TA 4293: PHILIPPINES CAPACITY BUILDING FOR HOUSING MICROFINANCE FINAL REPORT
to it a credit line if awarded the contract equal to 10% of ABC or cash deposit certificate a hold out on cash deposit issued by a licensed bank which shall be at least 10% of ABC.
CLASS”B”” DOCUMENTS
A valid joint venture Agreement; Letter authorizing the BAC or its duly authorized representative to verify all the documents submitted.
Eligibility Check
The BAC shall determine if each prospective bidder is eligible to participate in the bidding by examining the completeness of each prospective bidder‟s eligibility requirements or statements against a checklist of requirements using non-discretionary “pass/fail” criteria. This means that the absence, incompleteness, or insufficiency of a document shall make the prospective bidder ineligible.
The Procuring Entity reserves the right to review bidder‟s qualifications at any stage of the procurement process if it has reasonable grounds to believe a misrepresentation has been made by the said bidder. Should the review uncover misrepresentation, the procuring entity shall consider the bidder ineligible.
D. Pre-Bid Conference
The following must attend the pre-bid conference:
The BAC; The BAC Secretariat; The TWG members and consultants; Procuring entity end-users; Eligible bidders (not mandatory); The Observers;
When and things to be discussed at pre-bid conference:
Shall be held at least twelve (12) calendar days before the deadline for the submission and receipt of bids; Shall discuss the technical and financial component of the contract to be bid; Shall discuss the requirements in the Instruction to Build (ITB) and respond to queries raised by the bidders; Minutes of the pre-bid conference shall be recorded (by Secretariat) and made available to all participants not later than 3 calendar days after the pre-bid conference;
E. Supplemental and Bid Bulletins
Request for clarification(s) after the pre-bid conference must be in writing and submitted to the BAC at least ten (10) calendar days before the deadline set for the submission and receipt of bids; BAC shall respond to the said request by issuing a Supplemental/Bid Bulletin, at least seven (7) calendar days before the deadline for the submission and receipt of bids; Supplemental/Bid Bulletin issued by the BAC shall also be posted on the website of the procuring entity concerned, if available, and on the G-EPS; It is the responsibility of the BAC to notify in writing of the Supplemental/Bid Bulletins issued to all those who have properly secured Bid Documents;
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Bidders who have submitted bids before the issuance of Supplemental /Bid Bulletins have to be informed in writing and be allowed to modify or withdraw their respective bids; Request for clarification(s) after the pre-bid conference must be in writing and submitted to the BAC at least ten (10) calendar days before the deadline set for the submission and receipt of bids; BAC shall respond to the said request by issuing a Supplemental/Bid Bulletin, at least seven (7) calendar days before the deadline for the submission and receipt of bids; Supplemental/Bid Bulletin issued by the BAC shall also be posted on the website of the procuring entity concerned, if available, and on the G-EPS; It is the responsibility of the BAC to notify in writing of the Supplemental/Bid Bulletins issued to all those who have properly secured Bid Documents; Bidders who have submitted bids before the issuance of Supplemental/Bid Bulletins have to be informed in writing and be allowed to modify or withdraw their respective bids.
F. Submission of bids/Receipt/Opening of bids
Bids must be received by the BAC at the address and on or before the date and time indicated in the ITB; Any bid submitted after the deadline for submission shall not be received or accepted by the BAC; Even if only one bidder submits a bid envelope, the bidding process may proceed /or considered valid, if the bid was satisfactorily advertised and prices are reasonable in comparison to market values (ADB Procurement Guidelines-Section 2.61). If bid is found to be responsive to the bidding requirements, its bid will be declared as the SCRB and considered for award.
Procedures in Submission/ Receipt/Opening of Bids
Bidders shall submit their bids through their respective authorized representatives in two (2) separate sealed envelopes, the first containing the technical proposal and the second the financial proposal; The two envelopes shall be placed in an outer envelope which shall be sealed and addressed to the BAC and marked as specified in the ITB; The BAC receives the bid at the time , date and place specified in the bid documents; The BAC Secretariat must stamp the face of the outer envelope as “RECEIVED” indicating there on the date and time of receipt and have the stamped countersigned by an authorized representative; After receiving the bids, the BAC proceeds with the opening and preliminary examination of the bids in public, following the same procedure as the eligibility check; For each bid, the BAC first open the envelope containing the technical proposal to determine its compliance to the required documents for technical bid; The BAC checks the documents in the technical proposal against a checklist of required documents using a non-discretionary “pass/fail” criteria; In case one or more of the require documents in the technical proposal is missing, incomplete or insufficient, the BAC rates the bid “FAILED” and immediately return the technical proposal together with the unopened Financial Proposal. Otherwise, the BAC rates the Technical Proposal “PASSED”; A bidder determined as “FAILED” has 3 calendar days upon written notice or, if present at the time of bid opening, upon verbal notification, within which to file a request for reconsideration with the BAC; The BAC open the Financial Proposal of each remaining bidder whose Technical Proposal was rated “PASSED”;
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The Financial Proposal shall be opened within the same day. The BAC determines if all documents required for Financial Proposal are complete and sufficiently complied with. If so, the BAC rates the bid “PASSED”. If not, The BAC rates the bid “FAILED”.
The First Envelope (Technical Proposal) shall contain the following technical information / documents:
Bid security as to form, amount and validity period; Authority of signing official; Construction schedule and S-curve; Manpower schedule; Construction methods; Organization chart for the contract to be bid; List of contractor‟s personnel (viz., project managers, project engineers, materials engineers and foremen), to be assigned to the contract to be bid, with their complete qualification and experience data); List of contractor‟s equipment units, which are owned, leased, and/or under purchased agreements, supported by certification of availability of equipment from the equipment lessor/vendor for the duration of the project; Equipment utilization schedule; Affidavit of site inspection; Commitment of the contractor‟s licensed bank to extend to it a credit line if awarded the contract to be bid, or cash deposit certificate, in an amount not lower than that set by the agency in the Instructions to Bidders, which shall be at least equal to ten percent (10%) of the approved budget for the contract to be bid; Construction safety and health program of the contractor; Certificate from the bidder under oath of its compliance with existing labor laws and standards; A sworn affidavit in accordance with ITB Clause 3.2; Eligibility requirements as described in the ITB.
The Second Envelope (Financial Proposal) shall contain the following financial information / documents:
Bid prices in Bill of Quantities in the prescribed Bid form; Detailed estimates including a summary sheet indicating the unit prices of construction materials, labor rates and equipment rentals used in coming up with the bid; and cash flow by the quarter and payments schedule; Any other document described in the ITB.
Modification and withdrawal s of bid
A bidder may modify its bid, provided, it is done before the deadline for the submission and receipt of bids; Bidder shall not be allowed to retrieve its original bid; but shall only be allowed to send another bid equally sealed, properly identified, and marked as a “modification”. Bid modifications received after deadline shall not be considered and shall be returned to the bidder unopened; A bidder may, through a letter, withdraw its bid before the deadline for the receipt of bids. Withdrawal of bids after the applicable deadline shall be subject to appropriate sanctions; A bidder may also express its intension not to participate in the bidding through a letter which should reach and be stamped received by the BAC before the deadline for receipt of bids A bidder that withdraws its bids shall not be permitted to submit another bid, directly or indirectly, for the same contract.
