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






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.


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