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PHASE I. COMPANY SELECTION
Company Background
Fernando Air Base Savings and Loans Association, Incorporated or FABSLAI was
established on 11 May 1962 to help military personnel especially the soldiers alleviate their
problems on household finances and set them free from usurious way of financing in the
community of Fernando Air Base, Lipa City. It started with 230 members and Php 30,000.00
initial capital. It was first registered with the Securities and Exchange Commission (SEC) on July
23, 1965 and re-registered in 1991 for another twenty five (25) years.
FABSLAI is governed by RA 8367, otherwise known as the “Revised Non-Stock
Savings and Loan Association Act of 1997”. It was the first savings and loan association that
offered housing project to its members. The Fernando Air Base Airmen’s Barrio Housing Project
was designated pilot project by the Central Bank of the Philippines and the housing units were
inaugurated by then President Ferdinand E. Marcos in 1967.
FABSLAI is managed by seven (7) Board of Trustees who are elected (No Proxy Voting)
by the regular members every second Friday of February of each year. Its day to day operations
are handled by an efficient workforce headed by the General Manager.
COMPANY LOGO
TYPES OF MEMBERSHIP
1. Regular Members (with voting power)
- Officers, enlisted personnel, and civilian employees assigned in Fernando Air Base
2. Honorary Members (without voting power)
- Officers, enlisted personnel, and civilian employees assigned in other units of
Philippine Air Force, spouses and dependents of regular members
Product Description
Savings
A. Capital Contribution (CapCon)
- Minimum of P1,000.00 (maintaining balance) deposit
- earns dividend every July and February of each year
- has an average rate of 14% per annum as per approval by Bangko Sentral ng
Pilipinas
B. Savings Deposit
- earns interest every month with 4% interest rate per annum
Loans
- Offered to all members on short – term and medium – term basis, ranging from one
(1) month to a maximum of five (5) years
Kinds of Loans
1) Salary Loan
2) Collateral Loans
3) Back to Back Loans
Mode of Payments
1) Payroll Deduction (Sec 7, RA 8367 & Sec 4307S, BSP Cir 192)
2) Post Dated Checks (for loans not covered by payroll deduction)
Loan Insurances are covered by:
1) BenLife Insurance – up to 80 years old
2) GrepaLife
Alay sa Pamilya Program (APP)
- entitles members to a death benefit of Php 15,000.00
Community Involvement
- Maintains scholars in elementary and high school (dependents of FABSLA
members)
- Livelihood trainings
Eligibility requirements for loan for an individual
Must be a member of the Philippine Air Force, wether enlisted or official.
Must be a Civilian employees, wether casual or permanent.
Must be retired Philippine Air force
Must be a member of the association, wether regular or honorary.
Purposes of loans
Repayment of past due loans
Starting small business
Housing – new or house improvement
Medical assistance
Educational assistance
Emergency loans
Calamity loans
FABSLAI OFFICES:
• Main at Fernando Air Base, Lipa City
• Villamor Branch at Airmen’s Mall, Villamor Air Base, Pasay City
• Back-Up Processing Center at Clark Air Base, Pampanga
• Help Desk at AFP Finance Center, GHQ, Camp Aguinaldo, Quezon City
• Liaison Office at EAAB, Zamboanga City
• Liaison Office at Mactan Benito Ebuen Air Base, Lapu-Lapu City
PHASE II. INDUSTRY OVERVIEW
The rapid growth of financial institutions in the area calls for a more competitive
challenge for the association.
Major Competitors
1. Armed Forces of the Philippines Savings and Loans Associations,
Inc .(AFPSLAI)
The major player in the industry, was founded in 1972 and is based in Quezon
City, the Philippines. It serves members from the AFP, PNP, BJMP, and BFP. It
operates branches in Isabela, Baguio, Clark, Aguinaldo, Crame, Bonifacio, Sangley,
Lucena, Legaspi, Catbalogan, Tacloban, Iloilo, Cebu, Palawan, Butuan, Cagayan De
Oro, Pagadian, Davao, Zamboanga, Cotabato, and General Santos, the Philippines.
2. Air Material Wing Savings and Loans Association, Inc. (AMWSLAI)
Air Material Wing Savings Loan Association, Inc. AMWSLAI is a non-stock
savings and loan association legally established and operating since June 13,
1956 . We are a P15 Billion organization authorized by the Bangko Sentral ng
Pilipinas. Currently, it already have 38 branches and liaison offices nationwide.
