Mariel Vincent Rapisura, Author at Social Enterprise Development Partnerships, Inc.

Public-Run Versus Customized Trainings in MFIs

By Carlo Niño Yacob

Organizations regularly include capacity-building in their development plans. This have become an essential human resource strategy because it aims to improve, if not sustain, the level of knowledge and skill needed by its employees in the performance of their functions. In the case of microfinance institutions, capacity-building interventions are done mainly as a requirement for compliance or due to a perceived need. MFIs would often find themselves choosing between public-run or customized trainings. What is the difference?

Public-run trainings, by virtue of being public-run, are trainings that are conducted to serve the general need of the public. It prioritizes breadth of knowledge that is applicable for most. On the other hand, customized trainings provide attention to the distinct practices of organizations. It goes in-depth with interventions being rendered.

During public-run trainings, capacity-building providers aim to deliver general topics to encompass the wide audience. In this regard, the event could also be an avenue for networking with other organizations. Some MFIs bring delegates to these events for the primary purpose of engaging in best practices sharing. Organizational learning, aside from what is imparted by the resource speakers, is spurred by organization-to-organization interaction. In terms of fees, public-run is cheaper compared to customized ones.

For customized trainings, a prior assessment of the organization would be carried out to understand what interventions it needs and how to deliver them appropriately. This means gathering enough information about the systems, processes, policies, and personnel so that these can be integrated to the lesson. With this focused scope, areas for improvement can be easily identified and discussed during the training itself, thus, making the intervention more beneficial and impactful to the organization.

The management needs to take into consideration the institutional needs and objectives to be able to identify the appropriate training for the organization.

ARDCI Celebrates 17th Founding Anniversary

By: Bea Arnela

Agricultural and Rural Development for Catanduanes, Inc. (ARDCI) recently celebrated its 17^th founding anniversary last September 11, 2015. The festive day started with a Thanksgiving Mass and was followed by a colorful parade around the town of Virac. Hundreds of ARDCI members gathered in the Virac Sports Complex to join the fun-filled celebration. Senator Francis “Chiz” Escudero graced the event and gave an inspirational talk. The members enjoyed various games and raffle draws. Toward the evening, the ARDCI staff, management, and valued guests continued the celebration in the Virac Town Plaza. During the area presentations, the members showcased their talents through impressive production numbers. The event aptly ended with vibrant fireworks display.

ARDCI acknowledged distinguished partners with the ARDCI Uswag Award and SEDPI was a proud recipient of the recognition.

ARDCI has plenty of reasons to be grateful and to celebrate. Since the organization’s establishment in 1998, it has stayed true to its commitment to empower its members, primarily poor households, by providing financial services such as microcredit and micro-insurance. With its members growing close to 100,000 households, the organization now operates in 47 branches in ten provinces. In 2014, ARDCI began its operations in Mindoro and Marinduque with five and two new branches respectively. The organization recorded a remarkable 35.95% growth in number of active clients and 33.18% growth in loan portfolio on the same year.

Bicol region’s largest MFI has continuously strived for growth and progress. It has not always been an easy journey for ARDCI. Before the organization forged a partnership with SEDPI in 2007, ARDCI was struggling with its poor financial performance and net loss for four consecutive years prior. SEDPI helped ARDCI to improve its performance through providing Technical and Mentoring Assistance. The management’s tireless efforts and dedication in the partnership goals paid off. It was not long before ARDCI started posting positive income again and regained the support of donors and funders for its financial needs.

Until this day, ARDCI persistently works on its financial performance as shown in the table below.

Financial Performance	2012	2013	2014	Standard
Portfolio-at-Risk	4.78%	1.96%	3.05%	<5%
Adequacy of Loan Loss Prov.	100%	100%	100%	100%
Operational Self Sufficiency	176%	133.52%	145.51%	>120%
Loan Officer Productivity	295	303	354	>300
Financial Self Sufficiency	176%	130.41%	141.76%	>100%
Loan Portfolio Profitability	10.64%	13.04%	18.05%	> Inflation*

In terms of Portfolio Quality, ARDCI was able to maintain its PAR Ratio within the industry standard and is fully provided in terms of loan loss provision since 2013. Sustainability measures were also generally outstandingly high. Overall, these indicators accompanied by notable increase in outreach, suggest that the organization is financially sound and healthy.

