Bank Lending Process at the Bank of Multiple Islands

Supplementary Information

An initial performance analysis of the BLP over a 6-month period from July to December 2018
was conducted by BMI as part of the ‘time and motion’ study. Below are some of the results
from this analysis.

Note that a ‘day’ refers to a business day which consists of 8 working hours. An ‘hour’ refers to a
working hour.

● On average the processing time per case is approx. 138.35 hours (equivalent to 17.3
days) from application to settlement. This can be broken down into four phases as
follows: 33.5 hours for Application, 74.5 hours for Assessment, 18.1 hours for
documentation, and 12.25 hours for settlement.

● Additionally, some data about the time spent in transportation and communication is
given below. On average,
o 2.5 days are required to set up customer interview
o Internal mail requires 1 day of transportation
o Customer mail correspondence requires turn-around time of 2 days (including 1
day to reach customer and 1 day to return a completed document)

In addition to the above, the following information and assumptions are also given.

● In total approx. 2500 cases (including approx. 800 cases with loan amount over $5
million) were lodged in the system during that period. Overall about 80% of these cases
were settled successfully, while the remaining cases were rejected due to various
reasons. The total loan amount of all the settled cases was approx. $4 billion.
● In general, BMI is responsible for the cost of the mailing and delivery of documents that
are relevant to BLP. The average total cost per customer application is $65.
● It is valid to assume that customers complete the documentation upon its arrival and
post it straight away and customers’ mails are posted via standard post.
● Remuneration (e.g. salary) paid to employees at BMI is considered sufficiently
competitive in the national banking sector.
 OPMAN 131.04 Fundamentals of Business Project Management

Mini-Project 1
Business Process Improvement
of a Bank Lending Process
for Bank of the Multiple Islands

Submitted on:
March 18, 2023

Proposal submitted to:

Andre Fournier, MBPM

Proposal made by:

Leopoldo A. De Castro III

Agatha C. Gutierrez
Therese O. Llanera
Zen Kristianne N. Magdamit
John Gilbert G. Mundin
Darrel Ong
Executive Summary

1
 With a variety of services directly pertaining to both personal and business
endeavors, the Bank of Multiple Islands also known as BMI is a notable banking
institution. Due to its popularity and ratings, there are, aside from their current clientele,
newer ones who apply to BMI. However, with such a significant number of individuals
applying for their services, there are many issues they face. The most prominent source
of problems that need solving is the bank lending process (BLP). The overall high cost
and the experience of potential customers decrease the chances of the institution
handling those individuals. The process is quite rigorous with many procedures in place,
which make for a long period of waiting time for people. These issues are of utmost
concern as many decide to find other places to finance them.

In that respect, due to the aforementioned issues, Process Improvement

Manager, John Majors is assigned to deal with the issues at hand quickly and efficiently.
First and foremost, he conducted a process efficiency exercise to see the normal
response of the bank lending process (BLP). Through the data collected from the
exercise, he saw the general metrics of the procedures done. Results showed that
approximately 60% of the Business Banking Division’s time was used up by lending
activities.

Understanding that the average of the process would take up to 13 days and that
more than half of the department’s time is being used up by that particular service, John
Majors has tasked the BPM team to lessen the amount of time used up for bank lending
while simultaneously improving the overall process to the satisfaction of both the
customers as well as the bank itself. The BLP of the bank is the service that the team
focused on in which there are four distinct phases: customer application, application
assessment, application documentation, and finally, loan settlement. Assuredly, this
would more likely attract a steady stream of clients and substantially increase it should
their services become faster and much more convenient.

With that, as a prerequisite to improving the Bank Lending Process, the BPM
team aims to comprehensively and clearly illustrate the existing process in order to
identify any and all potential areas of improvement. To do this, they came up with
Business Process Models for each of the four aforementioned phases arranged
together in a comprehensive collaboration diagram, as well as a Governance
Framework that provides a detailed articulation of the management and organization of
these process models. Emphasized in the paper are the time-consuming workflows that
are overcomplicated by unnecessary steps, the repetitive back-and-forth of documents,
and excessive manual work that altogether contribute to increased inefficiencies and
operational costs. Through this process analysis report, the BPM team aims to provide
a clear picture of the existing processes and the issues that are in need of improvement.

