Clarify that HMF consists mainly of loans to the poor and low-income households for home improvement/repairs, housing construction, house and/or lot acquisition, and/or access to basic infrastructure or public services. Clarify that Agri Microfinance refers to loans for small farmers and fisherfolk for primary production purposes, tools and equipment, or for purchases of farm produce and/or processing.
ALTHOUGH APPROVED BY THE BSP, THIS IS NOT SOMETHING THAT YOU USUALLY ADOPT. WE RECOMMEND MAXIMUM TERM OF 5 YEARS.
* Those marked with asterisks are inherent risk mitigating features of the MABS Approach to micro-agri
In the past, small loans to farmers or micro agri loans were considered agricultural credit, thus requiring traditional collateral and stringent documentary requirements. What are requirements: FS, TIN, According to the BSP, these conditions had been the major barrier for small farmers seeking access to much-needed financial services to increase their economic activity. With the new classification, the product will enjoy the benefits of microfinance such as the acceptance of cash collateral and other innovative guarantees, character and cash flow based lending, small and frequent amortizations, and simpler documentary requirements. The move by the BSP has shown that when applied appropriately, the microfinance technology could be extended to other types of products and services of the bank.
THESE ARE EXAMPLES OF AGRI PRODUCTS THAT BANKS OFFERING MAP ARE SERVICING. THE BANK MAY CHOOSE TO IDENTIFY A SPECIFIC AGRI SUB-SECTOR FOR A START AND EVENTUALLY DIVERSIFY TO OTHER AGRI SUB-SECTORS TO REDUCE CONCENTRATED RISKS.
Market expansion through Product Diversification
Market Expansion via Product Diversification Training on Expansion Strategies September 13, 2011 RBAP Bldg, Intramuros
What Should We Do? MF Growth Strategy 2011 – 2014 Introduce new loan products to existing clients? Exploit new distribution channels? Form strategic alliance with other institutions & cos.? Introduce new loan products to new markets segments? Growth Objectives Move upmarket to target bigger customers? Expand branch network to new region? 1. What’s my strategic growth objective? 2. How do I assess competing opportunities? STRATEGIZING – OPTIONS! OPTIONS!
9 Ways to Build Demand: Mix and Match Source: Philip Kotler, International Marketing Guru & Professor, Kellog School of Mgmt, Northwestern University, Illinois P R O D U C T S Existing Modified New MA R K E T Existing Sell more of existing products to our existing types of customers (Market Penetration) Modify current products and sell more of them to our existing customers (Product Modification) Design new products that will appeal to existing customers (New Product Dev.) Geographical Enter and sell our products in other geographic areas (Geographic expansion) Offer and sell modified products to new geographical markets Design new products for prospects in new geographic areas New Sell our existing products to new types of customers (Segment Invasion) Offer and sell modified products to new types of customers Design new products to sell to new customers (Diversification)
Why Should We Do It? <ul><li>Increase efficiency? </li></ul><ul><li>Improve distribution? </li></ul><ul><li>Improve cost-effectiveness? </li></ul><ul><li>Expand markets? </li></ul><ul><li>Reach more unbanked areas? </li></ul><ul><li>Improve income? </li></ul>Why This Technology? Why This Channel? (Ex.: ATM; MP Banking; MBOs) Why This Product Innovation? (Ex.: New microloan prods; savings prods; microinsurance) <ul><li>Respond to client needs? </li></ul><ul><li>Increase Client Retention? </li></ul><ul><li>Remain competitive? </li></ul><ul><li>Fill market gap? </li></ul><ul><li>Expand markets? </li></ul><ul><li>Improve Income? </li></ul>Think Through Analysis
Regulations provide opportunities to diversify MF products
… microfinance principles and methodologies <ul><li>- small loan amounts </li></ul><ul><li>alternative forms of collateral </li></ul><ul><li>character & cash flow-based </li></ul><ul><li>regular amortization </li></ul><ul><li>short-to longer-term (for housing) </li></ul>*/ CGAP
BSP recognizes loans for housing to low income groups as microfinance but with loan amount and term that may extend beyond P150k and 12 months, respectively. Micro Agri Loan Small loans up to P150k Short term: up to 12 months
<ul><li>BSP guideline allows up to 15 years to pay a loan for new housing or purchase of lot </li></ul><ul><li>Bank can set lower maximum term. </li></ul>
Better Credit History Improved Asset, Shelter & Home-based Enterprise Stronger Community & Economy OUTPUTS Progressive Housing Outputs
MABS APPROACH TO AGRI MICROFINANCE <ul><ul><li>Market segment - Farming households with multiple sources of income * </li></ul></ul><ul><ul><li>Regular loan payments (option: regular with balloon payment) - not totally dependent on success or failure of farm production* </li></ul></ul><ul><ul><li>Cashflow - determines amount a farmer can borrow & pay* </li></ul></ul><ul><ul><li>Value chain finance – pursue opportunities to reach farmers who are linked to markets, technology, training which reduce farmer’s risks* </li></ul></ul>
<ul><li>Where to classify the Micro Agri loan Product? </li></ul><ul><li>In January 2006, The BSP Monetary Board approved the classification of the Micro Agri loan Product as microfinance. </li></ul><ul><li>Why is this important? </li></ul><ul><ul><li>No need for Financial statement </li></ul></ul><ul><ul><li>No need for TIN </li></ul></ul>
Examples of Agricultural Products Financed Under MAP ABACA VEGETABLE COPRA POULTRY SMALL FARM TOOLS and EQUIPMENT FRUITS MARINE PRODUCTS RICE FARM ANIMAL