How to prepare and analyze the CIBI Report

How to prepare and analyze the CIBI Report

Introduction The Credit Investigation and Background Investigation (CIBI) report is the primary tool of the bank in screening its MF clients. It shows the results of the investigation done by the bank to establish the loan applicant’s character and repayment capacity This session will equip the participants with data gathering skills to the preparation of the CI/BI report.

Objective At the end of this session, participants will be able to:
1. Prepare an exhaustive CIBI report for new borrowers which focuses on the client’s character and capacity to pay 2. Prepare a complete CIBI report for repeat borrowers which focuses on repayment behavior on past loans and status of client’s business.

Who prepares the CIBI Report?
Account Officer prepares the CIBI report by gathering and evaluating information, and establishing applicant’s creditworthiness. MFU Supervisor reviews and validates the accuracy of information in the CIBI report.

How to conduct the CIBI 1.You should have the applicant’s Loan Application and CIBI Forms when you conduct the CIBI. Study beforehand the information in the Loan Application for faster verification in the field. 2.Conduct the interview with the character references. Follow the flow process provided in the overview module. 3. In interviewing character references, observe the tips provided in the previous session on Loan Application.

Types of CIBI Report CIBI Report for New Borrowers (CIBI-N)
CIBI Report for Repeat Borrower (CIBI-R) Show sample forms for each. Explain that the CIBI form for a repeat borrower is much shorter than for a new one.

New Borrowers CIBI Report

The CIBI–New Form The CIBI form for new borrowers is a seven-page document composed of four-parts namely: 1) results of interview with client, 2) character references, 3) character and cash flow analysis, and 4) AO & Supervisors Findings and Recommendations.

Outline of the CIBI-N Form (Part 1)
Part 1 – Results of Interview with the Client I. Personal Information II. Business Information III. Market Risk Analysis IV. Payment Records V. Inventory of Business Assets VI. Merchandise Inventory VII. Inventory of Personal Assets VIII. Balance Sheet All underlined sections of the CIBI form are linked to what each section look like and how these sections are filled-up. Click on each section to see the form.

Outline of the CIBI-N Form (Part 2 & 3)
Part 2 – Results of Interview with References IX. Interview with Character References X. Interview with Barangay Official Part 3 – Character & Cash Flow Analysis XI. Character & Risk Analysis checklist XII. Red Flags XIII. Cash Flow Computation XIV. Cash Flow Risk Analysis XV. Suggested Courses of Action All underlined sections of the CIBI form are linked to what each section look like and how these sections are filled-up. Click on each section to see the form.

Outline of the CIBI-N Form (Part 4)
Part 4 – Findings & Recommendations XVI. Account Officer’s Finding & Recommendations XVII. MF Supervisor’s Review Results All underlined sections of the CIBI form are linked to what each section look like and how these sections are filled-up. Click on each section to see the form.

Repeat Borrowers CIBI Form

The CIBI–Repeat Form The CIBI for Repeat Borrowers/Loans should start at least two (2) weeks before the maturity of the current loan to ensure a quick turn-around time for the re-loan (remember quality service). Quick turn-around time for the next loan is very important for micro borrowers. They value being able to get their next loan within the next 24 or 48 hours.

Outline of the CIBI-R Form
The CIBI report for repeat borrowers consist of four (4) pages and contain the following: Analysis of Repayment Behavior Results of monitoring Savings Balances Business Data Market Risk Analysis Inventory of Business Assets Merchandise Inventory Inventory of Personal Assets All underlined sections of the CIBI form are linked to what each section look like and how these sections are filled-up. Click on each section to see the form.

Outline of the CIBI-R Form
VIII. Comparative Balance Sheet IX. Cash Flow & Comparative Cash Flow Analysis X. Cash Flow Risk Analysis XI. Suggested Courses of Action XII. Account Officer’s Findings & Recommendation XIII. MF Supervisor’s Review Results All underlined sections of the CIBI form are linked to what each section look like and how these sections are filled-up. Click on each section to see the form.

