Full Report

Executive Summary

The Microenterprise Access to Banking Services (MABS) Program was designed to address the need of the Philippine microenterprise sector and other low-income people to gain access to a wide range of financial services and ensure that all sectors of society can participate in a growing economy. The program oversight continued to be led by the Mindanao Development Authority (MinDA) under the Office of the President. Altogether, the MABS program spanned 15 years, beginning in 1997 and closing in 2012.

In 1997, the MABS Program introduced a new approach to delivering microfinance services in the Philippines, an approach grounded in international best practices tailored to the needs of Filipinos in rural areas known as the MABS Approach. This approach was based on careful market research and pilot testing to ensure that products were suited to client needs. The program helped rural banks introduce new savings and loan products for microenterprises and small-scale farmers and applied innovative technologies such as mobile phone banking to expand the frontier of financial services delivery. In the fourth phase of the program starting in 2008, the MABS Program helped develop new microfinance services, including microinsurance and housing microfinance.

As in the earlier phases, the program did not provide loan funds and encouraged banks to focus on a deposit mobilization strategy for raising funding instead of relying on government loans or loan guarantee programs. MABS also leveraged the involvement of government and private sector partners in achieving its milestones. In particular, the Rural Bankers Association of the Philippines (RBAP) provided counterpart resources and full access to its membership base to enable the program to provide technical assistance to a wide array of rural banks. All participating rural banks were required to invest and contribute time, money, and resources for MABS provided training and technical assistance.  This helped to ensure appropriate buy-in and commitment from the senior management of partner rural banks. It also helped to ensure a commercial, demand-driven approach that made the MABS program successful and contributed toward the ongoing sustainability of the program under the leadership of RBAP.  In addition, the MABS program was able to leverage scarce USAID funding with support from a range of local and international companies

To expand and sustain rural banks’ involvement in microfinance, MABS also supported RBAP’s advocacy work with several regulatory bodies and other agencies to promote a proactive and positive policy and regulatory environment including close working relationships with the Bangko Sentral ng Pilipinas (BSP) and the Insurance Commission of the Philippines. MABS also assisted RBAP in its support for the Credit Information Systems Act as well as collaborating with the Bankers Association of the Philippines Credit Bureau to promote better use and adoption of credit information sharing services.

With the support provided by MABS, 322 rural banks received technical assistance and training in a range of microfinance services including microinsurnace and mobile phone banking by June 2012.[1] These banks have disbursed more than 3.2 microfinance, microagri, and housing microfinance loans totaling more than 44 billion PHP (more than $960 million) and were managing more than 1.4 million microdeposit accounts with balances of 2 billion PHP (more than $48 million). Most banks were able to generate almost all the loan funding they needed from their savings mobilization efforts and private sources of funding.

USAID’s MABS Progam accomplishments (2008-2012) are highlighted in the chapters that follow. Chapter 1 describes the role and importance of the private partnerships that served as the cornerstone for the MABS program. Chapter 2 analyzes the importance of the policy and regulatory environment and the role of MABS in supporting developments during the past four years. Chapter 3 summarizes the MABS Approach to developing microfinance services.  Chapter 4 documents the efforts to promote savings mobilization strategies. Chapter 5 details the work of the program in focusing on mobile phone banking services and other technologies to expand outreach to more clients. Chapter 6 describes MABS’ role in developing housing microfinance products. Chapter 7 focuses on the program’s support and development of the microinsurance services of rural banks. Chapter 8 reviews development of the microagri product. Chapter 9 highlights overall achievements, and the final chapter offers insights and ideas about lessons learned and areas that should still be supported to continue to promote greater financial inclusion in the Philippines.[2]

Exhibit 1. Participating Bank Units as of June 2012

Exhibit 2. MABS Program Impact on Microloans & Microdeposits 1998-2012

Year

Participating bank units

New microloan clients

Microloans disbursed

Microloans disbursed (million pesos)

Outstanding microloan portfolio (million pesos)

Outstanding microdeposit balance (million pesos)

1998

4

447

85

0.50

0.30

0.09

1999

14

3,741

4,143

26

7

12

2000

42

10,067

21,155

172

53

171

2001

75

23,360

70,953

645

129

336

2002

104

37,549

102,890

1,097

225

541

2003

117

36,138

115,058

1,360

317

567

2004

204

62,539

159,955

2,019

525

1,002

2005

264

71,145

208,621

2,889

632

1,104

2006

320

87,461

254,633

3,224

921

1,578

2007

358

134,023

408,397

5,226

1,468

1,688

2008

529

130,532

415,771

5,747

1,603

1,831

2009

573

104,211

401,540

5,414

1,696

1,930

2010

584

123,885

441,538

6,149

1,963

2,023

2011

626

141,241

454,155

6,528

2,108

2,087

June 2012

643

52,844

209,122

3,334

2,179

2,085

Cumulative

1,019,183

3,268,016

43,831

Exhibit 3. MABS IV Program Impact Summary Table June 2012

Phase 4: 2008-2012
Indicator

Target

Actual

  1. Bank units receiving MABS’ technical assistance

630

643

  2. Cumulative microborrowers served

950,000

1,019,183

  3. Cumulative microloans disbursed (in billion pesos)

42.27

43.1

  4. Cumulative new microdepositors served

900,000

896,162

  5. Rural bank clients registered to use mobile phone banking services

390,000

390,035

  6. Bank branches offering mobile phone banking

975

1,171

  7. Value of monthly mobile phone banking transactions (in million pesos)

550

743.6

  8. Bank branches offering microinsurance

125

158

  9. Active persons covered by microinsurance

150,000

427,158

  10. Bank branches offering microhousing loans

50-100

83

  11. Cumulative number of microhousing clients

4,000

4,005

  12. Cumulative number of bank branches offering the microagri-loan product

90

67

  13. New microagri-loan product clients

31,700

26,135


SNAPSHOT: Progress through Sound Banking

When MABS started working with Cantilan Bank in 1999, developing a strategic roadmap and boosting organizational commitment were important objectives to get the bank to focus on expanding access to its services. Before working with MABS, the bank did little or no marketing, so many potential clients did not know the services it offered or thought it was not interested in low-income households and microentrepreneurs.

Soon after the partnership with MABS began, William Hotchkiss III took over leadership of this bank, which his father had helped incorporate in 1980. After 37 years in the Philippine Air Force, he had retired to run the bank. He was convinced of the value of sound bank management and providing financial access to microentrepreneurs. He also appreciated the step-by-step approach MABS took to working with rural banks. MABS’ guidance and Gen. Hotchkiss’ strong commitment marked the beginning of the bank’s transformation.

The partnership began with capacity building. Following the MABS Approach, initial training focused on conducting market research; developing client-responsive products, proper credit and background investigation, and cash flow analysis; and collecting loan payments on time. The first research the bank undertook revealed strengths and weaknesses and a low awareness of its products and services by the local population. The survey also informed bank managers about the types of products and services the bank should focus on, the size of the untapped market of low-income households, and the large micro- and small enterprise sector.

Technical assistance and training provided by MABS to bank staff helped the bank improve its approach to microfinance services, especially credit underwriting, loan collection discipline, and a new focus on savings mobilization. The changes in policies and practices were incorporated at all levels of the bank and resulted in a significant growth in its loan portfolio, deposits, number of employees, branches, and outlets. With MABS’ support, Cantilan Bank developed and offered loans and deposit services for the microfinance sector and developed microagricultural loan services, a housing microfinance product, and microinsurance for low-income clients. With MABS’ support, the bank also implemented information and communications changes that assisted it in broadening its outreach. It became the first rural bank to offer an ATM/debit card with an integrated SMS alert service and was one of the first banks to use GCASH mobile money services to expand outreach to rural clients.

The bank’s impact in the town of Cantilan is evident. As bank grew, so did its tax payments to the community. As the largest taxpayer in Cantilan, the bank is now paying more than 25 times in taxes what it paid in 1999 and accounts for more than half of the municipality’s revenue. Bank profits and business, generated largely from the bank’s ability to mobilize deposits — which were in turn invested in local businesses — helped propel Cantilan from a 5th class to a 2nd class municipality.[3]

“RBAP-MABS is the perfect partner for Cantilan Bank in its mission of countryside development,” said Gen. Hotchkiss. “RBAP-MABS has been key to our transformation as a community bank.”

From 1999 to 2012, the bank’s loan portfolio grew from 80 million ($2 million) to 900 million PHP ($21.4 million), deposits grew from 100 million PHP ($2.5 million) to 704 million PHP ($16.8 million), assets rose from 100 million PHP ($2.5 million) to 1.2 billion PHP ($28.6 million), bank employees rose from 37 to 258, and the branch network increased from 3 to 38.[4]


CHAPTER 1. Private Partnerships for Inclusive Growth

The Development Challenge

Microenterprises represent 90 percent[5] of the number of businesses in the Philippines. These microenterprises employ 37 percent of the country’s workforce and are the primary source of livelihood for 40 percent of Filipino households. Most microentrepreneurs historically had little access to reasonably priced formal credit, which businesses need to expand. Formal financial institutions (i.e., banks and credit unions) had generally not focused on low-income households or microenterprises due to their small size and difficulty in assessing credit-worthiness. In addition, banks viewed small loans as too costly to administer to earn a positive return. Because of this, the only credit available to microenterprises was that offered by moneylenders, pawnshops, and to a limited extent, nongovernmental organizations and government programs. The high cost of these forms of credit precluded microenterprises from growing, and there was little or no formal access to savings services that would allow this subsector to save its way out of poverty.

USAID Investment in Strengthening the Rural Banking Sector

With USAID support, the Rural Bankers Association of the Philippines launched the MABS Program in 1997 to address the problem of limited access to banking services: loans and deposit services. An assumption was that formal financial institutions could most efficiently provide financial services. MABS’ objective was to help privately owned banks develop the capability to profitably provide services to the microenterprise sector.