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Bid Security
Bidder shall furnish as part of the bid a bid security in local currency or in a freely convertible currency , in the form and amount specified in the ITB; Surety Bond are not acceptable form of security (ADB Procurement Guidelines, Section 2.14 and Section 14.2 of ITB); Bid security shall be in the amount equivalent to 2.5 % of ABC ( GPPB bid docs ITB/ADB Procurement Guidelines); Bid securities shall be valid for a reasonable period of time/shall be indicated in the bid documents/shall be not later than 120 calendar days from the opening of bids (per BDS of ITB).
G. Bid Evaluation
The main purpose of the evaluation is to determine the Lowest Calculated Bid (LCB).
Steps in determining the LCB
Establish the correct calculated prices of bids through a detailed evaluation of the financial component of the bid; and Ranking of the total bid prices as so calculated from the lowest to the highest. The bid with the lowest price shall be identified as the LCB.
Required time in evaluating the bids
The total evaluation process must be completed not more than 5 days for projects with ABC of P50M and below; The earliest possible time to complete the evaluation: 1 day (GPPB Resolution No 014-2006, Annex C-Period of Procurement Activities, Earliest Possible Time); The total evaluation process must be completed not more than 5 days for projects with ABC of P50 M and below.
Detailed evaluation of bids
Detailed evaluation of bids by the BAC of all bids rated “passed”. The bid must be complete; Bids not addressing or providing all of the required items in the bidding documents, including bill of quantities shall be automatically disqualified. Where a required item is provided but no price is indicated, the same shall be considered non-responsive; Required item specifying a “0” (zero) would mean being offered for free to the Government; Minor arithmetical corrections to consider computational errors, omissions and discounts if allowed in the bidding documents to enable proper comparison of all eligible bids. All bids shall be evaluated on an equal footing to ensure fair and competitive bid evaluation. For this purpose, all bidders shall be required to include the cost of all taxes, which shall be itemized in the bid form and reflected in the detailed estimates. Such bids including taxes shall be the basis of evaluation and comparison.
In case of discrepancies between:
Bid prices in figures and in words, the latter shall prevail; Total prices and unit prices, the latter shall prevail; Unit cost in the detailed estimates and unit cost in the bill of quantities, the latter shall prevail; The corrected per item cost for all items shall be the basis for the corrected grand total cost;
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If the bidder does not accept the arithmetical corrections done by the BAC, the BAC must disqualify the bid and forfeit the bid security of the bidder.
There is no ceiling for financial proposal
Based on the detailed evaluation of bids, those that comply with the requirements shall be ranked in ascending order of their total calculated bid prices as evaluated and corrected; If no bid complies with all the bid requirements, the BAC should declare a failure of bidding. BAC shall issue a resolution declaring failure of bidding. The BAC then reviews the terms and conditions stated in the Invitation to Bid; Members of the BAC, including its staff and personnel, as well as its Secretariat and TWG, are prohibited from making or accepting any kind of communication with any bidder regarding the evaluation of their bids until the issuance of the Notice of Award.
H. Post Qualification
Within seven (7) days from the determination of the LCB, the BAC shall conduct and accomplish a post-qualification of the bidder with the LCB to determine whether the bidder complies with and is responsive to all requirements and conditions for eligibility, the bidding of the contract, as specified in the bidding documents, in which case the said bidder shall be considered and declared “Lowest Calculated Responsive Bid” (LCRB); If the bidder with LCB fails the criteria for post-qualification, the BAC shall immediately notify the bidder in writing of its post-disqualification and the grounds for it. The post-disqualified bidder shall have three (3) calendar days from receipt of notification to request the BAC for reconsideration of its decision. The BAC shall evaluate the request for reconsideration and shall issue the final determination of the said request within seven (7) calendar days from receipt thereof. (GPPB Resolution No. 014-2006, Section 34.4); Immediately after the BAC has notified the bidder of its post-disqualification and notwithstanding any pending request for reconsideration the BAC shall initiate and complete the same post- qualification process with the second LCB. If the second bidder passes the post-qualification and provided the request for reconsideration of the first bidder has been denied, the BAC shall declare the second bidder as the bidder with the LCRB; If nobody passes the post-qualification, the BAC shall declare a failure of bidding; The BAC shall issue a Resolution declaring a failure of bidding. The BAC then reviews the terms and conditions in the Invitation to Bid; It must conduct a re-bidding and posting and publishing the new Invitation to Bid is required; All bidders that have initially responded to the Invitation to Bid in the first bidding shall be allowed to submit new bids.
DBP and ADB Review of Results of Bidding
After bids have been evaluated, the borrower shall, before final decision on the award is made, furnish ADB (thru DBP) detailed report on the evaluation and comparison of the bids received, together with the Recommendation for Award. The borrower shall award the contract only after receiving “No Objection Letter” from ADB. (Appendix 1 of the ADB Procurement Guidelines)
I. Award of Contract
The BAC shall issue a Resolution recommending to the Head of Procuring Entity (Mayor) award of the contract to the bidder with the LCRB at its submitted bid price or its calculated bid price, whichever is lower;
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Within the period of not exceeding seven (7) calendar days from the recommendation of award, the Head of Procuring Entity shall approve or disapprove the recommendation; Where project cost is less than P50 M, the recommendation shall be approved within 4 calendar days ( GPPB Resolution No 014-2006 , Section 37.2.1); After the approval of the BAC Resolution recommending the award of contract, the Head of Procuring Entity or his duly authorized representative shall immediately issue the Notice of Award (NOA) to the bidder with the LCRB; Simultaneously a copy of the NTP shall be furnished to all losing bidders and posted in the website of the Procuring Entity; If the bidder refuses to accept the award within the validity period, the BAC shall forfeit the bid security of the bidder and shall initiate the blacklisting procedure in accordance with the Uniform Guidelines for Blacklisting; The BAC then initiates and completes the post-qualification of the bidder with the second LCB.
Performance Security
Ten (10%) of the contract price in the form of an unconditional bank guarantee or cash deposit; The Performance Security shall cover the period from the time of signing of contract until the final acceptance of the project ( GPPB Resolution No. 012-2005); The procuring entity reserves the right to reject any and all bids, declare a failure of bidding, or not award the contract: a. if there is prima facie evidence of collusion; b. if the BAC is found to have failed in following the prescribed bidding procedures; c. for any justifiable and reasonable ground where the award of the contract will not redound to the benefit of the Government.
J. Contract Signing
The winning bidder or its duly authorized representative shall formally enter into contract and submit all documentary requirements to perfect the contract within 10 calendar days from the receipt of Notice of Award.
Documentary Requirements:
Written Confirmation of Award Contract Form signed by the Bidder Performance Security Other documentary required by the existing laws and procuring entity
The Procuring Entity signatory is encouraged to sign the contract the same day as the signing of the Bidder, provided that all contract documents are completed.
The Chief Accountant or the Chief Budget Officer may sign the contract as an instrumental witness
K. Notice to Proceed (NTP)
The procuring entity shall issue the Notice to Proceed together with a copy of the approved contract to the successful bidder within Three (3) calendar days from the date of approval of contract by the appropriate government approving authority
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For infrastructure project with ABC less than 50M pesos, the NTP must be issued within two (2) calendar days. If effectivity date is provided, such date shall not be later than seven (7) days. (GPPB Resolution No. 014-2006, Section 37.5).
