Quarterly Report Microenterprise Access to Banking Services Program Phase 4 (Mabs-4) Seventh Quarter October – December 2009

QUARTERLY REPORT MICROENTERPRISE ACCESS TO BANKING SERVICES PROGRAM PHASE 4 (MABS-4) SEVENTH QUARTER OCTOBER – DECEMBER 2009

March 2010

This publication was produced for review by the United States Agency for International Development. It was prepared by the Microenterprise Access to Banking Services Program.

QUARTERLY REPORT MICROENTERPRISE ACCESS TO BANKING SERVICES PROGRAM PHASE 4 (MABS-4) SEVENTH QUARTER OCTOBER – DECEMBER 2009

Contract No. EEM-I-00-07-00008 Rural Bankers Association of the Philippines (RBAP) Mindanao Economic Development Council (MEDCo)

The author’s views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government.

ACRONYMS USED IN THIS REPORT

ADB Asian Development Bank ARMDEV Associated Resources for Management and Development Inc. BSP Bangko Sentral ng Pilipinas CI/CO Cash-in/Cash-out CIBI Credit and Background Investigation EAGLE Efficiency, Asset Quality, Growth, Liquidity, and Earnings GXI G-Xchange, Inc. IFC International Finance Corporation IPA Innovations for Poverty Action KRA Key Result Area MABS Microenterprise Access to Banking Services MABSTeRS MABS Technical Resource Specialists MAP Micro Agri-loan Product MATTS MABS Training and Technical Services MBB MicroBanking Bulletin MCPI Microfinance Council of the Philippines MEDCo Mindanao Economic Development Council MIAAP Microinsurance Associates Agency Philippines MIC Microinsurance Centre MICRA Microfinance Innovation Center for Resources and Alternatives MIS Management Information Systems MIX Microfinance Information Exchange MPBS Mobile Phone Banking Services MPMS MABS Performance Monitoring System MSP MABS Service Providers PB Participating Bank RBAP Rural Bankers Association of the Philippines ROLI Rule of Law Initiative SAF Special Activities Fund SEC Securities and Exchange Commission SMS Short Messaging Service TA Technical Assistance TAB Text-A-BillPayment TAC Text-A-Credit TAD Text-A-Deposit TAP Text-A-Payment TAR Text-A-Remittance TAW Text-A-Withdrawal USAID United States Agency for International Development

The author’s views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government.

CONTENTS

ACRONYMS USED IN THIS REPORT ...... 3 EXECUTIVE SUMMARY ...... 1 CONTRACTOR’S REPORT ...... 9 A. MSAB ‐4 OVERSIGHT ...... 9 B.E XPECTED RESULTS ...... 9 C. KEY RESULT AREAS (KRAS) ...... 10 Key Result Area 1: Expansion of banks providing microfinance services ...... 10 Key Result Area 2: Assistance to Banks to Extend the Range of Services ...... 15 Key Result Area 3: Sharing of lessons learned with global practitioners ...... 26 D.P ERFORMANCE ...... 32 E. ADMINISTRATIVE INFORMATION ...... 33

TABLES

TABLE 1: MABS-4 KRA1 DATA FOR QUARTER 7 VS. TARGETS (QUARTER 7, YEAR 3, AND END-OF- PROJECT) ...... 10 TABLE 2: KRA2 DATA FOR QUARTER 7 VS. TARGETS ...... 15 TABLE 3: KRA3 TARGETS ...... 26 TABLE 4: MABS-4 TARGETS VS. DECEMBER 2009 RESULTS ...... 32 TABLE 5: PROJECT FUND STATUS: DECEMBER 31, 2009 ...... 33

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ANNEXES

ANNEX 1.1 PUBLIC-PRIVATE PARTNERSHIPS REPORT

ANNEX 1.2 SAF APPROVALS

ANNEX 1.3 SAF TRACKER

ANNEX 1.4 REPORTS TRACKER

ANNEX 1.5 PARTICIPATING BANKS’ PERFROMANCE

ANNEX 1.6 MICROLOAN PORTFOLIO

ANNEX 1.7 MICRODEPOSIT PORTFOLIO

ANNEX 2.1A OCTOBER 2009 HIGHLIGHTS

ANNEX 2.1B NOVEMBER 2009 HIGHLIGHTS

ANNEX 2.1C DECEMBER 2009 HIGHLIGHT

ANNEX 2.1D PRESS RELEASES: OCTOBER - DECEMBER 2009

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EXECUTIVE SUMMARY

This document serves as the Seventh Quarterly Report of the Microenterprise Access to Banking Services Program’s Phase 4 (MABS-4) - covering the period from October 1 through December 31, 2009. It also lays out the workplan for the next quarter.

The MABS Program is a United States Agency for International Development (USAID)- supported program jointly implemented with the Rural Bankers Association of the Philippines (RBAP), with oversight provided by the Office of the President through the Mindanao Economic Development Council (MEDCo). MABS is one of the principal elements of USAID-Philippines’ efforts to accelerate economic growth through expanded participation of lower income groups in productive activities. MABS-4 was launched in May 2008.

The Program provides participating rural banks with the MABS Approach Training and Technical Services (MATTS) package, a systematic, step-by-step training and technical assistance package followed by rural banks as they develop the full capability to profitably provide loan, deposit, money transfer and other financial services to microentrepreneurs and low-income households. By combining technical training for partner rural banks, education to microentrepreneurs and continuous implementation of new technologies, MABS has succeeded in developing the capacity of rural banks to expand access to banking services throughout the countryside. The Program has helped most of its participating banks (PBs) become major players in the Philippine microfinance sector.

Since 1997, the MABS Program has provided training and technical assistance to 90 rural banks with 422 branches and 151 other bank offices to develop microfinance products and services. These PBs have disbursed over 2.1 million loans totaling more than PhP27.1 billion (approximately US$ 571 million) to more than 683,000 new bank borrowers. These partner banks also manage more than PhP1.9 billion (US$41.6) in small savings deposits from over 1.4 million micro deposit accounts.

Technologies introduced by MABS – such as improvements to management information systems and performance monitoring systems — helped banks manage their operations efficiently. Innovative technologies such as mobile phone banking services (MPBS) are now revolutionizing banking not just in the Philippines, but also in the microfinance sector worldwide. MABS helped demonstrate that rural banks can earn profits and benefit society through microfinance.

Despite these achievements, there are still many more Filipino microentrepreneurs without access to financial services. It is estimated that microfinance institutions are reaching only a third of over 4.0 million families who are engaged in micro business activities.

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To address this gap and to give more small entrepreneurs access to more financial products, USAID decided to support and implement the fourth phase of the MABS Program. The overall objective of MABS-4 is to substantially increase the level of banking services being provided to the microenterprise sector, and to lower socio- economic groups in general, by the rural banks and other banks in the Philippines.

During MABS-4 (May 1, 2008 to March 1, 2013), at least 550 rural and thrift bank branches and other bank offices will initiate or substantially expand the level of services they are providing to the microenterprise sector. Other objectives of MABS-4 are:

• Continue expanding access to microfinance. MABS will support the expansion of MABS participating banks to a cumulative total of 550 branches and other bank offices, to increase the cumulative number of new micro borrowers by more than 375,000 during the period of the extension to bring the 15-year total of new borrowers reached to more than 800,000, and to increase the amount of loans disbursed by more than US$500 million to bring the total 15-year cumulative amount of micro loans disbursed to over US$800 million. MABS will focus on providing technical assistance and support to existing MABS PBs to help them grow and open branches.

• Increase agricultural lending. MABS will work with additional rural banks to conduct market research to enhance the micro agri-loan product (MAP) and expand micro agri-lending to an additional 65 bank branches and reach at least 30,000 additional small farmers.

• Introduce housing microfinance. With the rapid population growth in the Philippines, the demand for housing continues to rise. According to the Asian Development Bank (ADB), there is a very large unmet need in the area of housing finance, particularly in rural areas. MABS will initially work with a small group of rural banks to develop and pilot various micro-housing products and if this proves successful, will roll out these services to at least 50 rural bank branches reaching at least 5,000 new clients.

• Expand the use of new technologies. The MABS Program and participating rural banks offer mobile phone banking services and are the acknowledged worldwide leaders in the field of mobile phone banking for microfinance. The innovative partnership that RBAP-MABS, developed with Globe Telecom’s subsidiary G- Xchange Incorporated (GXI), is a success story that has been widely documented in both the local and international media. The MABS initiative and pilot in mobile phone banking and mobile commerce services have just scratched the surface of possibilities and there is still more to be done to promote and institutionalize these services for hundreds and thousand of rural bank clients across the country. Major activities that MABS will undertake to accelerate the expansion of MPBS, which will reach more than 500,000 bank clients and customers through 500 rural bank branches during MABS-4 include: enhancing existing mobile phone banking services for rural banks and developing new products, assisting in promoting and marketing the services locally and nationally, supporting the adoption of appropriate

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regulatory framework for electronic banking and e-money, developing partnerships with international remittance and e-payment firms, and assisting in developing interface software between short messaging services (SMS)-based electronic-money transactions and the back-end system of rural banks to allow for greater efficiency.

• Develop micro-insurance products. The estimated market for micro-insurance in the Philippines is enormous, with most potential clients operating as microentrepreneurs in the large informal sector. In partnership with local insurance companies, MABS will work with 125 rural banks to reach at least a third of rural bank clients and ensure that there is improved access to insurance options which rural banks will be able to offer.

• Improved Access to Credit Bureaus. As more and more institutions engage in microfinance, the need for a comprehensive, accessible, and accurate credit information sharing has become clear. The Credit Information System Act was signed into law in October 2008 - MABS will work with rural banks, the Bangko Sentral ng Pilipinas (BSP – the Philippine Central Bank), and private credit bureaus to ensure that rural banks will be able to participate and access credit bureaus over the coming years.

• Communications and other activities. MABS will continue using appropriate communications and marketing tools to ensure that there is widespread public awareness of the activities and achievements of the Program and that knowledge tolls developed by MABS, best practices, and lesson learned are shared with key organizations in the local and global microfinance industry and practitioners.

Continue expanding access to microfinance During the 7th Quarter, the Program took a strategic step towards expanding its network of participating banks by formally accrediting a third MABS Service Provider (MSP) – the Microfinance Innovation Center for Resources and Alternatives (MICRA). MICRA joins Associated Resources for Management Development Inc. (ARMDEV) and Punla sa Tao Foundation as accredited MATTS trainer and technical services providers to new and existing partner banks.

