owns a debt to him/her or to any member of his/her family; neither can he/she become a co-maker, surety nor endorser on any loan contracted with the cooperative. The application for a loan by a member of the Credit Committee shall be subject to the approval of the Board of Directors (Article X, Section 7 of CSMPC Amended Bylaws);
17. The manager shall re-check and re-validate the lending application of the member and shall sign the form for approval;
18. All Lending Application Forms shall be signed by the Chairman of the Board of Directors.
19. After the Lending Application Form (LAF) has fully signed by the Member-Applicant or Debtor, CRECOM, Loan Clerk, Co-Maker, Manager, Chairman of the Board of Directors, the Treasurer must disburse the approved loan amount to the Member-Applicant himself/herself or through his/her representative, preferably the Loan Clerk. And the disbursed loan amount shall be reflected in the journal;
20. The Treasurer or the Loan Clerk shall issue a Receipt stating only of Loan Retention and Surcharges to the loaner or debtor;
21. The Treasurer or the Loan Clerk shall provide one (1) copy of the Lending Application Form (LAF) to the Debtor; and one (1) copy for the cooperative; Provided further, that the Consolidation or Summary of Transactions in the Lending Operation shall be copy-furnished to the Audit Committee (AC) considering the Policy on Social Responsibility (Section 2, IRR of R.A. 9520, otherwise known as the Cooperative Code of 2008).
22. In case of a violation committed by an officer or employee or member, a complaint for irregularities or violations shall be filed at the Ethics Committee in any calendar month for investagation. The recommendation of the committee shall be endorsed to the Board if there is no disputing party; and if there’s a violation with disputing parties, the documented complaint shall be endorsed to the Conciliation and Mediation Committee with the presence of disputing parties for amicable settlement. However, the penalty of such violation shall be decided by the Board via a resolution to be attached in the memorandum and these shall be endorsed to the Manager for the implementation of the penalty.
C. Penalty of Violation:
Anybody who violates this policy shall be liable for Written Reprimand in the first offense; Suspension in one (1) to two (2) working days without pay in the Second Offense; and Suspension from Work in 3 regular working days without pay in the Third Offense. Beyond these violations stated is subject for Involuntary Termination as stipulated in Article III, Section 9 (c) (ii) and (iii) that state … When he/she has continuously failed to comply with his/her obligations and when he/she has violated any provision of this By-laws and the rules promulgated by the cooperative as provided by Republic Act 9520.
IV. Separability Clause:
Should any part of this policy is found inconsistent with existing laws, rules, and regulations, the remaining guidelines and procedures hereof shall remain in full force and effect.
The General Manager shall oversee the overall day to day business operations of the cooperative by providing general direction, supervision, management and administrative control over all the operating departments subject to such limitations as may be set forth by the Board of Directors or the General/Representative Assembly (Rule 7, Section 4.9).
This policy shall take effect fifteen (15) days following the approval of the Board of Directors and posting of this policy in three (3) public areas where the cooperative operates.
Article 6 (2) of R.A. 9520 Philippine Cooperative Code of 2008 Article 6 (7) of R.A. 9520 Philippine Cooperative Code of 2008 Article 7 (a-b) of Objectives and Goals of a Cooperative Article 7 (b) of R. A. Philippine Cooperative Code of 2008 Article V, Section 7 (3) (a) of the Cooperative Bylaws of CSMPC Article V, Section 7 (3) (b-f) of the Cooperative Bylaws of CSMPC Article IX, Section 7 of the Cooperative Bylaws of CSMPC Article IX, Section 3 (b) of the Cooperative Bylaws of CSMPC Article III, Section 1 of the Articles of Cooperation of CSMPC Article V, Section 14 of the Cooperative Bylaws of CSMPC R.A. 9474, Rule 2 (g) IRR Lending Company Regulation Act of 2007 R.A. 9474, Rule 2 (h) IRR Lending Company Regulation Act of 2007