TERM PAPER

TOPIC: DEVELOPMENT OF A GOOD COLLECTION STRATEGY

Instructions:
1. Interview a microfinance institution of your choice (Aside
from Prime Yield Services and Lending Corporation)
2. Analyze their collection strategy
3. Courier new
4. Font size – 12
5. Double spaced
6. Short bond paper
7. Hard copy, soft copy and powerpoint presentation
8. To be presented in the finals (50% of final exam and 100% 1
Quiz)

Format:
1. Introduction
a. History
b. Loan Products Offered
c. Target Market
2. Analysis of collection strategy. Use the following
parameters:
a. Tools used
b. Mode of payment of clients
c. Term of loan
d. Personnel effectiveness and efficiency
e. Collection on delinquent accounts
3. Presentation of the data gathered. : Use tables and textual
presentation
4. Recommendations and Suggestions to improve collection
procedure.
INTRODUCTION
The company: PhilSupport Microfinance Institution

The company was founded on March 2020 due to the financial crisis
caused by the Coronavirus-19 pandemic. The microfinance
institution aims to provide quick support loans to
underprivileged members of society, particularly women and those
working in the agricultural sector in order to help in coping
with the financial repercussions caused by the pandemic such as
quick personal finance and small business loans. The company
started with initial funding from the Development Bank of the
Philippines and support from the Government’s Bayanihan to Heal
as One Act of 2020.

HISTORY

Mr. Jose delos Santos of the Economics Department at Chittagong

University in Bangladesh developed the Grameen Bank Approach
(GBA), which PhilSupport pioneered. This approach, which bypassed
conventional lending institutions like banks, gave needy citizens
direct access to non-collateralized loans to help supplement
their income, expand their job opportunities, and improve their
lives.

Initially, PhilSupport served the communities surrounding the

University of the Philippines in Los Baos, Laguna, before
expanding throughout the provinces of Rizal, Quezon, the southern
part of Metro Manila, and portions of Cavite. In mid-2020,
PhilSupport began expanding outside of Luzon, in the Visayas
province of Antique.

Apart from the aforementioned provinces, it had already

established branches in Aklan and Capiz by 2021. PhilSupport now
serves more than seventy-four thousand (74,000) needy families
through its sixty (60) branches, the majority of whom live in
inaccessible areas. Surprisingly, these households have a 98
percent retention rate and a 99 percent repayment rate.

The Micro-Finance Council of the Philippines (MCPI), Micro-

Finance Information and Data Sharing (MIDAS) Credit Bureau is one
of PhilSupport's founding members. PhilSupport's various training
programs, as well as various forms of service and goods, have
served as a model for local and international institutions that
use the Grameen Bank Methodology for their micro-credit programs
over the years.

LOAN PRODUCTS OFFERED

1. General Loan - This loan is for income generating activities

of all active members who are conscientious about their
obligations. It can range from a minimum of five thousand
(5,000) to one hundred thousand (100,000) with loan term
choices.
2. AGAP Loan - This loan, which includes insurance and
marketing assistance, helps poor farmers and fishermen in
PhilSupport-covered areas. The Farmers Enterprise Program
(FEP) and Farmers Livelihood Resiliency Program (FLRP) were
introduced in partnership with local government units and
private institutions and companies.
3. Quick Loan - This income-generating loan can be used only on
a cash basis for such short-term business opportunities as
fiesta sales, trade fairs, export orders, etc. It is
available to all active members with an outstanding credit
rating during the 3rd cycle of the current General Loan
PhilSupport-1.
4. Incentive Loan - This loan is intended for house or toilet
construction or repairs, electrical or water connection, and
immediate family’s school expenses such as tuition and
miscellaneous fees, uniform, school supplies, etc. It is
available to all active, conscientious members during the
2nd cycle of the current General Loan for PhilSupport-1
members.
5. Special Loan - This loan can be availed of for all types of
personal household needs, SSS/PhilHealth premium, family
emergencies, and center hall construction and improvements.
It comprises five types: 3K Loan; SSS/PhilHealth Premium
Loan; Emergency Loan; Resiliency Loan; and Center Loan
5Cs OF CREDITWORTHINESS

● The five Cs of credit is a system used by lenders to

gauge the creditworthiness of potential borrowers,
consisting of a quintet of characteristics.
● The first C is character—reflected by the applicant's
credit history.
● The second C is capacity—the applicant's debt-to-income
ratio.
● The third C is capital—the amount of money an applicant
has.
● The fourth C is collateral—an asset that can back or
act as security for the loan.
● The fifth C is conditions—the purpose of the loan, the
amount involved, and prevailing interest rates.

PhilSupport interviews the applicant, gathers documents and

performs a background check; if below PHP 5000, the applicant
doesn’t need a co-borrower. PhilSupport then contacts the company
where the applicant works to check the capacity to pay.
PhilSupport declines the applicant if she has an outstanding
credit card loan.

DOCUMENTS NEEDED

1. Valid primary IDs such as NBI, Passport, Driver’s License

2. Certificate of employment (employed) or business permit (if
business owner)
3. 3 months payslip or Tax report if business owner
4. 2x2 photo
5. Contract with signature
6. Copy of barangay clearance
7. Co-borrower (PHP 5000 above loan amount)
TARGET MARKET

The poorest women in PhilSupport's service areas, referred to as

branches, are its principal voters, known as "nanays." Each
branch is responsible for 30 to 50 centers. Farmers and fishermen
have had the same loan access in recent years thanks to the
PhilSupport Agricultural Program (PAP).

Analysis of collection strategy

1. TOOLS USED - Microsourcing (third party) and MicroBilt tools

2. Client’s mode of payments: major banks (BPI, Landbank, RCBC
and Eastwest) and payment centers (Cebuana, Palawan Express)
3. Term of Loan - monthly, quarterly and annually (ranges from
12 to 24 months)
4. Personnel effectiveness and efficiency - CORE Values:
Accountability, social commitment, human dignity and
integrity, the microfinance company is equipped with leaders
who believe that they are a community of servant Leaders
working with marginalized families for social transformation
and prosperity.
5. Collection on delinquent accounts - delinquent accounts are
attempted to close twice by sending a letter to the account
owner; otherwise, it is sent to Microsourcing for further
handling, thus the company counts these accounts as
“losses”.
AMORTIZATION SCHEDULE (on a 12-month period sample)

Presentation of the data gathered

In 2020, Q4 has the highest number of Loan proceeds, mainly
because of the holidays and people got laid off due to the
pandemic.

Recommendations and Suggestions to improve collection procedure

1. Do a thorough background check of the person signing up for
the loan.
2. Have an inspection of the documents, or ask supporting
documents to prove identity and income.
3. Have a co-borrower and ask for proof of addresses.
4. Ensure that the borrower understands the terms of the loan
and the contract and encourage them to ask questions.
5. Do a background investigation of the residence address.