Fin 055 Complete Sas

FIN 055:Microfinance Operations and Management
Student Activity Sheet Module #1
Name: _____________________________________________________________ Class number: _______

Section: ____________ Schedule: ______________________________________ Date: ______________
Lesson title: Overview of Microfinance Materials:

Lesson Objectives: FLM Student Activity Sheets
1. At the end of this module,
2. 1. I can identify general details about microfinance. References:
3. 2. I can distinguish competencies needed in microfinance Competency Based Learning
technology. Material for Microfinance
Technology NC II
“Start where you are. Use what you have. Do what you can.” - Arthur Ashe
A. LESSON PREVIEW/REVIEW
1) Introduction
Congratulations for taking the next big step towards becoming a Banking and Microfinance
Professional! This subject will be giving you the competencies needed if you want to pursue a
career in the microfinance industry. Are you ready? Let’s start.
Please read the learning targets before you proceed to the succeeding activities. The learning
targets are your goals. Remember, you need to achieve your learning targets at the end of the
lesson.
2) Activity 1: What I Know Chart

What do you know about Microfinance? Try answering the questions below by writing your ideas
under the What I Know column. You may use key words or phrases that you think are related to
the questions.
What I Know Questions: What I Learned (Activity 4)
What is microfinance?
Who are the clients of

microfinance institutions?
What are the types of products

and services in a microfinance
institution?
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This document is the property of PHINMA EDUCATION

B. MAIN LESSON
1) Activity 2: Content Notes
Below is the notes about microfinance operations and management. You may underline or
highlight words or phrases that you think is the main focus of the lesson.
Before we move on to the main topic, let’s have an overview of what will be implemented in a
Flexible Learning Mode.
Our learning framework remains to be Active Learning. In response to the needs of this new
normal, we will be adopting a Flexible Learning Approach. It is a combination of face-to-
face classes and home-based learning.
For school year 2021, we will follow the 4-10 schedule, which means:
1. Students will attend face-to-face classes for 4 days in a week;
2. Study at home for the next ten (10) days
The primary instructional material for the flexible learning set-up is the Flexible Learning
Module.
The learning experiences in the modules are designed for full self-study in the event that
students will need or will be required to stay at home.
Teacher’s Role in the 4-10 Schedule
A. In class, face-to-face, (4 days)

1. Mentor
2. Collect Flexible Learning Module Student Activity Sheets
3. Give summative assessments (quizzes, examinations)
4. Facilitate supplementary group activities
5. Provide supplementary content via videos, etc.
B. At home, self study, (10 days)

1. Check and grade collected output.
2. Monitor work through phone calls and chats, provide guidance, answer questions,
and check understanding.
Aside from this, tips for an effective home study is also shown on the next page. Please follow
these tips as these will be a big help in making your home study a success.
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Tips for an Effective Home Study
1. Get a good night’s sleep. Students of all ages should get at least eight hours of sleep every
school night. It’s the best way to ensure that the brain is refreshed and ready to process all of
the information learned during the day. It may be tempting to stay up late to cram, but it’s more
beneficial to get enough rest.
2. Eat properly. Don’t forget to eat! Your body and your brain needs fuel to help stay in top
form. Plus, it’s difficult to focus when you stomach is growling. Have healthy snacks but make
sure they are prepared in advance so you don’t spend too much time away from your work.
3. Get dress. By getting up and getting ready for the day, helps set the tone for making it a
productive day. Not getting dressed makes people more likely to decide to just watch videos
and sleep after lunch.
4. Have a designated study area. Whether it’s the kitchen table or the desk in your bedroom,
create an area to study that is a designated study zone. Try to reserve your bed for sleeping
and avoid studying in it (it’s easy to take a nap!).
5. Create a timetable. This helps you organize your time, schedule your breaks, and is useful
when you have multiple subjects to study. Write your schedule so you can remember it and
refer to it often. Set reasonable limits for how much time you spend studying each day, and
break you session up into manageable chunks.
6. Post your daily learning schedule. This will inform family members of your class schedule.
Thus, allowing you to finish modules and other school related activities on time.
7. Take notes. This may include underlining or highlighting parts of lesson that you find
important or may be seen as its focus.
8. Try active studying. It is as simple as asking questions before, during, and after study time.
Not only does this help to give your study session direction, but it also helps keep you on track
and reflect on how to improve your next study session.
9. Use a dictionary. If you pass by unfamiliar words, search for its definition. This will help you
understand each lesson everyday plus it will help you widen your vocabulary.
Now, it is time to move to our main discussion.
“Microfinance” refers to financial services to the poor that included not only credit, but also savings
and other services such as insurance and money transfers (Ledgerwood, 1999).
In 1983, Dr. Muhammad Yunus established the Grameen Bank (which means “village bank”)
which now serves millions of clients in Bangladesh. Grameen Bank’s microcredit program to the poor
began to be noticed by other countries including the Philippines around the 1980s. The micro credit era
had begun and enthusiasm on the Grameen lending method spread quickly.
The entrepreneurial poor is the usual client of microfinance institutions. It is composed of mostly
women, undergraduates, residents of a community for a long time, not clients of traditional banks, self-
employed, and engaged in home-based business.
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Types of Microfinance Products and Services
1. Financial services include providing credit (loans), savings, and micro insurance.
2. Non-financial services
A. Social services focus on improving the well-being of the microfinance clients.
B. Enterprise development services include business trainings and skills development.
Microfinance Loans - are loans granted to the entrepreneurial poor for their micro enterprises to
enable them to raise their income levels and improve their living standards.
Features of microfinance loans

1. Typically unsecured
2. Group or individual loans
3. Progressive lending
4. Short term loan
Microfinance Lending Methodologies

1. Group methodology are provided in the context of a group.
Examples of Group Methodology

A. Grameen Methodology is a lending method that is based on groups of 25 to 30 clients who
meet weekly with the loan officer where they taught financial literacy and credit discipline.
B. ASA Methodology is a lending method that is almost the same as the Grameen Method. It
requires groups of 25 to 30 loan borrowers. Loans are small and repaid weekly through weekly
group meetings.
2. Individual methodology is a single client lending where repayment and schedules rely solely on
the individual (cash flow, character-based learning).
Examples of Individual Methodology

A. Micro enterprise Access to Banking Services (MABS) is a microfinance model designed for
rural banks in 1998. It is a complete program that teaches rural banks how to make their financial
services accessible to micro enterprises. It also teaches how to develop and improve these
microfinance services.
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Differences between Individual and Group Methodology
Feature Group Individual

1. Loan Size Maximum of P 150,000 (loan Maximum of P 150,000 (loan
ladder applies) size based on client’s cash flow
and capacity to pay)
2. Loan Term Based on loan cycle not Based on client’s cash flow not
exceeding 12 months. exceeding 12 months.
3. Frequency of loan repayment Loans are repaid or collected Flexible
weekly.
4. Mode of loan release Released to group of borrowers. Released individually.
5. Mode of loan repayment Clients pay in cash and is Clients pay in cash of they
collected by loan officers during deposit their payments to the
the weekly meeting. depository bank of the MFI.
6. Loan monitoring Loan officer visit groups of Loan officer visit clients
clients weekly. individually at least once a
month.
7. Loan security Group guarantee Character-based lending
What are the competencies needed in the microfinance industry?
Basic Competencies
1. Participate in workplace communication
2. Work in a team environment
3. Practice career professionalism
4. Practice occupational health and safety procedures
Common Competencies
1. Provide quality customer service
2. Comply with quality and ethical standards
3. Performing computer operations
Core Competencies
1. Selecting potential area for microfinance operation
2. Promoting microfinance products and other services
3. Forming group of microfinance clients
4. Facilitate center meeting
5. Process application for loans and other services
6. Collect dues
7. Update financial records
These core competencies will be discussed in detail on the following modules.
Now, let us proceed to the activities that will strengthen your knowledge of the topic.
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2) Activity 3: Skill-building Activities
Let’s practice! Answer each activities to test your understanding of the lesson. I know you can do
this! You may start now.
Exercise No. 1: Read each statement carefully. Identify what is being asked in each number.
Write the letter of the correct answer on the space provided.
_____1. Which of the following best describes a microfinance?

a. It is a provision of micro credit to the poor.
b. It is the supply of broad range of financial services including micro credit.
c. It involves the supply of loans to the low-income individuals with proven track record of banking
experience.
d. It is simply lending to the poor.
_____2. Microfinance institutions in the Philippines are of three types: non-government organizations,
banks, and _________.
a) Private lending companies c) Cooperatives
b) Bumbay d) Informal money lenders
_____3. Financial services of microfinance include ___________.

a. Loans and savings c. Financial literacy program
b. Training d. Health seminar
_____4. The following are characteristics of a microfinance client, except __________.

a) Engaged in home-based business c) Not clients of traditional banks
b) Undergraduate d) New members of the community
_____5. Microfinance is important because ___________.

a. It helps generate jobs and opportunities
b. Poor individuals are better off without education
c. Banks are collapsing
d. It helps promote dependency
You may now see the key to correction on the last page. How many right answers did you get?
Write your score on the space before the instruction. I hope this activity helped you in this lesson.
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Exercise No. 2: Read the statements carefully. Distinguish if the following is a basic competency,
common competency, or a core competency in Microfinance Technology. Put a check mark on
the corresponding column.
Competencies Basic Common Core

1. Promote microfinance products and services
2. Comply with quality and ethical standards
3.Practice career professionalism
4. Form group of microfinance clients
5. Performing computer operations
6. Work in a team environment.
7. Facilitate center meetings.
8. Provide quality customer service
9. Practice in workplace communication.
10. Select potential area for microfinance operation

Now let’s check your final understanding of our lesson for today. I hope that everything about the
topic is clear to you. This time you have to fill out the What I Learned column.
4) Activity 5: Check for Understanding

On the space provided, write TRUE if the statement is correct and FALSE if it is incorrect.
__________1. Micro enterprise Access to Banking Services (MABS) is a microfinance model

designed for rural banks in 1998.
__________2. Dr. Muhammad Yunus established ASA microfinance.
__________3. Microfinance refers to financial services to the poor that included not only credit,
but also savings and other services such as insurance and money transfers
__________4. Non-financial services include loans and savings.
__________5. The entrepreneurial poor is the usual client of microfinance institutions.
You may check the correct answers for this activity on the last page. How many correct answers
did you get? Write your score on the space before the instruction on this exercise.
C. LESSON WRAP-UP
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1) Activity 6: Thinking about Learning

A. Work Tracker
You are done with this session! Let’s track your progress. Shade the session number you just
completed.
B. Think about your Learning

1. Please read again the learning targets for the day. Were you able to achieve those learning
targets? If yes, what helped you achieve them? If no, what is the reason for not achieving them?
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2. What question(s) do you have as we end this lesson?

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FAQs
1. What are the benefits of microfinance?
Microfinance can improve lives, empower people, and create opportunities.
2. Where can we access microfinance?

Microfinance can be accessed through banks (rural, thrift, some commercial banks), non government
organizations, and cooperatives.
KEY TO CORRECTIONS
Skill-Building Exercises
Exercise No. 1
1. B 2. C 3. A 4. D 5. A
Exercise No. 2
1. Core Competency 6. Basic Competency
2. Common Competency 7. Core Competency
3. Basic Competency 8. Common Competency
4. Core Competency 9. Basic Competency
5. Common Competency 10. Core Competency
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Check for Understanding

1. True
2. False – Dr. Muhammad Yunus established the Grameen Bank.
3. True
4. False – Non-financial services include social services and enterprise development services.
5. True
1
FIN 055: Microfinance Operations and Management

Lesson title: History of Microfinance Industry Materials:

2. 1. I can identify details about the history of microfinance industry. References:
Competency Based Learning
Material for Microfinance
Technology NC II
Start Right! Finish a task before starting a something new! You can make it!
1) Introduction
Good day Microfinance Operations & Mgt class! Do you know how and where Microfinance
started? And who are its clients? Well, let’s discuss it today! Let’s begin!
lesson.

What do you know about The History of Microfinance? Try answering the questions below by
writing your ideas under the What I Know column. You may use key words or phrases that you
think are related to the questions.
What is the difference of a bank &

a microfinance?
Who are the clients of

microfinance institutions?
What are the benefits of

microfinance?
1

B. MAIN LESSON
According to Ledgerwood, 1999: Microfinance refers to financial services to the poor that included not
only credit, but also savings and other services such as insurance and money transfers.
Microfinance in Bangladesh
• In 1983, Dr. Muhammad Yunus established the Grameen Bank (which means “village bank”)
which now serves millions of clients in Bangladesh.
• Grameen Bank’s microcredit program to the poor began to be noticed by other countries
including the Philippines around the 1980s. The microcredit era had begun and enthusiasm on
the Grameen lending method spread quickly
Important Features of the Definition:

• It is not just credit
• It has a target market - the poor and low-income
households
• It is linked to the microenterprise
Who are the MF Clients? The**Entrepreneurial Poor**

Profile of Microfinance Clients
• Mostly women
• Undergraduates
• Residents of community for a long time
• Not clients of traditional banks
• Self-employed
• Engaged in home-based
business
The Benefits of Microfinance

• Improve Lives
• Empower People
• Create Opportunities
2

Microfinance Institutions (MFIs)

 are organizations that supply microfinance loans and other financial and
non-financial services to the poor.
Where Can I Access Microfinance?

• Banks (Rural, Thrift, Some Commercial)
• NGOs (Non-Government Organizations)
• Cooperatives
MFI products & services

Financial services include providing credit(loans), savings,
and micro insurance
Non Financial services
• Social Services
– Focus on improving the well-being of the
microfinance clients.
• Enterprise development services
– Include business trainings and skills development
3

Exercise No. 1: Read each statement carefully. Identify what is being asked in each number.
Write the letter of the correct answer on the space provided.
_____1. Which of the following best describes what a microfinance is?

a. It is a provision of microcredit to the poor.
b. It is the supply of broad range of financial services including microcredit.
c. It involves the supply of loans to the low-income individuals with proven track record of banking
experience.
d. It is simply lending to the poor.
_____2. The two microfinance methods which have been implemented by different MFIs in the
Philippines are:
a. TSPI and ASA c. TSKI and ASA
b. ASA and Grameen d. CARD and TSPI
_____3. Microfinance institutions in the Philippines are of three types - NGOs, Rural Banks, and
_______.
a. Private lending companies c. Cooperatives
b. Bombay d. Informal money lenders
_____4. Financial services of microfinance include ___________________.
a. Loans and savings c. Literacy program
b. Training d. Health seminar
_____5. Microfinance loans are considered small. The client repays the loan by one-time payment
throughout the loan term.
a. The first statement is false. c. Both statements are true.
b. The first statement is true. d. Both statements are false.
_____6. Which of the following best describes a microfinance client?
a. New members of the community c. Has completed education
b. Client of Bombay in the past d. Client of commercial bank in the past
_____7. Microfinance is important because___________________
a. It helps generate jobs and opportunities
b. banks are collapsing
c. poor individuals are better off without education
d. it helps promote dependency
4



On the space provided, write TRUE if the statement is correct and FALSE if it is incorrect.
__________1. In 1983, Dr. Muhammad Yunus established the Grameen Bank (which means
“village bank”) which now serves millions of clients in Bangladesh.
__________2. Microfinance started in Bahrain.
__________3. Microfinance refers to financial services to the poor that included not only credit,
but also savings and other services such as insurance and money transfers.
__________4. The MF Clients are the Entrepreneurial Poor
__________5. One of the important features of Microfinance is that, it is not just a credit.
C. LESSON WRAP-UP
A. Work Tracker
completed.

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2

FAQs
1. What are the pros and cons of microfinance?
Many argue that microfinance is very beneficial, as it provides financial opportunities for those in
impoverished nations or those with lower socioeconomic backgrounds. Another benefit of microfinance
is that it encourages people to be financially independent and provides them financial resiliency to be
able to cover any large unforeseen expenses.
Additionally, microfinance helps to provide financial services to those in remote locations where
traditional financial institutions do not have operations. It also provides education. Finally, microfinance
can encourage entrepreneurial activity and business development in poverty-stricken areas.
Some downsides of microfinance include claims that it can take advantage of those in tough economic
situations, a situation similar to loan sharks. Some microfinance loans may include interest that can be
as high as 30% or even higher. Furthermore, according to several studies, recipients of microfinance
loans did not realize an improvement in their annual net income.
KEY TO CORRECTIONS
Exercise No. 1
1. B
2. B
3. C
4. A
5. A
6. B
7. A

1. True
2. False – Microfinance started in Bangladesh.
3. True
4. True
5. True
3

Lesson title: Selecting Potential Area for Microfinance Materials:

Operations FLM Student Activity Sheets
Lesson Objectives:
References:
2. 1. I can conduct area scanning/mapping.
3. 2. I can coordinate with concerned government office.
Technology NC II
4. 3. I can review barangay profile.
5.
Life is not always Perfect. There is always a possibility for a problem. The problem is not the end. But it’s the
beginning of a different life.
1) Introduction
Good morning/afternoon class, welcome to FIN 055 Microfinance Operations and Management.
Now, we will start discussing the 1st among the 7 core competencies of MF Tech NC II and that
is the Selecting Potential Area for Microfinance Operations. Let us begin!
lesson.

What do you know about The 1st Core Competency in MF Tech NC II? Try answering the
questions below by writing your ideas under the What I Know column. You may use key words or
phrases that you think are related to the questions.
What is area mapping?
What is data collection?
1

What is the role of loan officer in

coordinating with government
offices?
B. MAIN LESSON
CONDUCT AREA SCANNING/MAPPING
Microfinance institutions (MFIs) undergo an area

selection process before establishing a new branch or
forming additional clusters1 for an existing branch.
Whichever objective the MFI wishes to achieve, this activity
should be part of the business plan of the whole institution.
The specific steps in selecting a potential area for
microfinance operations are briefly presented below:
Step 1. Conduct Area Scanning/Mapping. The
first step involves visiting the potential area to assess its
economic activities.
Step 2. Coordinate with concerned
government office. This step requires the Loan Officer to pay
a courtesy visit to the government offices and barangay
officials and introduce his or her MFI and its microfinance program.
Step 3. Review Barangay Profile. The second step is the gathering of existing area profile
from the barangay or other government agencies. This would allow the MFIs to get more accurate data
on the target area's socio-demographic characteristics and economic activities.
Step 3. Conduct Area Survey. In conducting an area survey, the Loan Officer verifies initial
information gathered from government offices and local officials. At this stage, the Loan Officer also
identifies potential interviewees to the survey.
Step 4. Conduct Interviews. Community leaders and micro entrepreneurs in the target area are
interviewed to gather information about the area’s peace and order situation, economic activities, informal
lending practices, and business needs.
Step 5. Processing Survey and Interview Results. At this step, results of the area survey
and interview are consolidated.
Step 6. Submit Survey and Interview Results to Branch Manager.
A written report of the survey and interview results prepared and submitted to the branch manager.
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Determining Potential Area

All the activities mentioned above will be done once the potential area has been identified. In most MFIs,
the Program Manager or the Operations Head is the one who decides where a new branch will be put up
based on the MFI’s criteria and business plan. The general criteria in selecting potential area for
microfinance operations used by most MFIs are the following:
Enough number of potential clients - the number of potential clients should be enough to form
a group or cluster of groups based on the standard set by the MFI. Some MFI uses poverty index in
identifying potential clients, other MFIs use percentage of poor household (30%-50%).
Distance and accessibility from the office – most MFIs set a radius of 5-7km. from the branch
office for their area of coverage. This is to ensure efficiency in terms of time travel of the Loan Officer to
and from the branch and within centers.
Transportation – availability of public vehicles for easier accessibility.
Existing microeconomic activity – this covers the types and levels of businesses in the area.
Existing MFIs and other lending institutions – presence of financial institutions operating in the
area indicates that the economy in the area is
progressive. However, the MFI should also analyze
the products and services offered by other financial
institutions as the market may be saturated already.
Peace and order – the area should have
low incidence of holdups and robbery to ensure the
security of the Loan Officer and cash collected.
Presence of banks to deposit collections –
there should be a depository bank to facilitate
transactions and minimize security risk.
Data Collection
The preliminary step in the area selection process
requires MFIs to gather data related to the target area.
Data refer to the information on various things such as
socio-demographic characteristics and responses to
interviews. These are collected in order to establish a factual basis for making decisions.
Prior to collecting data, it is important to answer five key questions.
1. What is the purpose of collecting the data?
2. What type of data is needed?
3. Where will this be collected?
4. When will this be collected?
5. Who will collect the data?
In the case of the MFIs, data collection is important to determine the viability of a certain area for
microfinance products and services. For example, data on economic profile provides the MFI information
on the number of potential clients in the area.
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If the MFI has research unit or personnel assigned to conduct research, he or she conducts the data
gathering; otherwise, a senior officer may initiate it. It is usually the Branch Manager who scans the area
and collects preliminary data to assess if a barangay is a potential expansion area2.
The Loan Officer has limited participation in selecting a potential area. The common tasks include
identifying the area and gathering secondary information.
However, it is important for the Loan Officer to understand the activities involved in area selection. The
succeeding section will discuss how area scanning is done.
AREA SCANNING
Area scanning involves going around a potential area and assessing its economic activities. It provides
the MFI a general picture of the target area – volume of business, the types of enterprises, the sources
of livelihood, and the operating financial institutions.
Steps in Area Scanning
Step 1. Secure a road map

A road map can be bought from a bookstore or obtained from the barangay office of your target area. If
you are getting any document from the barangay, a courtesy call to the barangay officials should be done
first. The process on how this is done will be discussed in the succeeding Learning Element: Coordinate
with concerned government offices.
Step 2. Walk through the streets

Using the road map, walk though each street. Note the
location of the enterprises in the area and identify the type
of businesses present (i.e. retail, services, manufacturing,
agriculture, etc). Also, take a note of the landmarks such
as bridges, hospitals, schools, churches, and financial
institutions operating in the area.
Step 3. Visit the public market

Go to the public market and note the number of active
stalls. Also, note the businesses present according to the
types i.e. fresh or processed food, non-food, and services.
This will provide information on the common types of
products traded in the community. Some public markets
have a map posted outside the office of the market administrator. Taking note of the map would make it
easier for you to identify what types of products are being sold in the market.
Step 4. Gather data from municipal or barangay office

You can get other data on the existing enterprises in your target area from the municipal or barangay
office. The learning element on reviewing barangay profile will provide the process on how this is
conducted.
4