Comparison of CIBI Forms
Information Supplied CIBI-New CIBI-Repeat 1. Business information Yes Updated 2. Market risk analysis 3. Payment records Optional 4. Inventory of business assets 5. Merchandise inventory 6. Inventory of personal assets 7. Balance Sheet Updated/Comparative 8. Interview with character references 9. Interview with Barangay Official 10. Checking with Other Financial Institutions 11. Results of Monitoring 12. Savings balances 12. Cash flow analysis

Repayment Capacity CASH FLOW ANALYSIS
The preparation of the Cash Flow will be presented in detail in: Session 4 - Cash Flow Lending Session 5 - Preparing the Cash Flow Session 6 - Cash Flow Review Techniques

To Summarize - A properly accomplished CIBI gives the Account Officer a clear basis for recommending the approval or rejection of a loan application. When done properly, the CIBI report provides a vivid description of the “story” of a loan applicant to the credit committee that decides on the loan application.

To Summarize - The information in the CIBI Report should be analyzed in the light of character indicators. The character indicators provide the bases for assessing the level of risks of granting a loan to an applicant. Character analysis together with the cash flow analysis positions the bank to make better decision on the loan amount the bank can afford to risk with a borrower.

To Summarize - Therefore, the use of the CIBI tools for analyzing character and cash flow decreases the level of risk when lending to microentrepreneurs who do not have hard collateral and credit history.

CREDIT INVESTIGATION FORM FOR NEW LOAN APPLICATION
RURAL BANK OF XYZ, INC. CREDIT INVESTIGATION FORM FOR NEW LOAN APPLICATION NAME OF APPLICANT: Major Business Activity: ___________________________________________ Secondary Business Activities: ___________________________________________ Business Registration Permit No:_________________________ (Municipal/City Hall or Barangay Office) Fill in the official FULL first and last name of the applicant. If the applicant goes by a different name, write in parenthesis afterwards. Example: Manuel J. Cruz (Maning) This information can be lifted from the loan application form. This is repeated here to serve as a guide to the account officer on what questions to ask to the applicant and to the character references. Get this data if your loan product eligibility criteria requires it. The business registration permit attests that the microenterprise activity can legally operate in the specified trade area.

Working Capital information:
I – Business Information Sales Frequency  Daily  Weekly  Semi-monthly  Monthly  Others : Gross Sales Low : Average : High : How often is the business open?  Mon  Tues  Wed  Thurs  Fri  Sat  Sun Business Trends Peak Months : Slow Months : Average Months: Working Capital information: How often do you buy stocks? How much do you spend each time? Where do you usually buy your stocks? How are stocks purchased?  Cash  Consignment  Credit : What terms? _________ High or low months in terms of sales guide decisions on whether to increase, maintain or reduce loan amounts. The more operating days the business has, the greater the sales potential Indicates the amount of sales from the business cycle as when sales are daily, how much comes in a slow day, in a busy day, etc. Sales frequency indicates how often money from the business comes in (used as an input for the Cash Flow)

II - MARKET RISK ANALYSIS Potential Problems/Risks
A Market Risk Analysis is important to establish if the applicant has a clear understanding of his/her market and the capacity of the business to cope with demand II - MARKET RISK ANALYSIS (For loan P50,000 and above) Factors Description Potential Problems/Risks 1. Clients 2. Supplies 3. Production/Sales/Services 4. Others Indicate seasonality of applicant’s business Will the proposed loan term fall during a lean or a peak season? What could negatively affect business production or sales? Can the business increase production or sales easily or not? Does the applicant have a regular supplier? A regular supplier would indicate increased business transactions. Are stocks readily available when needed? Is the supplier reliable? Are supplies bought in “Cash” or “On Credit?” If on Credit, what are the terms? Who are the applicant’s clients? Do they buy on wholesale or retail? Do they buy cash or credit (e.g ) and what is level of sales on credit? Is the business market limited only to local area and is there much competition?

Provides the Account Officer with information on the applicant’s repayment behavior
III - PAYMENT RECORDS Receipts of Bills Business (Check 3-months receipts & get average amount) Household Comments (on-time/delinquent, etc.) Water Electricity Landline Cell phone (post paid) Mortgage/Rental payments 5-6 payments This section of the CIBI report must be completely filled-up. The account officer must ask to see copies of official receipts (OR’s) or proofs of payments. To get a better handle of the applicant’s repayment behavior, AO must request receipts for the last 3 months prior to loan application.

