1. RURAL BANK OF CANTILAN, INC.
MICROFINANCE EXPERIENCE
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2. 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

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

4. 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 ____:

5. 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

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

7. 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)

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

9. Kitâ Insakto, Tipon Asenso ( K I T A ) PRODUCT FEATURES
Intended for microentrepreneurs
Loan sizes of P2, up to P25, 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

10. Kitâ Insakto, Tipon Asenso ( K I T A ) Borrower Eligibility Criteria
Individual, male or female, 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.

11. 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.

12. 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

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

14. 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

15. 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.

16. 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.

17. 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.

18. 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.

19. 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.

20. 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

21. Loan Delinquency Management
ALARM SIGNALS IN MANAGING DELINQUENT PAYORS

22. 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.

23. 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

24. 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.

25. 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.

26. 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.

27. 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.

28. K I T A Lending Process and Procedures

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

30. 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

31. 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

32. 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

33. 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.

34. 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

35. 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

36. 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

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

38. 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

39. 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

40. ACCOMPLISHMENTS OF KITA LOAN FOR THE FIRST 3 MONTHS PILOT TEST

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

42. SIGNIFICANT THINGS LEARNED FROM THE MABS PROGRAM

43. SIGNIFICANT THINGS LEARNED FROM THE MABS PROGRAM

44. Daghang Salamat !