The rural bank industry began in the 1950s as a way to encourage private investment and expand access to banking services in rural communities. Typically, rural banks are family-owned, with relatively modest start-up capital requirements. USAID focused the program on rural banks because 1) they are in a position to offer services in virtually every municipality through a collective network of 2,100 branches and other offices, and 2) their relatively low cost and overhead structures suggested that they were best positioned to competitively offer commercial microfinance services. More importantly, as banks, they were able to offer secure savings services as well as to eventually source all their financing needs from private capital without the need to rely on the government or international donors.

The program was expected to have a four-year life, with the possibility of extension to ensure attainment of objectives or expand the original objectives. Initially, MABS’ objectives were to assist 20 rural banks in Mindanao to develop the capability to profitably provide loan and deposit services to 8,000 microborrowers and 15,000 microdepositors. It was intended that participating banks would have found their microfinance experience sufficiently attractive to make offering microfinance services a permanent and substantial part of their business.

After a successful initial phase of MABS, USAID/Philippines continued and expanded support for the program. USAID extended MABS in 2001 and again in 2004. New goals were established to expand the delivery of the MABS Approach to 350 participating bank units and expand access to new microfinance loans to 500,000 microborrowers. A number of additional targets in terms of numbers of microdepositors, average portfolio size of participating bank units, participation of banks with multiple branches, and experimentation with microagricultural lending were also established.

Exhibit 4. Indicators as of June 2012

Indicator

Target

Actual

Phase 1: Nov. 1997 – Sep. 2001
    1. Banks receiving MABS technical assistance

20

28

    2. Microborrowers served

8,000

37,600

    3. New microdepositors served

15,000

90,000

Phase 2: Oct. 2002 – Sep. 2004 
    1. Rural bank units (head offices and branches) receiving MABS’ technical assistance

180

204

    2. Cumulative microborrowers served

125,000

173,841

    3. Cumulative new microdepositors served

200,000

234,082

Phase 3: Oct. 2004 – May 2008 
    1. Bank units receiving MABS’ technical assistance

350

320

    2. Cumulative microborrowers served

350,000

499,064

    3. Cumulative new microdepositors served

400,000

510,430

    4. Bank branches offering microagri-loan product

50

41

Phase 4: 2008 – Sep. 2012 
    1. Bank units receiving MABS’ technical assistance for microloans and microdeposits

630

643

    2. Cumulative microborrowers served

950,000

1,019,183

    3. Cumulative microloans disbursed (in billion PHP)

42.27

43.1

    4. Cumulative new microdepositors served

900,000

896,162

    5. Rural bank clients registered to use mobile phone banking services

390,000

390,035

    6. Bank branches offering mobile phone banking

975

1,171

    7. Value of monthly mobile phone banking transactions (in million PHP)

550

743.6

    8. Bank branches offering microinsurance

125

158

    9. Active persons covered by microinsurance

150,000

427,158

    10. Bank branches offering microhousing loans

50-100

83

    11. Cumulative number of microhousing clients

4,000

4,005

    12. Cumulative number of bank branches offering the microagri-loan product

90

67

    13. New microagri-loan product clients

31,700

26,135

Rationale for MABS-4

By 2007, USAID’s investment of $17 million through MABS had resulted in some 300 bank branches extending microfinance services to 500,000 microenterprises. Participating banks had disbursed the equivalent of more than $300 million in microloans. As indicated above, MABS accomplished several key objectives to help ensure the continuing and growing availability of commercially oriented microfinance services to millions of microentrepreneurs and low-income households in the Philippines. Notwithstanding this success, most microenterprises had limited access to reasonably priced commercial microfinance services. Therefore, USAID considered it important that banks already offering microfinance services would continue to do so, while expanding their microfinance clientele. In addition, USAID wanted to assist MABS in reaching additional banking units. The successful first three phases of the program provided a base of support and services that USAID thought could be built on to expand services to existing microenterprise clients, as well as to new clients.

Staff of participating banks were trained on how to conduct market research. This photo, taken on October 10, 2009, shows Cantilan Bank trainees interviewing clients during microagri-loan product development training.

At the end of MABS-3, USAID realized that two things remained to be accomplished. First, USAID wanted to assist RBAP and the MABS Program to take steps to help ensure continued and expanded availability of bank-provided microfinance to microentrepreneurs, smallholder farmers, and low-income savers. Second, RBAP, through MABS, should take advantage of the fact that participating banks had a base of more than 500,000 microclients with established credit and deposit histories. USAID realized that this substantial client base could be assisted with a range of new financial products and services. USAID also wanted to ensure that lessons learned about commercial microfinance through MABS were made available to interested practitioners around the world.

Final performance targets under MABS-4 included:

  • Continue to increase the number of banks and branches participating in MABS to an additional 310 branches and provide 24 billion PHP in microloans to an additional 450,000 microborrowers
  • Expand access to small farmers by helping participating banks offer microagri-loan products
  • Expand access to mobile phone banking services to microenterprise clients of participating banks
  • Increase access to microinsurance services throughout the country in collaboration with private sector insurance providers and participating rural banks
  • Develop and implement microhousing products and services
  • Support the use and access of credit bureau services by rural banks

SNAPSHOT : The Right Recipe for Success

The year 2009 was challenging for Renie and Carina Gonato. Renie retired after 30 years of employment with a beverage company, which meant he would no longer receive a monthly paycheck. For a steady source of income, the couple knew they had to put more work into Carina’s small business selling a local Filipino favorite — chicken lumpia (chicken rolls) — in their neighborhood on consignment. After being prodded by her neighbors and recognizing that she could earn more income, she decided to make and sell her own chicken lumpia. After three months of taste tests and gathering her neighbors’ feedback, she perfected her recipe. Initially, she only sold her lumpia in the Mactan Export Processing Zone compound. Through word of mouth, her lumpia gained popularity and soon, orders started growing steadily.

Initially, Carina only needed 5 kilograms of chicken meat each day. But as orders increased, she needed additional capital to increase production and meet the demand. When she learned about First Agro Industrial Rural (FAIR) Bank’s microloan product, Pamilya, she immediately sent the required documents and applied for a loan. The bank granted the initial loan of 50,000 PHP ($1,190) for working capital. Subsequent loans from FAIR Bank helped her buy new equipment, increase production, and diversify into hog-raising.

Her enterprise’s annual profit level reached 2 million PHP ($47,619), of which 90 percent is reinvested in the business. The business now uses more than 1,000 kilograms of chicken a day to meet rising demand. She now exports her lumpia to Malaysia and Qatar. The business also employs 50 workers, many whom come from the poorest provinces of the region. The Department of Science and Technology is continually assisting Carina in business development, providing inputs so that the entire production process meets quality standards.

Carina knew she had a good product and did not need a handout or grant, but needed access to sustainable and ongoing finance and a safe place to save. She says of her years of partnership with FAIR Bank, “We would not have achieved this kind of success without FAIR Bank. They acted as a financial bridge to help us grow our business.” FAIR Bank has received technical assistance and training under the MABS Program since 2005.

Based on her hard work and success, Carina received the Citi Microentrepreneur of the Year Award in 2011.[6]


CHAPTER 2. Promoting an Enabling Environment

To expand and sustain rural banks’ involvement in microfinance, MABS continued to work with RBAP and the Bangko Sentral ng Pilipinas during the fourth phase of the program to promote an appropriate policy enabling environment. From 2008 to 2012, BSP issued 16 circulars to support expansion of microfinance services. Although these policy initiatives were led by BSP, they benefited greatly from the inputs, policy discussions, position papers, and technical studies developed for RBAP by MABS.

Effect of New Regulations

Guidance from BSP in the circulars provided clearer rules on microcredit products; liberalization of bank branching; support for microdeposit policies, including relaxation of upfront banking “Know Your Customer” requirements for small deposits; the allowance of microinsurance services as an allied undertaking of rural banks in partnership with licensed microinsurance companies; and more support for uses of technology to expand outreach of banking services, especially the use of mobile money by banks to increase financial services.

In particular, based on lengthy discussions with BSP and visits by members of the Philippine Monetary Board to MABS’ participating rural banks, BSP issued Circular 694, which facilitated the ability of rural banks to open microbanking offices and expanded the range of microfinance banking services that these offices could offer. For MABS’ participating banks, this one significant change in regulations contributed to a substantial increase of bank branches and offices — from 320 at the end of MABS-3 in 2008 to 642 in 2012.

In addition, with strong support from RBAP, the Philippine Congress passed the Credit Information Systems Act in late 2008, which set the stage for renewed interest in credit bureau services. MABS-4 strengthened its collaboration with the Bankers Association of the Philippines Credit Bureau to promote this service to rural banks. With MABS’ support and the partnership between RBAP and the credit bureau, more than 70 rural banks are registered and actively using credit bureau services.

Paving the Way for Offering Microinsurance Products

Banking regulations have traditionally restricted the potential of rural banks to offer microinsurance. However, capitalizing on the government’s growing recognition of microinsurance as a financial risk mitigation measure for the poor, RBAP, with MABS’ support, began to more actively work with BSP and the Insurance Commission of the Philippines to advocate for creation of regulations that would allow rural banks to promote, sell, market, distribute, and service microinsurance services for their poor and low-income clients and household family members.

MABS’ participating rural banks are active in a range of activities, including small-scale manufacturing, as shown in this photo taken in March 2012. Working closely with regulatory bodies, RBAP, with MABS-4 support, helped rural banks offer a greater range of microfinance loans to meet the needs of larger microfinance clients.

