Group Lending Best Practices from Bangko Kabayan Visit

MABS staff visited Rosario, Batangas on Thursday, June 24th, to witness first-hand how Bangko Kabayan developed such a successful group lending program.   Bangko Kabayan has approximately three Account Officers in each of its 14 branches across Batangas province. Each account officer handles 10 to 12 centers, focusing on group lending. With 25 members per center on average, those numbers really add up.
Group lending was at the core of the Grameen Bank philosophy. Based in Bangladesh, Grameen Bank was the first to provide microfinance loans under its founder, Nobel Peace Prize winner Mohammad Yunus.  In this structure, a group of borrowers, mostly women, are liable for each other’s loan repayments.  If someone from the group does not pay, then the rest of the borrowers must cover that payment.  Beyond the group is the “center”, a set of groups that meet weekly to collect loan payments, discuss each other’s businesses, and socialize.  MABS conducted four focus group sessions in Rosario, including a discussion with Namuco Center (right).
A common theme among the members was their loyalty to the group, the center and Bangko Kabayan.  When asked if they would move to an NGO that would offer larger loans, the consensus was that they would remain with Bangko Kabayan.   Based on the focus group discussions, three reasons for this loyalty prevailed.  First, the bank provides a demand-driven product.  For example, unlike many other banks, Bangko Kabayan offers its centers the option of meeting weekly, bi-monthly or monthly, given that certain criteria are met.  Additionally, loans are not restricted to the P25,000-P30,000 level.  Members requested higher amounts, and the bank met their needs with loans of up to P60,000.
The second reason for the strong loyalty is the portfolio of products Bangko Kabayan offers its clients.  Many members have housing microfinance loans and educational loans through the bank.  Additionally, loans are available when members have medical emergencies in the family.  Members appreciate Bangko Kabayan’s continuing product innovation.  At a center meeting in Barangay Namungahan (right), the Account Officer presented a microinsurance product that not only covers the principal borrower, but also her husband and children – an insurance product that is rarely available for microfinance clients.
Another key to member loyalty is the center fund, a pooled account that each member deposits into weekly.  This fund is used for parties, field trips, business development training and other events that keep members interested, educated and active.   Understanding that the center activities are critical to its success, the bank subsidizes many of these events.
Bangko Kabayan’s organizational practices also contribute to the group lending program’s success in a number of ways.  First, bank management strongly supports the Account Officers with incentive programs, free transportation and training seminars.  Second, the bank encourages Account Officers to carefully research business development and financial education topics, and present them at center meetings.   Third, the groups select their own members, helping to tighten the bonds between borrowers and ensure the quality of the bank’s clients.  Additionally, to mitigate the risk of fraud, Account Officers never take possession of the money.   Center Treasurers, elected by the members, carry the money to the bank branch for deposit.  Finally, the bank forms partnerships with local businesses for community development projects, providing lending centers with the opportunity to participate.  It is inspiring to see people with so little give back so much to their communities.
There is no secret to Bangko Kabayan’s success.  The bank meets its clients’ demands with innovative products, focuses on building solidarity among its group members, and provides Account Officers with strong management support and training.  By applying these principles, your bank can also develop a successful group lending program.
Share your group lending stories and experiences by replying to this post.
Until next time, Mabuhay ang Rural Banking!

MABS staff visited Rosario, Batangas on Thursday, June 24th, to witness first-hand how Bangko Kabayan developed such a successful group lending program.   Bangko Kabayan has approximately three Account Officers in each of its 14 branches across Batangas province. Each account officer handles 10 to 12 centers, focusing on group lending. With 25 members per center on average, those numbers really add up.

Namuco CenterGroup lending was at the core of the Grameen Bank philosophy. Based in Bangladesh, Grameen Bank was the first to provide microfinance loans under its founder, Nobel Peace Prize winner Mohammad Yunus.  In this structure, a group of borrowers, mostly women, are liable for each other’s loan repayments.  If someone from the group does not pay, then the rest of the borrowers must cover that payment.  Beyond the group is the “center”, a set of groups that meet weekly to collect loan payments, discuss each other’s businesses, and socialize.  MABS conducted four focus group sessions in Rosario, including a discussion with Namuco Center (right).

A common theme among the members was their loyalty to the group, the center and Bangko Kabayan.  When asked if they would move to an NGO that would offer larger loans, the consensus was that they would remain with Bangko Kabayan.   Based on the focus group discussions, three reasons for this loyalty prevailed.  First, the bank provides a demand-driven product.  For example, unlike many other banks, Bangko Kabayan offers its centers the option of meeting weekly, bi-monthly or monthly, given that certain criteria are met.  Additionally, loans are not restricted to the P25,000-P30,000 level.  Members requested higher amounts, and the bank met their needs with loans of up to P60,000.

Brgy. NamungahanThe second reason for the strong loyalty is the portfolio of products Bangko Kabayan offers its clients.  Many members have housing microfinance loans and educational loans through the bank.  Additionally, loans are available when members have medical emergencies in the family.  Members appreciate Bangko Kabayan’s continuing product innovation.  At a center meeting in Barangay Namungahan (right), the Account Officer presented a microinsurance product that not only covers the principal borrower, but also her husband and children – an insurance product that is rarely available for microfinance clients.

Another key to member loyalty is the center fund, a pooled account that each member deposits into weekly.  This fund is used for parties, field trips, business development training and other events that keep members interested, educated and active.   Understanding that the center activities are critical to its success, the bank subsidizes many of these events.

Bangko Kabayan’s organizational practices also contribute to the group lending program’s success in a number of ways.  First, bank management strongly supports the Account Officers with incentive programs, free transportation and training seminars.  Second, the bank encourages Account Officers to carefully research business development and financial education topics, and present them at center meetings.   Third, the groups select their own members, helping to tighten the bonds between borrowers and ensure the quality of the bank’s clients.  Additionally, to mitigate the risk of fraud, Account Officers never take possession of the money.   Center Treasurers, elected by the members, carry the money to the bank branch for deposit.  Finally, the bank forms partnerships with local businesses for community development projects, providing lending centers with the opportunity to participate.  It is inspiring to see people with so little give back so much to their communities.

There is no secret to Bangko Kabayan’s success.  The bank meets its clients’ demands with innovative products, focuses on building solidarity among its group members, and provides Account Officers with strong management support and training.  By applying these principles, your bank can also develop a successful group lending program.

Share your group lending stories and experiences by replying to this post.

Until next time, Mabuhay ang Rural Banking!