Market expansion through Micro Deposits

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  • Facilitator: Introduce the topic of what “is” savings mobilization. Bullet 1: Banks generate deposits and use the funds from deposits as a source of capital to make loans. This is the essence of “financial intermediation”. A bank is an intermediary since it has the authority to lend and collect deposits. Bullet 2: Savings mobilization means capturing deposits, protecting and managing them, and using them to fund the bank’s loan portfolio. Since deposits come from the public, savings mobilization also refers to: creating a safe and sound financial institution where savers can place their deposits and receive the full value of their money, and a positive real rate of return. A positive real rate of return means the depositor is offered an interest rate that is more than the inflation rate. For example if the annual inflation rate is 4%, the interest rate should be more than 4% per annum. developing appropriate savings products to satisfy local demand and marketing these products to savers of various income levels. ASK participants: “Aside from savings, what are the other sources of funds for the bank?”
  • Facilitator: Introduce the session on why and how people save.
  • Read bullets. Point out that surveys of small business owners found that children’s education and capital for business are two of the top primary reasons that people save.
  • Facilitator: Continue the review of the different savings goals that individuals have.
  • Facilitator: In introducing “how” individuals save, emphasize that there are non-monetary and monetary forms of savings. Ask participants for examples of non-monetary forms of savings. Process the responses, then, show the next slide.
  • Facilitator: Cite some examples of the non-monetary and monetary forms of savings as shown in the slide. State that there are disadvantages to some non-monetary forms of savings.
  • Facilitator: Explain that, within the exception of properties, such as land and house, many non-monetary forms of savings can be lost or stolen.
  • Facilitator: Discuss the advantages of monetary forms of savings. The key advantage of depositing savings in a bank are listed on the slide. Review these advantages with participants. Emphasize the deposit insurance on bank deposits up to P500,000 under present law. Emphasize that these reasons are messages that the bank should convey to existing and potential deposit customers and that these advantages should be incorporated in the bank’s marketing strategy to mobilize deposits.
  • The first step toward designing a product is to understand the clients’ needs so that the appropriate product or products can be designed. Testing the product is the second step – this is done on a limited scope, say, in one branch within a time frame of one year – but since rural banks have been offering savings products since the start, this timeframe could be reduced. Product testing is still a part of market research as further information is gathered for refining the product and determining the marketing strategy. The product review and modification or refinements are done before the product launch. The diagnostic activities/group exercises completed during the previous sessions were designed to bring the participant’s attention to the current status of their savings activities and to illuminate issues and problems that the bank needs to resolve to further develop its savings generation activities. With this foundation of knowledge, participants can proceed with developing a research plan for product development. Facilitator: Discuss the Product Development Flowchart presented in the slide.
  • The features and advantages of each type of deposit product are discussed in the following slides.
  • Facilitator: Introduce the seminar objectives and topics. (1.) Preparatory Activities - what is needed and who is to be involved (2.) Pilot Test Objectives – setting clear objectives and providing guidance on how to achieve those objectives (3.) Implementation Plan – an outline and timeframe to conduct the test
  • Market expansion through Micro Deposits

