Choosing the right clients is one of the major factors in a successful microfinance business. Proper client selection will make microfinance institutions avoid several delinquency problems and will surely save a lot of their time and efforts in the future.

For the second day of the credit competency training with seven credit cooperatives from Northern Luzon, the discussions focused on proper client selection. The training was held in Northview Hotel, Laoag City, Ilocos Norte on February 19, 2020. The training aims to reduce delinquency and improve collection to ensure financial sustainability.

In the discussions, the credit cooperatives learned about cashflow lending, credit and background investigation, client rating system, principles and methods of collection, and delinquency task force.

The first session inculcated in the participants the importance of knowing their clients’ cashflow. The participants filled out a sample cash flow while the lead discussant stressed the importance of taking into account all sources of income, as diversified income is key in mitigating the risks involved in agricultural finance. They also discussed the preparation of farm budget.

Succeeding session elaborated on the importance of a thorough credit and background investigation (CI/BI), as this can prevent a lot of delinquency problems. The trainer clarified that CI/BI is the appraisal not only of a prospective borrower’s ability but also his or her willingness to repay a loan.

The trainers presented a client rating system (CRS) which the participants found very useful and worth replicating. In fact, Mr. Charleston Dulay of ACPC said that the CRS can be used as a standard rating system of the credit cooperatives. “We thank the trainers for providing us a lot of tools that the cooperatives can use for their agri-input financing,” he added.

The participants also enjoyed a role-play activity where they were able to act as collectors and borrowers. The activity was followed by a discussion on the principles and methods of collection. After the role-play and the discussion, everyone agreed that the credit cooperatives must have savings and insurance products to prevent delinquency.

Before concluding the day, the trainers discussed the delinquency task force and shared to the participants some information on legal procedures for non-paying debtors. The trainers, however, ultimately discourages litigation and reminds the participants that this must be a last resort in solving delinquency problems.

Social Enterprise Development Partnerships, Inc. (SEDPI) was the successful bidder for this project under the Department of Agriculture’s Agricultural Credit Policy Council (ACPC). This was the first of six batches that were also held in Cagayan de Oro, Davao, Iloilo, Koronadal and Laguna.