Case Study Vifel Coop
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I. II.
III. IV.
TITLE OF THE CASE: Vifel Cooperative Bank TIME CONTEXT: November 2019 PERSPECTIVE: Bank manager of Vifel Cooperative Bank CENTRAL ISSUE: Failure/ default of members in paying their loans that may result to cash flow problems
V. STATEMENT OF OBJECTIVES:
To find out the factors that affects the debt collection of the bank To make recommendations for the improvement of debt collection of customers
STRENGTH
WEAKNESSES
Managed by an aggressive and dynamic bank manager Employees who are knowledgeable in banking , trusted , responsible and committed to their work. Continuous increase of members
Lack of knowledge of members in handling finances Non-paying members No pre-screening of members on their ability to pay the loan Excessive outflow of cash due to no credit limit
OPPORTUNITIES
THREATS
Increase of members and wide range of banking services provides opportunity for future expansions. Build relationships with influencers that can increase the number of members in the coop Economic growth that leads to members not defaulting in their loans and an increase in debit balance of members
A decline on the economy may result to an increase of members who will default their payments of their loans Entry of new competitor ( like kapq) which provides higher returns than the bank Faces threat in running out of capital due to non-paying members
1. 2. 3.
4. 5. 6. 7. 8.
Pre- screen of members on their ability to pay before availing a specific loan Conduct seminars in handling finances Make a policy on a credit limit of every member, the more the member is a consistent payer, the higher his/her credit limit. And a member who has an outstanding loan will not be able to avail another loan unless he/she pays his/her outstanding loan Make a contact team which sets a friendly reminder to customers in the payment of their loans. Evaluate the aging of receivables and pay attention to the customers whose loan payments are already past due Increase interest rates on loans that are way past due Offer discount loans to customers who pay early Create an online payment processing for easy payments.
CRITERIA
WEIGH T
Pre-screen of customers before taking a specific loan
Conduct seminars in handling finances
Make a policy on the credit limit of every member
Make a contact team which sets a friendly reminder of payments
Rating
Total
Rati ng
Total
Rating
Total
Ratin g
Total
1. Implementation
4
5
20
3
12
4
16
3
12
2. Risk
4
5
20
5
20
4
16
3
12
3. Cost
4
4
16
3
12
4
16
3
12
4. Benefit
4
5
20
5
20
5
20
5
20
5. Affectivity
4
5
20
5
20
5
20
4
16
Grand Total
20
24
96
21
84
22
88
16
72
CRITERIA
WEIGHT
Evaluate the aging of receivables
Increase interest rates on loans that are way past due
Offer discount loans to customers who pay early
Create an online payment processing for early payments
Rating
Total
Ratin g
Total
Rating
Total
Rating
total
1. Implementation
4
4
16
3
12
3
12
3
12
2. Risk
4
4
16
2
8
3
12
4
16
3. Cost
4
4
16
4
12
3
12
3
12
4. Benefit
4
4
16
4
12
4
16
4
16
5. Effectivity
4
3
12
3
12
4
16
4
16
Grand Total
20
19
76
15
56
17
68
18
72
In implementation, 1 being the hardest to implement and 5 as the easiest to implement In risk, 1 being the most risky, and 5 as the least risky In cost, 1 is the most costly, and 5 is the least costly For benefit derived, 1 is least beneficial and 5 as the most beneficial For Effectivity , 1 for least effective, and 5 with highest effectivity
The main problem of Vifel Cooperative Bank is the default payments of members .This may be due to the fact that the members were not pre screened before taking a specific loan Thus, some members availed the loan with less capacity to pay. And finally members has not been trained in handling their finances. These issues might be the reasons why members default on their loan payments
Currently, Vifel Cooperative has a problem with its debt collection, customers are defaulting their payments and their reason is the lack of income and knowledge in handling finances , and with that, we made an alternative course of action and picked the best one, and we think that Pre-screening of members before taking a specific loan is the first thing the manager should do, then the manager should set a credit limit depending on the customers credit rating, conduct seminars in handling finances, evaluate existing customer credit accounts, establish a contact team, create an online payment processing, offer discount loans on those who pay early, increase interest rate on loans that are way past the credit period, and periodic evaluation of the chosen actions.
ACTIVITIES
OBJECTIVES
DIVISION
PERSON
COST
Pre screen of customers
To check the capacity of the customers in paying the specific loan
Information manageme nt
Information manager
Make a policy on credit limits
To limit the amount of money the customer can borrow depending on its credit rating