In September 2008, with technical input from MABS and strong leadership of RBAP President Tomas Gomez IV, RBAP issued a position paper on microinsurance that was presented to BSP and the Insurance Commission.[7] The paper argued for approval of rural banks as delivery channels for simple, affordable, and relevant microinsurance products under a “partner-agent” model rather than the previously allowed model called bancassurance.[8] The paper highlighted the potential of rural banks to act on behalf of authorized insurance companies to promote microinsurance services, facilitate the sale and distribution of microinsurance services, process insurance collections, and facilitate payment of microinsurance claims.

What followed was a series of consultation meetings organized by MABS between RBAP, the Insurance Commission, and BSP during a two-year period, which resulted in issuance of several circulars and policies that allowed rural banks to sell, market, and service microinsurance services of licensed microinsurance companies. This allowed rural banks for the first time to sell and service microinsurance products as an “an allied undertaking” under Section 20 of the General Banking Law.

After these circulars were issued, RBAP-MABS continued regular consultations with the Insurance Commission and BSP to clarify remaining issues on microinsurance client eligibility and licensing requirements and procedures for rural banks as microinsurance agents. One of the most important issuances was BSP Memo 027-2011 in June 2011, which dramatically expanded the definition of microfinance clients to include microloan clients and microdeposit clients, as well as “existing clients classified by the bank as low income” and their household family members. This one change in policy led to a dramatic increase in the number of clients and household family members using microinsurance services, reaching 428,800 by June 2012.

Focus on Consumer Protection and Financial Transparency

The most recent circulars (Circulars 730, 754, 755) focused on a greater emphasis by BSP to champion consumer protection and financial transparency. As the number of institutions offering microfinance services grew, BSP determined that this growth should be accompanied by consumer protection and better financial transparency guidelines. The effort was fully supported by RBAP and MABS as a way to help the industry better address and manage growing competition and enhance awareness about creditor responsibilities to their clients.

Based on the new circulars, the Rural Bankers Research and Development Foundation, Inc. (RBRDFI), with MABS and BSP support, developed and launched financial transparency seminars for rural banks to support the new regulations. Between February and June 2012, more than 1,000 bankers from 450 rural banks attended the seminars on a full-cost basis.

Exhibit 5. Economist Intelligence Unit Microscope 2011:
Philippines is No. 1 in Regulatory Framework and in East Asia


SNAPSHOT: Microfinance Expansion Anchored on Service

Since MABS implemented the EAGLE Assessment System[9] in 2003, Bangko Kabayan has achieved an AA rating seven times, making it one of the most successful of MABS’ participating banks. Although Bangko Kabayan focused on overall targets set in the MABS EAGLE Assessment, Teresa Ganzon, the bank’s managing director, also credits the bank’s success to listening to its market, openness to innovation, and an all-encompassing adherence to its mission and vision.

“From MABS, we learned the value of conducting focus group discussions regularly to really understand what the clients want. We do not limit this to microloan clients, but include all our deposit and loan clients as well. We learned the art of listening and developing products according to the needs of the clients. A very methodical way of conducting market research (under the MABS Approach) was very helpful for us.” said Ms. Ganzon.

Guided by client feedback, Bangko Kabayan modified its products and policies. It was among the first to decentralize loan approvals for small loan amounts, flexibly grow and expand loan sizes to meet client needs, and introduce new products, including the MABS-developed housing microfinance loan. The bank also set clear standards and guidelines for staff — screening job applicants, ensuring that training modules are relevant and up to date, introducing incentives scheme to boost productivity, and using tools to monitor employee performance.

As a result, the bank continues to increase its client base and expand its branch network, while maintaining its portfolio quality. Since 2001, Bangko Kabayan has disbursed more than 149,000 microloans worth more than 2.8 billion PHP to more than 30,000 borrowers through its individual loan product Kaakibat ng Bangko sa Pag-unlad ng Kabuhayan, or KABAYAN loan, and group loan product Kapisanan ng mga Ilaw ng Tahanan, or KAPITAN loan. It also ranks among the top 3 percent of Filipino rural banks, with more than 1.8 billion PHP in assets.

Based on the success of Bangko Kabayan’s microfinance services, President Atty. Francis Ganzon said “…microfinance has become our mainstream product and we will bring it wherever we go.”[10]


CHAPTER 3. The MABS Approach

The practical implementation of the program is embodied in the MABS Approach training and technical services. It is a step-by-step procedure for preparing the organization, identifying market segments, designing financial products, and establishing lending processes to implement microfinance operations. This same systematic approach has been used as a template to develop products for housing microfinance, agricultural microfinance, and microinsurance. Rural banks were trained to design new products and services using the MABS Approach. MABS staff trained private sector business service providers on delivery of MABS Approach training and technical services. These MABS service providers (MSPs) now provide fee-based microfinance advisory services to rural banks, ensuring continuity and sustainability of the approach in the industry.

A Step-by-Step Management Approach to Microfinance

At the beginning of the program, MABS adopted a systematic approach to developing microfinance products and building proper management systems based on local needs and suited to rural banks and the markets they served.

The MABS Approach encouraged banks to develop financial services to meet microenterprise and low-income household needs. This included developing appropriate credit and savings products and services, as well as meeting insurance needs and leveraging new technologies to better serve these markets. The objective was to build self-sufficient financial intermediaries that meet client needs without the need to rely on government or donor funding or guarantees.

The MABS Approach helped rural banks address cash flow needs and offer a range of financial services suited to microfinance clients. This client in Cantilan, Mindanao taken in June 2010, represents a traditional sari-sari — a common business in the Philippines.

The approach helped banks adapt key microfinance best practices by providing a step-by-step method to product development. All products and services developed began with an appropriate senior management orientation to obtain buy-in, followed by market research, product development, pilot testing of all new products and services, performance monitoring, and product review, followed by appropriate steps for a full product launch.

Market research methodologies were key to understanding client behaviors and needs, as well as the local context of the bank. Based on this research, banks were able to gather sufficient insights to develop products suited to clients in their market. During the product development phase, banks were provided with guidelines to develop product features, as well as operation and procedure manuals. These new procedures were coupled with management information system support to allow banks to monitor performance of their new products during a four- to six-month pilot window. Banks then underwent a product review to assess, evaluate, and determine whether improvements to product features or a procedures manual were needed or if the product was ready for a full launch. Banks were then provided with guidance about launching their services throughout their branch network.

Once the product or service was launched, banks were encouraged to continue periodic product or operational reviews to ensure that the product remained relevant in the marketplace. In addition to reaffirming basic MABS Approach techniques and principles, the reviews assess the bank’s products, suggest overall operational improvement, and provide recommendations on how to increase efficiency and competitiveness of its systems and processes.

In short, the approach has been an integral part in developing program initiatives. It provided a system of innovation that powers market development, product innovation, and management processes of MABS’ participating banks. The modules of the core MABS Approach training and technical assistance in the exhibit below provide the template followed in introducing other product initiatives.

Exhibit 6. MABS Approach to Training and Technical Services

 

Module

Duration

Description

Benefits

Senior management orientation 1 month or less Understand requirements of setting-up microfinance operations and conduct an internal capacity assessment Identify strengths, weaknesses, and needs of the bank; assess management interest
Market research 1-2 months Conduct surveys on client demand and competition in target areas Establish market demand, competition for microfinance products and services
Product development 1 month or less Design microfinance product services tailored to market needs Develop own products tailored to market demand
Administration and management 1-2 months Determine appropriate processes, client selection, pricing, monitoring, and staff supervision Written manual for credit management processes and organization
Pilot test 4-6 months Implement and manage product roll-out in test areas Test product fit; gain practical experience
Product/operations review 1 month or less Document actual practices, compliance to policies and procedures to review performance before full roll-out in the bank Correct errors, improve product, and incorporate best practices
Total 8-12 months

Use of Performance Monitoring System Tools for Continual Improvement

Monitoring operations on an ongoing basis allows banks to analyze trends, compare branches or account officers, detect irregularities early on, and identify growth opportunities. MABS provided participating banks with a performance monitoring system and a package of reporting templates. The system includes product-based financial planning models that project and track key figures such as operational costs and interest rate scenarios. These models form the basis of microfinance business planning and are critical to helping the bank determine when its microfinance unit will reach the break-even point and when it will turn a profit.

The performance monitoring system reports provided MABS and banks with regular monthly, quarterly, and annual information on the performance of their microfinance products and services. MABS used the reports to issue a performance report card for each bank at least once a year. The report card was based on the EAGLE standard, which includes indicators for efficiency, asset quality, growth, liabilities, and earnings. Banks used the report card to detect their operations’ strengths and where improvements were needed. Many rural banks have used the EAGLE scoring system to more frequently monitor and compare the performance of branches and microfinance field staff.


SNAPSHOT: Microsavings – a Long-Term Investment

Microsavings serve as long-term investments to generate funds for loans, obtain new clients, and increase profits. By designing an effective microdeposit product and mobilization campaign, banks are able to increase deposit levels while answering the need for a low-cost and secure savings facility for rural communities. However, this requires choosing a target market and aligning product attributes with the needs of the target market.

Examples of these savings mobilization campaigns conducted by MABS participating banks include children’s savings programs and public concerts to boost deposits. Children’s savings programs such as the Kiddie Savers Club of Cantilan Bank provide basic financial literacy and school supplies in exchange for developing a savings habit with the bank. They encourage children and their parents to save small amounts focused on addressing future educational needs as well as instilling a savings discipline in children.

A young Kiddie Savers Club client shows her savings box in this photo taken in April 2012 in Cantilan, Surigao. MABS-4 helped banks reach out to youth to teach them to save.