In coordination with MICRA, MABS conducted an institutional assessment of new partner bank - RB Angeles. The team reviewed the results of a market study conducted by RB Angeles, interviewed the bank’s top management and support staff on their commitment and readiness in offering microfinance, and evaluated the capability of its management information system to generate the required MF reports. With RB Angeles demonstrating strong capability to offer microfinance services, the MICRA training team then delivered the MATTS modules to the bank’s core microfinance team. The bank plans to release the first batch of MF loans by the next Quarter – MABS will coordinate with MICRA in monitoring RB Angeles’ performance.

In November, MABS gave a presentation to the Laguna Federation of Rural Banks outlining the Program’s history, work and services, and accomplishments in promoting the MABS Approach to Microfinance and assisting partner banks in offering microfinance

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services. The rural bank representatives were also oriented on the basic procedures towards becoming a partner bank: undergoing an institutional assessment and completing the MATTS module. The two rural banks that signified interest to become MABS partner banks – Unilink Rural Bank and the Rural Bank of Sta. Rosa – completed the first MATTS module, the Senior Management Orientation, in December.

To further strengthen the capability of existing PBs, MABS provided technical and advisory services. MABS conducted product and operations reviews focusing on PBs’ strengths, areas for improvement, and performance and status of microfinance products and operations. The banks’ microfinance delivery systems, organizational structure, group and individual microfinance loan implementation and documentation, Management Information System (MIS), and microfinance product design and operational system were also assessed. MABS conducted the review of Bangko Mabuhay’s operations in October and the Rural Bank of Dipolog, Rural Bank of Solano, Bangko Santiago de Libon, and FAIR Bank in November.

At the tail end of the 6th Quarter, tropical storm Ondoy (international name Ketsana) dropped a month’s equivalent of rain within twelve hours in Metro Manila and its neighboring areas, triggering massive floods. The National Disaster Coordinating Council has placed the economic damage caused by Ondoy at PhP10. 45B. 1 Several MABS PBs - Rural Bank of Mabitac, Rural Bank of Cainta, and First Macro Bank – have reported that a number of their clients have been affected by the flood. A week after, another tropical storm, Pepeng, caused massive flooding in Northern Luzon, affecting PBs such as GM Bank, Mallig Plains Rural Bank, and FICO Bank, among others.

To strengthen rural banks’ readiness to respond to similar crises and calamities, MABS conducted a two-part Disaster Management Workshop series during the 7th Quarter. The first workshop was held in October at Mallig Plains College in Isabela. The workshop covered topics on disaster preparedness, disaster management execution and recovery, and review phase. MABS also gave inputs on preparing the Business Continuity Plan in the face of disaster, and shared various tools to use in preparing their organizations and personnel for readiness, execution and post disaster response. In close collaboration with MABS, the officers of Mallig Plains Rural Bank led the organization of the training event held at Mallig Plains College. The participants came from provinces affected by Typhoon Pepeng, including Nueva Vizcaya, Isabela, Cagayan, and Apayao.

The same workshop was rolled out to other rural banks in Luzon in November. MABS and RBRDFI gave the participants with a walk through on preparing their banks for disasters, execution of their disaster plans, post-disaster recovery and disaster management review and evaluation. The second day of the training concentrated on managing delinquency problems. MABS trained the participants on identifying the causes of delinquency, analyzing their loan portfolio, collecting their PAR (portfolio-at- risk) loans, making loan write-offs, and remedial management.

1 http://210.185.184.53/ndccWeb/images/ndccWeb/ndcc_update/TD_ONDOY/situation_report_on_humanit arian_coordination_on_tropical_storm_ondoy_ketsana_tc_2009_000205_phl_27.pdf ; accessed October 29, 2009

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To update bankers on the latest trends in the rural microfinance industry, MABS conducted roundtable conferences for rural banks with the theme “Innovation and Growth amidst Competition” during the Quarter. Sixty-three participants from 29 Luzon and Visayas rural banks gathered for the conference held in Manila while 28 participants from 15 Mindanao banks attended the conference held in Davao City.

The conferences included presentations on achieving growth in competitive markets, improving portfolio quality, and consumer protection. Bangko Kabayan Managing Director Teresa M. Ganzon presented how the bank addressed the challenges posed by crises and competition, citing their bank’s experiences and lessons learned. The conference also included updates on the latest trends and developments in relation to MABS initiatives such as housing microfinance, microinsurance and mobile phone banking services. Each presentation was capped with reactions from selected industry players, as well as open forums between the presenters, reactors, rural bankers, MABS technical team and guests. Aside from the presentations, the banks were also updated on MABS’ assessment of their performance in the last six months based on the EAGLE (Efficiency, Asset Quality, Growth, Liability Structure and Earnings) criteria. The newest batch of in-house microfinance trainers were also accredited as MABSTeRS (MABS Technical Resource Specialists) during the event.

Increase agricultural lending During the Quarter, MABS conducted in-house micro agri-loan product (MAP) training for two PBs: Cantilan Bank and Green Bank. Cantilan Bank’s officers and group lending account officers attended the training that aimed to increase client outreach and retain good clients. The account officers learned how to target the households of existing good borrowers under the group loan product, particularly their spouses.

MABS also conducted a MAP Refresher Course for Green Bank to retool and equip its officers and staff on the mechanics of MAP, specifically, on how to better analyze and package a MAP loan. The training was also intended to train the bank on how to increase its client outreach and portfolio, improve its portfolio quality, and eventually rollout the product to more branches.

As of December 2009, 55 rural bank units are offering MAP and collectively have 7,281 active borrowers with an outstanding loan portfolio of more than PhP68.2 million. These banks have disbursed a total of 38,985 MAP loans totaling more than PhP519.9 million to more than 17,500 new micro-agri loan borrowers. In Quarter 8, MABS will conduct training for Northern Mindanao-based banks. The training will focus on market research, product development, loan evaluation and analysis using the CIBI and Cashflow tools, action planning, target setting, and practical tips in implementing and monitoring a micro agri loan product.

Introduce housing microfinance MABS is assisting FAIR Bank as it prepares to develop its housing microfinance loan product in the next Quarter. FAIR Bank is the fifth participating bank that will offer

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shelter finance to its microenterprise clients. MABS is awaiting developments from the BSP on the formal approval and guidelines for banks that plan to offer HMF.

Expand the use of new technologies MABS has moved forward in expanding mobile phone banking services using the GCASH platform, as well as now pilot testing the SMART Money platform and the expansion of the semi-automated SMS gateway to provide reminders and alerts to clients. Meanwhile, its mobile phone banking services via mobile money were showcased in two major international conferences - the Mobile Money Transfer Summit in Dubai and the Mobile Money Transfer Asia-Pacific Conference (MMT-APAC) in Manila. At the Dubai Summit, MABS Chief of Party John Owens shared the experience of rural banks in the Philippines to more than 330 experts and leaders in the mobile money industry who participated in the summit. During the MMT-APAC, MABS and banks successfully implementing MPBS - Green Bank, Cantilan Bank, PR Bank, GM Bank, and 1st Valley Bank - shared their experiences with over 160 delegates from around the world. Representatives from the six banks presented issues and lessons learned from their respective MPBS pilots: how to overcome constraints in implementing MPBS in rural communities, the business model for rural banks to offer and use mobile money, and developing a mobile money ecosystem.

After successfully building mobile money ecosystems in rural areas, MABS also worked with one participating rural bank on the expansion of a mobile money ecosystem in an urban setting. With GXI and support from mobile wallet developer Utiba Ltd., MABS helped Philippine Rural Banking Corporation (PR Bank) identify a commercial area that will trigger the ecosystem expansion. The Greenhills Shopping Center (GSC), a popular bargain-shopping destination that is also in close proximity to PR Bank, was selected. MABS then trained mobile phone banking marketers who oriented, prepared, and signed up merchants and stall owners to accept mobile money as payment for their goods. The merchants were also introduced to the products of PR Bank, specifically the Text-A- Deposit service, which allows them to easily deposit their mobile money sales through SMS directly to their bank accounts. Over a hundred GSC merchants signed up and registered for the service via the bank’s marketing team. As part of the MMT- APAC post-conference study visit of the MMT APAC, delegates visited PR Bank to complete actual cash-in/cash-out transactions and visited GSC to visit accredited stalls, make purchases, and pay for their purchases with mobile money.

MABS is also gearing up for the major launch of the SMS Mobile Phone Banking Services, which banks will use to send information to their clients. The services include loan approval notifications, loan payment and commitment savings reminders, time deposit notifications, personalized greetings, promotional offers, marketing campaigns, client feedback, and other important informational messages. Currently, there are more than 50,000 bank clients registered to receive regular SMS alerts of financial information.

While monitoring developments on the request submitted to the BSP for the rollout of Smart Money services, one participating bank - RB Mabitac – is piloting Smart Money Money In and Money Out Services as well as disbursing part of the payroll via Smart Money. The pilot test allows RBAP-MABS to identify ways to improve the accreditation

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process of interested member rural banks as well as to address settlement and other issues.

Develop micro-insurance products During the Quarter, MABS conducted demand research for microinsurance in partner banks Banco Santiago de Libon, First Macro Bank and Bangko Kabayan while continuing its technical assistance to FAIR Bank on the process of partnering with a commercial insurer. In coordination with MICRA, MABS will be working with a microinsurance consultant in the next Quarter. A microinsurance product development workshop is also being organized.

Communications and other activities MABS continued promoting and communicating its work and achievements to its public and shareholders through articles, stories, and press releases featured in both print and online media, its website, www.rbapmabs.org, and through social networking sites LinkedIn and will start a Facebook and Twitter site in the next quarter. It is also sharing 85 videos on the popular video-hosting site YouTube. During the 7th quarter, 64 articles on the MABS Program were published in major broadsheets and online media. The Program was also promoted through presentations made for international study groups and partnerships with other industry partners.

A delegation of bank officers from the Centenary Bank of Uganda visited the Philippines in November for a weeklong study tour of the country's microfinance institutions (MFIs). To orient the Ugandan delegates on the country’s microfinance scene, MABS presented an overview of the Program and its impact to the Philippine rural banking industry. The presentation included extensive discussions on MABS's Microfinance for Agriculture Product (MAP) and mobile phone banking initiatives. The Ugandan study visit aims to draw from the lessons learned from the experiences of MABS and its participating rural banks and enact policies and programs that will better serve the landless farmers in Uganda.

