TO : BOARD OF DIRECTORS

THRU : EXECUTIVE COMMITTEE

FROM : Jan Dave O. Ogatis

General Manager – CARE Foundation Inc.

DATE : March 8, 2021

SUBJECT :PROPOSAL FOR NEW LOAN PRODUCT – MICRO

ENTERPRISE LOAN

MICRO ENTERPRISE LOAN

A. RATIONALE

Grameen Banking has contributed a lot in bridging the gap of financial inclusion
specifically in Bangladesh where it all started. With its mission of providing financial
access to the marginal sector, the program itself is a noble cause which could help
alleviate poverty if properly implemented and offered to proper individuals.
However, recently as per our own experience, Grameen Banking is not as effective
as it was before in helping the poor get out of poverty. Not because the program is
defective, but due to following reasons, first, the culture of most if not all the
communities that it served is somehow twisted when it comes to Loan or “Utang”.
As the famous qoute goes, “Utang lipay-lipay, Bayad likay-likay”. Such culture
destroys the program. Though Grameen Banking also focuses on capacity and
character building, at the end of the day, there are clients/members that are not
open-minded and settle for that mediocre credit culture. In other words Grameen
Banking is vulnerable to abusive clients and/or members.

Further, Grameen banking nowadays has been used by financial institutions purely
for profit-making and not as a tool for poverty alleviation. Many microfinance
institutions has emerged and offered grameen banking (group loan) program. The
emergence of various MFIs in the market has caused credit pollution.
Clients/members have acquired multiple loans from different MFIs, causing them to
have difficulty in paying their obligations rather than improving their quality of life.
What is more alarming is, MFIs tolerate such behavior by providing loans even if
the client already has multiple loans from other MFIs.

With such regression in the program, we realize that we need to make some
relevant changes in our Group/SELDA loan programs. The most relevant aspect
that needs to be changed is the program itself as soon as possible. We propose
that Group/SELDA loan program be stopped and create a new loan product that
would fit to the needs of the people at the same time mitigate the risk of poor credit
culture of Filipinos.

However, stopping the program immediately will most likely stir panic in the
community exposing the Company to possible non-recovery of accounts. Hence it
is important to create a product that would cater the financing needs of good paying
clients/members to lessen the impact of the termination of Group/SELDA loan
program. We come up with a new product called Micro Enterprise Loan. This
program will replace Group and SELDA loan products with the following
distinguished features compared to Group and SELDA loan program:

KEY FEATURES GROUP & SELDA MICRO ENTERPRISE LOAN

Accountability Group Accountability Individual Accountability
Voluntary Surrender Agreement
Security/Collateral Mutual Guarantee
(VSA) & Chattel and/or CBU
Type of Borrower Only Female Any Gender

B. OBJECTIVE

1. To cater members of good credit standing upon discontinuance of

Group/SELDA loan products

2. To Maximize Loan Disbursement by having a product replacement that

caters to micro enterprises
C. GENERAL GUIDELINES

Eligible Eligible Loan Charges Savings Penalty

Borrowers: Projects/Busines Requirement
s

*Must be *Preference will be *Processing fee: *Initial Savings 3.5% per

between 21-63 given to existing month of
years old during Group/SELDA  2.5% of the  Minimum of the past
the time of clients availing of approved 10% of the due
application; our program loan amount approved amortization
loan (Principal
* Borrower can *For new Cleints, *Other charges amount plus
be male or at least 1 year in deducted from Interest)
Female business operating the loan proceeds
in agricultural (includes but not
* Borrower must production, trading limited to
be in good and other essential Annottaion Fee,
health condition businesses Insurance (OD)
Fee)
*At least 2
years residency *Documentary
if homeowner Stamp Tax

*5 years if - (DST): P1.50

“renter” per P200 loan

*Borrower must
have a
business

D. PRODUCT FEATURES MATRIX

Product Features MICRO ENTERPRISE LOAN

Frequency of Payments Weekly
Payment Mode Cash/PDC
Security Requirements Chattel Mortgage and/or CBU
Minimum Loanable
Amount 8,000.00
(Cash-flow based)
Maximum Loanable
Amount 30,000.00
(Cash-flow based)
Capital-Build Up/Savings Initial Mandatory CBU
Deposit - Minimum of 10% of approved loan amount

