November 29, 2000

On-the-road from the Philippines

Friday, Nov. 10: Going north

Today we went north into the mountains. Our first stop was NICO, whose vision statement (framed and hanging in the lobby) is: "A model for integral human development." NICO achieved the silver level of FOCCUS branding and is on track to become the first to achieve gold (Quality CU). The Savings and Credit With Education (SCWE) program is thriving here, with 76 Savings and Credit Associations, each comprised of 25-30 groups, totalling 2,000 rural women. Five full-time employees manage the SCWE program.

NICO has assets of 86 million pesos (U.S.$1.7 million) with 6,000 members, mostly small farmers and small businesses. Loans/assets ratio is at 75%. Capital is 9.7%, up from 5% in 1998. Delinquency is 4%, down from 71% when the program began, and savings/assets are 60%, up from 37% in 1998. When NICO joined the CUES project, it had to charge off five million pesos and reclassify another 6.6 million in loans.

Collectors at NICO are each responsible for 350 loans. On old loans, they go out to collect payments personally. Members with new loans, however, come into the co-op to make payments. NICO is still a multi-purpose co-op, but it plans to spin off its grocery store and a farm supplies trading business.

Our second visit was to Kapalong Co-Op, which will be branded in December. At that time, its tiny office will be doubled and facilities upgraded. It's important that all FOCCUS credit unions have a similar appearance and look like "serious" places to save and borrow.

Kapalong had 637 members before it began the CUES program two years ago; today it has 5,153. Of those, 1,540 are women in its SCWE program, and 280 are children in its Youth Savers program. Youths have deposited about 100,000 pesos (U.S.$2,000). While we were there, a little girl deposited 10 pesos (about a nickel). Assets have almost doubled, from 7.9 million pesos ($160,000) to 14.1 million ($280,000). Savings are up from 22% to 50%. Delinquency is at 13.08%, down from 73.92%. And institutional capital has grown from 8.5% to 12.62%.

This is another co-op with a side business—selling motorcycle and bike parts. But this business is profitable, so Kapalong won't spin it off. Kapalong has become so successful that banks in the small town consider it as major competition.

Our next visit was to Tagum Cooperative, one of the larger co-ops in the program, $150 million pesos in assets ($300,000). Tagum, too, is about to reach FOCCUS status and is being remodeled for a December transition. The 26-year-old manager's grandparents were founding members of USPD Co-op, the sugar-cane credit co-op we visited Tuesday.

Delinquency at Tagum is at 13.99%, down from 68%. Provision for loan losses (over 12 months) is at 100%, up from the 13% when it joined CUES in 1998. Membership grew 19% this year to 10,720. Tagum has 33 full-time employees and 13 interns. Its 15-month-old SCWE program already serves 1,905 women.

Collections have been a problem at Tagum, so collectors changed their strategy: 10 collectors went into the field for three months and brought the delinquency down by 18%. Also, Tagum's massive whiteboard displays a tally by collectors so members can track the delinquency decline. This reinforces the notion they must pay on time.

As for Tagum's net income: In 1997 it was 381,000 pesos (US$7,600). In 1998 it was 930,000 ($18,600). In 1999 it was 4.9 million pesos ($98,000) and at the end of September their net income for 2000 was at 6.9 million pesos ($138,000). Lois expects it will be close to 9 million pesos ($180,000)—after dividends and loan provisioning—by year-end.

After lunch, we stopped briefly at a Batch 2 co-op that joined the program in 2000. It serves primarily workers at an enormous coconut plantation. A big issue for this co-op: getting loan payments on member accounts from the company owning the plantation, which wasn't depositing the funds. The co-op is retraining members to pay their loans and is considering implementing Tagum's collections strategy to cut the 62% delinquency.

The day's final visit was to Panabo Multi-purpose Co-op. Its side business, a pharmacy, no longer operates. Panabo has 1,800 women in its SCWE program. Its SCWE manager is the only male SCWE employee in the co-ops. He goes into the field to present to SCAs only when his staff can't. This poses a problem: presentations on family planning methods and breast feeding are usually conducted by women; that's why all SCWE field staff are women.

Panabo is fully provisioned for loan loss, with institutional capital of 10.94%—up from 5% when it joined the CUES program. Delinquency is down from 76% to 12.93% (it was at 44% in January) with net income at 12%. Asset growth is 40% this year, and member growth is 15%. Non-earning assets dropped to 9% from 22% in 1998. Assets started at 24 million pesos in 1998 ($480,000) and reached 35 million ($700,000). Membership grew to 4,000 (including 1,600 women participating in SCWE).

The big issue at Panabo: too much savings. Its liquidity is 85%. This is becoming a problem for CUES co-ops. Many did such an excellent job teaching people to save that now they must focus on loans. With no corporate network or reliable investment opportunities (co-ops are not covered under the Philippine equivalent of FDIC), about all they can do with excess funds is put them into other CUES co-ops without enough liquidity.

The work Lois and her staff do every day is revolutionizing the co-ops that were visionary enough to sign on with CUES Philippines. The co-ops do the hard work, but they view Lois as the one who made it possible.