Card Rural Bank - Microfinance Gateway · CARD RURAL BANK (A) As far as the management of the CARD Bank was concerned, the years from 1997 to 2002 were the most successful period

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CARD RURAL BANK (A)

As far as the management of the CARD Bank was concerned, the years from 1997 to 2002 were the most successful period in the bank’s fledgling existence – thus far. From a loan portfolio worth Php17.6 million in 1997, the bank’s microfinance program had since disbursed a total of Php314.3 million loans as of 2002. Consequently, the bank’s outreach had expanded from 3,680 members in 1997 to 32,381 by 2002. Savings mobilized from the public, which amounted to roughly Php8.9 million in 1997, rose to Php192.9 million by 2002. More importantly, the bank’s repayment rate was 100 percent in 2002 – a lofty accomplishment considering the organization’s phenomenal growth and expansion. However, operations in the field revealed tensions in sustaining the bank’s microfinance program.

In a small barrio located in the outskirts of San Pablo Laguna, an account officer (AO) of CARD Rural bank waited patiently. He had been talking to a delinquent member in her home for close to six hours, but had made no progress. “The business is bad,” she says. “I’m having a hard time repaying.” The AO, accustomed to the situation, empathized with her. After another hour of dialogue, a resolution had been reached. The member had agreed to pay in the next center meeting. Relieved, the AO thanked her, wished her well, and prepared to move on. He hurried to meet another delinquent member who lived a couple of miles away.

While taking a break and drinking coffee at the CARD head office one quiet

afternoon, the executive committee (EXECOM) of the CARD MRI reminisced on the bank’s growth and expansionary years. Having been a part of the bank since its inception, the people comprising the EXECOM knew intimately well the strategies, the systems and procedures, and evaluation and control measures the organization undertook through the years. However, all of them were certain that despite the innovations the bank implemented through the years, operational challenges were just around the corner.

Micheal Benedict A. Lopez wrote this case under the supervision of Prof. Maurino Bolante, of the Asian Institute of Management with funding support from the Microfinance Management Institute (MMI), a joint venture of the Open Society Institute (OSI) and the Consultative Group to Assist the Poor (CGAP). All case materials are prepared solely for the purposes of class discussion. They are neither designed nor intended to illustrate the correct or incorrect management of problems or issues contained in the case. Copyright 2005, Asian Institute of Management, Makati City, Philippines. All rights reserved. Not for resale. Translation, reproduction, and/or transmission of this material for teaching and non-profit purposes are allowed without written permission from AIM. Please address requests for permission to use materials for purposes other than those cited above to: Knowledge Resource Center – Library Casebank, Asian Institute of Management, 123 Paseo de Roxas, Makati City 1260, Philippines. Tel. No. (632) 892-4011 local 164/214/398; Telefax: (632) 817-2663; Website: http://www.aim.edu; Email: [email protected]. Copies of translated material must be sent to the same address.

CARD RURAL BANK (A) 2

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CARD NGO

Origins

The Center for Agriculture and Rural Development Inc. (CARD) began as a non-governmental organization (NGO) organized by 15 rural development practitioners in December 1986. Registered as a non-stock, non-profit organization in 1987, CARD emerged at a time when the government, under the Aquino administration, intensified rural-based, anti-poverty initiatives and programs. In particular, it was during the time of the Aquino government when the number of NGOs increased and their activities intensified. Among the key policy thrusts of the Aquino government based on the NEDA Medium Term Development Plan from 1987 and 1992 were the:

a) Alleviation of poverty; b) Generation of more productive employment; c) Promotion of equity and social justice; and d) Attainment of sustainable economic growth

Indeed, CARD’s establishment was a welcome development for the rural

community – a sector that continued to bear the bulk of poverty in the country. As seen in Table 1, the rural sector’s share to the country’s total poverty reached 70.2 percent in 1985, while the number of poor people was roughly 18.7 million. In the same year, poverty incidence in the agricultural sector was 63.7 percent. In 1988, the agricultural sector’s share to total poverty remained steady at 61.7 percent, while poverty incidence of the agricultural communities was at 61.7 percent. In 1991, the agricultural sector accounted for about 62.7 percent of the country’s total poor population. In addition, approximately 17.4 million persons of the country’s poor came from the rural sector during that year. By 1994, the total number of poor persons in the agricultural community ballooned to 18.1 million.

Table 1: Share of Rural Poverty in the Philippines (1985-1997)

Rural Sector 1985 1988 1991 1994 1997

Population share (%) 61.3 62.0 49.9 50.2 52.4 Poverty incidence (%) 56.4 52.3 55.0 53.1 51.4 No. of poor persons (000') 18,744 18,118 17,346 17,988 19,591 Share to total poverty (%) 70.2 71.4 60.8 65.7 72.2

Agriculture (urban and rural) Population share (%) 47.4 45.5 44.5 43.3 40.1 Poverty incidence (%) 63.7 61.7 63.7 62.0 60.3

No. of poor persons (000')

16,344

15,552

17,910

18,103

17,561 Share to total poverty (%) 61.3 61.7 62.7 66.2 64.7

Source: Family Income and Expenditure Survey (various issues)

Asian Institute of Management Copyright 2005


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As one of the NGOs organized during that time, CARD began operations by organizing community training and livelihood assistance for landless coconut workers in San Pablo Laguna in April 1988. After providing training in project management and organizational development, CARD provided landless poor grouped under 15-member associations or samahans short-term micro loans worth from Php1,000 to Php5,000. These samahans were accorded flexible repayment schedules and were encouraged to generate savings through their own activities.

However, the results of the program were unsatisfactory. After eight months of

operations, only two of the seven samahan were able to repay their loans. These samahan were the ones who chose to pay in monthly, while the rest opted to pay lump sum maturity. The repayment rate after a year was only 68 percent and after less than a year of operations, management decided to reexamine the program and determine why it wasn’t so successful. One of the key reasons for the program’s failure was the lax policy on repayment, which depended mainly on members themselves. Executive Vice President Lorenz Bañez explains this further:

“Before, when we gave them (members) the money, we asked them when they

would pay. However, very few can really meet their obligations. Even before the harvest ends, the members already have so many obligations incurred. Chances are they will prioritize first on their families before they pay us...that’s why it was very hard to get a high collection rate.” The Grameen Bank Model Replication Program

In late 1988, CARD, under the leadership of the CARD Founder, Dr. Jaime Aristotle B. Alip, decided to study another credit delivery program patterned after the Grameen Bank of Bangladesh. The Grameen Bank originated as a research project by Prof. Muhammad Yunus to prove that the poor could operate income-generating activities if they were provided working capital. Prof. Yunus was eventually proven right as his project soon became one of the largest credit delivery institutions in Bangladesh with an outreach of roughly 3.7 million borrowers in Bangladesh – 96 percent of whom were women – as of 20041. The Grameen Bank model focused on providing credit delivery and capacity building initiatives to landless poor women. To attain these objectives, the program harped on the principles of:

a) group and center formation; b) collective responsibility; c) graduated loans; d) compulsory savings; and e) weekly repayment.

1 www.grameen-info.com



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Impressed with the features of the Grameen Bank model, Dr. Alip joined the Grameen Bank Exposure and Dialogue Program and suggests he stayed in Brameen Bank for a long time. When he came back, he adopted the Grameen Bank Model for CARD. The vehicle to launch this program was the Landless People’s Development Fund (LPDF).

Through the LPDF, CARD sought to provide poor, landless women-folk

opportunities for self-employment through the provision of credit. Women were chosen over men because the “initial experience of CARD as well as lessons drawn from other credit and savings programs have shown women to be the best entry point for a development program since they are good financial managers. It was also determined that income generated from women’s loans went directly to the improvement of their families’ welfare, in the form of better food, education for children, clothing and shelter for the family.”2 Ultimately, the founder of CARD believed that the Grameen Bank model to be an effective and relevant microfinance, poverty alleviation strategy.

Moreover, CARD, as an institution, envisioned itself to become a bank that could

be owned by its members. This was a fundamental strategy that the CARD founder, Dr. Alip, devised from the onset. “It has always been the intention of CARD to set-up a duly registered, formal financial institution even when we were just starting,” Dorie explained.3 Financial and operational independence were the key reasons cited for this strategy. Specifically, CARD wanted to eliminate the pitfall of many NGOs of relying too much on external sources of funds such as grants and donations. They also feared that the longer a microfinance institution operated as an NGO, the harder it was to sustain its operations. Therefore, through the LPDF, CARD aimed to accomplish the following objectives:

1. provide banking services especially designed for landless rural workers by

bringing services to community sites and accommodating the least financial transactions within their affordability;

2. provide non-collateralized loans to non-bankable, but viable projects; and 3. ensure that one million poorest Filipinos would be provided with financial

services by 2009

The modified Grameen Bank model that CARD adopted drew its strength from the interplay of its training, savings mobilization, and credit services. The training program compelled members to attend 24 hours of initial training called the Continuous Group Training (CGT). The training was conducted by the technical officer with the key objective of creating a culture of credit discipline and to ensure that all members had a minimum understanding of the credit program. The CGT was composed of five modules: a) Group Building and Value Formation, b) Organizational Mechanics; c) CARD

2 Extracted from the case study entitled “Case Study of CARD Rural Bank,” prepared by Dr. Jaime

Aristotle B. Alip for the Country Workshop on the commercialization of Microfinance held in Westin Philippine Plaza Hotel, Manila, July 16-18, 2002

3 Directly quoted from the Case Study entitled “Card Rural Bank , Inc.: An MFI Story of Motivation and Innovation.” (p. 7, 2003)



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Operating Systems and Procedures; d) Project Management and Enterprise Development and Management, and e) Commitment Building Ceremony.

