DESIGNING EFFICIENT ORGANIZATIONS FOR

MICROFINANCE OPERATIONS

CANTILAN BANK’S EXPERIENCE

OBJECTIVES

Share our experiences in:Organizing & Managing the bank’s microfinance operations,The Approach used by the bank in expanding its MF operationsThe Organization & Management structure before and after the expansion of its MF operations

OUTLINE OF PRESENTATION

Bank’s traditional management styleOrganization & Management Structure at the start-up phase of its MF Operations How RBC expanded its MF OperationsChanges in the Organization & Management Lessons Learned

BEFORE CANTILAN BANK STARTED ITS MF OPERATIONS

The BM’s were solely accountable for the portfolio quality

No training program

No product design, no clear cut policies

No proper supervision of loan accounts

AO’s cannot recommend approval of loans

BEFORE CANTILAN BANK STARTED ITS MF OPERATIONS

Bank will just wait for clients to come and pay; delay was widely tolerated

Restructuring was very rampant, no policies/guidelines

No staff incentives for good performance

No MIS for monitoring of loan portfolio quality and staff performance

START OF CANTILAN BANK’s MF OPERATIONS

MF activities started at Tandag branch;

Only the MFU supervisor and AO’s were involved at the start-up phase

Area of coverage was within 30 min. walk radius from the bank

Branch staff very skeptical with MF

There was conflict in market with Commercial Loans

START OF CANTILAN BANK’s MF OPERATIONS

Designed staff incentiveMIS was enhanced to generate loans

monitoring reportsThe President was monitoring the MF

operations The MFU Supervisor reports result of MFU

Operations at MANCOM Meeting

CHALLENGES AT START-UP PHASE

The MFU has experienced:

Caused by: What was done

Slow Growth in Portfolio

Fellow employees’ and old clients’ resistance to changes

Continuing Client Orientation

  & Staff Training

Poor marketing (old mentality)

Conduct Strategic Planning & Target Setting

Organizational Structure When MF Operations StartedOrganizational Structure When MF Operations Started

In te rn a l A u d it

C ash D ep t A cc t. D ep t.

R eg u la r L oan s M F U

L oan s D ep t.

B ran ch H ead

O p era tion s O ffice r A d m in

G M

P res ./C h a irm an o f th e B oard

B O D

HOW CANTILAN BANK EXPANDED ITS MF

OPERATION

EXPANDING KITA OPERATIONS

Practiced the vertical before horizontal approach of expansion;Conducted product review before replication, minor adjustments were madeEvaluated different areas to identify the best expansion branchIdentified main office as first branch to replicate KITA

EXPANDING KITA OPERATIONS

Hired 4 AO’s for Cantilan branch, trained for three months at Tandag branchNew AO’s were assisted by senior AO’s and Supervisor in starting up activities in CantilanKITA implementation in Cantilan was closely supervised for 3 mos.Expansion to Madrid was planned after 4 mos.

EXPANDING KITA OPERATIONS

Promoted Senior AO in Tandag, MF Supervisor promoted to Product SupervisorReplicated KITA to newly opened branchesConduct product review every six mos.Involved all bank officers in trainingsStudied the market for potentials of new MF product ( trisikad operators)

CHALLENGES ENCOUNTERED

INTERNAL

Insufficient Logistics

MIS

Some BM’s insist on giving AO’s other loan accounts

Strong “demand” from top management to maintain “ZERO PAR”

CHALLENGES ENCOUNTEREDWhat was done

INTERNAL

Made the best of resources available

MIS enhancement was accorded top priority by management

Top management strictly ordered that MFU AO’s be unloaded of other loan accounts

MFU team strongly bonded together to help each other maintain a good loan portfolio

CHALLENGES ENCOUNTERED

EXTERNAL

Competition

Peace & Order ( Hold-up )

Malpractices of competitors resulting to breakdown of best practices

Clients spoiled by other competitors

CHALLENGES ENCOUNTEREDWhat was done

EXTERNAL

Maintain excellent Service Quality

Briefing on emergency measures was given to all field staff

Regularly reminded MF staff that we should never sacrifice quality of clients

Bank President initiated the formation of a Code of Ethics

Present Organization Structure Present Organization Structure

ACCOUNT OFFICER

OPERATIONS HEAD

LOANS SECTION HEAD

LOAN OFFICER

MFU SUPERVISOR

ACCOUNT OFFICER

MF PRODUCT HEAD

BRANCH MANAGERS

CANTILAN BANK’S PRESENT CHAIN OF COMMAND

The Loans Section Head ( former MFU Supervisor) Reports directly to the Operations Head

The Heads of all types of loans report to the Loans Section Head

The MFU Supervisors and AO’s are directly under the BM’s

Effects of Changing the Banks’ Organizational Effects of Changing the Banks’ Organizational StructureStructure

• Branch Managers are directly accountable for the performance of KITA

• Best practices are implemented in all types of loans and in bank-wide operations

• Improved loan portfolio quality

• Standardization of Policies and Procedures

• Clearer flow of communication

LESSONS LEARNED

Strong leadership and close supervision is critical in ensuring the best operational resultsVery gradual phasing and thorough training of staff is the best approach in expanding MF Operations Organizational set-up should be revised as MF operations expand Consistent monitoring of top management is very critical in maintaining good portfolio quality

LESSONS LEARNED

Strict adherence to Product Manual will solve all types of operational problemsConstant review of the product will enable the MFU team to respond to needs for enhancements and/or revisionsTraining program is very important in improving the skills of all staff and supervisorsPositive attitude towards competition creates a good market image of the bank