REFERENCES:
1. REPUBLIC ACT NO. 9184 (THE GOVERNMENT PROCUREMENT REFORM ACT) and the IMPLEMENTING RULES AND REGULATIONS (IRR) 2. GOVERNMENT PROCUREMENT POLICY BOARD RESOLUTIONS (GPPB) 3. PHILIPPINE BIDDING DOCUMENTS AS HARMONIZED WITH ADB, JBIC AND WB 4. PROCUREMENT GUIDELINES - ASIAN DEVELOPMENT BANK (ADB)
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Appendix 33 The DPUCSP Website TA 4293: PHILIPPINES CAPACITY BUILDING FOR HOUSING MICROFINANCE FINAL REPORT
Appendix 33
DPUCSP Website
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Appendix 34 Draft HOME Indicators Scoring Sheet TA 4293: PHILIPPINES CAPACITY BUILDING FOR HOUSING MICROFINANCE FINAL REPORT
Appendix 34
Draft Home Indicator Scoring Sheet1
Household and Community Profile General socio-economic characteristics of the association members fall 25 SCORE H under the target beneficiaries of the project. The members demonstrate (sample savings discipline and capacity to borrow and repay. only) A. The community is made up of households belonging mostly to the informal sector and/or the low-income group. 4 B. LAND/PROPERTY OWNERSHIP Households can show tenure security (whether existing or to be 7 obtained as a result of the loan) or proof of legal use, possession or ownership of their residence (for both house and lot, when applicable). Land ownership or secure tenure is available for the development of a housing project Have clear policies against selling of housing rights C. LIVELIHOOD and/or EMPLOYMENT Members have a means of livelihood (engaged in various 7 entrepreneurial activities such as sari-sari stores, retailing and wholesaling of various products, etc.) or are gainfully employed Community has a livelihood program D. SAVINGS PROGRAM The community has an ongoing Savings Mobilization program which 7 entails a stringent community collection mechanism. The members set aside funds to pay for their land and housing. Organization and Governance The association is fully compliant with proper legal and regulatory 30 O agencies. It has a strong leadership which is able to supervise, facilitate (sample and manage affairs of the association and promote community only) participation and development. A. HLURB or SEC Duly registered with the proper regulatory agency 5 Complies with reportorial requirements of HLURB/SEC (annual report, audited financial statements and General Information Sheet) HOA has no adverse findings from the appropriate regulatory agencies B. Clearly worded Vision and Mission statement with a definite focus 4 and objective toward the development of the community and its members.
C. MEMBERS of the BOARD Have undergone orientation by the HLURB/SEC or any other 8 competent agency deputized by it on how to conduct meetings, preparation of minutes, handling of accounts, laws and pertinent rules and regulations within the prescribed period after election or appointment. Clearly defined roles and responsibilities Board composition is in accordance with by-laws
1 This has been submitted by the consultants t HUDCC and DBP.
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Board selection procedures are in place and implemented accordingly No adverse credit background on the individual Board Members Updated minutes of board meetings/committee reports D. Active Membership Members consist of the owners of all real property over which the 8 HOA has jurisdiction as prescribed in their Articles of Incorporation and Bylaws. Complete list of members is properly maintained. Holds regular elections and conducts regular officers/General Assembly (GA) meetings. GA is involved in drafting and approving Project Policies and Procedures E. Has proposed projects that are based on community demand and 5 takes into consideration its affordability.
Management and Technical Knowhow and Capacity The members of the community demonstrate technical, financial and 35 management skills including estate management. Existence of policies (sample M and procedures on transparency and accountability for funds, records only management and simple operating systems.
A. Has established administrative Policies and Procedures (secretariat 7 and records management, simple operating systems) B. Availability of externally audited financial statements which are 7 approved by the Board and General Assembly. C. Keeps financial and other records sufficiently detailed to enable the 3 association to fully declare to each member the true statement of its financial status. D. Funds are kept in accounts in the name of the association and 3 separate from funds of any other association or any authorized fund custodian. E. Existence of a project implementation committee or shelter project 3 committee with clearly defined functions. F. Has a Collection Efficiency Record of ______% for the past ___ year 5 (s). G. Existence of HOA policies and guidelines (whether DRAFT or already 5 approved by the GA) on property management and maintenance. H. Has knowledge of applicable laws (i.e. CMP, UDHA, BP 220) and 2 other related ordinances External Relationships 10 Linkages with the LGUs, national government agencies, NGOs, (sample E business sector and other institutions signified through MOAs/MOUs only
A. Actively cooperates with the public (LGUs and national government 4 agencies) and private institutions in promoting their common goals and activities for the benefit of the HOA members B. Preferably with LGU guarantee 3 C. No adverse findings from external institutions 3
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Appendix 35 Case Study for Butuan TA 4293: PHILIPPINES CAPACITY BUILDING FOR HOUSING MICROFINANCE FINAL REPORT
Appendix 35
The Balangayan Butuan Housing Site Development A Study on the Role of DPUCSP
I. BACKGROUND
The BALANGAYAN BUTUAN (BB) is a city government-led multi-sectoral shelter program that aims to address the shelter needs of around 3,488 displaced families from the 19 urban and rural barangays that are affected by the Cotabato-Agusan River Basin Development Project (CARBDP). The BB program stems from the Balangayan Butuan Master Development Plan (BBMDP), a four-phased program formulated in June 2003, and is being implemented by the Office of the City Housing and Development of Butuan. Its focus is on relocating the affected families to the 81-hectare housing site at Barangay Pagatpatan.
Under the program, the Butuan city government undertakes to provide the land equity, site development, use of equipment in the construction of houses, development of road networks, electrification and water facilities and identification of beneficiaries, land disposition, and documentation. The LGU actively participates in the construction of houses1 and capacity building.
From March to May 2003, the city government carried out a comprehensive survey and tagging operation and later established stringent guidelines on the selection of beneficiaries based on the criteria2 set by the Screening Committee and the Balangayan Butuan Council.
Relocation is done after a series of consultations with affected communities. Since the first build and transfer in June 2003 and up to December 2007 a total of 655 families now reside at Phases I, II & III of the Barangay Pagatpatan relocation site. The riverbanks that have never been without shanties are now totally cleared of settlements along 7 barangays.
The area is presently provided with basic amenities, 2 health centers, a playground, 2 day care centers and livelihood facilities such as the Block Tiendas for residents who want to engage in business and a Terminal Bay for tricycles plying the Pagatpatan route.
Values transformation and socio-economic related activities are integrated into the BB program to enable the families to take on viable livelihood endeavors. Livelihood projects are undertaken based on the expressed need of the households, the potential to generate income, and the availability of resources.
Resettled families are likewise being organized and capacitated to become model communities. They are provided assistance in acquiring housing units at a cost based on their affordability level through the pooling of resources from various donors and partners. These are benefits that they did not enjoy when they were living along the banks of the Agusan River.
Notwithstanding the noteworthy achievements thus far the city is still faced with the need to access additional funding to complete site development and upgrading works as laid out in their Shelter Development Plan.
1 The program adopts three (3) housing schemes: BB- Gawad Kalinga; BB- Habitat for Humanity; and BB-CIGLA or the City Government Lot Acquisition scheme that awards lots from the LGU’s 51 existing subdivisions to the poorest of the poor. 2 The selection criteria are comprised of the following: 1) effectively landless or must not own any real property; 2) identified as poor living within the city; 3) married or widowed with dependents, or unmarried men or women with dependents; 4) must be included in the census and tagging conducted by the City Housing Office and must be residents of the priority barangays for housing project of the city; 5) must be registered voters of Butuan city; 6) must be a family with or without children; and, 7) must be willing to become a member of the neighbourhood association.
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This prompted the local government to look for other sources such as the DPUCSP facility of the Development Bank of the Philippines (DBP). This makes the DPUCSP a participant or contributor to the BBMDP, a program anchored on multi-sectoral participation of partners who each have a role to play in program implementation. The specific contribution of DPUCSP to the development objective of the BBMDP is the purpose of this report.
