Microfinance: Greening the Countryside with TREES

As a humble housekeeper, Mrs. Rosie Bilog never dreamed that she'd one day be rubbing shoulders and making small talk with the highest representative to her country of the most powerful nation in the world today.

Like many of her neighbors, Mrs. Bilog of Bgy. Lumbia processes cashew nuts in her home-based family business. Her parents started the family enterprise in 1988 and she learned how to prepare the local delicacy while still a primary school pupil at Lumbia Elementary School.

The supply of raw cashew nuts is highly seasonal, so Mrs. Bilog and other cashew nut producers like her have to stock up on inventory during the harvest season from April to June to allow them to process the product year round and meet the increasing demand for the increasingly popular pasalubong and snack item.

Produced entirely in households like the Bilog's, the cashew nuts are sold by wholesalers and retailers in Cagayan de Oro, Manila, Davao, Cebu and Dumaguete. Mrs. Bilog also has a retail outlet at the Cagayan de Oro airport.

Besides mobilizing financial resources from the country's rural areas through loans and deposits, micro enterprises like the Bilog's cashew processing cottage industry also provides livelihood and employment in the rural areas where opportunities are few and far between. In fact, the Bilog's family business provides employment and livelihood for at least 12 other families who help them process the nuts, as well as numerous other wholesalers and retailers who buy them for resale.

Having already invested P500, 000 in their home-based enterprise, the Bilogs secured a P50, 000 loan for additional working capital last year from the Cagayan de Oro branch of the Green Bank of Caraga, through its Total Response for the Economic Enhancement of the Society (TREES) micro enterprise lending project, which is supported by the United States Agency for International Development (USAID) Microenterprise Access to Banking Services (MABS) program.

"Our micro enterprise lending program is entirely self-financed with resources mobilized internally by our bank," stressed Joseph Omar Andaya, president and CEO of Green Bank, which has the most number of branches among the MABS' participating banks with 42 covering Mindanao and the Visayas. "MABS just provides us with technical assistance."

What Mrs. Bilog didn't know at the time she applied for a loan last June was that she would be marking a milestone as Green Bank's 30,000th micro enterprise client with no less than US Ambassador Kristie Kenney.

Mrs. Kenney joined bank dignitaries headed by GreenBank President and CEO Joseph Omar Andaya; John Owens, MABS program manager, and Tess Espenilla, USAID project officer in simple rites recognizing Bilog as their 30,000th micro client and the major role played by MABS and its micro enterprise clients in the growth and expansion of Green Bank.

Green Bank started offering micro loans in 2000, when it received training and technical assistance in the design, development and management of its microfinance services through the Rural Bankers Association of the Philippines-MABS (RBAP-MABS).

The program is jointly implemented by RBAP and the Office of the President through the Mindanao Economic Development Council. It assists rural banks in developing their capability to provide financial services (loans and deposits) to micro entrepreneurs who are usually not served by the domestic banking system.

Since it became a MABS participating bank seven years ago, Green Bank has expanded its operations from six to 42 branches and another 52 KIOSKs (branch extension offices in public markets). The bank has released over 98, 000,000 micro loans with a total portfolio of PhP185M (US$3.775 million). Over half of the bank's total clients are micro enterprises and 20 percent of its total loan portfolio is invested in microfinance, Mr. Andaya said.

During her brief talk, Mrs. Kenney lauded Green Bank for its support of the MABS microfinance operations, which she said was instrumental in demonstrating that micro enterprises are 'bankable' clients and microfinance operations can be profitable to the bank.

Mrs. Kenney also met with Mrs. Bilog and other microfinance clients of Green Bank after her talk, encouraging them to continue with their small businesses and become key players in the socio-economic development of the Philippines rural areas.

When MABS was launched in late 1998, Mr. Owens said the program only had four participating banks serving 447 microfinance loan clients with total loan portfolio of PhP337, 374. The program also worked with rural banks to target and attract micro-deposit accounts. In 1998 the four MABS participating banks had opened only 482 new micro deposit accounts with total deposits of PhP92, 933.

By the end of last year (2006), MABS was already working with 87 banks with 322 participating banking units (head offices and branches) serving over 148,000 micro clients with a total loan portfolio of over PhP 950 million. These banks were also managing some 1.2 million micro deposit accounts with deposits amounting to almost PhP 1.6 billion.

As for Mrs. Bilog, she has applied for a P500,000 loan to be released this April. The proceeds from the loan will be used to expand distribution of her products to Cebu and Iligan cities. With a little help from friends in TREES and MABS, she has now graduated to the big leagues and no longer needs to borrow as a micro borrower.

"There's no better measure of success for our micro loan clients than the time when they no longer need to borrow as a micro borrower and move up as a valued regular client of the bank," Mr. Andaya said.

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