Thirty-six representatives from financial institutions, networks, development organizations, and consulting and rating firms joined the Dialogue for the Beyond Codes action research project held on November 9 and 10 in Washington D.C. The Dialogue group composed of industry experts and practitioners from the US, Mexico, Africa, India, Bosnia and the Philippines shared field experiences and discussed research results, validated and weighed universal indicators for the assessment process, and made recommendations on the next steps to the Smart Campaign Steering Committee.

Aside from MABS, Cantilan Bank Executive Committee Chairman General Charles Hotchkiss, Rural Bankers Research and Development Foundation, Inc. Chairman Tomas Gomez IV, and representatives from the Bangko Sentral ng Pilipinas (BSP), Microfinance Council of the Philippines Inc., and two representatives of microfinance non-government organizations (NGOs) also participated in the dialogue. MABS’ and Philippine rural banks’ practices in promoting client protection were presented to other participants.

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Ms. Annabel Bonsol, a microloan client of MABS PB Bangko Kabayan, was named the 2009 Citi Microentrepeneur of the Year for the Maunlad category in November. Ms. Bonsol started her business (rag manufacturing) in 2006 by borrowing a sewing machine to finish her first order of ten bundles of rugs. Bangko Kabayan lent her additional capital, which allowed her to purchase a high-speed sewing machine. Her business now has 12 units of high-speed sewing machine and employs 30 sewers, 5 maintenance personnel, and 65 helpers.

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CONTRACTOR’S REPORT

a. MABS-4 Oversight

MABS-4 receives overall program guidance from a Steering Committee, composed of a representative from the Office of the President (MEDCo Chairman), the Chairman of the Rural Bankers Research and Development Foundation Inc. (RBRDFI), a USAID representative, and the RBAP President. This committee identifies focal areas for program coverage and formulates and agrees on major policies that guide the MABS Program.

The Program receives guidance and support on implementation matters from a Management Committee. The Management Committee is composed of a representative of MEDCo, who chairs the Committee and the USAID Project Officer responsible for the MABS-4 Program. In his/her capacity as Chairman of the Management Committee, the MEDCo representative convenes meetings of the committee at least quarterly. The agenda of the meetings shall continue to focus on program implementation issues.

MABS-4 covers the period from May 1, 2008 to March 1, 2013.

b. Expected Results

MABS-4 activities and initiatives are directed towards achieving the following key results:

1. Key result area (KRA) 1: Expansion of banks providing microfinance services a. Number of bank and bank branches expanded b. Number of microborrowers expanded c. Number of microloans expanded d. Expansion in the number of microdepositors e. Support to credit bureau expansion and enhancements to MIS

2. KRA 2: Assistance to banks to extend the range of services a. Mobile phone banking services expanded in participating banks b. Microinsurance services offered in participating banks c. Microhousing finance services expanded in participating banks d. Micro agri-loan product rollout

3. KRA 3: Sharing of lessons learned with global practitioners a. Participating banks encouraged and assisted in adhering to MABS best practices b. Public awareness of RBAP-MABS Program widespread c. Key organizations knowledgeable of MABS accomplishments and lessons learned

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c. Key Result Areas (KRAs)

Key Result Area 1: Expansion of banks providing microfinance services

Table 1: MABS-4 KRA1 Data for Quarter 7 vs. Targets (Quarter 7, Year 3, and End-of-Project)

** Other banking offices included in cumulative bank branches and other banking offices

MABS will work with new and existing rural banks to provide technical assistance and training to at least 200 additional banks branches to expand microfinance services. The cumulative number of new micro-borrowers reached by PBs will exceed 375,000 during the period to bring the 15-year total of new micro-borrowers reached to more than 800,000. The overall increase in microloans disbursed over the next five years is expected to exceed US$500 million and will bring the total 15-year cumulative amount of micro loans disbursed to over US$800 million. MABS will focus on providing technical assistance and support to existing MABS PBs to help them grow and open branches.

MABS PBs are also expected to manage more than 1.4 million micro deposit accounts by the end of Year 2 and 1.7 million accounts by 2013.

To achieve these key results, MABS will aggressively market MATTS to new and existing rural banks through the combined efforts of the MABS technical staff and accredited MABS Service Providers (MSPs). MABS will also continue to provide microfinance training and technical services to existing rural banks that have plans of establishing new branches and other banking offices.

• To ensure adherence to the MABS Approach and standards, PBs’ microenterprise operations will be closely monitored and analyzed. PBs will also be provided with periodic feedback and coaching on how to maintain and/or expand their services.

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• MABS will also ensure that banks are conducting annual planning sessions, which should include focus on microfinance lending operations, and that they are regularly improving the effective supervision and management of their microfinance operations. The team will also see to it that banks establish their own training programs and are continuously providing basic microfinance courses for newly-hired and existing account officers - with an emphasis on proper client selection using intensive character and background investigation (CIBI) and cash flow lending analysis, as well as effective sales skills. Training courses for existing and new MABS Technical Resource Specialists (MABSTeRS) to serve as in-house trainers on the MATTS will also be regularly conducted.

• During Phase 4, MABS will use the distance learning platform to train additional bank staff and complement classroom training. As MABS expands its services to additional rural banks, providing quality, classroom training on microfinance best practices to the more than 1,500 account officers, supervisors, and branch managers of PBs has become a challenge. Classroom training entails substantial travel and lodging costs and disrupts employees’ set work schedules.

MABS developed an online distance-learning program as an alternative to on-site training. The course provides intensive training on the core elements of the MABS Approach through lectures, exercises, and quizzes. Chat rooms are provided for course participants to communicate real-time with facilitators and peers.

The distance-learning program was piloted in 2006 and launched in 2007. The distance- learning site, www.moodle.rbapmabs.org, contains four courses: Introduction to Distance Learning, MABS Microfinance Basics, Delinquency and Remedial Management, and Middle Management Training: Effective Supervision. This web-based distance-learning course will reduce the costs of training bank staff and scale up the delivery of training to the continuously increasing number of microfinance staff that need to be trained and re- trained. Aside from reduced training costs and scaled-up training, the distance learning course deliver an integrated learning package to the banks – as the primary learners (account officers) complete the online modules, their supervisors and managers can also actively participate as learning partners. MABS will also, from time to time, supplement onsite and classroom training with the distance learning courses.

One of the other objectives of MABS-4 is to provide support to credit bureau access and suggesting corresponding enhancements to PBs’ management information systems (MIS) to allow them to comply with reporting requirements.

Republic Act (RA) 9519 or the Credit Information System Act (CISA) was signed into law in October 2008. The CISA will create a centralized Credit Information Credit Corporation (CICC) which will set the standards for credit reporting operations that will improve not only the ability of creditors to assess risk and allocate credit more efficiently, but will also promote the protection of the rights of consumers against irresponsible use or erroneous reporting of credit information. The operations and services of the CICC is expected to greatly benefit the rural banking sector, as it will improve the overall

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availability of credit, especially to small borrowers; lower the cost of credit to responsible debtors, reduce dependence on collateral to secure credit facilities and enable financial institutions to lower their overall credit risk, thus contributing to a healthier and more stable financial system.

Since this will be a new reporting requirement for rural banks, they will need assistance in improving their systems to properly gather and submit credit history information of their clients. MABS will collaborate with CIS, the BSP and other private credit bureaus to determine the generic/standard reporting structure to ensure that the reports generated by the rural banks will be acceptable to both the national credit bureau and private credit bureaus. At this time, the program is waiting on the implementing rules and regulations to be issued by the Securities and Exchange Commission (SEC) and has remained in contact with the Bangko Sentral ng Pilipinas (BSP) and the International Finance Corporation (IFC) as well as discussions with USAID about collaboration with the LINC- EG project on the latest developments.

Accomplishments for the Seventh Quarter:

Task One: Conduct the Senior Management Orientation (SMO) to orient officers of rural banks that plan to implement microfinance operations utilizing the MABS technology. MABS gave an overview of the MABS Program and the MABS Approach to Microfinance to the members of the Federation of Laguna Rural Banks in November. MABS highlighted its continued success in promoting the MABS Approach to Microfinance and in assisting rural banks in implementing MABS initiatives. The requirements and procedures to becoming a MABS participating bank (PB) were also outlined to four new rural banks that expressed interest to join the Program.

In December, MABS and Microfinance Innovation Center for Resources and Alternatives (MICRA) Philippines Foundation - a MABS affiliated Service Provider (MSP) - conducted a Senior Management Orientation to the Boards of Directors and Officers of Unilink Rural Bank and the Rural Bank of Sta. Rosa. The MABS team presented the history and accomplishments of the MABS Program and highlighted the positive performance of MABS participating banks as they implemented the MABS Approach to microfinance. The participants were also oriented on how to provide microfinance products and services in their respective banks. The two banks were able to understand the critical operational and cultural success factors required for rural banks offering microfinance services.

Task Two: Facilitate and assist in the conduct of MATTS for new rural banks and provide advisory services to banks with plans of expanding microfinance services. During the 7th Quarter, MABS coordinated with MSP MICRA Philippines in completing the institutional assessment of new PB, RB Angeles. Five PBs: Bangko Mabuhay, Rural Bank of Solano, Rural Bank of Dipolog, Banco Santiago de Libon, and FAIR Bank, on the other hand, received technical assistance and advisory services.

To assess the Rural Bank of Angeles’ capability to implement microfinance in its banking operations, MABS conducted an institutional assessment in November. In

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coordination with the bank's top management, MABS reviewed the results of the initial market research conducted at the bank’s branch in Capas, Tarlac. MABS also interviewed the bank’s top officers, branch managers, and microfinance staff to weigh their interest and ability to do the MABS Approach. The capacity of the bank’s management information system (MIS) to generate the reports MABS requires from its participating banks was also assessed.

MABS conducted a 3-days product and operations review of Bangko Mabuhay’s microfinance products and operations for both individual and group loans in October. The review focused on the strengths, areas for improvement, performance and status of the bank’s microfinance products and operations. The bank’s microfinance delivery systems, organizational structure, group and individual microfinance loan implementation and documentation, Management Information System (MIS), and microfinance product design and operational system were also assessed.

