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Turning Around: Licking the PAR Problem Experience of the Rural Bank of Digos , Inc.

Turning Around: Licking the PAR Problem Experience of the Rural Bank of Digos , Inc. Gionvanni D. Gabriento Manager , Human Resource & Administration. 2009 RBAP-MABS National Roundtable Conference May 12-13, 2009 Hyatt Hotel and Casino Manila. RURAL BANK OF DIGOS.

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Turning Around: Licking the PAR Problem Experience of the Rural Bank of Digos , Inc.

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  1. Turning Around: Licking the PAR ProblemExperience of the Rural Bank of Digos, Inc. Gionvanni D. Gabriento Manager, Human Resource & Administration 2009 RBAP-MABS National Roundtable Conference May 12-13, 2009 Hyatt Hotel and Casino Manila

  2. RURAL BANK OF DIGOS • The bank opened and started operating on February 17, 1956 • The bank is the PIONEER BANK in Digos, Davao del Sur • In the 80’s the bank was hounded by: • Problems in the sugar and coconut industries • Failure of Masagana 99 • Peso Devaluation • Bad economy

  3. RURAL BANK OF DIGOS The bank turned a new leaf in the 90’s: New Management- Increased capitalization, computerization, opened 3 branches Business partnerships with Bangko Sentral ng Pilipinas, Land Bank of the Philippines, Coconut Industry Investment Fund Finance Corporation Entry of the Microenterprise Access to Banking Services in Mindanao (MABS-M)

  4. RURAL BANK OF DIGOS In the horizon is a brighter 2000’s: Head Office & component departments had been created Professionalization of the Human Resources and Administrative Department Infusion of additional capital Opened 2 more branches Received the Regional and National Award from Land Bank of the Philippines

  5. MICROFINANCE BACKGROUND HOW AND WHEN MICROFINANCE STARTED: • The bank was one of the pilot banks of the MABS Program • MABS trained the bank in microfinance in 1998 • Main Branch, Digos, Davao del Sur • One loan product for microentrepreneurs • Four Field Staff, each with a target of 120 accounts • Zero PAR in the first 3 years of operation

  6. MICROFINANCE BACKGROUND Microfinance Products: Negosyo Palambuon Pundo Padaghanon (NPPP) • a short term loan to assist microenterprise operators to expand their business • operations and accumulate their own capital that will, in due time, make them • less dependent on borrowed funds. It focuses more on microenterprises that • generate regular daily sales and on microenterprise operators who currently • depend on loans from informal moneylenders for working capital. KAABAG SA MAG-UUMA(KASAMA) • a short term loan that caters to small farmers with household agricultural • activities and sources of income other than the farm , for the purpose of • helping them with their financial requirements. A market driven product which • identifies and meets clients needs based on character and cash flow.

  7. MICROFINANCE BACKGROUND Support from MABS: • Countless trainings and seminars • Transportation equipment – motorcycles • Office equipment – computers, printers • Branch visit and technical assistance • Regular product Evaluation

  8. PROBLEMS ENCOUNTERED AFTER SEVERAL YEARS • Clients immediate change of address / relocation - cannot be located • Complacency and lack of supervision of Account Officers • Haphazard CI / BI and loan evaluation • Relaxed collection efforts (tolerance of delinquent clients) • Lack of follow-up training for Account Officers and Supervisors • Multiple borrowings of clients (from other lending institutions)

  9. REMEDIAL MEASURES • Tutok, Dikit, Kulit Strategy • Rigid follow up of delinquent clients • Demand letters • Follow up and collect from loan Co-Makers • Filing complaints against delinquent clients in the Barangay Court • Seizure of personal/business assets of delinquent client • Regular evaluation of MF Supervisor, validation thru area visits

  10. REMEDIAL MEASURES • Re-training of Account Officers and other bank staff • Make sure loans are properly evaluated • Client validation visit • Regular monitoring of AO performance • Year-end branch and staff incentive based on: • Number of Active Borrowers and Loan Portfolio • Level of Portfolio at Risk

  11. MICROFINANCE PERFORMANCE 5-YEAR PORTFOLIO AT RISK

  12. MICROFINANCE PERFORMANCE

  13. LESSONS FROM EXPERIENCE • Hawklike staff performance monitoring is key to success in microfinance • Preparing and training the staff in the basics of microfinance lending is of utmost importance • Prudent conduct of CI/BI and Cash flow evaluation = quality loan portfolio • Intensified collection efforts (no room to relax) = disciplined clients

  14. LESSONS FROM EXPERIENCE • Patience is a virtue in dealing with both AOs and clients • A good relationship with clients encourages loyalty • Give to Caesar what is due to Caesar – branch incentive program works!

  15. PLANS FOR THE FUTURE(Moving Forward) • Development of new loan and deposit products • Market Penetration/ Expansion • Updating of existing product manuals • Continuing training and seminars for bank officers and support staff • Opening of new branches

  16. END OF PRESENTATION

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