ARTICLE 111 of Manual of Operation
Section 1. Loan Policies, Criteria and Qualification
The Cooperative adapts the following C’s of Credit in evaluating and approving of loans:
1. Capacity
2. Character
3. Capital
4. Collateral
5. Condition
A. Loans
1. A Regular Member may avail of a regular loan, provided that:
a. He/She has paid at least fifty percent (50%) of the required minimum capital subscription, that is, One Thousand (1,000) shares, equivalent to Pesos: Ten Thousand & 00/100 (Php 10,000.00);
b. On His/Her first loan, the member can avail of up to one hundred percent (100%) of his paid-up capital;
c. On His/Her subsequent loans, the member may be allowed to apply for a loan beyond one hundred percent (100%) of His/Her paid-up capital, provided, that He/She has fully paid the minimum capital subscription;
d. Loan shall be available and may only be processed thirty (30) days upon payment of fifty percent (50%) minimum subscription; and
e. Total loans, excluding special loans and mini loan, shall in no case exceed two hundred percent (200%) of the paid-up capital.
2. An Associate Member may avail of a regular loan, provided that:
a. He/She has paid at least fifty percent (50%) of the required minimum capital subscription, that is, One Thousand (1,000) shares, equivalent to Pesos: Ten Thousand & 00/100 (Php 10,000.00);
b. Loan shall be available and may only be processed thirty (30) days upon payment of fifty percent (50%) minimum subscription; and
c. Total loans shall in no case exceed one hundred percent (100%) of the paid-up capital.
B. Requirement for Co-maker
1. For loans equivalent to one hundred percent (100%) or less than the paid-up capital, no co-maker is required.
2. For loans more than one hundred percent (100%) of the total share capital, three (3) co-makers shall be required.
C. To qualify as a Co-maker, He / She must:
1. Have at least Pesos: Fifty Thousand and 00/100 (Php50,000.00) paid up capital;
2. Be in service to the company for at least three (3) years for loans more than one hundred percent (100%) of the principal borrower’s paid-up capital;
3. Have a good credit rating or regularly deducted from His/Her payroll the payment due to YECC; and
4. Not have a personal loan of two hundred percent (200%) of paid-up capital.
Bad credit rating is defined as the inability or failure of the co-maker to pay His/Her existing loan for four (4) consecutive paydays, except if such inability to pay is due to absences brought about by fortuitous event, SSS covered sickness and maternity leave.
D. Co-makers shall be equally liable with the principal borrower for the latter’s balance, which liability arises when:
1. the principal borrower has been separated from the company;
2. all of the principal borrower’s capital share, patronage refund and savings deposit from YECC and other receivables from the company have been fully exhausted;
3. the principal borrower shows no intention to settle His/Her loan balance; and
4. even if the principal borrower has proposed settlement terms, and the same have been accepted by the Cooperative, He/She has been default in payment for at least two (2) months from separation.
E. Loans subject for collateral and no collateral conditions:
Loans which have an exposure of more than Pesos: Three Hundred Thousand and 00/100 (Php 300,000.00) beyond his/her paid up capital shall be secured by collateral.
The following are the criteria and conditions in accepting collateral:
1. Collateral shall be limited to Land, Motor Vehicle and Jewelries.
2. Collateral shall only be applied to the amount in excess of Pesos: Three Hundred Thousand and 00/100 (Php300,000.00) loan exposure.
3. Subject to other provisions hereunder, only ninety percent (90%) of the value of the property shall be considered. Value of the property shall be determined as follows:
a. For land, the Zonal Value / Fair Market Value (whichever is higher), as stated in the latest Tax Declaration, Certification or any similar document from the City/Municipal Assessor's Office, or Bureau of Internal Revenue, whichever is applicable.
b. For motor vehicle and jewelries, the Appraised Value provided by the qualified appraiser.
4. Borrower shall:
a. Surrender original copies of Land Title, Official Receipt/Certificate of Registration of motor vehicle, and or Jewelries;
b. Certified True Copy of Title, Tax Declaration, BIR Certification or Certificate of Appraisal;
c. For land or motor vehicle not registered under the name of borrower, Special Power of Attorney executed by the registered owner in favor of the borrower.
i. All collaterals must be free from liens and encumbrances.
ii. YECC and the borrower, in addition to the usual form, shall execute loan/mortgage agreement stating all the conditions for the approval of loan and the conditions for collaterals.
iii. All collaterals (i.e., land title, OR/CR, jewelries) shall be returned to the borrower/member once the loan exposure falls below Pesos: Three Hundred and 00/100 (P300,000.00).
The above-mentioned collaterals and loan application shall be evaluated by Credit Committee and subject for approval by the Board of Director.
F. Basic considerations for granting and approval of loans to members:
1. Paid up capital;
2. Capacity to pay for loans beyond one hundred percent (100 %);
3. Have good credit standing or regularly deducted from his/her payroll; and
Bad credit rating is defined as the inability or failure of the borrower to pay his/her existing loan for 4 consecutive paydays, except if such inability to pay is due to absences brought about by fortuitous event, SSS covered sickness and maternity leave.
4. All Regular Loans exceeding P100,000.00 shall be covered by the Loan Protection Plan (LPP) thru the Federation at the expense of member/borrower.
G. Reasons for disapproval of loan application
1. Member/Borrower exceeds the maximum loan entitlement of two hundred percent (200%) of paid-up capital.
2. Has no capacity to pay for the new applied loan
a. Upon the recommendation of His/Her Superior due to unauthorized absences/ tardiness, resulting to suspension.
b. Lack of required number of co-makers, please refer to Section 1(B).
c. Incomplete information in the LOAN APPLICATION FORM.
d. Loan beyond one hundred percent (100%) of paid-up capital of member employees retiring from the company (2 months prior to retirement).
e. Those who already filed their resignation.
f. Credit Committee shall immediately notify the borrower of loan disapproval.
