September 2021 Issue No. 84 Managing delinquency

 
 
CAUSES OF DELINQUENCY 
EXTERNAL FACTORS
 
 
Individual Crisis
-
 
Unpredictable individual circumstances
increases the risk of delinquency.
Situations may include the death 
of relative, unemployment or salary reduction.
 
Natural Disasters
-
 
Floods, Hurricanes and Earthquakes may deter 
profitability of projects and also give rise to restructuring of
disposable income. 
 
State of Economy–

An economy in a recession can affect 

delinquency. Recessive economies face liquidity problems hence 
expected loan repayments would be negatively affected
. 
 
Transaction Cost of Loan
-

High transaction costs lead to the 

reduction of funds to execute projects. Projects that are not fully 
capitalized may be compromised, consequently affecting the 
repayment process.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EFFECTS OF DELINQUENCY ON FINANCIAL INSTITUTION
 
-
Reduction of Financial Institution 
Assets due to write off loans
-
Loss of Credibility to Lending Programs/
Institutions
-
 Decreased Long
-
term institution viability
 
-
 Increase in Loan Loss Provisioning
-
Delayed Earnings 

 
-
Slow rotation of loan portfolio –Delayed