Some practical tips in area scanning are also discussed below to help you in carrying-out this activity.
Practical Tips in Area Scanning
1. When conducting area scan, wear comfortable clothes and footwear since you will be walking around
the area.
2. If you would be taking photos of enterprises like store, ask permission first from the owner or staff.
3. Ask for the best means of transportation around the area. Some MFIs allow
the staff to bring his/her own motorcycle, especially in upland areas where public transportation is limited.
It is best coordinate with your branch manager regarding the policy on doing field work and get his
recommendation for this particular activity.
4. Keep in mind the criteria set by the MFI and the indicators of a good microfinance market.
Once you are done with the area scanning, consolidate the results.
Consolidating Results of the Area Scanning/Mapping
It is important to consolidate the results of your area scanning so that it would be easier for your supervisor
to identify the type and level of business activity in the target area. The Rural Bankers Association of the
Philippines-Microenterprise Access to Banking Services (RBAP-MABS) has developed a market
assessment form that can be used in presenting the results of area mapping.
The area map gives the MFI a general picture of the economic activities in the area but it does
not reflect the preferences and attitude of the micro entrepreneurs towards financial institutions. As
such, it is important to interview potential clients and other members in the community.
If an MFI is going to put up a

new branch, the head office
decides which area it would be.
If the area is an additional cluster
to an existing branch, the branch
manager initiates the selection
of the area.
5

Prior to collecting data, it is important to determine the following:

Purpose of collecting data;
What data will be collected;
Where will it be gathered;
When will it be collected;
Who will do the actual data collection?
The general criteria in selecting potential area for microfinance operation are:
Enough number of potential clients;
Distance and accessibility from the office;
Existing microeconomic activity;
Peace and order; and,
Banks are present to deposit collections.
Doing an ocular visit provides the MFI a
general picture of the economic activities in
the target market.
When scanning an area, make sure to
note the location of the enterprises and what
type it is.
COORDINATE WITH CONCERNED GOVERNMENT OFFICE
6

In selecting a potential area, the MFI needs to gather information in order to know if the target area
satisfies the criteria of the MFI. The data needed can be obtained from government offices such as the
barangay office or municipal hall. As such, it is important to coordinate with the government offices
where the needed information can be gathered.
Setting an Appointment
The first activity that the Loan Officer should do is to set an appointment with the concerned
government official upon the instruction of your supervisor. There are two ways by which an appointment
can be set. One way is to call the concerned office or to send a letter to the head of the government unit
such as the mayor or barangay captain. This type of letter is called a business letter.
A business letter is a formal communication between two or more parties. It strives to be

informative, specific, persuasive, direct to the point, and accurate. This means that the message has to
be delivered in the shortest way possible that can be understood.
Different Parts of the Letter

A business letter has various parts – the addressee, salutation, body, and closing. Each part has a
specific function so it follows that the content for each section differs.
Addressee. The first information that should be seen in your letter is the date when you wrote it, the
name of the person to whom it is addressed, the person's designation, and his/her address.
Salutation. The salutation is a formal greeting used in letters. It normally begins with Dear and the name
or title of the person you are writing to. If you are writing to a government official, you use Hon. + Last
Name: or Atty + Last Name: for a lawyer. The most commonly used salutation is Ms./Mrs./Mr.+Last Name.
Note that the abbreviated form is used in the salutation and a colon or comma is written at the end of the
salutation.
Body. The body contains the message of the letter. Begin by briefly introducing the organization you
represent. Then, explain why you are writing the letter and what help you need from them. Be careful,
however, when you use the pronoun we in behalf of your organization, since it commits your company to
what you have written. A simple guideline is to use I when stating opinions, and we when presenting
company policy. End your letter politely with a note that tells the reader what action will follow or an
instruction of what he or she will do or appreciation of thanks for a help that will be given.
The body of the letter should be single spaced. Then, skip a line between each paragraph. When you
are finished writing the body, skip a line before signing-off.
Closing. Sign off the letter with Yours truly, or Sincerely, if its a formal business letter. Use a comma at
the end of the closing, then place your signature and name three lines below the sign-off.
There are different formats in writing a business letter. The most common is the block format. Figure 1
shows you a sample of a business letter in block format.
7

Organizations usually have a standard letter format when setting appointments with government offices.
The Loan Officer only needs to fill up the required information such as the details of the addressee and
proposed schedule for the meeting. If there is none, the Branch Manager usually prepares the written
communication. Although it is the Branch Manager who writes the letter, it is also important that you know
the basic rules in writing a business letter.
Do not forget to attach the profile of your organization since you have only provided a short
background in the body of your letter. Providing a more comprehensive write-up would allow the reader
to know more about your organization. After writing the letter and sending it to the addressee, make sure
that you follow-up the response to your request. Call or visit the person in making a follow-up.
CONDUCTING A COURTESY CALL
Conducting a courtesy call means that a representative of the organization pays a visit to the head
of another institution. A courtesy call is one way to introduce a new organization to the local authorities.
“The meeting is usually of symbolic value and rarely involves a detailed discussion of issues” (Wikipedia,
2010).
MFIs through representatives do a courtesy call to a local official, usually the barangay captain or the
Mayor of the area being considered as a possible market for microfinance services. It is also an
opportunity to request permission from the local leaders even before any pre-operation activities in a
municipality or barangay, such as conducting area survey and interviewing community members.
The Branch Manager takes the lead when conducting a courtesy call. You, as the Loan Officer,
accompany the Branch Manager so you can be introduced as the one who will be assigned in the area
in case you will operate there. It is also your opportunity to share other services offered by your MFI
which may not be mentioned by your Branch Manager.
During courtesy calls, remember to do the following:

1. Dress simply, neatly, and appropriately or wear your office uniform if you have any. Also wear
your company ID which serves as proof that you are a legitimate employee of the organization
you are representing.
2. Extend your hand or give a business card when introduced by your Branch Manager.
3. Explain clearly the purpose of your visit.
4. Thank the barangay chairman as well, even if your Branch Manager has already said it.
5. Leave a company brochure or flyer so he or she can learn more about the MFI.
MEETING WITH THE BARANGAY COUNCIL

Meeting with the barangay council allows the MFI to introduce itself and promote its products and
services. It is, in effect, conducting an orientation program for the community officials. It is also a way of
getting the assistance of the local leaders in implementing the MFI activities. A good time to meet the
barangay council is during one of their regular meetings. You can request them to include in their agenda
an orientation about your MFI.
8

Step 1. Prepare for the orientation

It is important that you are well prepared for any meeting. You should be very clear with your
agenda so that you will know what to prepare considering the time allotted to you for the orientation.
Once the agenda, time, and venue have been finalized, start preparing for the meeting.
a. Prepare the outline and review the details of the topics to be discussed. As mentioned, the purpose of
meeting with the barangay council is to orient them about your MFI. The topics commonly discussed
during the orientation are:
- Description of MFI
- Vision / Mission and Officers of MFI
- Year MFI was established
- Size of MFI in terms of number of branches and employees
- Strength of MFI (e.g. future plans)
- Products and services offered
b. Prepare the materials before the orientation. The basic materials to prepare are the:
- orientation kit or flip chart
- pens
- attendance sheet
- brochures
- audio-visual presentation about your MFI
c. Set up the orientation venue at least 30 minutes before the session. Prepare the chairs and ensure
that there is enough space and seats for the participants.
Step 2. Welcome the barangay council.
Treat your audience like guests and make them feel welcome. Create a good impression with
them by being genuinely enthusiastic and polite.
a. Greet your audience warmly as you start the session. Use the vernacular to put them at ease.
b. Introduce yourself. Mention your first name or preferably by your nickname to make the session less
formal
c. State the purpose of the gathering. This gives them an idea of what will be the focus of discussion.
Step 3. Discuss the orientation topics
Introduce the MFI to your audience to establish the MFI’s credibility and stability. There are basic
elements to include in introducing MFIs, namely, the description of MFI, its vision and mission, the
founders and officers, the year it was established, its size, and the products and services it offers. Explain
your activity plan and which places you intend to visit. For example, mention that you will be interviewing
market vendors the following week to know their attitude towards financial services. Also, state the
assistance you need from them if there is any.
Encourage group discussions in order to get all ideas and questions out. Keep conversations focused on
the topic and answer their questions tactfully.
9

Step 4. End the orientation
Use phrases to send signal that you are about to end your presentation. Ask the participants if
they have questions and make sure that everybody hear your explanation. If you do not know the answer,
politely say so. Then ask assistance from your Supervisor or Branch Manager.
After the question-and-answer part, distribute brochures or flyers that contain details about the products
and services of the MFI. Do not forget to thank them for their time.
It is important to take note what has been discussed during the meeting. Ensure that the important issues
and other details are documented such as the date and time, venue, list of attendees. It is not necessary
to write the whole discussion but only the highlights of the discussion and the major points raised and
decisions taken.
There are two ways by which an appointment can be set – either by calling the
office or sending a letter.
In writing a business letter, the message has to be clear and accurate.
Follow-up your addressee’s response to your letter.
An MFI conducts courtesy call to a local official when his or her town is being considered as a
possible market for microfinance services. A courtesy call allows the MFI to introduce their
organization to the local authorities, as well as inform them of the MFIs activities.
When meeting with the barangay council, set the agenda and prepares all materials needed.
During the meeting, orient the community leaders about the MFI – vision and mission, founders
and officers, year established, size of the MFI, and products and services. End the orientation by
clarifying any questions and thanking the attendees.
REVIEW BARANGAY PROFILE
Conducting an area scanning or mapping provides the MFI a quick look of its target area’s
economic activities. To validate the results of your area scanning, you need to review the existing profile
of the municipality or barangay. This is another important step in selecting potential area for microfinance
operations.
Barangay Profile and Secondary Data
A barangay profile describes the physical and demographic characteristics, economic status, and
basic services available in the area. More specifically, it describes the geographical location, classification
(rural or urban), and general description (mountainous, coastal, etc) of the area. In terms of demographic
characteristics, it provides data on the population, number of households, number of registered voters
and community workers. It also identifies the basic services and the proximity of service institutions (i.e.
day care centers, medical facilities, and financial institutions). It also shows data about the public
transportation sector (number of operators and modes of public transportation), sources of income, and
types of businesses in the area.
10

A barangay profile is an example of secondary data. This is considered secondary because the
information was gathered by someone else and is available from the barangay office. Thus, secondary
data are information that has already been collected and available for use.
Sources of Secondary Data
The Barangay office is your primary source of secondary data. For example, a Community Profile
Study (CPS) and Barangay Development Plan (BDP) can be obtained from the barangay hall. The CPS
presents the socio-economic profile of the barangay while the BDP reflects the five-year development
plan of the local government with regard to the economic, social, and infrastructure concerns.
If the CPS and BDP contain all the information you want to know, there is no need to get data
from other government agencies unless you want to validate the available information. Otherwise, you
have to identify what other data you need and from which department to get it. The table 1 shows the
kind of data available from different government offices and community organizations.
Aside from government institutions, there are other sources of secondary data.
Database or a collection of numeric data and/or information that may be
In computer-readable form for electronic distribution
Local association and NGOs publish detailed information on a certain industry or sectors. These
materials are published in the form of annual reports, as part of a regular trade journal, or as special
reports. In some cases, they are available only on request from the association.
Other published sources such as books, dissertations, newspapers, magazines, and the like that
contain information relevant to the sector or community.
Individuals outside your organization with expertise on your industry or activity which may include
11

university professors and researchers, government officials associated with the industry, etc.
COLLECTING SECONDARY DATA
As mentioned in the previous inputs, secondary data are available and can be obtained from
various sources. Since the data is already existing, data collection can be done in a short period of time.
A day or two is sometimes enough to collect information especially if the agency has a good record-
keeping system. The challenge with getting secondary data is that some information may not be readily
available or those which are available may be outdated and do not reflect the current status of the area.
Steps in Gathering Secondary Data
The common ways of getting the social and economic profile (SEP) of a specific area are visiting
government office and doing internet research. Some provinces and municipalities publish their SEP in
the internet which allow for easy access to information. In most cases, however, you would still have to
go to the government office that collects socio-economic profiles.
From government agencies

1. Determine which institutions conduct research or gathers information about specific socioeconomic
profiles.
2. Go to appropriate government agencies/units and ask permission to collect the needed data
3. Collect the needed data.
From the internet

1. Open a search engine such as Google and Yahoo
2. Type in the search box the name of the town/municipality/barangay
3. A list of websites and short description will appear on your screen. Click on the link of website
that might contain the information you need.
The information generated from the barangay profile and other documents can be used to validate
the results of the area scanning. While an ocular inspection provides you a general picture of the area,
secondary data gives you more accurate statistics and description of a specific barangay. Data on the
number of households, sources of income, number of businesses, and credit sources which can be found
in secondary data are important information to the MFIs.
12

Exercise No. 1: Read the instructions carefully.
Choose a particular barangay. Prepare an official request letter to the barangay. Then, create a
narrative report on the socio-economic profile of your chosen barangay.
The student should:

1. Present the socio-economic profile of an area by identifying its
consolidated community information:
Enough number of potential clients
Distance and accessibility from the office
Transportation
Existing microeconomic activity
Existing MFIs and other lending institutions
Peace and order
Presence of banks to deposit collections
PERFORMANCE CRITERIA Yes No
1. Area’s socio-economic profile gathered from concerned
government agencies are presented
2. The community information are well presented
Exercise No. 2: Read each question carefully. Answer the questions briefly.
1. Why is it important to meet with the barangay council?

________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
2. Discuss the steps in conducting a meeting.

________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
13



Read each statement carefully. Identify what is being discussed in each number. Write the letter
of the correct answer on the space provided.
_____ 1. This is the first things that should be determined prior to collecting data.
a. type of data to be collected c. purpose of data collection
b. where the data be collected d. who will collect the data
_____ 2. Why is distance important in selecting a potential area?

a. allows easy transaction
b. efficiency in terms of travel time to and from the branch and within centers
c. ensure security of collected cash and Loan Officer
d. for easy monitoring
3. How does an MFI select a potential area? Arrange the steps with 1 being the first step.
______ Conduct interview
______ Conduct an area scanning/mapping
______ Submit survey and interview report to branch manager
______ Conduct area survey
______ Process survey and interview
______ Review barangay profile
_____ 4. These are demographic characteristics reflected in a barangay profile except?

a. Registered voters c. Population
b. Number of households d. Registered businesses
_____ 5. These documents can be obtained from the barangay office

a. Barangay Development Plan c. both a & b
b. Community Profile Study d. none of the above
_____ 6. This data can be obtained from the Municipal/City Treasurer's Office?
a. Income source c. Public transport
b. Number of households d. Registered businesses
_____ 7. If I want to know the number of households in the area, where would I go?
a. City Treasurer's Office c. Market Administrator
b. National Statistics Office d. None of the Above
14

_____ 8. A barangay profile is considered as a secondary data because

a. another person collected the data it contains c. both a & b
b. it is available in the barangay office d. none of the above
C. LESSON WRAP-UP
A. Work Tracker
completed.

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
FAQs
1. What are the microfinance models?
Two models outline how microfinance is operated:
a. Banking for individual entrepreneurs and small businesses revolved around relationship-based
banking.
b. Services for a group, where multiple individuals come together to form a group to collectively
apply for a loan.
2. What promotional materials and documents do you give to concerned government officials?
✓ Company ID, Leaflets, brochures, company profile
✓ Official Request letter serves a form of courtesy call to community leaders
2

KEY TO CORRECTIONS
Exercise No. 2
Proposed Answers:
1. Meeting with the barangay council allows the MFI to introduce their organization and the products
and services it offers to the community leaders. It is also an opportunity for the MFI to get the
assistance in conducting their activities.
2. The first step in conducting a meeting is to prepare for it. This means that the agenda, the place, and
time of meeting be set. The materials needed for the meeting and the venue should be prepared.
The second step is welcoming the participants of the meeting. This requires you to make the attendees
feel welcome by greeting them and introducing yourself.
At this stage, the purpose of the meeting should be conveyed.
The third step is the actual meeting. Go through the topics you have prepared which include
background of the organization, programs and services, and activities to be conducted. Encourage
group discussions and answer the questions that are raised for clarification.
At the end of your presentation, ask the attendees again if they have any questions.
If there is none, distribute brochure or flyers and thank the participants for attending the meeting.

1. C
2. B
3. 4,1,6,3,5,2
4. D
5. C
6. D
7. B
8. C
3

Lesson title: Selecting Potential Area for Microfinance Materials:

Operations FLM Student Activity Sheets
Lesson Objectives:
References:
2. 1. I can conduct area survey.
3. 2. I can conduct interviews.
Technology NC II
4. 3. I can process survey and interview data.
5.
The earlier you start working on something, the earlier you will see results.
1) Introduction
Now, we will continue discussing the 2nd part of the 1st among the 7 core competencies of MF
Tech NC II and that is the Selecting Potential Area for Microfinance Operations. Let us begin!
lesson.

What do you know about the 1st Core Competency in MF Tech NC II? Try answering the questions
below by writing your ideas under the What I Know column. You may use key words or phrases
that you think are related to the questions.
What are the steps in selecting

potential area?
What are the steps in conducting

area survey?
1

Why do we need to conduct

interviews?
B. MAIN LESSON
Below are the notes about microfinance operations and management. You may underline or
CONDUCT AREA SURVEY

The delivery of microfinance products and services starts with area selection, to either establish
a new branch or expand the operations in an existing municipality or city. Whichever objective the MFI
wishes to achieve this activity should be part of the business plan of the whole institution.
The Branch Manager is the one who initiates the activity and assigns a specific area for Loan
Officers to assess. The Loan Officer’s primary responsibility starts with the data collection and then
submits his or her initial recommendations in a report based on the gathered data to the Branch Manager.
Data Collection
Data collection is not a supplementary task of the Loan Officer. It is one of his or her main
functions. The results of the data gathering affect the microfinance operation of the institution; thus, it is
important that the Loan Officer conduct it systematically.
There are two (2) pointers to remember in collecting data:

1. Understand the rationale and relevance of the data to be able to determine the extent of data collection
needed; and,
2. Identify the sources to be able to gather reliable data and save resources.
Criteria in Selecting Potential Area

Most microfinance institutions follow general criteria in selecting potential area for their
microfinance operation, regardless of the microfinance methodology they implement. Knowing this will
help the Loan Officer come up with informed recommendation, and help the Branch Manager make
informed decision.
The general criteria in selecting potential area for microfinance operation are:
• Enough number of potential clients - the number of potential clients should be enough to form a group
or cluster of groups with 15-30 members. If the area where the Loan Officer collects data is for the
establishment of a new branch, the total number of groups in one cluster depends on the branch viability
model or standard of the MFI
• Distance and accessibility from the office - the distance should not be more than 5-7 km from the branch
office specifically for ASA methodology implementers. This is to ensure efficiency in terms of time travel
of the Loan Officer to and from the branch and within centers.
2

• Existing microeconomic activity - the level of economic activity in the area determines the need for
microfinance products and services.
• Peace and order - the area should not be high risk to holdups and robbery, to ensure the security of
the collected cash and the Loan Officer. This incidence may be difficult to avoid for MFIs serving the high
poverty areas, thus, security measures must be set to manage the risk.
• Presence of banks to deposit collections - if the potential microfinance area is being selected for the
establishment of a new branch, there should be banks
near the prospective branch office to allow easy transactions and minimize security risk.
Procedures in Selecting Potential Area

The initial step in selecting potential area is to conduct an area survey.
Scanning the area involves walking around the central business district to assess the economic activities.
While doing so, the Loan Officer can develop an area map, and plot the establishments and major
institutions like schools, church, and barangay hall.
The area map could become the basis for selecting potential respondents during the area survey.
The Loan Officer validates his or her observations made during the area scanning alongside other
documents about the area to come up with more information that is reliable.
This initial information provides a general profile of the area, but does not reflect yet the behavior of the
micro-entrepreneurs toward financial services. Thus, the next steps in the process of selecting potential
area are equally important. The focus of the next sections will be the discussion on how to conduct area
survey. We will discuss the other steps in a separate learning element.
CONDUCTING AREA SURVEY

Once the Loan Officer has established the general profile and the area map of the potential area for
microfinance operation, he or she is now ready to conduct area survey. A survey is a method used to
gather primary data to come up with an estimate of the size of potential market.
Steps in Conducting Area Survey

For selecting a potential area, the Loan Officer has four (4) steps to follow in conducting survey.
1. Identify size of sample respondents;
2. Contact the community leaders;
3. Assess the general characteristics of the area; and,
4. Conduct a competitor’s analysis.
Step 1. Identify Size of Sample Respondents

In conducting the area survey, the Loan Officer need not go to all the micro entrepreneurs in the area,
but rather get samples. A sample is any part of the population of individuals from whom the Loan Officer
gathers information.
The Loan Officer selects randomly a sample of survey informants from the total population in the area.
He or she must remember that a genuine area survey follows a scientific process, and does not involve
only one person. Otherwise, the result will not be reliable and may have a negative effect on the
3

microfinance operations. There are generally two ways to get the sample size: one is through a random
sampling, the other one is through a non-random sampling.
In a random sampling, the MFI must determine a significant sample size for its respondents. For
example, the sample size is 100. To obtain a sample size of 100 from a population of 1,500
microenterprises, the Loan Officer just need to select 100 out of the total entrepreneurs. One of the ways
to do this is to select from the area map earlier developed. The Loan Officer assigns each selected survey
respondent with a number for easy identification. He or she can further divide the sample like pre-
allocating a number of respondents from different population. Figure 2 illustrates this process.
The other way is non-random sampling or systematic sampling method. In this process, the Loan Officer
gets every nth individual in the population list to be included in the survey. To know the interval (nth)the
Loan Officer has to divide the total population by the desired sample size, then select from the list until
he or she has determined the desired number of respondents. The sample in Figure 3 illustrates this
process.
Step 2. Contact the Community Leaders

After identifying the size of the respondents, it is time to talk with the community leaders. Before the Loan
Officer conducts area survey, the first groups that he or she should visit are the barangay officials, as a
sign of courtesy. The other community leaders are those coming from the religious groups, socio-civic
groups, business groups, and others.
Leaders in the community can help identify the appropriate respondents. Although the Loan Officer has
to be very clear with the criteria for choosing respondents, otherwise they may identify those who could
not provide significant information.
The Loan Officer should introduce himself or herself first and present a business card, the MFI’s brochure,
or flyer to the community leaders. This creates an atmosphere of professionalism and trust to the
institution. He or she then introduces the MFI’s purpose, key officers, location, and the purpose of the
visit.
The Loan Officer must also provide all the necessary information about the MFI to the community leaders,
as they could be the best medium to market the products and services to their constituents.
4

Step 3. Assess the General Characteristics of the Area
Once the community leaders allowed the Loan Officer to conduct the area survey, he or she can do the
initial ocular survey of the general characteristics of the area by going around the area where there is
high economic activity.
The specific aspects to observe are the following:
• Is the community neat and clean?

