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.

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.

Exhibit 12: Deposit Growth Rate

Exhibit 13: Loan Balance Growth Rate

Exhibit 14: Return on Assets

Exhibit 15: Return on Equity

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