The savings mobilization component was geared towards conditioning the poor to

save regularly. CARD believed that a strong savings mobilization was essential to the program’s sustainability. Moreover, CARD strategically linked savings mobilization to credit services. This meant that, under the program, participants could only avail of credit only if they adhere to save. The savings mobilization program aimed to achieve the following objectives:

a) Impose discipline on the group members in developing a savings habit; b) Enhance capital formation and increased investment; c) Provide cover for normal business risks, seasonal variations in income, and

natural calamities and political disturbances Having established the LPDF in 1990, CARD pilot-tested the modified Grameen

Bank model in three (3) barangays. A samahan has been organized per barangay with a total membership of 89 members who were mostly women. To replicate the Grameen Bank model, members were formed into groups of 5’s composed of all women or all men members (men were very few so some groups had mixed membership at the start). The members were subjected to trainings as groups (i.e. CGT) for 72 hours and required to attend weeekly meetings religiously, with each member paying the weekly compulsory savings of P5 pesos. The savings were channeled to a fund called the center fund. CARD established a policy on savings which allowed members to withdraw their savings only if they resigned or to offset a loan balance. At that time, three kinds of loans were offered to the members namely the:

a) Regular Project Loan – (initial loan was Php1,000 and graduated up to a fourth

cycle with a maximum of Php10,000); b) Multipurpose loan – up to Php5,000; c) Housing Loans – up to Php20,000

Establishing the CARD NGO System

Group Structure CARD’s adoption of the Grameen Bank model program necessitated a recalibration of the NGO’s structure of operations. From a structural perspective, CARD needed to reorganize its various associations or samahans into centers composed of federations of six to eight groups, with five members per group. With their extensive experience in NGO work, the CARD management shifted from the samahan structure to that of centers. More importantly, CARD, using the Grameen Bank structure, designed the centers to become venues where loans and savings transactions took place on a weekly basis.



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The strength of the center revolved around the dynamics of the group. The group was a unit of five like-minded individuals sharing similar socio-economic conditions and who bonded together to achieve a new way of increasing their household income through the program. Voluntarily formed by themselves, the group was the main unit in the credit and savings scheme of CARD.

The group elected its own set of officers. In particular, the members elected their own leader and secretary. Five to eight groups were then federated to form a center, which was headed by an elected center chief. The center chief was tasked to conduct the weekly meetings and was responsible for the observance of all rules set by the CARD and the Center. The rationale for group formation were as follows:

1. To replace the need for collateral and guarantors, and to ensure credit discipline among members.

2. To act as an internal pressure to ensure conformity and compliance to the rules of the program.

3. To instill and promote discipline through center meetings. 4. To facilitate loan proposal/approval. 5. To help one another understand and live up the roles and responsibilities of the

group officers and members.

The measures used to form a center depended on the area where the center would be located. To adhere to the Grameen bank mission of helping the “poorest of the poor,” CARD essentially formed centers located in the poorest villages or barangays. Specifically, CARD conducted an ocular survey and interviews with families in a particular area to determine whether the site passed the required socio-economic profile. Ideally, the area must have a high enough concentration of poor people to enable the program to organize at least three full centers per barangay. Consequently, in 1999, CARD implemented the barangay mapping process which involved house-to-house visits and a Means Test. In conducting the Means test, the technical officer (TO) interviewed family members to determine their socio-economic profile based on three indices, namely: a) housing index; b) income; and c) value of productive assets and/or landholding. Exhibit 1 provides an explanation of these indices.

The process in determining a potential center socio-economic acceptability began

with the AO gathering secondary provincial data on the prospective site. An ocular survey of the target area was then conducted to determine the total population and to map the area with the highest concentration of poor households based on a cursory survey of eligible looking houses (based on house index). Aside from the housing index, the AO needed to determine the site’s economic index and marketable asset index. Once the indices had been ascertained, the AO then provided the CARD NGO management with a report containing the following basic information: population, area, livelihood, income levels, average family size, transportation available, peace and order situation, infrastructure, facilities and institutions, problems and potentials. Considering these types of information, the management decided whether to target the area or not.



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Nurturing the Group Members

Once CARD had determined the location of the center, the organization proceeded to group members into five members each and required them to undergo a continuous group training or CGT. The CGT was a series of training that ran for 24 hours.4 It consisted of five modules, with each module subdivided into several relevant topics (refer to Exhibit 2). Facilitated by the AO, the modules were designed to equip the members with their knowledge, skills and values necessary to run the centers effectively and manage their projects successfully. The CGT methodology entailed group dynamics, lectures-discussion, workshop, story telling and role-playing exercises. The final output required the trainees to submit individual project proposals.

Aside from the CGT, CARD also subjected the members to a Group Recognition

Test (GRT). The GRT was intended to evaluate each prospective member’s knowledge and understanding of the principles, concepts, procedures, systems, and mechanics of the program, as well to ascertain whether the group members knew their rights, duties and responsibilities to the center and the program. Members could not participate in the program if they failed the GRT. Center Activities Weekly Center Meeting

The weekly center meetings were conducted to ensure program sustainability, foster discipline among members, and serve as a monitoring tool for management. Center meetings were conducted not only for the purpose of collecting amortization and compulsory savings, but also to provide opportunity for the members to discuss plans, map out activities, update each other on project status and thresh out problems. Meeting time was kept to a maximum of one hour, to give TOs more time for membership expansion. The center chief and secretary served as overall facilitators of the center. Specifically, the chief facilitated center meetings and approved loan proposals at center level, while the secretary checked the attendance, kept records, and prepared minutes of center meetings. The secretary also took charge in the absence of the center chief. Generally, the activities in the center meeting flowed as follows:

a) Signing of attendance sheet b) Opening prayer c) Recitation of Ten Decisions/Worker’s Pledge d) Roll call by the center secretary e) Reading of the minutes of previous meeting f) Reporting on the group status and attendance rate g) Discussion of agenda of the week and other Matters

4 In the beginning, CARD conducted a 72 hour CGT, but was eventually shortened to 24 hours to

hasten loan processing and improve the efficiency and productivity of technical officers



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h) Group reporting on attendance, repayments and Center fund balance i) Roll call by AO j) Reading and signing of letter of understanding k) Closing Prayer

The handling of funds – both loan repayments and savings – gathered from the

centers were done by the TOs, who remitted the money to the branch office5. Group Funds Mobilization

Aside from requiring members to give compulsory savings (i.e. through the center

fund), CARD also encouraged them to save voluntarily. Furthermore, CARD allowed the centers to undertake group funds mobilization schemes – an example of which was the butaw. For this scheme, group funds were mobilized through a weekly collection of Php1 to Php2 per member. The group funds were earmarked for emergency expenses and to pay miscellaneous necessities incurred by members. These funds were not intended to help those who were having repayment problems. However, not all centers practiced the butaw. Centers that practiced this group savings scheme handled the management and collection activities of the butaw and not CARD. Center Monitoring and Control

Fundamentally, much of the monitoring and control procedures implemented by CARD for the centers rested squarely on TOs since they were the recipient of funds coming from the centers. Since CARD geared itself to operate savings and credit delivery functions as accorded by the Grameen Bank model, the institution needed to orient and train the TOs to maintain individual accounts of member transactions. Specifically, TOs were required to keep records or ledgers of loans and savings accounts of each member. This served as a monitoring tool for the organization. Ms. Lorenza Bañez explained the accounting and control duties of AO’s in detail.

“An AO keeps records of the loans and savings account of members. They will

have to reconcile the total transactions of the day and the amount of money on hand with the bookkeeper, who keeps a recording of loans and savings ledger. At the end of the day, the AO and the bookkeeper will have to reconcile their records and by the end of the month, they have to present a schedule of the individual balances of the loans and savings. We had a system before wherein the AO had a listing of the balances and borrowers had to sign whether the balances were correct”

As one of the incorporators of CARD, Ms. Lorenza Bañez vividly recalled the

early years of CARD’s operations. In fact, she was one of the key persons who developed the organization’s administrative and financial policies and procedures. After working part-time with CARD in 1988 to 1989, she decided to settle permanently with the organization and immediately worked on its administrative and financial systems. A

5 In 1999-2005 members brought their repayments to the branches. In 2005, the AO began

collecting money again in the centers.



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certified public accountant (CPA), Ms. Bañez declared that a successful microfinance program could only succeed if it functioned like a bank. “When we started, we already had in mind the ultimate objective of establishing a bank because that’s the most sustainable way to implement microfinance,” she declared. “With that in mind, we decided to establish a system that is similar to banking operations such as keeping the accounts individually and then making specific records of the transactions per account.”

As a control process, CARD used passbooks and ledgers to document and

monitor its transactions. In particular, members were issued passbooks, which they used to record savings and loan transactions by hand. The passbooks were used to record the weekly transactions of the center based on the weekly collection sheet signed by each member, which corresponded to the actual cash collected by the AO. The collection sheet was submitted to the branch office together with the cash remitted through collections everyday. AOs were not allowed to go home without remitting the collections for the day.

Ledgers were computer generated/recorded based on cash transactions per

remittance. Ledger balances were confirmed by the AO through their amortization schedule. At the time a loan was released, a loan account was created and the corresponding loan ledgers/loan amortization schedule were printed – one for the AO and another copy for the member borrower. Updating of the printed ledgers was done at the centers every week when collections were undertaken.

“Whenever the AO comes over to the center meetings, the members would record

the loans they’ve received and the payments they’ve paid, Lorenz explains. “Every week, we reconciled their ledgers with our amortization schedule. This was called confirmation.”

To maintain control, Ms. Bañez indicated that CARD implemented a check and

balance system to track transactions. “We established a control wherein the one who records does not have access to the actual cash,” she said. The process was simple. The AO, who collected from the center, surrendered the money to the cashier, who then accounted for the money. After which, a separate bookkeeper was tasked to perform the recordings.

In the beginning, the members were a bit wary of the fact that the institution got

money from them and eventually loaned it back to them. “Iginigisa sila sa sarili nilang mantika (They are being fried in their own fat),” as Lorenz would say. To address this, CARD advocated a policy of transparency. “We faced that issue by giving them the actual computation,” Ms. Bañez explained. “We wanted them to know that we were doing this (i.e. getting their money and loaning them back) to help them. We had to get their trust.”