Table of contents

2
Introduction
A. Purpose of the Report
B. Project goals
C. Structure of the Report

Overview of the project conduct

Governance framework

Business process modeling

Conclusion

References

Appendix A : Project Management documentation

Appendix B : Peer Evaluation Form for Group

3
 Introduction

A. Purpose of the Report

The Bank of Multiple Islands (BMI) is a leading financial institution that

provides banking services to individuals and businesses in over 1000 branches
all across the country. BMI is well-known for having some of the highest customer
satisfaction ratings as the institution prides itself on efficient, honest, and
well-tailored services. However, with a rapidly growing base of almost ten million
customers, the institution is challenged with issues of maintaining the agility of
loan services while competing with the other major players in the banking sector.
The BMI’s current Bank Lending Process is unable to keep up with the flexibility
of loan services. It is to be seen that this issue be immediately addressed as this
may potentially lead to the company having them lose their competitive edge in
the banking sector. From the information gathered in the case study, we may
surmise that the problems stem from inadequate information quality, costly
processes, and extensive work duplication, which have ultimately led to
customers seeking alternative businesses for loan services. To address these
issues, a Business Process Modeling (BPM) analysis was conducted. The group
will take into account the improvement of the Banking Lending Process’s
provided data, overall effectiveness and efficiency, and lastly, customer
satisfaction. The report aims to provide a detailed analysis of the current process
to point out its shortcomings and then proceed to propose changes to help the
Bank of Multiple Islands improve its current framework. An assumption can be
made that BMI is a modern and openly understanding bank that holds upright
ideals while valuing efficiency and practicality. Thus the report intends to provide
process architecture, modeling assumptions, process models, and a summary of
findings to help the bank understand how the process is currently performed and
what areas need improvement. This case study highlights the importance of a
company's loan process and how it can affect customer satisfaction and
competitiveness in the market. Improving a company's loan process can lead to
increased customer retention and loyalty, as well as attract new customers. It is

4
 crucial to ensure that loan processes are efficient, cost-effective, and provide
quality data to make informed decisions. Additionally, companies must prioritize
customer satisfaction by providing flexible loan services and ensuring a seamless
loan application process.

B. Project goals

The goal of the team is to utilize BPMN and a Governance Structure to

achieve several outcomes. These outcomes include identifying the underlying
reasons for the subpar information quality, costly processes, and extensive work
duplication that have hindered the Bank Lending Process. In addition, the report
aims to create a governance structure that will help establish the company's
Bank Lending process. The report will use BPMN, a visual notation language that
depicts business processes graphically, to analyze and document the Bank
Lending process. The use of BPMN will facilitate the identification of
inefficiencies within the process by breaking it down into distinct activities and
analyzing how they interact with each other. This will enable the report's authors
to pinpoint areas where improvements can be made and propose changes to
streamline the process.

The report will also create a value chain and layered collaboration diagram
to analyze the Bank Lending process's efficiency, timeliness, and effectiveness.
The value chain diagram will break down the process into its primary activities
and analyze how they contribute to the overall value of the process. The layered
collaboration diagram will depict the relationships between the various
departments involved in the process, including loan origination, loan processing,
loan underwriting, and loan closing. This will enable the report's authors to
identify areas of inefficiency within the process and suggest changes to optimize
it.

5
 Moreover, the report will establish a governance structure to improve the
organization of the Bank Lending process. The governance structure will outline
the roles and responsibilities of each person involved in the process, including
loan officers, loan processors, loan underwriters, and loan closers. This will
ensure that everyone involved in the process understands their responsibilities
and that there is accountability for each step in the process.

Finally, the report will be concluded and provided with critical ideas that
will drive BMI admin to initiate foundational improvement within the Bank Lending
process of the Bank of Multiple Islands. These will be based on the analysis of
the Bank Lending process using BPMN and the governance structure, value
chain, and layered collaboration diagrams.

C. Structure of the Report

This report for the Bank of Multiple Islands will comprise a value chain,
multi-layered collaboration diagram, and process architecture. The governance
framework involves the process architecture of the Bank of Multiple Islands which
will be presented at the start of the report. Further research will be conducted to
identify the various business processes or services typically provided by the
Banking Industry, which will be supplemented by standards, frameworks, and
guidelines as well as modeling conventions. The core of the report is the
Business Process Modelling, which includes modeling assumptions and the
process models for the Bank Lending Process, as represented by the BPMN.
Lastly, the report will provide a summary of the main outcomes of the analysis,
based on the governance framework and the business process modeling, and
propose possible procedures for the process improvement initiative of the
business. To enhance the Bank Lending Process, the report aims to identify the
causes of poor information quality, high process costs, and excessive work
duplication that have compromised the business process. The report's primary
goal is to produce a governance structure that will position the Bank Lending
process of the company. The value chain and the multi-layered collaboration

6
 diagrams will be used to analyze how to improve the efficiency, timeliness, and
effectiveness of the Bank Lending process. The report also seeks to deliver
critical findings for the process improvement initiative of the Bank Lending
process of the Bank of Multiple Islands. The report for the process improvement
initiative of the Bank of Multiple Islands will start with the governance framework,
which includes the process architecture of the Bank of Multiple Islands. Further
research will be conducted to identify the various business processes or services
typically provided by the Banking Industry. This will be supplemented by
standards, frameworks, and guidelines found, as well as modeling conventions
adopted to justify the process architecture that was structured. Subsequently, the
Business Process Modelling will be presented, which includes modeling
assumptions and the process models for the Bank Lending Process, as
represented by the BPMN.