In November, MABS worked with three PBs that are gearing up for expansion. MABS conducted an operations review of TIGUM, a microfinance loan product of Rural Bank of Dipolog. Based in Zamboanga del Norte, RB Dipolog offers TIGUM in its five branches. The operations review evaluated the performance and present status of TIGUM loan product, and its strengths and areas for improvement in terms of policies, delivery system, procedures, loan documentation, and client feedback and satisfaction.

MABS assisted Rural Bank of Solano with a three-day operations review on November 18-20, 2009. Evaluated was RB Solano’s ISALABAY Loan, an individual microfinance product. Focus group discussions (FGD) with the MF Unit Staff and the micro loan clients were conducted to gather their views, ideas and recommendations on the loan product. Using MABS evaluation tools, interviews with clients that have dropped out and clients having some repayment issues were also conducted. MABS also reviewed the bank’s microfinance management and delivery systems.

The technical assistance visit to Banco Santiago de Libon (BSDL) on November 26-28 focused on helping the bank expand its client reach and further improve its microfinance operations. FGDs were conducted with the clients to obtain their feedback and opinions about the product and bank services. Also reviewed were the management information system (MIS) and the bank management’s expansion plan.

MABS technical assistance to FAIRBank in Bogo City, Cebu on December 8-11, 2009 foused on reviewing the bank's operations and assisting the bank in improving its services and expanding its client reach. MABS assessed the performance of the bank's top management in pursuing its improvement plan for microfinance, assisted the bank in designing a new microinsurance product for its group loan clients, and conducted a market survey for housing microfinance that the bank plans to offer to expand its services to current and potential clients.

Task Three: Conduct training on disaster management and managing delinquency. To strengthen rural banks’ readiness and stability in times of crises and calamities, MABS conducted a Disaster Management Workshop on October 29 at Mallig Plains

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College in Isabela. Thirty-eight participants from 17 rural and cooperative banks and 3 other microfinance institutions attended the workshop, which covered topics on disaster preparedness, disaster management execution and recovery, and review phase. Following Typhoon Pepeng, which wrought damage to provinces of Cagayan Valley Region, the workshop provided inputs to the participants on preparing their Business Continuity Plan in the face of disaster, and shared various tools to use in preparing their organizations and personnel for readiness, execution and post disaster response. In close collaboration with MABS, the officers of Mallig Plains Rural Bank led the organization of the training event held at Mallig Plains College. The participants came from provinces affected by Typhoon Pepeng, including Nueva Vizcaya, Isabela, Cagayan, and Apayao.

In coordination with the Rural Bankers Research and Development Foundation Inc. (RBRDFI), the same workshop was rolled out to other rural banks in Luzon. Forty participants from 21 rural banks attended the training held at the RBAP Building on November 24 and 25. A number of the banks that attended experienced damages due to typhoons Ondoy and Pepeng in September 2009. MABS and RBRDFI provided the participants with a walk through on preparing their banks for disasters, execution of their disaster plans, post-disaster recovery and disaster management review and evaluation. The second day of the training concentrated on managing delinquency problems. MABS trained the participants on identifying the causes of delinquency, analyzing their loan portfolio, collecting their PAR (portfolio-at-risk) loans, making loan write-offs, and remedial management.

Task Four: Monitor the developments on the Credit Information Systems Act. The Credit Information Act or RA 9510 was signed into law on October 31, 2008. The law mandates the establishment of the Central Credit Information Corporation (CCIC), which will gather information from financial institutions and consolidate them into a centralized system. The system will help address the lack of reliable information on the credit standing of borrowers, thus will be useful in creditworthiness checks and in facilitating decisions of financial institutions.

While the implementing rules and regulations of RA 9519 are being drafted, MABS will actively monitor developments and initiate an information drive to promote its benefits to rural banks. The Technical Working Group of the SEC has been working on finalizing the implementing guidelines as well as coordinating with the IFC and BSP.

Activities to be Completed in the Eighth Quarter:

Task One: Conduct the Senior Management Orientation (SMO) to orient officers of rural banks that plan to implement microfinance operations utilizing the MABS technology. MABS will be rolling out the SMO to the senior management of rural banks that signify interest to offer and implement microfinance products utilizing the MABS Approach.

Task Two: Facilitate and assist in the conduct of MATTS for new rural banks and provide advisory services to banks with plans of expanding microfinance services. For the 8th Quarter, MABS is scheduled to provide training and technical assistance to the following PBs: FAIR Bank, Rural Bank of Pilar, and the Rural Bank of Guinobatan.

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MABS will also closely coordinate with MSP MICRA as it delivers the MATTS Course to RB Angeles in the 8th Quarter.

Key Result Area 2: Assistance to Banks to Extend the Range of Services

Table 2: KRA2 Data for Quarter 7 vs. Targets

KRA2.1 Mobile phone banking services expanded in participating banks

Since 2004, the Program, with support from GXI - a wholly owned subsidiary of Globe Telecom – has been developing and implementing mobile phone banking applications and mobile commerce services for rural banks and their clients. The banks and clients are finding that MPBS offer significant advantages in terms of reduced costs, security and convenience in accessing financial services, and opportunities to expand their business.

For rural banks, mobile phone banking has several advantages since it improves transparency of financial transactions, helps control fraud, and reduces errors associated with cash transactions.

Clients, on the other hand, can now access and manage their financial services needs remotely - receiving loans, making payments and deposits, withdrawing funds from deposit accounts, remitting and receiving money from relatives and friends, and even buying and selling goods using electronic cash and their phones instead of point-of-sale systems. Rural banks can also provide payroll-processing services for small businesses where employees can receive their salaries via their mobile phone wallets.

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All of the MABS-developed MPBS have been approved by the BSP. These services include: Text-A-Payment (TAP) for loan payment and collection, Text-A-Remittance (TAR) to cash-in/out remittance locally and abroad, Text-A-Deposit (TAD) for remote deposit mobilization, Text-A-BillPayment (TAB) for remote bills payment, and Text-A- Withdrawal (TAW) to remotely withdraw money from their accounts in the form of electronic money directly from their savings account to their mobile wallet.

To build a sustainable and robust mobile banking ecosystem requires building the “source” (where cash could be converted to electronic money) and “use” (where electronic money can be used to buy or sell goods and services) components. The commercial viability rests on achieving the desired critical mass of users (both “source” and “use”) of electronic money in any given community. The rural banks that signed up to partner with GXI understand the business potential of being first to provide mobile banking services to their clients. However, the real value of the mobile banking service can only be achieved when the general public has accepted the technology and makes mobile phone banking, mobile commerce, and the use of mobile money a part of their everyday lives. The development and improvement of the mobile phone banking applications developed by MABS is an important and continuous activity to make MPBS and related mobile commerce opportunities an attractive opportunity for the banks and to new and existing clients.

The MABS program also facilitated the Memorandum of Agreement between RBAP and Smart Communications to make use of the Smart Money platform to facilitate money transfer services and banking services. BSP approval has been granted to RBAP and a pilot test of these services is expected to be completed during the next quarter.

While initial delays in the SMART Money rollout have delayed the number of registered mobile phone banking clients, we do expect that over 55,000 clients will be registered and will be receiving automated SMS mobile phone banking updates, reminders, and messages from rural banks during the next quarter using the MABS designed SMS Gateway.

Accomplishments for the Seventh Quarter:

Task One: Promote the use of Text Reminder System to interested rural banks and register clients, who will receive text reminders for loans, savings and general alerts. The Yale University-based research group Innovations for Poverty Action (IPA) released the 2nd results of the study on sending text reminders to borrowers. The preliminary findings are:

• Individuals who receive SMS reminders that include the name of the account officers (AO) have a significantly lower late repayment rate of 6.3% compared with the late repayment rate 11.4% for other clients who do not receive SMS reminders. This result is statistically significant.

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• Individuals who receive SMS reminders two days before their loan payment is due have a significantly lower late payment rate than those who receive messages on the day their loan payment is due. Individuals who receive messages on the due date have a late repayment rate of 12.4%, compared with 6.1% for two days before, and 10.9% for one day before. The result for sending reminders two days before due date is statistically significant.

The SMS Mobile Phone Banking Services include loan approval notifications, loan payment and commitment savings reminders, time deposit notifications, personalized greetings, promotional offers, marketing campaigns, client feedback, and other important informational messages. After completing the training, banks will be rolling out the SMS Alerts Service to clients who register with the banks to receive SMS Mobile Phone Banking Alerts. To date, there are more than 50,000 bank clients registered to receive regular SMS alerts of financial information. Active subscribers are Cantilan Bank, 1st Valley Bank, Bangko Kabayan and Green Bank. Banco Florida subscribed to the SMS Gateway system (stand- alone version), which they use to send general reminders and announcements to their clients.

Task Two: Implement MPBS using Smart Money in partnership with Smart Money services. One participating bank - RB Mabitac in Laguna with 8 branches is piloting Smart Money Service Money In and Money Out service. Another MABS participating bank, RB Sugbuanon, decided to delay the pilot testing of the system pending discussions with Smart about utilizing their automated RuralNet online system. The pilot test will allow RBAP-MABS to identify ways to improve the accreditation process of interested member rural banks as well as to address settlement and other issues. RB Mabitac has started releasing salaries through Smart Money to selected employees. A case study will be conducted in the next Quarter to support the request to BSP for the rollout of Smart Money services to interested and qualified rural banks.

Task Three: Continue to conduct accreditation training, accredit more interested rural banks, and provide technical assistance to qualified rural banks that plan to implement mobile phone banking services. The trainings were conducted in partnership with G- Xchange Inc. (GXI), Globe Telecom’s wholly owned mobile commerce subsidiary. Completion of the accreditation training is one of the BSP’s requirements for a bank to be accredited to offer MPBS. Accredited during the Quarter were Guagua Rural Bank in Pampanga, with 6 of its 14 branches offering MPBS, and RB Midsayap - with 5 branches. These banks were trained on MPBS features and procedures and have started to provide mobile phone banking services to their clients and provide payroll services to their employees through GCASH.

