A Comparative Study on the

Effectiveness of the Loan Recovery

Practices of the Two Selected
Commercial Banks

OVERVIEW
The immense success and development of human beings
would not have been possible without the idea of credit.
Loans can be considered as lifeblood of all banking
operations.
In case of the occurrence of non-performing loans, banks
take precautionary measures or loan recovery practices.
Banks need to undertake loan recovery practices because it
is important for them so that they can continue to be
operational.

THE PROBLEM STATEMENT

This study aimed to determine the effectiveness
of the loan recovery practices of two selected
commercial banks.
Specifically this study attempted to answer the
following questions:
1.

What is the personal profile of the respondent in terms of:

1.1 Age
1.2 Gender
1.3 Company Position
1.4 Number of years employed in the company

2.

What is the estimated average amount of loan lent to the

borrowers by the two selected commercial banks for calendar
years of 2012 to 2014 in terms of:
2.1 Commercial Loans

3. What is the estimated percentage of the non-performing loans of the

two selected commercial banks for the calendar years of 2012 to 2014?
4. What is the estimated percentage of the loan recovered of the two
selected commercial banks for the calendar years of 2012 to 2014?
5. How effective are the loan recovery practices of the two selected
commercial banks for the calendars years of 2012 to 2014 in terms of their:
5.1 Collection Efficiency
6. What is the Implication of the gathered data to the loan operations of
the two selected commercial banks?
7. Is there a significant difference on the effectiveness of the loan recovery
practices of the two selected commercial banks in terms of their collection
efficiency?

HYPOTHESIS
The hypothesis that was tested in this
study is:
There is no significant difference
on the level of effectiveness on the
loan recovery practices of the two
selected commercial banks.

OBJECTIVES OF THE STUDY

To assess the effectiveness on the respective loan
recovery practices of the two selected commercial
banks.
To compare the level of effectiveness of the loan
recovery practices of the two selected commercial bank
and;
To determine the significant difference on the loan
recovery practices of the two selected commercial
banks.

SCOPE AND LIMITATIONS

This study was focused on the assessment of the effectiveness
of the loan recovery practices of the two selected commercial
banks measured in terms of their collection efficiency during
the calendar years of 2012 to 2014
Respondents of the study included two groups
Bank A- 8 respondents from office branches around the
downtown center of Binondo, Manila
Bank B- 5 respondents from office branches in the universitybelt area in Sampaloc, Manila
Banking transactions was considered in selecting the bank
office branches

CONCEPTUAL FRAMEWORK
INPUT
Profile of the
Respondents
from the selected
Commercial Bank
Branch Offices
Age
Gender
Company Position
Number of years
employed to the
company

Loan Recovery
Practices
Rescheduling
Restructuring
Other recovery
alternatives
(Litigation)

PROCESS

OUTPUT

Questionnaires

Interview

Document
Analysis

Level of
effectiveness
of the loan
recovery
practices of
commercial
banks

METHODOLOGY
Research Design
Descriptive type of research
Sampling Procedure
Purposive Sampling
Participants
Bank A

Bank B

 Research Instruments
Questionnaires
Interview
Document Analysis
Statistical Tools
Frequency
Percentage
Weighted Mean
One Sample T-test

FINDINGS
1. Personal profile of the respondents in terms of:

1.1 Age
Age

30-35
36-40
41-45
46-50
50-51

years
years
years
years
years

Mean Age

Frequency
4
4
3
1
1

%
30.77
30.77
23.08
7.69
7.69
39.19 years

1.2 Gender
Gender

Frequency

Male

30.77

Female

69.23

Total

13

100

1.3 Company Position

Company Position

Frequency

Branch Manager

15.38

Branch Officer

46.15

Loan Processors

38.46

Total

13

100

1.4 Number of years employed to the company

Range

Frequency

1-5 years

7.69

6-10 years

15.38

11-15 years

38.46

16-20 years

30.77

21-25 years
Total

1
13

7.69
100

Mean

13.77 years

2. Estimated average amount of commercial loan lent

to the borrowers by the two selected commercial
banks for calendar years of 2012 to 2014 in terms
of:
2.1 Commercial Bank
BANK A
CY 2012

CY 2013

BANK B
CY 2014

CY 2012

CY 2013

CY 2014

2,000,001 10,000,001 - 50,000,00 10,000,00 50,000,00 50,000,00

-5,000,000 50,000,000
1111100,000,0 50,000,00 100,000,0 100,000,0
00
0
00
00

3. Estimated percentage of the non-performing

loans of the two selected commercial banks for
the calendar years of 2012 to 2014?
CY
2012
1-10%

BANK A
CY 2013
1-10%

CY
2014

BANK B
CY
CY
CY
2012
2013
2014

1-10% 1-10% 1-10% 1-10%

4. What is the estimated percentage of the loan

recovered of the two selected commercial banks
for the calendar years of 2012 to 2014?
CY
2012
61 80%

BANK A
CY 2013
81 100%

CY
2014
61 80%

BANK B
CY
CY
2012
2013
81 81 100% 100%

CY
2014
61 80%

5.