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CARD NGO Performance

CARD’s adoption of the Grameen Bank model had generated positive results. In 1990, the Grameen replication program had a total of 307 active members and generated about Php506,000 worth of loans. The next year, the number of members increased by 52 percent to 468, while loan portfolio rose by 40 percent to Php708,000. The institution also mobilized Php290,000 worth of savings in 1991. By 1995, CARD membership reached 4,240, while the value of loans shot to Php12.6 million. By 1995, total savings hit Php5.5 million (refer to Table 2).

Table 2:

CARD Outreach, Loan Portfolio, and Savings Mobilization (1990-1995)

Year

Active Members

Growth Rate (%)

Total Loan Portfolio

(in '000 pesos) Growth Rate (%)

Total Savings (in '000 pesos)

Growth rate (%)

1990 307 - 506 - 1991 468 52% 708 40% 290 - 1992 949 103% 1,528 116% 600 107% 1993 1,711 80% 2,576 69% 863 44% 1994 3,547 107% 7,152 178% 3,001 248% 1995 4,240 20% 12,609 76% 5,503 83%

Source: CARD Case Study (Alip, 2002)

By 1996, CARD instituted the following changes to improve its financial and operational self-sufficiency:6

a) The Php5 weekly compulsory savings per member was increased to Php10; b) Raised the effective rate of interest of loans by charging a service fee of 4 percent

of loans released; c) Increased the initial loan amount from Php1,000 to Php2,000; d) Introduced new loan products with higher ceiling (i.e. up to a maximum of

Php50,000). These were the Productive Enterprise Loan to expand businesses; and the Asset Acquisition Loan to finance fixed assets purchases;

e) Accessed larger amounts of funds from the People’s Credit and Finance Corporation (PCFC)

f) Developed a training system and operations manual; g) Replaced the 6-month first-loans with one-year loans; h) Requested a minimum self-financing ratio of 25 percent from repeat borrowers; i) Established a mutual life and accident insurance fund; j) Established multi-purpose loans for prime borrowers; k) Provided a staff incentive scheme

6 Alip, Jaime Aristotle. 2002. “Case Study of CARD Rural Bank,” pp. 11 and 13



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THE ESTABLISHMENT OF A RURAL BANK

A New Mission The impressive feats accomplished by CARD as an NGO had allowed its leaders to execute their plan to finally setup a bank. More importantly, by the end of 1995, the MFI had sufficient capital necessary to establish a rural bank. After satisfying the requirements imposed by Bangko Sentral ng Pilipinas (BSP), CARD obtained a license to operate a rural bank in San Pablo, Laguna in August 1997.7 CARD’s spin-off into a rural bank allowed it to pursue intensive savings mobilization necessary to sustain its objective of reaching 1 million poor people by 2009. At the onset, CARD NGO owned 40 percent of CARD Bank, while the board and management staff owned 60 percent. As CARD was transformed into a rural bank, the board and management revised the institution’s mission to embody its new capacity. CARD Bank’s mission goes as follows: CARD envisions building a sustainable financial institution owned, managed and controlled by landless poor women. CARD Bank is committed to provide continued access to financial services to an expanding client base, by organizing and empowering landless rural women, and by instilling the values of discipline, hard work and savings in an atmosphere of mutual respect. Consequently, along with the new mission of CARD Bank came a new strategy on the part of management – the gradual takeover of NGO branches into bank branches. Basically, as long as the NGO branch is self-sufficient and the location complies with the requirements of the BSP. CARD Bank paid the costs incurred in the development of the ngo branches plus eight (8) percent on the value of the loan portfolio and a three (3) percent premium. The specific factors CARD looked for in selecting an NGO for takeover were the following:

Approved license from the BSP for bank branching in the area where the NGO branch operated;

The place where the NGO branch operated showed potential for savings mobilization and demand for microfinance loans to perform full financial intermediation;

There should be at least 1,500 borrowing clients plus the potential to expand the client base in that branch;

There must be potential space for improving/expanding banking facilities and services; and

The peace and order situation must be good.

In 1997, four of 13 CARD NGO branches were subsumed under the CARD Bank, while the remaining branches continued to operate under the CARD NGO. By 2001,

7 The BSP required CARD to provide a feasibility study and possess Php5 million minimum paid-up

capital. The BSP also conducted site inspections and interviews with city hall officials (San Pablo city). Source: Case Study on CARD Rural Bank (Alip, 2002)



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more CARD branches emerged. In particular, the Masbate and Marinduque branches were opened in July and December 1999, respectively. Subsequently, in 2001, extension offices for CARD Bank Marinduque in the municipalities of Gasan and Torrijos were established. Modifications in CARD’s Financial Services

Savings Products The establishment of CARD Bank allowed the institution to mount an aggressive savings mobilization campaign. By becoming a bank, CARD was given the license to take deposits from the public. CARD’s voluntary savings program, which was in place since 1990, had been expanded to include three distinct savings products namely the Kayang Kaya Savings, the Tagumpay Savings, and the Tiwala Savings. The Kayang Kaya savings functioned like a regular savings account, while the Tagumpay savings was a mid-term savings meant for specific projects. The Tiwala savings was akin to a time deposit savings. Table 3 below shows the mechanics of these savings products.

Table 3

Card Bank Savings Products (As of 2003)

Kayang Kaya Savings

Minimum amount to open account Average Daily Balance to earn interest Interest per annum

Php50.00 Php500.00

4% Tagumpay Savings

Minimum amount to open account Average Daily Balance to earn interest Interest Rate: Php500.00 to Php9,999.99 Php10,000.00 to Php49,999.00 Php50,000.00 to Php99,999.00

Php20.00 Php500.00

3-4% per annum 5-7% per annum 8% per annum

Tiwala Savings

Minimum amount to open account Minimum Term Interest Rate: Php10,000.00 to Php49,999.00 Php50,000.00 to Php99,999.00 Php100,000.00 to Php499,999.00 Php1,000,000.00 to Php4,999,999 Php5,000,000 above

Php10,000.00 30 days

Market rate plus premium

Source: Case Study of Card Rural Bank (Alip, 2002) Meanwhile, the institution made further changes, this time with its compulsory savings program or the center fund (CF). For one, the bank increased the weekly savings contribution to the CF from Php10 to Php20 in 1999. A more critical change, however,



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occurred in October 2001 when the bank decided to allow its clients to withdraw their CF balances. This was pilot-tested in Marinduque branch only. What triggered this policy change was the spate of client resignations in 1999. These members resigned for various reasons, but through the impact study and exit surveys conducted by the in-house research unit in 2001, management learned that most members wanted to access their compulsory savings, especially during times of emergency. Since members could not withdraw their savings unless they resigned, they decided to do just that – quit the program. Thus, to address this issue, management allowed clients from Marinduque to withdraw their savings on two conditions – that they should be members for at least five years, and that they were required to leave Php1,000 in their savings untouched. Loans Offerings By the end of 1998, management saw the need to rationalize its credit services to make the bank more responsive to clients. As Dorie explained, “As the market expands, products, processes, and procedures have to be simplified to make services more efficient.”8 With this new thrust, the bank modified its loan products from five distinct types (i.e. regular project loan, housing loan, asset acquisition loan, enterprise loan, and CLAP loan) to two major loans product namely the Sikap and the Sagip. The Sikap loan represented all the previous loan products, while Sagip served as an emergency loan. The bank later developed two other special loans – the seasonal loan, which served to accommodate clients’ additional funding needs for school tuition fees and increased business opportunities and requirements on certain periods (e.g. holidays), and the individual loan. Exhibit 3 presents the mechanics of these new loan products. Loan Processing Procedures The formation of the bank and the strategy of absorbing viable NGO branches into the bank network had compelled management to adopt clear operational guidelines especially in the processing of loans. These guidelines included the loan proposal preparation and the loan processing approval. The succeeding paragraphs describe these procedures as summarized from the CARD operations manual. Loan Proposal Preparation

Once recognized, the group decided among themselves the two people who should get the first loan by determining the two (2) most needy members. Consequently, these two (2) group members submitted their project proposals for confirmation to the group members and the center group leader. The group leader then endorsed the proposal to the center chief, who in turn endorsed it to the AO during the center meeting. The application was then forwarded to the branch through the AO. The other three members could also submit their proposals, although the approval and release of their loans were made only after the first two (2) members have established good repayment standing for 4 weeks.

8 Directly quoted from the case entitled “CARD Rural Bank, Inc.: An MFI Story of Motivation and

Innovation”



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The loan proposal briefly stated how much the member intended to borrow from the program and how she planned to use the loan proceeds. It included an estimate of her proposed weekly expenses and income from the project. A short promissory note was attached to the proposal. Loan Processing Approval

The processing and approval of the loan application required a technical evaluation of the member’s loan application by the AO. The evaluation and the recommendation of the AO was contained in a report which was submitted to the branch manager (BM). Consequently, the branch manager approved the loan by indicating the approved loan amount and by affixing her/his signature. To sum up, the following processes were involved before a loan was approved: At the center level:

a) endorsement of project proposal by the group; b) center’s approval and endorsement to the AO.

At the branch level:

a) evaluation of project proposal by the AO; b) submission of evaluated project proposal by the AO to the BM c) validation of inventory by BM (for repeat loans); d) approval by BM; and e) preparation of Letter of Understanding.