Overview of the Project Conduct

Distribution of tasks

Task Assigned member

Executive Summary Gutierrez, Llanera

Introduction Ong

Overview of the Project Conducted Ong, De Castro

Governance Framework Ong, Mundin, De Castro, Magdamit

Business Process Modeling Gutierrez, Magadmit, Llanera, De Castro

Conclusion Ong, Llanera, Magdamit

Team 4 consists of six members namely, Agatha Gutierrez, Darrel Ong, Theresse
Llanera, Leopoldo De Castro, John Gilbert Mundin, and our team facilitator, Zen

7
Magdamit. We were tasked to act as a BPMN consultant team for assessing the Bank of
Multiple Islands and their main revenue-generating service, the Bank Lending Process.

In order to accomplish the deliverables being asked of the team, we divided the
tasks among the team members. Each member had a duty to fulfill for the team’s
benefit (see table above). From the early stages of this case study, the group
exemplified good and transparent communication amongst each other, whether it be
through chat or occasional team meetings. The group also held weekly realignment
meetings with the main purpose of gaining updates and feedback based on the
assigned task to each member. It was also a time when team members could ask for
help from other team members if there are things they wish to discuss and clarify.
Overall, the team showed good dynamics with one another.

Lastly, given that the project was given over a long period of time, the team opted
to create a Gantt chart which would keep the team on track and we could allot our time
properly for this case study. (See Appendix for Gantt Chart)

Governance Framework

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Process Architecture
According to La Rosa (2015), the main purpose of a process architecture is to
enumerate the main processes and determine the scope of these processes. In
addition, it also showcases the hierarchical order of the business processes. Namely,
the management, core, and support processes. With this, a business can see the
interdependencies between the processes and can evaluate which steps bring the most
value to the business. The process architecture will later serve as aid in the company's
value chain and process models.

Porter explains that process architecture is similar to the blueprints of a house

as it shows the bare bones of the business process. The group based the process
architecture created on Porter’s model which includes the “house” consisting of three
main segments. Management processes are considered the roof as it oversees the
whole process. They are required to guide and lead the whole process through various
high-level decision-making. The segment below is the core processes, these are the
main revenue-generating processes i.e. loan lending. At the very bottom, situates the
support processes which help facilitate the core processes. Lastly, on the side of our
“house” are the “walls” that represent our inputs and clientele. Inputs are required (e.g.
customer information, investors, etc.) because they make it possible to deliver or
produce the intended goal of the business. Furthermore, determining the clients are
necessary as they are the outputs of the whole process. Without knowing who the
services are catered towards, the business would not have an end goal, thus, the
business couldn’t function and it would be useless.

Management Processes

The triangular shape at the top of the Process Architecture Model houses the
Management processes of the Bank Lending Process. Within it, we observe how
different factors of the governance framework influence each other and how the current
processes lead to creating the output for the company’s stakeholders from the

9
information and resources provided by the input from the company’s supporters and
partners.
I. Policies & Regulations
These factors include specific policies such as BMI’s Mission and Vision
Statement, Bank Submission Checklists, and Contractual Obligations. These factors
concern themselves with the Organizing Function of the company. These policies are
what shape the Support Processes as the employees that allow the process to function
must rely on these factors to function in an orderly and efficient matter. Specifically, the
Bank Submission Checklist is a vital document in the Application Assessment part of
the core process as it allows the Bank Relationship Managers to properly assess the
transaction and whether or not to file it for approval.

II. Types of Management

Another factor one will observe in the Process architecture is the forms of
Management present that impact each of the company’s Core and Support Processes.
The administrative management serves as the Top-level management and takes care of
executive decision-making, policy, and strategy development, and even process
improvement. And though Risk Management, Legal Management, and Financial
management seem self-explanatory when observing the model, each form of
management actually can be further explained as significantly influencing each of the
processes. Risk management concerns itself with the assessment of the application as
it pertains to the approval of the documents for the transaction. Financial Management
lies in the documentation of the application as the costs and transactions need to be
accounted for as well as be covered by the company's expenses and journalizing
books. Lastly, Legal Management can be seen in the Loan Settlement, especially
through the support process provided by legal services, as they allow the process to
finish and the transaction to be complete under no illegal clauses or unfair settlements.

