Category: Microfinance

In December 2006, ARDCI’s financial performance was so dire, it was at the brink of collapse. In the same year, it has realized its fourth consecutive year of net losses. The morale of the staff is low and everyone was watching ARDCI that was once the envy of a lot of MFIs in the Philippines.

The Agricultural and Rural Development for Catanduanes, Inc. operates microfinance in four prvinces in Bicol, one of the poorest regions in the Philippines. In 2007, it forged partnership with SEDPI to turn around its ailing performance. SEDPI provided Technical and Mentoring Assistance to ARDCI in January 2007.

After braving inevitable change in the organization, ARDCI is now enjoying the fruits of its labor. The table below shows the drastic improvement in its performance.

Financial Performance	Dec 2006	Dec 2007	Nov 2008	Standard
Portfolio at Risk	27%	4%	2%	<5%
Adequacy of Loan Loss Prov.	41%	100%	100%	100%
Administrative Efficiency	38%	43%	41%	<20%
Operational Efficiency	47%	47%	45%	<30%
Operational Self Sufficiency	98%	101%	123%	>120%
Loan Officer Productivity	280	204	276	>300
Financial Self Sufficiency	92%	96%	111%	>100%
Return on Assets	-1%	0%	7%	> Inf
Return on Equity	-1%	1%	16%	>T-Bill
PESO Rating	46	53	86	85

Overall, the organization has experienced outstanding improvement in operations as evidenced by a number of milestones. These milestones are: (1) drastic improvement of the portfolio at risk ratio while maintaining the original value of loans outstanding; (2) increase in collection efficiency as shown in the increase in revenues; (3) decrease in operating expenses mainly due to the decrease in personnel costs in spite of introducing staff incentive schemes; and finally (4) breaking the trend of four consecutive years of net losses.

These improvements have not gone unnoticed. Donors and funders who deserted ARDCI in its turbulent times and ceased release of funds have now returned to support ARDCI’s financial needs. More importantly, other organizations are starting to look up to ARDCI as a model in transforming and improving microfinance operations.

All these were made possible due to the dedication and efforts made by management under the leadership of Mr. Danilo Tiburcio and his able support and operations team led by Ms. Alma Villanueva and Ms. Belen Teves. Without them, the achievements of ARDCI would have not been possible. Mr. Tiburcio’s management team led ARDCI in (1) installing information system that provides accurate and timely information crucial to decision making; (2) improved financial products; (3) rallied the staff to perform better; (4) arrested delinquency and installed policies, systems and procedures to prevent the recurrence of delinquency; (5) improved communication channels within the organization among others; and (6) tightened internal controls and internal audit.

Two years after having launched the Ateneo Diploma Course in Microfinance, 35 graduates were conferred the Diplon in Microfinance in December 2008. Most of the graduates are Nigerians and only 5 Filipinos were able to complete the Diploma.

The graduates we able to pass written exams and successfully completed projects to showcase their learnings in the Ateneo trainings.

It is expected that for 2009, more will be conferred with the Diploma in Microfinance. The first batch of graduates is a manifestation of Ateneo’s commitment in supporting the microfinance industry.

PEF is a non-stock, non-profit organization that provides financial support to projects that respond to the problems of poverty and marginalization. The Foundation envisions empowered communities that: have basic needs of life; are engaged in sociocultural and economic activities; and participate meaningfully in local governance. PEF addresses the needs of the urban and rural poor by providing civil society organizations that help them with development financing and technical assistance, and promoting appropriate technology and networking with all relevant stakeholders.

Through PEF’s support, SEDPI implemented a Training and Mentoring Assistance to four organizations in Southern Luzon. Also, a subsector research to identify the appropriate interventions needed to support coastal-based microenterprise was also implemented through SEDPI in Iloilo, Bohol, and Eastern Samar. SEDPI social entrepreneurs were instrumental in crafting project proposals to CORDAID and UNDP. PEF eventually won the bids and ended up with USD1 million from CORDAID to fund microfinance institutions in Mindanao and PhP20 million from the United Nations Development Programme to fund communities that adopt renewable energy. PEF also commissioned the services of SEDPI to conduct impact assessment to clients of three microfinance institutions that they have supported all over the Philippines.

SEDPI strives to make its provision of capacity building interventions affordable and accessible particularly to small and medium microfinance institutions. Although it offers the most affordable capacity building services, it is not dependent on subsidies to ensure the continuous provision of services. It has employed the following strategies to make this happen: (a) employing brilliant, young and Philippine-based human resource; (b) integrate research in its consulting services to locally adapt training materials; (c) partner with market players, particularly wholesale funding sources and donors, that would gain mutual benefit in the conduct of capacity building services.