• Are the main roads paved?
• Are businesses located in permanent structure?
• How close are people living to each other?
This initial observation will give the Loan Officer an idea of the behavior of the people in the community,
the means to transport goods and services, and allow him or her to calculate the flow of economic
activities.
Step 4. Conduct a Competitors’ Analysis

It is important to conduct a competitors’ analysis to determine how many
MFIs are operating in the area and estimate the size of the potential
clients who will avail of the products and services.
The Loan Officer can get the information from the community leaders or
by asking people in the community about the profile of financial service
providers in the area.
In analyzing the competition, the Loan Officer should focus on the main
features of their products and services.
The following questions can guide the Loan Officer:

1. Interest rate and service charge
Is the interest rate of competing institutions lower, higher, or same as your MFI?
Do the competitors pre-deduct the interest from loans?
What are the additional charges by your competitors?
Are their service charges higher, lower, or same as your MFI?
2. Term
Is the loan term offering of the competitors shorter or longer?
3. Manner of delivery
Does the competition release fund at the location of the clients, or the clients go to the MFI?
4. Services offered
What services do competitors offer?
Do the competitors offer their services for free or for a fee?
5

CONDUCT INTERVIEWS
THE BASICS OF CONDUCTING INTERVIEWS
After Learning on the importance of conducting area survey as part of the process in selecting
potential area for microfinance operations, it is important that the Loan Officer understands the next step
of the process which is conducting interviews.
Why Conduct Interviews?

In the selection of potential area for microfinance operation, the Loan Officer’s primary
involvement is data gathering. The interview is conducted after the area survey.
Aside from secondary data from public sources, the Loan Officer conducts interviews with
individuals or groups which allows him or her to validate the data gathered from other sources and make
informed recommendation to the Branch Manager if the area passed the criteria of the MFI.
Through interviews with people at various levels in the community, the Loan Officer, is able to:
• officially introduce his or her organization and loan programs to local leaders and the potential clients;
• enlist the support of the community by being partners in the cause of
helping the poor in the area; and,
• determine that applicants to the microfinance programs are actually
what the MFI is targeting to help.
Who Will be Interviewed?

Interview with the following individuals or groups are important
to make an informed decision about the potential area for microfinance
operation. These include:
a) Local Government Officials

The Loan Officer primarily works in the smallest unit of the local
government which is the barangay. The highest form of local
government unit is the province, followed by the cities/municipalities, then the barangay. Opening
communications with barangay officials (i.e. Barangay Captain, “Kagawad” or Council Leaders of different
political organizations in the barangay,) is a way of knowing more about the state of the community,
economic activities, peace and order situation, population, political setting, and other data. Details were
provided on the previous Module on Conduct Area Survey. Interviews with local officials in higher elective
positions i.e. municipal/town/city mayors and provincial governors are undertaken by MFI area
management in the opening of new branches.
b) Organized groups in the village/community1

Choose groups which have high concentrations of potential clients. Encourage women and men
who are actively involved in income generating activities to participate in the group interview.
Microentrepreneurs who have been involved in their microbusinesses for a long time know how to wisely
use resources such as loans and savings and can evaluate the risk of extending loans to future clients
who are from their area.
Organized groups are also knowledgeable of the major economic activities, informal sector
practices, information of existing microfinance competitors, including how much is being charge for
6

services, value added services and other lending activities. They can provide data on where the
barangays where economically active but poor community members can be found.
Organized groups include:

- Women’s Club;
- Home Owners Association;
- Market Vendor’s Association (no. of public market stall holders, etc.)
- Public Market Administrators
- Tricycle Owners and Drivers Associations (# of transport operators/units)
- Groups of local entrepreneurs of industries where the community is known (i.e. group of mat weavers,
basket-makers, clay pot makers, etc.)
- Religious leaders
c) Local Government Units/Departments

Secondary information is provided by the following organizations. Nevertheless, an interview with
key people from the organization can provide additional information which can go beyond the needed
data as indicated below.
Data Element Source

Population National Statistics Office / (PSA)
No. of households National Statistics Office / (PSA)
No. of registered enterprises Municipal Treasurer’s Office Barangay
Major sources of income Municipal Planning & Development Office
d) Applicants to the Program/Potential Clients

It is important to describe the basic characteristics and needs of the group of target clients. Some
microfinance organizations, after a formal meeting with the barangay officials and after a formal
introduction of the loan program to the community, conducts interview with potential clients. Home
visitations are already undertaken. Information that the Loan Officer gather during the interview includes:
1. Income data:
a. Main source of income
b. Estimated monthly income of the family
c. Estimated monthly family expenses
d. Net earnings of the family
2. Experience in Microenterprise - previous involvement in small income generating activities
3. Existing Loans with other institutions/informal money lenders
4. Family Data: number of family members in the household
5. Number of children of school age: how many are studying
6. Capitalization needs for existing/future business.
7. Asset data: the material things do the potential client have such as appliances, goods, furniture,
business tools/equipment, etc.
Data will help the loan officer determine the kind of assistance needed by the potential client in their
income-generating activities. The data is also useful in determining if the financial services will be
appropriate to the potential clients.
7

PREPARING FOR THE INTERVIEW

The Loan Officer must make sure that all his or her information is complete and that he or she
has the latest information. The following should be done as part of the preparation for the interview:
Before the Interview

1. The Loan Officer must coordinate with the local executives of the local government units covering the
area. In this case, it will be the Barangay Captain, members of the council and leaders of different political
organizations in the barangay. For local agencies or organized groups in the community, the head of the
group should also be notified.
2. An official letter signed by the Branch Manager must be given a few days before the interview. It shall
contain the date, time and purpose of the visit to the interviewee’s2 office. Be specific of the data that are
needed to give those to be interviewed time to prepare any requested documents related to the meeting.
3. For visits with the Municipal Hall or City Hall, inform them of the interview/survey to be conducted in
the area. State in your letter about your request for the following data:
a. Population per barangay
b. No. of households
c. No. of registered businesses
d. No. of establishments
e. No. of banks and other MFIs
f. Information on transport sector
g. Five-year plan
h. Map
4. Use other networks such as friends, families, barangays, and small businesses that the Loan Officer
were in contact with daily in the community.
5. Prepare a list of questions to make the interview flow easier. If there is a survey/interview format, be
familiar with the questions.
6. Do mock interviews. Practice with 1 or 2 other people to get a feel of the exercise.
IMPROVING INTERVIEWING SKILLS: HOW TO PROBE

In dealing with others, communication is very critical. It pays that the Loan Officer has the basic
interview skills that will make the session successful. The answers to be given by the person being
interviewed is dependent on the kind of questions that the interviewer will ask. The role of the interviewer
in making the interview session smooth is important. Asking the right questions, the manner of
questioning, the attitude of the interviewer, the way the interviewer presents himself or herself, are among
the considerations. A more in-depth discussion on communication tips will be made in the latter parts of
this module. Basic to interviews is the ability to ask questions in order to gather accurate, complete, and
relevant information from the interviewee. Remember that there is a limited time with the interviewee. It
is a waste of time, energy, and resources to go back for the missing data.
If focus will be on prospective clients, they may have a limitation on expressing themselves. It
pays to speak in Tagalog to facilitate communication. It is important to deliver the questions rightly so as
not to make them feel uneasy. In asking for income details, it pays to be more sensitive. Like when you
ask a spouse of tricycle driver, “Sa inyo pong palagay, magkano ang karaniwang kinikita ng isang tricycle
8

driver sa maghapon?” (What do you think is the daily earning of your husband?). It is indirectly asking
the interviewee of how much the husband earns.
Asking probing questions means the interviewer can make follow up questions to help the interviewee
answer the question better. Here are some pointers for better
probing:
A. Paraphrasing: restating in your own words what another person has said. Listen carefully to what the
interviewee is saying. Paraphrase often to get used to it. Use phrases such as:
- In other words (“samakatuwid,” “ang ibig ninyong sabihin po ba ay…”)
- I gather that ( “nakalap ko,” “nalaman ko”)
- What I hear you saying (“ang sinabi ninyo po ay,” “ang pagkakarinig ko po ay…”)
- Pardon my interruption, but let me see if I understood you correctly (Mawalang galang na po, tama po
ba ang pagkakaintindi ko na….”)
B. Summarizing: highlighting, reviewing, and organizing the discussion that has transpired between you
and the interviewee. Summarizing phrases include:
- If I understand you correctly, your main concerns are (“Kung tama ang aking
pagkakaunawa/pagkakaintindi, ay inyong mga pinakaimportanteng sinabi ay…”)
C. Questioning: Probing when multiple answers are possible, or when initial responses are unclear.
Questions are classified as:
a. Closed questions: answerable by Yes or No or other one-word answers.
The interviewer uses this when he or she wants precise, quick answers. This does not encourage
more sharing of information from interviewer.
Example: “May trabaho ba ang inyong asawa?” (Does your husband have work?) Answerable by
“Oo” or “Wala” (“Yes” or “No”). If the answer is “hindi regular” (not on a regular basis) interviewer
must make a follow up questions. “Ano po ang ibig ninyong sabihin? (What do you mean?) “Bakit
po?” (Why?). This is an open-ended question.
b. Open-ended question: inviting an actual question for a response.

Questions begin with “how,” “what,” and “why/why not,” are openended.
c. Return question: puts the question back to the questioner or group. Example: “What do you
think about that?” (“Ano po sa inyong palagay?”) or “Let us go back to the question.” (“Balikan po
natin ang tanong.”). In cases when the interviewee/s get to talk about something which is no
longer related to the original question.
d. General overview question: used to initiate a discussion or set up a thoughtful exercise.

Example: “How would you respond to a situation?” (“Ano ang gagawin ninyo sa ganoong
sitwasyon?”)
e. Hypothetical question: tests the respondent’s problem solving skills by asking a hypothetical
situation.
Example: “If sales are not good during rainy season, what will you do to earn a profit?” (“Kung
9

matumal ang benta sa tag-ulan, ano po ang inyong gagawin para kumita?)
PROCESS SURVEY AND INTERVIEW DATA
After conducting the interview, what do

you do with the information you gathered? How
can you consolidate the data to make it more
meaningful? How do you analyze the information
that you got from your survey?
PROCESSING SURVEY RESULTS

Data processing is the stage between data collection and data analysis. It involves classification
and summarizing of data for analysis. There are several steps involved in data processing.
Step 1. Data Screening.

It is important to check the questionnaire’s completeness and accuracy. Doing this right away will allow
you to go back to the respondent and clarify any problems or errors. There are several questions you
should ask as part of this initial data screening:
If the survey is self-administered, are the responses legible or readable?
Are all important questions answered?
Are the responses complete? Are all parts of the questionnaire answered?
Are all relevant contextual information included (e.g., date, time, place,
interviewer)?
Questionnaires that have incomplete answers should be separated from those that were
answered completely. For example, if the form has 2 parts – awareness of the MFI and business
information, and the clients only answered 1 of the 2 parts, the results of the survey is insignificant. As
such, those partial results should be discarded to clean the data pool, unless you can get in touch again
with your respondent to complete the form. There are questionnaires, however, that are designed in such
a way that the interviewee will have to skip certain questions because of his/her answer in one item. If
this is the case, then the questionnaire is still valid.
Step 2. Coding the questionnaire.

Coding means assigning a corresponding number to each response item.
When assigning codes, you should start with the smallest single digit number except zero and ensure
that the coding is consistent.
A response item is a possible answer to the question such as Male or Female for the question on Sex.
Once you have finished coding your questionnaire, you can start entering data into the database.
10

Step 3. Tabulating the responses.

Tabulation can be done manually or by using a computer. Manual encoding is suitable when the
sample size is small, while electronic tabulation is useful for large and complex studies. Regardless of
which method is done, a tabulation form should be created where the responses will be inputted. MS
Excel or OpenOffice can be used for tabulating the result of the survey.
It is important that the data is recorded accurately and systematically. Leahy (2004) provided
some guidelines for some of the most common problems in entering data into the tabulation sheet.
If the question was unanswered, leave the cell blank.
If there are two responses for a question that only requires one, treat the
question as unanswered.
If the circle falls between two response items, treat the question as
unanswered if you are not sure of the response.
If the open-ended response is incomplete, enter the given data.
ANALYZING AND PRESENTING DATA

Data Processing
The kind of analysis that will be done is dependent upon the information that you want to generate. The
most basic way to analyze survey results is through frequency counts and percentages. A frequency
count refers to the total number of responses per question. Excel or Calculator can automatically generate
the total number of responses for each question and its corresponding percentage once you input the
necessary formula. Ordinal scales can also be used if you want to rank the responses such as “what are
the top three reasons why micro-entrepreneurs apply for a loan”.
Presenting Survey Results
Tables and graphs can be used in presenting survey results.

A frequency table can be made to show the number of responses per question and its
corresponding percentage. For questions with more than 10 different responses like age and years in the
business, the responses can be grouped in ranges such as below 10, 10-19, 20-29, and so forth. Figure
3 shows a sample of frequency table.
A pie chart or bar graph can be used to synthesize findings and emphasize relationships between
variables. When using a graph, make sure that it is clearly labeled, the values are reflected, a legend is
specified, and the axes in the bar graph are labeled. Figure 4 shows a sample of pie chart.
Results can also be presented in a narrative format. When doing so, describe the highest proportions in
the table or chart first. Using the table in Figure 3 as an example, you can write the results as “70% of
11

the respondents answered yes while 30% answered no”.
Regardless of how the data is presented, it is important that the results are presented clearly and
completely. Learning Element 1.7 Submit Survey and Interview Report will guide you on how to make a
market research report which reflects the results of your area scanning, data gathering, and interviews.
Questionnaires should be checked for its completeness and accuracy right after conducting the interview
Data gathered through survey and interview should be summarized for
analysis.
The kind of analysis that will be done is dependent on the information that you
want to get from the questionnaire. The most basic way is to use frequency
counts and percentages.
Tables, graphs, and narrative report can be used in presenting data.
SUBMIT SURVEY AND INTERVIEW REPORT TO BRANCH MANAGER
1. The Area Survey Report or Market Research Report is a consolidation of the important details about
a potential area for microfinance operations. The Loan Officer should be reminded of the following
reasons why a survey is conducted:
• To have measurable data on the financial services needed;
• Assist in identifying opportunities for microenterprises;
• Use data to design microfinance products/services; and,
• Estimate number of prospective clients/size of potential market for Microfinance Institution.
2. Although formats among Microfinance Institutions may vary, there are general data that are usually
included in the report. The Loan Officer prepares the report for submission to the Branch Manager after
data gathering and interviews with concerned individuals.
3. Primary data are those gathered and prepared by the Loan Officer himself or herself after going
through his or her own survey while secondary data are those that are based on previous documents
prepared by other people.
4. A Survey Report can be divided into the following main headings:

a. Profile of the Area, Market size, Market risks, Recommendation/Conclusion
5. The recommendations made by the Loan Officer are important in the decision-making process by
the Branch Manager. It can affect the overall performance of the branch in terms of reaching its targets.
12

Let’s practice! Answer each activity to test your understanding of the lesson. I know you can do
Create sample interview questions. Prepare a video clip of a role play of an interview.
The student should:

1. Secure and prepare sample Questionnaires/ Interview
Guide Questions (Submit the hard copy)
2. Interview in accordance with MFI interview guidelines and
procedures (Role Play in a video clip)
4. Practice desirable work values relevant to the task of
conducting interviews are practiced (must be seen in the role
play via video)
1. Presented sample questionnaire / interview guide question

2 Conducted sample interview in accordance with MFI
interview guidelines and procedures
1. Describe how the loan officer should conduct data collection.

_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
2. Discuss the importance of the number of clients as criteria in selecting potential area for
microfinance operation.
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
13

3. Discuss the importance of accessibility of the potential area to the branch.

________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________


______1. The first groups that the Loan Officer visits before conducting area survey are the______.
a. Barangay official c. socio-civic groups
b. Religious groups d. youth groups
______2. The leaders in the community can help identify them.

a. Clients c. business groups
b. Appropriate respondents d. suppliers
______3. When introducing himself or herself, the Loan Officer should hand these.
a. ID and flyer c. business card and brochure/flyer
b. Brochure and ID d. business card and ID
_____4. The Loan Officer does this by going around the place of concentration of enterprises or the
center of the barangay where there is high economic activity.
a. An ocular survey to know the area’s general characteristics.
b. Survey the economic activities in the area.
c. Map where the economic concentration is.
d. Gather information about the potential respondents.
_____5. The specific aspects to observe includes neatness and cleanliness of the community, paved
roads, structure of the businesses, and _____________?
a. how close are people living to each other?
b. availability of electricity in the community?
c. where people get water source?
d. if houses have permanent roofing?
14

_____6. Initial observation of the general characteristics of the community gives the Loan Officer an
idea of the ____________.
a. behavior of the people in the community
b. the means to transport goods and services
c. calculates the flow of economic activities
d. all of the above
______7. The conduct of competitors’ analysis is for this reason.

a. To determine how many are operating in the area
b. Estimate the size of the potential clients who will avail of the products and services
c. All of the above
d. None of the above
_____8. Which of the following is an organized group in the community/village?

a) Municipal Treasurer’s Office
b) Office of the Barangay Captain
c) Homeowner’s Association
d) National Statistics office
_____9. The Loan Officer (LO) primarily works in the smallest unit of the local government. At his or her
level, which local official does the LO primarily interview and inform about the loan program?
a) Provincial Board Member
b) Barangay Tanod
c) Vice Mayor
d) Barangay Captain
_____10. During the interview with a potential client, income data are already being noted. Which of the
following is NOT part of the income data collected?
a) Estimated monthly income
b) Income Tax
c) Monthly household expenses
d) Net income
C. LESSON WRAP-UP
A. Work Tracker
completed.
15


___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
FAQs
1. How to conduct interviews?
Bring interview guide questions, know the basic company policies and profile.
The quality of answers/accuracy is dependent on how the LO handles the interview. Courtesy,
impartiality, presentability, and professionalism are important.
KEY TO CORRECTIONS
Exercise No. 2
Proposed Answers:
1. Describe how the Loan Officer should conduct the data collection, including the pointers he or she
should remember.
The Loan Officer should systematically conduct the data collection. He or she should understand the
rationale and relevance of the data to be able to determine the extent of data collection needed, and
identify the sources to be able to gather reliable data and save resources.
2. Discuss the importance of number of clients as criteria in selecting potential area for microfinance
operation.
The number of potential clients should be enough to form a group or cluster of groups with 15-30
members, and be able to achieve branch viability or self-sufficiency of a new branch.
3. Discuss the importance of accessibility of the potential area to the branch.

The potential area should be accessible to the branch to ensure efficiency in terms of time travel of the
Loan Officer to and from the branch and within centers.
16


1. A
2. B
3. C
4. A
5. A
6. D
7. C
8. C
9. D
10. B
2

Lesson title: Promoting Microfinance Products & Services Materials:

2. 1. I can introduce loan products and services. References:
Technology NC II
Every morning you have two choices: Continue to sleep with your dreams or wake up and chase them.
1) Introduction
For this day, we are going to move on to the 2nd Core Competency which is the Promote
Microfinance Products and Services. Well, this is all about Marketing and Promoting… Who
among you experience to do Marketing and Promoting? Wow! That’s Great!! I think this
competency will be easier for all of you!! Let’s begin!
lesson.