Based on a proposal developed by MABS, GXI agreed to provide RBAP/RBRDFI with PhP2.1M funding for Mobile Phone Banking Marketing Program, which will be implemented in the 8th Quarter. RBAP/RBRDFI will act as custodian of the funds, which will be used to seed incentive reimbursements from participating banks. Five partner banks have been trained on GCASH, MPBS and the mechanics of the program: New Rural Bank of Victorias, RB San Enrique, RB Guinobatan, Banco Santiago de

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Libon and Camalig Bank. Other accredited banks will be trained in January 2010. The MPB Marketing program aims to register 60,000 new clients to use MPBS in the rural areas.

Task Four: Present experiences and lessons learnt from the Program’s MPBS rollout to delegates of the Mobile Money Transfer Summit in Dubai in October and the Mobile Money Asia Pacific (MMT APAC) Conference. The MMT Summit and MMT APAC Conferences gathered mobile money transfer stakeholders and leaders from various fields: mobile network operators, banks, microfinance networks and institutions, mobile wallet developers, regulators, governments and non-governmental organization, and technology firms. In recognition of the pioneering work and implementation of mature mobile payment systems of Philippine telecommunications companies Globe Telecom and Smart Communications, the MMT APAC Conference was held in Manila and focused on the tremendous success of GCASH and Smart Money in the Philippines. To give participants actual experience in using mobile money and assume the role of user, a site visit was conducted as a post-conference activity. Conference participants visited stores and restaurants that are accepting GCASH payments and made actual transactions using GCASH as payment. They also visited PR Bank’s Ortigas Branch to observe and experience MPBS transactions.

At the pre-conference course, MABS and banks successfully implementing MPBS - Green Bank, Cantilan Bank, PR Bank, GM Bank, and 1st Valley Bank - shared their experiences. Representatives from the six banks presented issues and lessons learned from their respective MPBS pilots: how to overcome constraints in implementing MPBS in rural communities, the business model for rural banks to offer and use mobile money, and developing a mobile money ecosystem.

Task Five: Hold the Mobile Banking Dialogue in coordination with Microsave. After the MMT-APAC, USAID-MABS and MicroSave conducted an M-Banking dialogue at the EDSA Shangri-La Hotel in Manila on December 9 and 10. Selected microfinance practioners, networks including MicroSave, MABS, Mercy Corps, MICRA and ACCION, donor-supported efforts including USAID and IFC, various third party providers including EKO from India, and Mobile Money Issuers including Safaricom’s M-PESA and Globe X-Change Inc (GXI/GCASH), BanKO, and Microfinance Innovations for Resources and Alternatives (MICRA) participated in the dialogue. The dialogue looked at managing strategic partnerships and the implications for the business model, approaches to optimizing agent performance and optimizing the customer value proposition among other topics.

Task Six: Prepare for the rollout of the urban mobile money ecosystem and train prospective marketers who will offer MPBS to business owners in identified urban areas. Coinciding with the MMT APAC Conference, MABS assisted one participating rural bank with the rollout of MPBS in urban areas and the expansion of the urban mobile commerce ecosystem. MABS trained prospective MPBS marketing agents on the basic features, procedures, and benefits of MPBS and GCASH - the electronic money platform facilitating the services. They were also given an overview of the products and services offered by MABS participating bank Philippine Rural Banking Corporation (PR Bank),

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an accredited GXI partner bank offering MPBS. PR Bank hosted the post-conference study visit of the MMT APAC participants.

The marketers register more than 200 businesses in Greenhills Shopping Center to accept GCASH as payment for goods and services. Owners of these businesses opened deposit accounts with PR Bank. They were introduced and encouraged to use the bank’s mobile phone banking services. The urban mobile money ecosystem rollout was a joint initiative of the MABS Program, GXI, PR Bank, and mobile wallet developer Utiba, a technology firm based in Singapore that has completed ground breaking mobile money implementations including GCASH/Globe in the Philippines, Maxis Malaysia, True in Thailand and the Orascom Group.

Activities to be Completed in Eighth Quarter:

Task One. Focus efforts on the SMS Gateway service designed by MABS and developed by MyClick Technologies to reach out to more than 55,000 rural bank clients over the next quarter.

Task Two. Continue to promote the mobile phone banking rollout with GXI and other incentive programs for MPBS rollout banks. MABS will conduct training to prepare Bicol-based rural banks offer and expand MPBS to their clients. This training will equip bank staff with knowledge, skills and means to offer mobile phone banking services such as Text-A-Deposit, Text-A-Withdrawal, Text-A-Bills Payment, and Text-A-Sweldo in their banks.

MABS in coordination with GXI will launch and implement Marketer’s Program Part II. This is a continuing effort to increase usage and transaction volume venturing on the success of Marketer’s Program in 2008. This incentive program aims to acquire more microfinance clients of the bank to act as marketing agents to register Globe and TM subscribers to register to GCASH and become MPBS clients of the bank.

Based on requests from other rural banks, MABS and GXI will coordinate with RBRDFI to hold at least two accreditation workshops in the next quarter to coincide with the upcoming regional confederation conferences.

Task Three: Work closely with telecommunications company, Smart Communications (Smart), to pilot test the MPBS using Smart Money after BSP approval. MABS will continue to monitor the Smart Money pilot test at RB Mabitac and will follow up with the BSP on the approval of the Smart Money Money In and Money Out servcies for rural banks.

Task Four: Continue to accredit more banks to offer mobile phone banking services. MABS and GXI will coordinate at least two accreditation workshops in the next quarter to coincide with upcoming regional confederation conferences. SMS Alerts service by Myclick Technologies will be used to promote MPBS and encourage the bank to sign-up by announcing newly accredited RBs through SMS notification.

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MABS and GXI will conduct a special MPBS implementation training for three GCASH accredited rural banks based in the Bicol Region: Banco Santiago de Libon, RB Guinobatan, and Camalig Bank. The training will focus on the implementation of MPBS in the bank that includes processes of merchants and MPBS client selection.

KRA2.2 Microinsurance services offered in participating banks

With more than one million microenteprise borrowers and depositors and coverage across the nation, MABS participating rural banks are seen as strategically positioned to facilitate greater access to microinsurance services. Microinsurance also provides an opportunity for the banks to expand their range of financial services from which they can generate additional revenues. However, MABS sees it as imperative to promote access to quality insurance products by licensed (and regulated) providers who can effectively secure protection for low-income households. Hence, MABS will be promoting the partner-agent model among the banks..

In the partner-agent model, rural banks enhance access to microinsurance products for the underserved market minus the significant investment in resources necessary for the effective assessment and management of the risks of the insurance. The primary role of rural banks will be to serve as agents for the insurance company, which bears the risk of insuring the clients and is responsible for regulatory compliance.

MABS will assess the demand for microinsurance, foremost of which are life and hospitalization (health). Insights on the needs and preferences of existing and new clients, particularly women, will be determined through focus group discussions and localized surveys conducted by MABS and the bank staff.

On the supply side, information will be continuously updated and pooled on various insurers’ microinsurance products, including details on the types, products, terms, premiums and requirements. It is expected that this will facilitate the creation of healthy competition among insurers subsequent to which is the development of more affordable and better quality insurance products for our micro clients.

Accomplishments for the Seventh Quarter:

Task One: Enhance effective demand for microinsurance products through stakeholder discussions, promotional activities and development of tools for market education. In November, MABS helped with the assessment of PB Bangko Santiago de Libon’s formal microinsurance products and services. The MABS team conducted focus group discussions (FGDs) among the bank’s clients and field staff regarding the effectiveness and gaps in its microinsurance products underwritten by its partner-commercial insurance companies.

Insights from the review reveal that Banco Santiago de Libon has generated enough field lessons and client feedback to influence more simplified requirements and efficient claims procedures for ensuring the continued satisfaction of its microfinance clients.

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Notably, the bank’s management is successful at establishing strong rapport with its partners, which allows it to negotiate for services that are more suited to meeting the needs of its client base in rural communities.

As part of its effort to document partnerships between rural banks and formal microinsurance providers and learn from their experience, MABS reviewed and documented the early stage of partnership between First Macro Bank and MicroEnsure Philippines in the distribution of formal microinsurance services, other than MRI, for microfinance clients. With this partnership, the bank is able to offer a term life product with coverage for the principal’s spouse and up to two child-dependents. Meanwhile, MABS continued to provide technical assistance support to FAIR Bank in its effort to choose a suitable microinsurance product and partner commercial insurer.

Task Two: Conduct microinsurance demand research activities to acquire market information that will facilitate product development and enhancements by commercial insurance providers for more responsive microinsurance products for microfinance clients. MABS capitalized on the Regional Conferences in Luzon and Mindanao to disseminate the results of the microinsurance market demand studies conducted in four (4) partner rural banks in Southern Luzon, Central Luzon, Northern Mindanao and the Visayas. The presentation focused on influencing rural banks to negotiate for insurance products more responsive to the needs of their microfinance clients. Subsequently, the study responded to the need of commercial insurance providers partnered with RBAP for access to information on needs and preferences of the low-income market, which they hope to penetrate. Follow-through activities also included continued advocacy on the issuance of supportive regulatory policies for the sector via a position paper presented to the BSP in collaboration with RBAP. Technical visits conducted during the period installed information management systems to enhance the capacity of 2 rural banks in Luzon for effective delivery of formal microinsurance services through the partnership model.

Task Three: Follow-up on the dialogue with the Central Bank and the Insurance Commission for the formulation of enabling policies to promote the mainstream distribution of microinsurance through rural banks. RBAP-MABS advocacy in this regard is expected to bear fruit with the BSP seriously considering RBAP’s proposal. A draft circular is expected to be out in the next quarter.

Activities to be completed in the Eighth Quarter:

Task One: Enhance effective demand for microinsurance products through stakeholder discussions, promotional activities and development of tools for market education. In collaboration with MICRA and Mercy Corps, the MABS program will hold a seminar on microinsurance product development with several of the private insurance companies and brokers that RBAP has partnered with.

Task Two: Provide the Central Bank, the Insurance Commission and other Microinsurance Supervisory Agencies with relevant market information to assist in their

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formulation of policies and regulations that will facilitate distribution of microinsurance to microenterprise households through rural banks.

KRA2.3 Microhousing finance services expanded in participating banks

With rapid growth in population in the Philippines, the demand for housing continues to rise. According to the ADB, from 2001-2004, housing need was estimated at 3.6 million units and actual housing provision was just about one-fifth of this total, resulting in a huge unmet demand particularly among the poor and informal sector. Between 2005 and 2010, potential demand is projected to reach 3.76 million units, including housing units for new households of 2.58 million.

