1. Turning Around: Licking the PAR Problem Experience of the Rural Bank of Digos, Inc. 2009 RBAP-MABS National Roundtable Conference May 12-13, 2009 Hyatt Hotel and Casino Manila Gionvanni D. Gabriento Manager, Human Resource & Administration

2. RURAL BANK OF DIGOS The bank opened and started operating on February 17, 1956 The bank opened and started operating on February 17, 1956 The bank is the PIONEER BANK in Digos, Davao del Sur The bank is the PIONEER BANK in Digos, Davao del Sur In the 80’s the bank was hounded by: In the 80’s the bank was hounded by:  Problems in the sugar and coconut industries  Failure of Masagana 99  Peso Devaluation  Bad economy

3. 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)

4. 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

5. MICROFINANCE BACKGROUND HOW AND WHEN MICROFINANCE STARTED: The bank was one of the pilot banks of the MABS Program The bank was one of the pilot banks of the MABS Program MABS trained the bank in microfinance in 1998 MABS trained the bank in microfinance in 1998 Main Branch, Digos, Davao del Sur Main Branch, Digos, Davao del Sur One loan product for microentrepreneurs One loan product for microentrepreneurs Four Field Staff, each with a target of 120 accounts Four Field Staff, each with a target of 120 accounts Zero PAR in the first 3 years of operation Zero PAR in the first 3 years of operation

6. MICROFINANCE BACKGROUND Microfinance Products: N egosyo P alambuon P undo P adaghanon (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 business operations and accumulate their own capital that will, in due time, make them less 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.

7. MICROFINANCE BACKGROUND Support from MABS: Countless trainings and seminars Transportation equipment – motorcycles Office equipment – computers, printers Branch visit and technical assistance Regular product Evaluation

8. 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 Haphazard CI / BI and loan evaluation Relaxed collection efforts (tolerance of delinquent clients) 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)

9. REMEDIAL MEASURES 1.Tutok, Dikit, Kulit Strategy Rigid follow up of delinquent clients Rigid follow up of delinquent clients Demand letters 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

10. REMEDIAL MEASURES 5. Re-training of Account Officers and other bank staff Make sure loans are properly evaluated Make sure loans are properly evaluated Client validation visit Client validation visit Regular monitoring of AO performance Regular monitoring of AO performance 6. Year-end branch and staff incentive based on: Number of Active Borrowers and Loan Portfolio Number of Active Borrowers and Loan Portfolio Level of Portfolio at Risk Level of Portfolio at Risk

11. MICROFINANCE PERFORMANCE 5-YEAR PORTFOLIO AT RISK

12. 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

13. 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

14. 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!

15. 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

16. END OF PRESENTATION