1 THE ROLE OF TOP MANAGEMENT IN MICROFINANCE THE EXPERIENCE OF RURAL BANK OF CANTILAN, INC.

2 My Attitude Towards Microfinance Evolved from “wait-and-see” to a full- blown supporter/advocate. Had to take in the philosophy of both individual and group lending. Had to learn the details of both lending methodologies. Had to look at microfinance (MF) from a businessman’s point of view.

3 My Attitude Towards Microfinance Basically countryside development Going to the small people Best practices should not only be for microfinance, but should permeate into traditional rural banking Microfinance as a way to pursue RB Cantilan’s Mission

4 My Role in the MF Operations of the Bank  Had to exert efforts to make the Board of Directors, the higher levels of management and the other employees accept microfinance When I Came in as President of the Bank

5 Getting the Board on board Monthly operations report to the Board include progress made in our microfinance operation (e.g., when we were breaking even, when profit was first made). Have been constantly telling the Board that: o MF is the wave of the future for rural banking. o MF is the best way to achieve the mission of the bank, which is countryside development. o MF is the best way to reach and help as many rural customers as possible.

6 Convince the Board to approve policies that adopt the best practices in microfinance such as zero tolerance. Getting the Board on board

7 Setting directions Top management should set the direction of the microfinance operation Being a new product, microfinance would need somebody in the middle, and even at the top management to look at it on a daily, weekly and monthly basis It was a challenge to organize microfinance at the supervisory levels

8 Initial Organizational Structure of the MF Operations 1. Administrative Aspect 2. Operational Aspect MF Account Officers under the Branch Managers The MF Unit reports directly to the General Manager and the President

9 Preparing Branch Managers BMs thought that microfinance operations was something that can operate independently. In my monthly meetings with BMs, I always put in something about microfinance so that it will be instilled in them that microfinance is here to stay. Got them to accept that MF best practices should apply not only to MF but to other bank products as well.

10 Future Organizational Set-up for MF Operations  Operational aspect will be handled by the branch managers  MFU as part of Corporate Headquarters, overseeing MF Operations on an integrative level.

11 Setting the direction of our MF operations We have to go out to reach our clients. We can give the 5-6 operators stiff competition. We can give loans at reasonable cost. Microfinance is not only loans, but also savings. Without savings, it is difficult for people in the countryside to be development-oriented. Now, all our products have very strong savings component

12 Using MF in branch expansion When we set up our two new branches in August and September last year, in Claver and San Agustin (Surigao), my guidance was specific that our leading edge should be microfinance - it was to be our point of entry in the area. Now, the two new branches, as a whole, are breaking away ahead than if we just did traditional rural banking

13 Choosing the personnel for MF expansion Headed the three-member interview team Believes that future managers and supervisors of the bank will come from the MF staff Being at the field level, the microfinance staff can best internalize the microfinance best practices - this discipline will be invaluable when they are assigned supervisory positions in the future. Really looked for talents who can be groomed for managerial positions

14 Monitoring of MF operations The first thing I look into is portfolio at risk (PAR). The supervisors and account officers (AOs) know this, so they're on their toes as far as portfolio at risk is concerned. Then, I look at profitability. I ask "Are we making enough profit to be able to give incentives to the AOs?“The bank has an incentive scheme for the AOs who have been doing good work. I also make sure that I get the bank's microfinance data when I need it.

15 Dealing with the MF staff Asks the MFU head a very general question like “Kumusta ba ang operations natin” Want to hear an update from the MFU head I also talk to AOs and ask them how they are. I feel that when operations has been going well, for example, when PAR has been between zero to one percent, then probably there's no need for me to go down. When there are difficulties in certain types of operations, my presence becomes a little heavy.

16 Knowing the banks’ clients Every time I am in the bank, I see to it that I visit either a group center or an individual borrower. In MF operations, you’ve got to know the players to get to know the gut-feel of the situation When you make a policy decision, you have to know how it will affect the players in the arena

17 From a learner to a doer KAYOD, our microfinance product for tricycle operators, is a good example of how a microfinance institution graduates from being just a learner to a doer. Although it was with MABS' help that we designed KAYOD, basically, it was a result of our desire to really give out more microfinance products to the townsfolk who needed it. We saw that there was a sector that the bank could serve, we saw a market, and we encouraged our staff to design the product.

18 Summary Personal involvement of top management, especially the Chairman and the General Manager, is vital for the success of microfinance operations, or for any type of new operations for that matter. In any type of organization, human resource is of prime importance “Take care of your men and they will take care of the Microfinance mission!”