MABS: Making banking meaningful to the Mindanao microentrepreneur
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To most Filipinos in the lowest income groups, banking is the domain only of the rich, the landed, and the salaried.
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The concept of putting a part of one’s earnings in the bank for safekeeping or for that proverbial rainy day often appears strange to people for whom, to begin with, there is never enough money to go around.
As one rural wag puts it, “Every day is a rainy day for us.”
Low-income microentrepreneurs who seek financing are excluded from the banking mainstream, since they must comply with basic commercial banking requirements-such as providing collateral for loans-and must read and sign intimidating official documents in a language unfamiliar to them. Also, loan amounts sought by microentrepreneurs are typically so small that, given their costs in processing and administering the loans, banks find it difficult to make a profit on the loans. Banks therefore tend to shun doing business with microentrepreneurs.
For microentrepreneurs, the prospect of obtaining a loan from a bank for expanding a small business is so remote, and the processes involved in seeking one are so daunting, that they usually meet their credit needs by borrowing from moneylenders who come around on a motorcycle offering a “five-six” arrangement, which does not require collateral and documents-but which requires very heavy interest payments.
Responding to their need, the Microenterprise Access to Banking Services in Mindanao ( MABS-M) Program of the United States Agency for International Development (USAID) is helping to provide loan and deposit banking services to this largely untapped and unassisted segment of the economy in Mindanao, via existing rural banks and cooperative rural banks.
A joint program of USAID, the Office of the President in Mindanao, and the Rural Bankers Association of the Philippines (RBAP) , the MABS-M Program was launched in Mindanao in November 1997.
MABS-M provides selected Mindanao banks with training in proven Filipino and international microfinance practices, profitable microfinance methodologies, loan pricing methods, deposit mobilization techniques, and information management systems, all geared to assist the banks in developing the capability to profitably provide services to the microenterprise market - and thus enable them to expand their loan and deposit microenterprise portfolios.
The idea is for the banks to learn techniques for profitably handling microenterprise deposit and loan services and to make these services a regular part of their portfolios. In this way, capital can be made available to basic but vital microenterprises such as suka or toyo making, bakeries, sari-sari stores and carinderias.
Interested rural banks and cooperative rural banks must apply for participation in the MABS Program. Once an agreement is reached, the participating bank then begins an intensive training period of four to six months, followed by twelve to eighteen months of monitoring, evaluation, and further assistance as needed.
Trinidad Cupas, a candlemaker who took out a microloan of P25,000 from the Rural Bank of Kapatagan Valley (Lanao del Norte) (RUBANKA), speaks of her satisfaction at the banking services provided: “Diri ko nanghulam sa KVB tungod kay gamay ra ang ilang interest, ug paspas pod ang ilang serbisyo. Dayon, adtoon pa mi sa kolektor sa balay. So, dili na mi mag-ari sa bangko. (I decided to take out a loan from KVB because they offer low interest rates, and their service is fast. Also, the collector comes to the house, so we do not have to go to the bank.)”
Moreover, MABS-M techniques imparted to these banks as part of their assistance and training, especially the Deposit Mobilization Drive, have helped to invigorate them.
“The most significant training assistance that we received from MABS was in the matter of savings mobilization. In fact, this was why I applied for membership in the MABS program,” said Nicolas Lim, president of RUBANKA.
“The profits [from] the program have given us a return that has completely recovered the cost of the capital expenses,” Lim said “In a sense, it is an investment that has a payback of one year.”
MABS-M microfinance practices and principles have proven so influential and workable, they have been adapted by participating banks for other parts of their business as well.
For instance, zero tolerance for past due accounts-a basic principle in lending under MABS-M-was originally viewed with some skepticism by the bank managers. Now, however, they acknowledge the principle as sound and achievable, not only for microfinancing but also for their other products.
“For ninety percent of our commercial portfolio we now follow the same procedures that we follow for microfinance,” says Lourdes Pineda, compliance officer of Rural Bank of Sto. Tomas (Davao del Norte).
Bank officials also attest to the positive banking values promoted by the MABS-M Program, which they say raised morale not only among their clientele but also among their staff.
As Ismael Andaya, chairman of Green Bank of Caraga (Agusan del Norte) (GBC), points out: “This MABS technology works not only for our clients, but also for our people who deliver the services to our clients. It makes them realize their responsibilities.”
This is, truly, banking with a heart.
The MABS-M Program is concentrated in Mindanao but is gradually being expanded to other parts of the Philippines by the Rural Bankers Association of the Philippines.
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