What do you know about Microfinance Products & Services? Try answering the questions below
by writing your ideas under the What I Know column. You may use key words or phrases that you
What are the products & services

of MFI?
Why do MFIs need to promote its

products?
1

Who should promote the products

of MFIs?
B. MAIN LESSON
INTRODUCE LOAN PRODUCTS AND SERVICES

Why do MFIs Need to Market its Products?
Microfinance is a very dynamic sector. Institutions involved in microfinance face new market
challenges that include fierce competition, demand or diversified products and selective customers.
These result to high client dropout rates and low recruitment rates
To be able to recruit more clients, and reduce the dropout rate, MFIs recognizes the need to strengthen
their operations through marketing techniques used in other commercial businesses.
Why Should Loan Officers do the Marketing?
In a market-oriented business, like microfinance, operations people like the Loan Officers are also
the marketing people since they are the ones directly interacting, observing, and assessing clients. The
daily tasks of Loan Officers allow them to get feedback on the features of the products and observe the
behavior of the clients towards their products and services, even the products of competitors.
What Will Make Marketing Effective?
The best way to make things successful is to prepare a marketing plan. The Loan Officer can
design his or her own marketing plan, adopted from the marketing plan of the whole branch. A good
marketing plan considers the marketing mix or the “set of marketing tools used to pursue the marketing
objectives in the target market.”
In pursuing the marketing objectives of the branch, the Loan Officer must understand the four P’s of
marketing, namely:
1. Product
2. Price
3. Place
4. Promotion
2

Product is the actual products and services that the MFI offers to its clients. In the marketing plan, the
Loan Officer has to prepare to answer the following questions:
- What are the features of the loan, savings or insurance product of the MFI he or she is representing?
- What does the name stand for?
- How the MFI delivers its products and services?
- Is there a special training before the client can avail of the
product?
- Is there a penalty if the clients fail to repay?
Price is the cost of availing the product and services. For

microfinance, price is the interest rate and charges passed on to
clients.
Place is the location and channels of accessing the products and

services. The Loan Officer has to make clear to the clients the place
of transaction, in terms of release, collection, and center meeting.
Promotion is the means of communicating the value of the products

and services to the clients.
How Marketing is Done?
The marketing process that a Loan Officer uses is similar to the

marketing steps for any other product or services of the MFI. The
Loan Officer conducts the marketing and promotions after the
management has selected and approved the area for microfinance operation. Figure 1 summarizes the
process of marketing microfinance products and services.
Marketing Procedures
Step 1. Determining the Nature and Behavior of Microfinance Clients
To be able to recruit appropriate clients, the Loan Officer conducts an in-depth

analysis of the nature and behavior of microfinance clients. Understanding the nature and behavior of
clients also allows the MFI to modify its products and services, and maintain client loyalty. The Loan
Officer’s responsibility is to share the data gathered from his or her observations to the Branch Manager.
3

Identifying Potential Clients
Before the Loan Officer could

understand the nature and behavior of
the client, he or she has to establish first
who, his or her clients are. From the
result of the area survey and interview,
the Loan Officer has to segment his or
her target market.
Market segmentation is a process of
dividing the target market into smaller
groups using different variables like
demographics, needs and wants,
benefits expected and behavior.
Market segmentation helps the Loan
Officer understand the nature of their
potential clients, the types, and features
of product offerings suited to them, and
the marketing strategies to be
developed.
Some MFIs have standard factors in
segmenting their clients. It is important
for the Loan Officer to understand the
rationale for using these standard factors. Some of the useful factors for market segmentation in
microfinance are:
1. Financial Service Needs or Preferences - example savings, money transfer, size of loan
2.Demographics - potential clients’ characteristics such as age, gender, civil status, educational
attainment, family size, religion, language spoken, etc.
3. Socio-economic data - sources of income, living conditions, including health conditions of the
household members
4. Attitude toward a product or institution – positive, indifferent, negative. To understand the implication
of these factors to the MFI, Table 1 shows a sample classification using the age, gender, and socio-
economic data developed by World Women Banking:
Knowing Client’s Behavior
Result of studies show that microfinance clients’ preferences and behavior towards products and services
change due to the evolving trends in the microfinance industry. With so many institutions providing
microfinance products and services, the clients are presented with so many choices. Some of the
behaviors of clients are:
1. Clients can no longer wait for weeks to be able to get their borrowed money;
2. Most clients prefer simple and less paper works, since they often operate their businesses without
formal permit and documentation. They are not used to bulk of paperwork as part of the requirements to
4

avail of the products and services. The lesser the paper work means the faster they can avail of the
products and services;
3. Clients look for variety of products and additional services. They are no longer satisfied with single
and simple product;
4. Some experienced clients, make decision based on price; and,
5. Clients who have lower level of education require and value assistance in filling-out the application
form, information gathering, and transaction processes. They also value additional services like
insurance, house repair loan, education, and learning, particularly those services that can improve their
business.
At the end of the information gathering, the Loan Officer summarizes the data, writes analysis
and initial recommendations, and submits to the Branch Manager.
Step 2 – Developing Marketing Strategies
Marketing strategies are what the institution will do to achieve its objectives.
In simple terms, these are the ways to connect your product with the market. Below are basic strategies
that a Loan Officer can develop for
his or her target community.
1. Promotional and Marketing

Materials
In some MFIs, the Head
Office develops the promotional
materials, which in most cases are
written in Tagalog or English
language. Because of this, the Loan
Officer still modifies the promotional
materials to fit the language and
even culture of the target
community.
5

The World Women Banking listed some tips in developing promotional materials for loan products:
• Keep the message simple-

remember that people have
short attention span,
particularly your target
audiences who are busy not
only in business but often with
household chores as well.
• Emotional versus rational
benefits- when creating
promotional and marketing
materials use messages and
images that connect with the
customers on an emotional
level. Think of the time you
buy clothes, do you buy it
because of the price or
because it looks good on
you?
• Timing the promotions- aim
to the target clients at least
three times with the same
message. You have to
remember that different tools
or methods require different timing as to when to use it. We will discuss this in detail in the next input.
2. Link aging and Networking

Most MFIs are members of networks or local councils. Through the conferences sponsored by
these councils, MFIs are able to share the features of their products and services. With this, potential
clients have a chance to inquire about the products of the MFI, and even interview the participating clients
about the impact of the MFI to their business.
3. Communicating Products through the Local Government Units

Some MFIs promote their products through the Local Government Units either through a formal
orientation or through posting of promotional and marketing materials on the Bulletin Board at the
Municipal/City/Barangay Hall. In any which way, the Loan Officer has to follow the following protocols:
4. Client Activities
Most MFIs that implement group methodology conducts group activities with their clients. In these
activities, best clients and best groups are recognized.
There are presentations, contests that show clients’ talents, others have booth to display products
of clients. Often these activities are open to the public, thus, other non-members are encouraged to join
the MFI upon seeing the recognition, and the social activities enjoyed members of the MFI. These
6

activities serve as an indirect way of promoting and marketing the MFI in the community.
Step 3 – Selecting Appropriate Methods and Tools for Marketing
Sometimes we buy things because the product endorser is our favorite star or more often because
we believe in what the product endorser says.
These are the combination of marketing methods and tools. There are two points to consider
when selecting appropriate marketing methods and tools:
The message - what does the Loan Officer need to say to be able to attract the prospective clients to
join the MFI
The medium - a storage and/or transmission tools used to store and deliver information or data to reach
the target clients of the MFI.
Here are some of the common methods used by MFIs to market loan products:
1. Field Promotion
In microfinance, this is the most popular marketing method. Loan Officers do promotions by going
door-to-door to residential areas or conduct an orientation in a multi-purpose hall in the community or at
the center house, if there is one in the community. The Loan Officer does four stages in effective field
promotion.
Stage 1. Presentation.
- The Loan Officer should be well-dressed with his or her ID visible.
- Maintains eye contact with the client, smiles and introduces himself or herself.
- Introduces the name and gives the standard description of the MFI. For example, like ABS CBN
Bayan, “We do not just finance, we also educate and develop your business.”
Stage 2. Understanding.
- For home-based promotions, asks the prospective client if they have their own business.
- Marketplace-promotions, asks prospective clients if they would like to grow their business, need
to buy more inventories, invest in equipment, etc.
- Listens intently to what the client is saying.
Stage 3. Promotion.
- Explains the appropriate product that fits the needs and situation of the prospective client (if
MFI has different loan products)
- Explains the benefits of the loan products such as fast disbursement, minimal paper or
documentary requirements
- Explains the benefits of being a member of the MFI
- Provides information and answers any questions about the MFI’s products and services. Gives
out information sheet or application forms
- Encourages the prospective client to come to the branch with their documents
- Thanks the prospective client/s for their time and says goodbye
Stage 4. Follow-up.
- Takes the name of interested prospective clients
- Calls or visit the interested prospective clients within one week
7

2. Word of Mouth Marketing

In microfinance, this is the most powerful method, as most if not all MFIs rely on this because no
cost is needed to do this. However, the danger of this marketing mode is that prospective clients are free
to say anything about the institution, some maybe correct others may be contrary to the product features
of the MFI.
3. Brochures
The Loan Officer distributes brochures during field promotion or orientation and encourages
prospective clients to know more about the MFI’s products and services by reading it. However, poorly
designed brochures may damage the credibility of the MFI.
Step 4. Communicating the Value of the Product through Orientation

Client Orientation
Client Orientation is to inform clients about the features of the product. For those implementing
the word of mouth strategy in marketing, it is also the opportunity to clarify misconceptions about the
product and the MFI itself. It also serves as a venue to communicate the purpose of the MFI providing
microfinance.
Procedures in Client Orientation

1. Preparation for the Orientation.
a. Any orientation starts with the preparation of logistics, particularly the visual aid materials needed for
the presentation. The Loan Officer should use the promotional materials developed by the marketing
team. If no material is available, the Loan Officer should collaborate with other Loan Officers and the
Branch Manager to develop a standard guide in conducting orientation.
b. The materials to be prepared include:
- Flipchart or Manila paper
- Client orientation session book
- Application Form
- Attendance Sheet
- Overhead projector, if venue has power supply
c. The Loan Officer must also see to it that he or she is properly dressed and wears his or her official ID.
This adds up to the credibility of the Loan Officer as well as the MFI.
2. Set venue and time.

a. The orientation should be conducted on a specific time and day of the week. Oftentimes, it is
conducted in the afternoon when there are minimal business transactions or activities.
b. The Loan Officer should make sure that the session begins on time. It is here that the clients can
already observe the value of discipline.
3. Introduction of the Participants.

a. The purpose of the introduction of the participants is to set the tone of the whole orientation session.
It helps participants to relax and be comfortable in asking questions later on related to the orientation.
The orientation is not a formal training session, thus, “it should be conducted as informally as possible,
without losing sight of the objectives.”
b. The session should start with the Loan Officer introducing himself or herself. If there is any other
8

member of the MFI present in the session, they should also introduce themselves.
c. Then the potential clients should be requested to introduce themselves, stating their name, address,
and type of business.
4. Stating the Purpose of the Orientation.

a. The Loan Officer should state that the orientation is conducted to allow the participants to know more
about the MFI they represent and the products that in has developed to address the financial needs of
the micro entrepreneurs like the participants present in the session.
b. In stating the purpose, the Loan Officer should use simple language.
5. Introduction of the Institution.

a. Mission and Vision- Introduction of the institution starts with the mission and vision of the institution to
give prospective clients an idea of the purpose of the institution they will be joining. However, when
presenting, the Loan Officer should not read the visual aid but rather explain the content.
b. Key officers in the institution- this adds to the credibility of the MFI.
c. Name and Location of branches- this
makes the prospective clients know the
location of offices where they can
transact business. This adds to the trust
of the clients toward the MFI.
6. Presenting the Loan Products.

a. When introducing the types of loans,
or any other products it is better to write
it in a matrix or a chart, reflecting the
features for each product in order for
clients to visualize the discussion. An
example of a promotion matrix is
illustrated below:
7. Client Eligibility Criteria.

a. The Loan Officer then discusses the qualification of the clients. The Loan Officer must be careful that
discussions will revolve only around the policies and processes of the MFI.
8. Application Requirement.
a. The Loan Officer enumerates the Loan Application requirements,
which often includes:
- Loan Application, duly signed by the applicant
- Photos
- Any valid ID
- Promissory note
b. The Loan Officer also explains how the loan application form should be filled-out. It is better to have
an enlarged format of loan application to enable clients to visualize the discussion. Figure 1 in the next
page shows a sample application form.
9

c. For MFIs, the promotional activity or orientation is the best opportunity to distribute application forms.
Thus, the Loan Officers distribute the application forms and set another date for another meeting to collect
the form and the requirements.
9. MFI loan process.

a. The Loan Officer should also share the loan process to give clients an idea what happens next when
they submit their loan application form.
10. Ending the Session.

a. The Loan Officer should end the orientation, emphasizing the advantages of the loan product/s over
others, particularly 5-6 loans.
b. Do not forget to thank the clients, and share the next steps.
In some MFIs, the Loan Officer does not discuss the penalties for nonpayment of loans during the product
orientation so as not to discourage potential clients. They only discuss this once the clients have already
understood the principles of the institution and the rationale of the loan product.
CONDUCT ORIENTATION AND BRIEFINGS ON MICROFINANCE PRODUCTS AND SERVICES
UNDERSTANDING SAVINGS IN MICROFINANCE

For micro entrepreneurs, access to savings facility is important. For the MFI, it is the cheapest
source of fund. Even before microfinance, the poor had proven to save, through cash either at home, or
through participation in informal savings program.
Most of them did not have access to formal savings institution and invested their cash to other
types of assets like appliances or jewelries.
Why do People Save?

People save for different reasons. Most people save because of expected future events. Others
save anticipating there might be unexpected future events, which they will need cash, and easily recover
from what was lost. Some save because they want to invest or build their assets
In this context savings is defined as “money put aside by an individual or household for use in the
future. A key to good money management, savings help individuals and household manage risk, deal
with emergencies, smooth income, build assets, and meet financial goals. People save by putting money
aside when it comes in and by spending less when it goes out.” Despite the above reasons, people still
find it hard to save.
Why is it Difficult to Save?

It takes a lot of discipline to be able to save money. It is hard to resist the temptation of spending. The
main principles in savings are:
1. Spend less than what you earn. 2. Save every day or every week.
10

What are the Types of Institutions that Offer

Savings?
People can save in formal, semi-formal or
informal type of institution. Below are the
different types of institutions that offer
savings:
Savings Products for Microfinance
In microfinance, savings could be
compulsory or voluntary. According to World
Women Banking, “Compulsory savings have
been introduced as a condition for
obtaining a loan and are designed to ensure
that clients are able to meet their repayments. In contrast, voluntary savings programs do not assume
that clients need to be told how to save. Instead, they assume that when clients are offered a range of
quality savings products that cater to their needs they will choose to save.”
1. Compulsory Savings
Compulsory
savings are sometimes
called capital build up
(CBU) or fixed savings.
The amount is usually a
certain percentage of the
loan amount and is
deducted from the loan
amount upon
disbursement. Others
require a fixed amount
given together with the
weekly repayment. In most
MFIs, the amount saved
can only be withdrawn
upon resignation of the
client. Some MFIs provide interest on CBU, which could also be withdrawn upon resignation from
membership. The chart below illustrates how MFIs computes CBU.
In the above illustration, the Loan Officer should emphasize the importance of retaining the
membership to be able to accumulate savings, rather than the amount saved.
11

2. Voluntary Savings
This does not have
fixed amount, but depends
on the capacity of the client.
However, most MFIs set a
minimum amount to save
because it is too costly to
process small savings and
withdrawals. Subsequently,
some MFIs require that
once client has pledge an
amount for voluntary
savings, he or she may not
decrease or increase the
amount for the whole cycle.
The chart below shows a
sample computation of
voluntary savings.
In promoting the savings
product, the following step must be observed:
Step 1. Introduction
When introducing the savings product, do not start with the product itself. Instead, ask clients if
they have savings. Then present the benefits of savings, using the input on why people save. End this
part saying that there are different life events, which require money, and savings is the best option to
prepare people for these events.
Step 2. Presenting the Different Savings Products

Prepare a matrix showing the different savings products the MFI offers, minimum savings
required, weekly savings, interest earned, guidelines for withdrawal. The sample presented in the
previous input could be used as guide in writing the visual aid materials for presenting savings products.
Step 3. Presenting Benefits of Saving with your MFI

To persuade clients to save, the Loan Officer focuses the discussion on the benefits of savings
in an institution like MFI. Share these benefits below:
a. Convenience- emphasize that savings will be collected together with the repayment or the
group treasurer will collect savings and deposit to the bank, in case the MFI uses bank deposit scheme
in collecting repayment and savings.
b. Interest- emphasize how much clients can save at the end of the year out of the interest earned
by their savings.
c. Safety and security – emphasize that credibility of the MFI, its purpose, length of service,
location. Show the passbook to ensure clients that they can track their savings.
12

Step 4. Give tips on developing Savings Plan

To encourage potential clients to save, provide the idea on how to set their own savings plan. The guide
below could be presented to clients:
1. Set savings goals.
2. Figure out how much you need to save over what period of time to meet your savings goals. Set a
savings target.
3. Figure out how much you are earning over this period of time, the regularity (or irregularity) of your
earnings, and how much you can expect to save on a regular basis.
4. Identify which expense you can cut back (for example, video rental, cigarettes, or tea breaks) and
reallocate this amount to your savings.
5. Keep track of your savings. Check your passbook or other sources of information on your savings.
UNDERSTANDING MICROINSURANCE
As mentioned in the promoting loan products and other services learning element, the growth in
microfinance industry increased the demand for more innovative products and services. One product
equally important to savings and credit is micro insurance.
The term “insure” is used to mean protection from risk due to unpredictable events. “Insurance
reimburses an individual for some or all of financial loss that is linked to unpredictable event or risk.”
Insurance uses a system called “risk pooling” where each member pay a small amount called premium.
The premium is pooled together and is paid to individuals who suffered loss. The insurance
lessens the burden of paying big amount during the time of loss, by making small but regular premium
payments.
The International Labor Organization (ILO identified four (4) important elements that should be present
in an insurance product:
1. Insured event - the trigger event that leads to the payment of claims
for example sickness and death.
2. Benefit Amount - the amount of the claim that becomes payable upon
the occurrence of the insured event, it could either be a fixed amount
or the balance of the loan. The risk pooling mechanism makes it
possible for the benefit amount to be much greater than an individual’s
premium payments.
3. Beneficiary - the party that receives the benefit amount if the insured
event occurs.
4. Term of cover - the period within which the insured event must occur
for a claim to become payable.
Why Microfinance Institutions Provide Insurance?

It is important that the Loan Officer understands why micro insurance is offered as a financial service.
MFIs have several reasons for offering micro insurance.
1. Customer loyalty
Many MFIs realize that they need to offer a variety of products to enhance client retention, so that
even when clients do not want loan, they may still appreciate a savings account, a wire transfer
service, or insurance protection.
13

2. Product profitability
A diverse product menu allows cross-selling opportunities and spreads the acquisition costs for a
client across multiple products, enhancing product profitability.
3. Diversifying income streams
Micro insurance provides an additional source of income either from profit, if the scheme is provided
in-house (and well managed), or from fees, if done in partnership with an insurer. The latter situation
is particularly interesting to MFIs, which welcome opportunities to earn income without taking risks.
Common Types of Micro Insurance Products

Because of the high exposure of the microfinance clients to risks, one microfinance institution usually
offers a variety of micro insurance. The most common are death insurance, life insurance, disaster
insurance, and health insurance.
1. Death Insurance
Death insurance has long been existing among MFIs. It is commonly called “damayan” from the Tagalog
term “damay” in time of death. Members usually contribute agreed amount to cover the loan balance of
the member who died.
2. Life Insurance
Most MFIs like CARD and ASKI provide life insurance policies to their clients. Life insurance benefits are
given upon the death of the client who paid a certain premium for a particular period of time. Benefits
are given directly in cash to the client’s beneficiaries.
3. Disaster insurance
Because the Philippines is generally a disaster-stricken country, many livelihoods of MFI clients get
affected when disaster strikes. Thus, many MFIs are offering disaster insurance. Because this product
requires special skill to manage, most MFIs make reinsurance arrangements with commercial insurance
companies.
4. Health Insurance
Health insurance often covers hospitalization and medicines. Some MFIs though, particularly the bigger
ones, enroll their group of clients to the Philippine Health Insurance Program or PhilHealth. The benefits
are the same as a voluntary member of PhilHealth. Other MFIs have either outsourced health insurance
program or own insurance program.
Responsibilities of Loan Officers

Although the process of promoting insurance products is the same to that of loans and savings,
the actual techniques and methodology are different.
The Loan Officer’s responsibility is to sell the insurance products.
The Loan Officer bears in mind that not all clients can avail of the insurance products. This is because
not all clients are eligible for certain types of insurance. For example, in health insurance, the insurance
company would rather insure those who are less sickly.
Preparation for Actual Promotions

The International Labor Organization (ILO) suggests different techniques to enable Loan Officers
to promote the insurance product well, particularly those from the low-income group.
14

The Loan Officer can use these two techniques to promote insurance products:
1. Imaging- The Loan Officer should use the power of imaging to help the clients consider what happened
to the families left by the deceased, and how their situation can be less taxing to the family if there was
insurance. Although he or she has to be very discreet in discussing delicate words which clients may find
morbid.
2. Testimonial- The Loan Officer could bring a client who had good experience in insurance to discuss
the benefits and effect to the family of having insurance.
Prepare a marketing activity for your chosen MFI. Explain products and services offered through
an orientation.
The student should:

1. Explain Features of loan, savings and insurance products
2. Conduct Orientation and briefing on loan products, savings
product, micro insurance and other services
3. Practice Desirable work values relevant to the task of
conducting orientation and briefings on microfinance products
and services
1. Features of loan, savings and insurance products well
explained
2. Orientation and briefing on loan products, savings product,
micro insurance and other services conducted
3. Desirable work values relevant to the task of conducting
orientation and briefings on microfinance products and
services are practiced
1. Differentiate marketing and selling.

_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
15

2. Explain why MFIs should market its products and services?

_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
3. Why should operations staff should do the marketing?

_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________


_____1. It is the primary purpose of client orientation.

a. Inform clients about the features of the product.
b. Discuss the policies of the MFI.
c. Share the other services of the MFI.
d. Inform the clients about training program.
_____2. Preparation for the orientation to introduce loan products and services does not only include
the materials needed, but also for the Loan Officer to wear presentable clothes and his or her official ID
because…
a. it will make the Loan Officer appear well-groomed.
b. it will encourage clients to sign up.
c. it adds to the credibility of the loan officer and the MFI.
d. it creates friendship between clients and the Loan Officer.
_____3. The introduction sets the tone of the whole orientation session and helps participants to
___________.
a. know their seatmates.
b. know the Loan Officer.
c. bring out their talents.
d. relax and be comfortable to ask questions later on.
16

_____4. When stating the purpose of the orientation, the Loan Officer should mention that the
microfinance product has been developed because _________.
a. the MFI wants to address the financial needs of the micro entrepreneurs like the participants
present in the session.
b. the MFI has excess funds to share to the clients, thus they have developed a new product
line.
c. the MFI always develops microfinance product and services, it being the nature of its
business.
d. the MFI wants to develop the community thus; they promote different products.
_____5. The point of discussion on age requirement revolves around the ________.
a. age of terminating the membership.
b. legal age to sign documents.
c. age to participate in microfinance.
d. age acceptable to the group members.
_____6. When presenting the Mission and Vision, the Loan Officer should _______.
a. read the mission and vision, do not need to discuss what it means.
b. explain what the mission and vision means.
c. let the clients read without explaining what it means.
d. not present the mission and vision.
_____7. It is the better way of presenting product features.

a. Let the clients read it from the flyer.
b. Write features of each product in matrix form.
c. Write on the board so clients can compute.
d. Give clients a form to figure out the feature of the product
C. LESSON WRAP-UP
A. Work Tracker
completed.
17


___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
FAQs
1. How do we market microfinance products and services?
Marketing is the most neglected management function in the microfinance industry. Most MFIs do not
brand their products properly and fail to communicate their competitive advantage effectively. This
course emphasizes the need for effective marketing in enabling microfinance institutions to serve their
clients better and achieve improved financial performance in the process. The course will introduce
participants to the marketing mix: Product, Price, Place, Promotion and People. The course also
includes activities on crafting marketing plans, designing communications and advertisements, and
conducting marketing audits. In addition, the course also emphasizes that the best marketing strategy
is to have satisfied clients. Therefore, other topics that will be discussed include customer care and
customer protection.
18

KEY TO CORRECTIONS
Exercise No. 2
Proposed Answers:
1.
Marketing Selling
- Process of understanding and - Selling occurs only after a

satisfying customers’ needs in product is manufactured
order to make profits become sustainable. - The results of selling the product become the
- Continuous process of satisfying basis to improve the product, and continue the
customer needs, wants, and marketing process.
expectations superior to competition.
- Marketing starts before product
development.
- Marketing continues throughout the
product’s life, trying to find new customers,
improve product appeal and performance, learn
from product sales results, and manage repeat
sales
2. To recruit more clients and reduce the dropout rate due to fierce competition and demand for
innovative products and services.
3. The Loan Officer is the one directly interacting, observing, and assessing clients on a daily basis,
thus he or she knows the needs, gets the feedback on the features of the products, and observes
client’s behavior towards the product.