Modifications in CARD’s Operations As CARD progressed, the organization implemented new policies and procedures. One of the changes management undertook was to modify the collection system. Before 1998, AOs were the ones tasked to collect loan repayments and savings from the centers during the meetings, which they immediately remitted to the bank. This practice had been in place since 1988. However, a holdup incident, which killed a collector in Masbate, compelled management to change this practice. By 1999, CARD allowed either groups or centers, or by individuals even, to pay directly to the CARD Bank branch. The collection was also done a day before the center meeting, and then the group members can either assign one or two members to bring the payment to the CARD Bank branch nearest them. Other significant modifications undertaken by CARD to bolster field staff efficiency and accommodate members’ requests were the following:9

9 Summarized from the case study “CARD Rural Bank, Inc.: An MFI Story of Motivation and

Innovation,” p.18



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Shortening the CGT from 24 hours to eight (8) hours and the center meetings to one hour – this modification was done to increase the efficiency of the AOs so that they could cover more centers, recruit more members and have more time to do other work-related activities;

Replacing weekly center meetings with monthly meetings for those centers that

had been operating for more than four years and have been performing well in terms of attendance and payments – this was done to accommodate long time members who had become bored and tired of the weekly meetings. More importantly, the shift to once-a-week meetings for older and better performing centers was intended to allow members with expanded enterprises to devote more time to their businesses. This was especially geared towards traders whose businesses bring them to markets far from their villages. However, the center still conducted weekly payments and if the center encounters a single default or any problem, the weekly meetings were automatically reverted.

Loan application forms have been simplified – they were shorter, more clarified,

easier to fill up; are in a 3-in-1 format, and included the parts of obligations and endorsements. Accounts records have been transferred to manually processed ledgers which the AO carry with them almost all the time. Thus, anytime a member wanted to check her accounts she examined the ledger and need not go all the way to the branch.

SETTING THE MANAGEMENT CONTROL SYSTEM

Ultimately, the transformation into a rural bank entailed a thorough planning of

CARD’s management control systems. With the establishment of the Laguna, Quezon, Masbate, and Marinduque banks, management felt the urgency to establish more sustainable management control systems. Moreover, the reportorial requirements of the BSP and the demands of the new market (i.e. savings from the public) necessitated stronger internal control systems for the organization. The first to be reconfigured was the bank’s management control structures. Management Control Structures CARD’s evolution into a bank compelled management to modify and expand its organizational structure. As seen in Exhibit 4, the bank had been into two major responsibility centers namely the head office and the branch offices. These centers were accountable to the president/chief executive officer (CEO), who in turn, was answerable to the board of directors and ultimately, the stockholders. The President/CEO – Ms. Dorie Torres – supervised the overall operations of the head office, as well as the bank branches. The bank was steered by an six-person management team composed of president, executive vice president for finance, vice president for operations, assistant vice-president, information technology director, and general accountant.



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Head Office Management Control Systems Structure The head office oversaw the operations of CARD’s Bank branch network. Under the executive vice president were the various support units in finance, accounting, and administration. Apart from supervising overall operations, the president took charge of the branch operations network with the help of the vice-president for operations, assistant vice president for operations, area manager and the branch managers. However, despite the formal management control structures in the head office, Ms. Torres articulated that the organization followed a team-based approach to management. They considered themselves “hands-on managers”. “Nagtutulungan kami (we help one another),” Dorie stressed. “Management makes it a point to go to center meetings, meet the members, and talk to them.” Dorie, herself, regularly goes to the various branches and centers in all the areas CARD operated. Criteria or Indicators The head office basically supervised and provided support services to the various bank branches. However, as a regulated institution, CARD Bank had to expand its performance criteria to include the requirements of the BSP. Given this new mandate, the head office needed to assume the following strategic responsibilities.

a) Ensure compliance and timely submission of all reports required by Bangko Sentral ng Pilipinas by the branches and the Head Office.

b) Provide management and the board with the consolidated report of CARD Bank. c) Interpret the over-all bank financial performance by submitting financial

statements and ratio analysis on quarterly basis as required.

Among the key measures which the head office needed to keep track to ensure that the organization’s objectives and strategies are met included CARD’s overall outreach, portfolio quality, and overall financial and operational performance. Exhibit 5 shows the computations of these measures. The components of these measures were:

1. Outreach a) Number of active centers b) Number of active members c) Total active borrowers d) Number of member with loans e) Number, total amount and average amount of loans disbursed per loan

product f) Number of dropouts g) Total active savers (members and non-members) h) Total amount of savings



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2. Portfolio Quality a) Repayment rate (total paid/total due) b) Past due amount c) Total balance of loans with past due d) Portfolio at risk (PAR) e) Arrears rate/ Delinquency rate

3. Operational efficiency a) Number of AO (probationary and regular) b) Cost efficiency (admin and personnel cost/ave. portfolio) c) Profitability on performing assets d) Caseload per AO (No. of loans Outstanding/No. of AOs) e) Portfolio per AO (Amount of loans outstanding/ No. of AOs)

Performance Measurement, Reporting and Review Process

The head office monitored overall bank financial and operational performance through constant, periodic reports on the key measures cited earlier. These reports flowed as follows:

Table 4 Head Office Monitoring And Evaluation Reporting Process

From Head Office

Report Type Prepared By Frequency Submitted To

Consolidated Statement of Income & Expenditures

General Accountant Monthly/Quarterly Executive Vice President,

President & CEO

Consolidated Statement of Asset and Liabilities and Equity General Accountant Monthly/Quarterly

Executive Vice President,

President & CEO

Over-all Operations Update It Officer Monthly/Quarterly

Executive Vice President, President & CEO

Source: CARD Rural Bank Operations Manual

To better monitor its financial and operational performance, CARD established a loan monitoring system (LMS), which electronically tracked all types of accounts handled by the bank. A sophisticated computer system, the LMS automatically posted all transactions – whether savings or loan repayments – in the general ledger. Before, during the manual system, CARD accounted for savings and loan transactions separately and reconciled them in the general ledger. With the LMS system, the bank had a faster time reconciling the accounts.

In 2001, the bank further strengthened its monitoring system by incorporating the

E-Banker, which was a management information system (MIS) program capable of generating instantly different kinds of financial and operational reports needed by management. Through the E-Banker, CARD Bank could readily assess its loans and



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savings transactions, profitability, and all the key financial and operational indicators monitored by the bank. Branch Office Management Control Systems Structure Bank Branches functioned as the critical link between CARD Bank and the members. Specifically, “all activities of the CARD Bank were carried out through branch offices. Each branch office was headed by a branch manager with four to seven account officers as primary producers and front liners. The branch was the basic production unit and was responsible for implementing the financial delivery system and the non-financial activities in the field level. A branch office covered five (5) to 20 villages, with each village having one to three centers. A typical branch served 1,500 to 2,500 clients.”10

The area manager facilitated the coordination between the head office and the

branches. This person assists the vice president and assistant vice president for operations to ensure that programs were being run effectively and efficiently in a given area of coverage. The tasks and duties of the area manager and the other branch personnel can be seen in Exhibit 6. Criteria or Indicators From the field level, bank branches assumed the important role of ensuring CARD’s financial and operational viability. The sustainability and profitability of a given branch depended on the performance of its key personnel, especially the AOs, in maintaining high repayment rates, savings mobilization, and expanding outreach. Performance Measurement, Reporting and Review Process The bank branch’s critical role in the viability of CARD, as an institution, could be seen in the voluminous monitoring and evaluation reports it need to generate on a daily, weekly, monthly and quarterly basis. Table 5 below shows the scope and flow of a branch’s evaluation procedures.

10 Derived from the “Case Study of CARD Rural Bank” (Alip, 2002, p.8)



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Table 5 Branch Level Monitoring And Evaluation Reporting Process

From Branch Staff Prepared By Frequency Submitted To

Operations Update Branch Manager (BM) Monthly/Quarterly Area Manager

Center Account Status Account Officer (AO) Monthly Branch Manager (BM)

Consolidated Center Accounts Status BM Monthly Area Manager

Weekly Update Report AO Weekly BM

Consolidated Operations Update Area Manager Monthly/Quarterly AVP/VP

Financial Statements General Accountant Monthly/Quarterly EVP/President

Cash report Assistant Manager Daily General Accountant

Bank Reconciliation Statement Bookkeeper Monthly Area Manager

Schedule of the Following

Inventory of Fixed Assets Bookkeeper Monthly Finance officer (FO) or Area Manager

Advanced to Operations & Expenses Bookkeeper Monthly FO or Area Manager

Loans Receivables AO and BM Monthly FO or Area Manager

Fixed Assets Acquisition Bookkeeper Monthly FO or Area Manager

Motor Loan receivables Bookkeeper Monthly FO or Area Manager

Center Fund AO and BM Monthly FO or Area Manager

SSS/Med, BIR, Pag-Ibig Remittances Bookkeeper Monthly FO or Area Manager

Statement of Income and Expenditure Bookkeeper and FO Monthly/Quarterly Area Mngr. & Operations Director

Statement of Assets & Liabilities & Fund Balances Bookkeeper and FO Monthly/Quarterly Area Mngr. & Operations Director Source: CARD Bank Operations Manual

Center Management and Control Systems Structure

Under the Grameen system, the center, through the peer pressure exerted by the group members on one another, functioned as a form of control. The system of “imbunahan” or the practice whereby members absorb the debt of defaulting fellow members, served to motivate the members to encourage their group mates to pay on time. The center chiefs, along with the group leaders, had the responsibility to encourage and motivate center members to abide by the policies and procedures of the program.

Ultimately, the bank’s financial and operational viability hinged on how the

centers were being managed. The AO, therefore, had to coordinate with and supervise the key individuals in the center specifically the center chiefs and the group leaders.

Criteria or Indicators Centers were gauged according to its repayment rate, participation rate (i.e. level of attendance amongst members), and level of savings generated (i.e. CF). The Branch manager, assistant branch manager, and AO’s worked together as a team to ensure that the center chiefs and group leaders remained committed to the mechanics of the program.



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Performance Measurement, Reporting and Review Process The officers in the center namely the center chief, group secretary, treasurer and group leaders were required to submit periodic reports on key organizational activities such as the center fund collections, the business status of members and the overall status of all group members (see Table 6).