Microfinance and housing finance are related by the shared objective of providing access to marginalized groups. Also, since many microenterprises are home-based, microenterprise loans often contribute to home improvements or house construction that also benefits the business. Because of the potential for mutually reinforcing product and service design, it will be beneficial to examine the prospects for providing housing loans using microfinance technologies.

Introducing housing microfinance under MABS -4 will help address the credit demand of microenterprise clients for home improvement purposes and, to a certain extent, the shortage of affordable housing for low income groups. Based on a MABS survey of 210 clients of more than 20 MABS participating banks, close to 40 percent have used part of their loans from the rural bank during the last 12 months for home improvement or repairs. A majority (58%) indicated needing a loan for home repairs and improvement and 44% for the purchase of a house and/or lot.

MABS will assist rural banks in developing and offering micro housing products to reach 70 additional clients for a cumulative total of 489 clients through at least 37 rural bank branches by the end of December 2009, and more than 50 branches during the life of the project. Major activities during the Seventh Quarter and targets for the Eighth Quarter under this component include the following:

Accomplishments for the Seventh Quarter:

Task One: Continue to closely monitor the housing microfinance rollout. In the 7th Quarter, 40 branches of four banks – GM Bank, Cantilan Bank, Bangko Kabayan, and Green Bank – were offering housing microfinance loans and have disbursed 402 HMF loans totaling PhP13.56 million to 370 new clients. Some 852 cumulative HMF loans totaling PhP27.9 million had been disbursed to 790 clients. The product is being offered to existing clients who need funds mostly for home improvement and repair.

Tasks to be accomplished in the Eighth Quarter:

Task One: Continue to closely monitor the housing microfinance rollout.

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Task Two: Conduct product operations review and document implementation for case studies & product enhancement.

Task Three: Conduct new training courses in HMF for MABS participating banks.

KRA2.4 Micro agri-loan product rollout

Based on the nationwide survey of farmers by the Philippine Agricultural Policy Council (ACPC, 2004-05 survey), three-fourths of farm households depend on crop farming, one- third on livestock raising, while fishing is an additional income source for almost a fifth. The ACPC survey also showed the multiplicity of income sources for farming households, with more than half (52 percent) of these households having other incomes from non-farm sources. In terms of access to formal loans, the surveys found a higher share of 51 percent of all farm loans from formal sources in 2004-05 compared to 38 percent in 1996-97.2 While access to formal credit by farmers had improved, the unmet farm credit demand remains large. Excluding the livestock sector, ACPC estimated the unmet credit demand of rice, corn and coconut farmers at about US$1.47 billion. Reducing the gap in supply and demand faces two major challenges: reducing the risk of lending to farmers and reaching those farmers in areas farther away from town centers.

With so much of the labor force dependent on agricultural income, access to financial services in this sector is critical. Rural banks are uniquely positioned to serve this market. By incorporating MABS best practices and adjusting loan features to address the flexible needs of agricultural borrowers, rural banks have become more confident about lending to this sector. More technical assistance, training, and monitoring are needed to increase agricultural lending, and close monitoring will be critical to maintaining portfolio quality.

MABS developed in 2004 an approach to the Micro Agri Credit that essentially utilized the MABS Approach in designing and implementing microfinance products. The approach integrates market research, careful product design, pilot testing, and portfolio management. In many ways the MABS-Micro Agri Product approach was different from the traditional agricultural lending. MABS-Micro Agri lending approach took into account the multiplicity of income from various sources, the ability of farmers to make rationale decisions, and based the provision of credit on the borrower’s character and capacity to repay. Determining capacity to repay required an analysis of all farm and non-farm household income. Loan payments were amortized regularly on a weekly, semi-monthly or monthly basis, which was aligned with a borrower’s cash flow. Borrowers were allowed to pay a partial lump sum to take into account crop or livestock business cycles but the lump sum payment could not exceed 40% of the loan amount. This payment scheme substantially reduced the risks normally associated with the 100% lump sum payment option that banks traditionally used. This new approach to agricultural lending has been quite successful in reaching small farmers while reducing the risk of lending. MABS found that due to the multiple income sources, farmers were willing to pay their loan in frequent installments.

2 Supplying 20 percent of loans, traders and millers are the single most important source of credit for farm households, 7 percent of loans come from rural banks.

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Presently, there are two major challenges in micro agri lending. First: the slow take up of rural banks to offer micro agri loans using the MABS Approach for the following reasons: (a) bank’s long-standing impression that lending to small farmers remains very risky; (b) the MAP design is similar to the microfinance loan product offered by the banks, and (c) some 26% of the borrowers have used some or all of their loans for farming activities. Another challenge is managing the risk of various calamities (flooding, drought) as well as risks associated with pests and diseases, price, and market risks. The MABS micro agri lending approach addresses some of these challenges because of the inherent risk- mitigating factor associated with the regular amortization payment feature. Banks that implement the MABS Approach to micro-agri lending have generally maintained high portfolio quality; and this lesson will be shared and more widely disseminated in order to convince more banks to adopt the MABS Approach to micro-agri lending. Also, to differentiate micro-agri loans from microenterprise loans, the banks will be encouraged to offer the 60/40 mode of payment. Banks that are implementing 60/40, or some variations of this ratio (Cantilan Bank, Progressive Bank, GM Bank and RB Talisayan) have so far not reported any problems with loan recovery.

To encourage more banks to offer micro agri lending, the strategies are outlined below.

• Focus on rural banks that have the largest potential market for MAP

This strategy aims aims to tap new market segments to increase the client outreach of MAP implementing banks. In addition, specific major crop or agricultural produce will be identified in specific farming localities and its value chain analyzed to identify gaps and opportunities for financing. MABS will identify locations and linkages with small farmers and farmer associations, initially in Mindanao and other regions that are not affected by typhoons. A market research tool will be refined and market survey activities will be conducted to find out demographics, natural resources, types of agricultural activities, and the capacity of MABS banks in the area. MABS will assist the banks to target the small farmers in their areas and offer MAP. During the first two years of MABS-4, the MABS team will provide additional support to existing participating rural banks that are implementing the MAP and will encourage expansion to more farmers by actively promoting the services offered through existing networks that link to small farmers including larger trading companies and farmer associations.

• Provide additional technical assistance and training on the MAP

MABS will target existing MAP implementing banks, particularly the multi-branch banks that continue to commit resources and personnel to MAP. MABS will provide additional technical assistance/training support thru the special activities fund (SAF) when needed.

In the first two years of the program, MABS efforts will be directed towards assisting the existing MAP implementing rural banks to rollout the product to other branches while at the same time, encouraging other banks to join the training and offer micro agri loan to their clients.

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• Use technology to expand outreach to small farmers

This strategy aims to promote mobile phone banking, improve mobile phone banking use, expand coverage to remote agricultural areas, and help the bank and farmers reduce transaction cost.

Using the MABS-designed MPBS, MABS will explore the expansion of MAP payments and disbursements via mobile phone to reach small farmers in rural areas, which will coincide with the expansion of MPBS.

• Promote knowledge sharing to refine and enhance MAP

This strategy aims to promote knowledge sharing among stakeholders, support learning to improve the effectiveness and impact of the MAP to rural banks and farmer clients.

MABS will help banks analyze client feedback on the MAP and refine it to meet changing market demand. Using the MABS Approach to micro agri-lending, MABS will incorporate lessons learned from client feedback and the experience of banks that have enhanced their MAP services and cascade these lessons learned to other participating banks offering MAP services. Additionally, MABS will continue to participate in initiatives such as the Agricultural Microfinance Research Project, a multisectoral effort that documents innovative agriculture financing schemes.

Accomplishments for the Seventh Quarter:

Task One: Conduct in-house training on the MABS Approach to Agricultural Microfinance for group lending account officers and branch managers of Cantilan Bank to enable the bank to offer agri loan to its existing clients with good repayment record. The training will focus on teaching the bank the tools to identify group loan clients with household demand for micro agri loan and how to package an additional loan for these clients. MABS conducted a MAP training for Cantilan Bank’s officers and group lending account officers on November 12 and 13 in Cantilan, Surigao del Sur. Twenty participants attended the training that aimed to increase client outreach and retain good clients. The training taught the group loan account officers to target the households of existing good borrowers under its group loan product. Doing so will include their spouses as potential borrowers, and also expand the bank’s financial services to meet the needs of the borrowers’ households. The participants experienced hands-on and field exercises to fully develop their working and analytical skills on processing MAP loans.

A similar MAP Refresher Course was also conducted by MABS for Green Bank. Held in Butuan City in November 2009, the training re-tooled and equipped the officers and staff on the mechanics of MAP, specifically, on how to better analyze and package a MAP loan. The training was also intended to train the bank on how to increase its client outreach and portfolio, improve its portfolio quality, and eventually rollout the product to more branches. Twenty-six participants composed of account officers, officers in charge, area supervisors, product managers, area managers, branch managers, microfinance deputy head and microfinance head attended the training.

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The participants were given lectures, hands-on and field exercises to fully develop their working and analytical skills on processing MAP loans and reaching out to more MAP clients.

Task Two: Continue to closely monitor and collect the performance data of all MABS participating banks offering the Micro Agri loan Product. As of December 2009, 55 rural bank units are offering MAP and collectively have 7,281 active borrowers with an outstanding loan portfolio of more than PhP68.2 million. These banks have disbursed a total of 38,985 MAP loans totaling more than PhP519.9 million to more than 17,570 new micro-agri loan borrowers.

Activities to be completed in the 8th Quarter:

Task One: Conduct training on the MABS Approach to Agricultural Microfinance for small banks in Northern Mindanao. The training will focus on market research, product development, loan evaluation and analysis using the CIBI and Cashflow tools, action planning, target setting, and practical tips in implementing and monitoring a micro agri loan product. The following banks signified interest to offer the MAP and will be invited to the training: RB Dipolog, RB Oroquieta, Cooperative Bank of Misamis Oriental and Siam Bank.

Task Two: Continue to closely monitor and collect the performance data of all MABS participating banks offering the Micro Agri loan Product.

Key Result Area 3: Sharing of lessons learned with global practitioners Table 3: KRA3 Targets

Targets 1. 12 news items/articles released by end of Year 1.

2. 60 articles in local and international media by end of project.

3. 4 national roundtables organized and participation in 20 international conferences by the end of the project.