III. Functions of the Process

The different Functions include Strategic Planning, IT function, Authentication
Function, Organizing function, and Accounting Function. Each of these functions plays a

10
vital role in the process as they act as “cogs” in a metaphorical machine of the Bank
Lending Process. Specifically, the Authentication provides the Core and Support
Processes with verification of all the documents as well as the documentation of each of
the applications. Furthermore, the Organizing Function allows the processes to flow
smoothly to one another as the work becomes properly distributed and organized
among its members. The IT function handles all of the modern applications,
maintenance of websites and servers, as well as any forms of technological concerns
held by the company’s stakeholders such as employees or customers.

Core Processes
According to the Fundamentals of Business Process Management (2013), a core
process is essential for creating value in a company. It is essential to the service or
product that a company/business has to offer that clients and customers purchase in
exchange. The group focused on the BLP as the main revenue-generating process of
BMI as stated in this case study. Therefore, after analyzing the scenario, the group
concluded that the core processes in the BLP begin with customer application,
followed by application assessment, then application documentation, and lastly,
loan settlement. These are the four pillars without which the BLP can’t commence.

The core process is the generated value of the company as it’s directly linked to
external customers. It aims to give the client a satisfactory experience along with
gaining the customer’s trust through the bank’s performance. The main core processes
are the customer application, where the client will fill out necessary documents about
the loan they wish to take and this is paired with an interview that will validate the
customer’s information. The next step is the application assessment. This step aims to
approve the applicant's information along with their loan application. The risk
department also takes action in this step. Once everything is approved, the bank will
then officially post the customer’s application into their system. Application
documentation is the steps in which loan documents are going back and forth between
the loan center, customer, and bank. This aims to ensure that the data and information
are accurate and correct to prevent mix-ups when loan settlement is commencing. The

11
last and final step is the settling of the loan. This step is all about finalizing the
documents and file so that it can proceed to the legalization process. This includes
obtaining a loan stamp and lodging the mortgage with the Government Title Office.
Once all of these steps are completed, BMI can officially state that they have rendered
their service to the customer. It’s also worth mentioning that the core processes can
only be properly executed with the assistance of both management and support
processes.

Support Processes
According to the Fundamentals of Business Process Management (2013), the
support processes that can be seen in the process architecture are processes that aid
the core processes to be executed. Therefore, after analyzing the scenario of BMI’s
bank lending process, we were able to determine the processes that support the core
processes. These include Procurement, HR management, IT management
(SharePoint), Bank loan tracker, Internal mailing system, Risk management and
Legal Services (GTO). Procurement and HR management are processes that oversees
the whole BLP. Procurement is the company’s purchasing of their office equipment and
HR management is the company’s way of taking care and dispersion of employees. IT
management, specifically the SharePoint, a database that BMI uses to store customer
information which can be used in the future or other services offered by the company.
The BLP is a tedious process which includes a lot of back and forth paperworks
between different departments/parties (i.e. customers, loan centers, lawyers, bank), the
internal mailing system and bank loan trackers are support processes that help a
seamless transition of documentation. Not only this but it also reduces the risk of
documents wandering off as the documents are “tagged” to a single owner (customer)
which is traced by the system on the document’s whereabouts and destinations. Lastly,
Risk management and Legal services support the commencing of phase 2 and phase 4
in the BLP, respectively. Risk management is required in phase 2 of the BLP because it
talks about the application of the customer and assessing the loan that they are
applying for. The risk department is crucial here because they have to take into account
the bank’s situation when it comes to finding a middle ground between the customer

12
and the bank. Without a proper risk assessment, the customer can’t move forward to
the next phase. Similarly, legal services are also crucial for phase 4 of the BLP because
this is the settlement period. The bank must take into account the legal procedures that
take place here in the Philippines during a loan order. These include the signing of
notarized documents along with obtaining loan stamps for mortgages.

Suppliers/Partners
1. RCS Data Intelligence
RCS Data Intelligence provides credit reporting and analytical services to the
Bank. Specifically, RCS Data Intelligence collects, analyzes, and provides credit
information and insights to the Bank on potential borrowers. This information
helps the Bank make informed decisions on whether to approve or deny loan
applications, as well as determine appropriate loan terms and interest rates.
Additionally, RCS Data Intelligence continuously monitors and updates the credit
information of existing borrowers, enabling the Bank to identify and manage
credit risk effectively.
2. Business Banking Solution (BBS) team
The BBS team serves to support the branches and Relationship Managers with
their bank lending applications. From the information gathered, as well it could be
surmised that the BBS team is also in charge of guiding and training newer
relationship managers as it is expressed that they provide guidance to those who
are rather inexperienced.
3. Bank Relationship Managers
The Bank Relationship Managers are situated in the branches of the bank and
receive issuance of loans from the business customers. As such they are an
integral part of the BMI process as they receive approximately 60% of requests
inputted.
4. Corporate Banking Division
This branch of the Bank’s workforce is designated to improve process
performance and optimize the BMI’s processes. On top of this, they also oversee