TABLE 6

CENTER MONITORING AND EVALUATION REPORTING PROCESS

Records and Reports Prepared By Report Type Content of Report Submitted To

Group Leader

Weekly Collection and Business Status

Collections during the week Business Status of members

Center Chief/AO Center Chief/AO

Group Secretary/Treasurer Weekly Collection Collection during week Group Leader

Center Chief Weekly Status of Center Overall Status of all groups AO

Center Treasurer

Cash position

Center Funds Collection and Expenses

AO

Source: CARD Bank Operations Manual Incentives Salaries and Bonuses CARD Bank provided an array of compensation and incentive packages for its staff. Aside from the basic, fixed monthly salaries, the bank offered 13 to 16-month bonuses, depending on the performance of the institution. The bank also provided social security benefits (i.e. SSS), medical and health insurance for all regular staff.

To motivate the field personnel, especially the AOs, the bank provided them incentives in the form of commissions if they were able to maintain 100 percent repayments for the centers. Specifically, AOs would receive Php1 per member if they could maintain 100 percent repayment for a given month.

On the other hand, the bank established a counterpart incentive scheme for the support staff in 2001. Support staff incentives came in the form of profit sharing on the excess funds derived when the bank exceeded its targets. As a policy, profit sharing in the branch level depended on the branch’s performance. This meant that better performing branches received a larger slice of the profit. Stock Ownership Another key staff incentive of CARD was the policy allowing senior staff to receive shares of stock from the bank as a form of loyalty award. This incentive was available for senior staff members who have worked for the bank for more than five years. The senior staff could also purchase more stocks if they wanted, which were usually coursed through salary deductions.



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CARD Bank Performance Financial and Operation Results From 1997 to 2002, CARD Bank’s success could be seen in its intensive growth in terms of outreach, savings mobilization, and loan portfolio (refer to Table 7). By 2002, the bank had roughly 32,420 members; a savings balance worth about Php192.8 million; and a loan portfolio of approximately Php314.7 million. The bank’s repayment rate averaged almost 100 percent during the last six years, while Portfolio at Risk (PAR) was almost negligible. The institution experienced sustained increases in its financial and operational self-sufficiency rates from 1997 to 2001. The bank also performed well in term terms of profitability. In 1998, CARD Bank generated a net income of Php269,701. By year 2002, the bank earned close to Php8.5 million (see Exhibit 7A-B).

Table 7 Card Bank Operational Performance (1997-2002)

1997 1998 1999 2000 2001 2002

Total Outreach (NGO and Bank) 10,868 20,617 28,531 35,704 49,784 62,674

Total Outreach (Bank) 3,680 6,530 18,376 19,344 22,298 31,420

Total loan Portfolio ('000 pesos) 17,565 39,808 110,701 168,661 219,588 314,700

Savings Mobilized ('000 pesos) 24,674 23,460 69,284 104,140 156,429 192,800

Repayment Rate 100.00% 99.90% 100.00% 99.97% 99.36% 99.44%

Financial Self-Sufficiency 73.00% 73.00% 95.00% 102.00% 114.00% 113.88%

Operational Self-Sufficiency 122.00% 100.00% 102.00% 104.00% 139.00% 132.88%

Portfolio at Risk (PAR) 0.00% 0.10% 0.00% 0.03% 0.64% 0.56%

Number of Technical Officers 70 75 87 68 84 87Source: Various CARD Bank Annual Reports

NEW DIRECTIONS FOR CARD BANK The ASA Methodology

In 2001, the management of CARD underwent a simplification workshop aimed at further rationalizing the bank’s policies, procedures, systems and guidelines. The objective was to create more efficient and responsive services to clients. The workshop focused on another credit delivery program model called the Association for Social Advancement or ASA. Although similar to the Grameen Bank model, one of the main differences between ASA and Grameen was that the former did not practice group-liability in loan repayments. In effect, the members would not absorb or pay for a fellow members loan default. The ASA model prioritizes on individual loans using simple loan processing and accounting systems. Table 8 below shows a comparative profile between the Grameen and the ASA Model.

After studying the ASA model, the CARD management opted to pursue

individual lending for its members. This was due to a large degree on the bank’s findings that many of its members, especially the seasoned members, had grown tired of



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absorbing the default of other members. In fact, according to Ms. Torres, the husbands of the members themselves were the most vocal critics of the group lending scheme since they only wanted to attend to their own family concerns and obligations. “With the individual lending, the husbands are happier,” says Dorie. “They now look at it as their liability and not burden themselves with the liability of others.”

Table 8: Grameen Model Vis-À-Vis Asa

Grameen Bank Approach 1) exclusive focus and delivery of loans to the poor 2) small loan amounts that increase gradually fro one cycle to the next 3) weekly loan installments 4) mandatory weekly center meetings where educational inputs are often provided 5) the formation of homogenous groups by borrowers themselves 6) close monitoring and supervision of borrowers 7) non-collateralized loans secured through mutual (group) guarantees 8) staggered loan releases to group members, depending on the repayment performance of first two borrowers 9) compulsory weekly savings

Association for Social Advancement (ASA) 1) the formation of homogenous groups for credit and CBU collection 2) a simple standardized and cost-effective structure with only one branch manager and four loan officers 3) a simple bookkeeping and system and MIS 4) simple loan and savings products 5) loans paid on weekly basis 6) delinquency controlled by sit-down or doorstep technique 7) no group liability on loans; past dues considered individual obligations 8) increased loan amounts in succeeding cycles depending on repayment performance 9) fast expansion through cost-minimized operations

Source: IMC ADB Study on Philippine Microfinance, 2002.

Organizational Expansion As of 2002, CARD had expanded structurally encompassing several mutually reinforcing institutions (MRI). Aside from CARD Bank and CARD NGO, the CARD MRI was composed of:

1. A CARD Training Center – primarily established to provide in-house training, workshops, seminars and other non-financial services to external clients such as NGOs, People’s Organizations (PO’s), and individuals;

2. A CARD Mutual Benefit Association – an institution that provides life insurance,

loan redemption and provident fund/retirement to clients; Ultimately, CARD with the help of its mutually reinforcing institutions, had

forged a new vision which goes as follows:



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CARD is a group of mutually reinforcing institutions that is dedicated to ultimately empower the poor, by upholding the core values of competence, culture of excellence, family spirit, stewardship, and simplicity.

As CARD pushes through the next decade of the new millennium, management had set its sights on accomplishing its most ambitious strategy yet – to become a development bank by 2009. Dorie Torres remained confident that current CARD organizations would be able to accomplish this strategic objective.

“I think we have institutionalized the ways and means; and the policies and procedures needed to sustain and expand the organization,” she declared. “It will be a difficult process, but I think the results will be positive.”

OPERATIONS AT THE TRENCHES

While the management of CARD plotted new directions, the branch and field

personnel went about the daily rigors of the bank’s microfinance operations. On a daily basis, the center chief, branch manager, technical officers and other field personnel endeavored to sustain the program. Deep in the trenches, these people knew that sustaining the bank’s microfinance program required commitment and hard work. The Center Chief and the Bank manager

Myrna Capuno had been a member of the Sagtag C-2 center located in the municipality of Bay, Laguna for nearly three years. A mother of five children, Myrna had been the center chief since she became a member. Her husband was the one who made her aware of CARD. Before she became a member, Myrna used to be a domestic helper in Hong Kong. When she came back three years ago, she didn’t have work and neither did her husband. Since they wanted to start a business but didn’t have the capital, her husband encouraged her to join the center. Her first Sikap loan, which amounted to Php4,000, was used to start a “baklad” (fish trap). She paid this loan after six months. After paying off her first loan, she was able to secure a second loan, which amounted to Php8,000. After paying the second loan, she again secured another SIKAP loan, amounting to Php15,000 to start a “junk shop.” After paying off the third loan, she applied and received a fourth loan worth Php15,000 to start a sari-sari store.

As a center chief, her main concern was to ensure that all the center members

were able to pay their loans on time. She indicated that the center used to have 30 members, but has since gone down to 22 because a number of members have resigned. According to her, the reason for the resignations was their inability to pay off the loan mainly because the businesses failed. In order to limit or stop the resignations, Myrna would advise her members not to loan too much so that they could manage their monthly installments better. She also talked to them and encouraged them to work harder on their businesses. If a member fell short by Php20 or Php50, she advanced the money just to help the member avoid default. She said she’s able to help some members since she operated a store that was doing well. Myrna said that all the members were very



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concerned about defaulting because they knew it would be harder for them to secure another loan once they default.

Last May 2004, the center savings contributions increased to Php40 from Php20.

This policy was disseminated through a center meeting called by the branch manager, Marlyn Marudo. Myrna was also very particular about the weekly Php2 “butaw” and this was always a part of her weekly agenda. In fact, the center already had a passbook for “butaw” collections. The center treasurer deposited all butaw collections per week in the bank. The treasurer prepared a monthly report on the center’s butaw, which was checked by the center auditor. Myrna emphasized that the butaw was never used to pay for loans, but only to pay for the upkeep of the center and provide extra money for members in case of emergencies.

The Sagtag C-2 center met every Wednesday. Loan repayments were scheduled a

day before, on Tuesday. Normally, members assigned the secretary or Myrna herself together with another member to go to the bank. Myrna would wait until 1:00 PM for members to give their payments. Those members who were unable to give Myrna the money by 1:00 P.M. had to go to the bank themselves. She constantly reminded her members that the bank closed at 3:00 P.M. According to the branch manager of Bay, each center had its own system of paying the loans depending on what they agreed among themselves.

Myrna constantly reminded her members not to loan if they could not afford to

pay it. She told them that the practice of “imbunahan” did not apply anymore because of the new policy focusing on individual loans. She would talk to them one by one and tell them to be very careful when securing a loan. However, she also made it a point to invite new members in the group just the same.

