Rural bankers learn group lending best practices in Cebu workshop

July 24, 2010 By Leave a Comment
Seven MABS Participating Banks from Visayas and Mindanao joined the RBAP-MABS staff on July 21-23 in Cebu City for the Group Lending Enhancement Training Workshop.  Ms. Tess Espenilla of USAID opened the session with a welcome address expressing the need for the group lending product, which has been at the heart of microfinance for the past four decades, to be adjusted to the current needs of microfinance clients.  Eighteen rural bankers, mainly microfinance unit managers and other bank officers, from Green Bank of Caraga, Cantilan Bank, Rural Bank of Guinobatan, Rural Bank of Oroquieta, Siargao Bank, Progressive Bank and First Agro-Industrial Rural Bank participated in the workshop.
The workshop covered the stages of center development, tools for classifying the status of centers and members, group lending enhancement options, product transition models, market research and development of the product enhancement transition plan.  The rural bankers gained a wealth of knowledge on group lending product enhancement options and transition tools and processes.   Participants noted that applying the concepts covered in the training should not be difficult; the keys are to base transition on specific, established criteria and regularly review the needs of clients.
The highlight of the training session was applying the market research concepts in the field.  On the second day of the workshop, the rural bankers conducted interviews at two group lending centers from Green Bank’s branch in Cebu.  They gathered members’ opinions on the bank’s group lending products, the effectiveness of center meetings, and suggestions for further financial services that could benefit the members.  The workshop participants brought this knowledge back to the training room where they tabulated and analyzed the survey results. They also generated recommendations to enhance the product.  By the time the second day was over, it was evident that market research remains the foundation of crafting successful group lending products.
Microenterprise Access to Banking Services (MABS) is a United States Agency for International Development (USAID)-funded program in partnership with the Rural Bankers’ Association of the Philippines (RBAP), with oversight from the Office of the President through the Mindanao Development Authority (MINDA).

Cebu workshop 1Seven MABS Participating Banks from Visayas and Mindanao joined the RBAP-MABS staff on July 21-23 in Cebu City for the Group Lending Enhancement Training Workshop.  Ms. Tess Espenilla of USAID opened the session with a welcome address expressing the need for the group lending product, which has been at the heart of microfinance for the past four decades, to be adjusted to the current needs of microfinance clients.  Eighteen rural bankers, mainly microfinance unit managers and other bank officers, from Green Bank of Caraga, Cantilan Bank, Rural Bank of Guinobatan, Rural Bank of Oroquieta, Siargao Bank, Progressive Bank and First Agro-Industrial Rural Bank participated in the workshop. [Read more...]

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Fourteen trained on group lending enhancement

July 10, 2010 By Leave a Comment
Cabanatuan City, Nueva Ecija – Fourteen participants from six Luzon-based MABS participating banks underwent training forgroup lending product evaluationand enhancement. The three-day workshop was conducted to help banks determine and address the demands of their clients and enhance their group loan products, many of which have been in existence for almost a decade. It was held at the GM Bank Training Center in Cabanatuan City, Nueva Ecijaon July 7-9.
The participants went through a series of hands-on exercises, brainstormed on documented case studies, and discussedthe challenges in their group lending operations. They also shared their respective banks’ unique group lending experiences during the lecture. Their frank and open discussions proved to be eye-opening, making a good opportunity to learn from each other’s best practices. It also showed that what works best with some banks may not be applicable to other banks in other areas.
The participants got to interview existing group clients of the host bank using a market research survey tool to get the opinions, sentiments, and preferences of the clients regarding product  enhancements. From the market research exercise, the participants were asked to draw out ideas on product changes. The participants also learned simple tools that banks can use for a more systematic approach to enhancing their group loan products,as well as toolsfor transitioning clients from group to individual liability.
The Group Loan Enhancement Workshop proved to be a good venue for banks to share experiences about their decade-old group lending program and discuss the need to innovate or enhance group lending policies and procedures. “The workshop we just had is so timely as we are venturing into a process of enhancement of our group loan product. We learned that we need to know the needs and wants of our existing clients before going to the process of product enhancements for our group lending program. “, said Edsel Tan, First Macro Bank Program Manager.
This workshop is the first of two that RBAP-MABS Program will conduct this year. RBAP-MABS, a program supported by USAID, has been providing assistance to participating rural banks to improve their products and introduce innovations for increased efficiency.

group lending workshopCabanatuan City, Nueva Ecija – Fourteen participants from six Luzon-based MABS participating banks underwent training forgroup lending product evaluationand enhancement. The three-day workshop was conducted to help banks determine and address the demands of their clients and enhance their group loan products, many of which have been in existence for almost a decade. It was held at the GM Bank Training Center in Cabanatuan City, Nueva Ecijaon July 7-9.

