RURAL BANK OF CANTILAN, INC. MICROFINANCE EXPERIENCE Note: This is a sample presentation template that other banks can use. Some information left blank in this presentation may be applicable to other banks using this template.

OUTLINE OF PRESENTATION The Municipality of Cantilan Rural Bank of Cantilan (RBC) Institutional Profile RBC’s Microfinance Experience Features of RBC’s Microfinance Product Policies and Procedures Product Performance Problems Encountered/Lessons Learned

The Municipality of Cantilan Total number of barangays: Total population, 2000: Total # of households, 2000 Primary sources of income:

The Municipality of Cantilan (Location of CHQ & Main Branch) 1 Rural Bank (RB Cantilan) Active credit cooperatives: Pawnshops & lending investors: Number of registered business establishments as of ____:

BANK PROFILE Established in 1980 Has 5 branches including main office Total resources (Aug 02) PhP Total loan portfolio PhP Has 144 employees of which ____ is composed of MF staff

RBC Organizational Chart Board of Directors General Manager Accountant Cashier Loans Officer Bookkeepers Account Officers Regular Loans MF Supervisor Tellers/ Solicitors Account Officers Microfinance

BANK’S PRODUCTS Deposits Regular Savings Student’s Savers Time (Savings Deposit Plus; Double Your Money) Loans Agricultural (secured loans) Commercial (including MF products) Other Loans (Salary; Bgy Honorarium; Pensioners’ Loan)

RBC’s Microfinance Product K I T A (Kitâ Insakto, Tipon Asenso)

Kitâ Insakto, Tipon Asenso ( K I T A ) PRODUCT FEATURES Intended for microentrepreneurs Loan sizes of P2,000.00 up to P25,000.00 for first time borrowers Maximum loan up to P80,000 3% monthly interest amortized equally P200 service fee deducted up front; beyond P30K, 1% SC Loan term : 1 mo. – 6 mos. Mode of payment : Weekly Pick up service for loan payments & deposit

Kitâ Insakto, Tipon Asenso ( K I T A ) Borrower Eligibility Criteria Individual, male or female, 18-65 years old, in good health Engaged in present business for at least one (1) year. Residing in present address for at least two (2) years.

Kitâ Insakto, Tipon Asenso ( K I T A ) Borrower Eligibility Criteria Residence must be within the bank’s service area. Business is located within a defined geographical area coverage of KITâ loan product. Without any history of past due loam with Rural Bank of Cantilan or with any creditor or supplier.

Kitâ Insakto, Tipon Asenso ( K I T A ) Loan Size, Terms and Fees Loan Number Amount Term Interest rate Service Charge Penalty First 2,000-25,000 1-3 mos. 3%/month 200 2%/day Second 2,000-30,000 1-4 mos. Third 2,000-35,000 1-5 mos. Fourth 2,000-40,000 1-6 mos. Fifth 2,000-45,000 Succeding Loans 2,000-50,000

Kitâ Insakto, Tipon Asenso ( K I T A ) PRODUCT FEATURES Loan Security : P2,000.00 – P10,000.00 ; two co-makers only P10,001.00 – P20,000.00 ; two co-makers plus Security Agreement, Deed of Assignment of Deposits Above P20,000.00 - REM or Chattel Mortgage Deposit Build up: Initial deposit at least P100 Regular deposits to go with each loan payment

Kitâ Insakto, Tipon Asenso ( K I T A ) Loan Collateral Some form of collateral/guarantee may be required on all loans The value of the collateral will not be a determining factor in deciding how much a client can borrow. Collateral should not be relied on as a means of recovery

Kitâ Insakto, Tipon Asenso ( K I T A ) Repayment Capacity An assessment of now much a person or a business can borrow and easily pay over a particular time. Determined by looking at the net income of the business and the net income of the household on a daily, weekly and monthly basis. It is recommended that the initial maximum adjusted repayment capacity should not exceed 25% for first-time clients.

Kitâ Insakto, Tipon Asenso ( K I T A ) Loan Amortization Schedule Frequency of payments depends on the income flow of the borrower. Equal payments either daily or weekly. Daily amortization is paid from Monday to Friday. Weekly amortization is paid every 7 days from the anniversary day.

Kitâ Insakto, Tipon Asenso ( K I T A ) Payment Schedule Loan with DAILY payments: First installment starts the day after loan release. When a loan release falls on a Friday, the first installment shall be due Monday of the following week. Daily payments ate directly credited each day to the client’s account. Loan with WEEKLY payments: First installment shall be due on the 7th day starting from the day after releasing the loan. For example, when a loan is released on a Monday, weekly payment is due every Monday thereafter.

Kitâ Insakto, Tipon Asenso ( K I T A ) Restructuring Restructuring of loans should be discouraged and must be governed by strict rules Restructuring should only be allowed for clients who “can’t pay”. Restructuring should only be allowed once for each client. Terms of the restructured loan must not exceed 6 months.

Kitâ Insakto, Tipon Asenso ( K I T A ) Prepayment Only good clients who have paid at least 85% of the amortizations due and would need a repeat loan to meet a good business opportunity are allowed to fully repay their loans before the maturity date.

Kitâ Insakto, Tipon Asenso ( K I T A ) Savings Component Bank ultimate goal – to help clients achieve financial stability as a result of good savings habit. All loan clients are required to maintain deposit accounts. The minimum amount to open is P100. Clients determine how much they will deposit weekly, but minimum is P30

Loan Delinquency Management ALARM SIGNALS IN MANAGING DELINQUENT PAYORS

Loan Delinquency Management Alarm Signal No. 1: Payment is Delayed One (1) Day AO visits the client within 24 hours. AO determines the reason for non-payment. AO encourage the client to pay immediately so as to avoid falling behind in their payments.