Additional CBU
- 50% Voluntary; 50% Mandatory
 ADDITIONAL CAPITAL BUILD-UP
RANGE OF LOAN AMOUNT WEEKLY MONTHLY ACCUMULATED
8,000.00 10,000.00 150.00 600.00 `
10,001.00 15,000.00 180.00 720.00 3,600.00
15,001.00 20,000.00 200.00 800.00 4,000.00
20,001.00 25,000.00 220.00 880.00 4,400.00
25,001.00 30,000.00 250.00 1,000.00 5,000.00

- Voluntary CBU is only withdrawable starting on the

2nd Cycle but the client must retain at least 50% of
Voluntary CBU at all times.
- Mandatory CBU is withdrawable only upon
fullpayment and discontinuance of membership in
the loan program by the client.
- The client has the option to increase his/her
Voluntary and/or Mandatory CBU contribution
beyond what is required based on the given matrix
presented above.

CBU Interest Interest on CBU should be 1% per cycle (every 5 months)

Interest Rate 12.5% per cycle or 2.5% monthly
Term 5 months
Processing Fee 3.5% of the approved loan amount inclusive of 1% Notarial
Fee
Annotation Fee Based on the approved loan amount charged by the Registry
of Deeds
Loan Insurance Fee 5 per 1,000 amount of loan
Micro-insurance Premium depends on number of enrollees
Qualified dependents:
 Legal Spouse
 Maximum of three children
 Parents (for single clients)
Penalty 3.5% per month of the past due amortization (Principal plus
Interest)

Documentary Stamp Tax Doc Stamp Loan = P1.50 per P200 loan

E. MINIMUM DOCUMENTARY REQUIREMENTS

 Loan Application
 Credit Investigation Report (CIR) Form
 Business Proposal (Loan Investment Plan)
 Promissory Note
 Purok Residence & Business Certificate
 Barangay Clearance
  Deed of Chattel Mortgage
 Co-maker
 Government ID (Postal, Voter’s ID, Diver’s License, etc.)

Note: Additional requirements will be required if circumstance deemed it

necessary for us to conduct thorough investigation.

F. CREDIT INVESTIGATION AND APPROVAL GUIDELINES

Stages of Investigation & Approval

1st: CI/BI Investigation to Prospective Clients

2nd: Confirmation/Loan Documentations
3rd: Membership Education
4th: Final Screening by Branch Credit Committee Team
5th: Loan Processing
6th: Loan Disbursement

Guidelines:

No. Transaction Flow Details Responsible

Person
1 Credit Investigation Conduct CI/BI using Credit Credit Investigator
Investigation Report Form
2 Loan Application Screening and validation of Loan Credit Investigator
Validation Investment Plan
a. Confirmation visit of
approving authority to
Prospective Client
b. Result dissemination to
AO
c. Submission of loan
requirements for qualified
borrowers
d. Verification of authenticity
of “Voluntary Surrender”
Items, Equipment, etc.
3 Membership Orientation of detailed loan AO, ASG
Education Session products, borrowers obligations Supervisor
and loan processing
4 Loan Approval Credit Committee approved Credit Committee
loanable amount to Prospective (Branch Manager,
Clients ASG Supervisor)

We are endorsing this proposal for your perusal and suggestions. We are hoping
for your kind consideration on this matter.
Sincerely,

JAN DAVE O. OGATIS

General Manager – CARE Foundation Inc.

Recommended by:

PASCUAL DELA CRUZ TEOFILO VEÑIGAS

Group Manager – Legal Group Manager – Human Resource

ANDREWFER CORDERO JOEL TALAVERO

Group Manager – CPMRD Group Manager – Finance

Approved by:

MARIA HENRIETTA C. DELA PEÑA MARIA VICTORIA C. TAN

Board of Director Board of Director

MARIA VERONICA C. BASILIO MARIA ROSARIO S. CHIU

Board of Director Board of Director