RURAL BANK OF
CANTILAN, INC.
MICROFINANCE: Individual
Loan Product
Circa 1999
OUTLINE OF
PRESENTATION
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The Municipality of Cantilan
Rural Bank of Cantilan (RBC) Institutional Profile
RBC’s Microfinance Experience
Features of RBC’s Microfinance Product
Policies and Procedures
BANK PROFILE,
1999
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Established in 1980
Only bank in Cantilan
Has 5 branches including main office
Total resources (Aug 02) P
Total loan portfolio P
Has 144 employees
RBC Organizational Chart, 1999
Board of Directors
General Manager
Accountant
Bookkeepers
Cashier
Tellers/
Solicitors
Loans Officer
Account Officers
MF Supervisor
Regular Loans
Account Officers
Microfinance
BANK PRODUCTS,
1999
Deposits
 Regular Savings
 Student’s Savers
 Time (Savings Deposit Plus; Double
Your Money)
Loans
 Agricultural (secured loans)
 Commercial (including MF products)
 Other Loans (Salary; Bgy Honorarium;
Pensioners’ Loan)
RBC’s Microfinance Product
KITA
(Kitâ Insakto, Tipon Asenso:
Individual Liability Product)
Kitâ Insakto, Tipon Asenso
( K I T A )
PRODUCT FEATURES, 1999
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Intended for microentrepreneurs
Loan sizes of P2,000.00 up to P25,000.00 for first
time borrowers
Maximum loan up to P80,000
3% monthly interest amortized equally
P200 service fee deducted up front; beyond P30K,
1% SC
Loan term : 1 mo. – 6 mos.
Mode of payment : Weekly
Pick up service for loan payments & deposit
Kitâ Insakto, Tipon Asenso
( K I T A )
Borrower Eligibility Criteria, 1999
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Individual, male or female, 18-65 years
old, in good health
Engaged in present business for at least
one (1) year.
Residing in present address for at least
two (2) years.
Kitâ Insakto, Tipon Asenso
( K I T A )
Borrower Eligibility Criteria
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Residence must be within the bank’s
service area.
Business is located within a defined
geographical area coverage of KITâ
loan product.
Without any history of past due loam
with Rural Bank of Cantilan or with any
creditor or supplier.
Kitâ Insakto, Tipon Asenso
( K I T A )
Loan Size, Terms and Fees
Loan
Number
Amount
Term
Interest rate
Service
Charge
Penalty
First
2,000-25,000
1-3 mos.
3%/month
200
2%/day
Second
2,000-30,000
1-4 mos.
3%/month
200
2%/day
Third
2,000-35,000
1-5 mos.
3%/month
200
2%/day
Fourth
2,000-40,000
1-6 mos.
3%/month
200
2%/day
Fifth
2,000-45,000
1-6 mos.
3%/month
200
2%/day
Succeding
Loans
2,000-50,000
1-6 mos.
3%/month
200
2%/day
Kitâ Insakto, Tipon Asenso
( K I T A )
PRODUCT FEATURES
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Loan Security :
P2,000.00 – P10,000.00 ; two co-makers only
 P10,001.00 – P20,000.00 ; two co-makers plus
Security Agreement, Deed of Assignment of
Deposits
 Above P20,000.00 - REM or Chattel Mortgage
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Deposit Build up:
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Initial deposit at least P100
Regular deposits to go with each loan payment
Kitâ Insakto, Tipon Asenso
( K I T A )
Loan Collateral
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Some form of collateral/guarantee may
be required on all loans
The value of the collateral will not be a
determining factor in deciding how
much a client can borrow.
Collateral should not be relied on as a
means of recovery
Kitâ Insakto, Tipon Asenso
( K I T A )
Repayment Capacity
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An assessment of now much a person or a
business can borrow and easily pay over a
particular time.
Determined by looking at the net income of the
business and the net income of the household on
a daily, weekly and monthly basis.
It is recommended that the initial maximum
adjusted repayment capacity should not exceed
25% for first-time clients.