KRA3.1 Participating banks encouraged and assisted in adhering to MABS best practices

MABS will ensure that all participating banks not only adhere to best practices but also, institutionalize these best practices in their operations and, in the long term, make modifications and enhancements as suited. To achieve this, MABS will make use of the following:

7th QUARTERLY REPORT 26

• Continuously promote the adoption and observance of the MABS-EAGLE Assessment system as a tool in improving the banks’ microfinance operations

The EAGLE (Efficiency, Asset Quality, Growth, Liability Structure, and Earnings) assessment system is one of the Program’s major services that is highly appreciated and anticipated by PBs. Conducted by the MABS staff based on a 12-month performance review, the assessment makes use of 11 indicators for efficiency, asset quality, growth in outreach and portfolio, liability structure, and earnings to determine how the banks are implementing their microfinance services. The results of the EAGLE assessment is issued to the PBs in a scorecard format and accompanied with a written analysis and recommendations for improvement.

Banks that merit the highest assessment of AA are recognized and feted during an awards ceremony coinciding with the holding of the MABS National Roundtable Conference.

Starting 2008, MABS intends to release a mid-year (July to June) and annual (January to December) result of the EAGLE assessment system.

• Increase awareness of participant banks in latest trends and innovations in microfinance through national and regional roundtable conferences

MABS will continue to hold the yearly National Roundtable Conference for MABS PBs. The National Roundtable serves as a venue for learning through sharing best practices and innovations in microfinance - both local and international. The National Roundtable Conference also serves as a forum for presenting and discussing annual results and performance status of MABS PBs’ microfinance operations. The conference is usually held in the first or second quarter of the calendar year, with senior and middle management officers and microfinance supervisors of PBs in attendance.

During National Roundtables, the MABS technical staff discuss with PBs, individually, the results of EAGLE assessment of their microfinance operations, highlighting its strengths and weaknesses and providing recommendations.

The Regional Roundtable Conferences are similar to the national roundtable conference with a focus on PBs by island grouping (Luzon-Visayas and Mindanao). The Regional Roundtable Conferences, usually held in the last quarter of the calendar year, also serves as a forum for presenting and discussing the annual results and performance status of the microfinance operations of the MABS PBs. PB’s semi-annual EAGLE scorecards are prepared and distributed during the RRT.

Activities Completed in the Seventh Quarter:

Task One: Conduct the Regional Roundtable Conference for participating banks. To update bankers on the latest trends in the rural microfinance industry, MABS conducted roundtable conferences for rural banks with the theme “Innovation and Growth amidst Competition” on October 7 and 16, 2009. Sixty-three participants from 29 Luzon and Visayas rural banks gathered for the conference held at Hyatt Hotel and Casino in Manila

7th QUARTERLY REPORT 27

on October 7, and 28 participants from 15 Mindanao banks attended the conference held at the Grand Regal Hotel in Davao City on October 9.

The conferences included presentations on achieving growth in competitive markets, eliminating PAR problems, and consumer protection. As key presenter, Bangko Kabayan Managing Director Teresa M. Ganzon presented on how Bangko Kabayan addressed the challenges posed by crises and competition, citing their bank’s experiences and lessons learned. The conference also included updates on the latest trends and developments in relation to MABS initiatives such as Housing Microfinance, Microinsurance and Mobile Phone Banking Services (MPBS). Each presentation was culminated with reactions from selected industry players, as well as open forums between the presenters, reactors, rural bankers, MABS technical team and guests. Aside from the presentations, the banks were also updated on MABS’ assessment of their performance in the last six months based on the EAGLE (Efficiency, Asset Quality, Growth, Liability Structure and Earnings) criteria. The newest batch of in-house microfinance trainers were also accredited as MABSTeRS (MABS Technical Resource Specialists) during the event.

Activities to be Completed in the Eighth Quarter:

Task One: Organize participating banks into regional clusters and hold roundtable conferences for interested clusters.

KRA3.2 Public awareness of RBAP-MABS widespread

MABS carries out a communications program primarily aimed at ensuring continued, wide-scale public awareness of the Program by providing information on the Program’s activities and accomplishments. MABS uses and develops communications tools that are designed to effectively address the information needs of specific and previously identified audience groups. These are delivered through the appropriate channels: print media, videos, and the Program’s website - www.rbapmabs.org, the MABS blog at www.rbapmabs.org/blog and the RBAP Mobile Phone Banking website, www.mobilephonebanking.rbap.org

Accomplishments for the Seventh Quarter:

Task One: Provide support for articles and press releases on the Program’s work, achievements, and impact and publish in newspapers, magazines, and online media. During the 7th quarter, 64 articles on the MABS Program were published in major broadsheets and online media.

Task Two: Re-design www.rbapmabs.org website and establish a blog to provide and share regular updates for each of the Program practice areas. The new site, including a real simple syndication (RSS) feed for blog articles, has been launched, with re- organization and migration of links still ongoing.

Activities to be Completed in the Eighth Quarter:

7th QUARTERLY REPORT 28

Task One: Provide information to the press and other organizations to effectively promote the Program’s work, achievements, and impact via newspapers, magazines, and online media.

Task Two: Complete the re-design of www.rbapmabs.org website and development of a blog that will provide and facilitate the sharing of regular updates for each of the MABS Programs key results.

Task Three: Provide updates to RBAP’s Mobile Phone Banking website, www.mobilephonebanking.rbap.org.

KRA3.3 Key organizations knowledgeable of MABS accomplishments and lessons learned

The Program will also sustain initiatives to link rural banks with other established local and international institutions whose work primarily focus on microfinance, and who share the common objective of promoting financial transparency and improving microfinance performance monitoring and benchmarking in the Philippines. These institutions include the local Microfinance Council of the Philippines (MCPI), Microfinance Information Exchange (MIX), the Micro Banking Bulletin (MBB), Innovations for Poverty Action (IPA), Microfinance Innovation Center for Resources and Alternatives, Citi Foundation, the World Bank supported Consultative Group to Assist the Poor (CGAP), ACCION, Women’s World Banking (WWB), Banking with the Poor Network (BWTP), MicroSave, and others. In particular, MABS will continue to compile and submit various reports to them containing detailed information on the performance of banks participating in the MABS Program on an annual basis.

Accomplishments for the Seventh Quarter:

Task One: Establish presence and increase visibility through participation in conferences/other events promoting microfinance and study tours. Taking part in the international mobile money technology (MMT) scene, MABS presented alongside other mobile phone banking leaders on how mobile money works on the “front lines” of microfinance at the 2009 Mobile Money Technology Global Summit held in Dubai on October 26-27. MABS Chief of Party John Owens, shared the experience of rural banks in the Philippines who are effectively using mobile money transfer to expand outreach to more than 330 experts and leaders in the mobile money industry who participated in the summit.

Presenting with him in a panel discussion on how mobile money works on the ‘front lines’ of microfinance were Musoni’s Africa Implementation Team Manager Cameron Goldie-Scot, Aikku’s Microfinance Specialist Philippe Breul, and Utiba’s Product and Marketing Director RiteshAndley. They presented on the operational and cultural impact of mobile phone banking on existing practices of MFIs, MMT as a tool to increase productivity and reduce operational costs, and how MMT affects the lives of microentrepreneurs in Africa, India and the Philippines.

7th QUARTERLY REPORT 29

The Program’s mobile phone banking services via mobile money was also showcased in the Mobile Money Transfer Asia-Pacific Conference (MMT-APAC) in Manila. MABS and banks successfully implementing MPBS - Green Bank, Cantilan Bank, PR Bank, GM Bank, and 1st Valley Bank - shared their experiences with over 160 delegates from around the world. Representatives from the six banks presented issues and lessons learned from their respective MPBS pilots: how to overcome constraints in implementing MPBS in rural communities, the business model for rural banks to offer and use mobile money, and developing a mobile money ecosystem.

After the MMT-APAC, USAID-MABS and MicroSave conducted an M-Banking dialogue on December 9 and 10. Selected microfinance practioners, networks including MicroSave, MABS, Mercy Corps, MICRA and ACCION, donor-supported efforts including USAID and IFC, various third party providers including EKO from India, and Mobile Money Issuers including Safaricom’s M-PESA and Globe X-Change Inc (GXI/GCASH), BanKO, and Microfinance Innovations for Resources and Alternatives (MICRA) participated in the dialogue. The dialogue looked at managing strategic partnerships and the implications for the business model, approaches to optimizing agent performance and optimizing the customer value proposition among other topics.

A delegation of bank officers from the Centenary Bank of Uganda led by their principal credit supervisor, Mr. Abdul Kyanika Nsibambi visited the Philippines on November 2 for a weeklong study tour of the country's microfinance institutions (MFIs). To orient the Ugandan delegates on the country’s microfinance scene, MABS presented an overview of the Program and its impact to the Philippine rural banking industry. The presentation included extensive discussions on MABS's Microfinance for Agriculture Product (MAP) and mobile phone banking initiatives. The Ugandan study visit aims to draw from the lessons learned from the experiences of MABS and its participating rural banks and enact policies and programs that will better serve the landless farmers in Uganda.

Task Two: Join the second Beyond Codes dialogue. Thirty-six representatives from financial institutions, networks, development organizations, and consulting and rating firms joined the Dialogue for the Beyond Codes action research project held on November 9 and 10 in Washington D.C. The Dialogue group composed of industry experts and practitioners from the US, Mexico, Africa, India, Bosnia and the Philippines shared field experiences and discussed research results, validated and weighed universal indicators for the assessment process, and made recommendations on the next steps to the Smart Campaign Steering Committee.

Aside from MABS, Cantilan Bank Executive Committee Chairman General Charles Hotchkiss, Rural Bankers Research and Development Foundation, Inc. Chairman Tomas Gomez IV, Bangko Sentral ng Pilipinas (BSP) Representative Pia Roman, Microfinance Council of the Philippines Inc. Representative Lalaine Joyas, and two representatives of microfinance non-government organizations (NGOs) also participated in the dialogue. MABS’ and Philippine rural banks’ practices in promoting client protection were presented to other participants.