The participants went through a series of hands-on exercises, brainstormed on documented case studies, and discussedthe challenges in their group lending operations. They also shared their respective banks’ unique group lending experiences during the lecture. Their frank and open discussions proved to be eye-opening, making a good opportunity to learn from each other’s best practices. It also showed that what works best with some banks may not be applicable to other banks in other areas. [Read more...]

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Group Lending Best Practices from Bangko Kabayan Visit

July 8, 2010 By Leave a Comment
MABS staff visited Rosario, Batangas on Thursday, June 24th, to witness first-hand how Bangko Kabayan developed such a successful group lending program.   Bangko Kabayan has approximately three Account Officers in each of its 14 branches across Batangas province. Each account officer handles 10 to 12 centers, focusing on group lending. With 25 members per center on average, those numbers really add up.
Group lending was at the core of the Grameen Bank philosophy. Based in Bangladesh, Grameen Bank was the first to provide microfinance loans under its founder, Nobel Peace Prize winner Mohammad Yunus.  In this structure, a group of borrowers, mostly women, are liable for each other’s loan repayments.  If someone from the group does not pay, then the rest of the borrowers must cover that payment.  Beyond the group is the “center”, a set of groups that meet weekly to collect loan payments, discuss each other’s businesses, and socialize.  MABS conducted four focus group sessions in Rosario, including a discussion with Namuco Center (right).
A common theme among the members was their loyalty to the group, the center and Bangko Kabayan.  When asked if they would move to an NGO that would offer larger loans, the consensus was that they would remain with Bangko Kabayan.   Based on the focus group discussions, three reasons for this loyalty prevailed.  First, the bank provides a demand-driven product.  For example, unlike many other banks, Bangko Kabayan offers its centers the option of meeting weekly, bi-monthly or monthly, given that certain criteria are met.  Additionally, loans are not restricted to the P25,000-P30,000 level.  Members requested higher amounts, and the bank met their needs with loans of up to P60,000.
The second reason for the strong loyalty is the portfolio of products Bangko Kabayan offers its clients.  Many members have housing microfinance loans and educational loans through the bank.  Additionally, loans are available when members have medical emergencies in the family.  Members appreciate Bangko Kabayan’s continuing product innovation.  At a center meeting in Barangay Namungahan (right), the Account Officer presented a microinsurance product that not only covers the principal borrower, but also her husband and children – an insurance product that is rarely available for microfinance clients.
Another key to member loyalty is the center fund, a pooled account that each member deposits into weekly.  This fund is used for parties, field trips, business development training and other events that keep members interested, educated and active.   Understanding that the center activities are critical to its success, the bank subsidizes many of these events.
Bangko Kabayan’s organizational practices also contribute to the group lending program’s success in a number of ways.  First, bank management strongly supports the Account Officers with incentive programs, free transportation and training seminars.  Second, the bank encourages Account Officers to carefully research business development and financial education topics, and present them at center meetings.   Third, the groups select their own members, helping to tighten the bonds between borrowers and ensure the quality of the bank’s clients.  Additionally, to mitigate the risk of fraud, Account Officers never take possession of the money.   Center Treasurers, elected by the members, carry the money to the bank branch for deposit.  Finally, the bank forms partnerships with local businesses for community development projects, providing lending centers with the opportunity to participate.  It is inspiring to see people with so little give back so much to their communities.
There is no secret to Bangko Kabayan’s success.  The bank meets its clients’ demands with innovative products, focuses on building solidarity among its group members, and provides Account Officers with strong management support and training.  By applying these principles, your bank can also develop a successful group lending program.
Share your group lending stories and experiences by replying to this post.
Until next time, Mabuhay ang Rural Banking!

