The Cantilan Bank Microfinance & Micro-Agri

Experience

A Presentation ForThe BSP Study Group

July 23, 2010Butuan City

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1980: Year Bank started 12 : # of Branches

20 Kiosks P840.6M: Resources (6/10) P667M: Loan Portfolio P71.6M: MF Portfolio

(11% of total portfolio); P550M: Deposits

(82% of loan portfolio);• 249: # of employees

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MF Share to Bankwide June MF Share to Bankwide June 20102010

MF

Others

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• Cantilan Bank started transitioning from “traditional” to market driven banking in 1999

• Changes & Innovation To Take the Bank to The Next Level: Formulated Bank Vision and Mission; Staff training and professionalization Strategic and operations planning Systems improvement – MIS/Banking software Geographic expansion - from 3 to 12 branches & 20

OBOs.vers.Fin 08/21/12

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Change in leadership (1999); Partnership with the USAID-supported RBAP-MABS

Program starting in 1999; Regulations favorably affecting Bank’s growth,

outreach and efficiency◦ Lifting of interest rates ceilings ◦ GOP policy support for microfinance◦ Branching policy

Establishment of OBOs Availability of external credit facilities; Technology;

◦ Mobile phone banking / ATM Competition which made bank try harder, improve efficiency

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Deposit Products Loan Products

Regular Savings Deposit;

Time Deposit; Student Savers Club

(for pupils & students)

• Secured Loans;– Agricultural– Commercial– Industrial

• Back to Back Loan;• Salary Loans;• Pension Loans;• Microfinance Loans

– KITA Loan – Individual Loan;

– MAKITA Loan – Group Lending;

– PAG UMA Loan – Micro-agri;

– HOME Loan – HMF;– Pang-Eskwela Loan –

Educational Loan;– Commodity Loan – For

acquisition of cell phones and other home assets

Other Services

• On line/ Fund Transfers/ inter-branch deposits;

• Mobile Phone Banking;• Money Remittance;• Payroll servicing;• Accepts SSS remittances;• Demand Draft.

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• To offer a product suited to the farmers’ financial needs;

• To help farmers reduce their dependence on high cost informal loans;

• To provide farming households access to suitable deposit products.

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Small farmers involved in various agricultural activities (vegetable, backyard poultry, cattle, etc.);

VEGETABLE

POULTRY

MARINE PRODUCTS

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Loans can be used to finance: Farm working capital;Purchase of farm animal;Small farm tools and implements. FARM ANIMAL

SMALL FARM TOOLS and EQUIPMENT

RICE

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Small farmers with multiple sources of income;

Well defined policies and procedures patterned after the MABS MF lending approach;

Based on character- and cash flow rather than production cost per unit.

PAG-UMAvers.Fin 08/21/12

Amount: P3K to P150K; Term: 3 - 12 months Payment: Weekly, Bi-monthly, Monthly Interest rate: 3% per month Service Charge: Flat amount per loan Amortization: Straight regular; or 60/40 option (regular paymentWith balloon not more than 40%)

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Guarantees: Household assets/Co-makers;

Other condition: Contractual savings Repeat Loan Increase: Based on cash flow, repayment record; but not more than 30% of previous loan

PAG-UMAvers.Fin 08/21/12

Orientation and Application

CI/BI Cash flow Analysis

Loan ApplicationReview & Approval

Loan DisbursementCollection

&Monitoring

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• November 2004 in Tandag branch with one AO

• After 6 months

– 45 accounts

– Portfolio 228K

– Zero PAR

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San Miguel Nov 2005

Cantilan Nov 2005

Tubod May 2007

Surigao City Aug 2007

Butuan Dec 2007

Tandag June 2004Pilot Branch

Madrid June 2007

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Pag-uma OutreachPag-uma Outreach

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Overall PAR below double digit◦ PAR30 = 7%

Internal and external causes contributed to delinquency ◦ Initial birth pains ◦ Force majeure

Small agri producers NEED: Suitable, effective, efficient agri insurance product against typhoons, floods, pests & diseases

Portfolio QualityPortfolio Quality

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-

500,000.00

1,000,000.00

1,500,000.00

2,000,000.00

2,500,000.00

3,000,000.00

3,500,000.00

4,000,000.00

June 06 June 07 June 08 June 09 June 10

5-year Pag-uma Performance2006-2010

deposit

Deposit to Loan: 36% vers.Fin 08/21/12

Challenges What have been done

Staff perception that Pag-uma is just the same as existing micro loan product; very slow growth in initial years

Paying loans regularly was something new to farmers used to lump sum payments

Identified areas with high concentration of agri activities & existing clients with farming activities;

Set realistic targets per branch and AO

Involvement of top management in pushing and monitoring;

Improved communication and information on the benefits of regular payments; provided 60/40 payment option

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Challenges◦ Lack of more responsive agri insurance coverage◦ Inability to reach farmers at a faster pace

Future Plans ◦ Product enhancements; ◦ Incentives to clients◦ Insurance◦ Geographic expansion

PAG-UMAvers.Fin 08/21/12

Money remittance; Mobile Phone Banking; ATM –partnership with ENCASH, and, very

reently, DBP Championed Consumer Protection and

Transparency

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Challenges What have been done

Entry of MFIs not supervised by BSP – creates credit pollution, multiple borrowing, and over indebtedness

Improved our service delivery system;

Provided fair and transparent pricing;

Enhanced existing Product and developed new ones;

Continuous client education; Adherence to best practices

learned from MABS Approach

BUT MOST OF ALL, WE WAIT – for the implementation of the National Credit Information System

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Challenges What have been done

Inability to service small depositors in OBOs’ service areas;

OBOs in areas more distant from the branch makes depositing and withdrawing deposits costly for MF clients.

Given present regulation, no option except to adhere to current BSP regulations or face stiff penalties.

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• Name: Marial Lovella Lim• Business: Ampaw & Chicharon Processing; rice farm• Brief History:

• 2007: got 1st loan• Loan purpose: Working capital for rice production• Started with “Ampaw” and now “Chicharon”, pop corn,

banana chips; products use locally available raw materials and farm by products

• Cycle Information:• 1st Loan: 20K• Current (7th): 35K

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• Name: Mary Ruby Malazarte• Business: Hog & Poultry Raising• Started with just 10 Sows• Now: 189 heads ready for selling, 62 Sows, 42 piglets• Loan Information:

• 1st Loan of P50K• Current (3rd): 150K

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