(a) Capital: The consistency with which
the member has subscribed to shares. The amount of equity
injected into the project or purchase.
(b) Conditions: This relates
to the accompanying conditions under which the loan is to be
granted or applied for. Economic and sector conditions
must also be considered.
(c) Collateral: This is the security
provided by members and includes assignment of salaries/payment
for the purposes of the repayment of the loan. Saleability
of security and deterioration of security must be taken into
consideration vis a vis the period of repayment of the loan,
the economic conditions and market value of the security in
case of default.
(d) Capacity: The debt service
ratio and source of funds must be critically examined to minimize
delinquencies. Personal loans are repaid from budget surplus.
The Budget Analysis must be treated with conservatism and caution
and must therefore be critically examined. Consideration
must be given to job stability, age of member and prospects
for continuity of employment. This shows whether
the borrower will be able to make scheduled payments while meeting
other obligations and commitments during the payback period.
(e) Character: This is related to previous
experience with the Credit Union or other financial institutions,
judgement, legal action, pending bankruptcy proceedings and
general character with regards to honouring commitments.
Character rating supplements inadequacy of collateral but it
must never interfere with nor be a substitute for weak capacity
rating.
(f) Prospects of Advantage: There
must be the prospect of advantage to the borrower by way of
social and developmental benefits, increased productivity, cost
effectiveness, economy, leisure or otherwise.