7th QUARTERLY REPORT 30

Task Two. Monitor the results of the 2009 Citi Microentrepreneur of the Year (MOTY) Awards. Ms. Annabel Bonsol, a microloan client of MABS PB Bangko Kabayan, was named the 2009 Citi Microentrepeneur of the Year for the Maunlad category. Ms. Bonsol started her business (rag manufacturing) in 2006 by borrowing a sewing machine to finish her first order of ten bundles of rugs. Orders became regular and soon, she received additional orders from adjacent stores in the market. Bangko Kabayan lent her additional capital that allowed her to purchase a high-speed sewing machine. She hired two sewers to assist her. Initially her children helped in layering the sewn rugs, but later she hired out-of-school children to do the job. She also tapped the assistance of jobless women in their community in sewing and layering the rugs. Her business now has 12 units of high- speed sewing machine and employs 30 sewers, 5 maintenance personnel, and 65 helpers.

Into its seventh run, the MOTY Awards aims to elevate awareness of and promote support for microfinance by recognizing outstanding microentrepreneurs. The MOTY was first conducted in 2002 as part of the celebrations marking Citi’s 100 years of presence in the Philippines. There are two awards categories for the MOTY Awards, the Masikap Award and the Maunlad Award. The Masikap Award is open to microentrepreneurs who successfully started a business that is now a reliable source of income for the family. The Maunlad Award, on the other hand, is open to microentrepreneurs that have grown a business to a level that is now generating employment for people apart from household or family members. Ms. Josephine Alima, a peanut cookie manufacturer and microloan client of MABS participating bank First Isabela Cooperative (FICO) Bank – won the top award. Ms. Victoria Lim and Ms. Emilia Montinola, microloan clients of the Cantilan Bank and the New Rural Bank of Victorias also won major awards that year. Since 2002, microloan clients of MABS participating banks consistently made it to the winners’ list. Twenty-four (24) microloan clients of MABS participating banks have been so far named MOTY winners – eleven won in the Maunlad category, ten in the Masikap category, and three were given special awards. Nine of the 24 won the major National prize – six Maunlad National winners and three Masikap winners.

Activities to be Completed in Eighth Quarter:

Task One: Establish presence and increase visibility through participation in conferences/other events promoting microfinance and various study tours. The Program’s pioneering experience in providing partner rural banks with technical assistance in rolling out mobile phone banking services will be presented at the M-Commerce World Summit, which is scheduled for March in Singapore.

A Mobile Commerce Asia Summit will also be held in Manila in March 2010. MABS will be participating in the Summit and will assist RBRDFI in coordinating with the organizers on preparations for the proposed post-conference study tour. The proposed study tour involves a visit to PR Bank – a MABS partner bank and an accredited mobile phone banking services partner – where delegates can complete actual MPBS transactions. They will also visit the Greenhills Shopping Center (GSC), where delegates can shop and pay for their purchases using mobile money. In October 2009, MABS, GXI, and PR Bank enlisted and trained

7th QUARTERLY REPORT 31

more than a hundred GSC stall owners to accept mobile money as payment for their goods.

d. Performance

Table 4: MABS-4 Targets vs. December 2009 Results*

Ba se line Quarter 7 Actual Quarter 7 De cem ber Y ear 3 Ta rget MABS-4 End of Data from (December 200 9) Target 2009 Result (Oct 2009 – Project Targets Performance Indicators MABS-3 (October - as % of Se p 20 10 ) (Marc h 20 13 ) (April De ce mber Quarterly 2008) 2009) Ta rget 1. Over 200 additional bank branches New (Q7-Q6): 8 320 Cumulative: 42 2

O ther ba nking offices ** New (Q7-Q6): 2

Cu m ulat ive 15 1

Total New (Q7-Q6): 10 10 100. 00 % 40 2 00

57 3 573 100.00% 603 550 2. 375,000 new microborrowers Ne w (Q -Q ): 7 6 17,5 00 139. 73 % 70 ,000 375,0 00 24 ,453 499,604

Cumulative:6 83, 484 67 6, 531 101. 03 % 729,03 1 800,0 00

3. PhP20 billion in microloans disbused (Note: Increase(Q7-Q6): values in PhP billions) PhP18.27 1.47B Php 1.25 117. 60 % Ph p5 .00 P hp 24 billion (B) Cu m ulat ive : 27.17B Php26.94 100.85% Php30.69 Php42.27 4. Cumula tive numbe r of new microd ep osit New (Q7-Q6): 15,0 00 -276 .1 1% 60 ,000 350,0 00 accounts (41,416)

51 0,4 30 530,4 61 58 6, 877 90% 631,87 7 860,4 30 5. Numbe r of ru ral bank clients re gistere d to New: (Q7-Q6): (64) 19,000 -0.34% 76 ,977 439,3 49 use mobile phone banking services 60 ,651 Cumulative: 14 2, 023 8 6. 58% 200,00 0 500,0 00 122,9 59 6. Numbe r of ba nk bra nches off erin g mo bile New (Q -Q ): 170 100.00% 184 170 phon e banking 7 6 170 330 Cumulative: 88 6 886 100.00% 900 500 7. Tot al value o f month ly mobile ph on e PhP132 Php300.89 Php220 136. 77% P hp250 P hp400 bank in g t ra nsaction s (in PhP millions) million (M) 8. Ba nk branc hes off ering microinsuran ce 6 74 72 102. 78 % 1 05 1 25 9. Active microenterprise clients purchasing 400 48,0 00 6 9. 45% 65 ,000 150,0 00 microinsurance 33,337 10. Number of bank branches of fering microhousing loans New (Q7-Q6): 5 2125 0.00% 0 NA

Cumulative: 40 37 108. 11 % 45 50

11. Cumulative number of microhousing NA 79 0 489 161.55% 919 5,000 clients 12. Cumulative number of bank branches : offering th e micro agri-lo an prod uct New (Q7-Q6) 0 0 16 65 41 Cumulative: 55 55 100. 00 % 71 1 06 13. Number of new micro agri-loan product New (Q -Q ): 991 1 ,100 7 0. 79% 5, 400 30 ,000 clients 7 6 9, 200 Cumulative: 17,9 67 9 7. 79% 21 ,979 39 ,200 17 ,570

These figures include active MABS participating bank branches

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e. Administrative Information

Table 5: Project Fund Status: December 31, 2009

7th QUARTERLY REPORT 33

Public – Private Partnership Report (July to September 2009)

ANNEX 1.1: PUBLIC-PRIVATE PARTNERSHIP REPORT 1

ANNEX 1.1: PUBLIC-PRIVATE PARTNERSHIP REPORT 2

ANNEX 1.1: PUBLIC-PRIVATE PARTNERSHIP REPORT 3

ANNEX 1.1: PUBLIC-PRIVATE PARTNERSHIP REPORT 4

ANNEX 1.1: PUBLIC-PRIVATE PARTNERSHIP REPORT 5

ANNEX 1.1: PUBLIC-PRIVATE PARTNERSHIP REPORT 6

ANNEX 1.1: PUBLIC-PRIVATE PARTNERSHIP REPORT 7

ANNEX 1.1: PUBLIC-PRIVATE PARTNERSHIP REPORT 8

ANNEX 1.1: PUBLIC-PRIVATE PARTNERSHIP REPORT 9

ANNEX 1.1: PUBLIC-PRIVATE PARTNERSHIP REPORT 10

ANNEX 1.1: PUBLIC-PRIVATE PARTNERSHIP REPORT 11

ANNEX 1.1: PUBLIC-PRIVATE PARTNERSHIP REPORT 12

Special Activities Fund (SAF) Requests Approved during the Quarter:

BACKGROUND:

In 2000, the United States Congress passed the Microenterprise for Self- Reliance Act. The law specifies that at least half of the funding that USAID disburses be used to benefit the very poor. In compliance with the law, each microfinance or microenterprise development organization receiving USAID microenterprise funding is required to annually measure the poverty level/outreach of a random sample of their clients through the Poverty Assessment Survey.

The survey tool (Poverty Assessment Tool or PAT), developed by the IRIS Center of the University of Maryland for USAID, requires that MABS come up with at least 400 completed respondent interviews spread over four participating bank branches each in Luzon, Visayas and Mindanao. MABS implemented the first PAT survey in 2008. This second PAT survey will select at random the bank branches that will be participating in the poverty assessment survey. In Luzon these are Mallig Plains Rural Bank (Aurora and Sto. Tomas Branches in Isabela), Rural Bank of Gattaran (Allacapan, Cagayan Branch) and FICO Bank (Solana, Cagayan Branch). Meanwhile, the Visayas survey participants are Green Bank (Bacolod City Branch), First Community Bank (Bago City Branch) and Valiant Bank (Iloilo City and Duenas Branches). Finally, the Mindanao survey participants are Green Bank (General Santos City Branch), Rural Bank of Cotabato (Cotabato City Branch), Rural Bank of Lebak (Lebak, Sultan Kudarat Branch) and Siam Bank (Villanueva, Misamis Oriental Branch).

To minimize the cost of the survey, the bank staff will be the ones who will conduct the field interviews. However, MABS will provide simple guidelines and technical assistance throughout the duration of the survey. MABS will also process the survey data.

The respondents/bank clients will be interviewed face-to-face in the bank/branch premises, and hence, will require them travel to the branch. To partly help defray the costs of the banks, MABS will provide transportation and food allowance amounting to PhP150 to each survey respondent. The banks will also be reimbursed the cost of shipping the completed survey questionnaires to the MABS office.

Interviews will be conducted and survey results processed in Quarter 8.

ANNEX 1.2 SAF APPROVALS 1

ANNEX 1.3 SAF TRACKER 1

ANNEX 1.3 SAF TRACKER 2

ANNEX 1.3 SAF TRACKER 3

ANNEX 1.3 SAF TRACKER 4

ANNEX 1.3 SAF TRACKER 5

ANNEX 1.3 SAF TRACKER 6

ANNEX 1.3 SAF TRACKER 7

ANNEX 1.4 REPORTS TRACKER 1

ANNEX 1.5 PARTICIPANT BANKS’ PERFORMANCE 1

Microloan Portfolio MABS Participating Banks December 2008 – December 2009

ANNEX 1.6 MICROLOAN PORTFOLIO 1

Microdeposits * MABS Participating Banks September 2008 – September 2009

*Micro deposits are deposits with outstanding balance of PhP15,000 or below. New micro deposits of a given bank refer to the net change in deposits, i.e., the outstanding figures less baseline figures, i.e, the figures before MABS started working with the bank.

ANNEX 1.7 MICRODEPOSIT PORTFOLIO 1