H. Service Fees / Charges
All loans are subject to one percent (1%) service charge of the approved loan amount.
I. Capital build-up
If the member/borrower has no existing subscription for capital build-up of at least Pesos: Two Hundred and 00/100 (Php250.00) (semi-monthly) at the time of loan application, YECC will deduct five percent (5%) of the approved loan amount to be added to his/her paid up capital if the loan is beyond one hundred percent (100%).
Section 2 Authority and Responsibility
A. The Board of Directors has overall duty by providing sound and fiscal lending policies in order to protect the members’ welfare. In fulfillment of this responsibility, the board shall:
1. Review, evaluate and approve submitted collaterals;
2. Review and evaluate appeals pertaining to disapproved loans;
3. Evaluate and approve loan applications of members of the Board of Directors, YECC Management (GM and Staff) and Credit Committee members; and
4. Review and evaluate appeals pertaining to disapproval of member’s request on preferred manner of settlement of outstanding balance and loan restructuring.
B. The Credit Committee shall:
1. Evaluate and recommend for approval all loan applications within its lending authority, provided that all the terms and conditions of this policy are duly complied with, except for loan applications of members of the Board of Directors, YECC Management (GM and Staff) and Credit Committee members as provided under Section 2(A)(3);
2. Review, evaluate and recommend for approval of the Board of Directors submitted collaterals;
3. Review all delinquent loans on a monthly basis, and inform the concerned borrower of such delinquency, including possible options for settlement of the outstanding balance such as but not limited to:
i. Full payment; and
ii. Loans restructuring;
4. Recommend to the General Manager for approval of the preferred manner of settlement of the borrower’s outstanding balance; and
5. Recommend for approval by the General Manager of any member’s request for loan restructuring.
i. Loan term extension based on the following circumstances, subject to submission of proof:
a) Victim of fortuitous events;
b) Maternity leave;
c) Hospitalization of member or immediate family; and
d) And such other similar incidents.
ii. Loan term shortening
C. The Audit Committee — In order to protect the quality of all loan portfolio, the Audit Committee shall:
1. Create, review and revise audit checklist;
2. Review and verify requirements of approved loans;
3. Reconcile all disbursed /approved loans with Credit Committee;
4. Submit Audit Report and findings on a quarterly basis or whenever required by the General Manager and/or Board of Directors, and recommend to the General Manager appropriate actions to audit findings, if necessary; and
5. Review and submit to Election Committee or Board of Directors findings pertaining to the credit rating of candidate/s for elective or appointive positions respectively.
D. General Manager- The General Manager shall:
1. Be responsible for: the day-to-day management of all lending operations;
2. Approve and disapprove loan applications;
3. Verify the Capacity, Character and Capital of the borrower, the required Collateral, and other Conditions, if applicable;
3. Monitor and review reports on outstanding loans and collections, and implement delinquency control;
4. Organize and assign staff responsible to ensure that loan applications are properly recorded and processed; and
5. Act on the recommendation of Credit Committee on the borrower’s preferred manner of settlement of his/her outstanding balance or request on loan restructuring.
Section 3. Processing and Approval of loan application; Releasing of loan
A. All loan applications shall be filed in a form approved by the Board of Directors.
B. Applicant must provide all the necessary information. Loan forms with incomplete information and documents will not be accepted.
C. Forms of disapproved loan applications shall be returned to the member/borrower.
D. Loan applications shall be submitted to YECC designated offices or thru YECC website for processing.
E. Submitted loan application received thru designated offices shall be forwarded to YECC Office at the soonest possible time.
F. Credit Committee shall evaluate the loan application including but not limited to requirement of co-maker and collateral, records containing His/Her monthly transactions, e.g., paid up capital, savings, and loan movements.
G. Loan application shall be processed within five (5) working days from receipt thereof.
H. Loan proceeds shall be released thru check or bank transfer at the option of the borrower.
I. Credit Committee shall provide a copy of schedule of payments to the member/borrower upon release of loan proceeds.
Section 4. Collection
A. Credit Committee shall be responsible for the collection of loans. Approved loan computation shall be submitted to the concerned Accounting Office for scheduling of deduction in the payroll.
B. Every after payday, the Credit Committee and/or YECC Staff shall request collection list from the concerned Accounting Office.
C. Members, upon written request, may opt to pay His/Her existing loan in whole or in part of the Interest on Share Capital and Patronage Refund (IOSCAPR).
D. The Credit Committee Members, in coordination with YECC Staff and General Manager, shall regularly review posting of loan payments.
E. The YECC Staff shall prepare a monthly report of approved loans and balances, which shall always be available for verification and checking at all times by Chairperson and Vice-Chairperson of the Board of Directors, General Manager, Credit Committee, and Internal and External Auditors. YECC upholds absolute confidentiality of members' financial information in accordance with Article 49 of RA 9520 and Section 8 of RA 10173 Data Privacy Act of 2012.
Section 5. Guidelines on loan restructuring
A. Borrower must submit request letter addressed to the General Manager thru Credit Committee Chairperson stating the intention to extend or shorten loan term.
B. The Credit Committee shall recommend for approval by the General Manager of any member’s request for loan restructuring.
C. In approving request for loan restructuring, the General Manager may seek opinion or confirmation from the Board of Directors.
D. Member/Borrower may appeal his/her disapproved request for loan restructuring to the Board of Directors.
Section 6. Transitory Provisions
All provisions of this Revised Loan Policy shall take effect on January 1, 2024.
Section 7. Repealing Clause
All board resolutions or policies contrary to or inconsistent with the provisions of this Revised Loan Policy of 2023 are deemed repealed or modified accordingly.
