ALALAY SA KAUNLARAN, INC.
PARTNER’S APPRAISAL and SUPPORT REQUEST
- Project information
|Project Title||Expansion of operations and liquidity management|
|Name of proponent||Alalay sa Kaunlaran Microfinance Social Development Inc. (ASKI)|
|Head of organization||Rolando Victoria|
President and Chief Executive Officer
|Partnership start date||10 Sep 2012|
|Report date||19 Jul 2019|
|Date released||2 May 2019||30 May 2019|
|Maturity||2 May 2020||30 May 2020|
- Social enterprise description
ASKI was officially registered with the Securities and Exchange Commission (SEC) on March 23, 1987 as a non-stock, non- profit organization committed to the promotion and development of micro and small-to-medium enterprises and the delivery of social services. It formally launched its operations on July 1, 1987.
ASKI provides credit to those who do not have access to financial institutions, establishing market links and networks with private and public sectors. We changed the image of the poor, being viewed as a male farmer needing subsidized agricultural credit; we came to see them as generally female micro-entrepreneurs with no collateral to pledge, but with a business world to overcome with the help of micro-credit. ASKI is gender sensitive, giving opportunities for both the male and female capitalists.
From a small office in Cabanatuan City, Nueva Ecija, ASKI has branched out into other provinces in Central and Northern Luzon. It currently serves nearly 100,000 microenterprises.
- Social enterprise opportunity
The Bangko Sentral ng Pilipinas (BSP) defines microfinance as the provision of a broad range of financial services such as deposits, loans, payment services, money transfers and insurance products to the poor and low-income households, for their microenterprises and small businesses, to enable them to raise their income levels and improve their living standards.
Typical microfinance clients are low-income persons that do not have access to formal financial institutions. Microfinance clients are typically self-employed, often household-based entrepreneurs.
In rural areas, they are usually small farmers and fisherfolk as well as others who are engaged in small income-generating activities such as food processing and petty trade. In urban areas, microfinance activities are more diverse and include shopkeepers, service providers, artisans, street vendors, and others.
Financial products of microfinance used to be limited to savings and credit. Several financial services have sprung up in the past decade to address the other financial services needs of microfinance clients like insurance, remittance and even housing services.
The National Strategy for Microfinance envisions a viable and sustainable microfinancial market that will help provide poor households and microentrepreneurs with greater access to microfinance services.
It calls for a greater role for the private sector and the non-participation of government line agencies in the provision of credit and guarantee programs. Emphasis is on the adoption of market oriented financial and credit policies to ensure viability and sustainability.
It is worthy to note that the Philippines closed the gender gap in terms of financial inclusion which is largely attributed to microfinance institutions.
The microfinance industry in the Philippines has grown into a PhP75 billion industry as of 2016. There are currently around 200 banks and 2,000 microfinance institutions (MFIs) in the Philippines servicing millions of microfinance clients. As of 2014, there are 4.3 million borrowers and 5.1 million depositors.
Registered microenterprises comprise 97% of total registered businesses in the Philippines. Millions more operate in the informal sector and remains unregistered but are integral part of the local economy especially in rural areas.
ASKI is one of the top 10 Microfinance NGOs in the country with an asset size of PhP2.1 Billion. With the stong local economic performance driving the Philippine economy, ASKI could expand its portfolio and ride this momentum.
ASKI supports nearly 100,000 microenterprises in Central and Northern Luzon. These microenterprises enjoy access to credit to support their livelihood and other financial services such as savings and insurance that allow them to face external shocks better. Microenterprises under ASKI won the Citi Microentrepreneurship Awards in 2018 of Citi Group.
Various impact assessments reveal that there is improvement of quality of life of these microenterprises due to the increase in their income. However, it is also noted that it would take more interventions aside from microfinance that would ultimately lift them out of poverty.
ASKI is a member of ASKI group of companies that has a total of 12 organization in it. Among the companies are a mutual benefit association that provides insurance products to ASKI members; multipurpose cooperative that operates a grocery store; skills and knowledge institute that provides senior high school education; lending investor and travel and tours among others.
There are a total of 1,003 employees in the group of companies. Of which, 766 are employed under ASKI. The main creditor of ASKI is Land Bank of the Philippines (LBP).
It garnered numerous awards for its work as a social development organization from the Association of Development Financing Institutions in Asia and the Pacific; Karlsruhe Sustainable Finance; ASIA CEO Awards; Metrobank Foundation among others.
- Proposal details
ASKI would like to achieve the following:
- Increase the number of clients and portfolio
- Improve financial performance
The organization recently emerged from two years of consecutive losses due to challenges brought about by both internal and external forces.
- Expansion of operations
ASKI intends to establish additional 12 branches from its growing number of branches in Central and Northern Luzon. It hopes to bring its number of clients to hit 110,000 by the end of 2019.
