1. BUKIDNON COOPERATIVE BANK (BCB) MICROFINANCE EXPERIENCE

2. OUTLINE OF PRESENTATION n The City of Malaybalay n Bukidnon Coop Bank Institutional Profile n Previous Microfinance Experience of BCB n BCB’s Present Microfinance Experience n Features of BCB’s Microfinance Product n Performance of SIKAP Program for the First Three Months Pilot Test

3. The City of Malaybalay n First City in the Province of Bukidnon n Capital of the Province of Bukidnon n 44 barangays n Total population of 105,459 as of 1998 n Total of 12,354 households as of 1998 n Primary source of income: Farming &Trading

4. The City of Malaybalay n Has 6 commercial banks n Has 2 Rural Banks n Has 2 active credit cooperatives n Has several pawnshops & lending investors n Has 1,795 registered business establishments as of January, 1999

5. BANK PROFILE n First coop bank in Mindanao n 1998 Gawad Pitak Awardee as # 1 Coop Bank in the country n Established in 1977 n Has 4 branches including main office ( Valencia, Maramag, Quezon ) n Total resources of P80,479,999.98 n Has 35 employees; 19 in main office, 16 in 3 branches

6. BCB (Main Office) Organizational Chart Board of Directors General Manager AccountantCashierLoans Officer Bookkeepers Tellers/ Solicitors Account Officers Regular Loans MF Supervisor Account Officers Microfinance

7. BANK’S PRODUCTS n Deposits F Savings- P8,283,337.81 F Time -P16,086,090.55 n Loans F Agricultural - P34,906,242.38 F Commercial - P9,817,702.16 F Other Loans - P9,529,383.46 P54,253,328.00

8. BCB’S PREVIOUS MICROFINANCE EXPERIENCE n BCB previously offered two microfinance products: u Market Vendors’ Loans u Motorela & Multicab Maintenance Loans

9. LOAN FEATURES MARKET VENDORS’ LOANS LOAN FEATURES n Introduced for stall owners in 1979 n Clean loan up to P5,000.00 n Above P5,000.00 is collateralized n Payable in 6-12 mos with 12% p.a. interest n Collected daily/weekly/monthly/lumpsum n Deposit required before loan availment but no deposit build up thereafter.

10. MOTORELA & MULTICAB MAINTENANCE LOAN LOAN FEATURES n Intended for motorela & multicab operators n Loans up to P15,000.00, with Chattel Mortgage or Real Estate Mortgage n Payable in 6 moths to 1 year, mostly lump sum upon maturity n Pre-paid interest of 22% p.a.

11. PROBLEMS ENCOUNTERED n No product manual or guidelines n Past Due Ratio of more than 50% n Savings Deposits became dormant n Market value of tricycle mortgaged not sufficient to cover loan upon foreclosure n Product was stopped by the bank after 2 years

12. BCB’S EXPERIENCES AS PARTICIPANT BANK OF THE MABS-M PROGRAM

13. Bank’s Initial Perception on Microfinance n High operating cost & manpower intensive n Small loan amounts mean lower profit n Risky since it’s clean & caters to small clients n Market for small entrepreneurs is already saturated by informal moneylenders

14. Factors that Convinced the Bank to Resume its Microfinance Activity n Micro borrowers are not interest conscious n Close monitoring, clear guidelines & deposit build up mitigate risk n Frequent collection = high effective income n Bank’s bad experiences in big loans n Technical assistance from MABS-M will instill new discipline in implementing the product

15. BCB’S NEW MICROFINANCE PRODUCT Sariling Impok, Kita at Pag-asenso ( S I K A P )

16. TARGET CLIENTS

17. Sariling Impok, Kita at Pag-asenso ( S I K A P ) PRODUCT FEATURES n Intended for microentrepreneurs n Loan sizes of P3,000.00 up to P10,000.00 for first time borrowers n 3% monthly interest amortized equally n 3% service fee deducted up front n Loan term : 30, 60 & 90 days n Mode of payment : daily & weekly n Pick up service for loan payments & deposit

18. Sariling Impok, Kita at Pag-asenso ( S I K A P ) Sariling Impok, Kita at Pag-asenso ( S I K A P ) PRODUCT FEATURES n Loan Security : u P3,000.00 - P15,000.00 ; two co-makers only u P15,001.00 - P25,000.00 ; two co-makers plus Deed of Assignment of Deposits u Above P25,000.00 - REM or Chattel Mortgage n Deposit Build up: u Initial deposit at least equivalent to 5% of loan u Regular deposits to go with each loan payment

19. Sariling Impok, Kita at Pag-Asenso ( S I K A P ) INCENTIVES TO GOOD PAYORS n Eligibility ( not automatic ) for bigger loan within discounted debt capacity n 1/2% reduction of interest rate subject to Manager’s approval n Immediate release of repeat loan upon full payment of existing loan

20. ACCOMPLISHMENTS OF SIKAP LOAN FOR THE FIRST 3 MONTHS PILOT TEST

21. PERFORMANCE OF SIKAP LOAN PROGRAM FOR THE FIRST 3 MONTHS PILOT TEST

22. SIGNIFICANT THINGS LEARNED FROM THE MABS-M PROGRAM n Market study prior to product design n Product designed according to market needs n Loan administration procedures documented in the Product Manual n All borrowers are required to attend Client Orientation n Loan forms are properly filled up

23. SIGNIFICANT THINGS LEARNED FROM THE MABS-M PROGRAM n Thorough character and credit checking n Thorough cash flow evaluation n Very conservative determination of debt capacity n Simplified & fast processing of loan releases n Zero tolerance to delinquency

24. SIGNIFICANT THINGS LEARNED FROM THE MABS-M PROGRAM n ALARM SIGNALS IN MANAGING DELINQUENT PAYORS

25. ALARM SIGNALS & RECOMMENDATIONS ALARM SIGNAL # 6 PAYMENT DELAYED 4 WEEKS IMPOSE CHATTEL; KASABUTAN ALARM SIGNAL # 5 PAYMENT DELAYED 3 WEEKS FINAL LETTER FROM MANAGER ALARM SIGNAL # 4 PAYMENT DELAYED 2 WEEKS SECOND WARNING LETTER ALARM SIGNAL # 3 PAYMENT DELAYED 1 WEEK INFORMS CO-MAKER ; FIRST LETTER PAYMENT DELAYED 3 DAYS SUPERVISOR VISITS OVERDUE CLIENT ALARM SIGNAL # 2 ALARM SIGNAL #1 PAYMENT DELAYED 1 DAY LOANS STAFF REPORTS TO SUPERVISOR

26. Daghang Salamat Daghang Salamat ! “There is no truth to the saying that the poor does not pay or cannot save. All it takes is discipline which should first come from the bank. Our failures in handling microfinance in the past was mainly caused by the poor product design and our laxity in handling collections.” -Mr. Romy Garcia, Chairman