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The President’s Report

The President's Report

This report covers the last three years of KCCDMFI from fiscal year 2016 to FY 2018.

Rehabilitation Starts in 2016

2016 was a period of rehabilitation for KCCDMFI. The enactment of the Microfinance NGO Act of 2016 provided KCCDFI the external push to put our house in order. The law, authored by Senator Bam Aquino and Append Party list, provided the legal basis for KCCDFI to undertake its rehabilitation. In the past the Corporation Code and the Securities and Exchange Commission offered minimal guidance to microfinance NGOs (MF NGOs). But the latter’s phenomenal growth in the Philippines and increasing cases of malpractice and failure pushed Congress to enact the new law. On the other hand microfinance NGOs wanted relief from heavy taxes imposed by BIR applicable to commercial financing institutions.

The new law charged MF NGOs a gross receipts tax of 2% in lieu of the 5% plus 30% income tax charged to commercial financial institutions. The law also required that MF NGOs be accredited by the Microfinance NGO Regulatory Council (MNRC). To be accredited MF NGOs should score an average of 70% in a grading system based on three standards: good governance, social performance and financial sustainability.

Where before most MF NGOs had a passive board of trustees (BOT), giving the president and management a free hand to make major decisions, the new law requires the board of trustees to take the leading role. With this legal fresh mandate, and pressure from our creditors, the BOT took over control of KCCDFI.

In March 2016 the BOT appointed Ibarra A. Malonzo to replace Rodolfo Quinday as president upon the latter’s resignation. The BOT was reconstituted with new members to replace three resigned trustees. The BOT held 10 and 12 meetings in 2016 and 2017, respectively.

The BOT instituted the following measures over a two-year period:

  • Retrenched all 69 head office personnel with 34 rehired at lower rates;
  • Put in place the codified approving and signing authority (CASA) for strict cost control measures;
  • Sold off assets amounting to P20 million;
  • Paid outstanding loans due to four financing institutions amounting to P34 million and started paying KCCDFI Mutual Benefit Association P6 million pesos a year in interest and principal loan;
  • Negotiated restructuring of our outstanding loans with National Livelihood Development Corporation (NLDC) and Philippine Credit Finance Corporation (PCFC) then amounting to P84 million in principal; and
  • Suspended the collateralized individual loan product scheme because of low repayment rates.

But these were remedial measures to satisfy our creditors. We had bigger problems. We had plenty of competitors in the microfinance business and we were not even competitive in our home grounds in Zamboanga City, Sibugay, Basilan, Jolo and Bongao.  Our ambition to conquer the rest of Mindanao and even the Visayas was short-lived. We shut down 14 branches and left around P40 million in uncollected loans.

Why could we not compete in the microfinance market?  The quick answer is: microfinance had been changing rapidly since we started in 2001 but we stopped changing.

We stuck to our old small business loan product while competitors offered new loan products.

We stuck to manual recording of field transactions and it took months for management to discover fraud by our field staff.

We stopped training and retraining of staff, probably fearful that their new knowledge and skills would exceed that of management.

Our name is Kasanyangan Center for Community Development and Microfinance Foundation, but we were just doing lending like Bombay operators. We did not empower our members to develop their communities. We forgot that our mission is to help poor nanays, tatays and communities rise out of poverty.

To rehabilitate is to rebuild KCCDMFI so we can again stand up and compete in the business world of microfinance.

For the past three years, we focused on four urgent tasks:

First, we shifted from manual recording to a management information system called “Instafin” that is entirely computerized. Instafin connects the field credit officer (FCO) with head office through the internet and allows head office to discover fraud immediately. The system also sends text messages to the borrowers as soon as they make a transaction such as loan release, loan payment, savings, contributions, insurance contribution payment and claims received.

Second, we are addressing in earnest the challenge of community development. BOT member Luming Cabigas has initiated the formation of Kasanyangan Community Clubs (KCC) that run parallel to our centers and branches. The KCCs aim to be the organization of our borrowers and potential borrowers that shall undertake self-help and mutual aid projects. They have their own fund-raising sources such as membership fees, savings and raffle draws to undertake community projects. As local community organizations, they can access government social services for help and support in health, sanitation, education, livelihood development and environment protection.

Third, we have started a business development unit that has developed new loan products such as house repair, education loans, and micro agricultural loans and is providing business skills training for our borrowers.

Fourth, we are taking better care of our staff by providing them with more benefits and skills training.

We still have a long way to go in these four areas.

Recovery in 2018

Let me now report on 2018 which, I am happy to tell you, is a year of recovery for KCCDMFI.