Internally mobilized savings from clients and line of credit from Land Bank of the Philippines (LBP) are the two main sources of fueling ASKI’s growth. There used to be as much as 8 creditors that proved to be difficult to manage during the time it had difficult financial performance.
SEDPI comes in as another creditor that provides support for its gradual recovery since ASKI believes to partner with institutions who would remain and provide solutions in its most difficult times. It seeks to renew its PhP60 million credit line with SEDPI.
- Social performance management
- Social performance
The National Baseline Survey on Financial Inclusion reported that 47% of Filipinos borrow money. However, an astounding 72% of them access loans from informal sources – from family, friends and unregistered money lenders.
Only 15 out of a 100 Filipinos can borrow from formal financial institutions. A third of this access loans from MFIs such as ASKI.
ASKI offers low interest rates compared to informal lending sources such as loan sharks and five-six. Clients need not provide collateral as security for the loan and need not submit a lot of documentary requirements or fill out voluminous forms.
Savings and insurance products allows the poor to smoothen consumption and are better able to face external shocks.
- Environmental performance
Microenterprises have low negative impact on the environment. ASKI also does not support enterprises that have negative effect to the environment.
- Financial performance
|Return on asset||0.5%||(12.2%)||(10.7%)||1.0%||1.9%|
|Operational self sufficiency||105%||44%||58%||104%||106%|
|Portfolio at Risk||11%||28%||21%||13%||8%|
The period of decline for ASKI is over as its asset base stabilized at PhP2.1 billion for 2017 and 2018. The consecutive losses for 2015 and 2016 marked the lowest point of the organization in its three decades of existence.
Return on assets measures the efficiency of an organization in utilizing its resources to produce profit. The standard for return on assets is a rate higher than inflation. In the past two years, ASKI posted positive return on assets but is still below the target inflation rate.
Prior to 2017, return on assets is negative. This is the same trend for operational self sufficiency (OSS) which measures the ability of an organization’s income streams to cover all expenses. A 100% OSS means that an organization reached breakeven level. The standard for OSS is greater than 120% which means that ASKI still has a long way to go towards full recovery.
Portfolio at risk was high in 2015 and 2016 when the organization experienced net losses but improved in 2017 and 2018. The industry standard for portfolio at risk is 5% which represent the total amount of portfolio that may not be collected.
A careful review of ASKIs position revealed three key reasons for the financial challenges it faced in 2015 and 2016.
The first reason is lower than projected financial performance. The organizational performance from 2015 to 2016 has failed to meet the projected target. Actual portfolio is 30% less than projections while outreach is 23% less than target.
Impact of super typhoon Lando in October 2015 is the second reason. It damaged over Php823 million in agricultural and nonagricultural portfolio. Crop insurance coverage was inadequate. Two months after Lando, super Typhoon Nona devastated the same portfolio segment and delayed rehabilitation of the area.
The third reason is high attrition rate. Staff retention in 2014 was record low at 75% and 80% in 2015. Over this period, 502 employees resigned against the average 1,200 employees. Recruitment alone costed the organization Php 1.03 M, not including the trainings provided for the newly-hired. Aside from recruitment cost, the strategic cost of the resignations especially for supervisory and managerial levels is severe due to the rehabilitation status of the branches.
Management took the necessary steps to curb these challenges that’s why modest gains were posted for 2017 and 2018. Organizational targets were recalibrated to reflect the capacity of the organization to and focused more on internal cleansing rather than expansion in the past two years.
The internal cleansing led to the normalizing of staff turnover. Those who stayed proved to be loyal to ASKI and a new brand of ASKI employees are emerging – those that have genuine concern for the organization.
Exposure to external risks such as typhoon remains to be the challenge but is a general risk that the industry faces and not just to ASKI. SEDPI will come in to influence policies of ASKI on disaster preparedness and strengthening linkages with government programs.
Full recovery remains to be seen but gains in the past two years point to ASKI’s eventual rehabilitation.
- Repayment track record
|Date released||2 May 2019||30 May 2019|
|Maturity||2 May 2020||30 May 2020|
The total loan amount exposed to ASKI as of July 19, 2019 is PhP8,818,489. Since the partnership with SEDPI started, ASKI has consistently paid its loans on time. Aside from the existing loans, ASKI already finished paying off 9 loan agreements since it lent to it in 2012.
There were no instance that ASKI asked for delay in deposit of post dated checks even during the time that it experienced financial difficulties. It remained true to its promise to honor its obligations.
- Social investment participation
|Training||Attended and participated at least one of the training events of SEDPI or Vince Rapisura|
|Membership||Filled up the online SEDPI membership application form and successfully uploaded government-issued ID in compliance of Know your client (KYC) of the Anti-money laundering act (AMLA)|
- Investment information
|Date released||2 May 2019||30 May 2019|
|Maturity||2 May 2020||30 May 2020|
The loans are extended to ASKI without any collateral but with post dated checks as security. SEDPI does not offer any collateral nor guarantee of the investment. Social investors bear the risk.