II. THE DPUCSP SUB-PROJECT: BALANGAYAN BUTUAN LAND SITE DEVELOPMENT
The Barangay Pagatpatan property was designated by the CARBDP administered by the Department of Public Works and Highways (DPWH) as the site for the city socialized housing for families living in the danger zone areas and those considered as urban poor. This was covered in a Memorandum of Agreement (MOA) between the DPWH and the LGU. Development of the site, however, was left to the local government.
The city government of Butuan accessed the Development of Poor Urban Communities Sector Project (DPUCSP) DPUCSP facility to implement the “Land Site Development and Upgrading Works” which aims to (i) improve the access to tenured, serviced homelots and opportunities for upgraded and new houses and (ii) strengthen the capacity of the community towards participatory planning. It has two (2) components, namely,
A. New Site Development Component- Site Development Works for Phases II and III
In the 2005 FS, the city government proposed to develop a site covering an area of around 94,018 square meters (9.4018 hectares) under Phases II and III of the Barangay Pagatpatan housing project. Of the 9.4 hectares, 5.86 hectares (or 62%) are saleable areas or for home lots out of which 3.73 hectares is to be financed by DPUCSP. The rest are allotted for the road network, open spaces and community facilities. Prior to the said proposal 4.4 hectares for Phase II and .81 hectare for Phase III had been developed.
B. Upgrading Component- Provision of Drainage Facilities for the Housing Units in Phase I
To complement the existing drainage network under Phase I of the BBMDP, the LGU proposed to construct additional 807 linear meters of concrete hollow blocks (CHB) covered canals and 47 linear meters of 600-mm diameter reinforced concrete pipes through DPUCSP financing. These facilities would serve the need of the existing seventy four (74) housing units in Subdivision Block Nos. 16 to 19 and the open spaces and community facilities in Subdivision Block No. 20 of Phase I, for drain lines with durable materials and approved installation practices.
III. The DPUCSP Sub-Loan
A. Loan Application and Approval
The loan application for PhP15M under Part A of DPUCSP was made during the term of Mayor Theresa Plaza in mid-2005 and processed by the DBP- Regional Marketing Center (RMC) in Butuan City. It was approved on February 2007 with a 15-year term at 9.54% interest per annum. It took two (2) years to process for approval because of a land-ownership issue. At the time of the loan application, the DBP- RMC did not commence loan approval process because of their requirement that the site which is owned by the national government (DPWH) should be turned over or conveyed to the LGU.
Basically, this was an issue of conveyance of the title of a property under “Presidential Proclamation” to the LGU, free of any lien and encumbrances. (This is discussed separately in Section V – Issues and Concerns.). To address this it was agreed during the August 2006 Asian Development Bank (ADB) Review Mission that the issuance of conveyance to the LGU will be a subloan release condition. This was upheld later through DBP Circular No. 01-2006 which stipulates, among others, that "land proclamation or reconveyance of sub-project sites in favor of applicant-LGUs, as well as the required cancellations of liens and encumbrances on titles may be pre-release requirements. Clear title is,
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however, a pre-approval requirement for qualified enterprises which are private sector DPUCSP proponents".
B. Subloan Disbursement
Notwithstanding the pre- loan release condition, the full amount of PhP15M was released in 3 tranches within September – October 2007 after a project completion report of 40%, 60% and 90% were validated. Credit should be given to the DBP-RMC and the concerned unit headed by DBP Manager Freddie C. Mero for not allowing the unresolved issue to further delay the implementation of the subproject.
Per Mr. Mero the subproject was treated as a special transaction and granted exemption to the pre-release condition in view of the following reasons:
. The loan is IRA-based or secured. . The sub-project is considered as a high-impact undertaking that will be beneficial to the target communities . The sub-project could still be implemented despite the issue on ownership as it is not even a security of the loan . The property is government owned thus the transactions are on a government to government level.
The completion of the project prior to loan release was facilitated by the infusion of LGU equity.
Currently, the LGU, well within the grace period, still has to make its amortization on the loan. It is however paying the interest due via a debit system arranged with DBP Butuan.
IV. SUB-PROJECT IMPLEMENTATION
The implementation of the backfilling works under the new site development component of DPUCSP sub- project started in August 2007 and was completed by November 2007. A total of Php15.0M was awarded to a private contractor to backfill portions of Phases II and III, covering around 3.5 hectares and 220 subdivided lots.
The remaining component involving the provision of drainage facilities for Phase 1 will no longer be funded by the DPUCSP subloan as proposed in the feasibility study. Instead, the cost of the drainage works will be shouldered by the LGU as part of its equity, and actual work is expected to begin the second quarter of 2008.
A comparison of the proposed timetable of activities and cost estimates based on the 2005 FS and the actual sub-project implementation in 2007 is summarized in the table below:
PROJECTED SCHEDULE / ACTIVITY Estimated Costs ACTUAL IMPLEMENTATION (Per Feasibility Study) A. Pre-Construction Phase . FS Preparation, Appraisal and Loan was approved in February October 2005 Approval 2007 . Signing of Subloan Agreement . Preparation and Approval of November to December 2005 Detailed Engineering Plans, Cost Estimates and Bid Documents . Advertisement, Bidding, Bid Contract was awarded to RON January to March 2006 Evaluation and Award of Contract WOOD Construction in mid 2007 B. Construction/ Implementation Phase . Back-filling works April to October 2006 . Filling work started in August 2007 and completed in November 2007 Estimated DPUCSP . Depth of filing is .60m-.80m VOLUME 1: MAIN REPORT • APPENDIX 35 December 2009 PAGE 3
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PROJECTED SCHEDULE / ACTIVITY Estimated Costs ACTUAL IMPLEMENTATION (Per Feasibility Study) Financing: PhP15.827M . Covered 3.5 hectares . The P15M loan from DBP was utilized fully for this purpose. . Drainage System April to June 2006 Work will start on the second quarter Estimated DPUCSP of 2008 but using LGU funds. Financing: PhP1.164M
V. ISSUES AND CHALLENGES:
A. Land Ownership
The land-ownership issue is centered on the conveyance of the title of a property under “Presidential Proclamation” to the LGU, free of any lien and encumbrances. The Housing and Urban Development Coordinating Council (HUDCC) has been at the forefront of efforts to secure either the conveyance or the proclamation of the land by DPWH to the LGU.
It is hoped that a precedent execution of a Deed of Conveyance by Butuan City and DPWH for a property situated in Barangay Mahay which is also under the Balangayan Butuan program will justify the similar request for Barangay Pagatpatan. Barangay Mahay is part of the Lower Agusan Development Project (LADP) Stage 1 Phase II in the East Bank of Butuan while Barangay Pagatpatan, where the DPUCSP subproject is located, is part of LADP Stage 1 Phase I in the West Bank of Butuan.
Aside from causing the loan approval to be delayed by (2) years, the issue also affected the project costing after the Butuan City Housing Office decided not to update their 2005 cost estimates, opting to absorb the cost overruns as their additional equity. The issue was also cited as the reason why the City Housing Office has yet to determine the pricing for the serviced plots, and subsequently, why no payments have yet been made by the beneficiaries now in Barangay Pagatpatan. In the meantime, the Butuan City Public Information Office reports that the city’s Shelter Program’s cost recovery collection efficiency continues to increase with almost P5M in collections yearly.
The issue on land ownership was resolved only during the 2006 ADB Review Mission, when DBP agreed to temporarily waive this requirement and instead made it a sub-loan release condition. It is also hoped that a precedent execution of a Deed of Conveyance to the LGU for a property in Barangay Mahay3 will justify the similar request for Barangay Pagatpatan.