MABS staff visited Rosario, Batangas on Thursday, June 24th, to witness first-hand how Bangko Kabayan developed such a successful group lending program.   Bangko Kabayan has approximately three Account Officers in each of its 14 branches across Batangas province. Each account officer handles 10 to 12 centers, focusing on group lending. With 25 members per center on average, those numbers really add up.

Namuco CenterGroup lending was at the core of the Grameen Bank philosophy. Based in Bangladesh, Grameen Bank was the first to provide microfinance loans under its founder, Nobel Peace Prize winner Mohammad Yunus.  In this structure, a group of borrowers, mostly women, are liable for each other’s loan repayments.  If someone from the group does not pay, then the rest of the borrowers must cover that payment.  Beyond the group is the “center”, a set of groups that meet weekly to collect loan payments, discuss each other’s businesses, and socialize.  MABS conducted four focus group sessions in Rosario, including a discussion with Namuco Center (right).

A common theme among the members was their loyalty to the group, the center and Bangko Kabayan.  When asked if they would move to an NGO that would offer larger loans, the consensus was that they would remain with Bangko Kabayan.   Based on the focus group discussions, three reasons for this loyalty prevailed.  First, the bank provides a demand-driven product.  For example, unlike many other banks, Bangko Kabayan offers its centers the option of meeting weekly, bi-monthly or monthly, given that certain criteria are met.  Additionally, loans are not restricted to the P25,000-P30,000 level.  Members requested higher amounts, and the bank met their needs with loans of up to P60,000.

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Panelists explore group liability vs. individual liability in microfinance lending

June 14, 2010 By Leave a Comment
Ms. Rebecca Hughes, Innovations for Poverty Action (IPA)
Conventional wisdom suggests that group liability loans in microfinance are more effective in increasing repayment rates. Ms. Rebecca Hughes of Innovations for Poverty Action (IPA) explored this issue and presented IPA’s study results at the 2010 RBAP-MABS National Roundtable Convention held in Manila on June 2-3 June.
IPA’s study, designed and executed with partner bank Green Bank, found no measureable difference in repayment rates between group and individual liability loans. Additionally, the dropout rate of clients was no different in these two borrower populations. The study showed individual liability loans appealed more to new clients, but were not as popular with account officers who spend up to 90 minutes more per week on repayment activities for individual liability, as opposed to group liability loan clients.
The IPA study also explored whether moving from group liability to individual liability affected the social interaction among borrowers. (Note that in this study, the structure of the “center” – members of borrower groups that meet weekly to collect payments, discuss business, socialize, etc. – was kept in place; only the liability of the debt was transferred from the group to the individual.) The study found that there was less social cohesion as borrowers converted from group liability loans to individual liability loans. One piece of evidence Ms. Hughes cited was the decrease in spending on holiday parties among the center members. Additionally, new members within a center under the individual liability model were not likely to know each other as opposed to group lending, where existing clients were more likely to know the new borrowers. However, Ms. Hughes’ key takeaway was that by expanding individual liability lending products among its group liability product portfolio, a bank may deepen client outreach and provide more desired flexibility to its clients. Ms. Hughes stressed that additional studies should be conducted to measure the significance of these results.
For more information about IPA’s work on group versus individual liability, please review their study it conducted in coordination with the Financial Access Initiative.
Ms. Rebecca Hughes, Innovations for Poverty Action (IPA)

Rebecca Hughes

Conventional wisdom suggests that group liability loans in microfinance are more effective in increasing repayment rates. Ms. Rebecca Hughes of Innovations for Poverty Action (IPA) explored this issue and presented IPA’s study results at the 2010 RBAP-MABS National Roundtable Convention held in Manila on June 2-3.

IPA’s study, designed and executed with partner Green Bank, found no measureable difference in repayment rates between group and individual liability loans. Additionally, the dropout rate of clients was no different in these two borrower populations. The study showed individual liability loans appealed more to new clients, but were not as popular with account officers who spend up to 90 minutes more per week on repayment activities for individual liability, as opposed to group liability loan clients.

[Read more...]

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