HOUSING MICROFINANCE

CANTILAN BANK EXPERIENCE

BRIG. GEN. CHARLES Y. HOTCHKISS (RET.)

Chair – Executive Committee
Cantilan Bank, Inc.
 MABS offered the concept and technical
support;

 As part of Cantilan Bank’s mission to deliver

excellent banking and countryside
development services.
 Conducted market
research to selected Processed the data Conducted focused
Designed survey existing micro and and developed the group discussion to
questionnaire salary loan clients initial product finalize the product
as well as design design
depositors
 Incremental/ progressive approach;
 Varied purposes;
 Loans and small savings are sources of funds;
 Credit habit:
◦ Loans ranging from Php5K to Php200K;
◦ Amortized mode of payment;
◦ No collateral
 Credit preference:
◦ Separate loan;
◦ Longer loan term; and
◦ No collateral.
LOAN PURPOSE:
Any fixed improvement or repair of any type to fixed dwelling property
- Installation/replacement of roof, floors, walls, windows, kitchen and
bathroom).
- “Productive Housing” fixed improvements or extensions related to a
home-based enterprise (HBE) or on-site production
- Development, addition or extension of rooms or housing units for rent
- Upgrading security (fencing or burglar bars)
- Connection to public utilities like water, sewerage, electricity.
- Water harvesting or collection with water tanks
- Land registration costs related to the purchase/lease of land for
residential or business purposes
TARGET CLIENTS:
 Existing microfinance (individual loan) clients for at least 1
year;
 Repayment rate of at least 80% from the existing or previous
loan
 Borrowers may be home and/or land owners or renters.
 Have only 1 loan at the time of HOME loan application;
 Loan size from Php5K to Php150K;
 Maximum loan increase of 30% every repeat loan;
 Combined loan amortization for existing Micro
Enterprise Product and Housing at most 50% of
disposable income;
 Handled by existing HMF-trained AO;
 Loan term: first loan up to 12 months repeat up to 18
months
 Interest rate – same with existing micro loan;
 Weekly, semi-monthly or monthly modes of payment;
 All loans require savings equivalent to 20% of the loan amount.
Built-in Advantages:
• Used the same CIBI & Cash Flow analysis;
• Clients are known by character and capacity
to pay;
• Clients are used to the credit discipline;
• Demand from among the existing clients.
Pilot tested Target for
in two (2) Handled by May 2009:
Pilot testing
branches: one (1) 20 accounts
started
•Cantilan Account with
October
•Tandag Officer per 0.300M
2008
branch loan
portfolio
 Poor performance – “What went wrong?”

Pilot testing target

Actual performance at the end of pilot phase –

20 May 2009
accounts

Compliance with the pilot phase

4 accounts
target

0.300M 20% as to number 61% as to loan

0.184M
loan of accounts portfolio balance
loan
portfolio
portfolio
Causes:
• Weak drive;
• Account Officers turnover
• Fear of PAR – perception that giving more
loan to clients will increase delinquency
 Operational Aspects:
◦ Evaluated the performance;
◦ Identified bottle necks;
◦ Simplified loan documentations;
◦ Conducted retraining and training of other AOs to rollout
branches;
◦ Targeted potential clients with precision
◦ Set targets on a weekly basis to achieve;
◦ Intense weekly monitoring;
◦ Forged a commitment with everyone.
 Policy:
◦ Opened up the loan to all MEP clients (individual,
group and even depositors);
◦ Upfront deposit requirements of 20% of the loan
was reduced to 10%;
◦ Employment of a concentrated AO to boost the
production for a defined period;
◦ Roll-out to the branches.
Actual for June 2010
From Php184K loan
From 4 to 280 portfolio to

accounts Php3.8M loan

portfolio
Before After
Living Room Area Dining Room Area
Dining
LivingRoom
Room Dining Room
 Implementation Roll-out to
Enhancements
of a longer term another 6
by giving
and up to branches
incentives to
Php300,000 (geographic
clients
maximum loan expansion)
 Commitment is a must (top to bottom);
 Bottle necks should serve as challenges not
a hindrance;
 Commitment to pursue should be felt down
the line;
 There should be targets and a well planned
operational plan;
 Market sensitivity is important for product
customization;
 Initiatives and continuous enhancements;
LEAD TO SUCCESS...
 Housing Microfinance is one of the best
products for helping poor people get a
decent shelter, but commitment to proper
implementation is key.
 Fear of the unknown is best dispelled by
concrete demonstration that something new
can and will work.