1. A
2. C
3. D
4. A
5. B
6. B
7. B
19

Lesson title: Promoting Microfinance Products & Services Materials:

2. 1. I can facilitate microfinance training programs. References:
3. 2. I can administer survey on enhancement of MFI products and Competency Based Learning
services. Material for Microfinance
Technology NC II
You don’t have to be great to start. But you have to start to be great. -Zig Ziglar
1) Introduction
Today, we will finish the 2nd Core Competency which is the Promote Microfinance Products and
Services. Let’s begin!
lesson.

What do you know about Microfinance Products & Services? Try answering the questions below
What are the steps on how to

coordinate a microfinance training
program?
What are the steps in facilitating a

microfinance training program?
1

What are the types of survey?
B. MAIN LESSON
FACILITATE/COORDINATE MICROFINANCE TRAINING PROGRAM

When coordinating a MF training program, you have to prepare well to avoid unnecessary
tensions and stress when the training program starts. The training programs referred here is part of the
non-financial services that your MFI offers to your clients. These programs include enterprise
development or values enhancement courses.
Here are the steps on how to coordinate a microfinance training program:
Step 1- Organize the schedule

The Loan Officer is responsible for coordinating microfinance training programs with the cluster
heads and members. Such task requires a lot of planning and preparation. It is important to ensure that
all training sessions are scheduled ahead of time so that both participants and trainers can already block
their schedule.
Step 2- Confirm trainers’ availability

Contact the trainer and check his or her availability on the scheduled date of the training session.
Once there is confirmation, send a formal letter stating the objective of the training and other details to
allow him or her design the training module on the profile of the
participants. Include the important details in the letter such as
who will be responsible for the transportation, board and
lodging, and the honorarium if any. You may also consider
other options in case the trainer cannot fulfill his/her
commitment.
Step 3 -Prepare logistics

Once you have confirmed the trainers’ availability, see
to it that the trainers will be provided with all the materials and
support they need for the training session.
It is also the best that you bring along brochures and

flyers of your non-financial services so you can promote it
during the training session.
2

It will be helpful if you will prepare a checklist of the things you need for the training like the visual
aids, materials, and equipment. Below is a list of common materials needed for training:
a. Tarpaulin
b. Blackboard / Whiteboard
c. Chalk / Whiteboard Markers
d. Manila Paper
e. Pentel Pens
f. Coupon Bond
g. Identification Cards or Name Tags
h. Camera for pictures and video for documentation.
i. Voice recorder
Step 4- Disseminate information through cluster heads

Call and inform cluster heads and ask them to disseminate information to the other members.
Announce the activity and all-important details during the center meeting as well.
If the training will be conducted in the community, you may ask for the help of the cluster heads
in fixing the venue and logistics, especially if you are the one assigned to conduct the training session.
This will give you some time to prepare before the training session starts.
Facilitate Microfinance Training Program
When facilitating the training program, it is important to know the profile of the participants so you
can adapt the presentation to them.
Steps in Facilitating a Microfinance Training Program
Opening
o Start the session by making sure that the atmosphere is conducive for learning.
The training sessions should be in a well-ventilated room, or if the training session will be held outdoors,
be sure you have a black board or people can sit comfortably.
o Begin with a prayer, greet everybody accordingly, and introduce the topic for the session.
Establish rapport with your audience by acknowledging their presence and allowing each one to introduce
him/herself. Start with an ice breaker before every session, to keep the senses awake and alert. Once
you’ve set a pleasant mood and all trainees appear relaxed already you may already start the training
3

Training Proper
o Establish eye contact with the participants all the time,
so you can have a personal connection with them. More so,
such act will help them get connected to the whole lecture time.
Maintain an audible and pleasant speaking voice – neither too
loud nor too soft. A loud voice can irritate the audience, while a
soft modulation might set them to sleep.
o During the training session, encourage exchange of
ideas, most especially when issues or concerns crop up in the
heads of the participants. Through this healthy exchange of
ideas, you can ensure clarity of lecture, and spontaneity on the
part of the participants. Manage time, and agree to disagree if
there are issues of two opposing opinions. Allow the attendees
to ask questions, and be polite every time they want to share
their ideas. Avoid unnecessary information about one’s self or other topics which can side track
discussions and training out of hand.
Closing
o At the end of each session be sure to summarize everything, and end with a prayer. The training
session may end with a short quiz to check if the participants understood the ideas and concepts. In case
there are still vague ideas, spend some time to clarify the questions. Thank the participants for their time
and cooperation.
Coordinate Microfinance Training Programs
Step #1 Organize the schedule
Step #2 Confirm trainers’ availability
Call directly the trainer and check his or her availability on the scheduled date of training sessions.
Step #3 Prepare the logistics
Once you have confirmed the trainers’ availability, see to it that the trainers will be well provided
of the materials that they would use for the lecture.
Step # 4 Disseminate information through cluster heads
Call and inform cluster heads and ask them to disseminate information.
Facilitate Microfinance Training Program

When facilitating an MFI Program, you have to be ready to face up with group dynamics and group work.
o Start the session by making sure that the atmosphere is conducive for learning.
o Begin with a prayer, greet everybody accordingly, and introduce the topic for the session.
o Establish eye contact with the participants all the time, so you can have a personal connection
with them.
o During the training session, encourage exchange of ideas especially when there are issues or
concerns raised by the participants.
o At the end of each session be sure to summarize everything, and end with a prayer. Thank the
participants for their time and cooperation.
4

ASSISTS CLIENTS ON PROMOTING THEIR PRODUCTS

Businesses of MFI clients vary from trading to manufacturing to services. A lot of their products
are sold and distributed in “tiangges” or flea markets. However, some of these products have very good
quality and may pass the market standards if they are developed and promoted properly. Thus, one of
the non-financial services offered by MFIs is the assistance in the development and promotion of their
products; some call it Business or Enterprise Development Services (BDS/EDS).
For some MFIs, this is an expression of their social mission because it hopes to enhance the
capability of the clients in doing business, which hopefully would improve their productive and economic
situation.
Some MFIs have BDS or EDS unit that takes care of training and developing
the clients’ business while other MFIs partner with other institutions to perform these functions. In most
cases, the role of the Loan Officer is to coordinate the provision of this service with the BDS officer. It is
therefore important that you as Loan Officer understand your role in assisting clients to promote their
products.
In terms of business development, the roles of the Loan Officer are:

1. Identify the products with potential
Identify quality products which can pass the market standards.
Ask for basic information about the product so you can assess whether it has potential. This
could include a ready source of materials, high demand, competitiveness of the price and the
product, and the volume capacity in terms of production.
Ask the client what kind of assistance they need to improve their products.
Find out if the client is willing to accept the business development services
of the MFI.
2. Coordinate the assistance required with the BDS/EDS Officer
Discuss with the BDS/EDS Officer the basic information you have
gathered from the client to help them identify the next steps to be done.
Discuss the kind of assistance identified by the client and his willingness
to avail of the service
Discuss with the client the initial feedback of the BDS/EDS Officer
3. Set a visit by the BDS/EDS Officer
If there is a recommendation to visit and personally assess the product of the client by the
BDS/EDS Officer, set an appointment with the client so he or she can prepare for it.
Document the major points discussed by the BDS/EDS Officer with the client.
Strategies to Develop or Promote Clients’ Products

1. Capacity Building Programs
Some MFIs organize trainings or seminars related to enhancing marketing skills or product
development. This could be conducted by the BDS/EDS Department or other external providers.
Other seminar or training topics that could be offered to clients are those related to business
management like bookkeeping, accounting, business registration, inventory, and marketing.
2. Promotion on trade fair or communication media
Most local government agencies, social development organizations or church-based
organizations often invite MFIs to send their clients to local trade fairs organized during Christmas
5

season or fiesta. This is a very good opportunity to promote the products of the clients.
3. Identifying Market for the Client's Products
Other services could include forming linkage with buyers who might be interested in the clients’ products
or setting-up networks of local buyers and sellers.
One of the non-financial services offered by the MFI is business development services or enterprise
development services.
BDS/EDS is an expression of the MFI’s social mission.
The role of the Loan Officer in assisting clients in their business is to
coordinate with BDS/EDS Department or with partner institution.
To identify the good quality products ask for basic information about the product so you can
assess whether it has potential or not.
The Loan Officer coordinates the assistance required to the BDS/EDS Officer or partner
institutions to allow them to identify the next steps to be done.
Other strategies to assist clients in order to develop or enhance capacity is through:
1. Capacity building
2. Promotion on trade fair or communication media
3. Identifying
market for
clients
ADMINISTER SURVEY ON
ENHANCEMENT OF MFI
PRODUCTS AND
SERVICES
Microfinance institutions
conduct survey among their
clients from time to time to
respond to the fast-evolving
needs of the microfinance
clients. The information
generated from these
surveys will keep institutions
on track in answering the
needs of the clients with
regard to financial products.
Administering a survey for
enhancement of products
will deepen your
understanding of the
relevance of the
microfinance products to
your clients. You will
understand how they
perceive the use of money
6

and how they value savings, loans, and insurance.
Types of Survey
a. Questionnaire – a list of questions that is administered by the respondent to get useful information or
opinion on various microfinance products and services. It is important that the instructions and questions
are clear and simple to ensure that the respondents can answer them correctly. In case there are vague
questions, the Loan Officer has to be ready to help the respondent without influencing his/her answer.
b. Interview – a structured conversation with the respondent at a specified time. The researcher or the
Loan Officer administers the survey and the respondent is not given a copy of the survey from. The skills
of researcher or the interviewer is critical in this kind of survey to help the respondents answer the
questions correctly.
The main role of the Loan Officer is to administer the survey instruments according to the instructions of
the researcher. It is important to attend the orientation to know the objectives of the research and the
guidelines in the conduct of the survey. The results of the survey are usually given to the Branch Manager
or the research department for data processing and analysis.
Survey Administration
Your important task of administering survey is crucial in getting up to date information from your clients
to enhance your products and services. Surveys may be administered to current or former clients and
even to prospective clients whose opinion will be helpful in improving your products and services.
Preparatory Phase
1. Attend orientation given by the management make sure you understand the purpose, goal of the
research. Knowing the purpose of your survey will help you focus on how to conduct the survey.
2. Study and understand how the instrument will be used. This will help you anticipate questions or
concerns that the respondents may raise.
3. Prepare work plan so you can accommodate other tasks and duties. If you will be given an additional
assignment to administer survey, study your schedule very well so as not to leave out important tasks
such as collecting loans.
Questionnaire
1. Explain the questionnaire and the purpose of the survey.
2. Assure the respondents that all the information will be treated with confidentiality or anonymity and will
not in any way affect his relation with the MFI.
3. Do not promise anything to the respondents or create false expectations.
Inform the respondents that the study is conducted so you can improve your services, but be clear that
any changes will not be immediate.
4. Let the respondent fill-out the questionnaire at his own pace. If he is having difficulty in any of the
survey item, be ready to assist him without influencing his answer to the question.
5. Check if the questionnaire is completely filled-out. Inform the respondent if he missed any item and
find out the reason if it was skipped intentionally.
6. Thank the respondent and be sure to answer all his questions regarding the survey before leaving.
7. Keep the completed forms and submit them to the Branch Manager or the officer-in-charge.
7

Interview
1. Set an appointment and be punctual. This will allow you and
your respondent to prepare before the interview.
2. Wear proper attire or your office uniform.
3. Bring all the materials you need for the interview. If you are
using a recorder, check if you have spare batteries or cassette
tapes.
4. Inform the interviewee that you will be taking notes while
conducting the interview and ask permission before recording
your conversation.
5. Set the respondent at ease. Assure the respondent that all
the information will be treated with confidentiality.
6. State the questions clearly and repeat if necessary.
Rephrase the question if this is not understood by the
respondent.
7. Allow the respondent to answer and express himself freely.
If the first response does not seem to satisfy the question,
probe the interviewee politely.
8. Thank the respondent after the interview and explain how the information will be of use to the MFI
Microfinance institutions conduct survey to respond to the evolving needs of the clients.
The common survey methods are questionnaire and interview.
Questionnaire is a list of questions that is administered by the respondent.
Interview is a structured conversation with the respondent at a specified time.
Attending the survey orientation will make you understand the purpose and goal of the
research.
It is necessary to explain the purpose of the survey to the respondent.
The Loan Officer should assure the respondents that all the information will be treated with
confidentiality or anonymity.
The survey forms should be completely filled-out.
Assess at least two (2) MFI products and services offered together with its marketing activities.
8



_____1. When coordinating a microfinance training you need to:

a. Understand the benefits of microfinance products.
b. Plan and prepare the training design.
c. Write and study modules about a topic in microfinance.
d. Participate and study microfinance
_____2. The training program usually includes topics on:

a. Livelihood skills
b. Sports and recreation
c. Playing musical instruments
d. Computer literacy
_____3. The loan officer confirms the trainer's availability by:

a. Sending a letter and wait for the response.
b. Send an SMS to the trainer a day before the training.
c. Call the trainer and request for a confirmation.
d. Ask someone to check the trainer’s schedule.
_____4. All the materials are needed in the training venue except:
a. Reference Books
b. Tarpaulin
c. Camera for pictures and video programming
d. Pentel Pens
_____5. The cluster heads can help you in preparing for the training program by:
a. Providing budget for the training
b. Disseminating information to the members
c. Designing the training program.
d. Preparing the visual aids and handouts
_____6. When answering queries you have to be:

a. polite
b. annoyed
c. hurried
d. don't entertain questions when you are facilitating
9

_____7. Establish rapport with the participants. Spend a lot of time in cracking jokes to put them at ease.
a. First statement is true, second statement is false.
b. First statement is false, second statement is true.
c. First and second statements are true.
d. First and second statements are false.
_____8. Allow attendees to ask questions and listen every time they want to share ideas. Establish eye
contact with the participants all the time, so you can have a personal connection with them.
a. First statement is true, second statement is false.
b. First statement is false, second statement is true.
c. First and second statements are true.
d. First and second statements are false.
C. LESSON WRAP-UP
A. Work Tracker
completed.

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
10

FAQs
1. What are the ways to make microlending better?
1) Increase flexibility
Traditionally, microfinance organizations have required clients to use loans solely for investment
in their own business, says Joanna Ledgerwood, editor of The New Microfinance Handbook and
director of Financial Sector Deepening Zambia (FSDZ). But, she adds, many use loans to pay
for food or other expenses, such as a new roof. This is not bad, she says, as long as the
borrower has the means to repay the loan and interest. Indeed, by insisting that borrowers
invest only in their businesses, “We sometimes force clients to lie,” Ledgerwood says. If instead,
for example, MFIs were willing to give a loan to a farmer to survive the “hungry season”—the
time when a farmer’s stockpiles run out before the next harvest—she wouldn’t have to pre-sell
her harvest at, say, a 50 percent discount to pay for food during that time. Instead, she could
hold on to her crop and sell it at market prices when it’s harvested or even later. “If the objective
of microlending is to increase incomes and improve the quality of people’s lives, credit that
allows a family to eat during the hungry season can do exactly that,” she says.
2) Use holistic financing

Some MFIs, including FINCA (the Foundation for International Community Assistance), are
beginning to look at microlending from a more holistic perspective. In Uganda, FINCA recently
began giving loans for the purchase of solar lanterns. These lanterns, which have a two-year
warranty—unusual in a market flooded with cheap and unreliable products—cost $40 each, and
replace hazardous and costly kerosene lamps. The lanterns provide light for children to study at
night, give adults more time to work and can be used to charge mobile phones and power a
radio. FINCA estimates that the lanterns, usually financed on a six- to eight-month loan
repayment schedule, actually pay for themselves in six months with the savings customers
accrue on phone charging and fuel costs. Other possible energy-efficient solutions FINCA is
exploring—mainly developed by recent engineering graduates in the U.S.—include solar-
powered water purification and irrigation pumps.
3) Employ research
For years, the effectiveness of microlending programs has been measured primarily by the rate
of loan repayment as well as through anecdotal information. But just because a client repays a
loan does not mean the business has been profitable. A borrower may take on more debt, sell
assets (like a cow), go without food or even take children (usually girls) out of school to help
work and make the money needed to repay the loan. Rather than assume that loan repayment
guarantees positive impact, Innovations for Poverty Action (IPA), an international research and
policy nonprofit, maintains that the same rigorous controlled studies used to determine drug
effectiveness should be used to measure the success of financial programs. These types of
studies already have shown the limits of microlending. “Loans are an important financial tool,
but only one tool, and not a universal tool,” says Beniamino Savonitto, initiative director of the
Global Financial Inclusion Initiative at IPA. “There are other products low-income people want
and need, like savings accounts.” For example, he says, it makes sense to help farmers put
11

aside money to cover food costs during the hunger months, rather than encourage them to take
out expensive loans.
4) Take advantage of technology

Technology is the microfinance game changer. Through big data analysis of mobile phone
usage and money transfers, lenders can evaluate potential customers and make loans without
making clients travel long distances to bank branches. This makes the process faster and
easier, but still secure, says Rupert Scofield, FINCA president and CEO and author of The
Social Entrepreneur’s Handbook. Using mobile money services also lowers costs both for banks
(they don’t have to invest in buildings and staffs) and for clients (they can save on bank fees).
Technology is also helping women, says Mary Ellen Iskenderian, CEO of Women’s World
Banking. Being able to use cellphones to get loans or make payments or deposits—instead of
walking many miles to make transactions—is extremely convenient. Women also value
confidentiality. They may not want their husbands, fathers, sons or neighbors to know that
they’re saving or to have access to those funds—fearing that family members will take this
money and use it for other purposes. Thus, if the cellphone is in the woman’s name, mobile
money accounts can provide much-needed privacy and security.
5) Make it personal
“We need to tackle the complex needs of women and their families, which a loan can only partly
address,” Iskenderian says. “Microlending will be more effective if there are other safety-net and
asset-building products in place—like insurance, savings and pensions—so that families can be
secure and repay that loan.” This also means retraining the frontline staff who are making the
loans, so they can better meet clients’ individual needs. In Gujarat, India for example, many
women microentrepreneurs pursue the potentially profitable business of buffalo dairy farming.
But a buffalo costs 30,000 rupees (roughly US$473, as of April 29, 2015), and the MFIs in that
state do not lend more than 10,000 rupees ($158). So women are forced to borrow from other
sources to start their businesses. “The key factor is listening to the client,” Iskenderian says.
“Financial services tailored to clients’ needs—and women’s needs in particular—will be more
effective at really making a difference.”
KEY TO CORRECTIONS

1. B 5. B
2. A 6. A
3. C 7. A
4. A 8. C
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Lesson title: Forming Group of Microfinance Clients Materials:

2. 1. I can orient target client. References:
3. 2. I can conduct background investigation. Competency Based Learning
Technology NC II
Life is short. Live it. Fear is natural. Face it. Memory is powerful. Use it.
1) Introduction
Good morning/afternoon class, now that we are done with the Two Core Competencies of MFI,
let us now proceed with the 3rd one which is the Form Group of MF Clients. Let’s start ‘coz I know
you are very excited to begin!
lesson.

What do you know about Forming Group of Microfinance Clients? Try answering the questions
below by writing your ideas under the What I Know column. You may use key words or phrases
that you think are related to the questions.
What is a target client orientation?
What are the procedures in

orienting target clients?
What is a credit investigation?
1

B. MAIN LESSON
MEET WITH BARANGAY OFFICIAL/S

The task of the Loan Officer does not end in selecting potential areas for microfinance operations or
promoting microfinance products and services to communities. Your task as the Loan Officer/ Account
Officer / Project Officer of an MFI is also covered by your ability to form, evaluate, organize, and develop
group clients.
Request letters can have very positive results if written correctly. When writing your letter of
request, keep in mind exactly what it is you wish to accomplish, and construct your letter accordingly.
Commonly, MFIs have their own formats in preparation of request letters address to barangay officials to
schedule a meeting. As you write your letter, remember the importance of your request. There may be
a great deal riding on the outcome of this correspondence. For this reason, consider the following points
as you compose your letter:
1. Think of your audience.

2. Introduce yourself or the MFI.
3. Be straightforward.
4. Be clear.
5. Be specific.
6. Be thorough.
7. Be brief.
8. Be courteous.
9. Make the request as easy to comply with as possible.
10. Be confident.
11. Don't apologize.
12. Don't be manipulative.
13. Include your contact information.
14. Express your gratitude.
15. Keep a receiving copy of your request letter.
16. Always have a conclusion
Upon the receipt or approval of the request letter by the concerned barangay officials, the meeting may
now be scheduled to the most convenient time of the official and the MFI personnel.
The LO should practice punctuality, at least 30 mins. to 1 hour before the scheduled time to avoid
chances of being late on said schedule or to be easily informed if the barangay officials is rescheduling
the meeting due to personal or professional reasons. If the so, the LO should follow-up the most
acceptable and reasonable time for the reschedule meeting.
2

During the meeting, the LOs together with some MFI personnel (Team Leader, or Branch
Manager) should be polite in introducing themselves. Wearing company ID / Field uniforms will be helpful.
Aside from the leaflets, or marketing paraphernalia, the team should bring the results of the area
mapping/area scanning to confirm and validate about the probability of forming group of microfinance
clients in the area. Remember the concept of courtesy call.
MFIs through representatives do a courtesy call to a local official, usually the barangay captain or
the Mayor of the area being considered as a possible market for microfinance services. It is also an
opportunity to request permission from the local leaders even before any pre-operation activities in a
municipality or barangay, such as conducting area survey and interviewing community members.
Do not forget to answer and take note of whatever questions or vague information that the officials are
giving.
The Branch Manager takes the lead when conducting a courtesy call. You, as the Loan Officer,
accompany the Branch Manager so you can be introduced as the one who will be assigned in the area
in case you will operate there. It is also your opportunity to share other services offered by your MFI
which may not be mentioned by your Branch Manager.
After the meeting, do not forget to express your sincerest gratitude regardless of whatever the results
are.
Note that as you form group of microfinance clients in the area, the barangay officials will be your
partners in facilitating effective and efficient microfinance operations.
What is a Target Client Orientation?

(1) A target client orientation is an activity where the Loan Officer introduces to the target clients
(applicants) the basic information about the MFI and the products and services it offers.
What Are the Objectives Of Target Client Orientation?