Loan servicing department
Loan officers Estimate d xxx
1 month
Conduct seminars in handling finances
To educate the members in handling their finances
Wealth manageme nt department
Wealth Estimate manageme d xxx nt professionals
1 month
Evaluate existing customer credit accounts
To determine the customers who’s payables are already past due
Accounting department
Chief financing officer
Estimate d xxx
3 weeks
Establish a contact team
To remind the customers of their payables
Customer service department
Customer service manager
Estimate d xxx
3 month s
Estimate d xxx
TIME 1 week
ACTIVITIES
OBJECTIVES
DIVISION
PERSON
COST
TIME
Create an online payment processing
For easy payment of loans
Electronic Banking Department
It specialist
Estimated xxx
6 months
Offer discount loans on those who pay early
To encourage the members to pay their payables early
Loan servicing Loan officers department
Estimated xxx
3 months
Increase interest rates on loans that are past the credit period stipulated
To encourage the members to pay their payables early
Loan Servicing Department
Loan Officers
Estimated xxx
3 months
Periodic evaluation of the chosen actions
To assess if the chosen actions are effective
Executive department
Bank Manager
Estimated xxx
Every year
III. IV.
TITLE OF THE CASE: Vifel Cooperative Bank TIME CONTEXT: November 2019 PERSPECTIVE: Bank manager of Vifel Cooperative Bank CENTRAL ISSUE: Failure/ default of members in paying their loans that may result to cash flow problems
V. STATEMENT OF OBJECTIVES:
To find out the factors that affects the debt collection of the bank To make recommendations for the improvement of debt collection of customers
STRENGTH
WEAKNESSES
Managed by an aggressive and dynamic bank manager Employees who are knowledgeable in banking , trusted , responsible and committed to their work. Continuous increase of members
Lack of knowledge of members in handling finances Non-paying members No pre-screening of members on their ability to pay the loan Excessive outflow of cash due to no credit limit
OPPORTUNITIES
THREATS
Increase of members and wide range of banking services provides opportunity for future expansions. Build relationships with influencers that can increase the number of members in the coop Economic growth that leads to members not defaulting in their loans and an increase in debit balance of members
A decline on the economy may result to an increase of members who will default their payments of their loans Entry of new competitor ( like kapq) which provides higher returns than the bank Faces threat in running out of capital due to non-paying members
1. 2. 3.
4. 5. 6. 7. 8.
Pre- screen of members on their ability to pay before availing a specific loan Conduct seminars in handling finances Make a policy on a credit limit of every member, the more the member is a consistent payer, the higher his/her credit limit. And a member who has an outstanding loan will not be able to avail another loan unless he/she pays his/her outstanding loan Make a contact team which sets a friendly reminder to customers in the payment of their loans. Evaluate the aging of receivables and pay attention to the customers whose loan payments are already past due Increase interest rates on loans that are way past due Offer discount loans to customers who pay early Create an online payment processing for easy payments.
CRITERIA
WEIGH T
Pre-screen of customers before taking a specific loan
Conduct seminars in handling finances
Make a policy on the credit limit of every member
Make a contact team which sets a friendly reminder of payments
Rating
Total
Rati ng
Total
Rating
Total
Ratin g
Total
1. Implementation
4
5
20
3
12
4
16
3
12
2. Risk
4
5
20
5
20
4
16
3
12
3. Cost
4
4
16
3
12
4
16
3
12
4. Benefit
4
5
20
5
20
5
20
5
20
5. Affectivity
4
5
20
5
20
5
20
4
16
Grand Total
20
24
96
21
84
22
88
16
72
CRITERIA
WEIGHT
Evaluate the aging of receivables
Increase interest rates on loans that are way past due
Offer discount loans to customers who pay early
Create an online payment processing for early payments
Rating
Total
Ratin g
Total
Rating
Total
Rating
total
1. Implementation
4
4
16
3
12
3
12
3
12
2. Risk
4
4
16
2
8
3
12
4
16
3. Cost
4
4
16
4
12
3
12
3
12
4. Benefit
4
4
16
4
12
4
16
4
16
5. Effectivity
4
3
12
3
12
4
16
4
16
Grand Total
20
19
76
15
56
17
68
18
72
In implementation, 1 being the hardest to implement and 5 as the easiest to implement In risk, 1 being the most risky, and 5 as the least risky In cost, 1 is the most costly, and 5 is the least costly For benefit derived, 1 is least beneficial and 5 as the most beneficial For Effectivity , 1 for least effective, and 5 with highest effectivity
The main problem of Vifel Cooperative Bank is the default payments of members .This may be due to the fact that the members were not pre screened before taking a specific loan Thus, some members availed the loan with less capacity to pay. And finally members has not been trained in handling their finances. These issues might be the reasons why members default on their loan payments
Currently, Vifel Cooperative has a problem with its debt collection, customers are defaulting their payments and their reason is the lack of income and knowledge in handling finances , and with that, we made an alternative course of action and picked the best one, and we think that Pre-screening of members before taking a specific loan is the first thing the manager should do, then the manager should set a credit limit depending on the customers credit rating, conduct seminars in handling finances, evaluate existing customer credit accounts, establish a contact team, create an online payment processing, offer discount loans on those who pay early, increase interest rate on loans that are way past the credit period, and periodic evaluation of the chosen actions.
ACTIVITIES
OBJECTIVES
DIVISION
PERSON
COST
Pre screen of customers
To check the capacity of the customers in paying the specific loan
Information manageme nt
Information manager
Make a policy on credit limits
To limit the amount of money the customer can borrow depending on its credit rating
Loan servicing department
Loan officers Estimate d xxx
1 month
Conduct seminars in handling finances
To educate the members in handling their finances
Wealth manageme nt department
Wealth Estimate manageme d xxx nt professionals
1 month
Evaluate existing customer credit accounts
To determine the customers who’s payables are already past due
Accounting department
Chief financing officer
Estimate d xxx
3 weeks
Establish a contact team
To remind the customers of their payables
Customer service department
Customer service manager
Estimate d xxx
3 month s
Estimate d xxx
TIME 1 week
ACTIVITIES
OBJECTIVES
DIVISION
PERSON
COST
TIME
Create an online payment processing
For easy payment of loans
Electronic Banking Department
It specialist
Estimated xxx
6 months
Offer discount loans on those who pay early
To encourage the members to pay their payables early
Loan servicing Loan officers department
Estimated xxx
3 months
Increase interest rates on loans that are past the credit period stipulated
To encourage the members to pay their payables early
Loan Servicing Department
Loan Officers
Estimated xxx
3 months
Periodic evaluation of the chosen actions
To assess if the chosen actions are effective
Executive department
Bank Manager
Estimated xxx
Every year
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