The overall objective is to increase the number of microfinance institutions that are able pass standards of commercial funding sources to access funds. In the capacity building cooperation, Cordaid will provide funds for capacity building to microfinance institutions through SEDPI. This will be done in several options: (1) provide grants for capacity building applicable to challenged microfinance institutions; (2) provide 0% interest capacity building loans to emerging microfinance institutions; and (3) provide interest-bearing capacity building loans to strengthened microfinance institutions through the Bank of the Philippine Islands.

Challenged Microfinance Institutions are those that are facing financial and organizational challenges to attain microfinance standards. The board and management of Challenged MFIs are committed to attain microfinance standards in the next two to three years and are willing to undergo intensive capacity building. One major obstacle of Challenged microfinance institutions is their inability to afford capacity building services. On the other hand, Emerging microfinance institutions are defined that are in the process of reaching a scale of operations to attain microfinance industry financial performance standards. The board and management of Emerging MFIs are committed to attain the microfinance industry standards in the next 12 months and will undergo intensive capacity building. Lastly, strengthened microfinance institutions are small and medium-sized MFIs that have attained microfinance industry financial performance standards that plans to expand its operations or introduce new innovations in its operations. Both emerging and strengthened microfinance institutions usually have difficulty to access funds from the market or are able to access funds but these are not enough to meet their financial needs.

In April 2008, the Academy for Microfinance Development in Indonesia (AMiDA) invited SEDPI’s president, Mr. Mariel Vincent Rapisura, to be part of the first faculty to deliver trainings in AMiDA. Mr. Rapisura delivered a training on entitled: “The New Frontier: Linking Microfinance and Remittances.” The participants evaluated the delivery of Mr. Rapisura at 4.78 from a possible high score of 5.00.

The Microfinance Innovation Center for Resources and Alternatives (MICRA) hosted AMiDA. MICRA is an INdonesian foundation focused solely on the development of the microfinance industry. Mercy Corps founded MICRA in early 2006 to institutionalize and expand its work over the past six years in microfinance throughout Indonesia. Three of SEDPI’s staff were participants in AMiDA.

 

Progressive Bank Inc. (PBI) is a rural bank operating in Panay Island. Considered as a significant player in its market, PBI enjoys a Php 116 million portfolio with 15,000 clients and although it has a near perfect performance boasting a 2% Portfolio at Risk Ratio, its management still feels there is plenty of room for improvement.

PBI commissioned the services of SEDPI for an organizational appraisal in March 2007. The result of the appraisal led PBI’s management to forge partnership with SEDPI to further improve its financial products and services with the goal of achieving both its financial and social missions. With the assistance of the BPI Capacity Building Loan, PBI was able to spread its capacity building expenditures in the next three years.

From the appraisal, the needs of the organization were identified. The capacity building needs of the staff were identified and focus was given on crafting incentives schemes, compensation system, and staff benefits. On the client level, better product designs were needed to win the already saturated market over well-established competitors. Through the training and mentoring assistance (TAMA), PBI was able to clarify its niche as the leading service provider of financial services and enterprise development support for the economic empowerment of the poor in Panay.

One of the most recent PBI-SEDPI partnerships was the Strategic Planning held in October 2007. On hand for the planning were PBI’s board members, managers and supervisors, ensuring holistic and participative discussions on vital issues.  The institutional values, vision, and mission were crafted based on the understanding and direction favored by both the board and staff. Key Result Areas, performance indicators and strategies were set not only from careful market research, but also from realistic capacities of field staff and the institution.

In the end, the strategic planning resulted in PBI’s clear direction to all its stakeholders

With plans of supporting microfinance institutions in its country, members of the Central Bank of Nigeria (CBN) traveled to the Philippines to attend trainings at the Ateneo and visit a well-established microfinance cooperative in Manila. Not long after, CBN employed the services of their Ateneo trainers, SEDPI, to capacitate its staff on microfinance.

The partnership with CBN allowed SEDPI to visit Nigeria, a country with a population of 140 million (2006) and a per capital GDP of $694 (2005). The first of two sets of trainings was held on March 2007, with topics including Fundamental and Methodologies of Microfinance, Financial Product Design, and Financial Analysis.  The trainings ran for two weeks, and were held in Lagos, Nigeria.  In its reviews, the topics were seen as “very promising, interesting, and relevant.” Further, the participants commented that the speakers gave “excellent presentations” and have “deep knowledge” of the topics.

The second leg of the trainings was again held in Lagos, this time on the topics of Delinquency Management, Risk Management for Microfinance Institutions, and Managing, Developing, and Supervising Microfinance Staff.  The trainings are best summarized by a comment made by one participant: “The lectures were enlightening, and the manner of presentation was refreshing.”

Talks are now underway of providing regular trainings to CBN staff in the future. With the help of SEDPI’s capacity building, it is hoped that the Central Bank of Nigeria be one day a key proponent of microfinance in their country.