HOW TO COMPUTE APPROXIMATE VALUE:
Include all assets used in the business; these could be used as loan guaranty (security agreement) IV - INVENTORY OF BUSINESS ASSETS [Machiknery, furnitures, fixtures, etc] Qty. Description Approximate Value HOW TO COMPUTE APPROXIMATE VALUE: Purchase Price minus Accumulated Depreciation = Approximate Value Definition of Terms: Depreciation –the decrease in the value of an asset due to “wear and tear” , obsolescence or impairment. Usually computed annually by dividing the purchase price of the asset by the useful life of the asset (ex. P5,000 / 5 yrs. = P1,000 depreciation expense yearly) Accumulated Depreciation – the total of Depreciation already expensed by the business. This amount is deducted from the Purchase Price of the asset to get its Net Value (or Approximate Value) Purchase Price – Amount paid to buy the asset

V – MERCHANDISE INVENTORY Estimated Value (Qty. x Unit Cost)
Most retail outlets (sari-sari stores) have different items in their merchandise inventory. Limit the list to the five (5) fastest selling items since this could provide a rough estimate of the sales and purchase levels. V – MERCHANDISE INVENTORY (List down the five[5] fastest selling/largest items) Qty. Description Unit Cost Estimated Value (Qty. x Unit Cost) Unit Selling Price Total Unit buying price of merchandise Unit selling price for each item of merchandise Description of merchandise (e.g. sardines, laundry soap, softdrinks, etc.) Indicate quantity; include unit of measure (kgs., bottles, cans, etc.) Total Purchase Cost (Quantity x Unit Cost)

Relate the approximate value of the asset to its age
Personal assets could serve as guarantees, should the bank require them (especially for larger ticket loans) VI - INVENTORY OF PERSONAL ASSETS [Real Estate and other personal properties (appliances, etc)] Qty. Description Approximate Value If asset has a potential for use as a guarantee, check for ownership documents Relate the approximate value of the asset to its age During the visit to the applicant’s residence, check condition of the assets

Shows the joint financial condition of the business and the household
Shows if the size of the business/business assets can support the requested loan amount VII - BALANCE SHEET ASSETS LIABILITIES Cash on hand and in Bank P Loan Payable Accounts Receivable Other Payables Business Assets Total Liabilities Merchandise Inventory Personal Assets Total Networth Total Assets Total Liabilities and Networth Should reflect the combined value of inventory of (1) Personal Assets (household or serialized assets), (2) Business Assets (microenterprise activities), and (3) Merchandise Inventory Include all collectibles the applicant has, whether from the business or personal loans to other persons Should include whatever cash the applicant actually has on hand and in deposits with any institution (data on deposit may be retrieved from the Loan Application Form (Savings Information)

VIII - INTERVIEW WITH CHARACTER REFERENCES
Provides the Account Officer with independent information on the applicant’s reputation VIII - INTERVIEW WITH CHARACTER REFERENCES Source # 1:  Supplier  Creditor  Landlord Source # 2: Source # 3: Source # 4:  Residential  Business Neighbor Source # 5:  Residential Source # 6: Indicate the reference category of the interviewee by putting a √ in the appropriate box. Fill in the full first and last name of the person interviewed

A - INTERVIEW WITH CREDITORS/SUPPLIERS/LANDLORDS
(Interview with suppliers applicable for loans P50,000 and above/Write N/A if not applicable) Source # 1 Source # 2 Source # 3 Are you a relative of the applicant?  Yes  No How long has the applicant been purchasing/borrowing/renting?  < 1 yr  > 1 yr  < 1yr  > 1 yr  < 1 yr Does the applicant pay on time? How often does the applicant place an order (daily, weekly, monthly)? How much does the applicant spend per order? What is the term of payment? (Cash, On credit, what’s the term?)

