New Developments & Future Trends in Microfinance for Rural Banks
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This presentation was given on November 11, 2011 during the 54th Annual Rural Bankers Association of the Philippines Charter Symposium at the Manila Hotel. It covers the progress of the RBAP-MABS program as well as new developments and trends in microfinance that rural bankers should consider as they move forward.
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New Developments & Future Trends in Microfinance for Rural Banks
- 1. New Developments &Future Trends in Microfinance for Rural Banks John V. Owens 54th RBAP Charter Symposium Manila Hotel November 10-11, 2011
- 2. Providing technical assistance and training to rural banks in microfinance best practices since 1997!
- 3. @15!
- 4. • 100 participating rural banks • 1,100 bank branches& OBOs
- 5. Key Indicators As of Sept-2011 Cumulative No. of New > 900,000 Borrowers Cumulative Amount of Loans > PhP 37 B Disbursed Total No. of Micro-deposits > 1.45 M Total Volume of Micro- > PhP 2 B deposits
- 6. Technical Initiatives and Training in microfinance best practices Enhancement of ICT Systems to support microfinance operations Microfinance Products and Services Local & International linkages
- 7. Micro-Loans Performance Indicators 1998 - June 2011 300,000 2,500 Micro-Loan Portfolio Balance (in Millions) 246,016 249,579 250,000 No. of Active Borrowers Outstanding 2,000 223,125 2,028 203,964 1,963 200,000 184,933 1,696 1,500 1,603 150,000 139,454 1,468 1,000 100,000 89,137 921 72,315 500 45,216 632 50,000 33,587 22,266 525 10,185 317 225 85 1,905 129 53 0 0 7 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 No. of Active Micro Borrowers Outstanding Micro-Loan Portfolio Balance (in Millions)
- 8. Micro-Deposits Performance Indicators 1998 – June 2011 1,600,000 2,500 1,446,772 1,458,905 1,437,370 1,424,111 1,400,000 1,280,994 Amount of Micro-Deposit Balance (in Millions) 2,000 1,200,000 1,170,669 2,059 No. of Micro-Depositors 2,023 1,000,000 1,930 1,500 1,831 835,469 800,000 771,799 1,688 1,000 600,000 1,578 523,713 482,488 1,104 400,000 1,002 349,459 567 500 197,146 541 200,000 336 171 482 11,601 0 0 12 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 No. of Micro Depositors Outstanding Amt. of Micro Deposit Balance (in Millions)
- 9. Factors Affecting Banks Inclusive New Regulations Technologies Increasing Changing Rural Competition markets Banks
- 10. What is your market niche? Households Enterprises Teachers Out-of-town Workers Farmers Fishermen Employees Utility companies Children 10
- 12. Multiple Borrowings & Over-indebtedness
- 13. More Discriminating Borrowers & Savers ATM Cards Microinsurance
- 14. Addressing the Needs of your Market TRADITIONAL PRODUCTS NEW PRODUCTS Microfinance Housing Microfinance Salary Loans Microinsurance Commercial Loans Cash Cards Agriculture Loans ATM services Deposit Services Micro-Agricultural Remittances Loans Bill Payments Money Transfer Services Mobile Phone Banking
- 15. Inclusive Regulations enabling Greater Outreach Branchless Banking via Mobile, Cash Card, ATM, and Microinsurance Debit Card Microsavings products More micro loan products (Housing Microfinance, Micro Agri) Micro Banking Offices
- 16. • Micro Deposits (deposits/withdrawals) • Micro Loan Disbursements and Collections • ATMs • Electronic Money Cash-in and Cash-out services • Bill payments • Remittances • Government Payments • Utility Payments
- 17. small loan Small Farm Home amounts Production Improvement alternative forms Farm tools & House/Lot Acquisition of collateral equipment character & cash flow-based regular amortization short-to longer- term (for housing) */CGAP
- 18. MicroSavings
- 19. MicroSavings
- 20. MicroSavings
- 21. WIN P500 BE THE FIRST TO TEXT YOUR NAME AND EMAIL ADDRESS TO 0-917-848-MABS
- 23. New Technologies & Channels
- 24. Widespread Mobile Banking Technologies SMS Banking
- 25. Mobile Money Platforms •Card-less Mobile Money Platform •Card-based Mobile Money Platform •Now linked to an ATM card •Instant Smart Money Card •Co-branded with rural banks •MasterCard Debit Card •Payments •Payments •Money Transfer •Money Transfer •Mobile Banking •Mobile Banking
- 26. “Toys are hooks for selling Happy meals as mobile payments or mobile transfers are hooks for selling a depository relationship”QasifShahid MCB
- 27. Today, Rural Banks Can Offer the Following Mobile Phone Banking Services…
- 28. Lower Cost of Technology
- 29. Use of Card-based & ATM Banking
- 30. Use of Third-Party Networks
- 31. Are you using Social Networking & Crowdsourcing to expand your market outreach?