ARDCI takes pride in sustaining and flourishing its grassroots-led development initiatives not only in microfinance operations but also in its social services programs. Throughout the years, ARDCI provides unwavering committed service and looks forward to more wonderful years with its member and partners.

DAR Project Reaches 19,000 Poor Households

By: Hazel Atienza

The Department of Agrarian Reform Micro Agri Loan Product (MALP) was an integrated credit delivery project for Agrarian Reform Beneficiaries (ARBs). The program aims to intensify and fast track the provision of microfinance services to target clients (ARBs/ARB households and rural women) to finance their agri-based enterprises through capable partner MFIs. Having access to formal financing was one of the major achievements of the project for the ARBs. By the end of the project, there is already a total of PhP356.2 million in loan portfolio from 18,987 ARBs, ARB households and rural women. This amounted to a total of PhP86.6 million in savings and share capital generation. Market Linking, access to crop insurance, and access to agri-extension services were the other important milestones of the project.

Social Enterprise Development Partnerships, Inc, (SEDPI), the chosen service provider for the project, extended capacity buildings services to 23 Microfinance Institutions (MFIs). Through the 23 MFIs, the ARBs were not only able to access formal financing which allowed them to no longer borrow capital from informal money lenders with very high interests; they also had an avenue where they could put their savings during peak income seasons.

SEDPI also incorporated market linking as an essential design of the product. In the course of the intervention, several partners of MALP expressed keen interest in the area of value chain financing as well as market linking. These organizations saw the importance of the system and planned to institutionalize it not only for MALP. In fact, a key insight during the conduct of MALP is the importance of market linking especially for organizations with strong existing micro-agri product.

One of the highlights of the entire MALP intervention in terms of market linking is the intervention with Alalay Sa Kaunlaran Inc. (ASKI). SEDPI linked ASKI with Organic Options Inc. (OOI), a marketing and trading company for agricultural products. ASKI developed a partnership with Organic Options where OOI will buy the produce of farmers under MALP. The agreement also includes provision of assistance for the farmers to transition from conventional farming to organic.

SEDPI was also able to link the MFIs to Philippine Crop Insurance Corporation (PCIC). Insurance is a critical financial product that must be accessed by farmers to protect them from risks incurred by unexpected circumstances. Through the MFIs, the crop insurance, including other insurance products from PCIC, was made more accessible to the ARBs and the farmers. Seventeen MFIs are now underwriters, with 2 MFIs processing their underwriter application. The rest opted to become agents. The remaining MFIs opted to explore other risk mitigating measures such as the Agricultural Guarantee Fund Pool (AGFP).

Agricultural extension services allow provision of knowledge and technical know-how on farming. Through the project, MFIs were linked to Municipal Agriculture office and key topics such as pest management and fertilizer application were the most requested in addition to knowledge on vegetable farming.

The project proved to provide a win-win situation both for the farmers and the MFIs. Farmers were empowered through the interventions mentioned hence the need for capital and more savings would also increase providing more business for the MFIs.

Importance and Characteristics of a Rainy Day Fund

By: Romeo Arahan Jr.

One of the pre-requisites in pursuing financial freedom is to have a rainy-day fund, or an emergency savings fund. What it does is it provides an individual, access to funds in an extremely urgent and critical event. SEDPI advises its participants to follow the three rules in forming their rainy day fund. First, the amount should be equivalent to six times their monthly income or nine times their monthly expenses. Second, the fund should be liquid. Third, the fund should have restricted access.