B - INTERVIEW WITH RESIDENTIAL AND BUSINESS NEIGHBORS
Source # 4: Source # 5: Source # 6: Are you a relative of the applicant?  Yes  No  Yes  No Have you known the applicant for more than two years? Has the applicant lived in the community for over two years? Is the applicant of good moral standing in the community? Is the applicant debt-free? Has the applicant been involved in any legal dispute (if yes, explain in box below)? Is the applicant known to be:    Gambler    Irresponsible    Violent    Drug abuser    Womanizer    Indebted    Alcoholic    Trouble-maker Explanation on any negative reference:

IX – INTERVIEW W/ BARANGAY OFFICIAL
(If Barangay Clearance does not provide information on legal cases) Name: Is the applicant known to be:  Gambler  Indebted  Womanizer  Violent  Alcoholic  Irresponsible  Drug abuser  Trouble-maker Are you a relative of the applicant  Yes  No Have you known the applicant for more than two years? Has the applicant lived in the community for over two years? Is the applicant of good moral standing in the community? Is the applicant debt-free? Has the applicant been involved in any legal dispute (if yes, explain in box below)? Explanation on any negative aspects:

When analyzing stability
Character & Risk Analysis Checklist Stability When analyzing stability look for permanency These indicators show how “rooted” an applicant is – or how difficult it is for an applicant to leave town and the loan obligation. A) Indicators of Stability Yes No   Married?   Married with children?   Children attending school?   Resident in the same community for over two years?   Home owner?   Business in operation for over two years?   Business in the same location for over two   Business in fixed location (non-ambulant)?   Client has post-paid cellular phone The absence of any of these indicators does not mean that an applicant cannot qualify for a loan – it simply means that the risk of lending is higher

Having multiple businesses
Character & Risk Analysis Checklist Entrepreneurship Client does not have all of his/her money invested in one business. Should one business fail, s/he has other sources which can pay for the loan Having multiple businesses Is a clear indicator of entrepreneurship B) Indicators of Entrepreneurship Yes No   Has multiple sources of income?   Business in operation for over five years?   Business is located in commercial area?   Applicant keeps financial record?   Applicant explains clearly use of loan? Only for loans P25,000 and above   Applicant has clear explanation of business expansion?   Applicant has clear vision of market and competition? Business growth over the years means that a client has survived several years of trials (economic, political, natural calamities); this means that client has good entrepreneurial skills.

Indicators of reputation have the biggest weight among the
Character & Risk Analysis Checklist Reputation Indicators of reputation have the biggest weight among the 4 risk categories. A bad reputation eliminates positive aspects about an applicant Be suspicious when character references refuse, or are hesitant to provide information about the applicant If interview results of reputation are mixed, the AO must interview more references until s/he is completely satisfied with the applicant’s reputation C) Indicators of Reputation Yes No   Applicant belongs to/holds position in community association?   Applicant has a good reputation as confirmed by CIBI with neighbors?   Applicant has good reputation as confirmed by CIBI with peers?   Applicant has good reputation as confirmed by CIBI with suppliers/Landlords?   Applicant is clear from legal cases at the Barangay? at the court? If the applicant has legal cases, look further into the nature of the case. Double check for Collection cases and cases involving moral turpitude.

Character & Risk Analysis Checklist Repayment Behavior
It’s the person, not the Business, that pays a loan – therefore, how an applicant pays his other obligations tells you how he will pay his loan A refusal to show receipts could indicate delays in payment that the applicant does not want the AO to find out D) Indicators of Repayment Behavior Yes No   Applicant has no outstanding loans with financial institutions?   Applicant has no outstanding loans with appliance stores?   Applicant has no outstanding loans with informal sources?   Payments paid on due date or late not more than 3 days as confirmed by receipts.   Bills paid on time as confirmed by payment slips/receipts?   Rent is paid on time as confirmed by receipts?   School fees paid on time as confirmed by receipts?   Payment to suppliers paid on time as confirmed by ORs?   Applicant has active savings/checking accounts?   Last three bank statements show increasing balances?   Applicant has credit line from suppliers? (NOTE: For first 3 questions, if any loan is outstanding, mark the NO box) Funds used for family emergencies (illness) do not necessarily disqualify an applicant – It just tells you to be cautious (the illness could take long to cure or recurrent). Decreasing balances in bank deposits could indicate liquidity/cash problems. Find out where the funds went.