Kitâ Insakto, Tipon Asenso
( K I T A )
Loan Amortization Schedule
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Frequency of payments depends on the
income flow of the borrower.
Equal payments either daily or weekly.
Daily amortization is paid from Monday to
Friday.
Weekly amortization is paid every 7 days
from the anniversary day.
Kitâ Insakto, Tipon Asenso
( K I T A )
Payment Schedule
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Loan with DAILY payments: First installment starts
the day after loan release. When a loan release falls
on a Friday, the first installment shall be due Monday
of the following week. Daily payments ate directly
credited each day to the client’s account.
Loan with WEEKLY payments: First installment shall
be due on the 7th day starting from the day after
releasing the loan. For example, when a loan is
released on a Monday, weekly payment is due every
Monday thereafter.
Kitâ Insakto, Tipon Asenso
( K I T A )
Restructuring
Restructuring of loans should be discouraged
and must be governed by strict rules
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Restructuring should only be allowed for clients who
“can’t pay”.
Restructuring should only be allowed once for each
client.
Terms of the restructured loan must not exceed 6
months.
Kitâ Insakto, Tipon Asenso
( K I T A )
Prepayment
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Only good clients who have paid at least 85% of
the amortizations due and would need a repeat
loan to meet a good business opportunity are
allowed to fully repay their loans before the
maturity date.
Kitâ Insakto, Tipon Asenso
( K I T A )
Savings Component
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Bank ultimate goal – to help clients achieve financial
stability as a result of good savings habit.
All loan clients are required to maintain deposit accounts.
The minimum amount to open is P100.
Clients determine how much they will deposit weekly, but
minimum is P30
Loan Delinquency Management
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ALARM SIGNALS IN MANAGING
DELINQUENT PAYORS
Loan Delinquency Management
Alarm Signal No. 1:
Payment is Delayed One (1) Day
AO visits the client within 24 hours.
AO determines the reason for nonpayment.
AO encourage the client to pay
immediately so as to avoid falling
behind in their payments.
Loan Delinquency Management
Alarm Signal No. 2:
Payment is Delayed Three (3) Days
AO warns client of adverse
consequences of non-payment (penalty
charges, negative credit ratings).
AO informs co-borrower and comakers.
AO reports result of visit to MFU
Supervisor
Loan Delinquency Management
Alarm Signal No. 3:
Payment is Delayed One (3) Week
Sent first warning letter
MFU Supervisor visits borrower
If the client is unable to pay, the MFU
Supervisor should visit the co-borrower and
co-maker to collect.
MFU Supervisor reports result of visit to the
Branch Manager.
Loan Delinquency Management
Alarm Signal No. 4:
Payment is Delayed Two (2) Weeks
Branch Manager visits borrower, co-borrower
and co-makers.
Branch Manager informs the clients of more
drastic measure like notifying the barangay
captain.
Branch Manager warns the client of becoming
blacklisted borrower.
Loan Delinquency Management
Alarm Signal No. 5:
Payment is Delayed Three (3) Weeks
Third and final warning letter sent.
Notify the barangay captain.
Finalize the “Dacion en Pago” or chattel
mortgage.
Ask the client to come to the bank
immediately to avoid legal action.
Loan Delinquency Management
Alarm Signal No. 6:
Payment is Delayed Four (4) Weeks
AO, MFU Supervisor, and the Branch
Manager should now arrange to get the
security item or chattel.
Clients will not be able to borrow from
the bank again.