“The fund should not be accessed at all times because it should only be used in matters of life and death. By the time it should be used however, it should be readily accessible,” Romeo Arahan, SEDPI program officer said in one of the trainings for the Financial Literacy, Leadership, and Social Entrepreneurship (FLSE) Program in Pototan, Iloilo on November 21, 2015.

The participants in Pototan, Iloilo had a different opinion on the rainy day fund. Being the rice granary of Iloilo, majority of the participants are saving their hard-earned money and invest it in agricultural-related activities. Aside from rice farming, they venture into hog raising, which can also provide additional income for their families. Arahan, however, advised against the practice of using the rainy day fund for investing. “The rainy day fund is there to have easy money in cases of emergency. If the fund is used to buy for pigs, it will hinder liquidity. By the time the individual needs the money, he still needs to sell the pigs at the value of the rainy day fund, which might take a long time. Because he needs the money right away, he will be forced to sell the pigs at a lower price,” he explained.

This also goes to investing into other physical assets like jewelry, as a participant shared that he already has an established business and is keen on investing his rainy-day fund to buy jewelry. “For jewelry, it will provide easy liquidity because there are numerous pawnshops in the area. However, the pawnshop will charge interest every month until the principal is fully paid. In this sense, the interest paid could have been added to further build up the rainy day fund,” Arahan shared. He added that if selling jewelry is an option, there should be an extensive network of prospective buyers who are willing to pay at a preferred price which might also take a long time to establish.

In both cases, SEDPI recommended putting the emergency savings fund in a rural bank in their municipality. “In this way, they are not only preparing for their financial freedom, they are also helping the rural areas by putting their funds in these banks,” Arahan ended.

The training on financial literacy is the first in a 12-week training under the FLSE program for families of overseas Filipino workers.

Why Financial Literacy is Crucial to Microfinance Staff

by Denise Subido

Microfinance Institutions (MFIs) face a myriad of issues in running their day-to-day operations. One problem they are constantly faced with is delinquency. Delinquency is a prevaling problem that has negative repercussions for an institution. One peculiar finding, however, is that when there is delinquency, there are also cases of fraud. In fact, SEDPI President and CEO Vince Rapisura states, “One hundred percent of our MFI clients experiencing delinquency problems also have problems on fraud.” When MFIs address fraud, they could also address their delinquency problems.

Fraud happens when there is heavy financial burden on an MFI staff. MFI staff who were caught to have committed fraud cited that they needed money because they were experiencing emergencies in the family. This shows, then, that financial need comes from the fact that personal money is not properly managed.

Given this reality, it is crucial that MFI staff are well-versed in personal financial management. Financial literacy trainings for MFI staff can achieve this goal. It promotes people to make better personal financial choices to manage day-to-day expenses, prepare for emergencies, and take advantage of opportunities to achieve financial goals. These trainings can help equip staff with skills and knowledge to manage their personal finance.

In addition, MFIs should also create policies that enable and encourage staff to practice good personal financial management. Some policies that do so are automatic savings with the institution; adding counterpart from the institution to the staff’s savings; providing adequate insurance protection to the staff and their family; and an option for the staff to increase their SSS contributions.

Once these policies are put in place and are coupled with financial literacy trainings, staff can become better equipped to manage their own finances. This will direct them to be able to better handle financial emergencies and will, eventually, give the staff peace of mind since they are now able to achieve financial freedom. The staff can then have more focus at work and will no longer need to turn to desperate measures just to make ends meet. An added benefit to this is that the staff will also patronize the financial products of the institution.

Last November 12, the Social Enterprise Development Partnerships, Inc. (SEDPI) conducted an Innovation Meeting with the top management of Ramon Aboitiz Foudation, Inc. (RAFI) – Microfinance. RAFI Microfinance is the microfinance and entrepreneurship focus of RAFI. They provide financial products such as loans, savings, and insurance to low-income households in Cebu, Bohol, and Leyte. During the innovation meeting, the team found that their staff needed interventions in terms of financial literacy. RAFI-MF aims to improve the financial literacy of their clients, but their staff, however, are not financially literate. This needs to be addressed first so that they can walk the talk in terms of financial literacy.

