The importance on microfinance product operations reviews

By Ms. Girlie Lopez, RBAP-MABS Regional Coordinator for the Visayas

FAIRBank opsrev 1RBAP-MABS has been assisting rural banks with conducting operations reviews that provide the bank management and board with an objective, independent, and external review of the banks’ microfinance operations.  The main activities are to:

  • monitor the bank’s microfinance unit performance vs. targets set in the annual strategic plan;
  • review operational systems, procedures, and actual practices of staff to identify any actual or potential problems;
  • assist in suggesting changes to improve performance and correct weaknesses, recommending possible technical assistance and/or training for staff to further enhance the microfinance program;
  • focus on identifying actual and potential delinquency related problems.

RBAP-MABS is now training teams within rural banks to perform and conduct their own internal product operations reviews.

Recently, RBAP-MABS trained a team from the First Agro Industrial Rural Bank (FAIRBank) to build its internal capacity to conduct product and operations reviews. The hands-on training on the methodologies, tools and processes involved in an operations review is the best way to understand the various tools and to transfer the required skills from RBAP-MABS to the specialized team within the bank.

FAIRBank opsrev 2

Trained on March 16-18, the team’s assignment was to review and evaluate the bank’s housing microfinance loan product, which was at the end of its pilot test phase in Daangbantayan and Bogo branches. FAIRBank is poised to rollout the loan product to its four other branches in the coming months so they wanted to have a proper review to see what needed to be enhanced or improved before rolling out the product to other branches.

The evaluation team members came from different units and were composed of representatives from the Bank’s Systems and Procedures Department, Operations Department, and the Human Resource Department. To ensure objectivity of the operations review, it is important that the members of the reviewing team are not involved in the implementation of the loan product being reviewed.

Selecting the right people in the bank is an essential success factor.  With the senior management’s support, FAIRBank’s evaluation team enthusiastically immersed themselves into the training. Assisted by RBAP-MABS, the team learned the tools of reports analysis, reviewed the bank’s management information system, checked their loan documentation, conducted focus group discussions with bank employees and clients, and validated accounts through client visits. The hands-on nature of the training helps the participants more readily understand the process and retain the knowledge needed.

FAIRBank opsrev 3The findings, observations and recommendations were presented during the exit meeting with the senior management. Product reforms will be implemented to make the housing microfinance loan more attractive, and training for the branch rollout will be programmed in the coming months.

“It was our first time conducting an Operations Review. We were very excited in knowing the process from the very beginning up to the exit meeting,” Training and Development Administrator Ms. Minguez said.

To date, approximately 270 Housing Microfinance Loans valued at more than PhP 8.6 million has been disbursed to over 190 FAIRBank clients, mostly for home improvement. The Housing Microfinance Initiative for rural banks was introduced in 2008 under the USAID-supported RBAP-MABS Program, and is now providing technical support to more than 7 banks with 59 branches.  These banks have disbursed more than 2,800 Housing Microfinance Loans valued at more than PhP 85 million to more than 2,000 borrowers.