B. Tie-up with an MFI
The possibility of linking the livelihood component of the City’s Shelter Program with the Enterprise Bank, Inc. (EBI) to provide the beneficiaries access to shelter finance was also discussed during the March 2007 ADB Review Mission. While both the LGU and the EBI expressed their interest in the idea, there has yet to be further discussions on the matter.
C. Partnering for Housing Construction
With the 3.5 hectare site under Phases II and III now ready, the next step is to construct the houses on the 220 subdivided home lots. Of the 655 housing units of the families that have been relocated to other areas in Barangay Pagatpatan, 143 were constructed in partnership with Gawad Kalinga (GK), 25 units are under
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3 Barangay Mahay is part of the Lower Agusan Development Project (LADP) in the East Bank of Butuan. Habitat for Humanity (HfH), 236 units were done through the city’s CIGLA4 scheme, and 251 units were funded by the LGU.
For the DPUCSP-funded site, the challenge for the city government is to look for partners to fund or donate the housing units. At present there is no commitment from GK due to issues internal to their organization. The Habitat for Humanity, on the other hand, can undertake a few more units as it is believed to have set aside funds for a hundred plus homes.
It is to the LGU’s credit that it has identified a new partner, the Kadayawan, Inc. with whom they signed a Memorandum of Agreement on December 13, 2006 to implement the Kadiyawan Bahay Pag-asa Program in Barangays Mahay and Pagatpatan. Along with the MOA signing was the groundbreaking ceremony at Barangay Mahay.
Kadiyawan (which means “for the good”) commits to construct some 1,000 homes for the families who are being relocated from the banks of Agusan River. A substantial number is expected to be built at Barangay Pagatpatan. The year 2007 marked the beginning of the Kadiyawan house build in Barangay Mahay totalling 30 units.
Partners in the Kadiyawan Bahay Pag-asa Program include the Philippine Council for Evangelical Churches (PCEC), Alliance of Christian Development Agencies (ACDA), and the Christian Reformed World Relief Committee – Philippines/Asia (CRWRC)5.
VI. LESSONS LEARNED
The Balayangan Butuan housing program was classified under the Good Practices category (for its poverty reduction, social services, and housing themes) of the 2006 Best Practices of the UN-Habitat6 that included 329 different initiatives from close to 60 countries worldwide. Nine (9) of these projects were from the Philippines with one even making it as one of the 12 awardees of the 2006 Dubai International Award for Best Practices to Improve the Living Environment.
Locally, it was also recognized by the Bureau of Local Government of the Department of Interior and Local Government (DILG) as one of the Best Practices that have proven to be effective solutions to specific problems encountered and demonstrated a level of sustainability and replicability.
The program offers valuable lessons in the implementation of a city government led multi-sectoral shelter program:
4 Stands for City Government Lot Acquisition (CIGLA), a scheme wherein the LGU awards lots from among its 51 acquired properties to the poorest of the poor or those with no capacity to pay. 5 CRWRC has been working in the Philippines since 1970 and is currently involved in programs focused on school and community development, justice education, small business development and income generation, and health and environment education. 6 The Best Practices and Local Leadership Programme (BLP) was established in 1997 in response to the call of the Habitat Agenda to make use of information and networking in support of its implementation. It is a global network of government agencies, local authorities and their associations, professional and academic institutions and grassroots organizations dedicated to the identification and exchange of successful solutions for sustainable development. VOLUME 1: MAIN REPORT • APPENDIX 35 December 2009 PAGE 5
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A. LGU commitment to Housing and Settlement
The identification of housing and resettlement as a priority area for development for the LGU ensured that they would pursue the project despite the encountered delays in the approval of the loan and the change in political leadership. The LGU also initiated partnerships with financial institutions and other organizations that contributed in land development and housing construction. The LGU also provides an annual budget for site development through the City Housing and Development Office, and appropriates specific amounts for construction of houses thru ordinances.
B. Role of DBP Butuan Branch
The role of the DBP Butuan branch office proved critical to the program, particularly when the bank’s account officer pushed for the disbursement of the loan inspite of the ongoing issues regarding land ownership. The account officer appreciated the city government led shelter program, and understood the need for DBP to support it.
C. Creation of a Housing and Development Office
It was under the administration of the former Mayor that the City Housing and Development Office was created and operationalized as a focal unit for housing.
This is relevant to DPUCSP as this fully conforms to the requirement for a sub-project implementing unit (SPIU). Having an established Housing Office facilitated the coordination and communications between the LGU and the DPUCSP Team (DBP, HUDCC and Consultants) for all matters related to the sub-project. The drafting of the FS in 2005 was made easier because much of the information or inputs needed are already included in the shelter program or strategy developed by the Housing Office.
As part of its commitment, the LGU provides yearly appropriation for site development through the City Housing and Development Office budget, and by way of an ordinance appropriating a specific amount for construction of houses.
D. Partnering
Without their partners the LGU will not be able to attain their goal of providing a better quality of life for the families living in danger areas by relocating them within 10 year’s time.
Even for the DPUCSP-funded site alone, the LGU needs partners for the construction of houses. There is a need to continually seek and identify program partners in order to increase their partner base. Such partnerships with individuals, institutions and organizations will greatly ease the burden on LGU resources and speed up the implementation of their housing program
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Appendix 36 Case Study for Enterprise Bank, Inc. TA 4293: PHILIPPINES CAPACITY BUILDING FOR HOUSING MICROFINANCE FINAL REPORT
Appendix 36
Case Study for Enterprise Bank, Inc.
Enterprise Bank, Inc. (EBI) “KMTK – Home Improvement Loan (Kalisod Mo Tabangan Ko)” A CASE STUDY
I. INSTITUTIONAL BACKGROUND AND CONTEXT
A. Brief History
Enterprise Bank Inc. was founded on May 10, 1976 as the New Rural Bank of Lianga, Surigao del Sur Inc. by a group of businessmen from Lianga, Surigao del Sur. Sometime in the 1980’s, the bank endured financial losses and a deterioration of its loan portfolio as a result of the bank’s involvement in government-led agri- lending programs without having the right understanding of its implications and a strong lending methodology. A change in management occurred in 1994 and saw founder Mr. Ignacito U. Alvizo taking the helm. Within 3 years, the bank’s performance improved on the back of its successful entry into microfinancing. The period saw a remarkable decline in the bank’s past due rate from nearly 90% to 6% coupled with an increase in the bank’s resources from Php 6.0 million to Php 400.0 million. The bank was also granted licenses to operate ten (10) additional branches by the Bangko Sentral ng Pilipinas (BSP) following the deregulation of the banking sector in the 1990’s. Branches were established in the municipalities of Tandag, Madrid, Aras-asan, Barobo, Hinatuan, and Bislig City in the province of Surigao del Sur; in the municipalities of San Francisco and Bayugan in the province of Agusan del Sur; in Butuan City in the province of Agusan del Norte; and in Tagum City in the province of Davao Oriental.
In 1997, EBI was accredited by the People’s Credit and Finance Corporation (PCFC) as one of its partners in Mindanao. The bank took on a new vision of providing microfinance services to enterprising poor women by launching “Kalisud Mo, Tabangan Ko” or KMTK, a credit program patterned after the basic Grameen Bank model of solidarity lending. This became EBI’s flagship loan product and proved instrumental in improving the bank’s overall performance.