As of December 2003, they have 239,355 members.
3. ACDI Savings and Credit Cooperative
ACDI is a duly registered cooperative in accordance with RA 9520. Its
members are active PAF, PN, PM military, civilian personnel, all AFP pensioners
and dependents of ACDI members.
4. Composite Wing Savings and Loans Association, Inc. (CWSLAI)
5. Air Cavalier Credit Cooperative (ACCC)
6. Other lending investors
Market Definition/Segmentation
FABSLAI’s market is made up of members of the Philippine Air Force (PAF) wether it
enlisted personnel or officer, PAF Civilian employees, and retired PAF. PAF enlisted or officer
are considered to be a regular member as long as their unit assignment is at he Fernando Air
Base, Lipa City. The legal wife of the PAF enlisted or officer who are assigned in Fernando Air
Base can also be a regular member of the association. Each regular member can sponsor a
their dependents to be a member but the status of their membership will now be considered as
honorary.
OPPORTUNITIES
On 21 September 1999, the 100th Training Wing was deactivated and the Air Education
and Training Command was established with a greater responsibility and wider scope of training
task. The company needs to coordinate and develop good relationship with PAF higher officials
in order to establish possible connections in order to gain access on the training camp.
Collection agency is another opportunity option for the association to lessen the
increasing past due loan accounts. These agencies will strengthen the collecting power of the
Collection department that will pursue payments on debts owed by the member /borrower.
Engage in a community involvement. The reason for this is because when people are
looking for services involved with their personal well-being or their businesses, personal word-
of-mouth referrals carry a lot of weight. It would also raise your personal and business profile in
your local community within your target market.
Increasing demand for financial assistance. The cost of living has been continuously
increasing, so the need for financial support also increases. Clients are most likely attracted by
the lowest possible interest rates a financial institution can give.
People now are more inclined in the sophistication of modern technology and the need
to embrace this technologies to improve products and services would be one of the
opportunities for the company.
THREATS
One of the major threats of the company is the continuous increase of other institutions
who are catering to the same market as the savings and loans societies. Major players tend to
outcompete rivals with powerful strategies. The company must aim at developing a sustainable
competitive advantage rather than a temporary in order to improve the company’s financial
performance and strengthen its long-term competitive position.
The restrictive policy of the Philippine Air Force regarding the Single Borrowers Limit
(SBL). This rule prevents the association to increase their credit exposure to the clients that
need huge financial assistance or support to cover up unexpected huge expenditures even if
they still have the capacity to repay the loan.
Regulatory policies of the Bangko Sentral ng Pilipinas regarding the dividend
declaration. Dividend rates are subject to the approval of the BSP depending on the evaluated
capacity of the company. These regulations make dividend declaration policies more
inconsistent and this inconsistencies threatens investors/depositors to invest on the association.
PHASE III. THE COMPANY
Financial services are essential to the well functioning of any thriving economy. All
individuals have time in their lives when they need to save money. They may need a larger sum
of money during financial urgencies such as, wedding or funeral, to pay for their children’s
education, to provide for themselves in old age, to provide in their business or in case of an
emergency in the future. Access to credit facilities such as banks or financial institutions is
equally important.
Financial institutions have emerged in response to the needs of the military personnel in
Fernando Air Base to lessen their problems on household finances and set them free from
usurious way of financing in the community. Fernando Air Base Savings and Loans
Association, Inc. is one of the institutions engaged in this type of activity. It is an organization
engaged in savings and small credit schemes. Through the establishment of savings and the
distribution of small loans, the association help their members improve their standard of living.
Each member of the group contributes the same amount to the group savings. In this
way, no group member has a disproportionate amount of power and the interest is divided
equally between members
Sizes of loans to individuals
A member/borrower can lend money from the association depending on the individuals
Single-borrower-limit (SBL) as assessed by the PAF Finance Center. Loans above
P300,000.00 will be subject to the approval of the Board of Trustees.