13
 the BMI’s day-to-day operations and ensure a smoother workflow among BMI’s
employees.RCS Data Intelligence
5. Lawyer
They ensure that all legal requirements are met and that the loan agreement is
legally binding and enforceable. They also help to identify and mitigate any
potential legal risks associated with the loan. In addition, the lawyer may review
and negotiate the loan terms, as well as draft and finalize the loan documents.
6. Broker
The broker acts as a middleman between the borrower and the lender. The
broker works on behalf of the borrower to find suitable loan options and negotiate
the terms and conditions of the loan with the lender. The broker plays a crucial
role in helping the borrower find the best possible loan option, as they have
access to a network of lenders and knowledge of the lending market. They can
also provide guidance to the borrower on the loan application process and help
them prepare the necessary documentation. In this case study, the broker
referred the business customer to the Loan Centre, where they were able to
access a range of loan options to meet their needs. The broker also worked
closely with the Loan Centre to ensure that the business customer received the
necessary support and guidance throughout the loan application process.

7. IT Management team
Seeing as BMI utilizes many forms of modern technology such as websites,
modern applications, and appliances. It would be understandable to surmise that
an IT management team would be necessary in order for the maintenance and
upkeep of the hardware and software, as well as the implementation of different
online platform accessibility.

Customers/Stakeholders
1. Business Customers
The Business Customers are usually companies or institutions that make
financial dealings with the bank. The bank then provides them with business

14
 loans, credit, savings accounts, and checking accounts that are specifically
designed for companies. In addition, they provide them with financing options,
cash management solutions, payroll services, and fraud protection.
2. Loan Centre
The Loan Centre is an external stakeholder responsible for processing loan
applications that have been approved by the Credit Department. The Loan
Centre then creates and processes the loan documents before returning them to
BMI for finalization and settlement of the loan agreement. The Loan Centre is
responsible for activities such as loan documentation preparation, verification of
information, and funding of the loan. The Loan Centre's role is significant as it
helps streamline the lending process by taking care of the loan documentation
and verification process, allowing BMI to focus on the core business of lending
money. By outsourcing this critical process, BMI can save time and resources,
reduce errors, and ensure compliance with legal and regulatory requirements.
3. Customer’s Guarantor
The Customer’s Guarantor is a financial term describing an individual who
promises to pay a borrower's debt in the event that the borrower defaults on their
loan obligation. Guarantors pledge their own assets as collateral against the
loans. (Investopedia, 2021)
4. Bank Lenders
The bank lender provides loans to business customers through the loan center.
The lender evaluates the creditworthiness of the customer, analyzes their
financial statements, and determines their ability to repay the loan. They also set
the terms and conditions of the loan, including the interest rate, repayment
period, and collateral requirements. Additionally, the lender monitors the
borrower's performance throughout the life of the loan, ensuring that they comply
with the terms of the agreement and manage any risks associated with the loan.
Overall, the lender plays a key role in supporting the financial needs of
businesses and enabling them to achieve their goals.
5. Bank Associates

15
 The Bank Associates work behind the scenes to help the loan officers by
reviewing loan applications, checking credit scores, verifying income, and
evaluating collateral. They also help to ensure that all required documentation is
in place and that loan files are complete and accurate. The bank associates are
responsible for assessing the creditworthiness of loan applicants and making
recommendations to the loan officers regarding whether or not to approve the
loan application. They also work closely with the loan officers to help them
structure loan packages that are both attractive to the customer and in line with
the bank's lending policies and procedures. Additionally, the bank associates
assist with loan servicing, which involves managing the ongoing administration of
loans that have been approved. This includes tasks such as processing
payments, handling loan modifications or extensions and managing collections
activities if a borrower falls behind on their payments.

Modeling conventions
In our analysis of the procedures followed by the BMI, it was imperative to
establish the business processes included in the company. For this specific
investigation, the goal was to scrutinize the lending process followed by the company
—with the intention of proposing different strategies to improve customer service
turnaround time. To document all necessary processes, the process architecture
provides in brief detail the main core processes of the organization. Its format follows a
strictly linear progression to indicate the advancement of the application process.
Included in the diagram are also the sub-processes under each process phase. The
hierarchical levels in the figure only included two (2) to keep concise the structure.