In addition, several MABS’ participating banks also engaged in a variety of promotional activities — from concerts to raffle promotions. In a study in 2011, MABS documented which aspects of the promotional activities led to the largest increase in the number and amount of deposits and assisted several rural banks in better defining their savings mobilization strategies. MABS was able to share with rural banks that savings mobilization provides a solid strategy for developing a rural bank’s ability not only to raise low-cost funds but also to sustain customer loyalty and improve a bank’s long-term profitability.


CHAPTER 4. Savings Mobilization

Savings mobilization was often referred to as the forgotten half of rural finance. In designing MABS, USAID emphasized savings mobilization more than previous donor-funded microfinance efforts had. MABS encouraged banks to appreciate the role and importance of savings and helped them focus on savings mobilization. The project encouraged banks to use their capacity to motivate borrowers to save through financial education and savings advocacies. This also allowed rural banks to generate small low-cost deposits to raise sustainable funding for lending activities and reduce external borrowings.

Expanded Savings Mobilization

MABS taught banks a range of strategies to reduce costs of maintaining small-value savings accounts, as well as methods to encourage clients to increase their deposit balances. The banks also focused on helping clients better manage financial assets and develop financially responsible habits. This effort was complemented by pilot activities in financial education using mobile phone technology together with a grant provided by sub-grant from Microfinance Opportunities under branchless banking grant provided by the MasterCard Foundation.

MABS-4 worked with banks to promote savings services in innovative ways to encourage clients to save more. At Cantilan Bank in April 2012, recipients of the government’s conditional cash transfer program were encouraged to open savings accounts.

Mobilizing deposit products provided rural banks with an attractive, stable source of funds for expanding their microfinance operations. Less reliance on external sources such as government or international donors helped banks focus on financial intermediation and become more self-sufficient. Banks also realized that providing microdeposit services[11]  was as important, if not more so, than providing microcredit.

The main challenge was to help banks reduce the cost of managing microdeposit accounts. Some banks introduced new products and incentives to encourage clients to save while reducing transaction costs. Apart from encouraging the use of ganansya boxes[12], the project encouraged banks to implement raffle schemes to persuade clients to open accounts and save more.[13]


SNAPSHOT: Building a Sustainable Mobile Phone Banking System: The Sta. Ana Case

From all appearances, Sta. Ana is a typical quiet 2nd-class municipality. Sitting on the northeastern-most edge of Luzon, Sta. Ana can be reached via a 14-hour ride from Manila or a 30-minute flight from Manila to Tuguegarao City, with another three-hour land trip. Other than an occasional cluster of commercial buildings or public markets, the road from Tuguegarao City to Sta. Ana is an unbroken stretch of farmlands and greenery. There is more to Sta. Ana than meets the eye, however. Although agriculture is still the predominant economic activity, there are latent industrial and tourism-related activities, mostly concentrated in the Cagayan Special Economic Zone and Freeport, which residents acknowledge as a key driver of economic growth, employment, and investment.

Despite these developments, basic services are still inadequate. Access to banking and financial services is lacking. There is only one bank — a branch of PR Savings Bank. The nearest commercial bank is in Aparri, a town two hours away by bus or van. Residents have to pay 300 PHP to 400 PHP ($7.14 to $9.52) for a Sta. Ana-Aparri round trip.

The combination of the town’s relative remoteness from a major commercial district and its lack of access to financial services was clearly an opportunity to introduce the benefits of mobile phone banking services. It was an opportunity that PR Savings Bank quickly seized. The bank’s Sta. Ana branch started offering mobile phone banking services in 2006, soon after it was approved to offer these services by BSP after receiving training and technical assistance from MABS.

PR Savings Bank was one of the first banks to offer mobile phone banking services as part of its products and services portfolio. It now offers a range of mobile phone banking services at its Sta. Ana branch and its 44 other branches nationwide.

Roberto Alingog, Jr., president and chief executive officer of PR Savings Bank, said the bank’s motivation for offering mobile phone banking services was based on three factors: offer an affordable, immediate, convenient, and personalized way to conduct client transactions; help client-merchants find a way to expand market reach and reduce costs; and facilitate development of a more robust local business environment, which would help generate more depositors and borrowers. From the onset, the bank saw mobile phone banking services as an alternative service delivery channel: a more cost-efficient alternative to ATMs.

In May 2008, PR Savings Bank, with support from MABS and Globe’s G-Xchange, Inc. (GXI), started paying its employees with GCASH mobile money through Text-a-Sweldo (Text-a-Salary). Text-a-Sweldo not only helped the staff better understand and promote the benefits of mobile phone banking services and mobile money in general, but also realized that the service could jumpstart mobile commerce and mobile payments in the communities served by the bank. PR Bank began promoting the use and disbursement of bank staff salaries via GCASH mobile money and offering payroll services via Text-a-Sweldo to large and mid-sized companies in its service area, thus driving the use of mobile money in communities while keeping the bank at the center of mobile money transactions, much the same way larger banks promote the use of debit cards.

Because Sta. Ana was an ideal location for the pilot, PR Savings Bank’s mobile phone banking services team worked with Globe’s GXI to accredit its clients as cash-in-cash-out mobile money agents and looked for companies interested in mobile money-enabled payroll services. In June 2008, the team identified a leisure resort and casino that started operations inside the Cagayan Special Economic Zone and Freeport as an ideal business to promote Text-a-Salary. During initial meetings with the resort, company officials acknowledged difficulties in managing their payroll. The company had about 800 employees, and every payday, it had to withdraw sufficient funds, prepare employees’ pay envelopes one-by-one, and have a cashier hand the envelopes to employees. The company was desperate for a more cost-efficient method of handling its payroll and was happy to receive an offer from PR Savings Bank to improve operations.

The first few months after the launch of Text-a-Salary were challenging. The bank had to teach the resort employees to register with GCASH and master procedures for cashing in and cashing out. It also identified businesses that could serve as GCASH mobile money agents. Eden Ellin was among the business owners identified. She owns a lodging house, grocery store, prepaid airtime loading station, and lotto outlet. Seeing that she could earn from the service charges, she agreed to become a GCASH mobile money agent. She averages 1,000 transactions a month, earning 30,000 PHP ($714). She says, “I not only get additional income, offering cash-in cash-out, but this also increases foot traffic in my grocery store and loading station, and I am able to offer additional services to my lodging house guests who want to send money outside Sta. Ana while they are on vacation.

By establishing a substantial user base of mobile phone banking customers, identifying and setting up local businesses as mobile money agents, and training bank staff to teach clients, PR Savings Bank has shown how rural banks can leverage mobile money and mobile phone banking services to not only benefit the bank but also entire communities.[14]


CHAPTER 5. Applying Technology: Mobile Phone Banking

The Philippines is regarded globally as the text messaging capital of the world. More than 86 percent of the population has access to a mobile phone.[15] Recognizing the potential to transform access to financial services through innovative technology, MABS pioneered the use of mobile technology to deliver microfinance services. MABS served as a bridge between rural banks, mobile network operators Globe Telecom and SMART Communications, Inc. and assisted with regulatory approvals from the Bangko Sentral ng Pilipinas.

MABS assisted rural banks in providing mobile phone banking and mobile commerce transactions by developing new products and services. MABS worked with RBAP to help obtain approval from BSP for mobile money-enabled banking services and to develop appropriate operations and procedure manuals for rural banks.[16]

Strategy for Expansion

During Phase 4, MABS initiated a multi-pronged approach to extend a full variety of mobile phone banking applications and services and expand the outreach to more rural bank clients, including:

  • Working with Globe‘s GXI and Smart Money to offer accreditation training courses to interested rural banks
  • Developing a Mobile Phone Banking Marketers’ Program with Globe’s GXI
  • Implementing the Channel Management Project with the Gates Foundation, through Mercy Corps
  • Promoting financial education to Support the Adoption of Branchless Banking Project with Microfinance Opportunities under a grant from the MasterCard Foundation
  • Supporting the use of mobile money-enabled debit cards
  • Improving access to government conditional cash transfers via mobile money and rural banks

Through these activities, MABS helped expand a network of banks that provided cash-in and cash-out services; offered mobile phone banking services; and promoted, trained, and educated new and existing clients.

Mobile Phone Banking Marketer’s Program

In coordination with GXI, MABS launched the Marketers Program, an incentive-based initiative to assist rural banks in using their own client base to act as marketers to better promote mobile phone banking services in the community. This increased usage and transaction volume by raising awareness of mobile phone banking services and assisting in better developing rural banks’ mobile payment ecosystems. Marketing agents helped clients to open accounts and learn about mobile phone banking services at accredited rural banks that made use of the GCASH platform to facilitate deposits, withdrawals, loans, loan and bill payments, remittances, salary disbursements, and mobile commerce opportunities for small merchants. The program targeted merchant-clients of rural banks, which also helped these businesses by providing cash-in and cash-out services, as well as increasing foot traffic.

Channel Management Project

The Channel Management Project built on the Marketers Program by assisting accredited rural banks in supporting and managing the network of merchant-partners to better market and service cash-in/cash-out needs of rural bank clients who used mobile phone banking services. It helped to further strengthen the rural agent network of mobile money-enabled agents in partnership with GXI and to expand the rural banks’ ability to cross-sell other bank products and services. Dedicated channel managers were trained and hired at select participating banks to implement merchant-partner channel management activities. The lessons learned were shared with other rural bankers through national roundtable forums and other events.

Clients are using mobile phone banking to meet a full range of their financial needs. The picture above shows a student preparing to cash-in before making a deposit via mobile money at a GM Bank kiosk in the town of Laur in Central Luzon in March 2009.

Financial Education for Branchless Banking Initiative

In May 2010, MABS assisted RBRDFI in obtaining a $100,000 sub-grant from Microfinance Opportunities under its grant from the MasterCard Foundation to support the uptake and effective use of branchless banking services through financial education. The partnership aimed to develop a robust financial education initiative to support a more rapid adoption and expansion of mobile phone banking in rural areas serviced by rural banks.