1. To convey the MFI’s Vision and Mission;
2. To introduce the MFI’s products and services
(e.g. loans, savings and insurance); and,
3. To encourage participants in the orientation to join and become members upon knowing the
MFI’s microfinance program and services.
Pointers to Remember in Conducting Target Client Orientation:

1. Dress simply, neatly and appropriately.
If you are shabby (untidy), you will attract attention and the participants will not be able to
concentrate on what you are saying. The same will happen if you are too extravagant in your outfit.
2. Be friendly and smile often. Your enthusiasm must be genuine.
3. Explain the topics in clear, straightforward, and simple terms.
Do not use terms that they will not understand.
For example, do not use the term “loan size” when you mean “loan amount.”
4. Focus on the benefits to the participants.
5. Explain in clear and authoritative voice but do not be arrogant in the way you speak.
Avoid being a know-it-all. You also learn from the participants.
3

6. Be courteous and polite.

Use “po” and “opo.” Normally, Loan Officers
address the participants “Nanay” or “Tatay” to accord them respect.
7. Connect with your audience.
Speak to them directly and maintain eye contact
with your audience.
Procedure in the Conduct of Orientation to Target Clients

1. Prepare for the orientation.
2. Welcome attendees.
3. Discuss MFI profile, products, and services.
4. End the orientation or wrap up.
Step 1. Prepare for the orientation

a. Prepare the outline and review the details of the topics to be discussed. (6-7)
The topics are commonly discussed in the following order:
• MFI Profile
- Description of MFI
- Vision / Mission of MFI
- Year MFI was established
- Size of MFI in terms of number of branches and employees
- Products and Services of MFI
b. Prepare the materials hours before the orientation.
c. Set up the orientation venue at least 30 (8) minutes before the session.
- Prepare the chairs and ensure that there is enough space and seats for the participants.
Step 2. Welcome the prospective clients.
Step 3. Discuss the orientation topics
Step 4. End the orientation

What is credit investigation/background investigation (CIBI)?
The decision to grant a loan is not as simple as giving out loan application forms. Before
a Loan Officer makes a decision whether to grant a loan or not, the loan applicant must undergo
a credit investigation/background investigation (CIBI) first. CIBI is the process of collecting
information about a loan applicant to verify the applicant’s personal background, financial
capacity, and repayment history. CIBI is generally conducted through interviews with the various
sources of information.
The findings gathered through interviews would help you assess whether a loan applicant
is creditworthy or not. The overall goal of CIBI is to screen out high-risk applicants to minimize
repayment problems later on.
4

Assessing Personal Background

In microfinance group loans, the applicant’s character is generally given more weight than capacity on
deciding whether to grant the applicant a loan or not. Look at the reflection of character (trustworthiness
and reliability) as revealed by reputation and references. Character is an important aspect in deciding to
release a loan to an applicant.
To assess the applicant’s character, focus on his or her reputation, stability, repayment behavior, and
aptitude for entrepreneurship. Let us go over them one by one.
1. Reputation - Refers to the applicant’s standing in the community, ties to community associations, and
accomplishments. Reputation is considered the most important of all aspects of character. Listed below
are some indicators of reputation:
- Good reputation confirmed by neighbors (e.g. honest)
- Good reputation confirmed by peers
- Clear from legal cases (e.g. no record in barangay)
Sources of information: neighbors, barangay officials
2. Stability - Refers to the applicant’s longevity and degree of permanency of residence in community:
- Resident of the community for a long time (e.g. 5 years)
- Married with children
- Children attending school
Sources of information: applicant (application form), neighbors
3. Repayment Behavior - Refers to the applicant’s history with other creditors (e.g. stores, neighbors).
How an applicant pays his or her other obligations tells you how he or she will pay his or her loan.
- How much outstanding balance with other financial institutions?
- No past dues with other creditors?
- Rent is paid on time?
Sources of information: store owner, landlord, suppliers, neighbors
4. Entrepreneurship – Refers to the applicant’s skill to manage a business.

- Applicant explains use of loan clearly?
- Applicant has clear plans to deal with competition?
- Applicant keeps record?
Source of information: applicant
Assessing Financial Capacity

Capacity refers to the ability of the applicant to earn enough to repay the loan on the agreed terms (i.e.
size of amortization and frequency of payments).
5

To assess the applicant’s repayment capacity, the basic indicators are:

- Can the business generate enough cash to make the loan payments?
- What are the family needs?
- How does the business compare to other businesses of the same type within the community?
CIBI Form
In most MFIs, there is a form used when conducting CIBI.1 All a Loan Officer has to do is to fill-out the
spaces and tick choices where applicable. In some, a CIBI form is more like a questionnaire. Figure 1
shows a sample of CIBI form:
CIBI Forms used by MFIs generally covers the following:

1. Personal Information – for validating applicant’s identity
- Name
- Birthday
- Marital Status
- Profession
- No. of Dependents
2. Business Information – for validating applicant’s stability and entrepreneurship aptitude
- Type of Business
- Length of time a business is operating
- Loan proposal
3. Household Income – for verifying financial standing
- Primary business
- Gross income per week
- Net profit per week
- Earning relatives who stay in the same house with the applicant
- Other sources of income
4. Household expenses – for verifying financial standing
- Rent
- Electricity
- Water
- Other loans
5. Housing Index – to verify that client is within target of population of the MFI that is, poor
entrepreneurs
6. House appliances – to validate applicant’s inclusion to the program for poor entrepreneurs
PROCEDURE IN CONDUCTING CIBI?

✓ Set the schedule for CIBI
✓ Interview Brgy. Officials
✓ Interview neighbors, suppliers, store owners
✓ Interview co-makers
6

ORGANIZE GROUP/ CENTER/ CLUSTER
In recent years, however, some MFIs shifted to individual lending but still maintained the group
aspect to the program. The borrowers are still organized into groups; come together for weekly meetings
and loan payment, but the liability is individualized. In other words, the responsibility of a member became
limited to the payment of his or her own loan, and at most, to the loan of another member for whom he
or she signed as co-maker.
7

Nevertheless, regardless of the scope of liability, organizing the borrowers into groups is important for
the following purposes:
GROUP LIABILITY INDIVIDUAL LIABILITY

Credit discipline Credit discipline is easier to instill because of Protection of one’s reputation
peer pressure and support. Everybody is in the community becomes an
aware that a bad loan of any member will incentive for repayment
have an effect on the credibility and future because collection is done in
benefits, such as new loans, of the whole the weekly group meetings
group. where borrowers learn of each
other’s status.
Pre-screening ofLoan A loan applicant can only join a group if the
Applicants members agree based on a set of criteria,
primary of which is creditworthiness. This
lessens the time and effort of the Loan Officer
in collecting information about the applicant’s
character and therefore can focus more on
verifying the existence of the business and
assessing repayment capacity.
Peer Monitoring Because of group liability, the borrowers
make sure that the loan of each member is
used properly and the business is managed
well.
Decision-making The members are empowered because they
are directly involved in the decision-making
processes of the loan operation such as:
a. pre-selection of loaners;
b. pre-approval of the loan amount applied for
by each member;
c. disciplinary action against an erring
member;
d. pre-approval of any request for a repeat
loan and
e. problem solving
Lowering Transaction a. Expenses related to the release and
Costs collections of loans are cheaper because
these are done in a shared
time and place rather than separate individual
appointments.
b. Operating costs are lowered since
certain tasks like monitoring and collection
follow-ups are shifted from
the Loan Officer to the borrowers
8

A. Group Liability
Generally, there are three types of groups under the group liability system. These are the
small/sub-group, center, and cluster. The small/sub-group is usually composed of five to seven borrowers
who are mostly women living in the same barangay (community). The members of this type of group are
typically in a similar economic condition, which generally means being engaged in a microenterprise such
as a small retail store (sari-sari) or a small eatery (carinderia).
Then five to six of these small/sub-groups are regrouped together to form a center. Therefore, a
center usually comprises 30 to 40 members. The name, center, is derived from the obligation of the small
groups to construct a meeting-center, a house or shed where they can discuss their concerns, and
conduct their business with the MFI. The center is where the Loan Officer collects the loan payments and
where the individual members transact business with the MFI.
A cluster is formed when all the centers being managed by a Loan Officer is grouped together.
Forming centers into a cluster promotes unity and creates awareness among center members that they
are part of one big community of borrowers that work hand in hand with the MFI to reach their goal of
improving their lives. A cluster usually consists of at least ten centers.
The small/sub-group, center, and cluster have its own set of officers, which is usually composed of a
leader, assistant leader, secretary, and treasurer.
Where does the liability for any non-paying member start?

The liability for any non-paying member generally starts with the small/sub-group, then the center.
In other words, it is only when all five to seven members of a small/sub-group fail to pay for the obligation
of one member will the center as a whole becomes responsible for the loan of that member. The cluster,
when properly formed and motivated, can also initiate efforts to produce the amount needed to pay off
the unpaid loan balance of a member(s) of that particular cluster. Based on actual experience of some
MFIs, the cluster raise funds by organizing raffle draws or Bingo games in the community.
The organizational structure commonly adopted by MFIs using group liability is shown in Figure 1.
B. Individual Liability
The lending group in the individual liability approach normally starts with five to six borrowers who live in
the same community and received a loan at the same time. Now this group grows in size as succeeding
batches combine with it. Usually, a group is limited to thirty members. When a group reaches its maximum
number, the new batches will form part of the second group in that particular area.
Some MFIs also call this group a cluster. The group or cluster has its elected set of officers. The
typical organizational structure followed in the individual liability approach is shown in Figure 2 below
Organizing Groups
In general, there are three main steps involved in organizing groups or a center. These are formation,
training, and recognition.
9

Let us consider the first step.

A. Formation
The first step in organizing group is group formation.
When Does Group Formation Start? The initial group formation typically starts after the orientation
seminar, which you, as the Loan Officer, is tasked to conduct.
How are groups formed?

1. Group Liability. You will encourage all aspiring members who were present in the orientation seminar
to form a group or center voluntarily by finding
trustworthy individuals who meet the minimum qualification set by your MFI.
Choose a potential group/center leader who will be in charge of initiating the formation and pre-screening
of interested applicants. This person will become your contact person in that particular community. For
new areas, a center with 15 – 30 members must be formed. Within this center, members should further
divide into groups of five.
For existing areas, you can assign the interested applicants to any group within a center who still
has available slots. If there are enough new members to form a new group of five or six, they may do so.
In any case, the existing groups and center who will take in the new members must approve the joining
of the new member in their group or center.
2. Individual Liability. There will be no group formation after the orientation seminar for the individual
liability approach. Instead, groups are formed after the loan approval where borrowers are grouped into
five or six members only for purpose of releasing the loan by batch. These batches eventually come
together to form one big group of about thirty members. Since the members no longer contribute towards
the repayment of a non-paying co-member, group formation in individual liability loans is largely intended
to consolidate and simplify transactions such as collection of
payments and loan disbursement.
Who are qualified to join a group?

1. Group Liability. Every MFI has its own minimum loan eligibility criteria.
But generally, group members must be:
- trustworthy individuals;
- residents of the same community (barangay), preferably neighbors and good friends;
- with existing business (some MFIs accept those with no existing business provided they possess
business skills);
- not more than 65 years old (usually the age limit to qualify for insurance benefits);
- only one member of a household may be in a group (to avoid many members being weighed down by
a family problem); and,
- preferably with a daily income.
Much of the success in group lending with group liability starts with the proper selection of group
members. Therefore, it is very important that the qualifications and mechanics of group formation have
been communicated clearly to the aspiring members.
10

2. Individual Liability. The borrowers who will be grouped together are only those who belong in the
same community and who were approved and released a loan based on the MFI’s criteria, foremost of
which are character, household income, existing business, and other sources of household income.
B. Training
Now let us look at the second step in organizing groups/center.
1. Group Liability
What is a Compulsory Group/Center Training? Compulsory Group/Center
Training is generally a minimum of 4-day (one hour per week) of education where you, the Loan Officer
explain in detail the program’s policies, procedures, and guidelines. Different MFIs have different
terminologies for this activity.
For example, ABS-CBN Bayan Foundation calls it POS (Pangkat Orientation Seminar), and the
Center for Community Transformation (CCT) calls it PMES (Pre-Membership Education Seminar).
However, it is called, the compulsory group/center training and have the same objective of empowering
the aspiring members to prepare them for the collective responsibilities of obtaining a loan including
keeping a harmonious relationship with their co-members. Attendance is a requirement for all aspiring
members who have formed their own group/center.
2. Individual Liability
The borrowers of individual
liability loans generally do
not undergo a Compulsory
Group/Center Training.
What they are given is a re-
orientation of the MFI’s
vision/mission and program
policies and procedures
before the loan is released.
They also meet with the
Loan Officer before loan
release to elect officers and
record the final names of
the qualified applicants in
the Loan Officer’s register
and meet potential
members who were invited
by the applicants to the
meeting.
However, there are also

some MFIs such as the
Center for Community
Transformation (CCT), who
also makes their loan
applicants go through a
11

Compulsory Training, which they call Pre-Membership Education Seminar (PMES), although the
approach they are using is individual liability.
C. Recognition
Now let us discuss the last step in organizing a
group/center.
1. Group Liability
A Group/Center Recognition Test usually follows the
Compulsory Group/Center Training. It is an oral test given
by the Branch Manager or Supervisor to the aspiring
members. It aims to assess their understanding,
acceptance, and ownership of the MFI’s vision and
mission, loan terms and conditions, and their
responsibilities as members.
The applicants are asked practical and situational

questions to determine their ability to apply what they have
learned in the training. If they are found suitable and well-
trained in the policies and procedures of the program, the Branch Manager or Supervisor recognizes
them as official members of the program. This means that they are now ready to receive an approved
loan as well as avail of other services offered by the MFI.
On the other hand, a group/center may fail in the Group/Center Recognition

Test due to the following reasons:
- The members do not know each other very well;
- The savings fund is incomplete;
- There are members who come to the Compulsory Group/Center Training or Group/Center Recognition
Test late;
- There is low understanding of the loan terms and conditions;
- Application forms are not properly filled-out;
- The elected Center Chief/Group Leader lacks leadership skills;
- Attendance during the Group/Center Recognition Test is incomplete;
- Late arrival of the Group/Center Recognition Test administrator. (This is also a ground for not passing
the Group/Center Recognition Test because the Loan Officer, Branch Manager or any representative of
the MFI should be the first ones to demonstrate discipline.)
You will have to re-group and/or re-train the members again if they fail in the
Group/Center Recognition Test. Therefore, it is your responsibility as the Loan Officer to train the aspiring
members the right way from the very beginning. It will be a waste of time, energy, and resources if you
have to do the training all over again just because it was not done properly the first time15.
12

2. Individual Liability
There is no Group/Center Recognition Test in the individual liability approach because the shared
responsibility of paying the loan of a co-member is removed.
ORIENT GROUP OFFICERS/CENTER OFFICER ON THEIR ROLES AND RESPONSIBILITIES
GROUP LEADER SECRETARY TREASURER

- Collects the repayment schedule -Maintains the documents of - Ensures that right amount is
and cash payments from his or her the Group (attendance given
group members logbook, bylaws, in some by the member
- Accomplishes the Collection cases, documents left by other - Records collection on Group
Report during the center meetings, member are taken Treasurer’s Summary or
indicating details of payment of each cared of by the Group Center
clients Secretary) Collection Summary
- Counts the cash payments in the -Ensures accuracy of entry in - Reports balance in the
presence of group members and he the collection report collection
or she fills out a cash -Checks attendance during - Recounts collection together
breakdown slip center meetings with
- Regularly visits the members the Loan Officer
- Serves as the intermediary of the
group and the staff
FACILITATE GROUP/CENTER/OFFICER MEETINGS
LOAN OFFICER = FACILITATOR. During center or

group meeting, the Loan Officer is present to help the
group leaders make the discussions and transactions
easier to process.
Present Scheduled Meeting

• Values Formation
• Practical Tips for Everyday Living
• Business Tips
Also, the LO counsels’ clients on per
13

Together with your group, perform the activity and submit a video clip. Group performance should not
exceed 15 minutes. It must be sent to your Teacher’s Gmail account 3 days after.
The student should:

1. Inform Target clients
2. Prepare / Secure Material for Orientation
3. Announce Venue, schedule for orientation
4. Gathered Target clients
5. Explain MFIs products and services introduced
6. Conduct Orientation
7. Practice Desirable work values relevant to the task of
orienting target
1. Target clients informed
2. Material for orientation prepared/secured
3. Venue, schedule for orientation announced
4. Target clients gathered
5. MFIs products and services introduced and explained
6. Orientation is conducted
7. Desirable work values relevant to the task of orienting target
clients are practiced
14

You and your group should perform the following. It should not exceed 10 minutes and must cover all the
required criteria.
The student should:

1. Identify Potential clients and Group/center
2. Select Venue and schedule of meetings, collections
and other activities
3. Facilitate Election of group/center officers in
accordance with MFI procedures
4. Identify Group/center officers
5. Organize Group/center
Yes No
PERFORMANCE CRITERIA
1. Potential clients and Group/center identified
2. Venue and schedule of meetings, collections and other
activities selected
3. Election of group/center officers facilitated in accordance
with MFI procedures
4. Group/center officers identified
5. Group/center organized


_____1. Which of the following best defines what a CIBI is?

a. Collection of facts and data about the applicant to verify his or her creditworthiness.
b. Gathering of information about the application to verify his or her identity.
c. Interview with various sources of information to verify the applicant’s character.
d. Collection of information to ascertain the right loan amount to lend to the applicant.
_____2. The question “does the applicant own the house?” is an indicator used to assess the
applicant’s _________________________.
a. entrepreneurship aptitude b. stability c. reputation d. repayment behavior
15

_____3. One prospective client has been in the community for five years and renting the same house
for the same number of years. His or Her neighbors said he or she is known for his or her short temper
and would easily pick a fight with anyone. He or She has a tiny sari-sari store which sells basic goods
to the community. Which aspect of character do you think the client is flawed?
a. Stability b. Repayment Behavior c. Reputation d. Entrepreneurship aptitude
_____4. A Loan Officer wants to verify the repayment behavior of a prospective client in the community.
Which of the following is the best source of information?
a. Neighbor b. Trade supplier c. Barangay official d. Applicant
_____5. Which of the following would you consider as factor(s) to consider when assessing the
repayment capacity of the prospective client?
a. A son was admitted to the hospital the day before the CIBI
b. A neighbor just opened a store across the applicant’s
c. Barangay officials implemented the no-stray-dogs ordinance
d. The community leaders initiated a clean-up drive
_____6. The main reason why borrowers are organized into groups is for ____________.
a. group enjoyment
b. group liability
c. group camaraderie
_____7. Under the group lending methodology, a borrower’s membership in the program is sustained
partly because of ____________.
a. peer support
b. peer openness
c. peer acceptance
_____8. Which of the following is NOT an advantage of organizing borrowers into groups?
a. Local authorities are mobilized
b. Transaction costs are lowered
c. Applicants are pre-screened
_____9. Organizing borrowers into groups empower them because ______________.

a. they learn about each other’s life
b. they see their co-members regularly
c. they are directly involved in decision-making
16

C. LESSON WRAP-UP
A. Work Tracker
completed.

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
FAQs
1. What are the pros and cons of group lending?
Pros:
• Helping financially: By having a group lending model, the group is able to pay for the loan of
someone who is undergoing severe financial strains due to illness, unemployment, or numerous
other factors.
• Helping their businesses: By meeting with a large group of small business owners each week,
there are often instances when one business owner shares some business knowledge or gives
a suggestion to another owner about how to improve their businesses. This is often beneficial
for the whole group, as they are able to greatly learn from each other.
• Women’s Empowerment: Many of the business owners receiving loans are women, and
therefore it is an opportunity for these women to meet out of the house, and make an income
that allows them to not be completely reliant on their husbands.
• Social affair: It is also a chance for the business owners to chat about life while drinking tea or
coffee and eating sweets.
17

Cons:
• Paying for someone else: While the group lending model is designed so that the group covers
the cost of someone that is unable to pay, this often causes tension within the group, even
among friends. When many of the business owners are struggling to make ends meet
themselves, the last thing they want to do is have to pay more to cover someone else’s loan.
• Group attrition: While there is no shortage of people wanting to receive a loan, there is a very
high attrition rate as people decide they no longer want loans anymore. This usually stems from
an unwillingness to attend weekly meetings, the above-mentioned un-satisfaction with paying
for others, etc.
• Differences in abilities and knowledge level: For microfinance organizations that also provide
capacity classes to their clients, a big challenge they face is the wide variety of learning abilities,
education levels, and levels of motivation. By allowing groups to be formed based on
geographical location or outside of the control of the organization, it is very difficult to effectively
help teach each group essential business skills.
KEY TO CORRECTIONS

1. A
2. B
3. C
4. B
5. A or B (both events would likely have an effect on applicant’s cashflow)
6. B
7. A
8. A
9. C
18

Lesson title: Facilitating Center Meeting Materials:

2. 1. I can present scheduled topics or agenda. References:
Technology NC II
It’s never too late to be what you might have been.
1) Introduction
Congratulations Everyone! Because we are now done with our 1st Periodical Exam and actually,
we are now in the 4th Core Competency of MF Tech NC II. Did you know that you are almost in
the half of the whole competencies? Now, let’s begin!
lesson.

What do you know about Facilitating Center Meetings? Try answering the questions below by
What is the purpose of a meeting

agenda?
Why do we need to check

attendance in meetings?
What are the contents of an

agenda?
1

B. MAIN LESSON
I. There is an agenda being followed in every meeting. The schedules of activities include
Leading Opening and Closing Prayers. Prayers are part of the Filipino culture, which gives
importance to the faith.
A.C.T.S
Acknowledge
Confession
Thanksgiving
Supplication
Loan Officers can begin with sample prayers during the first few weeks of the meetings. This will
provide the group members with ideas on how to say brief but meaningful prayers.
For the closing prayers, the leader should take note of what happened during the meeting and bring up
prayer concerns/issues that need to be solved.
General/ecumenical prayers are encouraged. This will address the issue for example, that the prayer
“Hail Mary” which is prayed by Catholics, is not observed in other religious groups.
II. Present Scheduled Topics/Agenda
What is a Meeting Agenda? The meeting agenda is a roadmap of meeting. It let the participants know
the flow of the meeting. More importantly, the meeting agenda gives a sense of purpose and direction.
The Agenda includes the following:
1. Meeting start time

2. Meeting end time
3. Meeting location
4. Topic headings
5. Topic detail for each heading
6. Time each topic is expected to last
7. Identify the expectation of the participants in the discussion
8. A typical MFI Group Meeting Agenda includes:
2

Activity Time Needed

a. Opening Prayer 2 minutes
b. Present Topics of Concern/Discussion 15 minutes
c. Fund raising
d. Values formation and other related activities
e. Attendance 5 minutes
f. Business/ Project Updates/ 15-20 minutes
g. Open Forum/discussion
h. Closing Prayer
What is the role of the Loan Officer in Group Meetings?