The modeling language used in this analysis is heavily reliant on the Business
Process Modeling Notation or BPMN. This notation provides a clear guide on how to
interpret the different structures and figures included in the report. With BPMN,
elements are clearly allocated in relation to their specific operations. This lessens
confusion within the flow of objects and procedures. The BPMN tools used for this
report include different resources gathered from learning outlets such as SAP Signavio
and BPMN.io.

16
 For the naming conventions followed by the diagrams, the organization intended
to use simple language and word combinations to avoid complexities in trying to
connect operations. Each object is named with either an active verb with an object it is
pertaining to an object with an accompanying past participle. These grammar
conventions are not strictly mandated for every object, but it serves as a guiding
principle for construction.

Diagrams included in this report were laid out in a simple format, avoiding any
unnecessary design detail that could derail the brevity of the processes. Colors would
vary according to their category group. In the case of the process architecture, each
process phase has an assigned color to distinguish the difference and categorical flow
of its core and sub-processes. For the case of the collaboration diagram, the layout will
strictly adhere to the BPMN model conventions. This signifies that all elements are
documented to correlate to set elemental standards of BPMN. As for the content layout,
pools will be grayscale with only labels to match the categories in an attempt to keep
the diagram as straightforward as possible.

Business process modeling

Process models of BLP

Value chain

According to the Packtpub, a BPMN value chain model is a one-liner that

consists of the basic steps of a process. There are no decision-making nor gateways,
just direct lines in this model. In this case, it shows the basic steps BMI and the
customers must do in order to fulfill the BLP. The value chain above can be broken
down into the four different phases of the BLP: Customer application, Application
assessment, Application documentation, and Loan settlement. This allows for the

17
company to have an easier representation of the Key performance indicators (KPI)
which tell them their areas of strength and weaknesses.

The highest level of process in the Bank Lending Process begins with requesting
and validating the customer’s request for a loan from the bank and creating and
validating application documents, this is the main objective of the first phase of the
process. Phase two is comprised of the bank sending their loan offer to the customer.
Phase three is where the majority of the high-level process is located in. This is mostly
the sending back and forth of documentation between the customer, bank, and loan
center. Lastly, phase four consists of the finalization and wrapping up of the whole bank
lending process and this is where the high-level process ends.

Layered Collaboration Diagram: High-Level Overview Process Model

The figure above shows the collaboration diagram for the lending process of the
Bank of Multiple Islands. BPMN 2.0 conventions were followed as a structure for this
diagram. The support teams of BMI were grouped separately from the Customer pool to
indicate the divide in customer-business relations. The Loan Centre, Lender, and Risk
Assessment Team are the main participants of the lending process on the banking end.
Relationships between pools show the interactions made by participants. Starting with
the request for a bank loan and ending with the completion of post-settlement
procedures. Call activities are labeled with task markers to indicate their type and
category. Embedded in the assumptions are the detailed descriptions of the elements
included in the collaboration diagram.

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Modeling assumptions

In creating the following models, a few key assumptions were made to facilitate
the analysis of the process. This section provides a detailed description of each phase
as well as the assumptions that were made through the process. Through these, the
BPM team aims to gain and provide a deeper understanding of the functionalities of
each phase and how they work together as one process.

The first assumption, as shown in the diagram, is the presence of four relevant acting
bodies throughout the lending process. This includes the customer who places a loan
application, the lender who is the primary handler of the application, the Loan Centre
who takes charge of centralizing and documenting all information as well as managing
the loan settlement in the last phase, and the risk assessment team to oversee risk
management and ensure if applicants are eligible for a loan request. All four parties
assumably collaborate consistently in order for the loan application to progress.

Phase One: Loan Application

The process begins with a customer applying for a loan. This initiates the first
phase labeled “Customer Application.” Depending on the price of the loan request, said

19
request will be coursed through the division whose capability is most appropriate to
handle the amount and complexity of the loan. Assumably, this is to ensure that the
work allocated can be done by that amount of people and that the assessments and
paperwork for the potential customer can be done quickly and attentively. The Lender
handling the loan then uses the information from their conducted customer needs
analysis to identify an ideal offer. Though not explicitly stated in the diagram, this has a
few issues regarding the ever-changing product options which make it difficult to
determine what is ideal. Regardless, in the next step, both a preliminary customer file is
created and the loan request is validated.

With that period over, then comes the requirements and information that the
customer must fulfill in order to complete the “Bank Submission Checklist.” Though it
was stated that this checklist was for loans over 5 million, it is assumed that a
requirements checklist is a general prerequisite to the official loan application document.
For the convenience of the borrower, all information and requirements asked to be
received by the lender will be gathered in one application. This helps keep track of
everything while also ensuring that there is no unnecessary repetitive back and forth for
each and every single document needed. After gathering the accomplished loan
documents from the customer, the application will once again be validated by the
Lender and the customer file will be formalized. In the case that there is missing
information, the Lender contacts the customer to request these. The loan application
process is done once the application and customer file are completed.