Because Sagtag Center had only 22 members, the center still met once a week

even though it has been maintaining a 100 percent repayment rate. According to Ms. Marudo, a center needed to have at least 30 members with a 100 percent repayment rate to be able to meet only once a month. Nevertheless, Myrna believed that meeting once a week was more advantageous since she was more updated with the welfare of her members and she could monitor them better. According to her, she didn’t have any problems with the current set of members. They all paid on time. The Technical Officer

Aged 26 years old, Ulysis had been an AO of the Bay branch for a year now. He used to work for the National Statistics Office (NSO) in Laguna. After a year with the NSO, he applied for a job at CARD Bay branch. His normal day was spent attending center meetings, averaging four a day. In particular, he’s in-charge of 16 centers, which fell under the supervision of the Bay branch. Aside from center meetings, Ulysis conducted inventory checks (LUC), identified and recruited new members, and marketed the bank to non-members (i.e. for



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savings deposits). As an AO, he was required to maintain a caseload of 500 members. If the number fell short of 500, Ulysis had to recruit to offset the backlog. Before, AOs were required to identify new barangays where the branch can set up a center. However, according to Ulysis, the current policy was just to maintain the current roster of centers. This policy was enforced only this year. Ulysis, together with the other bank staff and officers, conducted a direct selling campaign in various areas in the municipality every Saturdays. The objective of this campaign was to market the bank to non-members to entice prespective clients establish savings accounts with the Bay branch. They brought along brochures and other marketing materials and presented the bank’s products and services to non-members. According to Ulysis, the Bay bank managed to get an average of about three (3) to four (4) depositors per 20 people they approached. Just in case, Ulysis made follow-up visits if he had extra time. He considered it a lot easier to recruit non-members than to maintain the centers. Ulysis had found it more difficult to secure 100 percent repayment now that there was no more “imbunahan.” According to him, he needed to work double time to make sure that members paid. He indicated that before the policy to pursue the individual loans, the centers had a 100 percent repayment rate. Now that the “imbunahan” had been stopped, he now had 20 delinquent members. “Some would just give what they can spare,” Ulysis confided. He believed that about 20 delinquent members were on the verge of resigning, but they couldn’t do so because they could not pay off their loans. Since they could not rely on their group members to pay off their loan balance, they found it hard to pay off the loan completely. Ultimately, the biggest problem he faced as an AO was the shift from group to individual loans. Before, Ulysis explained that the center chiefs would help him collect loan payments from members, discipline them, and make them pay on time. This was because the members faced the risk of paying off a fellow-members default. Now that the group lending had been discontinued, Ulysis claims that even the center chief had become less vigilant on their members. Ulysis said that before, the center chief would always accompany him to the erring members. But now, the center chief would just tell him to go to the defaulting member himself. Furthermore, the other members would also help him collect. With the shift to the individual loan, members had become less participative in helping him collect. As a result, he now spent more time looking for defaulting members and convincing them to repay, which used to be the fellow members responsibility. He said that if he doesn’t visit members, talk to them, and encourage them to pay, no one would do these activities. Another problem Ulysis encountered as an AO was the “bangkasan” practice wherein a member would share the loan of another member. The problem with this was that the member who borrowed funds from another member normally found it difficult to repay the loan. Since the original loan was secured by another, the AO would ask the authorized borrower to collect the loan. He warned her that she faced the penalty if the



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person who borrowed from her cannot repay. Ulysis indicated that out of the 16 centers, three (3) had problems with “Bangkasan” or loan sharing.

Like any other AO, Ulysis sometimes faced the usual domestic related problems of members such as spouses fighting and drunk husbands who refused to let their wives entertain him. When these situations happen, he just visits the borrower another time.

Ulysis conducted random loan utilization checks. Before he was able to conduct a 100 percent inventory check, but ever since the individual loan policy was put in place, he now found it difficult to conduct 100 percent check. Ulysis says that ideally, an AO should be able to have inventory checks once a week. But he found it difficult to maintain this frequency because of increasing workloads. When he conducted an LUC, he brought with him a checklist to verify the particular details of the loan transaction, which included: The amount of loan disbursed; The date the loan was disbursed; The purpose of the loan; The amount of inventory used or the actual utilization of the loan; The current amount of inventory; The date of the last LUC; and Remarks from the AO

On a given day, Ulysis shared the activities he did by breaking it down as follows:

70 percent of his time was spent conducting center meetings and following up on

those who were defaulting. However, the bulk of his time was spent talking and convincing defaulting borrowers to pay. Center meetings normally lasted for only an hour. On the other hand, following-up on members took a longer time. He gave the example of his meeting with one member that lasted from 3:00 PM to 11:00 PM.

15 percent of his time was spent checking inventory and generating reports; 10 percent was spent training new members; Five (5) percent was spent marketing to non-members

According to Ulysis, the environmental factors had an effect on some members’

ability to repay especially those who were engaged in fishing and vegetable farming. For example, if it’s the rainy season, chances were those who fished for a living could catch and sell more fish – thus they could pay better. However, according to him, too much rain could adversely affect the vegetable growers since too much water resulted to poor growth thus less harvest – hence making their business less profitable.

In terms of salaries, Ulysis gets only the minimum wage (approximately

Php5,178). He receives the standard incentives such as 13th month bonus and a mid-year bonus. However, if collections were bad and the bank had not reached its targets, these incentives were not given.



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The Assistant Branch manager

Edita Rivera had been working for CARD for five years now. She started out as an AO of the Nagcarlan branch, then became an AO of Dolores for less than a year and of San Pablo for about three years. Eventually, she became the ABM of Bay branch. As ABM, she directly handled the operations side of the bank such as the supervision of TOs. Edita considered the Bay branch as a relatively good branch in terms of the quality of its members. Over the years, the bank had maintained 100 percent repayment rate except for year 2004 when the bank had 36 delinquent borrowers. Bank repayment averaged 97 to 98 percent.

As ABM, her duties were to assist the BM on the following functions:

formulate recommendations to improve day to day operations of the branch; monitor centers’ growth and development (goes to two center meeting a day); monitor individual projects of group members; prepare and submit branch weekly updates; facilitate staff meetings; provide technical assistance as required by the AO/center; prepare cash vouchers, weekly collectibles and summary loan releases through the

loan management system (LMS); prepare the financial report for submission to the area manager; monitor collection remittances by TOs and conduct pre-GRT and LUC regularly

According to Edita, the head office approved the yearly targets of the branch,

which were reviewed and monitored on a quarterly and monthly basis. The head office received all income from the branch, while the branch incurred the costs. She believed that the six TOs in the Bay branch were all hard-working individuals. However, she admitted that the TOs were overburdened by their caseloads especially now that the individual group lending policy had been implemented. Edita confided that the TOs wanted the group-lending scheme back for them to manage the portfolio better. She believed that the individual lending policy was creating pressures to the organization.

In terms of incentives, Edita says that all staff shared in the bonuses (i.e. mid-year

and even quarterly bonuses) the branch gave them. However, she indicated that during bad times, CARD did not provide quarterly bonuses.



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EXHIBIT 1

DEFINITIONS OF HOUSING, INCOME, AND MARKETABLE ASSET INDICES

Housing Index The house index involves a more detailed visual appraisal of the potential member’s dwelling and requires the allocation of points for each of the main components of the house such as size, structural condition and roofing material for a fair approximation of the value. If a potential member scores four (4) points or less, she is eligible to join the program.11 If the score is between 4.5 and 6.0, the potential member is subjected to the other two tests and is considered 2nd priority prospect. Those scoring 6.0 and above automatically fail the house index and are disqualified from participating in the program. Income Index The income index indicates the present economic status of the potential member. The cut-off score for the income index is per capita income of not more than Php1,500 per month. Marketable Asset Index The third and last test for program eligibility is the valuation of marketable asset index. This involves measuring the asset base of potential member households. If total productive assets do not exceed Php100,000 or the equivalent market value of one-half (1/2) hectare of agricultural land in the province, then the potential member passes the marketable asset index and fails when said cut-off valuation is exceeded.

11 Since 2001, a prospective member scoring 6.0 and below passes this criteria



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EXHIBIT 2

THE CONTINUOUS GROUP TRAINING (CGT)

Module 1. Group Building and Value Formation The first two modules deal with the concepts and principle of community organization. It seeks to provide the participants with the knowledge, attitudes and skills needed in building and managing a group or association. Equally important is the infusion of positive values that will continuously enhance the growth of their organizations. Activities which encourage the awareness of the members’ own viewpoints, feelings and needs as well as those of others are undertaken. Group interaction and cooperation are strengthened even as the members learn to understand themselves and others better. Under Module 1, the following topics are discussed:

a) Self/Group Awareness b) Effective Communication c) Cooperation d) Leadership e) Group Decision making

Module 2. Organizational Mechanics Technical inputs in managing their organizations are provided the prospective members in Module 2 of the training. The module focuses on building knowledge and skills in facilitating group meeting and other center activities as well as the preparation of organizational papers and documents such as constitution and by-laws, minutes of the meeting, and board resolutions. It also seeks to develop skills in the formulation of policies and procedures needed in the implementation of day-today activities of the center. As well, the infusion of positive values and skills that promote a more democratic organizational process is emphasized. The following topics fall under Module 2:

a) Overview of Center Management b) Center Structure (Composition, Duties and Responsibilities) c) How to Run a Meeting d) Preparation of Minutes of Meeting e) Preparation of Resolution f) Preparation of Internal Policies and Procedures (Recruitment, Center Fund,

Retention and Penalties)



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Module 3. Systems and Procedures The module on Systems and Procedures seeks to define/clarify the responsibilities and obligations of the members towards the program; and the resources/benefits they can receive. Thus, it is during this module that the rationale, policies, systems and procedures of the program are discussed in detail. The discussions focus on group formation, house-to-house visit, group recognition test, proposal preparation, loan approval, loan disbursement, loan utilization check, and the monitoring of weekly meetings and weekly savings/loan amortization collection. Attention is also drawn to the Ten Decisions to generate commitment to the group and center activities. It is expected that after the conduct of this module, each potential new member would have a clearer understanding of her obligations towards the program thereby ensuring that discipline, unity, courage, hard work are applied and demonstrated by all members at all times. Module 4. Project Management/Enterprise Development Module 4 aims to develop/enhance knowledge, skills and entrepreneurial capabilities of the trainees in the development and management of microenterprises. The module provides guidelines on project identification and the installation and maintenance of simple financial records and books of accounts. One of the outputs of this particular intervention is the preparation of simple project proposals which will become the basis for financial assistance under the program. Module 5. Commitment Building Ceremony The Commitment Building Ceremony is the culmination of the Continuous Group Training. This final module emphasizes the need for commitment to one another as members of a group/center. The participants verbalize their pledge to put into practical use the learnings from the course towards building and sustaining their groups/centers. The ceremony also provides the staff with an opportunity to renew their commitment to the program.



