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

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

  1. 1. 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
  2. 2. 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.

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

  4. 4. 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.” 

  5. 5. 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


  6. 6. 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


  7. 7. 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.

  8. 8. 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

  9. 9. 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).

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

  11. 11. •  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.
  12. 12. After cleaning up our loan portfolio in December, the number of loan accounts bank wide managed to rise in the first quarter of 2009.
  13. 13. 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.
  14. 14. •  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 .
  15. 15. 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

  16. 16. 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

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

  18. 18. 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

  19. 19. 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!

  20. 20. THANK
YOU


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