Effectiveness of the loan recovery practices of the two selected commercial

banks for the calendars years of 2012 to 2014 in terms of their:
5.1 Collection Efficiency

Measurement of
the Collection
Efficiency
1. Amount or
percentage of loan
recovered
2. Reduction of
accounts
receivable as part
of their secured
loan
3. Compliance of
customers to the
payment terms
4. Recovery of the
principal amount
5. Recovery of
interest payments

BANK A
Weighted Mean
Verbal
Interpretation

BANK B
Weighted Mean
Verbal
Interpretation

3.6250

Very
Satisfactory

3.6000

Very Satisfactory

3.5000

Satisfactory

3.6000

Very Satisfactory

3.2500

Satisfactory

3.6000

Very Satisfactory

3.1250

Satisfactory

3.4000

Satisfactory

3.7500

Very
Satisfactory

3.8000

Very Satisfactory

6. Implication of the gathered data to the

loan operations of the two selected
commercial banks?
Impact on the loan
BANK A
operations
Weighted Mean
Verbal
Interpretation

BANK B
Weighted
Mean

Verbal
Interpretation

1. Continue to
implement the
existing loan
recovery practices

3.6250

Very
Satisfactory

3.8000

Very
Satisfactory

2. Improve the
existing loan
recovery practices

2.1250

Good

3.2000

Satisfactory

3. Establish a new
or different loan
recovery practices

2.2500

Good

2.2000

Good

Composite Mean

2.6667

Satisfactory

3.0667

Satisfactory

7.

Is there a significant difference on the effectiveness of the loan

recovery practices of the two selected commercial banks in terms of
their collection efficiency?
Measurement of the
Collection Efficiency

1. Amount or
Percentage of loan
recovered
2. Reduction of
Accounts Receivable
as part of the
secured loan
3. Compliance of
customers to the
payment term
4. Recovery of the
principal amount
5. Recovery of the
interest payments

Bank A
Overall
SD
Mean

Bank B
Overall
SD
Mean

Mean
Diff.

Computed
t value

V.I.

3.6250

.51755

3.6000 .54772

.025

25.387

Significant

3.5000

.53452

3.6000 .54772

.10

24.241

Significant

3.2500

.46291

3.6000 .54772

.350

23.744

Significant

3.1250

.35355

3.4000 .54772

.275

26.152

Significant

3.7500

.46291

3.8000 .44721

.05

30.579

Significant

CONCLUSION
1 . The respondents of this study were composed primarily of female
participants and mostly between 30 40 years old. Majority of the
respondents also were Bank Officers having been employed to their
respective banking companies for more than 10 years.
2. The two selected commercial banks had a considerable amount of
commercial loan lent to their clients. It can be concluded that Bank
B lent a higher overall amount of commercial loan to its borrowers
compared to Bank A.
3. The amount and percentage of the non-performing loans of the two
selected commercial banks are at a low level for the calendar years
of 2012 to 2014
4. The two selected commercial banks exhibit an efficient loan recovery
practices, for the three consecutive years from 2012 to 2014. Bank B
had a higher overall percentage of loan collections over the three
year horizon.

5. The loan recovery practices of the two selected commercial banks are
effective, having a difference on the rating scale. Bank B has a more
effective loan recovery practices as compared to Bank A.
6. Bank B signified that it is more appropriate to continue to implement
and improve the existing loan recovery practices than to establish a new or
different loan recovery practice. While some of the respondents from Bank
A however is more willing to establish a new or a different loan recovery
practice than Bank B.
7. It can be concluded that the comparison on the level of effectiveness of
the loan recovery practices between the two selected commercial banks has
a significant difference in all aspects, and all the given data implies and
strengthens the idea that the two selected commercial banks has a
significant difference on the level of effectiveness on their respective loan
recovery practices.

RECOMMENDATIONS
Commercial banks should implement strategies that can
enhance cost-effective loan recovery.
Banks should have the necessary technologies and
expertise for controlling loan transactions.
Banks should follow the overall banking rules and
regulations in all their operations
Banks should consider all factors that can affect their
loan operations, such as economic conditions.
Banks should have the proper information system in
order to asses if a client is qualified to acquire a loan or
not.
Banks should establish a customer-friendly terms and
conditions regarding the repayment of a loan
Finally, this study is recommended for further research
in the future.

Thank you!