1. DELINQUENCY CONTROL
and
CAPITAL BUILD UP FOR
COOPERATIVES
Prepared by:
Efferson P. Ramirez

2. WHY DO PEOPLE BORROW?
- sickness or death of a family member
- loss of jobs
- lack of capital to start a small business
- to buy farm inputs
- to buy in cash instead of an installment
basis
- birthday parties, to satisfy vices and others

3. DELINQUENCY: when the payment of a loan is delayed or the
loan remains unpaid after its due date.
CAUSES OF DELINQUENCY:
1. Lack of cooperative Education:
- failure of member to make an adequate budget of his income;
- failure of member to appreciate the value of cooperativism;
- failure of member to know his duties and responsibilities
- failure of member to understand the terms and conditions of
payment of loan;
2. Unwise use of money/vested interest by some officers
- diversion of project plans
- misrepresented purpose of loans
3. Improper or Erroneous Evaluation of Borrowers:
- improper evaluation of loan applications

4. 4. No schedule of policies:
- lack of harmonious relationship between management staff
and members
- wrong attitude of Crecom towards members
5. Unexpected Natural Calamities:
- typhoons, floods, death
- irregularity of incomes
The problem on deliquency is a very common problem
being encountered by most cooperatives for it could
happen even before the loan is granted to a member,
however, the following are some measures to minimize
the problem on delinquency:

5. DELINQUENCY CONTROL MEASURES:
1. Continous Cooperative education:
Loan deliquency can be greatly minimized if the members
could be made to understand and appreciate the purposes of
organizing a cooperative;
a. to develop among members the habit of thrift and regular
savings;
b. to teach the members the importance of borrowing wisely
for productive and providential purposes;
c. to teach the members the wise use of money through
intelligent buying and budgetting

6. 2. Proper and Intelligent Loan Appraisal by Credit Committee:
Criteria for Loan Evaluation;
a.Character – spending habits, credit consciousness, credit
standing in the community, participation in cooperative
activities;
b.Capacity to pay – financial condition of borrower, his income
versus his expenses, loan from other sources.
c.Capital – his total capital contributions to the Coop,
availability of cooperative funds
d.Co- makers – solvency of co – makers, attitudes
e. Collateral – fixed assets free from any encumbrances
f. Purpose of loan – based on actual needs of borrower

7. 3. Loan deliquency goes high – if those who have current loans
find out that the operation of the cooperative is going down,
many of them would hesitate to pay their loans. They believe
that if the cooperative goes bankrupt, they may not need to
pay their loans.
4. The income goes down - if more loans are being extended,
there would be no more income. The fixed cost must have to
be taken from the capital.
5. Employees are discouraged – the future is black for the
employees of a cooperative in this situation. They would look
at their jobs as a temporary employment while they scout for
greener and more secured pastures.
6. The cooperative flops – it takes only a few months from the
time the services slow down until the time to close down.

8. PRIMARY STRATEGIES FOR CAPITAL BUILD UP
1. Continous Cooperative Education – this is one of
the principles of cooperativism, but its importance
is belittled. The reason why educational funds are
allocated every year from the surplus is to provide
a budget for membership education and staff
development. Members will always be supportive
to whatever programs of the cooperative only when
they understood and appreciated what the
undertaking is all about.

9. 2. Raffle Draw – the raffle draw cooperative style does not sell
tickets, it does not solicit funds from the public. It merely
encourages the members to add to their own savings and
share capital. Those who increase their share capital are given
raffle tickets. The prizes may be charged to educational funds
or the operating funds. After all, the objective of the draw is
to increase the capital and income of the cooperative.
3. Annual Dues – the cooperative may collect annual dues by
deducting the amount from the loans of the members when
they borrow or from their interest on capital at the end of the
year. In this way the members would not have shelled out
from their pockets.