In July 3, 2006, EBI opened its 9th branch in Davao City, a significant step toward attaining their target to broaden the scope of their services and increase their presence in Mindanao’s growth centers. With ten years of experience, and sixteen (16) service outlets now operating in Kidapawan, Bukidnon, Davao, Iligan City and General Santos City in addition to its 10 branches, EBI is now recognized as a pioneer in microfinance.
B. Mission Statement
The EBI has a number of mission statements that speak of their commitment to their clients, employees and shareholders. Foremost in the bank’s mission is:
“To provide innovative financial products and services to small and medium sized enterprises, microentrepreneurs, especially women, and to members of low-income groups and to ensure that credit is utilized to improve their economic well-being.”
C. Legal Structure, Governance and Organizational Structure
The Enterprise Bank, Inc. is principally owned by the Alvizo clan and founder Mr. Chito Alvizo is the majority stockholder. Its board consists of six-members, of which two are independent. In addition to Atty. Ronald E. Alvizo who is both the President and Chairman, the bank’s executive team includes one Senior Vice-President,
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two Vice Presidents and eight Assistant VPs. Twenty three managers make up the Bank’s Management Team. The bank has a current manpower complement of 342 as of December 31, 2007.
D. Funding Sources
The bank is able to fund its operations and various credit programs partly through its own funds and mostly in partnership with different financing institutions such as the People’s Credit and Finance Corporation (PCFC); Land Bank of the Philippines (LBP); Small Business Guarantee and Finance Corporation (SBGCF); UCPB-CIIF Finance and Development Corporation; National Livelihood Support Fund (NLSF); Bangko Sentral ng Pilipinas, and the Development Bank of the Philippines (DBP). In 2006, the bank entered into a loan agreement with Netherlands based OXFAM (Novib). Another Netherlands based bank, TRIODOS also expressed interest in partnering with EBI.
As of year-end 2007, EBI has a capital stock of PhP46.5M and a total net worth of PhP102.18M.
E. Affiliations
EBI joined the Rural Bankers Association of the Philippines (RBAP) after its establishment in 1976. EBI also affiliated itself with the Caraga Federation of Rural Bankers in the same year. EBI founder Mr. Chito Alvizo served as the Chairman of the Mindanao Microfinance Council1 which was established in March 2004.
II. MARKET AND CLIENTELE
As of December 31, 2007 EBI’s 11 branches and 16 service outlets had served 60,707 clients of which 39,183 (64.54%) are microfinance borrowers. The remaining 35% (21,524) are non-microfinance clients.
The bank is aiming to reach 100,000 clients served by 2010 and is targeting rural poor women, farmers and fishermen in Eastern and Northern Mindanao.
III. OPERATIONAL AND FINANCIAL PERFORMANCE
The following are the operational results and performance indicators of EBI for the period January to December 2007:
PORTFOLIO Group Loans PhP 205,487,541.46 Individual Loans PhP 407,662,929.92 TOTAL PhP 613,150,471.38
RELEASES Individual Loans/ Small Business Loans PhP 69,656,400.00 Group Loans PhP 69,944,000.00 TOTAL PhP 139,600,400.00
1 Mindanao Microfinance Council acts as the industry's representative body in the region. Its role is to consolidate the efforts of its member institutions to move toward a growth-oriented environment by promoting common operating standards, sharing information on best practices, being involved in the development and crafting of industry- and client-related policies and adopting common goals.
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PERFORMANCE INDICATORS Total Loans PhP 595,759,514.20 Liquid Assets PhP 154,093,908.21 Total Deposits PhP 272,715,951.57 Deposit to Loan Ratio 46.28% Liquid Ratio (Quick Rate) 55.89% Credit Line (P661M) Utilization 55.76%
PROFITABILITY Total Assets PhP 830,323,501.17 Total Capital Accounts PhP 102,183,415.33 Average Portfolio PhP 604,487,297.60 ROA (Asset Yield) 3.17% ROE (Total Capital) 23.68% Portfolio Yield 41.64% Expense to Income (Operating Cost Ratio) 90.45%
IV. PRODUCTS AND SERVICES
In addition to its regular savings, time deposit and checking account service, EBI is offering eight loan products for livelihood, agriculture, fishing, livestock, small businesses, salary and pension. More than half or 58% of the bank’s loan portfolio is allocated for the micro-agri program. EBI launched the Micro Pabahay loan product in June 2006 using the Development of Poor Urban Communities Sector (DPUCSP) facility of the DBP.
V. DPUCSP AND EBI
A. Introduction to DPUCSP and Housing Microfinance
The Enterprise Bank was among the 8 rural banks that were represented during the July 14, 2005 presentation on the Development of Poor Urban Communities Sector Project (DPUCSP) and housing microfinance made by DBP and the Consultants to the Mindanao Microfinance Council in Davao City. EBI expressed their interest in the DPUCSP soon after and submitted the documents required for accreditation in August 2005.
B. The DPUCSP Sub-loan
On January 30, 2006 the DBP approved a Php 20.0M credit line for EBI under the DPUCSP facility, of which the EBI drew down Php 10.0M for the livelihood component of their KMTK Pabahay Program. By January 2007, EBI’s credit line was increased to P30M and a total of Php 23.08M was accessed, of which Php 7.14M were disbursed for home improvement loans and P15.94M for enterprise loans benefiting a total of 1,655 clients. EBI’s credit line was renewed again in January 2008 and increased to P35M of which P6.7M was disbursed during the first quarter.
VI. THE KMTK PABAHAY PROGRAM
The Enterprise Bank is the first rural bank to participate in DPUCSP in line with the bank’s objective to implement a home improvement loan program designed to cater to their clients’ shelter needs. EBI officially
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launched their Micro Pabahay loan product on June 30, 2006 in Davao City. The event was attended by 214 clients of the 25 centers from the Tagum and Davao branches. In his speech to the Rural Banker’s Association of the Philippines (RBAP) 53rd National Convention held in Davao City on May 18, 2006, the Vice-President of the Philippines and HUDCC Chairman Noli de Castro lauded EBI’s entry into housing microfinance as an innovative initiative that can make a profound impact in responding to the housing needs of the Philippines’ urban poor.
A. Design Process
Client participation in the program’s design phase is cited as a contributing factor to the success of the KMTK Pabahay program. Early on, consultations were made with clients in Tagum and Davao City to identify key elements that characterized their financing needs while also considering their capacity to pay. Center meetings were likewise constituted as part of a feedback mechanism to allow clients to express their opinions on how to enhance the loan product. This initiative resulted in the development of a demand-driven loan product that complements the KMTK livelihood lending program.
EBI implemented a home improvement loan in the past but was discontinued due to the absence of loan term funds for this purpose. Majority of the clients expressed interest to revive the loan scheme.
The Microfinance Availment Plan2 (MAP)
Under the DPUCSP guidelines, participating MFIs are required to accomplish and submit a MAP which is similar to a loan or project proposal. Representatives from the DBP, the Housing and Urban Development Coordinating Council (HUDCC), and DPUCSP consultants conducted a one-day MAP writeshop on December 19, 2005 in Davao City. The writeshop was participated in by Mr. Chito Alvizo, Atty. Ronald Alvizo along with the bank’s Assistant General Manager, Compliance Officer and key MIS person. The output at the end of the writeshop was a draft MAP which EBI finalized and submitted to DBP in January 2006.
B. Goals and Objectives
The EBI’s KMTK Pabahay program’s stated aim is to assist in improving client’s standards of living by providing access to flexible and affordable credit for home improvements. The bank envisions that the program will enable clients to engage in activities that would make their homes more livable, sanitary, and secure.
