1. Multiple Borrowing among Microfinance Clients Part 3: Focus Group Discussion Results Prepared by Ronald T. Chua and Erwin R. Tiongson July 26, 2012

2. Focus Group Discussion Background (1) Objective –Get qualitative perspective of changes in lending and borrowing behaviour and trends in Commonwealth Methodology –Focus group discussions of MFI Clients and Staff in Commonwealth Scope and Limitations of Methodology –Get range of behaviours and patterns observed in area –Qualitative, not quantitative –Highlights presence of range of patterns –Does not provide information on frequency of observed patterns –Not representative –Based on participant views/observations –Mention/observation does not provide indication of actual prevalence

3. Focus Group Discussion Background (2) Three focus group discussions Participants –MFI members known or who have admitted to having loans from at least one other MFI –Branch staff MFI clients were selected by MFI staff

4. Discussion Topics Observed trends and behaviour among lenders and borrowers Reasons for multiple borrowing Benefits of Multiple Borrowing Risks of Multiple Borrowing Consequences of trend towards presence of many lending sources

5. Focus Group Discussion FGD 1&2 FGD 3&4 FGD 5&6 Total Date Conducted June 24,2011 July 12, 2011 October 13,2011 MFI Client Participants 56516 MFI Staff 43613

6. FGD Participant Profile - Client Length of Residence 11 to 30 years ave, 20 With Multiple Livelihood activities 5 / 8 With reported leadership position 5 Years experience with MFis2 – 30 years, average 7.3 years No. of MFIs borrowed from2 – 4 No. of Current Loans with Distinct MFIs 1 - 3

7. Lenders Identified by FGD Participants FGD 1&2FGD 3&4FGD 5&6MFI Staff 810845

8. Lenders Mentioned ABS-CBN BAOS CoopEmmanuelKS BankPMDFSunlifeUPLIFT AdvanceBig BGcashLifeBank Red LendingTanglawWill AKAP BPI LendingGSISNOVADECI Robinson's BankTechton Yellow Lending Alay BuhayCARDICANOK Bank Sacred Heart Transnatio nal ArmandoCARITASJNLOMBSBTSKI ASACCT Kasagana KaOrakieShaliTSPI BangladeshDreamsKMBIPagasaSunny Inc.UKMA

9. Lenders and Lender Behaviour Increase in number of lenders in area in past 12 months preceding date of discussion Fewer “5-6” Lenders in area “5-6” reposition as bridge financiers More product offerings Better/improved product offerings Changes in borrowing requirements More benefits Changes in credit investigation Different lending models Recruiting through agents and providing incentives No increase in interest rates

10. Changes in Offerings More flexible repayment terms Change from group to individual guarantee or guarantor system Shorter/faster processsing time Top ups Insurance and wider insurance coverage (family members) Other services – scholarships Multiple loan products – education, emergency, etc,,, Allow two loans simultaneously More flexible terms on savings – lowered minimum required savings

11. FGD Participant Preferences Liked more lenders because have more choices Range of loan products Allowing more than 1 loan Range of benefits Individual guarantee over group guarantee No minimum savings required Has Bible study Not waste borrowers’ time Can double up payment Hiring of client children as staff

12. FGD Participant Dislikes Group/Center guarantee Many lending terms, conditions and requirements Penalties for late payments

13. Patterns of Multiple Borrowing Serial – one lender after another Single – multiple – single Single – multiple Multiple – single Multiple - stop

14. Reasons for Multiple Borrowing Maximize benefits (no single source offers complete package) Get bigger loans –Requirement of business –Other needs Meet emergencies Try out new sources

15. Perceptions about Multiple Borrowing Some think doing so helpful –Meet needs –Work harder to pay off debts Others wary –Risk of default with increased debt burden –Forced to sell off assets to pay debt

16. Perceptions about emerging borrowers behavior Actively comparing services, terms and conditions, etc… “Walang kaalaman sa paghihiram” “Maraming pinaguutangan” Borrowing without considering ability to pay

17. Other Observations Changing behaviour and requirements among barangay officials –Charging fees for certifications (both above and under the table) Increased incidences of fraud –Among borrowers/staff Ghost borrowers Riders –By Lenders – Scams Increased incidences of robbery/theft

18. Staff Perceptions (1) On presence of lenders –Too many lenders –Attempts by lenders to improve service offerings –“credit pollution” On MFI performance –Higher drop out rates –Higher non-loan renewal rates –Slower expansion

19. Staff Perceptions (2) On client behaviour/preferences –Clients prefer fast processing –Easier for clients to leave because of more choices –Easier to transfer to other MFIs –Borrow from other sources to pay off loans Estimate of multiple borrowing clients –10%, 50%

20. Staff Perceptions (3) On Own Work –work has become harder –Need to change way in dealing with clients –Staff increased tendency to take shortcuts –Tolerate multiple borrowing –Group grabbing by MFI staff –Changes in collection strategies Time with center meetings of other MFIs Clients and staff borrow from informal sources to pay off loans