10. 4. One – peso per visit – this scheme requires every member to
deposit P1.00 in his share capital everytime he visits the
cooperative for every reason. After all everybody has one
peso in loose coins. That is less than the cost of a pack of
cigarettes or a bottle of beer. Besides, the one peso is not a
payment, it is saved by the member and is added to his share
capital.
5. Authorized Retention from Loans – this is another scheme
that compaigns from those who are served by the cooperative.
By the authority of a Board Resolution, the staff shall deduct
a percentage from every loan granted and adds the deducted
amount to the borrowers share capital.

11. 6. Share Certificates – this scheme calls for the
distribution of the interest on capital and patronage
refund not in cash, but in the form of share
certificates.
7. Paluwagan – this scheme is particularly succesfull
among market vendors and other groups with a
regular source of income. The members are being
grouped by tens. All the ten will deposit P1.00
each in the number one’s share capital and so on
until all the ten group members have had their turn.

12. 8. Salary Deduction – saving to some people is easy. To others it
is hard. They spend all the money they lay their hands on.
Sometimes , they even spend money that they have not gotten
yet. For this kind of people, force savings is necessary.
Cooperatives can arranged savings by salary deduction if the
members concerned would sign the payroll deduction form.
This goes in line with the members’ pledge to save regularly.
9. Revolving Fund – if the total amount for interest on capital and
patronage refund is P100,000.00, the Board is authorized to set
aside P50,000.00 as a Revolving Fund for five (5) years. After
five years, this amount shall be distributed to the members as
they should have been five years ago.

13. 10. Doorstep Savings Program – this scheme is more applicable
to people who are busy that they don’t have time to visit the
cooperative (businessmen). They may have the money and
maybe willing to save but they don’t have the time to visit the
cooperative. For them, every second is GOLD. A
management staff may be go from door to door to this type of
people to collect their deposits.
11. Special Depositors
a. Special Members (minors) – the children of members are
encouraged to open up savings account with the cooperative.
They would not be allowed to borrow because they are not
old enough to enter into contracts and they usually don’t have
a regular source of income to pay back the loan. The parents
should not be allowed to withdraw from the savings of their
children without the latters consent.

14. b.Organizations– there are many community
organizations which do not have the juridical
personality to become members of the cooperative.
These group’s should be encouraged to open an
account with the cooperative, however, they are
not allowed to borrow.
c. Non-members – for people who want to support
the cooperative by saving their money in it, the
staff should not close doors. Anybody should be
encouraged to save in the cooperative, but, since
they are not members, they will not have the
priveledge of borrowing.

15. CAPITAL BUILD UP STRATEGIES FOR
COOPERATIVES
It is easy to organize a cooperative. It is difficult to
succeed. One failure affects the others, including
those that are to be organized.
Most cooperatives died a natural death, and the
foremost reason is lack of capital due to lack of
knowledge on some capital build up programs. Most
cooperatives considered today as successful, based
on their history, states that they have stood by their
own money, and besides have engaged in many
programs/ strategies on how to increase the needed
capital to extend maximum services to its members.

16. A cooperative which depends too much from outside
funding at the onset on its operation would merely
teaches its members to be dependent from outside
source of funds. They may never realize their duty to
capitalize their own business enterprize. They may
not even take their loans seriously because they say
that it is not their money at stake. Furthermore,
members may not develop pride and responsibility of
ownership knowing that the capital is not theirs. To
borrow from outside sources is not actually bad,
provided that a cooperative will borrow for
expansion purposes and officers and management
staff are well prepared with the knowledge and skills
on how to manage a bigger amount of money.

17. WHY DO WE SAVE? WHY DO WE ENGAGE
IN CAPITAL BUILDING?
Primarily, a cooperative must save and
engage in capital building to be able to
extend maximum service to members,
secondarily is that cooperative members
must finance their own business enterprise as
one of the practices of cooperativism.

18. EFFECTS OF LOW WORKING CAPITAL:
Insufficiency or low working capital can cripple a
cooperative permanently if it is not attended to
immediately. The following are the effects of lack
of capital:
1. Services slow down – the members applying for
loans can not be served at the right time. They have
to wait for days, weeks and sometimes months for
their loans. A delayed loan due to lack of capital
may not be very useful anymore.

19. QUESTIONS?