K I T A Lending Process and
Procedures
Microfinance Loan Flow Chart
Client Orientation
and Pre-application
Loan
Repayment
Credit and
Background
Investigation
Loan Release
Disbursement
Loan
Application
Loan Review
and Approval
Client Orientation
Applicants come to the
bank for the client
orientation
Client Logbook
Welcome and
introduction of
prospective clients
Question and Answer
Orientation proper
Attendance
sheet
Client comes
Pre-Application Procedure
to bank
AO interviews client to
determine eligibility
Orientation for
eligible clients
Clients complete the
pre-application form
AO conducts
the CI/BI
Credit and Background
Investigation
AO conducts
initial interview
If initial interview is
positive, AO visits two
reference suppliers or
creditors, or one of each
AO visits two co-makers, two to
three residential neighbors and
barangay captain/purok leader
or market administrator
If CI/BI is positive, AO
prepares the loan
application form
AO follows up the credit
references given by the
prospective client
AO verifies client for
court cases or
warrant of arrest
Loan Application
AO goes back to
the client together
with the
application form
and tells the cash
flow result.
If interested, the
applicant and
his/her spouse
should sign the
application form.
Preparation before the Credit
Committee Meeting
AO summarizes and prepares the
loan recommendation sheet
AO organizes the
applicant’s Credit Folder
Supervisor reviews
applicant’s Credit Folder
• Loan Recommendation
Sheet
• Loan Application Form
• Completed CI/BI Form
• Co-maker’s Profile
• Proof of Payments and
other documents
Check and reviews for
inconsistencies
Loan application is endorsed to
the Credit Committee
Loan Review and Approval
(Credit Committee Meeting)
Preparation
Supervisor
presents CI/BI
result to Credit
Committee
Credit Committee
• meets once a week to
review and approve loans
• composed of General
Manager, Tandag Branch
Manager and MFU
Supervisor
Discussion
Recommendation and Approval
Loan Release Disbursement
Manager Reviews and
signs Application form,
Disclosure Statement
and Cashier’s Check
Client receives cash from
Teller, signs receipt for amount
received, Teller stamps
“PAID” on the Discount and
Disclosure Statement, and CC
Teller forwards loan
security folder to New
Accounts Clerk who then
forwards the check to the
bookkeeper
Cashier checks deductions
and net proceeds, signs
Cashier’s Check and
forwards security folder to
the Loans Teller
Teller disburses loans,
encashes CC and gives
client the Loan
Disclosure and Discount
Statement, and schedule
of payment
AO prepares summary
of releases for the day
Supervisor encodes Client
Identification (CID),
executes first stage release
and tagging
Cashier approves loan
release, generates
schedule of payments
for AO, Teller and
Client
New Accounts Clerk
forwards security folder to
the Supervisor
Loan Repayment
There are two ways:
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Provisional Receipt based repayments through AO or
Bank’s Collector (manual system)
Official Receipt repayment through the Teller
Provisional Receipt based
Repayments
AO collects
payments from
client, issues PR
Bookkeeper generates computer based repayment at the end of the
day and updates individual manual ledger on the next day
Back at the office, AO
checks collection against
issued PR, enters collection
from each client in Excel
and give a copy of
Collection Sheet to Teller
Teller verifies totals per
summary and money
received, then posts
individual deposit collected
and repayment schedule with
provisional receipt.
In the event of shortages or averages,
AO records it in the collection summary
and trace its source. Any excess should
be turned over to the Cashier
Cashier makes
accounting of
receipts issued by
the collector for
the day, declares
missing or
cancelled receipts
AO forwards cash collected to the
Teller for issuance of Official
Receipt
Official Receipt Repayments
Teller should accept repayment and issue Official Receipt not less than the amount of
amortization due of the client
In case of over payment and client wants it save, Teller should accept it as deposit.
Teller posts the payment or savings deposit on the computer.
Bookkeeper generates computer based repayment at the end of the day and updates
individual manual ledger on the next day
Cashier makes accounting of receipts issued by the collector for the day, declares missing
or cancelled receipts
ACCOMPLISHMENTS OF KITA
LOAN FOR THE FIRST 3
MONTHS PILOT TEST
Daghang Salamat !
“There is no truth to the saying that
the poor does not pay or cannot save.
All it takes is discipline which should
first come from the bank. Our
failures in handling microfinance in
the past was mainly caused by the
poor product design and our laxity in
handling collections.”
-Mr. Romy Garcia, then Chairman of
BCB