In a process where there are many areas indicated as manual procedures, there
is a measure to help lessen the number of individuals doing such tasks, rather, they
could focus on the other later stages of BLP. The name for this particular improvement
is Digital Banking Engagement Platforms (DBEP), which makes certain that everything
inputted by the customer will be kept on file by the financial institution organized overall
(Legband, 2020). Such data integration illustrates to the bank whether or not the
applicant is a viable candidate for the loan they’re applying for (Defi Solutions., n.d.).

20
Phase Two: Application Assessment

For phase two, it is evidently seen through the diagram that there are many steps
in the process, this is good as there would be numerous precautionary and preventive
measures that may result in bad outcomes for the bank. Such measures would help
lessen mistakes and give the bank an increase in choosing less risky customers to lend
money to. However, while such ways are ideal as it helps assure the bank of the
customer’s proposal, it should also be noted that the process should be simplified. On
the bank's end, this will help avoid such problems that may result to any bureaucratic
procedures as well as the requirement of compensation of overtime or more hired
individuals due to the many man hours required due to the many steps taken by the
bank currently. Such a solution will be cost effective for the bank. Overall, in the end, the
lessening of steps may help become a faster process for the bank to verify the
information, review the proposal itself and decide whether they would lend to the
individual/s or not. Understandably, the bank is protecting its interest, however again
the procedure is too tedious. It takes a long time for them to process a loan that the
potential borrower may transfer to their competitor who can offer a faster loan
assessment procedure. This is an important issue highlighted in the case.

21
 According to this phase, it is possible for files to be lost should they be mailed. In
that case the current protocol is for individuals to deliver the file to the loan centre in
person so that it may be received immediately. Although while this does make sure that
the file does not get lost in transit, it is a waste of time for the individual doing it as they
could have been doing other things rather than being a messenger for it. The team
proposes transitioning from keeping paper documents to digital ones instead. This
would make the transfer to the loan centre much quicker while also not giving
individuals the task to walk across the town to hand the file in.

Phase Three: Application Documentation

By phase three, it is assumed that the borrower is eligible for a loan and that the
application is already approved. Their customer information must now be properly
documented through the loan centre’s system. All customer information is first received
by the Loan Centre wherein two simultaneous processes occur. While the customer
documents required for the loan are generated and forwarded back to BMI, the same
information is manually encoded into their internal system. This is so that
documentation won’t solely rely on the physical files that can easily get lost but can
instead be tracked through a system and physically reproduced as needed. However,
for this to work, the information must obviously be accurate, which often isn’t the case.
Documentation becomes an iterative and time-consuming process because of the lack
of quality assurance being done separately or beforehand. This results in an increased

22
amount of time and energy wasted through repetitive paperwork. This is another issue
highlighted in the process and should be further streamlined.

Once all information has been properly documented and matched with the loan
documents, these are sent back to the lender for re-checking. Once the documents
have been verified by the Lender, this is sent back to the applicant for review and
signing and is then sent back to BMI for a final re-checking by the handling Lender.
Essentially, this documentation process exists to ensure that information is consistent
given that there are many parties involved. Once all information and documents are
done with all stages, they are considered ready for settlement.

Phase Four: Loan Settlement

At this point, the lender proceeds to the fourth and last phase wherein the loan
settlement is initiated. It is assumed that there is no longer room for inaccuracies or files
getting lost in transit and that the files are directly forwarded back to the Loan Centre for
processing. At the same time, the Lender advises a lawyer of the pending loan
settlement for them to ensure that legal requirements are met. These are simultaneous
and time-saving assuming that it takes a few days for the files to get back to the loan
centre. From here, the loan centre takes charge with preparing the pre-settlement
checks as well as securing a settlement date with the lawyer. All pre-settlement checks
are assumably completed two days prior to the set date to give time for settlement
instructions to be prepared. These are all readily available by the day of the settlement

23
meeting. As shown in the diagram, if the settlement is affected, the loan account is
established and a settlement notice is sent to the Lender. Otherwise, the settlement is
reexamined by the lawyer and all preparatory steps in the settlement process is
repeated by the loan centre until it meets the legal requirements. Post-meeting, the loan
centre prepares the customer letter and completes the post-settlement checks four days
after sending the letter. They then mail the settlement letter to both the lender and
customer splitting the last steps of the phase into two acting parties– the loan centre
and lender– as shown in the collaboration diagram.