After initial market research, prototype testing, and revision based on results of the prototype testing, a financial education toolkit was completed in November 2011. The toolkit and materials include guides, posters, standees, brochures, and frequently asked questions that focused on assisting rural banks in better addressing issues faced by clients on use and adoption of mobile phone banking services. The toolkit also helps banks highlight the positioning of mobile phone banking services as a way to save time and money. Financial education messages, like the value of saving regularly and how to make a savings goal and plan, are also embedded in the tools.

Mobile Money-Enabled Debit Cards

In parallel with helping participating rural banks expand the use of and acceptance of mobile money, MABS worked with GXI to offer new mobile money-enabled debit cards. These debit/ATM cards were specialized cards that included a logo of the rural bank and were linked to the mobile money account of the clients. The idea of supporting a new mobile money-enabled debit/ATM card was to provide clients with more options to withdraw funds from an ATM when there are no agents nearby.

By 2011, the initial mobile money-enabled debit/ATM card launched in a partnership between MABS and GXI was rebranded by GXI to focus on employees who received their salaries via the Text-a-Salary service. New features offered included two free withdrawals a month from an ATM, low-cost life and accidental death insurance, burial assistance insurance, ATM theft insurance, and fire insurance.

In 2012, the Bangko Sentral ng Pilipinas authorized rural banks to assist with registration and release of instant Smart Money cards, which is expected to dramatically increase the access of Smart Money services among rural banks and their clients.

Government Conditional Cash Transfers

Through participating banks offering mobile phone banking services, MABS supported implementation of the Pantawid Pamilyang Pilipino Program — a government conditional cash transfer program implemented by the Department of Social Welfare and Development for poverty alleviation and social development. The program extends direct cash grants to poor households in rural areas. Mobile phone banking partner rural banks that are also GCASH accredited banks act as disbursement points for the program, using Globe’s GCASH remit service to facilitate remote cash-out payments.

Other Activities to Promote Mobile Phone Banking

Text Reminder System

Building on the success of the mobile phone banking services initiative, MABS expanded the services to include semi-automated mobile banking alerts for rural bank clients. MABS worked with private sector partner MyClick Technologies to develop a text reminder system, which automated sending loan payment reminders to borrowers. The system allows banks to input collection dates and amounts on a simple software program that automatically sends messages using a simple modem attached to a computer. Banks have used this program to send loan amortization payment reminders, contractual savings reminders, and marketing messages via SMS/text messages to their clients.

Partnership with Nokia

To better support mobile phone banking services, MABS also assisted RBAP in developing a strategic partnership with Nokia Philippines. Under this partnership, Nokia Philippines agreed to sponsor printing of a wallet guide for the MABS-developed mobile phone banking services. This guide describes features of the mobile phone banking services and gives users step-by-step instructions for completing transactions. Under the partnership, several rural banks also agreed to offer microloan services to clients who were interested in purchasing a Nokia phone. Known as the Own-a-Nokia Phone Loan Program, this initiative assisted rural bank clients who did not have a phone and needed financing to acquire one.

Opening a Window to the World

With the growing number of international study groups that visited the Philippines to study the  rural banks’ experience with offering mobile phone banking services, MABS worked with RBRDFI to set up the International Visitor’s Study Group Program. As host of these study groups, RBRDFI helped highlight the policy and regulatory environment around mobile money issuers and shared the country’s experience using mobile money to enable banking transactions and key lessons learned in implementing mobile phone banking services for rural clients.[17] Sharing key lessons and pioneering experience in mobile phone banking was not only limited to visiting study groups. MABS’ staff and representatives of participant banks were also invited to speak at international events to share their experience in offering mobile phone banking services.[18]

Results

As of the end of June 2012, 77 rural banks with 1,171 branches and banking offices were accredited to offer mobile phone banking services using GCASH and Smart Money. Registered mobile phone banking clients exceeded 390,000. More than 3 million mobile phone banking transactions valued at more than 17 billion PHP ($400 million) have been facilitated by accredited rural banks. (See exhibits below for historical information.)[19]

Exhibit 7: Mobile Phone-Accredited Banks

Exhibit 8: Mobile Phone Banking Transactions
– Data for 2012 is projected based on the actual growth rate of MPB transaction for the first half of 2012.


SNAPSHOT: A Dream Home Come True

After getting married in 2001, Joel and Erlyn Espinosa built a small nipa hut in Balasan, Iloilo to start a family. The couple was determined to change the course of the lives of their three children by sending them to school. “I didn’t want my children to be poor like us,” Erlyn said.

This wish and her enterprising flair pushed Erlyn to start her own business. From her wedding cash gifts, she bought a pedicab (a bicycle with a side car to carry passengers) that she rents out for 30 PHP ($0.71) per day. She borrowed 3,000 PHP ($71) from Progressive Bank, a local rural bank offering microfinance loans and services, to add another pedicab. In the following years, she added two more units, made and sold nata de coco (fermented coconut cream)[20] for a buyer, and started buying and selling peanut butter.

With her second microfinance loan from Progressive Bank, Erlyn bought a small freezer to make ice, which she sells at 2 PHP ($0.05) per piece to fishermen at the nearby port of Carles municipality. Later loans allowed her to buy a larger freezer, enabling her to sell more ice and earn 400 PHP ($9.52) each day. While her husband is at work, Erlyn tends to her small businesses.

All their hard work is paying off, as they have improved their home over the years. Starting with upgrading their roof from nipa to sturdy metal for better shelter against rain, later improvements transformed the lower half of the walls to concrete and upgraded the upper half from loose columnar bamboo to sawali (a tightly-knit bamboo mat). With more cash coming in, they built a sink and a toilet from concrete and ceramic bowls. In addition, with the increased income from their businesses, the couple acquired a bamboo sofa set, television, small stereo system, and electric fan.

Until 2011, Erlyn had to gather and carry water from a well outside their home to fill in her water bags, wash dishes, and bathe her children. Manual fetching of water was becoming a burden due to increasing livelihood activities. Joel wanted to install a water pipeline, but needed more financing.

In March 2011, Progressive Bank introduced the housing microfinance product with technical assistance from MABS. The housing microfinance product was designed to serve housing needs of poor families, who typically build their house in stages. The loan is distinct from traditional housing loans because borrowers to not need collateral to finance home construction, install utility services such as water and electricity, or make other home improvements. With a 15,000 PHP ($357) housing microfinance loan, Erlyn installed a water system from the well to the house. Water is pumped from the well through a small vacuum pump, up a blue water tank above the house. Another pipe connects the water tank to a faucet at the sink and all the way to the bathroom, where Joel installed a shower. The piping system makes it easier for Erlyn to make ice. Washing dishes is now faster, and the children enjoy bathing under a newly installed shower.

Looking back to where they started, the couple have gone a long way toward reaching their dream. Joel is now a katiwala (trusted carpenter leader), who hires and leads kasamas (workers) for home construction projects. People looking to build a house in Iloilo Province and elsewhere seek him for his services.

The Espinoso family stand in front of their house in Balasan, Iloilo in this photo taken in January 2012. The hardworking couple built their dream home — one room at a time — with the help of Progressive Bank’s housing microfinance loan.

Erlyn still dreams of further home improvement. She wants another loan to improve their wooden stair railings to prevent her small children from falling. The finishing touch will be a tiled floor and a wooden ceiling to insulate from the heat of the sun.

“All we have acquired for our home is due to Progressive Rural Bank, which trusted us with loans without collateral,” says Erlyn. With microfinance, the couple have established a true home and kept their three children in school.

A participating bank of the USAID-supported RBAP-MABS Program, Progressive Bank serves more than 21,000 clients through its four outlets in Iloilo Province. The bank has served more than 60,000 new borrowers and disbursed more than 170,000 loans worth 1.4 billion PHP ($35 million).


CHAPTER 6. Housing Microfinance

MABS-4 housing microfinance initiative was initiated with a market demand study conducted jointly in July 2008 by MABS and the Microfinance Innovation Center for Resources and Alternatives. Leveraging USAID funding with financial support from Mercy Corps, MABS conducted a survey with four pilot banks to determine the demand for housing loans by their existing microfinance clients and non-clients. The survey revealed a strong demand for small loans for minor home repairs and improvements. It also uncovered a demand for loan products that would enable clients to build houses gradually based on their cash flow. Clients often relied on their own funds because no product was available in the market. This limited what they could do because they often had to wait until they had saved enough to purchase materials little by little to build or improve their homes, which cost more and added time for them to work on their homes. Results from the market study became the basis for designing the housing microfinance loan product that was tailored to client cash flows and based on the incremental building method practiced by Filipinos in the countryside. This reduced the risks to the bank and the clients and allowed clients to obtain more funds up front, allowing them to buy materials at a bulk rate and reduce their costs.

With training and technical guidance by MABS, participating banks developed and introduced housing loan products. Product testing in each bank was done in one or a couple of branches and offered initially to existing microfinance borrowers. Green Bank of Caraga initiated the first pilot testing in two branches in September 2008; the other pilot banks followed. By September 2009, 35 branches of the pilot banks were offering housing microfinance products and had reached more than 450 new borrowers with disbursements of more than 14 PHP million ($350,000).

With the results of the pilot test and after several months of policy discussion with RBAP, MABS, and the Bangko Sentral ng Pilipinas, BSP issued a circular allowing qualified rural banks to offer housing microfinance loans using standard procedures and policies developed by MABS during the pilot test.

After a year of working with the four banks, MABS conducted several additional training courses for other banks. As a result of their training, other banks decided to include housing microfinance as one of their product lines. As of June 2012, 83 branches have helped more than 4,000 borrowers improve their homes with more than 180.3 million PHP in housing microfinance loans disbursed, exceeding the targets of at least 50 branches and 4,000 borrowers. Borrowers used their loans mostly to make minor repairs and home improvements. Banks introduced the product as an incentive product to their borrowers with a good record, but were beginning to offer this product to new bank clients as well.

