Collection Strategies and Customer Engagement on Loan Recovery in Selected Commercial Banks in Sta. Rosa, Laguna: Inputs to A Credit Risk Management Plan

Abstract

Commercial banks rely on effective loan recovery systems to maintain financial stability, reduce non-performing loans, and sustain profitable lending operations. However, limited empirical evidence has examined the combined influence of collection strategies and customer engagement on loan recovery in the Philippine commercial banking sector. This study assessed the implementation of collection strategies and customer engagement practices among selected commercial banks in Sta. Rosa, Laguna, and examined their relationship as a basis for developing a Credit Risk Management Plan. A quantitative descriptive-correlational research design was employed involving 140 respondents, comprising branch managers, account officers, and loan clients from 28 commercial bank branches. Data were analyzed using frequencies, percentages, weighted means, Analysis of Variance (ANOVA), and Pearson Product-Moment Correlation. Results revealed that collection strategies were implemented at a high level, particularly preventive collection measures, legal and ethical recovery practices, payment reminder mechanisms, and data analytics. Customer engagement was likewise positively assessed, with proactive communication, digital engagement, and customer feedback emerging as key strengths, although financial literacy programs received comparatively lower ratings. Correlation analysis demonstrated a significant positive relationship between collection strategies and customer engagement, indicating that stronger customer engagement supports more effective loan recovery. The proposed Credit Risk Management Plan, integrating preventive collection systems, customer-centered engagement, financial literacy, data analytics, and ethical recovery practices, was evaluated as highly acceptable. The study concludes that integrating operational collection strategies with sustained customer engagement enhances loan recovery performance, strengthens credit risk management, and promotes the long-term sustainability of commercial banking operations.