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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

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

rural bank of digos
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
rural bank of digos1
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)

rural bank of digos2
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

microfinance background
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
microfinance background1
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.
microfinance background2
MICROFINANCE BACKGROUND

Support from MABS:

  • Countless trainings and seminars
  • Transportation equipment – motorcycles
  • Office equipment – computers, printers
  • Branch visit and technical assistance
  • Regular product Evaluation
problems encountered after several years
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)
remedial measures
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
remedial measures1
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
microfinance performance
MICROFINANCE PERFORMANCE

5-YEAR PORTFOLIO AT RISK

lessons from experience
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
lessons from experience1
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!
plans for the future moving forward
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
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