Exhibit 9: Amount of Housing Microfinance Loans Disbursed

Exhibit 10: Cumulative Number of Branches (Reporting) – Housing Microfinance

Exhibit 11: Cumulative Number of New Housing Microfinance Borrowers


SNAPSHOT: Protecting the Poor with Microinsurance

Ermie Mayor arrived at her mother’s house after making the rounds in Dayhagan Pilar, Balasan Iloilo. She had sold a whole bilao (winnowing basket) of banana-que (deep fried bananas with caramelized sugar on a stick) and bicho bicho (deep fried doughnut coated with brown sugar) that her mother prepared in the morning. She had been sweltering under the blazing afternoon sun while balancing a bilao on her head, stopping by the nearby school and houses to offer her mother’s special banana-que and bicho bicho. She made about 500 PHP ($11.90) in profits each week — barely enough to feed Ashley, her four-year-old daughter and Jun, her six-month-old baby.

She missed Bonifacio, her husband, a skilled furniture manufacturer, who was temporarily assigned in the beach area to make furniture for a building owner. She had met him in Boracay when she was an office assistant for a small firm. After they married and settled in Balasan, Ermie borrowed funds from Progressive Bank to finance her husband’s furniture-making. Progressive Bank’s microcredit loans come with a microinsurance product that covers the borrower and two dependents. The microinsurance offered through the bank in partnership with an insurance company is designed as a low-cost policy suitable for low-income people.

In this photo taken in January 2012, Ermie Mayor carries her year-old baby in front of their house in Balayan, Iloilo. Microinsurance helped Ms. Mayor and her family get back on their feet after her husband’s sudden death.

One stormy night in April 2011, Bonifacio was struck and killed by lightning. His death was a shock to Ermie and her children, but the microinsurance from Progressive Bank and its insurance partner, Pioneer Insurance Company, helped her and her family continue with their lives.


CHAPTER 7. Microinsurance

MABS launched the microinsurance initiative to provide basic microinsurance services for clients of rural banks by establishing collaborative relationships with commercial insurers. Using the partner-agent model, MABS facilitated agreements between RBAP and 11 insurance providers. RBAP-MABS took this further by collaborating with the Philippine Life Insurance Association for an economic use of resources to educate insurers and launch collective efforts for market promotion and policy advocacy. RBAP, with MABS’ support, also coordinated policy initiatives concerning microinsurance with the Department of Finance, the Insurance Commission and the Bangko Sentral ng Pilipinas, which resulted in key issuances on microinsurance for the rural bank sector.

With almost 600 member rural banks in the Philippines, RBAP recognized the need to facilitate registration of their members in order not to overwhelm BSP and the Insurance Commission with members applying for approval. With direction and support from the MABS Program, as well as a timely grant from the International Labour Organization’s Microinsurance Innovation Facility, the Rural Bankers Research and Development Foundation promoted a “one-stop-shop” for rural bank microinsurance training and license accreditation that resulted in more than 192 rural banks being trained. MABS led efforts to develop the training curriculum for RBRDFI, providing assistance as it offered courses and worked with member rural banks to compile and complete their microinsurance agent applications. In developing the training curriculum, MABS and RBRDFI met with partner insurance companies, the Philippine Life Insurance Association, and the Insurance Commission.

In addition, RBRDFI tested the training curriculum, lessons from which prompted MABS to adjust the format to develop the Train, Request, Assemble, Choose, and Submit process, which is used to train and facilitate the microinsurance agent license application process for all rural banks today. The process prescribes the following steps for rural banks:

  1. Train in microinsurance basic and product mastery
  2. Request a no-objection notice from BSP
  3. Assemble a microinsurance core team
  4. Choose a partner-insurance provider
  5. Submit complete requirements to RBRDFI

In formalizing the licensing process for microinsurance agents, the Insurance Commission issued Circular 6-2011, which outlined training requirements and sets qualification standards for training curricula and training organizations. The RBRDFI training program designed by MABS was the first to be approved by the Insurance Commission as an accredited training organization for rural banks and remains the main trainer for interested and qualified rural banks to become licensed as microinsurance agents.

In an effort to facilitate the full process of rural bank licensing, MABS worked with RBRDFI, BSP, and the Insurance Commission to ensure efficiency in developing the one-stop-shop for rural bank licensing. In this process, MABS assisted RBRDFI in developing procedures and steps for member rural banks to compile documents and complete the application and training requirements. By developing a turnkey approach to all aspects of the application process, including approved templates and standardized checklists, the level of effort required to review and approve applications by BSP and the Insurance Commission was improved.

Regerio Aarreza and his wife, pictured here in October 2009, are clients of Cantilan Bank. They are beneficiaries of the bank’s microinsurance product, which was expanded after changes to regulations that allowed the bank to partner with insurance companies to offer a range of services.

By June 2012, 427,158 individuals (133,396 principal insureds and 293,762 dependents) were covered by regulated microinsurance products offered through 158 rural bank units. MABS also assisted RBAP in capitalizing on technology for better access to microinsurance information by rural banks, insurance providers, government regulators, and the international community, with the development of a comprehensive microinsurance marketing and management toolkit, an online resource portal (www.microinsurance.rbap.org), and the pilot use of SMS to promote awareness and improve servicing for microinsurance clients.[21]


SNAPSHOT: Fertilizing Profit through Microagri-Loans

With the support of Cantilan Bank, Lorna Espura and her husband were able to purchase and operate a 2-hectare vegetable farm in the beautiful fields of Cantilan, a town in Surigao del Sur, Southern Philippines. A loyal client of MABS’ participating bank Cantilan Bank, Lorna is now on her eighth loan.

Since 1992, Lorna has been raising vegetables such as string beans, pipino (cucumber), and okra. During the harvest months from July to December, she realizes revenue by harvesting crops every other day. Aside from this, she plants rice and raises hogs and native chickens. On top of these activities, she and her family operate a sari-sari (small grocery).

In this photo taken in October 2011, Lorna Espura and her son work on their farm in Cantilan, Surigao del Sur. Microagri-loans have helped finance farm operations of backyard growers and small farmers like Ms. Espura.

By managing a household with multiple and regular sources of income, Lorna was an ideal client for Cantilan Bank’s microagri-loan product designed with support from MABS. Cantilan Bank’s microagri-loan was ideal for Lorna and her husband because it allowed them to pay off most of the principal in regular payments as opposed to traditional agricultural loan products that required clients like Lorna to save and pay in a lump sum during the harvest. Because of her family’s regular sources of income throughout the year, the bank’s microagri-loan repayment plan was more suitable.


CHAPTER 8. Cultivating Small Farms With MicroAgri-Loans

More than 5 million farmers with landholdings of less than 5 hectares constitute 90 percent of all farmers in the country. Historically, financial institutions have been reluctant to lend to this sector because smallholders are perceived as risky due to a number of risk factors outside of their control: weather, pests and disease, and fluctuating prices.

However, given the many families who depend on agriculture and the rising demand for basic agricultural products, access to financial services in this sector is critical. Rural banks are uniquely positioned to provide financial services to this market, but need to incorporate credit underwriting measures to better help clients manage their credit and the challenges they face. Seeking to address this, the project, using the MABS Approach, assisted rural banks in developing a microagricultural loan product.

The MABS microagri-loan incorporates inherent risk-mitigating features. Loans are based on character and household cash flow rather than traditional agricultural project-based lending approaches that focus on per-unit costs and projected income of agricultural outputs only. Also, taking into account that most agricultural households have multiple and regular sources of income, the microagri-loans are structured to include weekly and monthly loan payments with only a partial lump sum balloon payment (no more than 40 percent) allowed during the harvest or sale of agricultural product. This approach significantly reduces the risk of the traditional method of 100 percent of the loan amount not being repaid in one lump sum at the end of the loan. Moreover, because most farmers have diversified income sources, understanding this and focusing on these types of microagri-loan clients tempers seasonal risks that clients often encounter under the traditional approach to agricultural lending. During MABS-4, the program sought to assist rural banks in rolling out this new approach to microagri-lending to small farmers with a target of adding 22,500 microagri borrowers. During MABS-4, the program provided additional technical assistance, training, and product assessments to increase small-scale agricultural lending and improve loan products.

Farmers such as the peanut farmer pictured above in Rgy. Arubug, Jones, Isabela, are one type of client targeted by banks offering microagri-loans. This photo was taken in March 2009.

Rural banks using the MABS Approach for microagri-lending became more confident with lending to this sector, while borrowers found it easy to pay their loans regularly and use the banks’ other services. In addition, MABS helped to participating banks link with farmer associations and other players along the value chain for value chain financing opportunities to sustain outreach to more farmers.

Although the MABS Approach to microagri-lending had built-in risk-mitigating measures, major weather-related storms and government-targeted and -directed credit programs made rolling out the program more difficult than expected in 2007. In light of the devastation to farms in Luzon brought on by significant wind damage and major flooding by typhoons Ondoy and Pepeng in 2009, as well as a substantial drought during the first half of 2010, banks remained cautious in offering or expanding microagri-lending.

In addition, competing government-targeted and -directed credit programs combined with loan guarantee programs such as the Agricultural Guarantee Fund Pool made it difficult for rural banks to offer fully commercial approaches to microagri-lending under the MABS Approach. Most rural banks preferred to stick to government-supported project-based lending that provided loan guarantees of up to 85 percent of the loan amount. The security that the expanded government loan guarantee programs provided had been more attractive than commercial approaches to microagri-lending, hence the MABS Approach for microagri-lending was only rolled out to 67 banks and bank branches and only 16,935 new microagri-loans were made between May 2008 to June 2012.