Group Leader is the person in-charge of the meeting
Loan Officer is the facilitator
3

Loan Officer as Facilitator

1. Motivating attendance & participation among group members;
2. Sharing information on program lending rules and practices;
3. Implementing an awareness education program;
4. Guiding the group in discussion about issues, as needed; and,
5. Ensuring that the meeting agenda is being followed.
III. Check Clients Attendance
In checking the attendance of members, the Loan Officer maximizes the presence of the group Secretary.
The group Secretary conducts the initial checking of attendance. However, the Loan Officer has to ensure
that proper documentation is strictly followed. The Loan Officer also reminds the group Secretary to
collect excuse letter from those who are absent. He or she also calls the attention of latecomers, and
reminds the group Secretary to record their names.
Together with your group, perform the activity and submit a video clip. Group performance should not
exceed 15 minutes. It must be sent to your Teacher’s Gmail account 3 days after.
The student should:

• Perform a Leading and Closing Prayer
• Present Scheduled Topics/Agenda
• Checks Clients Attendance
• Practice Desirable work values relevant to the task of orienting
target
1. Opening and closing prayers delivered in accordance with Microfinance

Institution (MFI) practices
2. Meeting agenda prepared
3. Meeting support materials distributed
4. Topics presented according to meeting agenda
4

5. Attendance of clients has been properly checked
6. Desirable work values relevant to the task of orienting target clients are
practiced


Read each statement carefully. Write True if the statement is correct and False if it is incorrect.
_______1. The Loan Officer presides in the weekly meeting.

_______2. The group meets weekly depending on the availability of the Loan Officer.
_______3. The partnership between the MFI and the client is based on mutual trust.
_______4. As part of developing decision- making skills, the Group Leader decides the fixed time, date,
and place of the weekly meeting and informs the Loan Officer about this.
_______5. The group meeting is a venue to bring out issues affecting the businesses of the clients.
_______6. The group both in branch office and during weekly meetings alternately undertakes group
membership, collections, and discussions of issues.
_______7. The Loan Officer appoints group leaders.
_______8. Convening the clients in a regular meeting promotes understanding in the group.
_______9. The weekly meeting is a venue for developing leaders in the community as they do their
assigned tasks in the group.
_______10. It is easier and less costly for the loan officer to go on house-to-house visits to get
payments because they can visit any time, they are available.
C. LESSON WRAP-UP
A. Work Tracker
completed.

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
5

___________________________________________________________________________
___________________________________________________________________________

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
FAQs
1. What are the skills needed in facilitating meetings?
a. Active Listening
When we actively listen we suspend our own thought processes and give the speaker our full attention.
We make a deliberate effort to understand someone's position and their underlying needs, concerns
and emotions.
b. Summarizing
A succinct and accurate summary of what's been said so far can be really helpful to move a group
towards a decision. Outline the emerging common ground as well as the unresolved differences: "it
seems like we've almost reached agreement on that element of the proposal, but we need to explore
this part further to address everyone's concerns". Check with everyone that you've got it right.
c. Synthesis
After discussing the issue freely move on to finding agreement on what needs to be done. During this
stage, sometimes called synthesis, you need to find the common ground, find connections between
seemingly competing ideas and weave them together to form proposals.
Start with a summary of where you think the group and its different members are at. Then start building
a proposal from whatever agreement there is. Look for ideas on how the differences can be resolved.
Focus on solutions that address the fundamental needs and key concerns that people within the group
have. It's not unusual for people to be willing to give way on some things but not on others which affect
them more closely. The solution will often be found by combining elements from different proposals.
6

KEY TO CORRECTIONS

1. False – The group leader is in-charge of the meeting.
2. False – Group meetings are not dependent on the availability of loan officers.
3. True
4. False – Agreements are done by the whole group and not just among the officers.
5. True
6. False – Most business transactions are done during the weekly group meeting, and not in the
branches. It is not only cost efficient but it is more practical. If facilitates the work of the loan
officer who deals with clients as a group and not as individual members.
7. False – The members of the group appoint the group leaders.
8. True
9. True
10. False – House to house visits are more costly than group meetings.
7

Lesson title: Processing Application for Loans and Other Materials:

Products or Services FLM Student Activity Sheets
Lesson Objectives:
References:
2. 1. I can evaluate documents of loan and insurance applicants.
Technology NC II
“The man who does not read books has no advantage over the one who cannot read them”-Mark Twain
1) Introduction
Good day Everyone! For today, we are going to proceed with the 5th core competencies of MFT
Tech NC II, which is the Process application for loans and other products/services. Now, let’s
begin!
lesson.

What do you know about Processing of Loan Applications? Try answering the questions below
What are the portions of an

application form?
What is a business proposal?
What are the steps in loan

application process?
1

B. MAIN LESSON
Issue Loan Applications

• Loan Application –
it is the process
wherein a loan
applicant provides
information to the
microfinance
institution (MFI) so
that his or her
eligibility to apply or
qualify for a loan can
be established.
2

Loan Application Form
The form has

usually three
major portions:
1. Personal and family
data,
2. Business data, and
3. Loan request data.
• First Portion:
a. Personal
Information such as
name, age, gender,
address, education,
civil status, data
and place of birth,
number of years in
the present
residence.
b. Family data
includes name of
family members,
their age,
educational
attainment,
occupation, name
of company where
they are employed
and household
income and
expenditures.
• Second Portion –
contains
information on the loan applicant’s business type of business, number of years in operation and
business address or location.
• Third portion – details the loan request such as amount of loan requested and how the
borrower intends to use the loan.
(see sample of application form)
3

In other MFIs, the Loan Application Form may contain a second page, which details the cash
inflow and outflow of the loan applicant’s business or what is termed as Cash Flow Analysis (see Figure
4 below for the Sample Cash Flow Analysis Form). MFIs include this portion in order to analyze the
financial status of a loan applicant’s business. In the form shown below, the loan applicant is required to
provide detailed daily inflows of cash into his or her enterprise including his or her customer’s credit
purchases (pautang). Then, he or she is asked to calculate the total income per month by adding daily
cash inflow and multiplying it by four weeks. The loan applicant is also asked to provide the detailed cash
outlays of his or her enterprise such as stall rental, water and electric expenses, transportation, and
salaries and wages of workers.
In some MFIs, the loan applicants are asked to present their household’s cash inflow and outflow (as
shown in the lower part of the Cash Flow Analysis Form in Figure 5 below). The loan applicant has to
provide information on the inflows of cash
into his or her household including salaries
of other family members, remittances from
relatives, pension, and other sources of
income. They are also asked to supply their
household’s cash outlays such as house
rentals, school allowance, fuel, medical
expenses, and other loan payments.
4

Procedure in Issuing Loan Application Form
Step 1: Identify who among the potential clients will avail of a loan
Loan application forms are usually issued during group meetings or borrowers’ orientation. Thus, this is
the best time to inquire who among the clients intends to avail of a loan.
Step 2: Check if the loan applicant who wants to avail of a loan is eligible to get one. For first-time
borrowers or new clients, the Loan Officer should check if the client has already paid his or her
membership fees. The Loan Officer should also check if the new client has saved and deposited regularly
to his or her account for the period required by the MFI (from two weeks to eight weeks) and has submitted
the necessary requirements to be a client of the MFI such as photo, barangay clearance, etc.
For repeat borrowers or old clients, the Loan Officer should

check if the client has successfully repaid his or her previous
loan and if he or she has settled the dues promptly and
immediately. The Loan Officer do this by looking at the
client’s passbook or at the Group Treasurer’s Register where
the client’s history of repayment is documented.
Step 3: Explain to the loan applicant how to fill out the

Loan Application Form.
The Loan Officer should issue the loan application form and
explain to the loan applicant the parts of the form and how to complete it. Afterwards, the Loan Officer
must remind the loan applicant about the important signatures that should be affixed to the form such as
the borrower’s, guarantor’s, and/or co-maker’s signatures.
When a loan applicant and his or her guarantor and/or co-

maker sign the loan application form, they signify their
agreement to the terms and conditions of the MFI concerning
the loan release. The guarantor should be a relative of the
borrower while the co-maker should be a member of the MFI
and not a relative of the borrower.
Getting the agreement of these parties is important because

the MFI does not require any collateral from the loan applicant.
Requiring the loan applicant to have a guarantor or a co-maker
is the MFI’s guarantee that the loans will be repaid. This serves
as an alternative to collateral.
The Loan Officer must be patient in guiding the loan applicant

on how to fill-out the Loan Application Form, for some loan applicants may find it difficult to fill-out the
form. Some loan applicants may have only finished elementary schooling or less and some may be too
shy to ask for help, thus the Loan Officer must be aware of the loan applicant’s
5

difficulty and should be accommodating enough to extend help (see Figure 6 below for a sample filled-
out Loan Application Form).
6

Step 4: Explain to the client the required documents to be attached to the Loan
Application Form.
After filling-out the loan application form, the loan applicant must submit the necessary documents such
as the specified photograph, a barangay clearance, and a document detailing how the loan applicant
plans to utilize the loan to be granted to him or her.
1. A recent photograph of the loan applicant should be affixed to the form. This helps the MFI
officers in recognizing the person applying for the loan. In some MFIs, particularly the ASA Philippines
Foundation there are exact specification for the photograph that the loan applicant should submit such
as the following:
a. On the left side of the photo is the borrower, while on the right side is the guarantor;
b. Size of the picture should be 1.5 inches by 3 inches;
c. With white background; and,
d. Two (2) copies for first-time borrowers (one to be attached to the loan application and another
to the passbook), and one (1) copy for old clients to be attached to the loan application from.
Thus, the Loan Officer must know the specific requirements for a photograph and ensure that the
loan applicant submit the required photograph.
2. The barangay clearance is asked of the loan applicant to ensure that he or she is a legal
resident the community.
3. The business plan is a document that details how the loan applicant intends to use the loan in
order to improve his or her business.
Step 5: Explain how to fill out the Business Proposal form

Other MFIs require that a Loan Application Form be submitted with a business plan1 or business
proposal, which details how the loan applicant intends to use the loan. A business proposal contains the
following items
(see Figure 7 for a Sample Business Plan template):
1. Planned purchases
- Sangkap/Materyales na bibilhin or Items to be purchased (column 1)
- Dami/Kilo na bibilhin or quantity or kilo of items to be purchased (column 2)
- Halaga ng bawat isa or Unit cost per item (column 3)
- Total ng bibilhin or Total cost of goods purchased (column 4: Quantity X Unit Cost)
2. Sales plan
- Presyo ng bawat piraso or Retail price per item (column 5)
- Total ng benta or Projected Gross Sales - column 6 which can be derived
by multiplying retail price per item by the number of goods to be sold (not
part of the table)
- Halagang kikitain or Projected Net Profit (column 7: Projected Gross
Sales less Total Cost of Goods)
7

Requiring the loan applicants to fill out the Business Proposal form reminds them that the loan to be
granted by the MFI should be used for improving or expanding the operation of their business.
The term “business plan” is used loosely here to mean “loan utilization plan” and is different from the
common or more popular definition of a business plan, which is a document that details an organization’s
growth strategy over a period of time, which includes marketing, financial, operation, and human resource
strategies.
Step 6. Remind the loan applicant to submit the Loan Application form, together with all the other
documents.
The loan application form is usually issued in the area where the group meeting or borrower’s orientation
is being held. The loan applicant should not take the form home. The Loan Officer should ensure that the
loan applicant submits the form and the required documents before the group meeting ends.
Issue Loan Applications
• The Loan Application form is an

important document that is issued by
a Loan Officer to clients who intend to
borrow money from the microfinance
institution.
8

• The Loan Officer’s main responsibility in issuing loan application form is ensuring that the loan
applicant is eligible to apply for a loan. The Loan Officer should check that the loan applicant met
the eligibility requirement for membership of the MFI (for first time borrowers) or that the loan
applicant has successfully paid his/her previous loans (for old clients).
• The Loan Officer must ensure that the loan applicant properly fills-out the Loan
Application Forms. He or she should also explain the necessary requirements that should be
submitted such as photograph of the loan applicant, barangay clearance and a business proposal.
• In the Business Proposal or Loan Utilization Plan, the loan applicant details how he or she intends
to use the money he or she wants to borrow from
the MFI. The Loan Officer should ensure that the
loan applicant clearly and properly accomplishes
this document.
Procedure in Gathering Applications for Loans

and Other Products/Services
• Step 1: Get the filled-out Loan Application

Forms from the Center Chief/Loan Applicants.
• Step 2: Check if the client filled-out the
form properly (including photo) and contains
complete signatures (applicant and
guarantor/co-maker).
• Step 3: Check if the business proposal is
complete and correct.
In completing this form, the loan applicant provided the following information:
1. The first four columns detail the proposal and purchases of the loan applicant:
a. Goods to be purchased (column 1)
b. Quantity/Kilo of goods to be purchased (column 2)
c. Unit cost of goods (column 3)
d. Total cost of goods (column 4 which is derived by multiplying Quantity by
Unit Cost)
9

The loan applicant should also detail how much he or she intends to earn from
the said items, thus he or she needs to supply the following data:
2. Projected Gross Sales (column 5 to 7)

a. Intended retail price per item (column 5)
b. Number of goods to be sold (column 6)
c. Projected gross sales
(column 7) which can be
derived by multiplying
retail price per item by the
number of goods to be sold
d. Projected net income
(column 8) which is derived by
subtracting Total
Cost of Goods from Projected
Gross Sales
The important calculations in
the Business Proposal are
summarized below:
- Total Cost of Goods =
Quantity X Unit Cost
- Gross Sales = Retail price per
item X Number of goods to be
sold
- Projected Net Profit =
Projected Gross Sales less
Total Cost of Goods
The Loan Officer should review the proposal with the loan applicant
meticulously, line per line, until he or she is convinced that
the costing are correct, the
pricing are realistic and the business proposal as a whole
is profitable. The Loan
Officer should check for the following:
- Are the goods to be purchased by the loan applicant
appropriate for type of
business he or she is operating?
- Are the unit costs correct or updated?
- Are the retail prices realistic?
- Are the calculations correct?
In checking the Business Proposal, the Loan Officer

should not just look at the
proper computation, he or she should also be aware of
the prevailing retail prices and
costs of goods. The Loan Officer should also be
10

knowledgeable of the “kalakaran sa

negosyo” or dynamics of various businesses or enterprises. Given the number of
applications the Loan Officer need to review, they should make themselves familiar
with the costings of every kind of livelihood venture that the clients are engaged in or
proposal to pursue so that they can easily spot any overpricing or unrealistic
assumptions in the business proposal.
• Step 4: Inform the loan applicant about the steps in processing loan application and how
long the MFI takes to process it.
• Step 5: Collate all loan application forms that were submitted by the loan applicant.
Process Loan Applications

• The Loan Officer has the primary task of ensuring that clients’ loan applications are administered
according to the policy of the microfinance institution.
• However, the Branch Manager (BM) has the primary task of reviewing loan applications of clients.
The Loan Officer could not start processing the loan applications until the Branch Manager has
undertaken the Credit Investigations, thus it is important that the Loan Officer and Branch
Manager work together to accomplish the whole process.
• A Credit Investigation/Background Investigation (CIBI) is a continuing process of compiling
information on the loan applicant’s character and state of business. Its fundamental purpose is to
determine a loan applicant’s creditworthiness and ability to repay loans (repayment capacity).
• A loan application should be processed immediately after the Branch Manager has undertaken
Credit Investigation, has decided on the loan amount to be granted to a client, and has affixed his
or her signature on the Loan Application Form.
• In other MFIs, the processing of loan applications takes place after the loan applicant has
successfully presented his or her Business Proposal to the Branch Manager, Loan Officer and
members of his or her group during the Loan Defense.
• The Loan Officer should fill-out the Loan Approval Summary Form, which shows the summary of
all loan applications that should be endorsed to the Branch Office or Head Office for the
preparation of cheques or cash to be disbursed to the clients.
Inform Clients about Loan Application Status

• Before releasing the loan to a client, the Loan Officer must clearly explain the approved loan
amount, schedule of loan repayment, and amount of loan amortization.
• Aside from those enumerated above, the Loan Officer should also be able to explain the built-in
services of the MFI such as compulsory savings, life insurance, and loan insurance.
• Compulsory savings aims to instill the values of thrift and savings among their clients. It also acts
as collateral or repayment insurance for MFIs because clients’ savings can be used to repay loans
in times of financial difficulties.
• Life insurance is offered by MFIs to give financial assistance to the beneficiaries of a client upon
his or her death.
• Loan insurance is imposed on borrowers in order to cushion the microfinance institution from
financial loss in the event of death of a borrower.
11

• One of the critical tasks of the Loan Officer is to remind the loan applicant to use the loan as
indicated in the Business Plan, that is, to invest the loan in acquiring more products or fixed assets
that can help grow his or her enterprise.
• When Credit Investigations result in a negative rating of the loan applicant, the approving
committee or officer of the MFI may disapprove the loan, approve the loan but adjust the loan’s
terms and conditions, or approve the loan but release it only after the loan applicant submits
additional requirements. The Loan Officer should be ready to explain any of these decisions and
the reason/s for these decisions to the loan applicant.
Who processes loan applications?
The Loan Officer has the primary task of ensuring that clients’ loan applications are administered
according to the policy of the microfinance institution. However, the Branch Manager (BM) has the
primary task of reviewing loan applications of clients. On the average, a Branch Manager processes
around 45 loan applications per week. If there are more than loan applications that the Branch Manager
could handle in a week, he or she usually asks the assistance of a Supervisor / Loan Officer in reviewing
loan applications and in conducting Credit Investigations. However, as a policy of most microfinance
institutions, a Loan Officer may not review the loan application of a client that belongs to the group that
he or she manages. In addition, Loan Officers may only conduct Credit Investigation for old clients or
repeat loan applicants. The Branch Manager may also ask the Supervisor (such as an Area or Regional
Monitor) to conduct Credit if the loan amount requested by client is within the supervisor’s responsibility
as stated in the policy of some microfinance institutions (see Table 1 below for an example of range of
responsibilities for Credit Investigation). A Loan Officer processing a Loan Application.
When should a loan application be

processed?
A loan application should be processed
immediately after the Branch Manager
has undertaken Credit Investigation, has
decided on the loan amount to be granted to
a client, and has affixed his or her signature
in the Loan Application Form.
For how long is a loan application

processed?
The loan application process usually takes

one week to be completed, or less for some
MFIs. Processing of loan application starts
after the conduct of Credit Investigation and
ends when the cheque or cash is ready to be
disbursed to the client.
12

Exercise No. 1: Study the business proposal below. Encircle the wrong calculation and
information in the business proposal. Answer the questions that follow.
Questions:
a. Are the goods for purchase by the loan applicant appropriate for the type of
business he or she is operating?
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
b. Are the computations for the Total Cost of Goods correct?

__________________________________________________________________________________
__________________________________________________________________________________
13

__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
c. Are the retail prices realistic?

__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
d. Are the computations for the Projected Gross Sales correct?

__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
e. Are the computations for the Projected Net Profit correct?

__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________


Read each statement carefully. Write True if the statement is correct and False if it is incorrect.
___________1. Before releasing the loan to a client, the Loan Officer must not explain the approved
loan amount, schedule of loan repayment, and amount of loan amortization.
___________2. Aside from those enumerated above, the Loan Officer should also be able to explain
the built-in services of the MFI such as compulsory savings, life insurance, and loan insurance.
___________3. Insurance aims to instill the values of thrift and savings among their clients. It also
acts as collateral or repayment insurance for MFIs because clients’ savings can be used to repay
loans in times of financial difficulties.
___________4. Life insurance is offered by MFIs to give financial assistance to the beneficiaries of a
client upon his or her withdrawal.
___________5. Loan insurance is imposed on borrowers in order to cushion the microfinance
institution from financial loss in the event of death of a creditor.
___________6. One of the critical tasks of the Loan Officer is to remind the loan applicant to use the
loan as indicated in the Business Plan, that is, to invest the loan in acquiring more products or fixed
14

assets that can help grow his or her enterprise.

___________7. When Credit Investigations result in a negative rating of the loan applicant, the
approving committee or officer of the MFI may disapprove the loan, approve the loan but adjust the
loan’s terms and conditions, or approve the loan but release it only after the loan applicant submits
additional requirements.
___________8. The Loan Officer should be ready to explain any of the decisions and the reason/s
for these decisions to the loan applicant.
C. LESSON WRAP-UP
A. Work Tracker
completed.

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
FAQs
1. Why is microfinance important for rural women?
As rural women are more subjugated to discrimination, microfinance aims to improve their status within
the family and community by giving them access to financial services. Women availing microfinance
activities tend to be more assertive, confident, own more assets and play a stronger role in decision-
making.
15

KEY TO CORRECTIONS
Exercise No. 1
16


1. False – The loan officer should explain the details of the loan.
2. True
3. False – Compulsory savings aims to instill the values of thrift and savings among their clients. It
also acts as collateral or repayment insurance for MFIs because clients’ savings can be used to
repay loans in times of financial difficulties.
4. False – Life insurance is offered by MFIs to give financial assistance to the beneficiaries of a
client upon his or her death.
5. False – Loan insurance is imposed on borrowers in order to cushion the microfinance institution
from financial loss in the event of death of a creditor.
6. True
7. True
8. True
2


Lesson Objectives:
References:
2. 1. I can recommend loan applications for approval.
Technology NC II
Because Knowledge is Power!! “Education is the passport to the future, for tomorrow belongs to those who
prepare for it today”- Malcolm X
1) Introduction
Good day Everyone! For today, we are going to proceed with the 5th core competencies of MF
begin!
lesson.