Vince adds, “MFI staff can serve better in delivering pro-poor financial products services if they are financially stable. They become true examples of financial empowerment and they can actively share their personal experiences to their clients.”

Financial Literacy for CASS Beneficiaries

by Carlo Niño Yacob

Carlo Yacob, SEDPI program officer, delivering a sesion to CCT beneficiaries in Siargao Island

The Climate Adaptation Support Services (CASS) project intends to develop communities in Siargao Island, Surigao del Norte, toward climate-resiliency through economic empowerment. Climate Change Commission (CCC) in collaboration with Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) implements CASS. With financial support in the form of cash transfers coming from the government, it was imperative for the beneficiaries to be educated first on how to appropriately manage funds prior the disbursement. For this specific purpose, the Social Enterprise Development Partnerships Inc. (SEDPI), the service-provider hired to conduct the efforts, delivered financial literacy courses for the CASS beneficiaries. Capacity-building was deemed necessary to ensure that the families of the beneficiaries have the proper knowledge and skills to build-up sustainable financial resources in case of emergency situations such as natural disasters and calamities.

To accomplish this task, financial literacy trainings which focused on personal finance were conducted in four municipalities – Del Carmen, Pilar, San Benito, and San Isidro. The attendees were instructed on the importance of personal fund management, the intricacy of managing expenditures, the principles behind setting financial goals, the various advantages and disadvantages of having loans and savings, the acceptable uses of loans and savings, the different kinds of loan products, the proper way of knowing debt capacity, the efficient tracking of loan payment schedules, the different types of savings, the suitable places to store money, the different kinds of insurance products, and the various institutions that offer these financial services.

Discussions and workshops were delivered to impart knowledge to the participants. To complement these, printed financial literacy handbooks that highlight important points were also distributed. By and large, the various interventions conducted were positively received with messages of gratitude and praise. In the Municipality of Pilar, a participant expressed, “Mahusay po, salamat salamat po sa inyong panahon! (Terrific! Thank you for your time!)”. Another participant from the area also mentioned, “Ser and Ma’am, salamat sa inyong pagsasabot kay dahan ang nakat-onan nako kon unsa ba pagpasikot sa panginabuhi. (Sir and Madam, thank you for the talk. It has taught me how to handle by business)”. She was referring to how the program has helped her in managing livelihood.

Most of the participants expressed appreciation on savings, loans, and insurance sessions. A participant remarked, “Natutunan sa insurance para mayroon maasahan sa pangyayari na emergency or pagkamatay, kalamidad. (I was taught that insurance would be reliable in times of emergency, death and calamity)”. In the area of Del Carmen, an attendee noted, “Naiintindihan po namin kung paano magbudget ng pera at pagcontrol ng pangungutang. (We understood how to budget money and control loaning.)”.

Moreover, several participants also included their impressions on the manner of facilitation of the trainings. They exclaimed, “Okay ang mga speakers excellent, nakakaintindi kami at malinaw ang pang-explain. (Excellent speakers, we were able to understand and explanations were clear)”. Another participant commented, “Puro excellent ang nilagay ko kasi marami akong natutunan at masaya ako dahil sa inyong mga lecture (I put all ‘excellent’ (in the evaluation sheets) because I learned a lot and I am happy because of your lecture.)”.

After these financial literacy trainings have been delivered, local government units in charge are expected that cash transfers would be initiated as soon as possible. It is hoped that the beneficiaries would apply their learning once this has ensued.

SDFI’s Net Income Soars by 46% in 2015

SEDPI Development Finance, Inc.’s (SDFI) net income jumped by 46% from PhP3.44 million in 2014 to PhP5.03 million in 2015. This is the highest net income of SDFI on record. The surge in net income is on the back of modest asset growth of only 9% that is an indicator of a more efficient use of resources.