- 36. Rural Bank Responses Market trend responses o Product diversification o Customer retention programs o Introduce payment services Competitive responses o Use MBOs o Introduce micro-deposits & mobile money transfer to „up-sell‟ other products/services Use third-party networks to outsource KYC & market bank services
- 37. Rural Bank Responses New Technology Adoption Deploy Cash/Debit Card, Mobile Phone Banking, and “Agent” Channels Upgrade Core Banking Solutions Utilize the Power of Social Networks
- 38. Things to watch out ... 1. Pricing Transparency – Tiered Pricing 2. Credit Bureaus 3. Leverage Technology 1. Outreach 2. Competition 3. Efficiency 4. Social Networks - Crowdsourcing
- 43. M a r a ming S a l a m a t!!! Email: jowens@rbapmabs.org Websites: www.rbapmabs.org www.mobilephonebanking.rbap.org microinsurance.rbap.org www.youtube.com/rbapmabs Facebook: MABS Phil
Editor's Notes
- The Rural Bankers Association of the Philippines -Microenterprise Access to Banking Services (RBAP-MABS)Programprovides technical assistance and training to rural banks in microfinance best practices since 1997 with support from USAID.The program is designed to develop the capability of rural banks to profitably provide financial services (loans, deposits, insurance, money transfers and mobile banking) for microenterprise clients.
- Starting at the end of this month, the RBAP-MABS program will start its 15th year that USAID has provided support to RBAP under this initiative to providing training & technical assistance to assist rural banks to provide microfinance services. This will also be the year that RBAP, MABS Service Providers, and partners fully take over the MABS activities and continue to expand and offer these services to its members.
- RBAP-MABS has now assisted more than 100 participating banks with more than 1,100 branches, OBOs, and MBOs to provide a full range of microfinance services.
- No of active borrowers = 246,579Micro loan portfolio balance = over P2.1B
- No of micro-depositors = 1,446,772Total Amount of Deposit Balance – over P2.B
- Today, rural banks are faced with a number of factors that affect their ability to expand their services. Markets are changing today more than ever before with new products and services and much greater access to information than ever before. Traditional and new players are now entering the market from all directions. New technologies provide banks and others with new ways to address market conditions. This is both a challenge and an opportunity for those who move quickly. New regulations are promoting greater financial inclusion than ever before.
- Please fix to 20 size font, enlarge the photos and center the words under each photo (use the top line as an example)
- Clients today are no longer satisfied with simple deposit and credit services but want access to new products and services including micro insurance, access to ATMs, cash cards, prepaid debit cards, mobile banking and other services.
- We continue to see pockets of multiple borrowings and over-indebtedness among some clients in certain markets so banks will need to be increasingly careful to select new clients and retain old clients as well as to continue to monitor how indebt clients are becoming. The need for sharing credit references and access to credit bureaus are now more important than ever before.
- Clients also have greater access to information from friends and neighbors and are comparing the services you offer. Do you offer good customer support, are you able to be reached, do you offer access to an ATM or debit card? Microinsurance? Accessible via SMS or on the phone? Are you open late or on weekends? Do you have accessible OBOs or MBOs in areas which are accessible to clients? Do you have low minimum maintaining balances for deposits? Quick loan processing?
- OBOs/MBOs can now accept deposits and is designed to fit the capacity and serve the needs of basic sectors.Features of Micro-Deposit includes:Minimum maintaining balance not exceeding P100Not subject to dormancy chargesOnly for individual clients whose ADB balance does not exceed P15kNo frills account to address to basic deposit account and increase savings consciousness to the low-income population.
- 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.
- We noted that a lot of Filipinos use to save like this
- Today rural banks offering savings boxes like these to tens of thousands of small savers
- And some successful rural banks have done quite well with carefully crafted raffles and/or concert campaigns to attract customers
- To demonstrate the effectiveness of raffles, let’s see who can be the first one to text me their name and email address and that lucky person will win P500 of GCASH.
- Microinsurance video
- New technologies are now offering opportunities not dreamed possible 5-10 years ago. SMS services, POS systems, cash cards, ATM cards, and prepaid debit cards. New social networking sites to reach and interact with clients are becoming increasingly important.
