GUIDELINES FOR PORTFOLIO AT RISK ANALYSIS

Possible causes

/

Indicators

/ Actions to be taken
IF PAR7 < 3% BUT GROWING OVER THE PAST THREE MONTHS / Rapid portfolio expansion while loan procedures still cumbersome / Productivity per AO below 150 clients
Disbursement/processing of first loans >7days
Disbursement/processing of repeat loan > 2 days
Approval centralized in a Credit Committee / Review loan procedures to eliminate redundancies
Reduce info requirements for repeat loans
Eliminate unnecessary documentation and paperwork
Simplify loan application
Simplify CIBI
Decentralize loan approval/ discretionary approval at branches with PAR7 <3%
Rapid portfolio expansion while understaffed
Weakening client monitoring and collection
Weakening management supervision / Productivity p/ AO near or above 150 clients
Client visits below 1 per month
Proof of loan collection (e.g. collection letters) are non existent / Hire additional AOs
Staff training
Rapid portfolio expansion while poor MIS / MIS reports are not timely/accurate/
MIS reports are not broken-down by AO
MIS reports are not broken-down by branch / If problems with timeliness and accuracy can not be solved within 30 days:
The bank needs to resort to manual reporting on portfolio quality
Slow down expansion until MIS if full operation
Break down reports by branch and AO
IF PAR7 IS > 3% IN ALL BRANCHES
(Something is wrong with the methodology, there is a need to review it) / Likely problems with the credit policies and procedures
Ranges or limits on loan amounts are not well defined
Loan increases (percentages) for repeat loans are too high
Terms are excessive or too short
Weak guarantee structures
Policies on loan follow up and collection are not well defined,
Poor procedures on loan analysis / PAR concentrated on repeat loans
PAR concentrated on large amounts (10,000+)
Manual does not define how often clients are to be visited or steps to be taken in case of arrears. / Review credit policies to ensure they are well defined
Review credit policies to ensure they follow best practices
Review and adjust policies on amounts
Reduce limits on first loans
Reduce increases of repeat loans
Review and clearly define steps on loan monitoring and collection
Review and clearly define steps on loan analysis
Policies and procedures (P&P) are OK but banks do not apply them at all or correctly due to
Lack of adequate training of AOs, branch managers, bank managers
Lack of MABS follow-up on implementation. / PAR concentrated on new or untrained AOS
PAR concentrated on new or untrained branches
P&P compliance analysis indicate high deviation across AOS and branches
Amount and/or quality of training are deficient. / Training of AOS, supervisors, and branch managers on P&P
 Strengthen monitoring of branches to ensure compliance and early problem detention
Supervisors, branch managers and credit committee needs to monitor compliance with P&P
IF PAR7 WITHIN A PARTICULAR BANK IS OVER 3% IN ALL PARTICIPATING BRANCHES. / Banks do not comply with defined P&P due to:
Lack of adequate training of AOs, branch managers, bank managers.
Lack of Supervisory follow up on implementation
Weak supervision
Lack of will of bank managers to comply with P&P
Management has introduced unauthorized changes to P&P
Lack of supervision of upper management on branch managers and compliance with P&P / P&P compliance analysis indicate high deviation across AOS and branches
PAR concentrated on repeat loans
PAR concentrated on large amounts (10,000+)
AOs and branches do not have a credit manual available. / Review credit policies to ensure they are well defined
Review credit policies to ensure they follow best practices
Review and adjust policies on amounts
Reduce limits on first loans
Reduce increases of repeat loans
Review and clearly define steps on loan monitoring and collection
Review and clearly define steps on analysis
Training of AOS, supervisors, and branch managers on P&P
Poor collection and client monitoring / Client visits below 1 per month
Proof of loan collection (e.g. collection letters) are non existent / Strengthen Main office monitoring on branches to ensure compliance and early problem detention
Supervisors, branch managers and credit committee needs to monitor compliance with P&P
Deficient MIS / MIS reports are not timely/accurate/
MIS reports are not broken-down by AO
MIS reports are not broken-down by branch / If problems with timeliness and accuracy can not be solved within 30 days:
The bank need to resort to manual reporting on portfolio quality
Slow down expansion until MIS if full operation
Break down reports by branch and AO
IF PAR7 OF A PARTICULAR BANK IS OVER 3% IN JUST ONE OR TWO OF ALL PARTICIPATING BRANCHES / Deviation from P&P
Lack of adequate training of AOs, branch managers and supervisors
Poor branch supervision from main office / PAR concentrated on new or untrained branch managers and AOs
PAR concentrated on new or untrained branches
P&P compliance analysis indicate high deviation among the high PAR branches and AOs / Strengthen Main office monitoring on affected branches to ensure compliance and early problem detention
Supervisors, branch managers and credit committee needs to monitor compliance with P&P
IF PAR7 OF A PARTICULAR BRANCH IS OVER 3% BUT AFFECTING A FEW ACCOUNT OFFICERS ONLY, / Deviation from P&P
Lack of adequate training of AOs
Poor supervision from branch manager and supervisor / PAR concentrated on new or untrained AOs
P&P compliance analysis indicate high deviation among those high PAR AOs / Training of AOS, supervisors
 Strengthen monitoring of branch manager, product manager and supervisors on the high PAR AOS to ensure compliance and early problem detention
Strengthen approval/review of loans submitted by high PAR AOS

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