    1. 1. <ul><li>Market Expansion Training </li></ul><ul><li>September 12-13, 2011 RBAP Building, Intramuros, Manila </li></ul><ul><li>Micro Deposits </li></ul>
    2. 2. MICR O deposits MOBILIZATION TRAINING
    3. 3. What is Micro Deposits Mobilization? <ul><li>The process of capturing, protecting, managing and using funds solicited from the public to finance the bank’s lending and other capital needs </li></ul><ul><li>It is the other half of financial intermediation, where deposits from savers are used by banks to make loans to borrowers </li></ul>
    4. 4. <ul><li>To take advantage of Circular 683 dated February 2010 that defines the general features of Microfinance Savings Deposit account as follows: </li></ul><ul><li>Minimum maintaining balance not exceeding One Hundred Pesos(P100.00) </li></ul><ul><li>Not subject to dormancy charges </li></ul><ul><li>Only for individual microfinance clients whose average daily savings account balance does not exceed Fifteen Thousand Pesos (P 15,000) </li></ul>
    5. 5. <ul><li>Micro deposits can be transacted at MBO (Microfinance Banking Office) thereby expanding the coverage of the banks. </li></ul><ul><li>Banks with MBOs can increase their deposits to loans ratio thereby decreasing reliance on borrowed funds with higher interest expense. </li></ul><ul><li>MF clients can also avail micro-insurance if they are micro depositors. </li></ul>
    6. 6. <ul><li>To tap the huge micro depositors which accounts for 90 % of Rural Banks Savings Deposit Account </li></ul><ul><li>(Source: PDIC data on Rural Banks Deposits as of December 31, 2010 – Those with balances of P 15,000.00 and below) </li></ul>
    7. 7. <ul><li>To encourage people to save specifically micro finance clients. </li></ul>
    8. 8. Why People Save & How They Save A. Why do people save? B. How do people save?
    9. 9. Why do people save? <ul><li>Children’s education </li></ul><ul><li>Capital for new or </li></ul><ul><ul><li>existing business </li></ul></ul><ul><li>Retirement / </li></ul><ul><ul><li>wealth accumulation </li></ul></ul>
    10. 10. Why do people save? (cont.) <ul><li>Emergency needs </li></ul><ul><ul><li>illness, disability, death </li></ul></ul><ul><li>Everyday needs </li></ul><ul><ul><li>school expenses, food, utilities, </li></ul></ul><ul><ul><li>transportation, clothing, rent, </li></ul></ul><ul><li>Acquire fixed assets </li></ul><ul><ul><li>house renovation, appliances </li></ul></ul><ul><li>Special occasions </li></ul><ul><ul><li>fiestas, weddings </li></ul></ul>
    11. 11. How do people save? <ul><li>Non – monetary form </li></ul><ul><li>Monetary form </li></ul>
    12. 12. How do people save…cont. Non-Monetary Form Monetary Form Jewelry Cash Livestock Passbook savings Inventory Time Deposits Land Rosca (Paluwagan, bubo-ay) House Durable Items
    13. 13. How do people save …cont. Problems with non-bank savings Form of Savings Problems Cash Potential for theft, overspending, demands from family Jewelry Theft, loss, difficulty of selling in an emergency Livestock Theft, death of animal, difficult to sell in an emergency Inventory Spoilage, theft, storage Land and House Not easy to sell Durable Items Depreciation, theft
    14. 14. How do people save…cont. <ul><li>Advantages of Bank Savings: </li></ul><ul><li>Withdrawability - easy access </li></ul><ul><li>Security - deposits are insured; no problems of theft </li></ul><ul><li>Returns - interest income; investment </li></ul><ul><li>Access to other services - loans </li></ul>
    15. 15. HOW TO EXPAND THRU MICRO DEPOSIT ACCOUNTS?
    16. 16. HOW TO MIGRATE FROM REGULAR SAVINGS INTO MICRO DEPOSIT ACCOUNTS? <ul><li>A SELF-ASSESSMENT OF BANK’S MICRO DEPOSITS MOBILIZATION PERFORMANCE THRU SWOT ANALYSIS </li></ul>
    17. 17. Micro Deposits Mobilization Product Development Process <ul><li>Steps and Procedures </li></ul>
    18. 18. Product Development Process Understanding Clients’ Needs - Product Testing Problem Definition Research Plan Conduct Research Develop Concept Costing & Pricing Product Prototype Design Pilot Test Product Review Modify Launch or Rollout
    19. 19. Micro Deposits Mobilization Developing the Product Concept
    20. 20. <ul><li>Designing Savings Product(s): </li></ul><ul><li>Brainstorming Guide </li></ul><ul><li>  1. Why design micro deposits product? What market opportunities for deposits can the bank try to serve? </li></ul><ul><li>  2. What are the bank’s objectives for designing the micro deposit product? </li></ul><ul><li>  3. What is the target market? </li></ul>Developing Product Prototype Workshop
    21. 21. <ul><li>Designing Savings Product(s): Brainstorming Guide </li></ul><ul><li>4. What new product will the bank introduce? What will be its “brand name” </li></ul><ul><li>5. What are the features of the new product? </li></ul><ul><li>6. And/or: Will an existing product be improved? What improvements will be introduced to an existing product? </li></ul>Developing Product Prototype Workshop
    22. 22. Different Micro Deposits Products for Different Needs <ul><li>A. Micro deposits product link with face cards and mobile phone banking </li></ul><ul><li>B. Micro deposits product link with micro insurance </li></ul><ul><li>C. Micro deposits product intended for the children of micro finance clients. </li></ul>
    23. 23. Micro Deposits Mobilization <ul><li>Product Pilot Test </li></ul><ul><li>Ready to take off….. </li></ul>
    24. 24. Action Plan <ul><li>SMART Characteristics </li></ul><ul><ul><li>S pecific </li></ul></ul><ul><ul><li>M easurable </li></ul></ul><ul><ul><li>A ttainable </li></ul></ul><ul><ul><li>R ealistic </li></ul></ul><ul><ul><li>T ime bounded </li></ul></ul><ul><ul><li>End of Presentation…Thank You! </li></ul></ul>

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