CDA intensifies efforts to curb delinquent loans

In light of the continuing instability of the local economy and its anticipated adverse effects on businesses, the Commonwealth Development Authority is mapping out plans to assist borrowers cope with slow business activities.

CDA Board Chair John S. Tenorio said the intensified move is aimed at preventing any further increase in the volume of problem loans although he insisted that the government-controlled lending agency continues to have a manageable number of delinquent accounts.

According to Mr. Tenorio, CDA corporate division officials have been brainstorming to identify possible ways that would assist borrowers cope with their financial obligation amid hard economic times.

The government’s major lending arm has been swamped with concerns on the increasing delinquency rate, as well as requests from borrowers for loan restructuring to allow them more time to settle their credit.

Mr. Tenorio said CDA is looking at extending the implementation of a flexible payment plan amid inquiries from borrowers on how they can continue paying their dues on time without sacrificing other basic necessities.

The government’s lending arm is also working double time to widen the scope of its recently-launched program aimed at educating its clients on ways to become better borrowers, underscoring the importance of a good credit history in their future loan applications.

Borrowers who have persistently failed to pay their monthly dues on time in the past are less likely to obtain loans from either government or private financial institutions even if they are able to settle their existing obligation.

Financial institutions are very particular in the consistency of the borrowers’ ability to pay their monthly obligations on time. This is one of the reasons behind CDA’s decision to mobilize its people to conduct a series of consultations with existing borrowers.

At the same time, CDA initiated a business counseling program to halt the rising number of problem loans which soared to 19 percent during the first half of the calendar year, from 13 percent by end-December 1999.

If the increase in the delinquency rate would continue at the first quarter level, it may translate to more than $2 million in unpaid and overdue collectibles from its $80 million portfolio each year.

Records obtained from CDA noted that the financial institution’s monthly collections fell by more than 40 percent from the average $700,000 to only $400,000 during the first three months of the year.

However, a big chunk of remiss loan payment collectibles are actually caused by the recently-implemented payment scheme which gives borrowers longer grace period to settle their outstanding credit.