The MABS-M Program An Overview

1. The MABS-M ProgramAn Overview

2. MABS-M Program • Background • Project Goals • MABS-M Partners • The MABS Approach • Where We Are Today • Where We Go From Here

3. What is MABS-M? Microenterprise Access to Banking Services in Mindanao The MABS-M Program provides technical assistance and training to rural banks and cooperative rural banks in Mindanao. The project is designed to expand the delivery of financial services to microenterprises and households belonging to lower socio-economic groups

4. Choosing a Strategy: Financial Services for Microenterprises • A major constraint to economic growth in Mindanao is limited access to financial services • Surveys indicate that less than 10% of the population regularly do business with a bank. Of this 10%, a majority come from upper socio-economic groups. • Lower socio-economic groups, including microenterprises, generally do not save and are forced to turn to moneylenders, pawnshops, or lending investors for loans. • 41% of all households, comprising an estimated 7 million people in Mindanao, depend on income from microenterprises.

5. Choosing a Strategy: Working Through Rural Banks • The GOP and the donor community have traditionally supported microenterprise activity through NGOs. • After 35 years of microcredit activity and with 500 microcredit NGOs currently in operation, it is estimated that only 1% of microenterprises are being reached. • NGOs can not legally mobilize deposits, and therefore have difficulty expanding outreach. • The financial discipline required to run a successful financial institution and many NGOs’ social mandate often conflict.

6. Choosing a Strategy: Working Through Rural Banks • There are 800 rural and cooperative rural banks throughout the Philippines, 141 of them in Mindanao. • Rural banks have low overhead costs, thus enabling them to profitably manage the large number of small transactions required for servicing the microenterprise sector. • Rural Banks can mobilize deposits.

7. The Opportunity for Rural Banks • Huge demand for financial services from microentrepreneurs and others from the lower socio-economic sector. • Pressure from commercial banks to move down market. • Microenterprise sector is less price conscious than service conscious. • Rural Banks know this market Profitable business opportunity

8. Project Goals By the end of the project, MABS-M will: • Reach a minimum of 50 rural and/or cooperative rural banks and bank branches. • Assist each bank to extend at least 500 new microfinance loans and mobilize at least 1000 new microenterprise depositors. • Ensure that the participating banks decide to make these services a permanent part of their portfolio. • Institutionalize microfinance services within the RBAP/RBRDFI.

9. MABS-M Partners

10. Steering Committee Sets policy direction, provides high-level input, endorses MABS-M activities. • Patricia Melizza Ruivivar, Chief of Staff, Executive Secretary of the President, Office of the President of the Philippines • Paul Davis, Chief of Economic Development, USAID • Alex Buenaventura, Executive Director, RBRDFI • Jose Lustre, President, RBAP • Reynaldo Reyes, President, Confederation of the Mindanao Rural Bankers

11. Management Committee Oversees the day to day program issues, provides input on implementation strategies. • MEDCO Representative, Nelia Agbon • USAID Representative, Teresita Espenilla

12. Bankers Advisory Committee Provides advice, feedback, and technical input to the Management Committee and the MABS-M Program. • Alex Buenaventura, Executive Director, RBRDFI • Boy Reyes, President, Confederation of Mindanao Rural Banks • Jun Laiz, President, Rural Bank of Sarangani, representing the MABS-M participating banks

13. MABS Approach Each PB receives approximately two years of focused support and attention. Our approach includes workshops, seminars, on-the-job coaching, exposure and training visits, and technical assistance. The general pattern is one of building up and then phasing out the level of dedicated technical assistance and training.

14. MABS Approach Goal for Participating Banks (PBs) • Development of products, practices, and procedures that follow microfinance best practice principles • Implementation of a profitable microfinance line of business • Seamless integration of microfinance into bank operations • Development of the capacity to not only manage the microfinance operation but continually improve it

15. Where We Are Now: • Interest in becoming a MABS-M participating bank was solicited from all 141 rural and cooperative rural banks in Mindanao. 43 responded with letters of interest and financial statements to assist in the screening process. • 4 rural banks were chosen for the 6 month pilot phase, which was recently completed. • 10 rural banks were chosen for Group 2 - the first rollout phase.

16. Activities Completed with 4 Pilot Banks: • Trained bank staff and managers and worked to build a microfinance “culture” of good service and repayment discipline among staff and clients • Developed new savings and loan products or modified existing products targeted at small savers and microentrepreneurs • Introduced new management and operating procedures and product documentation, incorporating microfinance best practices technology • Upgraded the capacity of the Management Information System (MIS) used by the pilot banks

17. Activities Completed with 4 Pilot Banks: (continued) • Created and helped implement product marketing plans • Developed operating manuals so as to achieve and maintain a high standard of service to clients and overall program implementation by the rural banks

18. Where do we go from here? • Continue working with the four pilot banks • Begin working with 10 Group 2 banks - June 1999 • Conduct Institutional Assessments for Group 3 banks - November/December 1999 • Select Group 3 banks - December 1999 • Possible expansion of MABS services under RBAP umbrella to Luzon and Visayas in early 2000

19. MABS Geographical Coverage • Our goal is to work in all 6 regions of Mindanao • We will cover Mindanao from 2 strategically located offices, our existing office in Davao and a new office in Cagayan de Oro. The Cagayan office will open this week.

20. Other Current & On-going Activities Regional Training • Will organize at least 2 regional training workshops in 1999 presented in conjunction with RBAP/RBRDFI and local Federations • Topics may include policy issues, MIS, microfinance best practices, deposit mobilization, and others

21. Other Current & On-going Activities Management Information System (MIS) • Work with RBAP/RBRDFI on the development of new software for rural banks. • Programming and functional improvement to existing MicroBanker software • Begin working with software products and MIS systems used by new PBs

22. Other Current & On-going Activities RBAP/RBRDFI Strengthening • Analysis of RBAP/RBRDFI structure, organization, and operations was currently completed • Strategic Development Plan for 2000-2003 was prepared with RBAP and presented to the membership at the convention in Manila • Continue work with RBAP and association members to finalize the plan and assist in its implementation.

23. Other Current & On-going Activities Microfinance Policy • Coordinated with RBAP and other USAID projects, C-PIP and AGILE • Work with Bangko Sentral ng Pilipinas (BSP) to improve the regulatory and policy environment for microfinance