SNAPSHOT: Access to Finance is Changing Lives

In 1999, Anunciacion Santillan used a folding bed along the sidewalk as a display area for the dry goods she sold. Back then, life was not easy; she and her husband worked hard, but still earned barely enough for their needs. Less than a decade later, she owns six merchandise stalls in the Bantayan public market in Bantayan Island, Cebu. This change came through hard work, perseverance, financial discipline, and a little outside help.

In 2003, the Santillans discovered FAIR Bank in Cebu. Mrs. Santillan’s first loan of 20,000 PHP ($400) was used to augment her savings and used as business capital. Additional capital meant more items to sell, thus, more opportunities for profit. Since then, she has maintained an excellent client standing with FAIR Bank, which released her 11th loan cycle of 80,000 PHP.

Anunciacion Santillan accepts her award during the Citi Philippines Microentrepreneur of the Year Awards in 2008. A total of 29 clients from MABS partner rural banks were recognized during the ceremony.

With the help and financing from FAIR Bank, her business grew and expanded. With her earnings, she was able to finance renovation and furnishing of her home, buy a car and a motorbike, and save with the bank. She was also able to expand to a hog-raising business, with about 100 heads of hogs.

The combined businesses are able to employ nine people, two of whom are her niece and nephew — who are now able to go to school with their own earnings. The businesses have become not just a source of blessing for the Santillans. but for their family and community as well.

Mrs. Santillan is more than happy to share not just her blessings, but her success story as well. She hopes that with it, other people will be inspired to try harder and succeed, knowing that she too had come from a humble sidewalk beginning just a decade ago. She was awarded the Citi Philippines Microentrepreneur of the Year Award for 2008.[22]


CHAPTER 9. Program Accomplishments

Less than a third of more than 4 million families engaged in microbusinesses were being reached by financial services at the beginning of MABS. A significant portion did not have access to formal financial services, especially in remote rural areas. Now, rural banks are in a position to reach this market with a full range of microfinance services: credit, savings services, money transfer services, and facilitating access to microinsurance. With support from MABS, rural banks are now providing a range of new and enhanced microfinance products and services to meet the void in the market.

Expanded Access to Microfinance Products and Services

MABS took an innovative approach to developing the capacity and outreach of rural banks to offer microfinance services. The past 15 years witnessed the MABS Approach training and technical assistance being provided to more than 120 rural banks with more than 1,300 branches and other banking offices. During its 4th phase, MABS assisted more than 642 branches and other banking offices in developing microfinance loan and saving services to reach an additional 500,000 borrowers and to provide 24 billion PHP in microloans. Over 15 years, MABS’ participating banks have reached more than 1,000,000 new borrowers and disbursed a cumulative total of 43 billion PHP ($935 million) in microloans. Planning, training, ongoing innovation, continual monitoring, and the commitment of rural bank managers led to significant growth in microfinance portfolios of MABS’ participating banks, often with higher returns than yields from other types of loan products.

Jennilyn Antonio, pictured here in October 2008, is one of the enterprising clients of the Rural Bank of Mabitac in Cabuyao, Laguna. Ms. Antonio is one of the 29 rural bank clients who were recognized by the Citi Microentrepreneur of the Year Awards.

Increased Agricultural Lending

As of June 2012, MABS’ participating rural banks had extended more than 66,200 loans to more than 26,100 small farmers worth more than 976 million PHP ($22 million). Loans averaged 14,000 PHP (about $333). With rural bank microagri-loan portfolios growing, MABS also encouraged participating banks to focus on increasing value chain financing in partnership with local farmer associations and other players along the value chain.

Expanded Savings Mobilization

The MABS Approach recognizes that safe and reliable deposit services are vital to clients’ businesses and personal interests. Effective savings strategies also enable banks to mobilize funds from their communities and reinvest these resources in the form of loans to local businesses. For their part, microentrepreneurs often use their savings for a mix of household and business needs. By expanding deposit services, rural banks are able to increase client outreach, reduce dependence on external borrowing, lower their cost of funds, and become full-fledged financial intermediaries that mobilize resources (deposits) and reinvest these resources in their communities.

MABS’ participating banks have achieved tremendous growth in microdeposits. As of June 2012, participating banks managed 1.4 million microdeposit accounts with total balances of 2 billion PHP ($48.7 million). Many of these rural banks have overall deposit-to-loan portfolio ratios that are greater than 1:1.

Rural Banks Sustaining Services

To sustain the momentum of MABS, the program coordinated with RBRDFI, the training arm of RBAP, to gradually manage training and other activities. This included the International Visitors’ Program for foreign guests interested in the MABS Program and its initiatives, as well as engagement of external trainers and other service providers to support rural banks in their microfinance operations.

Three training firms designated as MABS’ service providers were trained and licensed to provide training and technical assistance on a fee basis for rural banks. Two of these firms, Associated Resources for Management and Development, Inc. and Punla Sa Tao Foundation, are actively providing MABS Approach training and technical services. The third firm, Seed Finance Corp., was accredited in 2012 to support mobile phone banking training and technical assistance.

Training and technical assistance provided by the MSPs allowed MABS to expand the number of participating banks and provide flexibility in deploying MABS’ assistance to develop and focus on new initiatives. For its part, RBRDFI has rolled out training focusing on microfinance and related bank training courses. One recent example of the capability of RBRDFI and the interest of rural banks to pay the full cost of the training courses was the result of the MABS-designed loan pricing transparency course. The course was developed in partnership with RBAP and with support of BSP to assist the rural banking sector to comply with the major regulatory requirement to shift from flat interest rates to the declining basis method.[23] During four months in early 2012, RBRDFI rolled-out 27 financial transparency workshops benefitting more than 1,100 rural bankers from more than 450 rural banks.[24]

Microinsurance

During MABS-4, rural banks began doing their part to provide a safety net for low-income families by protecting them from falling deeper into poverty. Limited assets make poor people unable to protect and recover from disasters or from the loss of a family income-earner. In the absence of insurance, poor borrowers often default on their loans and fall deeper into debt when tragedy strikes. It can take years for low-income households to recover from the loss of a family member. In addition, other important household expenditures are often delayed or postponed indefinitely, children stop attending school, and critical illnesses requiring relatively expensive treatment remain untreated. Realizing this, USAID had the MABS-4 focus on encouraging partnerships between rural banks and insurance companies to offer microinsurance services. The results were dramatic, with 152 bank branches and other banking offices now providing microinsurance services to 428,819 individuals.

Policies that Encourage Growth

By encouraging rural banks to expand financial services offered to the microenterprise sector, USAID through MABS sought to contribute to economic growth by helping build inclusive financial markets to serve the enterprising poor and other low-income households. As banks opened their doors and became more client-friendly, the demand for microfinance services increased.

Simultaneously, MABS worked with RBAP to support an enabling policy, legal, and regulatory environment that increased participation of rural banks in the microfinance sector. An enabling environment is critical for making financial markets work for the poor, enhancing transparency, promoting expansion, and keeping the private sector engaged in microfinance. In the policy area, MABS:

  • Provided inputs to national support institutions and policy-making bodies, such as BSP and the Insurance Commission, to improve the policy and regulatory environment
  • Supported efforts to develop regulations on microdeposit, microagri-loans, microbanking offices, electronic money issuers, microinsurance, price transparency on loans, and passage of the Credit Information Systems Act
  • Engaged in partnerships to advance innovation and growth in the Philippine microfinance industry and to disseminate best practice

Consequently, BSP issued 16 targeted circulars from 2008 to 2012 to support expansion of microfinance services and open innovations in product design and delivery in a sustainable and prudential manner.

Comparison of MABS’ Participating Banks with the Rural Banking Industry

As far as the BSP supervision and examination function is concerned, the MABS Approach added discipline to participating banks. BSP examiners said these banks generally performed better than non-participating banks in terms of satisfying regulatory requirements and prudential standards for banks. Regular monitoring by MABS informed and made participating banks aware of their performance. This helped maintain operational discipline and effective credit administration. This commitment to excellence was demonstrated in the annual MABS EAGLE assessments that helped keep banks focused on best practices and performance standards. Several banks made an extra effort to maintain the highest standards and were recognized for this accomplishment during the annual EAGLE Awards ceremony during annual national roundtable conferences.

MABS’ participating banks often performed better than the overall commercial, thrift, and rural banking industries. In a 2011 study by MABS, using data from 2008 to 2010, participating banks were found to have increased their loans and deposits faster than the industry. They often had a better deposit-to-loan ratio and their asset quality and capitalization levels were better than the industry.

Exhibit 12: Deposit Growth Rate

Exhibit 13: Loan Balance Growth Rate

Exhibit 14: Return on Assets

Exhibit 15: Return on Equity

Links and Partnerships

MABS developed partnerships with local and international organizations to help participating banks learn about and share the latest tools and trends in microfinance. A few of these partnerships are described below.

The Microfinance Information eXchange (MIX)

MABS and MIX shared several common goals, including promoting transparency to attract private financing and increasing the quality and relevance of microfinance performance benchmarks. The two organizations have long collaborated to build a rural bank benchmarking database and improve transparency among rural banks engaged in microfinance operations. In addition, MIX forged an agreement with RBAP to continue engaging rural banks and increase the number of rural banks reporting to the MIX Market, the global web-enabled database of microfinance institutions.