The goals and objectives of the program supports and advances the idea that investment in home improvement directly promotes the client’s socio-economic well-being thru increased household earning capabilities which ultimately improves the client’s capacity to repay loans.
C. Features of the Loan Product
Table 1 below summarizes the features of EBI’s home improvement loan:
Table 1: Features of EBI’s Micro Pabahay Loan Product Maximum P25,000.00 Loanable Minimum P5,000.00 amount Average P6,000.00
2 The MAP is a documentation of plans and activities that will facilitate implementation and delivery of shelter finance and microfinance to target end clients. The MAP integrates all elements in shelter finance and microfinance delivery, including processes, activities and decisions that will have important implications on institutional performance and client impact.
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(based on the most frequently issued loan size) Loan Terms 6 – 12 months (with options to preterminate or pay in advance) Interest Rates 24% per annum Other Service 5% of loan amount Fees Charge Gross 7% Receipt Tax Repayment Terms Weekly Loan Disbursements 70% of loan amount is provided in the form of construction materials 30% in cash
VII. PROGRAM IMPLEMENTATION
The program was piloted in the cities of Tagum and Davao during the third quarter of 2006 and was subsequently rolled out to all branches of the bank. By the end of December 2007, a total of P42M loans have been disbursed to 1,655 clients who are availees of both livelihood and home improvement loans. This number represents 82.75% of their targeted 2,000 clients and are mostly from Tagum and Davao.
The program is implemented using the bank’s group lending approach. Clients who availed of home improvement loans are grouped together where they agree to guarantee each other’s loan. This makes it also easier for collection purposes.
Of the total loans disbursed by end of 2007, P36M went for livelihood loans and P6M went to home improvement loans. The housing loans make up four per cent (4%) of the total loan portfolio of the bank. The current loan portfolio balance stands at P8.343M. Since its implementation, the bank has had 100% repayment of the housing loans. So far 25% of the clients or 416 have renewed their loans after the first cycle.
For the year 2008 the bank targets to have a portfolio of P20M for housing and disbursed P37.2M loans to 5,290 clients.
Eligibility Criteria
The bank set the following criteria for clients wanting to avail of the KMTK Pabahay home improvement loans:
i. Must be an existing bonafide KMTK Class “A” client for 1 year with continuous availment and savings balance of not less than P3,000 ii. Must have no (outstanding loan?) past due account upon application iii. Must have an attendance rate of at least 80% iv. Must be a resident of a 1st Class Municipality v. Must be 18 to 58 years old for male or 21-60 years old for female borrowers vi. Must have security of tenure under any of the following conditions: • Borrower owns the property being upgraded. • Borrower has a valid leased contract during the entire period of loan • Borrower’s right is supported by valid proof or legal documentation i.e. deed of absolute sale, extrajudicial partition duly notarized by lawyer.
The home improvement loan also serves as a reward or incentive for clients who had no delinquency in their payments for 1 complete year. A client who is a homeowner yet is renting the land is still qualified to borrow.
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Some clients opt to withdraw their membership but keep their savings intact. Others, however, choose to withdraw and get their savings at the same time. The bank decided in both cases that should such clients decide to come back, they may do so but will not be eligible for housing loans.
Priority Projects
Generally, the Micro Pabahay home improvement loans are provided to finance the following projects prioritized as follows: Building & repair of toilets Building of septic tanks, “pahabwa”, tiles House repair, improvements, and adding of rooms Walling, ceiling, roofing, flooring, replacing foundations, drainage, fencing, gate, plumbing Access to basic services like water and electricity
Table 2: Summary of KMTK Pabahay Program Implementation (3Q 2006 to 4Q 2007) Pilot implementation 3rd quarter of 2006; Tagum and Davao City Number of clients 1,665 (all first cycle loans) (as of end of 2007) Renewals after the 1st cycle 416 clients (25%) Present areas of Tagum, Davao, Panabo, Cagayan de Oro, Tandag, implementation Butuan, San Franciso (Agusan del Sur) Profile of home improvement Housewives who have existing businesses and belong clients to the entrepreneurial poor Members of Class A centers with good standing Owners of the homes they are improving. e Building & repair of toilets Septic tank, “pahabwa”, tiles House repair and improvements (additional room) Walling, ceiling, roofing, flooring, replacing foundations, drainage, fencing, gate, plumbing Connections to basic services like water and electricity Approach / Methodology Group lending Total loans disbursed since P42M loans start of the program P6M for home improvement P36M for livelihood Loan Portfolio Balance P8,343,372.15 Portfolio at Risk (PAR) 0 2008 Targets Portfolio: P20M Disbursement: P37.275M No. of clients: 5,290
VIII. TYPES OF HOME IMPROVEMENTS FINANCED
EBI tracked the repairs undertaken by clients during the implementation period. Figure 1 below shows that the construction of an additional room, and repair of roofs and toilets account for bulk of home improvement spending.
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Figure 1: Types of Home Improvements Financed by EBI, 3Q 2006 to 4Q 2007
Toilet/ Gates/grills, bathroom, 5% 10% Doors & windows, 5%
Build/Fix roof, 30% Additional Room (kitchen), 50%
IX. IMPACT ON CLIENTS
The bank’s Micro Pabahay home improvement program was designed with the intended outcome of providing clients with access to flexible and affordable credit for home improvements which hopefully will result in increased household earning capabilities (e.g. better health and subsequently, more job opportunities, earnings from room rentals) and improvements in the client’s capacity to repay loans (e.g. better health leading to less medical expenses). The intended long term impact of the program is the reduction of poverty and improvement of the client’s quality of life by making accessible to them homes which are livable, sanitary and secure. The EBI acknowledges that there is much room for improvement. The results for the most recent home index test show that the standards of living for many of KMTK clients remain low. Most of the housing structures surveyed suffer from poor condition, and are situated in congested and unsanitary surroundings owing to the lack of toilet facilities and poor access to water. The congestion in these areas also pose as fire hazards for the residents.
X. CLIENT SUCCESS STORIES
The succeeding stories tell how the program has made an impact on the lives of four clients belonging to the POOH Center in Sasa, Davao City who were among the first clients for the home improvement loans and were the subject of interviews conducted in March 2008. The photo documentation and survey questionnaires are shown in Annex A.
Client A: Lilia Canonigo Rooms for Rent
Lilia Canonigo has been an active member of KMTK for 3 years and is currently serving as her center’s secretary. She claims to have used the proceeds from her livelihood loan for her business of buying and selling processed foods and AVON products. She is currently on her 8th loan cycle and is on track to pay off her Php 20,000 loan. She likewise qualified for a Php 10,000 home improvement loan which she used for the repairs of their home’s ceiling. Nanay Lilia says that the repairs which took a week involved the hiring of 4 carpenters. She is grateful for her loan which she said has lessened the heat inside their home. Before she had availed of KMTK’s home improvement loan, she had been using their family savings and the assistance they received from their daughter who used to work in Japan to fund the improvements they made on their home. Having fully repaid her loan within the 1-year term Nanay Lilia is considering another loan to repair the ceiling of the room they are renting out and is earning her family Php 1,000 monthly. She also has further plans to build a second storey and more rooms which will be rented out as well.