We opened three new branches in 2018, namely, Liloy, Olutanga and Marikina. This clearly shows that KCCDMFI is no longer sick. We are now in good health.

As evidence of good health we got our initial accreditation from MNRC last year good for one year up to March 2019. We amended our name to KCCDMFI in 2017 as required by MNRC guidelines.

We received our second MNRC accreditation in March this year, for a three-year period effective April 1. This means we passed the MNRC standards for good governance, financial sustainability and social performance based on our application report. But MNRC will review and validate performance and compliance with their directives.

Our application for loan restructuring with NLDC and PCFC was passed on to the Land Bank of the Philippine (LBP) upon the dissolution of the two microfinance institutions. LBP approved our application for loan restructuring in December 2018. The principal amount of P84 million which was deemed payable in 10 years, had accumulated penalties and interest amounting to P13 million which was deemed payable in five years.

Meanwhile LBP issued KCCDMFI a Certificate of Good Standing in January 2019.

To sum up our annual report, we have recovered from the downfall that started in 2014, and we have a five-year plan from 2019 to 2023 to grow KCCDMFI by 300% in outreach, loan portfolio and revenues by 2023.

We had substantially recovered by 2018 and we are confident we can move forward to a brighter future.

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ComDev Projects Make Strides in KCC Barangays

ComDev Projects Make Strides in KCC Barangays

The KCCDFI (now KCCDMFI) was founded in 2005 on the twin mandates of creating livelihoods and building communities, but it has neglected the latter to focus on the former. Fast forward a decade later to a 2016 KCCDMFI board meeting tackling reorganization. New trustee Illuminada (Luming) Cabigas had proposed the setting up of Kasanyangan Community Clubs or KCCs in KCCDMFI barangays as vehicles for mutual aid and protection.

Not a few other trustees and executive staff were lukewarm to the idea, citing the problems of funds and overburdened staff.  But Luming won over the doubters with her impeccable logic and some fundamental truths. She stressed that microfinance per se cannot address all the issues arising out of poverty: income, housing, education, health. This is where community development comes in which fosters unity among people to help them confront their problems such as lack of housing, toilets, electricity, etc.

Hence the concept of a local organization—Kasanyangan Community Club—empowered, able to raise funds and to harness other resources including those of government. Community development proceeds in tandem with business development. But, in the best traditions of community organizing, Luming emphasizes that the birthing process will eventually have to “let go” because the local organization will have to learn to stand on its own. “No government institution or do-gooder NGO” can achieve the organization’s goals otherwise it will “perpetuate dependency”, she adds.

Thus Luming has helped formulate seven goals for KCCs to be integrated into people’s daily lives. These include livelihood training, entrepreneurial development, decent housing, access to health and social services, education for all, environmental protection, and preservation of arts, culture and sports. After all, Luming concludes, community organizing is a way of life, not a project.

Luming is a business administration graduate magna cum laude, and a certified public accountant. Now in her 80s, Luming retired from the Land Bank as senior vice president in 1996, headed the People’s Credit and Finance Corporation (PCFC) in 2003, and was president-chief executive officer of Landbank Countrywide Development Fund until 2010. In 2001 PCFC granted Kasanyangan Foundation, Inc. microfinance unit (KCCDFI’s precursor) a P3 million loan whose renewal hinged on KFI’s spinning off its microfinance unit into another organization. There was apprehension over KFI’s social orientation that might undermine its microfinance operations; KFI had no income-generating projects. PCFC granted the newly-formed KCCDFI a P50 million credit fund.   

Luming joined the KCCDFI board of trustees in 2014 replete with ideas on how to perk up the organization. Local KCCs were established preceded by orientation sessions in 2016-17. In November 2017 450 representatives from 80 barangays met in a general assembly to form a KCC Federation. Current federation president is Yolanda Sembrano of Barangay Tetuan.

KCCs have four sources of funds: individual members’ savings fund with a P20 weekly minimum deposit qualifying non-client beneficiaries to be KCC members; the KCC center fund created through KCC fund raising campaigns which netted P1.4 million in 2018 and P800,000 in 2019; the Damayan Fund consisting of P200 yearly payments per member which provides a death benefit of P20,000 to members regardless of cause of death; and KCCDMFI which allocates specific sums for projects.

Grace Beron Rosales, head of KCCDMFI’s Community Development (ComDev) unit said that at the beginning it was not clear how the KCC scheme would develop. But as community projects, big and small, started to emerge, things began to fall into place. Examples of small projects are free haircuts and “Operation Tuli”, a free circumcision activity undertaken in coordination with seven military doctors, which benefited 122 boys in one day.

