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Turning Around: Licking the PAR ProblemExperience of the Rural Bank of Digos, Inc.
2009 RBAP-MABS National Roundtable ConferenceMay 12-13, 2009
Hyatt Hotel and CasinoManila
Gionvanni D. GabrientoManager, Human Resource & Administration
RURAL BANK OF DIGOS
• The bank opened and started operating on February 17, 1956
• The bank is the PIONEER BANK in Digos, Davao del Sur
• In the 80’s the bank was hounded by:Problems in the sugar and coconut industriesFailure of Masagana 99Peso DevaluationBad economy
RURAL BANK OF DIGOS
The bank turned a new leaf in the 90’s: New Management- Increased
capitalization, computerization, opened 3 branches
Business partnerships with Bangko Sentral ng Pilipinas, Land Bank of the Philippines, Coconut Industry Investment Fund Finance Corporation
Entry of the Microenterprise Access to Banking Services in Mindanao (MABS-M)
RURAL BANK OF DIGOS
In the horizon is a brighter 2000’s: Head Office & component
departments had been created Professionalization of the Human
Resources and Administrative Department
Infusion of additional capital Opened 2 more branches Received the Regional and National
Award from Land Bank of the Philippines
MICROFINANCE BACKGROUND
HOW AND WHEN MICROFINANCE STARTED:
The bank was one of the pilot banks of the MABS Program
MABS trained the bank in microfinance in 1998 Main Branch, Digos, Davao del Sur One loan product for microentrepreneurs Four Field Staff, each with a target of 120
accounts Zero PAR in the first 3 years of operation
MICROFINANCE BACKGROUND
Microfinance Products:
Negosyo Palambuon Pundo Padaghanon (NPPP)
KAABAG SA MAG-UUMA (KASAMA)- a short term loan that caters to small farmers with household agricultural activities and sources of income other than the farm , for the purpose of helping them with their financial requirements. A market driven product which identifies and meets clients needs based on character and cash flow.
- a short term loan to assist microenterprise operators to expand their businessoperations and accumulate their own capital that will, in due time, make themless dependent on borrowed funds. It focuses more on microenterprises that generate regular daily sales and on microenterprise operators who currently depend on loans from informal moneylenders for working capital.
MICROFINANCE BACKGROUND
Support from MABS:
Countless trainings and seminars
Transportation equipment – motorcycles
Office equipment – computers, printers
Branch visit and technical assistance
Regular product Evaluation
PROBLEMS ENCOUNTERED AFTER SEVERAL YEARS
1. Clients immediate change of address / relocation - cannot be located
2. Complacency and lack of supervision of Account Officers
Haphazard CI / BI and loan evaluation Relaxed collection efforts (tolerance of delinquent
clients)
3. Lack of follow-up training for Account Officers and Supervisors
4. Multiple borrowings of clients (from other lending institutions)
REMEDIAL MEASURES
1. Tutok, Dikit, Kulit Strategy Rigid follow up of delinquent clients Demand letters
2. Follow up and collect from loan Co-Makers
3. Filing complaints against delinquent clients in the Barangay Court
4. Seizure of personal/business assets of delinquent client
5. Regular evaluation of MF Supervisor, validation thru area visits
REMEDIAL MEASURES
5. Re-training of Account Officers and other bank staff
Make sure loans are properly evaluated Client validation visit Regular monitoring of AO performance
6. Year-end branch and staff incentive based on:
Number of Active Borrowers and Loan Portfolio Level of Portfolio at Risk
MICROFINANCE PERFORMANCE
Dec. 2004
Dec. 2005
Dec. 2006
Dec. 2007
Dec. 2008
50,000.00
250,000.00
450,000.00
650,000.00
850,000.00
PAR > 30 days Php PAR > 7 days Php
5-YEAR PORTFOLIO AT RISK
MICROFINANCE PERFORMANCE
Performance Indicators Dec.
2004 Dec. 2005 Dec. 2006 Dec. 2007 Dec. 2008
Active Borrowers 1,478 1,296 1,233 1,709 1,580
Loan Portfolio 6,506,900 5,391,896 5,518,089 8,851,910 9,439,937
Field Staff 17 12 11 15 11
Cum. No. of Loans Disbursed
10,865 14,785 18,621 23,897 28,814
Cum. Amount of Loans Disbursed
88,640,21
8 119,772,970
149,770,043
192,294,151
236,960,171
LESSONS FROM EXPERIENCE
1. Hawklike staff performance monitoring is key to success in microfinance
2. Preparing and training the staff in the basics of microfinance lending is of utmost importance
3. Prudent conduct of CI/BI and Cash flow evaluation = quality loan portfolio
4. Intensified collection efforts (no room to relax) = disciplined clients
LESSONS FROM EXPERIENCE
5. Patience is a virtue in dealing with both AOs and clients
6. A good relationship with clients encourages loyalty
7. Give to Caesar what is due to Caesar – branch incentive program works!
PLANS FOR THE FUTURE(Moving Forward)
Development of new loan and deposit products
Market Penetration/ Expansion
Updating of existing product manuals
Continuing training and seminars for bank officers and support staff
Opening of new branches