XI - RED FLAGS (mark all that apply)
Red Flags - Warning Signals! Red flags are warning signals that could indicate a character flaw in the applicant; these should be carefully evaluated when doing the Character/Risk Analysis XI - RED FLAGS (mark all that apply)  The applicant inquires about donor financing  The applicant provides contradictory information  The spouse contradicts the information provided by applicant  Applicant unable to provide receipts supporting information  Difficulty in finding co-makers  Children not sent to school  References (neighbors, peers, suppliers) reluctant to express opinion on applicant.  The spouse refuses to sign the application or collateral authorization.  History of violent behavior  History of spouse/child abuse  History of alcoholism  History of gambling  History of drug abuse  The applicant has a criminal record . Red flags on this side almost disqualify an applicant. Red flags on the right column should be strong grounds for rejection of the application

XIII - CASH FLOW RISK ANALYSIS
Provides Account Officers with some tips in analyzing repayment capacity XIII - CASH FLOW RISK ANALYSIS Is the amount of the loan smaller than the size of the business? Yes No Is the amount granted smaller than the amount requested by applicant? Yes No Is the installment granted smaller than the installment requested by the applicant? Yes No Is the amount granted less than 50% of the total assets? Yes No Is the loan amount less than 50% of the expenses? Yes No Compare the Adjusted Repayment Capacity (Cash Flow) with the Installment requested by the applicant (Application Form) Compare maximum loan amount (Cash Flow) with loan amount requested (Loan Application Form) Compare computed maximum loan amount (in the Cash Flow) with Total Assets (Balance Sheet) An asset size smaller than the loan amount will not be able to generate enough net income to be able to pay the loan.

XIV – SUGGESTED COURSES OF ACTION
Guides/tips that may be used by the Account Officer to make a decision on the Character/Risk Analysis of the applicant. These four (4) indicators are the benchmarks by which the Account Officer makes a decision whether or not to recommend a loan for approval. XIV – SUGGESTED COURSES OF ACTION Stability:  Resident in the community for over two years, home-owner, and/or business in operation for over two years, are the most important indicators.  If the applicant is not a resident in the community for over two years but (a) is a home-owner, and (b) his/her business has been in operation for more than 2 years, s/he could still qualify for a loan.  The longer the number of years the business is in operation or the applicant has lived in the same community, the higher the stability. Entrepreneurship:  Multiple sources of income and business in operation for over five years have the highest weight. Reputation:  Indicators of reputation have the highest weight among the four categories of risk.  If the results of reputation are mixed, the AO must interview more references until s/he is completely satisfied with the applicant’s reputation. Repayment behavior:  If applicant has a good credit history, as proven by records or receipts, with a delay of less than three days in any payment, s/he is qualified to take a loan.

Account Officer’s Signature
The CreCom will be putting a lot of weight on the information provided in this section as a basis for final evaluation and approval. XV. Account Officer’s Findings & Recommendation (This should be based on the results of the 4 character indicators analysis as well as cash flow analysis) Account Officer’s Signature I hereby certify that all the information stated in the Credit Investigation Report are true and correct and that I shall be held responsible for any misrepresentation. _______________________________________________ Signature over Printed Name Date Report Completed and Submitted to Supervisor Approval/rejection of the loan application, based on evaluation, should be clearly stated. Recommended loan amount, loan term and repayment mode should be stated. The statement at the bottom of the box reminds Account Officers not to provide false information, or deliberately withhold vital information that could mislead the CreCom into making the wrong decision on the loan application.

The CreCom will be putting a lot of weight on the information provided in this section as a basis for final evaluation and approval. XVI. MF Supervisor’s Review Findings (This should be based on how well the AO has analyzed the Character and cash flow of the applicant) MF Supervisor’s Signature I hereby certify that I have reviewed the information and analyses contained in this Credit Investigation Report and that I concur with the findings and recommendations of the account officer. _______________________________________________ Signature over Printed Name Date-Review Completed and Submitted to Branch Manager Approval/rejection of the loan application, based on evaluation, should be clearly stated. Recommended loan amount, loan term and repayment mode should be stated. The statement at the bottom of the box reminds the Supervisor to review the CIBI reports to detect any false information that could mislead the CreCom into making the wrong decision on the loan application.