International Visitor Program

To share the successful experiences of rural banks offering a range of microfinance services, MABS worked with RBRDFI to develop an international visitor program that hosted dozens of delegations from all over the world. To expose Philippine rural bankers to microfinance developments outside the country, MABS’ staff and participating rural bankers also attended international conferences.[25]

The Microfinance Council of the Philippines

MABS collaborated with the Microfinance Council of the Philippines, Inc. and its network of 40 institutions working for development of the microfinance industry on a number of initiatives, including the Microentrepreneur of the Year awards. The awards ceremony — a joint undertaking of Citigroup, the council, and BSP — recognizes outstanding microentrepreneurs who have accessed financial services from rural banks, credit cooperatives, or microfinance nongovernmental organizations; substantially grown their businesses; improved the quality of their lives; and contributed to their local economies. From 2008 to 2011, 29 clients from participating rural banks were recognized during these awards.

Innovations for Poverty Action

Innovations for Poverty Action, a non-profit organization based in the United States, conducts evaluations of public policies and development strategies. MABS facilitated relationships between the organization and rural banks to research and evaluate products and strategies related to microfinance, including microcredit, microinsurance, deposit collection, savings products, interest rate sensitivity, credit scoring, the impact of group versus individual liability, and effective use of SMS to borrowers for payment reminders and to savers for their regular deposit commitment.

Expanded Mobile Phone Banking Services

In partnership with Nokia, Globe Telecom, Smart Communications, and MyClick Technologies, MABS helped develop mobile money-enabled banking products and services for rural banks. The project worked with BSP to ensure appropriate standards were in place and developed turnkey training seminars and technical assistance packages that helped 77 rural banks with more than 1,171 branches and other banking outlets to process more than 17 billion PHP ($400 million) in mobile banking services that reached more than 390,000 clients and customers of rural banks.


CHAPTER 10. Looking Ahead

This section distills key lessons learned during MABS-4 and provides guidance on areas that still need to be addressed to expand access to financial services.

Microfinance services in the Philippines have expanded dramatically in the past five years, and competition for clients has been increasing. Global and domestic factors have also influenced this growth in services, which is characterized by rapidly changing market demands for greater access to information from financial providers, product innovations, an improved regulatory environment, and stricter compliance rules for banks that require them to meet higher standards of financial stability, transparency, and increased disclosure requirements.

The microfinance bubbles experienced in countries such as India and Morocco, which resulted in excessive competition and increased over-indebtedness, provide important lessons for microfinance players and regulators in the Philippines. So far, regulators and financial players have acted proactively to prevent a similar crisis, but more work remains to be done. In particular, growing competition and a lack of financial services for small enterprises sandwiched between microenterprises and medium-sized enterprises need to be addressed.

Credit Reference Sharing

The Philippines remains one of the few countries without a comprehensive credit reference bureau system. Although much has been accomplished in the past few years, with banks voluntarily sharing negative credit information on borrowers with poor histories, more needs to be done to avoid over-indebtedness by clients. Delays in implementation of the Credit Information Sharing Act and the inability to require all financial institutions to share credit histories of all borrowers in the financial system restrict access to financial services, and as seen in countries such as India, can lead to clients borrowing beyond their means. USAID should continue to support development of the government-supported Credit Information System and, more importantly, development and expansion of private efforts to support more comprehensive steps in sharing credit information of all borrowers.

Financial Transparency and Greater Competition

The microfinance market has also changed significantly, with clients demanding greater access to information and more transparency from financial institutions. BSP has acted proactively by issuing several circulars on financial disclosure and consumer protection practices. Changes in interest rate transparency guidelines, which came into effect on July 1, 2012, should have a significant competitive impact on banks and other financial institutions and should reduce effective interest rates on loans offered by rural banks and other microfinance institutions. Because all banks and financial players will now have to express rates using a standard effective interest rate policy, consumers should be able to more effectively compare loan interest rates. This should have a positive impact on reducing costs and increasing access to a larger range of potential microfinance clients. Implementation of this policy across all financial institutions, including players not normally supervised by BSP, will be important to ensure a level playing field but, overall, this development should augur well for expansion of credit in the Philippines.

The Road Ahead

Using alternative channels to engage clients. The next generation of clients (Generation Z, born after 1994) demands almost instant access to information and are increasingly more mobile. These clients are also increasingly reliant on social networks and will demand interaction with their banks in new ways, which will force banks to focus on alternative channels to meet the needs and characteristics of this market. Financial institutions will no longer be looked on as a place to go, but rather as institutions that help people organize their financial lives wherever they are. These clients probably will gravitate toward financial institutions that can interact with them on their level and will increasingly demand greater access via their mobile phones. USAID and the Philippine government should continue to support development of alternative channels for banks and other financial players to continue to promote deeper and broader financial inclusion, especially among youth that are entering the workforce as the next generation of entrepreneurs.

Continuing support for mobile money and mobile banking. The next level of product development will be aided by the ease of access to financial products through mobile phones. Mobile banking and the related use of mobile money are already demonstrating their game-changing role, allowing for greater financial inclusion than is possible via brick-and-mortar branch networks. Kenya has already demonstrated the significant role of mobile financial services and the impact it can have on society.[26] USAID should take advantage of the promising start of mobile money use by certain rural banks and their clients, as well as support the continued use of mobile financial services in the Philippines. Finally, investing in appropriate financial education should help to fast-track mobile financial services and the important impact this can have at the community level.

The client pictured above in Cauayan City in Isabela is one of a growing number of clients using mobile phone banking and mobile money platforms to improve their businesses.

Viewing conditional cash transfer recipients as potential bank clients. Rural banks engaged in servicing the Philippine government’s Conditional Cash Transfers program have a unique opportunity to translate “financial inclusion” into more concrete terms. Instead of merely transferring cash to the poor, the Philippines can follow examples from around the world and promote conditional cash transfers directly to mobile money-enabled bank accounts to promote greater financial inclusion for the unbanked and under-banked. A recent study by the World Bank showed that the Philippines still has a fairly high percentage of unbanked poor.[27]  Although this was similar to other countries such as Kenya and Colombia, recent advances in offering mobile money (as in the case of Kenya) and making conditional cash transfers directly to financial accounts (as in the case of Colombia) have led to significant increases in financial inclusion in these and other countries. The Philippines is fortunate to have not only two mobile money providers (electronic money issuers) but also the ability to link mobile money-enabled wallets to bank accounts. By combining the power of mobile money wallets and linking them to bank accounts, along with appropriate financial education, the Philippines could dramatically increase the level of financial inclusion with just this one change to the way conditional cash transfers are disbursed.[28]

Using the MABS Approach to address the “missing middle” Although rural banks have done a good job of serving the microenterprise sector, and thrift and commercial banks have done a relatively good job of serving medium and large enterprises, small enterprises are usually stuck in the middle. The same approaches deployed under the MABS Approachfor cash-flow lending relevant to the Philippine setting and environment can be applied to small enterprises that are often not served due to a standard approach of collateral-based lending and limited use of enhanced financial services such as lines of credit or purchase order financing. USAID should support development of new approaches to continue development and enhancement of greater access to financial services to this important but often overlooked “missing middle” of the financial landscape in the Philippines.


[1] The 322 rural banks include all banks that received training or technical assistance from the MABS program in the areas of microfinance, micro-agri loans, housing microfinance, mobile phone banking, and/or microinsurance.  (See Annex C. Inventory of Banks and Products.)

[2] To view a video on the MABS program’s 15 year history and impact look for the video “Bank On It” on the DVD or online at http://youtu.be/n-Zo2tx1FDo

[3] A municipality is considered a 2nd class municipality when its average income for the latest three calendar years reaches 40 million to 50 million PHP ($1 million-$1.2 million).

[4] You may review the video of Cantilan Bank in the attached DVD under the title “Small Wonders” or online at: http://youtu.be/RJW1mWKC-5Y.

[5] Philippine National Statistics Office, Survey of Establishments in the Philippines, 2000.

[6] You may view an interview of Carina Gonata in the attached DVD or online at: http://youtu.be/hereUeRFaoM.

[8] The bancassurance model only allowed banks to sell insurance if they were able to make a 5 percent investment in a private insurance company. Due to the size of the minimum investment required, only large commercial banks were able to provide insurance services in 2008.

[9] The EAGLE Assessment System is a performance assessment tool developed by MABS. Banks’ microfinance operations are assessed using five main indicators: E – efficiency, A – asset quality, G – growth, L – liability structure, and E – earnings.

[10] To view a video on the bank, see Bangko Kabayan 2012 EAGLE video in the attached DVD or online at: http://www.youtube.com/watch?v=cweO5xtxvJU

[11] Microdeposits are defined in the Philippines as deposit accounts with balances below 15,000 PHP ($375).

[12] Ganansya boxes are similar to piggy banks, but with a lock. The bank keeps keys to open the boxes. Depositors take home the box and are encouraged to save their extra change. When the boxes are full, depositors return them to the bank, where the savings are transferred to a passbook account. Microdepositors, including children, learn the value of saving this way, while the bank increases its deposits and develops clients for a lifetime.

[14] To view a video of the president of PR Bank, please see the attached DVD or online at: http://www.youtube.com/watch?v=m2zlZixq32s

[15] According to the GSMA Mobile Money Deployment Tracker, mobile phone penetration in the Philippines is at 86.5 percent. http://www.wirelessintelligence.com/mobile-money/

[16] You may view a video on MABS’ mobile banking services in the attached DVD (“Distant Access”) or online at: http://www.youtube.com/watch?v=7HdnrEKrG_U

[17] See Annex E for a list of international study tours.

[18] See Annex F for a list of international conferences.

[19] Figures for 2012 are projected based on the growth rate in the first half of year compared with 2011.

[21]See the video on the MABS Microinsurance initiative in the attached DVD or online at http://youtu.be/qfPFQpR8VX0.

[22] See the video of Mrs. Santillan’s story on the attached DVD or online at: http://youtu.be/RoJRLJIlQKs.

[25]See Annex E for a list of international study tours. For details about recent visits, see http://www.rbapmabs.org/blog/tag/international-study-visits/.

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