Borrower Classification Criteria
In monitoring and controlling credit extended to ECs, the company adopts a comprehensive credit rating system based on financial and non financial assessments of its borrowers. Financial factors being considered comprised the financial standing of the customer while the non-financial aspects include but are not limited to the assessment of the borrower’s nature of business, management profile, industry background, payment habit and both present and potential business dealings with the company. ECs are pre-qualified based on the following financial factors:
|Acid test/quick asset ratio||greater than or equal to 1|
|Current ratio||greater than or equal to 1|
|Times interest earned ratio (TIER)||greater than or equal to 1.5|
|Debt service coverage (DSC)||greater than or equal to 1.2|
|Collection efficiency||greater than or equal to 95%|
|System loss||less than or equal to 13%|
The following are the classification of Borrower-ECs:
• Group A “Super Prime” are those ECs that have positive cash flows, acid test/quick asset ratio and current ratios are at least 1 and passed TIER, DSC, collection efficiency and system loss.
• Group B “Prime” are those ECs that have positive cash flows, current and acid test/quick asset ratios are at least 1 and passed either TIER or DSC, but TIER and DSC must be both above zero. Their system loss and/or collection efficiency may be above the cap.
• Group C “Regular” are those ECs which have positive cash flows, and the TIER, DSC, current and acid test/quick asset ratios are all above zero. Their system loss and/or collection efficiency may be above the cap.
• Group D “Non-Prime” are those ECs which do not fall under the above classifications and will have to undergo the regular credit evaluation and approval process.
The classification of the company’s loans to members as of December 31:
|Loans to Members per Group||2015||2014|
The credit classification system that the company adheres to allow the expeditious processing of loan availments.