CREDIT ANALYSIS FORM FOR REPEAT LOAN
Repeat Loan CIBI Form RURAL BANK OF XYZ, INC. CREDIT ANALYSIS FORM FOR REPEAT LOAN NAME OF APPLICANT: No. of Past Loans: Indicate the FULL Name of the borrower; as indicated in the Loan Application form. Indicate the number of loans the borrower has had with the bank. The more repeat loans, the more information the Account Officer has on the repayment behavior (check the Client Status Report)

Indicate approved amount of each loan
Indicate whether loan is 1st, 2nd, 3rd, etc – starting with most recent loan Indicate approved amount of each loan Indicate number of loan installments Check applicable mode of payment (weekly, semi-monthly, monthly, others-specify) I - ANALYSIS OF REPAYMENT BEHAVIOR for the last three loans (This must be accomplished prior to client interview/investigation. Fill out the Client Classification column IF the Client Status Report is attached. ) No Loan Amount # of Inst. W Bi-Mo. Mo. Others On Time Payment Maximum No. of days delayed Classification # inst. % 1-3 4-6 7-13 14-29 30+ 3  2 1 Maximum loan amount entitled for next loan P____________ (Note: Increase in the loan size should not exceed 30% of the previous loan) Amount requested by client P____________ The column on Classification is explained in another slide. State causes for any delayed payments of four (4) days and over (last loan only)  Health problems  Death in the family  Marital problems  Problems with sales  Loan diversion  Problem with collection/receivables  Multiple borrowing  Other ______________

Sample “Client Status Report”
Let’s take a close look at this sample Client Status Report. The borrower had three loans with the bank. Look at the repayment record. Would you consider another loan for this borrower?

Delays in Payment and Loan Size
What do delays in payment signal? Payments over 7 days past due indicate that the loan amount is too large Partial payments indicate that the loan amount is too large A steady decline in the number of installments paid on time could mean the loan amount is becoming too large

A borrower’s repayment behavior determines the Client’s Classification.
The Client Classification serves as a guide for determining increases in loan amount for the next loan cycle.

Sample Client Classification Guide for Loans with Weekly Payments
AA A B C D Percentage of On-time/Full repayment 100% 90% 80% 60% Below 60% % INCREASE IN LOAN AMOUNT Up to 30% Up to 20% Up to 10% No Increase No Loan A. LOAN TERM & NO. OF WEEKLY INSTALLMENTS NUMBER OF ON-TIME/FULL PAYMENT 2 months - 8 installments 8 7 6 5 3 months - 13 installments 13 12 10 4 months - 17 installments 17 15 5 months - 21 installments 21 19 6 months - 26 installments 26 23 16 Note: But no missed payment exceeding 3 days, otherwise, no increase. But no missed payment exceeding 3 days, otherwise, no loan Under AA – all payments are on-time Under A – the number of payments not paid on time does not exceed 3 on a 6-month loan, and none over 3 days late; depends on loan terms and number of installments. Under B – the number of payments not paid on time increases to up to 5 for a 6-month loan. Etc. The general principles to remember are: % increase in the next repeat loan depends on record of timely payment. Missed payments should not exceed 3 days.

Client Classification and Loan Increase
The general rule: the increase should be no more than 30% of the previous loan for clients with 100% on-time full repayment but subject to results of account monitoring. When the increase being requested by the client is more than 30% of the previous loan, account officer must do a new cash flow to establish any improvement in the repayment capacity of the client (Refer to section on comparative cash flow).

Conditions to meet for not requiring a cash flow analysis
1. 100% on-time full repayment of the previous loan 2. Loan term for the next loan is less than 6 months 3. Increase over the previous loan is not higher than 10%. 4. Repeat loan amount is within the loan entitlement calculated in the previous cash flow analysis.

stagnation or deterioration. Deteriorations could mean
Shows business growth, stagnation or deterioration. Deteriorations could mean decreased ability to pay loans Put a √ in the appropriate box if statement applies, otherwise, provide updated information in the Repeat Loan Application Form II. RESULTS OF MONITORING Business Condition  Increase in Business Assets  Increase in Merchandise Inventory  Same business location  Change to a better business location  Increase in number of employees  Increase in number of days or hours of operation/  Expanded trade area or distribution network  Decrease in Business Assets  Decrease in Merchandise Inventory  Change to a lesser attractive business location  Decrease in number of employees  Decrease in number of days or hours of operation/  Reduced trade area or distribution network Consider seasonal trends that affect the borrower’s business (weather, business location, seasonality of demand) Analysis of the Cash Flow should closely evaluate the relationship of repayment behavior and improvements/ deteriorations of the business. Any increases in loan amount should be evaluated in the light of the borrower’s demonstrated repayment behavior.

