Problem Loan Management

Paper
Date Published: 
Jan 2004
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Understanding and Managing problem loans and their impact in West Bank and Gaza

This sheet summarizes the facts about problem loans and their impact on microfinance in the Gaza and West Bank area of Palestine. It states that problem loans affect the portfolio integrity and the profitability of lending operations. The sheet provides portfolio managers with strategies for spotting and handling problem loans.

The sheet also elucidates on the roles of a loan officer and costs of problem loans to the overall organization. Apart from that, it provides suggestions to the loan officer on what to do when a payment is missed, and how to monitor the loans effectively. Some of the strategies for dealing with problem loans include:

  • Screening out unsuitable borrowers or bad business ideas;
  • Obtaining character references;
  • Assessing the borrower's ability to manage projects;
  • Documenting available collateral sources;
  • Matching the size of the loan with repayment abilities; and
  • Ensuring sufficient cash flow.
Type: 
Paper