Revenues generated for the year increased by 5% while expenses declined by 2% for the same year. The increase in revenues and decrease in expenses resulted in a robust growth of the financing company’s bottom line.

There was only a slight increase in revenues due to the low interest rate environment in the Philippines. SDFI used to extend loans at an average of 13% per annum, now it only extends 11% per annum on average. It could hardly compete with commercial banks that extend 5% to 8% per annum to microfinance institutions. Commercial banks mobilize very low interest-bearing deposits from the public while SDFI mobilize investments from OFWs that gives up to 6% return per annum. This is to fulfill SEDPI’s mission to provide better returns to its investors who are mostly domestic workers overseas.

In spite of the slower growth in assets, SEDPI was still able to exceed its target. It targeted total assets of PhP250 million while actual total assets stood at PhP267 million. SEDPI is gearing up to achieve its target to grow to PhP350 million for 2016. The recent approval of a fresh line of credit worth PhP30 million from Union Bank will enable it to achieve this goal. It will also pursue a more active role in mobilizing social investments from Overseas Filipino Workers as well as young professionals in the Philippines.

The growth in equity outpaced growth in liabilities for 2015. Growth in equity was 16% while growth in liabilities was only 7%. This is a good position to be in since capital adequacy is strengthened to 27%. The banking industry standard is only 10% for the capital adequacy ratio. A good capital adequacy ratio means that the company is able to better serve its long term obligations from creditors.

For 2016, SEDPI hopes to further strengthen its financial performance as it tries to empower more Filipinos through its products and services.

Challenge of Integrating Crop Insurance in Agricultural Financing

By Romeo Arahan Jr.

SEDPI recently concluded the MFI Credit Support to Agri-production and Enterprises of Agrarian Reform Beneficiaries or ARB Households and Rural Women in the Program Beneficiaries Development Model Areas project of the Department of Agrarian Reform (DAR) on July 2015. During the contract period, SEDPI was able to formulate micro-agricultural loan products (MALP) to 23 MFIs that participated in the project. These MFIs are geographically diverse, catering to agrarian reform beneficiaries all over the Philippines.

One of the agreements during the project was for MFIs to provide crop insurance to their clients. Most of the partner MFIs were very keen in accessing crop insurance because of the risk mitigation benefits it provides to the clients’ farming activities in the event of natural calamities. SEDPI provided training to the MFIs on the importance of crop insurance and how this could be integrated in their financial products.

One of the main challenges of integrating crop insurance in agricultural financing products of MFIs is the notable lack of crop insurance providers in the country. SEDPI was only able to initiate linkage of the MFIs to the Philippine Crop Insurance Corporation (PCIC). Its crop insurance is the dominant product in the market right now. Its limited capitalization of PhP2 billion in 2013, hinders its growth in providing crop insurance to a wider range of clientele. In addition, private insurance companies, such as Malayan and CARD, are still undergoing pilot testing of their insurance products. As a result, MFIs and ultimately their clients have limited options on choosing crop insurance products that are more appropriate to their needs.

The threat of climate change is impending. It is important for the government to play a more active role in crop insurance to ensure protection of farmers’ livelihood and food security in the country. As a start, it should increase the capitalization of PCIC so that it could absorb serve more farmers and cover more geographic areas. The government could also provide incentives for private insurance companies to provide affordable and effective crop insurance products. It should also continue subsidizing premium payments of farmers on crop insurance similar to a project it implemented with DAR and PCIC previously. These are just small steps towards making crop insurance a robust industry in the Philippines.

Union Bank Approves 30M Credit Facility for SEDPI

L-R Neil Palteng, SEDPI Finance Officer; Edwin Salonga, SEDPI Chairperson; Vincent Rapisura, SEDPI President and CEO; Eugene Acevedo, Union Bank Senior Executive Vice President and Mae Basconcillo, Senior Relationship Manager

Union Bank approved a PhP30M credit facility for SEDPI Development Finance, Inc. SEDPI intends to use the funds to extend loans to microfinance institutions and social enterprises.

