1. Microfinance Lending Process and Procedures
The management of the Bank commits to provide microenterprises with quick access to affordable, non-collateralized loans. With this commitment in mind, I will be discussing to you the following simplified Lending Process & Procedures which the Microfinance Unit diligently follows in processing new loans.

2. Microfinance Loan Flow Chart
1) Client Orientation
and Application
2) Credit and Background Investigation
3) Loan Approval
The Microfinance Unit follows a standard flow in processing new loans. This process usually takes one week. It will start with a:
READ THE SLIDE…
Client Orientation then the Pre-application, followed by:
The Credit and Background Investigation, then the
Loan Approval. A Credit Committee Meeting is being held every Loan Approval. Then,
Loan Processing
Loan Disbursement, and finally,
Loan Collection
I will discuss each activity in detail.
6) Loan Collection
5) Loan Disbursement
4) Loan Processing

3. Attendance Sheet CLIENT ORIENTATION Question and Answer Client Logbook
Applicant comes to bank to
attend the group client orientation
Attendance Sheet
Welcome and introduction
of prospective clients
AO conducts individual
client orientation
CLIENT ORIENTATION
ALL prospective clients who intend should attend a Client Orientation. Loan applications will not be entertained if a client fails to attend an orientation.
The main reason why the MFU conducts Client Orientations is basically to inform the prospective clients of the policies and procedures of the Microfinance Loan.
There are two types of Client Orientation – the Group and Individual Client Orientation.
Group Client Orientation is usually done in the bank particularly in the Microfinance Office.
On the other hand, Individual Client Orientations are conducted for prospective clients whose residence/business is located far from the bank.
This is the procedure when clients attend the Client Orientation.
READ THE SLIDE…
Question and Answer
Client Logbook

4. Application Applicant fills out the application form
The applicant may choose to sign the
form at the bank or bring the form to
his/her house
AO determines applicant’s
eligibility
After the orientation, clients are required to fill out and sign the Pre-application Form.
READ THE SLIDE.
If eligible, the AO schedules
a CI/BI appointment
If not eligible, AO
proposes a savings plan

5. Credit and Background Investigation
AO conducts CI/BI to
assess the applicant
AO brings along the loan application
form to validate information
contained in the form
If necessary, credit
verification letters are sent
to the applicants creditors
AO visits references: suppliers,
previous and present creditors,
business neighbors, and residence
As I have said earlier, Credit and Background Investigations are administered to eligible clients.
READ THE SLIDE….
The CI/BI procedures will be discussed in a separate session so that we can fully understand and appreciate this important process.
If there are adverse
findings, application
is disapproved
If CI is positive, AO evaluates the
applicant’s debt repayment capacity

6. Preparations before the Credit Committee Meeting
AO summarizes and prepares
the loan recommendation
sheet
Loan Recommendation
Sheet, Loan Application
Completed CI/BI Form
Co-signer’s profile,
Proof of payments, and
other documents
AO organizes the
applicant’s credit folder
Supervisor reviews
applicants credit
folder
Checks and reviews
for inconsistencies
It is important that preparations are made before the Credit Committee Meeting so that all important pieces of information are gathered, filtered and summarized in order to have a good loan recommendation.
READ THE SLIDE….
Loan application is endorsed
to the Credit Committee

7. Loan Review and Approval (Credit Committee Meeting)
PREPARATION 2
CREDIT COMMITTEE:
1) Convenes every week to
review loan applications
recommended for approval
2) Composed of: GM/BM,
Loans Supervisor and AOs
AO presents CI/BI
Results to Credit
Committee 3 1
This is the procedure when we deliberate loan applications.
READ: CREDIT COMMITTEE convenes every week……
THEN READ: PREPARATIONS, AO PRESENTS….
During the Credit Committee meeting, the AO must explain the reasons behind his/her recommendations on the basis of his/her overall objective observations/impressions about the client, their character, reputation in the community, capacity to repay a loan, credit worthiness as well as the importance as to why the client should be given a loan. The Credit Committee members are expected to ask several questions based on the submitted documents including the CI/BI report. This is also an opportunity for the other AO to actively participate - ask questions about the client’s residence, business, character, cash flow analysis, and share their opinions or ideas about the loan application.
After the deliberation of the loan application, the Credit Committee decides whether to approve, disapprove or defer the approval of the loan application.
DELIBERATION
RECOMMENDATION
AND APPROVAL 4 5

8. Loan Processing (After the Credit Committee)
Supervisor informs the
AO to prepare
loan documents
If loan is disapproved,
AO visits the applicant
and informs the reasons
for disapproval
If loan is deferred,
AO informs the applicant
and obtains addt’l. info
a) Credit Memo/CC
b) Signature Cards
c) Promissory Note
d) Co-Signer’s Statement
e) Disclosure Statement
f) Deed of Assign. of Dep.
h) Security Agreement
If loan is approved, AO visits
the applicant and gives a list of
requirements for his/her compliance.
AO prepares loan documents.
There are at least three (3) key important results after the Credit Committee meeting.
READ…. If loan is disapproved…..
READ…. If loan is deferred….
READ…. If loan is approved…..
Supervisor checks completeness
of the credit folders

9. Loan Disbursement Supervisor gives copy of
credit ticket/cashier’s check to Teller
for disbursement/posting
Before signing, the BM or
supervisor explains to the
group their obligations
as Borrower(s) and
Co-Signer(s)
Borrower together with spouse
/Co-Signers, come to the bank
to sign the loan documents
READ THE TWO TEXT BOXES, THEN READ THE THIRD BOX….
This is also a crucial part of the Loan Process. In this step, the policies and procedures are again explained to the client particularly their obligations as Borrower, Co-Borrower or Co-Signer of the Microfinance Loan. This is to make sure each fully understands the product policies as well as the procedures.
(Note: Revise the last box if your bank follows a different procedure for disbursing loan proceeds.)
Client signs a withdrawal slip
to withdraw the loan proceeds
from Savings Account or encashes
Cashier’s Check through
Teller
Supervisor gives the client
a copy of the Loan
Amortization Schedule and
Discount Statement

10. Loan Collection Supervisor updates accounts
Supervisor generates weekly
payments due/Collection Sheet
for the week every Monday
Forwards cash
to Teller
Auditor accounts
for all PRs issued
vs. report
Cashier issues
pre-numbered PRs to
AOs for collection
Batches collections
for the day
AO collects payment
from client
It is important that all clients realize the importance of making their payments on time. The AO must monitor his/her portfolio closely, particularly with new clients, to ensure that they do not become delinquent in making payments. Once a collection schedule is established, the AO should STRICTLY ENFORCE IT!!! Borrowers tend to test the bank to see how serious it is about late payments. THE AO SHOULD LEAVE NO ROOM FOR LAX OR INTERMITTENT COLLECTION AS THIS REDUCES THE SERIOUSNESS WITH WHICH CLIENTS VIEW THEIR OBLIGATIONS.
READ THE SLIDE…..
(Note: Revise this slide if your bank follows a different loan collection procedure.)
AO retains other
copies which will be
used to batch the
total collections
Records pymts and
gives original PR