Tulay sa Barangay Concepcion, Kabasalan, Zamboanga SIbugay

Barangay Tolosa in Zamboanga City’s east coast has 130 members spread among four centers which meet in succession each Thursday morning Barangay Tolosa KCC decided to have a bigger center building which was constructed along with a flush toilet. Barangay Mampang also in the city’s east coast has a perennial water shortage problem. The barangay has 30 KCCDMFI centers and the decision was to construct a deep well in one center using KCC funds of P17,000. Projects in Barangay Patalon, Talisayan and Barangay Lumbangan, Tumaga pertained to center renovation and purchase of furniture and fixtures, all from local KCC funds. Bigger projects include construction of a foot bridge, a dryer and installation of a water system which are featured on this and subsequent pages.

Grace affirms that the KCCs have, in fact, contributed to KCCDMFI’s outreach and brought in new client-members. As well, potential leaders are identified as in touching base with 4Ps links (4Ps is a conditional cash transfer program of government). Some barangay folk ask, “Why have the projects come only now?” Grace says that the comdev concept is an organizing strategy in the field, integration within the community which, so far, has hardly been practiced.

Seaweed Dryer in Ipil

Step-by-step community organizing is laborious and time-taking. KCC simplifies the process by calling center leaders to an FGD (focus group discussion) on vision-mission-goals and structures. Shortly after point persons are identified, and plans are drawn up for the broader processes of community integration, and skills training in mobilizing people, needs identification, accessing resources and networking.

Grace says that the KCC federation can be tapped to help in information campaigns on programs and services, and on activities planned for members. In the past communications coursed through field operations suffered delays because field personnel were preoccupied with collection and outreach. The KCC federation affords direct ground-level contact to people. Future plans include training in garment making, financial literacy (in partnership with business development unit), toilet provisioning in Talon-Talon and information dissemination on access to health.

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Computerization: A Journey Towards Digitalization

Computerization: A Journey Towards Digitalization

Management Information System (MIS) is a unit responsible for providing timely and accurate information to the board and management for decision-making. MIS provides the big picture of the prevailing conditions of the institution. The usefulness of MIS came to the fore when KCCDMFI reached a critical juncture – almost half of its branches were closed due to monitoring problems. Had there been a computerized KCCDMFI MIS unit at that time, such problems should not have happened or should have been minimized.

The experience however, paved the way for the computerization of KCCDMI MIS. It eliminates the tasks of manual recording and monitoring of loan transactions. The level of complexity in monitoring loans and other transactions of the institution has been lowered dramatically.

Prior to computerization, KCCDMFI had practiced a manual system of MIS. With each loan transaction recorded manually. Field credit officers (FCOs) attended center meetings on a daily basis carrying an FCO register 24 inches long, 8 inches wide and ¾ of an inch thick. All center transactions of the FCOs are recorded in the register.

Manual recording is time-consuming and prone to errors especially if you were doing it on a very long register. When errors were committed, the FCOs often had to stay long hours in their respective branches to trace and correct the errors. Only then could they return home.

With the manual MIS, monthly reports took weeks because ample time was needed to manually consolidate data. Sometimes, due to time constraints, the submitted reports were riddled with inaccuracies and therefore not reliable.

KCCDMFI’s subscription with a cloud-based software is the first bold step towards computerization. The software minimizes the errors that are usually committed during data consolidation and report preparation. Reports that previously took weeks or sometimes months to produce, can now be readily available and can be accessed anywhere anytime as long as there is an internet connection.

INSTAFIN Dashboard

The computerization of KCCDMFI MIS is an affirmation of one of KCCDMFI’s core values; the value of balance of work and life. With computerization, FCOs have more time for their respective families, and they can home early since recording errors have been minimized and transactions have been automated and computerized.

Furthermore, computerization minimizes the opportunity for fraudulent transactions since data consolidation is done in real time. Besides, embedded in the system is a text messaging service which informs clients through text messages of each transaction made with the FCO or in the office. This service confirms to clients that the repayments were transmitted to, and received in, the office.

INSTAFIN: The First Bold Step To Digitalization

INSTAFIN is a cloud-based software from Oradian which KCCDMFI has subscribed to, for MIS computerization. With INSTAFIN KCCDMFI is able to monitor its operations and access data in real time. INSTAFIN is instrumental in the recent increase of KCCDMFI’s loan portfolio and number of clients. For a long time, KCCDMFI had only one loan product and resisted creating another one because of the complexities of manual recording. With INSTAFIN, KCCDMFI has over 10 different loan products designed to meet the clients’ needs.

The road towards digitalization may be long and full of challenges but with INSTAFIN, KCCDMFI has taken a first bold step forward that concretizes the saying: “a journey of a million miles begins with a single step.”

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