On January 27, 2016, Union Bank top executives welcomed the SEDPI team in a meeting held at the Union Bank headquarters in Ortigas Center, Pasig City.

“What you’re doing is unique.” Eugene Acevedo, Union Bank Senior Executive Vice President exclaimed after SEDPI’s CEO, Vincent Rapisura, formally presented SEDPI’s products and services. “We are happy to begin our long term relationship with you,” he added.

SEDPI’s Chairperson, Edwin Salonga, thanked Union Bank for trusting the organization.

Ms. Mae Basconcillo, Senior Relationship Manager, processed SEDPI’s application while Aaron James Ureña, Relationship Manager initiated and endorsed SEDPI’s application.

Adopting Technology to Improve Microfinance Efficiency

By: Bea Arnela Parungo

RAFI Microfinance (RMF) has constantly been revolutionizing their operations through breakthrough innovations. Last April, RMF upgraded its Management Information System (MIS) to improve efficiency in operations. On-field account management and record-keeping using the mobile application eliminates redundancies and reduces total work load. Instead of recording in collection sheets, the field staff encodes the data directly on the application thus updating the system automatically over the internet. Previously, the field staff has to fill out the collection sheet and upon arrival in the branch; the support staff would input the data on the system. Most microfinance institutions have this same practice.

RMF’s new MIS encourages client interaction. Clients receive a system-generated SMS for every payment-related transaction. This notification gives assurance to the clients by informing them that their payment was received and correctly recorded. An SMS-based customer care group monitors all the incoming and outgoing text messages. This SMS system also lets the members send inquiries and complaints if there is any discrepancy in the payment made and the amount recorded in the system. At times, RMF clients even send thank you messages and express appreciation for the SMS notifications. All the feedback received by the customer care group are consolidated and forwarded to the branches regularly.

Aside from improved operations efficiency and better customer service, the system also serves as an internal control measure. The system limits the chances and opportunities for fraudulent activities. At any time, the branches and the main office can generate real-time operation reports. Furthermore, the client will be notified if there is an error in recording their payment. If a payment is not encoded in the system, the client will not receive a payment confirmation message. All clients are required to have a mobile number on file and they are well-informed about the SMS notification efforts. So far, there are no loopholes identified in this new system.

Before rolling out the new MIS, RMF setup a transition plan. Information and promotional materials were prepared. Training courses and forums were conducted. Communication procedures were also delivered to inform the clients of the changes that will affect them. Every now and then, e-mail blasts are sent to the staff for system-related updates and reminders.

Implementing an MIS upgrade to all of RMF’s 23 branches was not an easy journey. As with any other endeavors that entail change, one of the major challenges was dealing with resistance. According to Mr. Edwin T. Marfil, RAFI’s IT Manager, his team made sure not only to highlight the benefits of the new system but more importantly to make everyone fully understand how the new system works. Internet connection is also another concern since the system is an internet-based program. Some of RMF’s areas of operation have very poor internet signal. The field staff then may use the offline mode feature of the mobile application. Once back in the branch or anywhere with a stable internet connection, the data saved offline will then sync on the server.

Purchasing a first of its kind MIS system in the country, the mobile devices of the field staff, and establishing a support infrastructure for this new MIS all come at a cost. In addition, the IT Team remotely monitors the operations from the main server. There is also a data back-up mechanism and regular and preventive maintenance costs to keep the system up and running. When asked about the expenses involved in adopting a new MIS, Mr Marfil said that the great benefits of using the new MIS outweigh the costs. “In the long run, it is more expensive to lose clients.” he added.

RAFI is very progressive in terms of technology. Mr. Marfil pointed out choosing the proper technology platform as a key to effectively support operations. Collaboration between the IT Team and the RMF Team together with the full support of the top management made this innovation possible. RAFI aims to continuously improve their operations and find ways to serve their clients better.