Methods of Payment/ Modes of Payment
Loan monthly amortization of the individual borrower is automatically deducted from their
salary through payslip deduction as authorized by BSP under Sec 7, RA 8367 & Sec 4307S,
BSP Cir 192. In the case of the retired PAF borrowers, their monthly amortizations are
automatically deducted from their pension through billing. The monthly billing is forwarded by
the Collection department to the Philippine Air Force Finance Center (PAFFC) for proper billing
and adjustments of deductions. Other methods of payment can be made thru an issuance of the
post dated checks (PDC).
Institutional Impact
1. Human Resources
FABSLAI is managed by seven (7) Board of Trustees who are elected (No Proxy Voting)
by the regular members every second Friday of February of each year. Its day to day
operations are handled by an efficient workforce headed by the General Manager. The
Board of Trustees(BOT) who are the decision making body and approves the general
policies, rules and regulations of the association. All elected BOT’s are long-time residents
of FAB who knows the clients and the environment in which FABSLA operates. It also
composes of three other department heads aside from the General Manager. Each
department also composed of department supervisors who reports directly to the
department heads. The rank and file employees are categorized as permanent and
contractual employees.
ORGANIZATINAL CHART
2. Operations and Systems
FABSLA’s operations are conducted systematically with the use of the DOS base
system. Individuals fill in loan application form and submitted to the front line employees
together with the complete requirements. Further assessment are done by the front line
employees on the filed application form and informed immediately the member once there
has been a problem or additional requirements needed. The loan application will then be
forwarded to the loan processing section once it has been properly assessed and no other
problems occur.
3. Marketing
Knowledge of the services provided by the association spreads throughout the
community by word of mouth. Other means are also been using like the use of tarpaulin
advertising which are mostly located on the key areas within the Fernando Air Base. It also has
Board of Trustees
DepartmentHead
General Manager
Supervisor
DepartmentHead
DepartmentHead
Rank & File
Supervisor Supervisor Supervisor
a quarterly issue of its newsletter to inform the public the accomplishments and the projected
programs of the association.
4. Feedback Mechanism
There is a scheduled once week board meeting which are attended by the seven Board
of Trustees together with the General Manager to tackle on issues and concerns of the
members and its employees.
Profitability ratios
Gross Profit Margin
Admin expense ratio
Sales & services expenses Ratio
2008
81,806,837
116,862,322
= 70%
16,032,519
116,862,322
= 13.7%
35,055,485
116,862,322
= 30%
2007
74,044,321
105,500,449
= 70%
22,742,942
105,500,449
= 21.5%
31,456,128
105,500,449
= 29.8%
It is revealed that the company, for the past two years of its operation, has shown an
overall efficiency in its operating performance as being presented in the result of its margins.
Operating expenses has been maintained in a lower ratio. A decrease in the administrative
expenses on the second year of its operation is due to the adjustment of the salary grades of
the regular employees.
Liquidity Ratios
Current ratio
Acid test ratio
2008
765,676,831
162,483,892
= 4.71
764,443,965
141,506,742
= 5.40
2007
748,953,412
134,479,823
= 5.57
748,227,686
121,511,285
= 6.16
The company has a minimal decrease of its ratio on the calendar year 2008.
Nevertheless, the company’s financial position in the past two years of its operation has been
relatively in a good standing. Although there has been a substantial increase in the current
liabilities on the calendar year 2008 the company also has increased its collection due to the
improvement of the collection department and also the implementation of the adjusted loan
interest rates increased the loan releases of the company which later affects the current assets
for the calendar year 2008.
Balance Sheet Trend Analysis and Vertical Analysis
The analysis shows that a substantial increase in the other current assets portion of the
balance sheet and the acquisition of real and other properties results to an increase of 3.1% of
the total assets on the next calendar year. An increase in the non-current assets of the
company are acquired from the embarked properties of the creditors. The company adjusted its
loan interest rates at a lower percentage and conducted an on wheels project that results to a
2% increase of its receivables.
Capital contributions decreased by 3.5% due an increase of the withdrawals and
resignation of membership.
Surplus (free) has substantially increased to back up an increase of the company’s past
due loans.
The vertical analysis shows that on the past two years of its operation of the company
there has been no significant difference from the composition of its balance sheet except that
there has been a nominal change on the capital contribution portion of the balance sheet.
Income statement trend analysis and vertical analysis
The company’s income increased by 14.5% as an end result of the decrease in the
admin expenses of the company.
