Teresa GanzonJanuary 27, 2011

Bangko Kabayan: A Case Study of

Microfinance and the Culture of Reciprocity

The Philippines

Developing nation

Population = 96 Million

About 1/3 (32.9%) of whom live below the poverty line, earning less than $2 a day

Microfinance in the PhilippinesThe government has been encouraging

private sector, including the formal banking sector, to introduce and offer microfinance services.

Few formal financial institutions have chosen to engage in microfinance.

Today, only about 10-15% of the 680 rural banks dispersed in the Philippine countryside offer microfinance products.

53-year old Philippine rural bank in the province of Batangas

Grew its resources and loans, mostly fueled by rediscounting funds from the Central Bank

Experienced disastrous results in the ‘70s causing it to nearly close down from wholesale defaults

We became very conservative in lending and only accepted loans secured by hard collateral

Bangko Kabayan, 1957

Economy of Communion

A business does not exist to produce profits only for its owners, but for the following purposes: For those in need in the community For structures of formation For reinvestment into the company

Paradigm consistent with the distributive nature of social enterprises

Paradigm Shift

From traditional, collateral-backed lending to unsecured microfinance technology

Strict monitoring of accounts

Hiring and recruiting qualified field personnel

Acquiring competencies in cash flow and character-based risk assessment

Our true calling

Focus group discussions

Product Development

Educational Loan

Micro- insurance

Housing

Microfinance

Grassroots Entrepreneurship Education

Opportunity Seeking

Understanding Financial

Statements

marketingHuman Resource Management

OPERATIONS

Clients giving back

Community Development Officers (CDOs)rolling out the Entrep Eskwela Program in

different microfinance centers

Conclusion

Transformation from a traditional, collateral-based lending institution into one that has been able to adopt microfinance unsecured lending

Even as a microfinance-oriented institution, we have chosen to do things differently. We do not wish to grow in a manner where relationships from within the enterprise and with the clients will be secondary to “standardization and structure”.

This is a challenge we face today – and every moment of our enterprise life: to balance the demands of business while not losing track that man and relationships are primary and central.