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Client B: Nenita Canete The Chief’s Manor
Forty-year old Nenita Canete is the Center Chief of POOH Center. She has been a KMTK member for 6 years and earns her keep as a fish vendor in the Sasa Public Market. She had previously taken out a Php 24,000 enterprise loan from the bank for her business and a Php 20,000 home improvement loan which was spent on her home’s ceiling repairs, wall finishing, and tiling of the stairs. The work took one month and a half to complete with the tiling taking the longest time. Nanay Nenita also spent for additional insulations which were installed under the roof and has significantly lessened the heat inside their home. Within 6 months Nanay Nenita has repaid both loans and is now poised to avail of a second loan to finance the painting of the newly finished walls. And when this too is done, up next will be the construction of a concrete fence behind their house to replace their makeshift fence. Prior to her KMTK membership, she would allocate part of her fish vending for home improvement expenses. Nanay Lilia had earlier on purchased a videoke machine using proceeds from a previous loan and now the earnings from the machine helps pay off her current weekly amortizations.
More than the satisfaction of seeing the gradual improvements on her home, Nanay Lilia welcomes the challenge of fulfilling her obligations and commitments as a borrower. She shares that this keeps her busy and driven and that she considers these newly acquired attitude as a benefit which she has gained from the program.
Client C: Teresita Tabudlong No signs of slowing down
Teresita Tabudlong is a 65-year old entrepreneur who has been a KMTK member for 3 years. Instead of slowing down in her old age, everyday she cooks “kakanin” or native rice delicacies which she sells in her store and another outlet. What is remarkable is that she begins working at 1:00 am, just so that her goodies would be available and fresh in time for breakfast. Nanay Teresita says that she was able to expand her “kakanin” business through her P12,000 livelihood loan from EBI. Her repayment performance also qualified her for a P7,000 home improvement loan which she spent on improvements on their toilet and the construction of a septic tank. Her son worked on the project for a week and so what used to be only a hole in the ground is now a cemented area with a decent toilet bowl. She said that would not have been able to make any improvements had it not been for the assistance extended to her. Still, Aling Teresita has no plans of taking it easy as she is already making plans to expand her sari-sari store.
Client D: Elena Gorgonio
Now a widow, 62 years old Nanay Elena is rightfully proud and quick to tell about having successfully raised her children and putting them through school. From her brood of eight, five of her children have already graduated with degrees in education and engineering. She has also been a member of KMTK for 6 years and recently availed of a Php 30,000 loan to expand her trade as a wholesaler of mats and bed sheets. With her youngest son, Nanay Elena purchases her merchandise from a manufacturer in Mati City and consigns these to retailers. Nanay Elena likewise availed of a P20,000 home improvement loan to start the construction of a new house to replace their worn out wooden house. Already, portions of the wall of their old house have been demolished to give way to a new wall made of hollow blocks. This first phase of construction was overseen by his son and had taken
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two weeks. Still, another loan is needed to complete the construction. She is thankful for the bank’s Pabahay program and said that the renovation of their house would not have been possible without it.
XI. KEY ISSUES AND CHALLENGES
The following issues emerged during the pilot stage of the Micro Pabahay home improvement program’s implementation:
1. The bank’s inadequate Management Information System (e.g. codes differentiating the various loan products were not available) made loan monitoring difficult. Bank employees ended up having to extract information for reports generation manually which, aside from taking a longer time, also resulted in less accurate reports.
2. Initially, the bank employed varying payment schemes, (e.g. quarterly payments for the home improvement loan and a weekly payment for the livelihood loan) which also added to the difficulty in payments monitoring. Thereafter, the bank decided to shift to the same weekly payment scheme for both loan products to lessen the bank employees workload.
3. The bank’s policy of extending housing loans only to clients with existing livelihood loans and savings proved troublesome when cases surfaced where a client with a fully paid livelihood loan and the required savings is left with an existing housing loan.
4. For a time, the Account Officers (AOs) were required to market the housing loans to the clients and they reported that this distracted them from their regular work, and resulted in lowering of their overall productivity and efficiency. In response, the bank decided to create a separate unit consisting of 2 people that will handle the marketing, evaluation of potential clients, monitoring of the housing loans as well as dealing with the accredited hardware stores for the purchase of materials to be used by the clients.
XII. SUCCESS FACTORS
EBI was able to successfully integrate the MKMTK Pabahay lending program into its existing microenterprise finance operations by employing the following:
(a) Top to Bottom Involvement
EBI did not have a separate unit for product development (such as their housing loan) although it was clear that there has been an involvement from top to bottom in getting the home improvement program underway. The bank’s board, the management team, and personnel from the different departments participated in the program’s planning stages. And while the decision to go into housing microfinance came from the top, more importantly, the entire bank staff voiced support for the decision.
(b) Proper Client Selection
The client selection process is a basic principle in microfinance and must be carefully tied into both the microfinance institution's business approach and its financial product. This was well applied by EBI in their home improvement loan product as demonstrated by the following considerations:
Clear target market
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EBI is clear when it comes to its target market for their Pabahay program. It has defined from the onset the clients that may be avail of the product and has clear strategy on how to market the product among their clients. The program was also piloted on their best performing branches, Davao and Tagum.
Eligibility criteria
A well-defined and thought of eligibility criteria ensures that the bank only lends to qualified clients and minimize the risks of the bank. This was a lesson they learned from their previous house repair loan program implemented in 2001 but stopped shortly after for lack of proper criteria. The bank’s refocus on Class “A” clients has also resulted in excellent repayment rates on their housing loans. Nevertheless, the bank is constantly reviewing its lending criteria to enable them to reach a greater number of clients.
Employing Participatory Processes as Keys to Understanding Client’s Needs and Preferences
By taking into consideration the inputs of the target clients through consultations, EBI was able to design a demand-driven loan product which complements the KMTK livelihood program.
(c) Effective Control Measures
Savings
The bank encouraged savings and ensured a fair and transparent administration of the loan by imposing a Maximum Credit Limit (MCL) using the formula “amount of savings x 230%”. This represents the total exposure a client may have for housing less the outstanding livelihood loan amount.
70-30 disbursement
To prevent the loan from being diverted to other uses, the loan proceeds were disbursed 70% in the form of materials purchased directly from the hardware of their choice. The amount is released to the hardware after a purchase order (PO) has been issued. The remaining 30% of the loan is in the form of cash. One area that needs to be monitored, however, is the probability of clients not using the construction materials but reselling it to others.
(d) Clear Goals and Product Offering
The bank has clearly defined its priority projects and the items that can be funded by the home improvement loan. This makes the evaluation process and the monitoring easier.
XIII. LESSONS LEARNED
The key lessons from the EBI experience include the following:
1. The EBI experience has shown that putting the Management Information System (MIS) in place should come before the introduction of a new loan product. Ideally, the MIS should be able to handle new products, can take into account different repayment schedules, can service clients with more than one loan product outstanding at any given time, and must be able to handle varying loan terms. It should also be able to provide accurate and timely reports.
2. In the case of EBI, their creation of a dedicated unit to market the new loan product, evaluate and monitor the housing loans helped expand the bank’s home improvement program beyond the pilot branches to the other branches of the bank.
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3. EBI was able to integrate its housing microfinance program into its existing microenterprise finance operations without adversely affecting the quality or growth of the existing microfinance portfolio. This can be attributed to the success factors cited namely, the top to bottom involvement of the bank personnel, careful client selection, control measures, and clear goals and product offering.
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Annex A
INTERVIEW QUESTIONS: EBI KMTK PABAHAY PROGRAM CLIENTS
1. How long have you been a member of KMTK?
2. What is the nature of your business?
3. What loan cycle are you in?
4. How much is your current enterprise loan?
5. How much is your home improvement loan?
6. What did you use it for?
7. How long did it take you to finish the improvement? What were the difficulties you faced?
8. How did the home improvement loan help you?
9. Prior to this loan, how are you able to finance your home improvement, if any?
10. How are you able to pay off your loan?
11. What other improvements are you planning on after this loan?
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