Rev.vers.Fin 08/21/12
Self-Administered Institutional Assessment for Rural Banks
Interested to Start a Microfinance Operation
Under the MABS Program
This form is to be completed by banks interested in starting their microfinance operations using the MABS Approach. The questions below will help the bank assess its readiness to begin microfinance operations. Any response under the columns NO or DON’T KNOW/NOT SURE implies that management should first do a deeper review of the bank’s market opportunities and institutional constraints before going ahead with its plan to venture into microfinance.
Name of bank: ______
Address:______
Name of person submitting this form:______
Position in the bank: ______
A.Market
1.Size of Potential Market
Are there at least 12,000 households in the service area where the potential 8/21/128/21/12pilot branch is located, including those of barangays within 5 km radius of the branch?[1]
YESNODON’T KNOW
2.Competition
If there are financial institutions that are active in lending to microenterprises in the branch’s service area, and given what you know of your competitors’ client outreach, do you believe
that this market is already saturated/nearing saturation?[2]
YESNODON’T KNOW
B.Organization & Management
1.Organizational Culture
Successful microfinance institutions (MFIs) are tough in
dealing with their delinquent borrowers. They impose high
penalty charges to discourage late payments, make
frequent follow-up visits on delinquent borrowers, bring
some of the more difficult ones to court, and if necessary,
get items provided by the borrower as loan security.
Is your bank prepared to do all of these?YES NONOT SURE
The cost of microenterprise lending can be higher than the
cost of more traditional lending.Transactions are small yet
numerous. Is the bank willing to charge an interest rate that
will be higher than its present rates to cover all its costs?YES NONOT SURE
Microfinance loans are not covered by conventional collateral.
Is the bank willing to relax its loan security requirements, at
least for loans up to PhP25,000?YES NONOT SURE
Microfinance requires dedicated and hard-working field staff.
Successful MFIs set weekly and monthly performance targets
for their staff and weed out those performing consistently below
management expectations. Is your bank prepared to be firm in
demanding a high level of performance from your staff?YES NONOT SURE
Is your bank willing to provide cash incentives later on to those
staff who perform consistently well? YES NONOT SURE
3.Management Priorities
Is management willing to be directly involved and give priority attention to its microfinance operation, especially during the product-testing phase (first 12 months)?
YESNONOT SURE
C.Microfinance Unit
1.Is the bank willing to set up a microfinance unit (MFU) consisting of
a full-time MFU Supervisor and at least, two full-time and
preferrably new, Account Officers (AOs) in the pilot branch?YESNONOT SURE
2.Is the bank willing to keep the MFU staff exclusively focused
on the microfinance products of the bank?YESNONOT SURE
3.Is the bank willing to organize a core group within the bank,
consisting of a senior officer at the head office, the manager of
the pilot branch and the MFU Supervisor to plan and oversee
the implementation of the bank’s microfinance operation?YESNONOT SURE
4.Is the bank willing to send this core group to attend the
four-month MABS modular training program?YESNONOT SURE
5.Is the bank willing to decentralize is loan approval process and
provide lending authority, even if limited, to its branches to speed
up loan processing and approval?YESNONOT SURE
D.Other Resource Requirements
1.Loan Portfolio
Will the bank be able to allocate at least PhP1.2 million for lending
during the first 12 months of its microfinance operations[3]?YESNONOT SURE
2.Infrastructure
Is the bank willing to provide sufficient space, furniture and
equipment (e.g. computers, typewriter, steel cabinets, motorcycle)
in the pilot branch for its MFU?YESNONOT SURE
3.MIS
What banking system or management information system does MICROBANKER
the bank currently use? RB2000
BYTE PER BYTE
IN-HOUSE
OTHERS (specify) ______
NONE (or excel-based)
Is the bank willing to invest in enhancing its computer hardware
and software to accommodate the microfinance reports needed to
track daily loan releases, daily loan delinquency report, portfolio
at-risk, and other reports prescribed by the MABS Approach?YESNONOT SURE
Is the bank willing to provide the MFU with its own dedicated
desk-top computer and printer for easier access by its staff to
information on the status of loans and deposits of their clients?YESNONOT SURE
F.Comments/Suggestions
______
______
______
______
SignatureDate
N.B. After filling out this form, kindly return it to the training Facilitator. Thank you.
Module 1: Senior Management Orientation
Institutional Assessment Handout ver.08/21/12
Page 1 of 3
[1] The assumptions used are as follows: a bank needs at least two account officers (AOs) to start its microfinance operations; one AO, on the average, can work with as many as 150 borrowers; the bank’s market share is 10% of the total number of households with a microenterprise; and the total number of all households with a microenterprise is 20% of the total number of all households in the community.
Given these assumptions, the minimum household population requirement is estimated as follows:
Minimum number of active borrowers per branch: 2 AOs * 100 borrowers = 300
Total number of HHs engaged in microenterprises: 300/10% = 3,000
Total number of Households: 2,400/20%=12,000
[2] Competitors you should be wary of include other rural banks, NGOs, and cooperatives that may already be lending to your target clients. Lending investors, Bombays, and other five-six operators may presently dominate your target market, but they pose little competition to the bank as it could offer substantially lower charges.
[3] 240 borrowers with an average loans outstanding of PhP5,000 each