The Global Crisis and Microfinance: A Rural Bank’s Perspective

Brig. Gen. Charles Y. Hotchkiss (Ret.)  Chair – Execu-ve Commi1ee  2009 RBAP-MABS National Roundtable Conference May 12-13, 2009 Hyatt Hotel and Casino Manila

What is the global financial crisis?  • The global financial crisis is an ongoing issue  which put a number of countries into a  recession and the major stock indices into a  downward spiral.  • The crisis came to the forefront of the  business world and media in September 2008  with the failure and merging of a number of  American financial companies with the sub‐ prime mortgage crisis. 

How does the global financial  crisis affect microfinance?  Indeed, how does it affect Can-lan  Bank?   

According  to  Kate  McKee,  CGAP  official  and  former  head  of   Microenterprise development at USAID:   “It’s in -mes of crisis that we see what  microfinance is really made of.  During past  emergencies, microfinance has held fast.  And  even as the current global banking mess has  gone from bad to worse, recent headlines have  global and industry leaders asser-ng that  microfinance can and should be able to  withstand it.”  

How does Can-lan Bank view the  ﬁnancial crisis?  • It is a Challenge and growing concern as  unemployment could increase, and deposits and  loans might decline   • But also, it’s an opportunity to strengthen the bank  and become be1er at what we do through:  – Staying true to our mission and vision  – Be1er strategic planning and expanding in mul-ple ways  – Innova-on  – Be1er a1en-on to our human resources  – Be1er customer care  

Can-lan Bank’s Market Proﬁle  • Caraga Region is one of the poorest regions;  many families are engaged in micro and small  enterprises as a major income source  • An agricultural and ﬁshery‐based economy   • Export‐oriented mining industry has become  important in recent years  • Overseas Filipinos, 17K, send money regularly to  their families thus helping fuel the economy  

Possible Eﬀects to Local Economy and  Microentrepreneurs  • We an-cipated there may be reduced family  income and a reduc-on in remi1ances and that:  – Income from microenterprise will cover much of the  family’s needs  – More sales on credit due to reduced liquidity of  households  – Possible reduc-on in sales   – Higher spending to meet basic needs may aﬀect  client’s capacity to meet obliga-ons and save  • In reality, remi1ances are up this quarter and there  are no reports of OFWs coming home in our region. 

Possible Challenges & Responses of   CBI:  CHALLENGES  RESPONSES    Delinquencies may    Tighter monitoring  rise if risks are not  and control of  properly managed  delinquencies      Reduced deposit     Promote and encourage  balance due to heavier  greater savings  withdrawals and fewer  mobiliza-on to help  new accounts   clients weather the  crisis 

Eﬀects on the MF Market Environment  • Demand for loans may increase but the bank  will have to be more careful during the  screening process.  • Increased compe--on by other microﬁnance  players may lead to over‐indebitedness.   Therefore, we need to guard against clients  with mul-ple loans, especially at this -me  (credit bureau may help). 

What has been the impact of the  crisis to Can-lan Bank, so far?  SELECTED INDICATORS: TRENDS 

• ank wide portfolio declined due to B • fter Sept. 2008, deposits managed A fewer qualified applicants, tightened to increase. The episodes of decline loan policies for clean loans, P10 M were due to the shutdown of mining loans were written off in Dec.’08. companies. • ut loan volume has been rising since. B • eposit levels have stayed much D higher than they were prior to the onset of the global financial crisis.

After cleaning up our loan portfolio in December, the number of loan accounts bank wide managed to rise in the first quarter of 2009.

MICROFINANCE PORTFOLIO • he decline in MF loans is not directly related to the global financial crisis; T rather it is due to internal challenges that we’ve started to address. • he bank tightened loan screening for both new and repeat clients to T improve portfolio quality. • ortfolio growth comes mostly from repeat borrowers and, to a lesser P extent, from new borrowers.

• he dips in deposits are due to withdrawals to pay for loans and the T need for additional cash due to inclement weather and/or seasonal farm production needs. Notwithstanding, micro deposits are up since a low in August 2008 .

The Bank’s Ini-a-ves:  • To update the strategic and opera-onal plans  guided by the bank’s mission and vision  • Expansion – ver-cal & horizontal – based on  market research and MABS Approach  • To align the budget to improve staﬀ capability  and adopt available technologies to improve  cost‐eﬃciency and bank expansion   • Pro‐ac-ve stance across loan products to be1er  manage delinquency 

Improving Products and Delivery  • New product development & enhancements  • Encourage contractual micro‐savings  – Even among regular loan clients  • Provide addi-onal insurance coverage other  than credit life to reduce risks to clients as well  as to the bank  • Expand mobile phone banking and ATMs in  other branches 

Human Resources  • Invest in training to produce well‐trained,  analy-cal, mo-vated ﬁeld staﬀ  • Localized hiring  • Hiring of undergraduates 

Delinquency Management  • Proac-ve approach in microﬁnance has  been adopted for regular loans  • Contractual savings product is integrated  in all loan products as added service to  borrowers, as a source of low cost fund,  and to help manage credit risk 

In Conclusion  • The global ﬁnancial crisis has had li1le  nega-ve impact on the bank’s opera-ons  • The crisis oﬀers an opportunity to improve our  fundamentals, what we do and how we do  them so that we are prepared for any crisis,  domes-c or global! 

THANK YOU 

The Global Crisis and Microfinance: A Rural Bank’s Perspective

by MABSIV on May 26, 2009

Accessibility

Categories

Tags

Upload Details

Usage Rights

1 Embed 4

Statistics

The Global Crisis and Microfinance: A Rural Bank’s Perspective — Presentation Transcript