New Major Initiatives under MABS
Over the years, MABS has stood side by side with rural bankers as together we have continually developed new loan products, addressed delinquency issues and developed new deposit services to encourage increased savings in communities served by rural banks. Many new technologies have been introduced by MABS - enhancements to MIS banking software programs, PDA collection systems, performance monitoring systems, and mobile phone banking services - which have all helped the rural banks to manage and expand their microfinance operations in an efficient and profitable manner.
Among our strategies for expansion are as follows:
Microfinance has evolved as an economic development approach intended to benefit low-income groups. The term refers to the provision of financial services to low-income clients, including the self-employed. Financial services generally include savings and credit, and some microfinance organizations also provide insurance and payment services.
Microfinance activities usually involve:
• Small loans, typically for working capital;
• Informal appraisal of borrowers and investments;
• Access to repeat and larger loans based on debt capacity and repayment performance;
• Streamlined loan disbursement and monitoring;
• Secure savings products.
Microfinance clients are typically self-employed, low-income entrepreneurs in both urban and rural areas. Clients are often traders, street vendors, service providers (hairdressers, tricycle operators), small restaurant operators, artisans and small cottage industries. Usually their activities provide a stable source of cashflow and income (often from more than one activity).
Introduce Housing Finance
With the rapid population growth in the Philippines, the demand for housing continues to rise. According to the ADB, there is a very large unmet need in the area of housing finance, particularly in rural areas. MABS will work with a small group of rural banks to develop and pilot various micro-housing products.
Increase Agricultural Lending
The MABS team utilized the MABS Approach to work with banks to develop a Micro Agri Loan product. In many ways the MABS-Micro Agri Product approach was different from the traditional agricultural lending. MABS-Micro Agri Loan Product took into account the multiplicity of income from various sources, the ability of farmers to make rationale decisions, and based the provision of credit on the borrower’s character and cash flow.
This new approach to agricultural lending has been quite successful in reaching small farmers while reducing the risk for bankers lending to this sector. Since 2004, MABS participating banks utilizing the MABS-Micro Agri Loan helped reach over 12,000 small farmers with loans totaling more than PhP300 million (US$60 million). During the next few years, MABS team will work with additional rural banks to conduct market research to enhance the micro agri loan product and expand micro agri lending.
Develop Microinsurance Products
The estimated market for micro-insurance in the Philippines is enormous, with most potential clients operating as microentrepreneurs in the large informal sector. In partnership with local insurance companies and brokers, MABS will work with rural banks to ensure that there is improved access to insurance options (life, accident, hospitalization, property, and crop) which rural banks will be able to offer to their clients and customers.
Expand the Use of New Technologies
The MABS Program and participating rural banks offer mobile phone banking services, such as Text-A-Payment, Text-A-Deposit and Text-A-Sweldo (salary), and are the acknowledged leaders in the field of mobile phone banking for microfinance in the Philippines. The innovative partnership that RBAP-MABS developed with Globe Telecom’s subsidiary G-Xchange (GXI) is a success story that has been widely documented in both the local and international media. The launch of the mobile phone banking website at www.mobilephonebanking.rbap.org provides rural banks, their clients, and potential clients with access to up-to-date information on mobile phone banking services, locations of accredited rural banks as well as remitta nce partners worldwide.
Future plans include:
* Enhancing existing mobile phone banking services for rural banks and develop new products.
* Assisting rural banks in promoting and marketing the services locally and internationally.
* Supporting the adoption of appropriate regulatory framework for electronic banking.
* Continuing to strengthen ties between telecom operators and rural banks.
* Assisting in developing interface software between SMS-based e-money transactions and the back-end system of rural banks to allow for greater efficiency.
Distance Learning Programs
Introduce and aggressively roll out distance learning programs to ensure updated training for rural bank personnel as well as to ensure the continued sustainability and profitability of rural banks offering microfinance services. Distance learning programs, formally launched in 2007 at www.moodle.rbapmabs.org, currently contain four integrated learning modules - Introduction to Distance Learning, MABS Microfinance Basics, Delinquency and Remedial Management, and Middle Management Training: Effective Supervision.
Distance learning reduces the bank’s training costs and provides faster access to training for new microfinance staff.
Advanced MABSTeRS Training
MABS has also trained rural bank managers and supervisors to act as the bank’s in-house microfinance specialists, referred to as MABS Technical Resource Specialists (MABSTeRS). To further strengthen banks’ continuing in-house capability to deliver training and to assist them in developing microfinance specialists, MABS will conduct a series of advanced ‘train the trainer’ courses for MABSTeRS. These advanced seminars will allow banks’ MABSTeRS to more quickly develop, train and deploy new staff to meet the bank’s rapidly expanding microfinance services.
Improved Access to Credit Bureaus
As more and more institutions engage in microfinance, the need for a comprehensive, accessible, and accurate credit information sharing has become clear. With the passage of the Credit Information System Act on October 31, 2008, MABS will work with rural banks, the BSP, and private credit bureaus to ensure that rural banks will be able to participate and access credit bureaus over the coming years.
The MABS program has helped demonstrate that rural banks can be both profitable and help society through microfinance, and the new initiatives will allow participating banks to sustain growth, improve profitability, while remaining competitive in a continually changing environment.