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EXHIBIT 3 CARD BANK LOAN PRODUCTS

SIKAP LOAN

Loan Cycle Loan Ceiling/Range Maturity Interest Rate First 4,000 22 weeks Second 8,000 22 weeks or 48 weeks 10% for 22 weeks Third 15,000 requires postdated checks 20% for 48 weeks Fourth 30,000 for loans above Php70,000 plus 4% service fee Fifth 50,000 and 1.5% reduction for LRF Sixth 80,000 Seventh 81,000 to max of 100,000

SAGIP LOAN Loan Cycle Loan Ceiling/Range Maturity Interest Rate First 2,000 22 weeks Second 3,000 can be availed after the 5% for 22 weeks Third 4,000 first SIKAP loan plus 4% service fee and Fourth 5,000 Renewable upon 50% payment 1.5% reduction for LRF Fifth 6,000 Sixth 7,000 Seventh 10,000 maximum

I Loan Cycle Loan Ceiling/Range Maturity Interest Rate Individual Loan 50,000-150,000 maximum 22 weeks or 48 weeks 10% for 22 weeks 20% for 48 weeks plus 4% service fee and 1.5% deduction for LRF requires post-dated check upon loan release Seasonal Loan 50,000 maximum 22 weeks 10% for 22 weeks plus 4% service fee and 1.5% deduction for LRF 5% deduction for pledge savings



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EXHIBIT 4

CARD BANK ORGANIZATIONAL CHART

Board of Directors

President/CEO

Internal Auditor

Audit Assistant Senior Auditor

Executive AssistantExecutive Vice President

Management ConsultantInformation Technology Unit

Vice President for Operations

Assistant VP for Operations

Area Manager

Branch Manager

Bookkeeper Senior Loan Officer

Cashier

Account Officer Tellers

General Service Staff

IT Officer Programmer IT Assistant

Administration Treasury Investment

Admin Assistant Investment Officer General Accountant

General Bookkeeper General Acct. ClerkGeneral Service Staff

Accounting

Stockholders



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EXHIBIT 5 CARD OPERATIONAL AND FINANCIAL PERFORMANCE INDICATORS

Outreach Method of Calculation

Average Loan Amount Disbursed Total Amount of Loans / Number of Loans Disbursed

Total Number of Loans Outstanding # of Loans with repayments owed to CARD at a Future Date + # of Loans with Payments past due but recoverable

Total Amount of Loans Outstanding Amount of Loans with repayments owed to CARD at a future Date + Amount of Loans with payments past due but recoverable

Ave. Amount of Loans Outstanding Total Amount of Loans Outstanding / Number of Loans Outstanding

Portfolio Quality

Total Amount Paid

Total Amount Due

Repayment Rate (Total Amount paid during the Period / Total Amount Due during the Period) X 100

Past Due Amount

Total Balance of Loans With Past Due

Portfolio at Risk (PAR) (Total Balance of Loans Outstanding with one or more payments past due / Total Amount of Loans at the end of period) X 100

Arrears and Delinquency Rate (Amount of Payments past Due / Total Amount of Loans Outstanding at the end of Period) X 100

Loan Loss Rate (Amount Written Off in Period / Average Value of Loans Outstanding during Period) X 100

Operational Efficiency Indicators

Number of Technical Officers

Cost Efficiency Ratio (Operating Cost (excluding cost of fund) / Average Loans Outstanding)

Cost of Inflation

(Donated Funds for Portfolio) Inflation Rate X Value of Portfolio

Cost of Inflation

(Donated & Borrowed Funds Inflation Rate X Value of Portfolio + (Inflation Rate - Interest Paid on Borrowed Funds) X Value of Portfolio Financed with Borrowed Funds

for Portfolio)

Self Sufficiency Rate (Level 1) (Financial Income / Operating Expenses) X 100

Self Sufficiency Rate (Level 2) (Financial Income / Operating Costs + Loan Loss Expense)

Self Sufficiency Rate (Level 3) (Financial Income / Operating Costs + Loan Loss Expense + Financial Expense)

Self Sufficiency Rate (Level 4) (Financial Income / Operating Costs + Loan Loss Expense + Financial Expense + Cost of Inflation)

Case Load Per Technical Officer Total Number of Outstanding Loan / Total Number of Technical Officers

Portfolio Per Technical Officer (Amount of Loans Outstanding + Total Savings) / Number of Technical Officers Source: CARD Bank Operations Manual


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EXHIBIT 6

Functions of CARD Bank Personnel

Area Manager Duties and Responsibilities:

a) Provide program direction for all branches. b) Conduct regular supervision to all Branch Managers. c) Review and approve all loan applications from Php11,000 to Php50,000. d) Conduct regular field monitoring visits and provide intervention strategies as

required. e) Conduct regular center assessment and provide recommendations to improve

performance. f) Conduct regular field monitoring visits and provide intervention strategies as

required. g) Ensure management that all branches are adhering to strict credit discipline and

are following the rules and regulations of the program. h) Approve/note daily cask position, check vouchers and financial reports. i) Sign/countersign checks. j) Prepare consolidated Area Operations Update. k) Monitor monthly collectible/repayment rate/portfolio-at-risk l) Ensure that all books of account are updated and balanced. m) Check and approve daily cash position. n) Approve Cashier’s Blotter Sheet. o) Approve loans for processing

The duties of the key branch bank personnel were as follows:

Branch Manager Job Objective: To assist the Area Manager in ensuring smooth day-to-day program implementation by directly and completely implementing guidelines and framework at the branch level in coordination with all the Technical Officers and administrative personnel. Duties and Responsibilities:

1. Coordinates program implementation at the branch. 2. Sets branch policies and procedures congruent with over-all CARD policies and

guidelines. 3. Conducts regular supervision to AO’s and other branch staff in order to assess

performance and identity problems. 4. Monitors weekly collectibles/repayment rate/portfolio at risk


CARD RURAL BANK (A)

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5. Conducts regular field visit to the branch area of coverage. 6. Conducts regular group/center assessment and provides recommendations as

necessary. 7. Prepares and submits annual projected plan of the branch and make quarterly

revisions when necessary. 8. Prepares and submits monthly assessment of branch operations quarterly status

reports and plan of action of the branch. 9. Reviews and validates documents/reports regarding GRT, LUC, and subsequent

loans. 10. Maintains harmonious relationship with the staff and funding agencies. 11. Provides timely reports to AM. 12. Submits to Area Office Loan Application Forms, promissory note, cash voucher,

weekly collectibles and summary of loan releases for check processing. 13. Sees to it that Loans Monitoring System functions properly. 14. Delivers remittances of branch cash collection to the Area Office-Cashier

including the summary of collection sheet. 15. Prepares/submits Branch Operations Update every 1st working day of the

Following month. 16. Checks daily cash position. 17. Reviews and finalizes Financial Report for submission to AM. 18. Traces and checks Adjusting Journal Entries. 19. Reviews cash/checks receipts and check disbursements.

Assistant Branch Manager Job Objective: Assists the Branch Manager in the full implementation of all branch policies and procedures towards maintaining and sustaining attainment of branch goals. Duties and Responsibilities: Assists BM in the performance of the following functions:

1. Formulation of recommendations to improve day-to-day operation of the branch. 2. Monitoring of centers’ growth and development. 3. Monitoring of members’ individual projects. 4. Maintaining harmonious relationship with all branch staff and members. 5. Preparation and submission of branch weekly updates 6. Facilitating weekly staff meeting. 7. Facilitating weekly branch staff meeting regarding project implementation. 8. Provision of technical assistance as required by TOs/Centers. 9. Preparation of cash vouchers, weekly collectibles and summary loan releases

through the E-Banker. 10. Preparation of Financial Report for submission to AM. 11. Monitoring of collection remittances by TOs. 12. Conduct of pre-GRT and LUC regularly.



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EXHIBIT 6-A CARD BALANCE SHEETS

1997 1998 1999 2000 2001 2002 2003Resources Cash and Cash Items 889,520 427,433 2,025,994 2,133,921 2,765,077 8,153,321 5,121,957 Due from Banko Sentral ng Pilipinas 100,000 100,000 241,269 693,826 1,077,602 1,617,847 1,658,712 Due from Other Banks 2,062,790 6,701,416 5,203,495 12,919,679 14,269,729 36,494,436 23,664,983 Investments in Bonds and Other Debt Instruments - 3,347,966 12,085,234 43,285,626 Loans Receivable 17,565,313 39,011,636 108,487,187 165,322,403 215,196,297 308,824,573 330,477,804 Deferred Income Tax - 304,612 821,469 1,332,569 2,189,190 2,884,793 - Bank Premises, Furniture, Fixtures, and Equipment - net 1,522,437 2,124,379 3,864,308 3,042,537 3,967,201 10,714,655 10,451,961 Other Resources 197,085 463,662 1,339,576 1,352,666 3,285,576 4,149,733 6,675,371 Total Resources 22,337,145 49,133,138 121,983,298 186,797,601 246,098,638 384,924,592 421,336,414 Liabilities and Capital Funds Liabilities Savings 13,443,792 8,940,720 56,405,080 97,315,348 120,787,934 192,558,671 249,205,529 Demand 4,072,929 512,282 347,235 72,361 Deposit Liabilities 101,388,277 121,300,216 192,905,906 249,277,890 Bills Payable - 14,000,743 12,273,670 23,733,000 64,514,057 108,191,493 64,371,405 Accrued Taxes, Interest and Other Expenses 39,653 721,227 1,094,045 2,802,228 5,624,845 - Other Liabilities 3,728,161 2,475,208 17,211,606.0 26,137,898 27,636,868 30,561,464 15,127,551 35,609,886 44,034,171 Total Liabilities 5,125,539.0 22,995,240 97,409,663 158,484,969 206,566,669 336,707,285 357,683,466 Capital Funds 22,337,145 49,133,138 24,573,635 28,312,668 39,531,969 48,217,307 68,244,449 121,983,298 186,797,637 246,098,638 384,924,592 425,927,915 Source: CARD Annual Reports


