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MANAGING COMPETITION: The Experience of FICOBank

MANAGING COMPETITION: The Experience of FICOBank. A presentation for the 2005 MABS National Roundtable Conference Mr. Herminio G. Ocampo President Marco Polo Hotel, Davao City April 26, 2005. FICOBank Profile. Founded on Sept. 10, 1976 by Samahang Nayons (SNs) and cooperatives

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MANAGING COMPETITION: The Experience of FICOBank

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  1. MANAGING COMPETITION:The Experience of FICOBank A presentation for the 2005 MABS National Roundtable Conference Mr. Herminio G. Ocampo President Marco Polo Hotel, Davao City April 26, 2005

  2. FICOBank Profile • Founded on Sept. 10, 1976 by Samahang Nayons (SNs) and cooperatives • Opened its door to the public on January 2, 1980 • With 225 regular members-stockholders (SNs and cooperatives) • Employs 118 personnel, 21 or 18.26% of which are directly involved in the Microfinance operations

  3. FICOBank Profile • Has 7 operating units: a Head Office and 6 branches. • A 7th branch will soon be opened in Solana, Cagayan • Has a Corporate Office that houses the executive officers and support staff

  4. FICOBank Profile Financial Growth

  5. Our Venture into Microfinance • In search for new business opportunities and desire to expand its market, the bank participated in the microfinancing program of PCFC in 1999. • The Kabuhayan group loan product, using the Grameen Banking Approach, was therefore developed for low-income women clients • However, the experience with group lending was not very good due to some delinquency and fraud problems

  6. Our Venture into Microfinance • These problems were expected because we ventured into the new business with inadequate skills in market research and product development process, inadequate logistical support for MF field personnel and cut-throat competition among MF players • After three years doing group lending, FICOBank felt the need to equip itself with knowledge and skills needed to operate a viable and successful microfinance operations; at the same time, the Bank decided that it wanted to cater to small microenterpreneurs with existing business. Thus, in 2001, we signed up with RBAP, to adopt the MABS Approach for our individual microentrepreneur borrowers. Rural Bankers Association of the Philippines

  7. Our Venture into Microfinance • The series of training and technical assistance from RBAP-MABS paved the way for the conception and final implementation of our FICOBank KABALIKAT SA BAYAN An Individual Microfinance Loan Product

  8. Kabayan Product Performance: As of Dec. 31, 2004 Our Venture into Microfinance No. of Active Borrowers: 914 Loan Outstanding : P 19,103,895 No. of Account Officers : 9 No. of Branches Implementing MF Individual Loan Product: 4 Net Income for the Year: 8,845,164 Cumulative Net Income Before Taxes: 15,094,138 (2001-2004)

  9. Our Venture into Microfinance Kabayan Product Performance: As of Dec. 31, 2004 Portfolio Quality: PAR over 1 day Amount: P829,550.00 Ratio: 4.34% PAR over 7 days Amount: P757,642.00 Ratio: 3.97% PAR over 30 days Amount: P470,819 Ratio: 2.46%

  10. 204 financial institutions are distributed within the region as of 2002: FICOBank Experience with Competition

  11. FICOBank Experience with Competition Microfinancing is not a monopoly of FICOBank in the region:

  12. FICOBank Experience with Competition Clients Served by PCFC accredited MFI’s in Region 02 using Group Lending Scheme Total Possible MF clients In Region 02 - 137,388 Total No. of Clients served by MFIs - 64,861 Potential clients - 75,527 47% Source: PCFC

  13. FICOBank Experience with Competition • Last year, 3 rural banks in the area started offering individual microfinance loan product using MABS Approach and 4 more will start offering the same this year, still using the same lending technology. • It is easy to see that the trade area in Cagayan Valley where FICOBank is located is increasingly becoming more and more competitive. • So is FICOBank afraid of competition?

  14. FICOBank Experience with Competition • No, we are not! • We have a healthy regard for competition. • FICOBank sees competition as an opportunity to build on our capabilities so that we can perform better. • By improving ourselves, our bank’s product and services, it benefits our clients and the community where we operate.

  15. FICOBank Strategy against Competition Our strategy: Superior products and services through constant innovations and excellent customer-service orientation in delivering improved financial services & solutions

  16. FICOBank Strategy against Competition The support elements required by this strategy: • Unqualified support by top management; • Strong middle management and availability of trained front-liners; • Culture of innovation; • Appropriate and reliable Management Information System (MIS); • Internal Controls; and • Effective and efficient organizational machinery

  17. FICOBank Strategy against Competition Unqualified support by the BOD and top management • Provide strategic direction, quality oversight and control for the business • Sensitive to the skills training of personnel (e.g. sales skills) • Create policies that improves program features (e.g. lending and savings interest rates) • Welcome and embrace constructive changes in the program

  18. FICOBank Strategy against Competition Strong middle management • Sales orientation (from operations-focus to marketing-orientation) • Supervise and track staff performance (target and goal-driven) • Branch Managers and their branch staff provide feedback mechanism (market intelligence)

  19. FICOBank Strategy against Competition Culture of Innovation • The practice of continuously finding ways to make things • better for the organization and the customers. • Focus on product research and development with attributes • friendly to customers; and • Lending processes to do away with bureaucratic and • ineffective procedures or the difficulty fro frontliners to do • their job well

  20. FICOBank Strategy against Competition Appropriate and Reliable Management Information System (MIS) • Helps in oversight, control and decision making; • Simplifies procedures and accelerates service delivery • Must be tailored to the requirements of the business;

  21. FICOBank Strategy against Competition Internal Control • Handles problems arising from the expectations and realities of the program; -program target and accomplishment -collection and remittances -systems and procedures in use -service quality and the likes • Management must be on top of operations anytime and ensure that arising problems are promptly attended and acted upon.

  22. FICOBank Strategy against Competition Effective and Efficient Organizational Machinery • Set forth the proper delineation of duties hence, redundancy of work is avoided resulting to more productivity

  23. The Effect of Competition on FICOBank’s Operation Competition was a strong stimulus for FICOBank to improve its services, procedures and support systems. Some of the changes FICOBank implemented to maintain its competitive stance can be seen in the following areas: • Centralized Fund management • Three-level loan screening • Asset Management • MIS-Information Technology • Product Development • Human Resources training

  24. The Effect of Competition on FICOBank’s Operation

  25. Maraming Salamat!

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