GROUP LENDING ENHANCEMENT WORKSHOP

Enhancement/Transitioning Cases

Objectives of the SessionObjectives of the Session

• To present the transitioning/enhancement some banks did to their group lending program.

• To draw out from the participants their own ideas on how product enhancement/transitioning should be done.

• To present possible effects –good or bad-- of each model based on bank’s experience

MethodologyMethodology

1. Divide the group into four groups.2. Assign one case per group.3. The group will be tasked to study each case

and write down their observations in manila paper.

4. Assign a leader to report the output

Guide QuestionsGuide Questions

• If you are the one doing the transitioning/enhancement, how should you have done it. Comments

• What do you think are the possible outcome of the transitioning/enhancement model?

Why did these banks decide to Why did these banks decide to enhance/transition their group loan enhance/transition their group loan

products?products?

• Rising PAR and client drop-outs alarmed the banks and motivated them to enhance/transition their group lending product.

• For one bank, management mandate to do away with group lending led to the transitioning.

• The cases describes the different approaches these banks implemented.

Case 1Case 1

• The bank enhanced its group lending by reducing the number of center meetings from 4 to 2 times per month done very other week. All the other product features were maintained. The weekly payments due when no meeting is scheduled, are picked up by the AO from the center chief. It is the AO who decides when a center can transition.

Case 2Case 2

• The bank transformed its group lending on a mandatory basis and shifted all groups and members from group liability to individual liability as soon as the groups and their members finished paying their existing group liability loans. All other group loans feature were maintained.

Case 3Case 3

• The bank graduated all its group clients to individual loan. The set of criteria for graduating clients included the following: client’s loan should not be lower than P10,000; 80% of repayment should have been made on time. There were no options given to clients who did not meet the criteria.

Results: Case 1Results: Case 1

• Even new and problematic centers were made to meet only twice or once a month because AO had the option to choose the centers.

• Rise in PAR and discipline breakdown of the centers.

• AO no longer following his timetable of activities because he can pickup the payment from the centerchief anytime of the day

Results: Case 2Results: Case 2

• Centers and members with repayment problems are also transitioned

• Lower down the morale of good performing centers and members since no recognition was given during the process

• Rise in PAR.

Results: Case 3Results: Case 3

• Massive drop out in the number of microfinance clients who were not qualified with the criteria set.

• Decreased in the loan portfolio.• Improved repayment performance.

Case 4Case 4

• The bank gave options to their group loan clients to graduate into individual loan products.

• Bank applied a set of criteria: - must be a client for more than 2 years - good repayment performance - with existing business - last loan availed not lower than P15, 000.

Results: Case 4Results: Case 4

• Better client retention.• Easier marketing for new qualified clients.• Increased in loan portfolio.• Improved repayment performance.• The bank’s mission to serve the poor through

group lending is still fulfilled.

Thank You!