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EXHIBIT 6-B

CARD INCOME STATEMENTS 1997 1998 1999 2000 2001 2002 2003

Interest Income On Loans and Discounts 1,257,855 9,235,955 18,330,672 39,588,827 55,826,742 75,050,846 107,106,207 Due From Other Banks 192,552 122,408 711,148 583,493 1,179,758 1,400,689 1,291,964 Investments in Bonds and other Debt Instruments 269,000 840,107 1,188,920Total Interest Income 1,450,407 9,358,363 19,041,820 40,172,320 57,275,500 77,291,642 109,587,091Interest Expense Loan/Bills Payable - 1,315,987 3,891,569 11,778,946 4,741,107 10,039,550 10,774,922 Deposit Liabilities 109,335 476,163 1,740,275 3,137,632 5,704,804 7,302,808 11,959,576Net Interest Income 1,341,072 7,566,213 13,409,976 25,255,742 46,829,589 59,949,284 86,852,593Provision for Probable Loan Losses - 796,156 1,417,868 1,124,922 1,052,815 1,081,522 5,901,517Net Interest Income After Provision for Probable Losses 1,341,072 6,770,057 11,992,108 24,130,820 45,776,774 58,867,762 80,951,076Other Income Service Charges 704,953 4,004,381 5,637,197 14,284,059 19,125,451 27,630,711 34,702,289 Miscellaneous 30,872 33,006 121,233 120,348 267,233 933,766 1,133,245 735,825 4,037,387 5,758,430 14,404,407 19,392,684 28,564,477 35,835,534Other Expenses Salaries and Employee benefits 760,459 3,023,898 8,526,758 14,101,115 19,063,416 26,278,904 39,619,164 Transportation and Travel 65,658 820,762 1,677,330 3,488,517 3,485,201 4,105,637 3,493,730 Security, Messengerial and Janitorial - 337,122 863,664 2,129,968 - Rent 50,000 671,608 1,601,903 1,957,866 - Office Supplies 85,117 434,695 804,199 1,309,736 - 2,389,266 3,133,803 Depreciation and Amortization 80,813 352,303 836,369 1,205,956 - Communication, Light and water - - - 1,188,975 - Repairs and Maintenance - 113,782 375,144 936,254 - 1,493,660 Management and other Professional fees 446,600 3,417,696 589,830 2,416,304 1,197,350 Insurance - - - 663,326 Taxes and licenses - 144,372 42,395 508,788 - 2,438,962 Advertising - - - 386,153 Representation and Entertainment 100,240 355,051 346,528 293,924 Program Monitoring and Evaluation - - - 256,890 1,271,024 Program Development Cost 8,750,151 15,209,265 35,504,513 Occupancy 6,624,171 11,857,758 14,956,215 Employee Trainings 7,113,064 5,487,189 4,147,180 Miscellaneous 362,471 729,413 767,687 4,857,387 Other Operating Expenses 9,784,029 6,232,202 5,276,019 1,951,358 10,400,702 16,431,807 35,701,159 54,820,032 75,492,843 108,598,998Net Income before Income Tax 125,539 406,742 1,318,731 2,834,068 10,349,426 11,939,396 8,187,612Provision For (Benefit From) Income Tax Current - 441,653 848,193 1,313,135 3,925,046 4,139,757 3,969,955 Deferred - (304,612) (516,857) (511,100) (856,621) (695,603) (1,766,708)Net Income 125,539 269,701 987,395 2,032,033 7,281,001 8,495,242 5,984,365



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EXHIBIT 7-A CARD BALANCE SHEETS

1997 1998 1999 2000 2001 2002 2003Resources Cash and Cash Items 889,520 427,433 2,025,994 2,133,921 2,765,077 8,153,321 5,121,957 Due from Banko Sentral ng Pilipinas 100,000 100,000 241,269 693,826 1,077,602 1,617,847 1,658,712 Due from Other Banks 2,062,790 6,701,416 5,203,495 12,919,679 14,269,729 36,494,436 23,664,983 Investments in Bonds and Other Debt Instruments - 3,347,966 12,085,234 43,285,626 Loans Receivable 17,565,313 39,011,636 108,487,187 165,322,403 215,196,297 308,824,573 330,477,804 Deferred Income Tax - 304,612 821,469 1,332,569 2,189,190 2,884,793 - Bank Premises, Furniture, Fixtures, and Equipment - net 1,522,437 2,124,379 3,864,308 3,042,537 3,967,201 10,714,655 10,451,961 Other Resources 197,085 463,662 1,339,576 1,352,666 3,285,576 4,149,733 6,675,371 Total Resources 22,337,145 49,133,138 121,983,298 186,797,601 246,098,638 384,924,592 421,336,414 Liabilities and Capital Funds Liabilities Savings 13,443,792 8,940,720 56,405,080 97,315,348 120,787,934 192,558,671 249,205,529 Demand 4,072,929 512,282 347,235 72,361 Deposit Liabilities 101,388,277 121,300,216 192,905,906 249,277,890 Bills Payable - 14,000,743 12,273,670 23,733,000 64,514,057 108,191,493 64,371,405 Accrued Taxes, Interest and Other Expenses 39,653 721,227 1,094,045 2,802,228 5,624,845 - Other Liabilities 3,728,161 2,475,208 17,211,606.0 26,137,898 27,636,868 30,561,464 15,127,551 35,609,886 44,034,171 Total Liabilities 5,125,539.0 22,995,240 97,409,663 158,484,969 206,566,669 336,707,285 357,683,466 Capital Funds 22,337,145 49,133,138 24,573,635 28,312,668 39,531,969 48,217,307 68,244,449 121,983,298 186,797,637 246,098,638 384,924,592 425,927,915 Source: CARD Annual Repor


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EXHIBIT 7B CARD INCOME STATEMENTS

1997 1998 1999 2000 2001 2002 2003 Interest Income On Loans and Discounts 1,257,855 9,235,955 18,330,672 39,588,827 55,826,742 75,050,846 107,106,207 Due From Other Banks 192,552 122,408 711,148 583,493 1,179,758 1,400,689 1,291,964 Investments in Bonds and other Debt Instruments 269,000 840,107 1,188,920 Total Interest Income 1,450,407 9,358,363 19,041,820 40,172,320 57,275,500 77,291,642 109,587,091 Interest Expense Loan/Bills Payable - 1,315,987 3,891,569 11,778,946 4,741,107 10,039,550 10,774,922 Deposit Liabilities 109,335 476,163 1,740,275 3,137,632 5,704,804 7,302,808 11,959,576 Net Interest Income 1,341,072 7,566,213 13,409,976 25,255,742 46,829,589 59,949,284 86,852,593 Provision for Probable Loan Losses - 796,156 1,417,868 1,124,922 1,052,815 1,081,522 5,901,517 Net Interest Income After Provision for Probable Losses 1,341,072 6,770,057 11,992,108 24,130,820 45,776,774 58,867,762 80,951,076 Other Income Service Charges 704,953 4,004,381 5,637,197 14,284,059 19,125,451 27,630,711 34,702,289 Miscellaneous 30,872 33,006 121,233 120,348 267,233 933,766 1,133,245 735,825 4,037,387 5,758,430 14,404,407 19,392,684 28,564,477 35,835,534 Other Expenses Salaries and Employee benefits 760,459 3,023,898 8,526,758 14,101,115 19,063,416 26,278,904 39,619,164 Transportation and Travel 65,658 820,762 1,677,330 3,488,517 3,485,201 4,105,637 3,493,730 Security, Messengerial and Janitorial - 337,122 863,664 2,129,968 - Rent 50,000 671,608 1,601,903 1,957,866 - Office Supplies 85,117 434,695 804,199 1,309,736 - 2,389,266 3,133,803 Depreciation and Amortization 80,813 352,303 836,369 1,205,956 - Communication, Light and water - - - 1,188,975 - Repairs and Maintenance - 113,782 375,144 936,254 - 1,493,660 Management and other Professional fees 446,600 3,417,696 589,830 2,416,304 1,197,350 Insurance - - - 663,326 Taxes and licenses - 144,372 42,395 508,788 - 2,438,962 Advertising - - - 386,153 Representation and Entertainment 100,240 355,051 346,528 293,924 Program Monitoring and Evaluation - - - 256,890 1,271,024 Program Development Cost 8,750,151 15,209,265 35,504,513 Occupancy 6,624,171 11,857,758 14,956,215 Employee Trainings 7,113,064 5,487,189 4,147,180 Miscellaneous 362,471 729,413 767,687 4,857,387 Other Operating Expenses 9,784,029 6,232,202 5,276,019 1,951,358 10,400,702 16,431,807 35,701,159 54,820,032 75,492,843 108,598,998 Net Income before Income Tax 125,539 406,742 1,318,731 2,834,068 10,349,426 11,939,396 8,187,612 Provision For (Benefit From) Income Tax Current - 441,653 848,193 1,313,135 3,925,046 4,139,757 3,969,955 Deferred - (304,612) (516,857) (511,100) (856,621) (695,603) (1,766,708) Net Income 125,539 269,701 987,395 2,032,033 7,281,001 8,495,242 5,984,365

Asian Institute of Management


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Documents

Card Rural Bank - Microfinance Gateway · CARD RURAL BANK (A) As far as the management of the CARD Bank was concerned, the years from 1997 to 2002 were the most successful period