Family problems, illness, loss of income (retrenchment,
Put a √ in the appropriate box if statement applies, otherwise, provide updated information in the Repeat Loan Application Form II. RESULTS OF MONITORING Household Condition  Other household income continue to be the same if not better  No health problems within the family  Household assets remain the same if not better  Same home address  Change to a better residential location  No conflicts in family relationships  Job loss of any household member  Health problems  Decrease in household assets  Death in the family  Change of home address  Marital problems  Court/Barangay cases of any household member Family problems, illness, loss of income (retrenchment, business closure, etc) could signal decreased liquidity.

Decreasing balances in bank deposits could indicate liquidity/cash problems. Find out where the funds went. III - SAVINGS BALANCES (This must be accomplished prior to client interview/investigation) Type of Account Balances during the last three months Remarks for decreasing balances only Indicate here the type/s of deposits that client keeps in your bank. AO should request CASA bookkeeper to print a statement of balance

IX – COMPARATIVE BALANCE SHEET
Shows changes in the asset base of the business Shows trend for business growth /deterioration Increase in loan amount should be justified by business growth IX – COMPARATIVE BALANCE SHEET ASSETS LIABILITIES Previous Amount Current Change Cash on hand and in Bank Loan Payable Accounts Receivable Other Payables Raw Materials Goods in Process Finished Goods Total Liabilities Total Assets Other Assets Total Networth Total Liabilities and Networth Net change must be positive to justify an increase in loan amount

XI - COMPARATIVE CASH FLOW
THIS IS TO BE USED WHEN CLIENT IS ASKING FOR AN INCREASE OF MORE THAN 30% OF THE PREVIOUS LOAN. Shows improvements/deteriorations in the Cash Flow Provides inputs with respect to decision on loan amount of the repeat loan XI - COMPARATIVE CASH FLOW (Add information about new cash flow if required; otherwise, just provide results of previous cash flow) Previous Loan Current Loan Change Total Business Income Less : Total Business Expense Net Business Income Add : Total Household Income Less : Total Household Expense Net Household Income Maximum Loan Entitlement Positive change indicate improve cash positions – improved repayment capacity Reflect data of the latest Cash Flow

XIII - SUGGESTED COURSES OF ACTION
If delays happened at the end of the loan term, AO must consider: Decreasing the loan amount Repeating the same loan amount Suspending additional loans until situation gets under control If delays happened at the beginning, business has already recovered. AO can proceed with increase as allowed by the client classification and cash flow. The AO can also request a higher increase as an exception case. If repayment behavior deteriorates from one loan to the next, client must be reaching borrowing limit. AO must consider not to grant any increases. If repayment behavior rapidly deteriorates from AA to C, the last amount granted was already too high. AO must consider to reduce loan amount or discontinue servicing the client. If the delay was caused by health problems, the AO must evaluate if the situation is solved (one time occurrence) or recurring (e.g. dialysis). If problem is recurring, the AO must consider not granting additional loans. If payments are consistently late, the problem might not be the size of the loan but the client.

XIII - SUGGESTED COURSES OF ACTION
If client has multiple borrowings (from other lending institutions) but no delayed payments beyond 3 days, the AO must check repayment behavior with other sources to confirm good standing (delay no higher than 1-3 days). If client has multiple borrowings and has delays of four days or more, the AO must consider suspending any additional loans until loan with other institution is repaid in full. If savings balances are declining, the business or household might be experiencing liquidity problems. The AO must investigate the causes of the decline. If there are no clear justifications, the AO must consider reducing or suspending the loan until the situation gets under control. If it’s a repeat loan, the AO will do the cash flow analysis every other loan ONLY if repeat loan amount is the same or within 10% increase, not more than P25,000, loan term is 6 months or less, and the client has not made payments with delay of not more than 3 days. If a borrower does not meet these qualifications, a cash flow analysis will be done for every loan.

How to prepare and analyze the CIBI Report

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