The reduction of the company’s expenses from 21.6% to 13.7% play a significant
role on the increase of the company’s income.
STRENGHTS
The association’s outstanding reputation over the community. The image the
association established has been sustained over the years. The image that the association will
be regarded as a reliable, credible, trusthworthy and responsible financial institution in the area.
The ongoing diversification of the association’s clientele. FABSLA has been attempting
to branch out into other Air Base’s to reach and cater the needs of other PAF personnel
assigned to different bases nationwide.
All Board members are long-time residents of FAB who know the clients and the
environment in which they operate very well.
Institutional advantages of the institution in mobilizing deposits. The strong community
orientation and private of the association suggest that institution are an effective type of financial
institution to mobilize savings in rural areas. Management, the staff, shareholders and clients
are largely from the same region and know each other well. This is a decisive factor because
people only deposit their money in institutions they know and trust. In contrast to financial
institutions owned by the public, the private ownership normally ensures at least a certain
minimum level of efficiency.
WEAKNESSES
Insufficiency of human resources not in quantity but in quality, especially as the key
functions of control, education and training, and informatics. There has been a sufficient
number of manpower but the problem is that its manpower has lack of proper training to perform
his/her tasks efficiently and effectively.
Another weakness of FABSLA is that it is using an obsolescence computer program that
enables it to process transactions at a lower accuracy level. Manual updating of the members
loan subsidiary ledgers is still practiced by the association thereby errors are not immediately
eliminated. The insufficiency of the program promotes duplication of process to check and
recheck.
Increasingly poor monitoring of loans thereby increase in the number of past due loans.
There is no clear policy regarding the monitoring of loan payment.
PHASE IV STRATEGIC ISSUES IDENTIFICATION
In an industry wherein processes are standardized, the best strategic plans to gain
competitive advantage is that to develop a more attractive customer service that would entice
more customers and retain its existing ones.
Good customer service is the lifeblood of any business. If you're a good salesperson,
you can sell anything to anyone once. But it will be your approach to customer service that
determines whether or not you’ll ever be able to sell that person anything else. The essence of
good customer service is forming a relationship with customers, a relationship that the
individual customer feels that he would like to pursue.
Proper monitoring of loans must also be taken into consideration in order to level down
the number of past due loans. The collection department should formulate a clear collection
policies or have another party to do the collection activities.
PHASE V STRATEGIC FORMULATION/IMPLEMENTATION
The need for a periodic review of customer services needs such as speedy attention to
resolve clients’ complaints cannot be overemphasised. Efficient and effective credit and savings
mobilization by management so as to retain existing customers and attract new ones are also
advocated for.
Build up a positive image of the association in the community: Apart from the actual
services provided by the bank to its customers, the image is determined through a series of
factors such as the good reputation and credibility of the individual members of the
management and of the shareholders. Thus, the selection of the management as well as the
broadening of the shareholder base must be done cautiously and should include criteria such as
personal integrity.
Install an effective computerized system: Efficient hardware and software are a
prerequisite to cope with the high number of cash transactions. They will lower operating costs
and contribute to improving the general management information system of the financial
institution.
Improve service orientation: Customers expect rapid services from a financial institution.
In addition to qualified staff and modern technologies, the localities of the institution should have
sufficient space and seating possibilities. The extension of banking hours over the weekend is a
major step towards realizing the concept of an institution as a service center.
Maintain a liquidity above the commercial banks' average: Financial institutions with a
small capital base engaged in mobilizing microdeposits should maintain a high liquidity
ratio. This means maintaining a liquidity at least above the banking industry's average. In
the Filipino context, a 20% liquidity ratio for microfinance institutions appears to be
sufficient to meet unexpected situations.
Price savings products above the competitors' rates: In a relatively competitive
environment, microfinance institutions should consider offering their customers a savings
interest rate above the rate of the competitors. This policy can contribute to increasing the
bank's deposits.
Conduct careful fund management on a daily basis: To satisfy the liquidity needs of a
microfinance institution and to improve financial efficiency, the fund monitoring should be done
daily. In case of urgent liquidity needs, rapid access to a liquidity pool is very important.
Conduct careful risk asset management: The composition and performance of the bank's
assets should be monitored constantly through the analysis of key ratios, such as the net
worth to risk assets ratio and the past due ratio.