“scorecard” incentive remuneration system for microfinance

Session 2: “SCORECARD”

Incentive Remuneration System for Microfinance

Vivian Lim 1st Valley Bank, Inc.

2012 RBAP-MABS National Roundtable Conference June 7-8, 2012

Hyatt Hotel Manila

1st Valley Bank, Inc.

Why Scorecard?

• To reward our Account Specialists for outstanding performance • To meet the Bank’s set target(s)


Background

•  Introduced in 2003 •  Dubbed as Account Specialist’s “Report

Card” (like a student’s report card in school & MABS Eagle Scorecard for RBs..)

•  A tool for performance management


Scorecard

•  an individual progress report card for account

specialists handling microfinance loans §  serves as a tool in giving incentives to account

specialists


Indicators

•  Loan Portfolio • Number of clients • Number of Disbursement • Portfolio-At-Risk •  Target


•  Defined indicators and parameters •  Set weights and scores for each indicator •  Pilot-tested the “scorecard” and modified

some parameters •  “Sold” the scheme to the staff •  Monitored the scheme’s performance and

made adjustments

How did we do it?


Impact

•  Regular documentation and monitoring of AS monthly performance

•  Organized system in weeding out

“unproductive” AS from the “performers” •  Healthy competition among employees and

team effort is encouraged •  Use of scorecards in other loan products


Selected Microfinance Indicators Indicators

December 2002 (Start of Scorecard-2003)

December 2011

Net Change 2002 to 2011

No. of Branches 6 25 317%

No. of Account Specialists

11 40 264%

No of Supervisors 1 4 300%

Total Micro Loans P 5.7M P55.6M 875%

No. of Clients 849 5,063 496%

Total loan disbursed 3,331 9,770 193%

Total disbursements P 31.4M P220.6M 602%

Average accounts/AS

77 126 64%

Average loan/AS P 0.5M P1.4M 180%


This is how it looks like (front)


This is how it looks like (back)

Indicators Weight, %Weighted Value

A. NUMBER OF CLIENTS 20% 1.0050 to 70 1 0.2071 to90 2 0.4091 to 110 3 0.60111 to 120 4 0.80above 120 5 1.00

B. LOAN PORTFOLIO 40% 2.00up to 600,000 0 0.00

600,001 to 800,000 1 0.40800,001 to 1,300,000 2 0.801,300,001 to 1,700,000 3 1.201,700,001 to 2,000,00 4 1.60Above 2 mi l l ion 5 2.00

C. PORTFOLIO-‐AT-‐RISK (%) 30% 1.500.00 to 1.00 5 1.501.01 to 2.00 4 1.202.01 to 3.00 3 0.903.01 to 4.00 2 0.604.01 to 5.00 1 0.30above 5% 0 0.00

D. NUMBER OF DISBURSED LOAN 10% 0.500 to 4 0 0.005 to 10 1 0.1011 to 15 2 0.2016 to 20 3 0.30

21 to 25 4 0.40

Above 25 5 0.50

TOTAL 25 100% 5.00

BONUS POINTS FOR EXCEEDING MONTHLY TARGET ON LOANS:

up to 50,000 0.25

150,001 to 300,000 0.75above 300,000 1.00

50,001 to 150,000 0.50

Microfinance UnitScoring System-‐ Monthly

ScoreExcess


Sample

Performance Performance Performance Performance Performance PerformanceData Data Data Data Data

A. Number of Clients 121 1 124 1 125 1 118 0.8

B. Loan Portfolio 2,074,022.12 2 2,069,487.22 2 2,284,030.30 2 2,258,923.58 2

C. Portfolio-‐at-‐Risk ( % ) 0.00% 1.50 0.00% 1.50 0.00% 1.50 1.69% 1.20

D. Number of Disbursement 33 0.5 42 0.5 42 0.5 26 0.5

Target on Loans 2,175,658.53 2,210,344.17 2,279,715.45 2,314,401.08 2,349,086.72 2,383,772.36

(101,636.41) 0 (140,856.95) 0 4,314.85 .25 (55,477.50) 0

5.00 5.00 5.25 4.50 0.00 0.00

Average Score, Quarter 5.08 Average Score, Quarter 1.50

MAY JUNE

IndicatorsJANUARY FEBRUARY MARCH APRIL

Score Score Score Score Score Score

TOTAL SCORE, Monthly

BONUS POINTS ( Exceeding target )


Success stories of 1st Valley

•  Effective tool because indicators are objectively measured

•  Used the scorecard not only for micro but also for other loan products

•  Designed another scorecard to measure branch performance based on 2012 Target

•  Allows additional compensation for deserving employees

•  Encourages team work, a spirit of collaboration and social cohesion among employees in a branch


THANK YOU

“scorecard” incentive remuneration system for microfinance

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