MANAGING MICRO FINANCE; Save first, borrow later
Friday, 25 May 2012 00:00 Written by AMADO P. MACASAET
BanKo, the microfinance arm of the Ayala Group, has an unorthodox way of
doing business. While its main objective is to lend small sums to
ordinary people, it requires borrowers to sign an agreement to save.
Tessie Tan, president of the institution operating out of Greenhills in
San Juan, explained in a recent interview with Malaya Business Insight
that one in five poor Filipinos wants to borrow.
And these borrowers pay their debts, Ms. Tan said, since they know they
will have to borrow again and must present good credit history.
Paying a debt, says Ms. Tan, is ingrained among Filipinos. It is a
cultural value brought about by necessity, she said. Micro borrowers pay
their obligations regularly to build good credit reputation to enable
them to borrow more next time.
Looking at these things, Ms. Tan says she sees a nation of small savers
and micro entrepreneurs.
The process of developing savings consciousness could be very tedious,
according to Ms. Tan. The first step is financial education. Priorities
have to be drawn up. Old habits that die hard must be taken out of the way.
Thus, Ms. Tan said, BanKo started with a core group, notably the
overseas Filipino workers.
Those who send money home through the remittance centers of the Bank of
the Philippine Islands are encouraged to start a savings account.
Today, the group has an estimated one million OFW depositors.
BanKo then fanned out to the other groups, notably the cooperatives,
rural banks which are supposed to be competitors, non-government
organizations and the like.
The like includes pawnshops, drugstore chains, money changers,
pawnshops. They are BanKo's outlets which accept initial deposits of as
low as P50.
After a while, Ms. Tan said, she observed that the minimum (also
initial) balance of P50 had gone up to P1,000.
The project is catching fire. Small people go to BanKo and its outlets
with coins and small change to deposit; there are at least 75,000
accounts in this category.
According to Ms. Tan, this is the group that needs maximum help and
protection.
That is why, she explained, the small depositor is provided or may be
provided with life insurance five times the balance of the savings
account, together with other covers such as fire, flood, and earthquake,
for a maximum benefit of P10,000.
According to Ms. Tan, a small borrower who has no appreciation of
accounting practices hardly knows that he may be in a business with the
highest return on equity.
Citing an example, Ms. Tan talked about a man in small tuna trading in
General Santos in Mindanao. The man buys one big fish weighing several
kilos. He goes to the market and sells the fish for Pl,200 on a capital
of P1,000.
The man goes to BanKo or its outlet, pays back the P1,000 he borrowed to
buy the tuna but leaves P50 to add to his deposits. He walks home with
P150 in profits earned by the sweat of his brows and with the help of
BanKo or its outlet.
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CARLOS ANI - International Microfinance Consultant - SEEDFINANCE Corporation Chairman
Mailing address: PO Box 90 UPLB Los Banos Laguna, Philippines 4031
Emails: carlosani@gmail.com , carlosani@seedfinance.net
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