- Mobile Banking services allow clients to access bank account information on the go. While sophisticated systems do exist, only the higher end versions are beyond the reach of rural banks. Today, low cost SMS Gateway systems such as MABS partner MyClick allow one way and two way messaging for clients. Mobile money enabled solutions are also becoming more popular.
- Today, banks can offer both GCASH and Smart Money mobile money services to facilitate greater access to banking services.
- “Toys are hooks for selling Happy mealsas mobile payments or mobile transfers are hooks for selling a depository relationship”QasifShahid Head of Remote Banking & Executive Vice President MCB Pakistan
- As I mentioned before, lower costs for MIS systems, SMS systems, and even POS systems like this one are making it easier and cheaper to invest in new technologies to expand outreach.
- Cash cards offered by banks such as BDO or ATM cards like the co-branded GCASH Rural Bank FaceCard are now providing greater access and significantly lower fees than ever before. Smart Money MasterCards offer the convenience of not only accessing ATMs but also paying in over 50,000 MasterCard POS merchants nationwide.
- The BSP has opened the doors to partnering and offering banking services that can be promoted through third party agents. BPI has lost no time setting up kiosks in different areas to promote micro savings using the Easy Savers Plan that provides new customers with an instant ATM card. BanKO is also offering any business who wants to partner with them to become a partner outlet like the ones pictured here. Cheaper POS systems and liberal agent banking regulations in countries such as Brazil mean that most banking transactions take place in shops rather than going to a bank where you can pay bills and support deposits and withdrawals. By using a mobile wallet, BanKO is a good example of how this is also now taking place in the Philippines.
- Social networking via SMS marketing or updates or sites such as Facebook and Twitter are changing the face of banking.
- Here is an example of one banks Facebook site
- Here is another which also provides updates not only about the bank but also information relevant to clients
- BanKO has done extremely well over a short time bringing some of the their clients together to provide information and even business opportunities. For those interested in partnering with the bank to become a BanKO Outlet and make money, the bank is also actively promoting this via social network sites such as Facebook.
- Banks need to look at how to promote their services and get more viral adoption such as using the FaceCard concept to encourage others to bank with the bank
- Rural banks need to diversify their products and services to both reach new clients and retain existing customers. Now is the time to diversify your product and consider services such as microinsurance, offering a cash/debit/ATM card. Take advantage of new rules to offer payment services. In the future we see prepaid services such as light, water, or even cable as becoming opportunities to service new and existing clients. . The ability to open MBOs provides greater and faster ability of banks to reach new market niches as well as locations. Micro savings services and reduced KYC as well as the ability to outsource KYC to open small accounts will dramatically change the banking landscape and rural banks should take advantage of this as well or potentially loss clients to their competitors both new and old. Make sure to use micro deposits, mobile money transfer services, or payments as a way to “cross-sell” other services in the bank. Offer cheaper transfer or payment services for those who maintain accounts at the bank or are a borrower.
- Take advantage of cash/ATM and debit cards now being offered in the market. Mobile phone banking will only grow and now is the time to ensure you are an early mover. Utilizing merchant partners as “agent” channels is already happening and should be actively explored. At the end of the day, your success will be based not only on your efforts but also on building successful partnerships and strategic alliances in your community. Invest in core banking solutions and make sure to take advantage of low cost and powerful social networking as well as tapping influencers in your community.Inclusive regulation will require quite a bit more focus on loan pricing in the coming year so take advantage of organizations such as MFTransparency. Also their will be increasing importance of consumer protection principles and responding to customer issues so make sure you consider your customer relationship management strategy
- Pricing Transparency will force greater efficiency--- more strategies on tiered pricingNeed for expanded use of credit bureausLeverage technology to addressOutreachCompetitionEfficiency(Examples: ATMs, cash cards, mobile money, and improved MIS)4. Make use of Social Networks - crowdsource
- Before this presentation, I did my own crowdsourcing on twitter to ask what advice I could give to rural bankers in the Philippines about the future of microfinance and banking and here is one of the answers I received from the famous author of Bank 2.0 and the new CEO of one of first cardless bank in the US and UK, Brett King. Basically the important thing for banks to consider is about how to create a “utility” in the bank-client relationship to answer the important question of how does the bank help me get stuff done and simplify my financial concerns!Salamat.
- And here is another set of advice from London
- Here is from a colleague that has worked with rural banks in Indonesia and is the now the mobile money head for Visa covering South East Asia!
- And finally from Scott Bales who has worked with WING in Cambodia and FUNDAMO where he provided advice to Bank Andara in Indonesia and various mobile money initiatives linked to microfinance efforts in Pakistan.