Loan Delinquency Management Alarm Signal No. 2: Payment is Delayed Three (3) Days AO warns client of adverse consequences of non-payment (penalty charges, negative credit ratings). AO informs co-borrower and co-makers. AO reports result of visit to MFU Supervisor

Loan Delinquency Management Alarm Signal No. 3: Payment is Delayed One (3) Week Sent first warning letter MFU Supervisor visits borrower If the client is unable to pay, the MFU Supervisor should visit the co-borrower and co-maker to collect. MFU Supervisor reports result of visit to the Branch Manager.

Loan Delinquency Management Alarm Signal No. 4: Payment is Delayed Two (2) Weeks Branch Manager visits borrower, co-borrower and co-makers. Branch Manager informs the clients of more drastic measure like notifying the barangay captain. Branch Manager warns the client of becoming blacklisted borrower.

Loan Delinquency Management Alarm Signal No. 5: Payment is Delayed Three (3) Weeks Third and final warning letter sent. Notify the barangay captain. Finalize the “Dacion en Pago” or chattel mortgage. Ask the client to come to the bank immediately to avoid legal action.

Loan Delinquency Management Alarm Signal No. 6: Payment is Delayed Four (4) Weeks AO, MFU Supervisor, and the Branch Manager should now arrange to get the security item or chattel. Clients will not be able to borrow from the bank again.

K I T A Lending Process and Procedures

Microfinance Loan Flow Chart Client Orientation and Pre-application Credit and Background Investigation Loan Application Loan Repayment Loan Release Disbursement Loan Review and Approval

Client Orientation Applicants come to the bank for the client orientation Client Logbook Welcome and introduction of prospective clients Question and Answer Attendance sheet Orientation proper

Pre-Application Procedure Client comes to bank AO interviews client to determine eligibility Orientation for eligible clients Clients complete the pre-application form AO conducts the CI/BI

Credit and Background Investigation If CI/BI is positive, AO prepares the loan application form AO conducts initial interview If initial interview is positive, AO visits two reference suppliers or creditors, or one of each AO follows up the credit references given by the prospective client AO visits two co-makers, two to three residential neighbors and barangay captain/purok leader or market administrator AO verifies client for court cases or warrant of arrest

Loan Application AO goes back to the client together with the application form and tells the cash flow result. If interested, the applicant and his/her spouse should sign the application form. MFU Supervisor checks the cash flow information and completeness of needed documents. Applications ready for submission to the mini CRECOM are summarized by each AO in a form. If additional information is needed, the supervisor ask the AO to gather the information.

Preparation before the Credit Committee Meeting Loan Recommendation Sheet Loan Application Form Completed CI/BI Form Co-maker’s Profile Proof of Payments and other documents AO summarizes and prepares the loan recommendation sheet AO organizes the applicant’s Credit Folder Supervisor reviews applicant’s Credit Folder Check and reviews for inconsistencies Loan application is endorsed to the Credit Committee

Loan Review and Approval (Credit Committee Meeting) meets once a week to review and approve loans composed of General Manager, Tandag Branch Manager and MFU Supervisor Preparation Supervisor presents CI/BI result to Credit Committee Discussion Recommendation and Approval

Loan Release Disbursement Cashier checks deductions and net proceeds, signs Cashier’s Check and forwards security folder to the Loans Teller Manager Reviews and signs Application form, Disclosure Statement and Cashier’s Check Supervisor encodes Client Identification (CID), executes first stage release and tagging Client receives cash from Teller, signs receipt for amount received, Teller stamps “PAID” on the Discount and Disclosure Statement, and CC Teller disburses loans, encashes CC and gives client the Loan Disclosure and Discount Statement, and schedule of payment Cashier approves loan release, generates schedule of payments for AO, Teller and Client Teller forwards loan security folder to New Accounts Clerk who then forwards the check to the bookkeeper New Accounts Clerk forwards security folder to the Supervisor AO prepares summary of releases for the day

Loan Repayment There are two ways: Provisional Receipt based repayments through AO or Bank’s Collector (manual system) Official Receipt repayment through the Teller

Provisional Receipt based Repayments AO collects payments from client, issues PR Bookkeeper generates computer based repayment at the end of the day and updates individual manual ledger on the next day Cashier makes accounting of receipts issued by the collector for the day, declares missing or cancelled receipts Teller verifies totals per summary and money received, then posts individual deposit collected and repayment schedule with provisional receipt. Back at the office, AO checks collection against issued PR, enters collection from each client in Excel and give a copy of Collection Sheet to Teller In the event of shortages or averages, AO records it in the collection summary and trace its source. Any excess should be turned over to the Cashier AO forwards cash collected to the Teller for issuance of Official Receipt

Teller posts the payment or savings deposit on the computer. Official Receipt Repayments Teller should accept repayment and issue Official Receipt not less than the amount of amortization due of the client In case of over payment and client wants it save, Teller should accept it as deposit. Teller posts the payment or savings deposit on the computer. Bookkeeper generates computer based repayment at the end of the day and updates individual manual ledger on the next day Cashier makes accounting of receipts issued by the collector for the day, declares missing or cancelled receipts

ACCOMPLISHMENTS OF KITA LOAN FOR THE FIRST 3 MONTHS PILOT TEST

PERFORMANCE OF KITA LOAN PROGRAM FOR THE FIRST 3 MONTHS PILOT TEST

SIGNIFICANT THINGS LEARNED FROM THE MABS PROGRAM

SIGNIFICANT THINGS LEARNED FROM THE MABS PROGRAM

Daghang Salamat !