The expansion phase of the group vs. individual liability lending project has encountered problems along the way. After Bohol, Carcar and Leyte, we decided to extend the project westward, finding ourselves in Bacolod and Roxas branches around the time I took over the reins last year.
But in general we've been having difficulties getting to all the barangays, or villages, in the center assignment list. And now center generation has slowed from a trickle to a complete stop. Recently management decided to freeze all new loan releases at branch level and to give it 1-2 months to build up their loan reserves. Current clients can avail of re-loans but no new clients. Bacolod and Roxas aside, we are just about to enter Toledo on the other side of Cebu, but right now operations will be pushed back. The bank is also worried about the proportion of secured loans to unsecured. It's quite lopsided and puts the bank at enormous risk. The ripples from the economic downturn are making everyone edgy, even at the rural banks.
There's also the PAR (portfolio at risk) issue. Double-digit PAR has been plaguing the branches in Western Visayas, which makes everyone edgy about the project, particularly the individual liability product we're trying to evaluate. It just happens that our centers that have individual liability also happen to have Development Officers who bucked training and policies. In one area, one DO was conducting credit and background checks over the phone, without ever visiting client businesses, center meetings were being disregarded. It's our bad luck that this DO was mis-managing individual liability centers, which makes the microfinance supervisors and branch managers resentful of the new product.
At the training, I presented to BMs, DOs in our project areas, and supervisors the details about the project and the concept of random control trials so they could see why sticking to policies is critical. At times it felt like I was facing a firing squad or witch hunting court in Salem. Even with the head of MFU at my side, many attacked, decrying the product as the reason why centers failed. I countered that much of the project implementation in problem areas was non-existent so in fact it made no sense to attribute the failures of centers to the product. In the end, I'm not sure their anxieties were mollified much. Many can stomach that repayment rates may be no different between the two products but in reality they think that mispayment hits individual liability centers harder because it puts the onus on the DO to make collections (before they could rely on the joint liability structure and ask center members to cover a mispayment). We'll need to look at the data again, maybe run some activity based costing record keeping before we can safely draw conclusions.
Fun and tense 2 days:
Labels: green bank, IPA, training, western visayas