LOAN RESTRUCTURING GUIDELINES:

(Reference on Operational Guidelines of CANDEVCO)

Load restructuring, though legally acceptable scheme in a financial institution and beneficial to the
member-borrower on one side, however carries greater risks and damaging for the cooperative if abused
and not properly implemented.

It will create an artificial low delinquency ratio which could mislead the management and officers into
believing that the coop’s loan quality is satisfactory and that delinquency is manageable since
restructured loans are considered current.

Restructuring could create a sense of complacency for both borrowers and coop employees thus
exposing the coop to even more risk. The borrowers may abuse the option (especially if restructuring is
offered) to delay its payment to the cooperative since they can avail of restructuring that could make
their delinquent accounts current by paying only a portion of their account instead of the whole amount
due. On the part of the employees, complacency might develop as the branch delinquency level is partly
reduced by restricted loans.

Per CDA Standard Chart of Accounts definition of LOAN RECEIVABLE – RESTRUCTURED, ‘’A loan could only
be restructured if all unpaid interest and penalty are paid and what is left to be restructured us the
principal’’, in our case, service fee and loan protection insurance are also required to be paid in addition
to penalties and interest before finally transacting the account.

It could be also an option of the cooperative in case the member-borrower has no immediate/available
cash for the settlement of the interest, penalties, and other fees prior to the restructuring, that all fees
will be recognize as receivable from the member and will be paid in an installment basis based on
amortization schedule to be recorded manually on an excel type monitoring.

Because of the seemingly great danger restructuring could bring to any financial institution like our
cooperative, it must not be made for the purpose of artificially correcting delinquency status and hide
the real situation of the loan portfolio quality, in accounting the action tantamount to Window Dressing.

Hence, restructuring (if only the last option left) has to be made specifically for the purpose of helping
the borrower settle his/her loan obligation extra-judicially (and should improve the coop’s advantage to
collect or recover) by way validating the truthfulness of borrower’s excuses on his/her failure to pay, and
thoroughly re-evaluating the borrower’s present and immediate future financial condition and capacity
to pay through a personal visit to the client-borrower or at his/her business to ascertain that indeed the
defaulting borrower is worthy of a loan restructuring.
A. Causes of default acceptable for loan restructuring.

1. Entrepreneurial (Business and relative livelihood activities)

a. Default caused by fortuitous events like typhoon, flooding, earthquakes,
and the like:
b. Severely poor economic condition but not mismanagement: and
c. Fire
d. Pandemic 2020-2021
2. Personal (Providential Loans)
a. Defaults caused by borrower’s sickness and/or accident or of his/her
immediate family members.
b. Death borrower’s immediate dependent family member who is not a
coop member, and;
c. Separation from employment

B. Steps in Restructuring
1) Ascertain that the borrower is worthy of an option to restructure his/her loan by a
personal visit. Validate the causes of default and it must at least be one of the
acceptable causes of default mentioned above. (The Field Validation Report is suggested
for use in his action)
2) Thorough evaluation or re-evaluation of borrower’s present capacity to pay through the
aid of cash flow analysis tool knowledgeably accomplished.

C. After ascertaining that the borrower is worthy of an option to restructure, them required
payment shall then be advised to prepare such as Interest, penalties, service fees, filling fees,
and loan insurances.

D. Attached collaterals (If Available) to improve coop vantage if existing collateral/s are inadequate
to cover the loan restructured in case foreclosure eventually becomes the last option.

E. Considering that all required/perquisites have already been made, the approval to process the
transactions shall then be sought from the BOD.

F. Once duly approved, facilitate loan restructuring as follows:

a. – Extend 1 year Below

G. The team shall not exceed five (5) year in maximum as much as possible. However, if full
payment is not possible within two (2) year, the term shall be determined by the borrower’s
present paying capacity.