2. DESIGNING EFFICIENT ORGANIZATIONS FOR MICROFINANCE OPERATIONS CANTILAN BANK’S EXPERIENCE

3. OBJECTIVES Share our experiences in: Organizing & Managing the bank’s microfinance operations, The Approach used by the bank in expanding its MF operations The Organization & Management structure before and after the expansion of its MF operations

4. OUTLINE OF PRESENTATION Bank’s traditional management style Organization & Management Structure at the start-up phase of its MF Operations How RBC expanded its MF Operations Changes in the Organization & Management Lessons Learned

5. BEFORE CANTILAN BANK STARTED ITS MF OPERATIONS The BM’s were solely accountable for the portfolio quality No training program No product design, no clear cut policies No proper supervision of loan accounts AO’s cannot recommend approval of loans

6. BEFORE CANTILAN BANK STARTED ITS MF OPERATIONS Bank will just wait for clients to come and pay; delay was widely tolerated Restructuring was very rampant, no policies/guidelines No staff incentives for good performance No MIS for monitoring of loan portfolio quality and staff performance

7. START OF CANTILAN BANK’s MF OPERATIONS MF activities started at Tandag branch; Only the MFU supervisor and AO’s were involved at the start-up phase Area of coverage was within 30 min. walk radius from the bank Branch staff very skeptical with MF There was conflict in market with Commercial Loans

8. START OF CANTILAN BANK’s MF OPERATIONS  Designed staff incentive  MIS was enhanced to generate loans monitoring reports  The President was monitoring the MF operations  The MFU Supervisor reports result of MFU Operations at MANCOM Meeting

9. CHALLENGES AT START-UP PHASE The MFU has experienced: Caused by:What was done Slow Growth in Portfolio Fellow employees’ and old clients’ resistance to changes Continuing Client Orientation & Staff Training Poor marketing (old mentality) Conduct Strategic Planning & Target Setting

10. Organizational Structure When MF Operations Started

11. HOW CANTILAN BANK EXPANDED ITS MF OPERATION

12. EXPANDING KITA OPERATIONS Practiced the vertical before horizontal approach of expansion; Conducted product review before replication, minor adjustments were made Evaluated different areas to identify the best expansion branch Identified main office as first branch to replicate KITA

13. EXPANDING KITA OPERATIONS Hired 4 AO’s for Cantilan branch, trained for three months at Tandag branch New AO’s were assisted by senior AO’s and Supervisor in starting up activities in Cantilan KITA implementation in Cantilan was closely supervised for 3 mos. Expansion to Madrid was planned after 4 mos.

14. EXPANDING KITA OPERATIONS Promoted Senior AO in Tandag, MF Supervisor promoted to Product Supervisor Replicated KITA to newly opened branches Conduct product review every six mos. Involved all bank officers in trainings Studied the market for potentials of new MF product ( trisikad operators)

15. CHALLENGES ENCOUNTERED INTERNAL Insufficient Logistics MIS Some BM’s insist on giving AO’s other loan accounts Strong “demand” from top management to maintain “ZERO PAR”

16. CHALLENGES ENCOUNTERED What was done INTERNAL Made the best of resources available MIS enhancement was accorded top priority by management Top management strictly ordered that MFU AO’s be unloaded of other loan accounts MFU team strongly bonded together to help each other maintain a good loan portfolio

17. CHALLENGES ENCOUNTERED EXTERNAL Competition Peace & Order ( Hold-up ) Malpractices of competitors resulting to breakdown of best practices Clients spoiled by other competitors

18. CHALLENGES ENCOUNTERED What was done EXTERNAL Maintain excellent Service Quality Briefing on emergency measures was given to all field staff Regularly reminded MF staff that we should never sacrifice quality of clients Bank President initiated the formation of a Code of Ethics

19. Present Organization Structure ACCOUNT OFFICER OPERATIONS HEAD LOANS SECTION HEAD LOAN OFFICER MFU SUPERVISOR ACCOUNT OFFICER MF PRODUCT HEAD BRANCH MANAGERS

20. CANTILAN BANK’S PRESENT CHAIN OF COMMAND The Loans Section Head ( former MFU Supervisor) Reports directly to the Operations Head The Heads of all types of loans report to the Loans Section Head The MFU Supervisors and AO’s are directly under the BM’s

21. Effects of Changing the Banks’ Organizational Structure Branch Managers are directly accountable for the performance of KITA Best practices are implemented in all types of loans and in bank-wide operations Improved loan portfolio quality Standardization of Policies and Procedures Clearer flow of communication

22. LESSONS LEARNED Strong leadership and close supervision is critical in ensuring the best operational results Very gradual phasing and thorough training of staff is the best approach in expanding MF Operations Organizational set-up should be revised as MF operations expand Consistent monitoring of top management is very critical in maintaining good portfolio quality

23. LESSONS LEARNED Strict adherence to Product Manual will solve all types of operational problems Constant review of the product will enable the MFU team to respond to needs for enhancements and/or revisions Training program is very important in improving the skills of all staff and supervisors Positive attitude towards competition creates a good market image of the bank