To participate, you need to enter into a joint venture with SEDPI and it will joint venture contribution certificate. Payouts coming from repayments on principal and interest will be reflected in the social investor’s SEDPI wallet. Once in the SEDPI wallet, the amount no longer earns. Notify SEDPI if you wish to reinvest the amount in the SEDPI wallet.
The interest rate is computed based on diminishing balance method to reflect proper effective interest. In this method, the interest is only charged to the outstanding balance of the loan given a specific period. Sample computation shown in the table below:
There is a 3% entry fee to participate in the joint venture. If one intends to contribute PhP100,000, they should deposit additional PhP3,000 for the entry fee and for a total of PhP103,000.
If the joint venture contribution is redeemed or pre-terminated before two years, a 3% exit fee will be charged on the amount to be withdrawn since SEDPI will provide funds to replace the lost capital. For example, if PhP100,000 will be withdrawn, PhP3,000 will be charged to the amount which will mean that the net proceeds will be PhP97,000.
All remittance fees, if any, related to deposit, redemption and pre-termination shall be charged on the account of the social investor.
- Other conditions
Social investors may only invest a maximum of PhP500,000 investment to ASKI. This is to encourage portfolio diversification and at the same time avoid concentration of portfolio to a few.
SEDPI will provide a digital joint venture contribution certificate as proof to the social investor that can be viewed online. They must also have attended Vince Rapisura’s or SEDPI training events on financial literacy online or classroom setting.
- New social investors
New social investors can accomplish online application form by visiting SEDPI Social Investments Online. They must apply for SEDPI membership online and will be asked to provide personal information.
All social investors are required to at least elect one beneficiary for the account. The ownership of the investment will be transferred to the beneficiary if something happens to the social investor.
They will also be asked to upload a copy of their government-issued ID in compliance with Know Your Client provision of the Anti Money Laundering Act (AMLA).
Upon successful completion of membership application form, they will receive an email containing login credentials and procedures on how to deposit initial investment.
When deposit is made to SEDPI bank account for the investment, the social investor will log in to SEDPI Social Investments Online and select advice for additional investment where they will input investment details and upload proof of remittance of their deposit.
- Existing social investors
Existing social investors shall log in to SEDPI Social Investments Online using their credentials and select advice for additional investment where they will input investment details and upload proof of remittance of their deposit.
- Bank account details
The following are the bank account details of SEDPI.
|Account Name||SEDPI Development Finance, Inc.|
Unit 303 Loyola Heights Condominium, 23 Dela Rosa Street
Loyola Heights, Quezon City
Phone: +63 2 4338795
|Bank||Banco de Oro||Bank of the Philippine Islands|
|Bank Address||768 EDSA, Barangay Pinyahan, Quezon City, Philippines||Katipunan Avenue, Quezon City|
Sources of information and practical tips on money management
Mga bagay na dapat mong malaman sa insurance
Mga iba pang babasahin tungkol sa insurance:
- Iba’t-ibang klase ng insurance
- Must-have insurance for people in their 30s
- Ang pinakamatatag na insurance company sa Pilipinas (Part 1)
- Ang pinakamatatag na insurance company sa Pilipinas (Part 2)
- Anong insurance dapat mayroon ang mga bata?
- Gusto kong paghandaan ang future ng anak ko, tama bang investment-linked insurance ang kinuha ko?
- Paano gumagana ang ibinabayad na premium sa insurance para mabigyan tayo ng proteksyon sa panahon ng emergency
- Kung akala mo insurance ang education plan, basahin mo ito
- Insurance para sa mahirap
- Bakit mahal ang VUL o investment-linked insurance
Mga bagay na dapat mong iwasan sa insurance
Ito ang listahan ng mga articles na isinulat ko at videos na nagawa ko tungkol sa VUL para makakuha tayo ng mas sulit at mas epektibong insurance coverage.
- Bakit mahal ang VUL?
- Bakit mas maganda ang BTID kaysa VUL?
- Epektibong paggawa ng BTID upang masulit ang pinaghirapang pera sa insurance at investment
- Paanong mas maliit ang fund value sa VUL kaysa sa BTID?
- Ok ba talaga ang VUL kasi protected ka nito beyond 65 years old compared to term?
- Ok ba talaga ang VUL para sa estate taxes?
- Why Not VUL?
- Anong gagawin ko kung may VUL na ako? Paano ko ito ititigil?
- Pagkakaiba ng savings sa VUL
- Mga terms and conditions na kailangang hanapin kung bibili ng VUL
- Paano pumili ng mabuting insurance agent
Different kinds of investments
Preparing for retirement
How are articles on retirement
- 10 Commandments of retirement
- Mga kinakatakutan ng retirees at paano ito paghahandaan
- Magkano ang matatanggap mong SSS pension upon retirement
Watch videos on money management
Get in touch with Sir Vince
Join online groups of Sir Vince
Join Sir Vince blog newsletter