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Delinquency > Delinquency (1stSem) > Flashcards

Delinquency (1stSem) Flashcards

1
Q

A condition that arises when an activity or situation does not occur at its scheduled (or expected) date, and instead occurs later than expected.

A

DELINQUENCY

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2
Q

Used to describe a situation in which a borrower misses their due date for a single scheduled payment for a form of financing, like student loans, mortgages, credit card balances, or automobile loans, in addition to unsecured personal loans.

A

DELINQUENCY

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3
Q

Borrower misses their due date for a single scheduled payment for a form of financing

A

DELINQUENCY

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4
Q

Remedied by paying overdue amount plus any fees or charges incurred

A

DELINQUENCY

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5
Q

Affects credit score

A

DELINQUENCY

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6
Q

Borrower fails to repay their loan as scheduled in the terms of their promissory note.

A

DEFAULT

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7
Q

Triggers the remainder of loan balance due in full.

A

DEFAULT

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8
Q

Significantly affects credit score and makes it hard to borrow in the future.

A

DEFAULT

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9
Q

_____ play a critical role in MFI’s _____, _____, _____, and _____.

A
  1. Delinquent Loans
  2. Expenses
  3. Cash Flow
  4. Review
  5. Profitability
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10
Q

COST AND IMPLICATIONS OF DELINQUENCY

_____ mean additional expenses for closer monitoring, more frequent visits to borrowers and a more extensive analysis of the portfolio.

A

Additional effort to collect delinquent loans

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11
Q

COST AND IMPLICATIONS OF DELINQUENCY

Putting more time, effort, and resources into controlling delinquency may _____.

A

compromise MFI’s ability to reach new borrowers and expand services or outreach

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12
Q

COST AND IMPLICATIONS OF DELINQUENCY

Delinquency can result in a _____. If loan principal is not recovered at the scheduled time, loans to other borrowers can’t be made.

A

slower turnover of the loan portfolio

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13
Q

COST AND IMPLICATIONS OF DELINQUENCY

Delinquency can result in _____ which means payment of some expenses may also have to be delayed.

A

inability to pay expenses due to reduced cash flow

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14
Q

COST AND IMPLICATIONS OF DELINQUENCY

With reduced cash flow, the MFI may be _____ or _____.

A

• unable to make timely repayment of borrowed funds
• meet the demand for savings withdrawals

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15
Q

The _____ of MFI is affected if interest revenue is not received on delinquent loans.

A

profitability

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16
Q

The most significant effect on profitability occurs when the _____ is not repaid and loan loss provision must be made.

A

loan principal

16
Q

Portfolio at Risk (PAR) Formula

A

PAR = 𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 𝐿𝑜𝑎𝑛 𝐵𝑎𝑙𝑎𝑛𝑐𝑒 𝑜𝑓 𝑃𝑜𝑟𝑡𝑓𝑜𝑙𝑖𝑜 𝑤𝑖𝑡ℎ 𝑂𝑣𝑒𝑟𝑑𝑢𝑒 / 𝑇𝑜𝑡𝑎𝑙 𝐿𝑜𝑎𝑛 𝑃𝑜𝑟𝑡𝑓𝑜𝑙𝑖𝑜

17
Q

EFFECTS OF DELINQUENCY ON MFI

A
  • Less income
  • Increasing expenses
  • Less efficiency (of field staff)
  • Decline in image
  • Ever-increasing delinquency
  • Lost credibility with investors/donors
  • Fewer clients
  • Decrease sustainability
  • Shortened life of MFI
  • Restructuring
  • Bankruptcy
18
Q

EFFECTS OF DELINQUENCY ON CLIENTS

A
  • Less discipline
  • Less ttrust
  • Less motivation
  • No possibility to reborrow
  • Bad image in the community
  • Client not served effectively
  • Chain reaction to others in the group (other borrowers stop paying: those waiting for a loan cannot receive it)
  • Loss of savings
  • More difficult sustaining business and family needs
19
Q

EFFECTS OF DELINQUENCY ON FIELD STAFF

A
  • Low performance
  • Decreasing benefits
  • Must focus on delinquent
  • No bonus
  • Loss of motivation
  • Retrenchment/Forced resignation/Downsizing
  • Extra effort to motivate clients
  • Laziness
20
Q

Loan installment has not been paid at the period stipulated in the loan contract.

A

PAST DUE

21
Q

Late payment, partial payment or a skipped payment.

A

ARREARS

22
Q

TRUE OR FALSE

Delinquency occurs when a loan payment is one day late.

A

TRUE

23
Q

TRUE OR FALSE

The cost of delinquency are direct, but they are hidden.

A

TRUE

24
Q

TRUE OR FALSE

Delinquency is not contagious: the cost can snowball.

A

FALSE

25
Q

5 MAIN CAUSES OF DELINQUENCY

A

• Institutional-related causes
• Client-related causes
• Credit officer-related causes
• Group-related causes
• Externally-driven causes

26
Q

Institutional-related causes

A

• Poor product design
• Poor service delivery
• Poor client selection
• Faulty Collection System (Poor loan management)
• Poor credit discipline
• Poor HR practices
• Poor managerial practices
• Credit officer-related practices

27
Q

Client-related causes

A

• Illness/ Death in the family
• Poor Client Discipline
• Poor Business Practices

28
Q

Externally-driven causes

A

• Calamities
• Natural Disasters
• Poor Economic Condition
• Price Fluctuations

29
Q

TRUE OR FALSE

In traditional thinking, the causes of delinquency is the fault of the client.

A

TRUE

Delinquency (1 decks)

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