BUKIDNON COOPERATIVE BANK

(BCB)MICROFINANCE EXPERIENCEMICROFINANCE EXPERIENCE

OUTLINE OF PRESENTATION

The City of Malaybalay Bukidnon Coop Bank Institutional Profile Previous Microfinance Experience of BCB BCB’s Present Microfinance Experience Features of BCB’s Microfinance Product Performance of SIKAP Program for the

First Three Months Pilot Test

The City of Malaybalay

First City in the Province of Bukidnon Capital of the Province of Bukidnon 44 barangays Total population of 105,459 as of 1998 Total of 12,354 households as of 1998 Primary source of income: Farming

&Trading

The City of Malaybalay

Has 6 commercial banks Has 2 Rural Banks Has 2 active credit cooperatives Has several pawnshops & lending

investors Has 1,795 registered business

establishments as of January, 1999

BANK PROFILE First coop bank in Mindanao 1998 Gawad Pitak Awardee as # 1 Coop

Bank in the country Established in 1977 Has 4 branches including main office (

Valencia, Maramag, Quezon ) Total resources of P80,479,999.98 Has 35 employees; 19 in main office, 16

in 3 branches

BCB (Main Office) Organizational Chart

Board of Directors

General Manager

Accountant Cashier Loans Officer

Bookkeepers

Tellers/ Solicitor

s

Account Officers

Regular Loans

MF Supervisor

Account Officers

Microfinance

BANK’S PRODUCTS

DepositsSavings- P8,283,337.81Time -P16,086,090.55

Loans Agricultural - P34,906,242.38Commercial - P9,817,702.16Other Loans - P9,529,383.46 P54,253,328.00

BCB’S PREVIOUS MICROFINANCE

EXPERIENCE

BCB previously offered two microfinance products: Market Vendors’ Loans Motorela & Multicab Maintenance

Loans

MARKET VENDORS’ LOANS

LOAN FEATURESLOAN FEATURES Introduced for stall owners in 1979 Clean loan up to P5,000.00 Above P5,000.00 is collateralized Payable in 6-12 mos with 12% p.a.

interest Collected daily/weekly/monthly/lumpsum Deposit required before loan availment

but no deposit build up thereafter.

MOTORELA & MULTICAB MAINTENANCE LOAN

LOAN FEATURES Intended for motorela & multicab

operators Loans up to P15,000.00, with Chattel

Mortgage or Real Estate Mortgage Payable in 6 moths to 1 year, mostly

lump sum upon maturity Pre-paid interest of 22% p.a.

PROBLEMS ENCOUNTERED

No product manual or guidelines Past Due Ratio of more than 50% Savings Deposits became dormant Market value of tricycle mortgaged

not sufficient to cover loan upon foreclosure

Product was stopped by the bank after 2 years

BCB’S EXPERIENCESAS PARTICIPANT BANK OF AS PARTICIPANT BANK OF

THE MABS-M PROGRAMTHE MABS-M PROGRAM

Bank’s Initial Perception on Bank’s Initial Perception on MicrofinanceMicrofinance

High operating cost & manpower intensive

Small loan amounts mean lower profit Risky since it’s clean & caters to small

clients Market for small entrepreneurs is

already saturated by informal moneylenders

Factors that Convinced the Bank to

Resume its Microfinance Activity

Micro borrowers are not interest conscious Close monitoring, clear guidelines & deposit

build up mitigate risk Frequent collection = high effective income Bank’s bad experiences in big loans Technical assistance from MABS-M will instill

new discipline in implementing the product

BCB’S NEW MICROFINANCE

PRODUCTSariling Impok, Kita at

Pag-asenso ( S I K A P )

TARGET CLIENTS

Sariling Impok, Kita at Pag-asenso

( S I K A P )

PRODUCT FEATURES Intended for microentrepreneurs Loan sizes of P3,000.00 up to P10,000.00

for first time borrowers 3% monthly interest amortized equally 3% service fee deducted up front Loan term : 30, 60 & 90 days Mode of payment : daily & weekly Pick up service for loan payments &

deposit

Sariling Impok, Kita at Pag-asensoSariling Impok, Kita at Pag-asenso( S I K A P )( S I K A P )

PRODUCT FEATURES

Loan Security : P3,000.00 - P15,000.00 ; two co-makers only P15,001.00 - P25,000.00 ; two co-makers plus

Deed of Assignment of Deposits

Above P25,000.00 - REM or Chattel Mortgage Deposit Build up:

Initial deposit at least equivalent to 5% of loan

Regular deposits to go with each loan payment

Sariling Impok, Kita at Pag-Asenso ( S I K A P )

INCENTIVES TO GOOD PAYORS

Eligibility ( not automatic ) for bigger loan within discounted debt capacity

1/2% reduction of interest rate subject to Manager’s approval

Immediate release of repeat loan upon full payment of existing loan

ACCOMPLISHMENTS OF SIKAP LOAN FOR THE FIRST

3 MONTHS PILOT TEST

-

50

100

150

200

250

300

350

400

450

Aug-99 Sep-99 Oct-99 Nov-99 Dec-99

Number of Active Borrowers and Outstanding Depositors

ActiveBorrowersActiveDepositors

PERFORMANCE OF SIKAP LOAN PROGRAM FOR THE FIRST 3

MONTHS PILOT TEST

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

Aug-99 Sep-99 Oct-99 Nov-99 Dec-99

Amount of Loan and Deposit Portfolio

Loan PortfolioBalanceDepositBalance

SIGNIFICANT THINGS LEARNED FROM THE MABS-M PROGRAM

Market study prior to product design Product designed according to market

needs Loan administration procedures

documented in the Product Manual All borrowers are required to attend Client Orientation Loan forms are properly filled up

SIGNIFICANT THINGS LEARNED FROM THE MABS-

M PROGRAM Thorough character and credit

checking Thorough cash flow evaluation Very conservative determination of

debt capacity Simplified & fast processing of loan

releases Zero tolerance to delinquency

SIGNIFICANT THINGS LEARNED FROM THE MABS-M PROGRAM

ALARM SIGNALS IN MANAGING DELINQUENT PAYORS

ALARM SIGNALS & RECOMMENDATIONS

ALARM SIGNAL # 6 PAYMENT DELAYED 4 WEEKSIMPOSE CHATTEL; KASABUTAN

ALARM SIGNAL # 5 PAYMENT DELAYED 3 WEEKSFINAL LETTER FROM MANAGER

ALARM SIGNAL # 4PAYMENT DELAYED 2 WEEKSSECOND WARNING LETTER

ALARM SIGNAL # 3 PAYMENT DELAYED 1 WEEKINFORMS CO-MAKER ; FIRST LETTER

PAYMENT DELAYED 3 DAYSSUPERVISOR VISITS OVERDUE CLIENT

ALARM SIGNAL # 2

ALARM SIGNAL #1 PAYMENT DELAYED 1 DAYLOANS STAFF REPORTS TO SUPERVISOR

Daghang SalamatDaghang Salamat !

“There is no truth to the saying that the poor does not pay or cannot save. All it takes is discipline which should first come from the bank. Our failures in handling microfinance in the past was mainly caused by the poor product design and our laxity in handling collections.”

-Mr. Romy Garcia, Chairman