For the final steps of the bank lending process, the loan centre simultaneously
prepares the loan stamping and registration details then finally lodges the mortgage with
the Government Titles Office. At the same time, the lender, after receiving the
settlement letter, completes the post-settlement activities and finalizes the lending file.
Both the post-settlement and management of loan documents are completed and the
four-phase bank lending process is complete.

Conclusion
The Bank of Multiple Islands illustrated the phases and the processes each took
in order to get the results that they desire. Such processes create an environment
where quality is superior and of topmost priority for the institution. There are also other
factors such as core processes as well as support processes that add to all of those
affairs and proceedings. Furthermore, there are individuals, suppliers, and customers
who participate in such matters. All these factors added altogether encompass the
activities done by the organization in addition to the goals they wish to achieve for
themselves as a whole. The phases were all meticulously created with a specific
objective and design in mind, the act of curating the different parts is what tailors the
entire experience of the customer. The phases have their own personal objectives and
goals of attainment. Phase 1, the request, application, and additional information
needed by the Lender are asked for. The second vets and verifies the customer
themselves alongside the request, before accepting the said proposal of the client.
Thirdly, the next steps would be to process documents and files that have been asked

24
as these will serve as the data for the proceedings as well as the various times where
files would be sent back and forth for verification by both parties, the client and the
bank. Lastly, the fourth step for the overall process, is necessary for the culminating
stage that the loan would be finalized with the terms that were agreed upon for the
benefit of everyone involved which will signify the eventual concluding of the preceding.
That distinct part is the pinnacle of what has to be planned from the beginning of when
the loan had been considered by the bank as a sensible and suitable option for them to
partake in.

However, due to the many processes, this makes the overall application period
longer for the clientele which may as mentioned in the study that customers will possibly
find another financial institution to secure their loans. This would then thus lessen the
revenue of BMI. The improvements and recommendations for actions the team have
decided on will help alleviate the situation at hand. All these actions make the subject of
the entire undertaking of all transactions and decisions viable and well thought out for
the institution.

25
References

Dumas, M., La Rosa , M., Mendling, J., & Reijers, H. A. (n.d.). Fundamentals of
Business Process Management. Google Books. Retrieved March 17, 2023, from
https://www.google.com.ph/books/edition/Fundamentals_of_Business_Process_
Managem/KgVTDwAAQBAJ?hl=en&gbpv=1&printsec=frontcover

Marcello La Rosa Follow Professor at Queensland University of Technology. (n.d.).

Process Architecture - Part I. Share and Discover Knowledge on SlideShare.
Retrieved March 17, 2023, from
https://www.slideshare.net/mlarosa/process-architecture-part-i

Value Chains . Packt subscription. (n.d.). Retrieved March 17, 2023, from
https://subscription.packtpub.com/book/application-development/9781849689441
/2/ch02lvl1sec28/value-chains

Legband, M. (2020, August 3). The value of process improvement in the Banking
Customer Experience. Credera. Retrieved March 17, 2023, from
https://www.credera.com/insights/the-value-of-process-improvement-in-the-banki
ng-customer-experience

3 loan process improvement ideas in banking to optimize lending practices.

defiSOLUTIONS.com. (2018, May 23). Retrieved March 18, 2023, from
https://defisolutions.com/defi-insight/2018/05/23/process-improvement-ideas-in-b
anking/

26
Appendix A: Project Management documentation

Gantt Chart

27
Appendix B: Peer Evaluation Form for Group

Mini-Project # 1
Peer Evaluation Form for Group Work
Using a scale of 1-4 (1=strongly disagree, 2=disagree, 3=agree, 4=strongly agree):

Evaluation Criteria De Castro Magdamit Gutierez Mundin Ong Llanera

(211842) (216713) (212915) (214139) (214340) (216710)

Attends group 4 4 4 4 4 4
meetings regularly
and contributes
meaningfully to group
discussions

Completes assigned 4 4 4 4 4 4
tasks on time

Prepares work in a 4 4 4 4 4 4
quality manner

Demonstrates a 4 4 4 4 4 4
cooperative and
supportive attitude

Contributes 4 4 4 4 4 4
significantly to the
success of the project

Based on these 4 4 4 4 4 4
considerations, the
mark each member
of the team would
receive:

28
 Team Declaration

By submitting this Mini-project 1, We are aware of the University rule that a student
must not act in a manner which constitutes academic dishonesty as stated and
explained in ADMU Student Handbook. We confirm that this worl represents our team’s
effort, we have viewed the final version and does not contain plagiarized material.

Full Name Student Name Signature

Leopoldo A. De Castro III 211842

Agatha C. Gutierrez 212915

Darrel Ethan C. Ong 214340

Therese O. Llanera 216710 /s/ Therese O. Llanera

Zen Kristianne N. 216713

Magdamit

John Gilbert G. Mundin 214139

29