How do we prepare a summary of

loan applications?
How do we prepare insurance

claims?
1

What are the steps in

recommending qualified
applicants?
B. MAIN LESSON
PREPARE SUMMARY OF LOAN APPLICATION

The summary of loan application called in some MFIs as Branch Loan Approval Sheet (BLAS) is the
listing of the qualified loan applicants. It is prepared by the Loan Officer for all his or her clients who
submitted loan proposal. The BLAS serves two basic purposes:
1) to guide the Branch Manager in evaluating and approving the request for loans, and;
2) major reference of the accounting department in preparing the cash or check voucher, depending on
the MFI policy on mode of loan release.
The BLAS contains information about the client and the request for loan such as client name, center
name or number, loan cycle, loan amount requested. It also contains the important information needed
for loan endorsement by the loan officer.
This is also used for preparation of loan disbursement and to make the work of the Loan Officer efficient
and effective. In preparing the BLAS, the Loan Officer has to follow four steps namely: checking of all the
required documents submitted by the applicant for completeness and accuracy of information; write the
information required of the BLAS; review all the data you have written; and sign the BLAS and submit it
together with loan application forms and documents of all clients requesting for loan. Each step will be
discussed below.
Steps in Preparing the Branch Loan Approval Sheet (BLAS)
Step 1. Check all the Required Documents Submitted by the Loan Applicant
When the qualified applicants submit the loan application, you must check first the individual loan
documents for completeness and correctness of all information required. Loan applications with
incomplete documents and information should not be included in the BLAS and must be returned to client
for completion.
Here are some pointers on checking the completeness of the documents:
1. Loan application forms must be checked if the following are correct and complete: spelling of client’s
name, center name or number, address, credit history, attendance and repayment rate, capacity to pay
2

data and other information required in the application form.
You must also check if all the required signatories such as of spouse and center officers have affixed
their signatures. Signatures have to be validated using other documents such as previous loan
application or identification card. Other MFIs have a signature card on file for crosschecking.
If the Barangay clearance is included in the required document you may validate if the applicant’s address
is within the jurisdiction of the issuing barangay, the document is original and with no erasures or
alterations. Do not accept photocopy of barangay clearance.
The certificate must also be dated not later than 6 months at the time of loan application and must state
“for loan purposes only.”
2. Photo of the client - this is usually required for first time loan applicant. Renewal of loans does not
necessarily require photo. Some MFIs do not accept cut-out photos.
3. Business proposal – this is usually included in the loan application where client presents how the
requested loan will be used. The information required in the business proposal is presented in learning
element #5.1 Issue Loan Applications.
4. Credit and Repayment history – you must check for the repayment rate of the client. Most MFIs allow
only reloans for those with 100% repayment rate. Others have policy of reducing loan size due to late
payments. Knowing the repayment history will help you determine appropriate loan size you will
recommend to your branch manager.
5. Attendance record - the same with repayment rate, you must check for the center meeting attendance.
Most MFIs allow only reloans for those with not less than 85% attendance rate. Others have policy of
reducing loan size due to absences during center meeting. Knowing the attendance history and rate will
help you determine appropriate loan size you will recommend to your branch manager. You can make
use of the center attendance logbook as your reference.
6. Cash flow analysis form – you must check for the client’s cash flow. There must be enough income to
pay the weekly amortization after deducting household and business expenses from household and
business income.
The details on how this is analyzed is discussed in learning element #3.3,

Schedule and Conduct Family Background Investigation and CIBI.
7. Shared Responsibility Form (for group liability) or co-makers statement (for individual liability) - you
must check if all members or co-members have signed this form.
8. Promissory Note – you must check if the loan applicant has signed this document.
3

Step 2. Write the Recommended Loan Amount

When you have completed checking all the documents, you must write the recommended loan amount
on column 9. Then sign at the bottom of the row in this column. Do not forget to sign the endorsement
portion in the loan application as shown in the figure 2 sample loan application. After signing, you may
now proceed to filling up the BLAS.
Step 3. Write the Entries of all the Loan Application Data in the BLAS
1. Name of each applicant in column 1
2. Group name in column 2
3. Loan cycle in column 3
4. Business type of the client in column 4
5. Attendance Rate in column 5
6. Repayment Rate in column 6
7. Previous loan in column 7
8. Loan amount requested by the client in column 8
9. Recommended loan amount by the Loan Officer in column 9
10. Insurance amount in column 11
The information in the BLAS is complete, it provides a clear overview of all the data of the individual loan
applications submitted. It makes it easier for the branch manager to make decision on the loan amount
applied for. It also helps the cashier or teller in preparing the loan amount to be disbursed to the clients,
as well as in checking if there are funds available.
Step 4. Review the Data Entered in the BLAS

After filling up the BLAS, you have to review again for completeness and accuracy.
Step 5: Sign and Submit the BLAS to your Branch Manager

Do not forget to sign the branch loan approval sheet before submitting to your Branch Manager. This will
ensure that you have studied and reviewed your summary of loan application well.
Prepare Insurance Claims

Unlike the loan application summary where clients come in groups, insurance come by individual, unless
there is a plague or calamity that hot your area of operations. Thus, a summary is not necessary, but
instead the preparation of claims is more important to understand.
In order to understand the process of preparing claims for insurance, let us assume that you have one
client who died of a natural death, and her first degree relatives are claiming for insurance. You receive
a call from your client’s first degree relatives (husband, daughter or son) informing that their mother died.
Here are the steps you have to work on:
Step 1- Request for Significant Documents

Request the client’s beneficiaries to bring original and photocopy of the following documents:
1. Certificate of Death
2. Medical Certificate of the Dead Client (if client died in the hospital)
3. Birth Certificate of the Beneficiary (photocopy)
4

Step 2- Submit Documents to the Person-In-Charge of Insurance in the MFI

If the insurance claim is processed at the Head Office, submit the documents to the personnel in charge
of the insurance service. Ensure that you have a reproduce a copy for your branch. Also make sure that
you have the receiving date reflected on your copy, this is important later in tracking when the claim was
submitted.
Do not forget to inquire from the person in charge when the claim could be expected. Then inform the
deceased client’s beneficiaries about the date.
RECOMMENDING QUALIFIED LOAN APPLICANTS

In order to meet your target is to recommend qualified loan applicants and even insurance claimants.
This task is done after the summary of loan applications has been accomplished.
The Loan Officer should exercise utmost objectivity and honesty in this task. If the recommendation is
based on mere instinct, the loan has a greater chance of failure. Thus, the Loan Officer should
recommend only qualified loan applicants after a thorough assessment of the documents submitted and
a careful and objective assessment of his or her character.
The following are the steps in recommending qualified applicants so that their loans will be
approved.
Step 1. Review the BLAS Against the MFI Criteria for Loan Approval
In the previous learning elements, you learned how to fill up the Branch Loan Approval Sheet or the BLAS
which contains summary of the profile and performance of the client.
Check the information in the BLAS vis-a-vis against the standard set in your MFI. Check if the attendance
rate reached the required rate for increase in the amount of loan. Then check the repayment rate for the
same purpose.
Step 2- Check Other Significant Documents in the Absence of BLAS

If your MFI do not use the BLAS, you may double check the applicant’s information summary against the
other documents available. The list of document below will provide you different information to help you
craft your recommendation.
a. Client’s passbook, loan officer’s register, amortization payments, insurance payments- These
documents provide information on the repayment behavior of the client. Check the and assess if she
pays her dues on time.
b. Attendance Logbook - The attendance is the client’s is a measure of her discipline and motivation to
be part of the program of a microfinance institution.
c. Cash flow Report – The cash flow provides information about the capacity of the client to pay.

After a thorough review of the applicant’s cashflow, you will have to compute for the loan amount that the
applicant can borrow. Some MFIs practice that the loan amount should not be more than 50% of the
cashflow of the client.
5

Step 4. Write the Narrative Recommendation

After writing the recommended loan amount, you have to write the narrative recommendation explaining
why you recommended such amount. This narrative part should be based on your analysis of the
cashflow or the performance of the client, in case he or she is a repeat borrower.
Step 5. Affix Your Signature in the Recommendation Form

Do not forget to affix your signature as a sign of accountability to your recommendations.
The steps in recommending qualified applicants for loan and insurance involves the following:
Step 1. Review the BLAS Against the MFI Criteria for Loan Approval
Step 2- Check Other Significant Documents in the Absence of BLAS
Step 4. Write the Narrative Recommendation
Step 5. Affix Your Signature in the Recommendation Form
Procedure in Preparing Summary of Loan Applications and/or Insurance

Step 1: Submit all Loan Application Forms to the approving authority.
The Loan Officer initiates the loan approval process by consolidating the individual loan application forms
and submitting them to the approving authority, which may be the Branch Manager or the Credit
Committee of the MFI.
Step 2: Assist the Branch Manager

or the supervisor in scheduling and
sometimes in conducting Credit
Investigations.
After submitting all Loan Application
Forms, the Loan Officer should assist
the Branch Manager or the supervisor
in scheduling the Credit Investigation.
He or she may also help in conducting
Credit Investigations when there are
more than the loan applications that
the Branch Manager could handle in a
week.
The aim of Credit Investigations is to
assess the loan applicant’s ability to
repay the loan (repayment capacity). It
is a continuing process of compiling
information on the loan applicant’s
character, state, or condition of
business, and capacity to repay loans. This is a critical task within microfinance institutions, as most of
them do not require collateral from loan applicants as guarantee for loan recovery.
6

The following are the information gathered during Credit Investigations/Background Investigations (CIBI):
a. Character of the loan applicant - Data on the loan applicant’s lifestyle and reputation are gathered.
b. Condition of business of the loan applicant - The main objective for assessing the business is to
determine if it really exists or if it is doing well, financially. To achieve this, the Branch Manager may
interview other vendors
and the loan applicant’s customers, and visit the business location to check for the level of business
activity.
c. Capacity or the Cash inflow and outflow - The Branch Manager looks at the inflow and outflow of
cash in the loan applicant’s business and household. The Branch Manager gathers data on the loan
applicant’s daily, weekly, and monthly expenses and income. To know the loan applicant’s expenses, the
Branch Manager may ask for proof of payments of electric bills, water bills, and school tuition. To know
the income of a loan applicant, the Branch Manager may ask the client about the nature of his or her
business and other household income, as well as income of the members of the family.
d. Capital – Some MFIs also look at the capital invested on a business to know how much the loan
applicant has invested in the business.
e. Collateral – Some microfinance institutions require loan applicants to present collateral or any
possession of the loan applicant with value, which would serve as a guarantee on loan. The collateral
should have greater value than the applied loan amount.
Ability to repay the loan of a repeat borrower or old client is also assessed based on his or her repayment
history (repayment of previous loans), adherence to the policies of the MFI, and ability to grow the
enterprise using the loan granted by the MFI. The Branch Manager may use the following questions in
assessing a repeat borrower:
a. Did the client add new items to his or her list of products for sale?
b. Did the client increase the number of his or her ventures?
c. Did the client expand his or her enterprise?
d. Is there any improvement in the client’s business cash flow?
e. Did the client follow the institution’s policies?
The Branch Manager may also conduct the following activities in order to determine the repayment
capacity of a loan applicant, thus helping reduce the risk of repayment problems in the future.
- Gather data on the loan applicant’s history of loan repayment from other financing institutions.
- Visit the barangay hall to look for cases on collection of debts filed against the loan applicant.
- Interview the loan applicant’s neighbors or relatives to know about his or her reputation and character
such as lifestyle and spending patterns.
- Interview the co-maker to confirm that he or she is willing and able to guarantee the loan applicant’s
loan.
When the Branch Manager is convinced of the loan applicant’s ability to repay
the loan and the profitability of his or her business proposal, he or she then determines
the loan amount to be granted to the loan applicant and affixes his or her signature on
the Loan Application Form. After the Branch Manager has accomplished all of these
tasks, the Loan Officer then initiates the process of loan approval that will lead to the releasing of the
client’s loan. (Note: a more detailed discussion on Credit Investigation is covered under the Learning
Element “Gather Client’s Information”.)
7

In other MFIs, the loan applicant is asked to defend his or her business proposal during the “Loan
Defense.” The Loan Officer, Branch Manager, and members of the loan applicant’s group gather to
assess the loan request and business proposal of the loan applicant.
Step 3: Accomplish the Loan Approval Summary Form.

If the Branch Manager’s credit investigation results to positive rating of loan applicants, he or she should
then endorse the loan application forms to the Loan Officer who should accomplish the Loan Approval
Summary Form (see Figure 1 for a sample Loan Approval Summary Form). The form shows the summary
of all loan applications that should be endorsed to the Branch Office or Head Office for the preparation
of cheques or cash to be disbursed to the clients.
Below is the process for accomplishing the Loan Approval Summary Form:
Given: On April 6, 2009, after conducting Credit Investigations, the Branch Manager of an MFI in
Caloocan City approved the loan applications of the following clients. Their loans will be released the
following week.
1. PhP12,000 loan request of Mang Chino who is a client of the MFI since November 2007.
2. PhP14,000 loan request of John, a first-time borrower.
3. PhP8,000 loan request of Aling Fely who is also a first-time borrower.
4. PhP13,000 loan request of Mina who is a client of the MFI since October 2008.
5. PhP16,000 loan request of Charina, another first-time borrower.
6. Lisa requested for a PhP20,000 loan, but only PhP15,000 was approved. She has been a client since
March 2009.
7. PhP4,000 loan request of Marie, a first-time borrower.
8

Using the information

above, the entries on the
Loan Approval Summary
will be as follows:
- Number of new loans: 4.
These are the loans of first-
time borrowers that were
approved. Clients’ no. 2, 3,
5, and 7 are first time
borrowers.
- Number or reloans: 3.
These are the loans
approved from old clients of
the MFI. Clients 1, 4, and 6
are old clients or repeat
borrowers.
- Number of loans
approved: 7
- Number of loan approval
forms attached: 7. It is
assumed that all approved
loans have corresponding
forms.
- Total amount of new
loans: PhP42,000 (see
computation below)
- Total amount of reloans: PhP40,000 (see computation below)
Step 4: Submit Loan Approval Summary Form to the Branch Manager or the
MFI’s approving authority and sometimes in conducting Credit Investigations.
After completing the Loan Approval Summary Form, the Loan Officer should then endorse this to the
management for loan approval and release. The Branch Manager will then forward all forms to the Head
Office for the preparation of cheques or cash to be disbursed to the clients. The Loan Officer then
disburses loans to the client during group meetings. The whole process normally takes about one to two
weeks from issuing of loan application to
disbursement of the loan.
9

10

Exercise No. 1: You and your group should perform the following:
1. Interview at least 2 MFI, conduct a comparison analysis regarding their process of loan application.
You may also ask a copy of their Loan Application form (for academic purposes only).
2. Prepare a comparison report and report it to the class. Only 2 members are allowed to present your
work.
3. Attach also the documentation during the interview conducted. Submit the hardcopy in a short bond
paper (minimum of 2 pages).
4. Provide a cover page which includes your names (last name first), subject code and description,
Teacher’s name and your section.


Read each statement carefully. Select the best answer. Write your answer on the space provided.
_____ 1. Information that must be checked in the Loan Application form

a. Name of Center Chief
b. Educational need of children of clients
c. Repayment and Attendance Rate of client
d. Work Address of Spouse of Loan Applicant
_____ 2. Information that must be checked in the Barangay Certificate/Clearance

a. Purpose of certificate/clearance
b. Name of Barangay Officials
c. Barangay projects
d. Barangay Ordinances
_____ 3. Information that must be checked in the Business Proposal

a. Income of Spouse
b. Medical Expenses of family
c. Support received from relatives abroad
d. Expenses required by the business
11

_____ 4. Repayment Rate must be checked to determine

a. Outstanding Loan Balance of loan applicant
b. Appropriate loan size based on Repayment Rate policy of the MFI
c. Repayment of Loans of client to other MFIs
d. If spouse pays the loan
_____ 5. What will you do if documents of loan applicant are incomplete?

a. Photocopy documents of another member
b. Tell her not to do it the next time
c. Inform loan applicant that her loan application will be processed only
when she completes the documents.
C. LESSON WRAP-UP
A. Work Tracker
completed.

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
12

FAQs
1. What customer protection measures exist for clients?
Concerns about negative impact of excessive interest rates, abusive lending practices and over-
indebtedness and high multiple lending among poor borrowers have all led to the greater attention
given to responsible financial practices and developing Client Protection Principles. The three main
aspects of these are as follows:
➢ Customer Protection, Regulation and Supervision to ensure customers are treated fairly and
appropriately and that they understand the implications of their actions
➢ Improve standards and codes of conduct with an emphasis on consistency
➢ Financial Literacy training to make clients more informed so that they can become more
responsible for their own financial welfare.
KEY TO CORRECTIONS

1. C
2. A
3. D
4. C
5. C
13


Lesson Objectives:
References:
2. 1. I can check loan utilization.
Technology NC II
The Gift that keeps on giving: “The beautiful thing about learning is that no one can take it away from you”—
B.B. King
1) Introduction
Good day Everyone! For today, we are going to proceed with the 5th core competencies of MF
begin!
lesson.

What are the procedures in

informing clients about loan
application status?
Do we need to inform loan

applicants about non-approval of
loans?
1

What is loan utilization check?
B. MAIN LESSON
PROCEDURES IN INFORMING CLIENTS ABOUT LOAN APPLICATION AND/OR INSURANCE

STATUS
Step 1: Inform the loan applicant about the approved loan, schedule of loan repayment, and
amount of loan amortization.
The Loan Officer has to discuss with the loan applicant the approved loan, interest rate charged by the
MFI, schedule of loan repayment and the amount of weekly loan amortization1. The following could be
the “script” that the Loan Officer could follow in talking to the loan applicant:
Step 2: Remind the loan applicant of the built-in savings and insurance costs
included in his or her weekly amortization.
Most MFIs have recognized that clients have various financial needs aside from credit. To address this,
MFIs have expanded their financial services to include not only business loans but also savings services
and micro insurance programs such as life insurance and credit life insurance. Thus, some MFIs include
compulsory savings and premium payment for insurance in the total amortization of the client. The Loan
Officer must clearly explain to the client the built-in savings and insurance
costs included in his or her weekly amortization.
1. Compulsory savings. Microfinance Institutions (MFIs) offer savings

services in tandem with loan services in order to instill the values of thrift and fund accumulation among
their clients. MFIs usually require a minimum weekly savings amount (e.g. PhP50 every week). Other
MFIs require a percentage of the total approved loan to be deposited at the start of each loan cycle and
to keep that amount saved while a loan is still outstanding or until the client terminates membership in
the MFI.
The funds are added in the client’s savings account and documented in the passbook. In some MFIs, the
funds can be withdrawn, while in other MFIs the amount is kept while a loan is still outstanding or the
client is still a member of the MFI. For MFIs that allow withdrawal of savings, they set a maximum amount
that can be withdrawn every month (e.g. a maximum withdrawal of only PhP400 a month), while some
limit the number of withdrawals to only twice or thrice a month during the term
of the loan.
2

The Loan Officer should also encourage the client to save more, over and
above the required minimum savings per week. He or she should also explain to the
client the benefits of increasing his or her savings:
a. Savings help clients

reserve funds for own
business capital, for
emergencies, for
household expenses or
future events;
b. It provides a cushion for
clients to fall back on if
their cash flow is tight;
c. It serves as an
important loan guarantee
for the client, and,
d. It helps build credit
ratings of the client and
can serve as collateral in
the
future.
2. Premium payment for

Life Insurance. Life
insurance is provided in
order to give financial
assistance to the client’s
beneficiaries upon his or
her death. Benefits are
given directly in cash by
the MFI to the family upon
the death of a client.
Premium4 for life
insurance is usually
collected by either
automatically deducting
the premium amount from
the loan principal or by
adding the amount to the
client’s loan amortization. For example, a particular MFI requires that clients pay a
premium of PhP10 every week, which should be given together with the weekly loan repayment. In other
MFIs, clients are required to pay a set amount (say PhP300 for every loan disbursed) or a percentage of
loan principal (say 5 percent of approved loan) as premium payment for life insurance.
3

3. Premium payment for Loan Insurance or Credit Life Insurance. Loan insurance policies are
commonly imposed on borrowers in order to cushion the microfinance institution from financial loss in the
event of death of a borrower. Thus, it helps cover loan default. It is also a mechanism to relieve the
borrower’s family of the added burden of inheriting loan obligations. Thus, in case of death of a client, his
or her family will not have to pay back the remaining loan. Premiums for the loan insurance are commonly
automatically deducted from the loan principal or added to the client’s amortization payments. In some
MFIs, premium amount for loan insurance is set as a percentage of the approved loan, for example,
premium for loan insurance is set at one percent (1%) of total approved loan. Other MFIs set a fixed
amount as premium, for example, the client upon loan disbursement pays PhP300 for every approved
loan. Table 1 below summarizes the features of the built-in financial services offered by micro-finance
institutions:
The Loan Officers should

remind the clients of these
built-in savings and
insurance costs included in
his or her weekly
amortization. The Loan
Officer may have the
following “script”:
“Ang naaprubahang loan
ninyo ay PhP4,000. Ang
ating MFI ay nagpapataw
ng 15 porsyento bilang
interes, kaya ang interes ng
inyong utang ay PhP600.
Ang kabuuang halaga na
kailangan ninyong bayaran
ay PhP4,600. Ito ay
kailangang pong bayaran
sa loob ng 23 linggo, kaya’t
ang inyong lingguhang
hulog ay PhP200.”
“Karagdagan pa dito, ang
ating MFI ay mayroong
built-in savings at insurance
services. Kaya’t
nakapaloob sa inyong
lingguhang hulog ang
PhP90 na savings at ang
PhP10 bilang premium
para sa life insurance. Kada
linggo kayo po ay
magbibigay sa MFI ng
kabuuang PhP300.”
4

(Your approved loan is PhP4,000. Our MFI charges 15 percent of loan as interest rate, thus the interest
amount of your loan is PhP600. The total amount that you have to repay is PhP4,600. This has to be
repaid in 23 weeks, thus your weekly loan amortization is PhP200. In addition, our MFI have built-in
savings and insurance services. Thus, your weekly loan amortization will include a PhP90 savings and
PhP10 as premium payment for life insurance. Every week you will have to give a total of PhP300 to the
MFI.)
Step 3: Remind the loan applicant of his/her responsibilities as borrower and the
responsibilities of the guarantor and/or co-maker.
One of the main challenges faced by MFIs is loan repayment. The Loan Officer has a huge part in
ensuring that the MFI overcome this obstacle by carefully explaining to the client his or her responsibilities
as a borrower. The Loan Officer must remind the borrower that his or her main responsibility is to pay the
full weekly amortization on the dates and terms agreed upon with the MFI. This means that the borrower
must (1) pay the weekly loan amortization, (2) save at least the minimum amount required by the MFI
every week, (3) pay the required premium for life insurance, and (4) pay the required premium for loan
insurance or credit life insurance. In some MFIs or for specific loan products, there is a need for a
guarantor or co-maker, or both. The Loan Officer should also talk to the guarantor and/or the co-maker.
The guarantor is a relative of the borrower while the co-maker is an active member of the MFI and not a
relative of the borrower. The Loan Officer must remind the guarantor and/or co-maker of their
responsibility – to shoulder a borrower missed or incomplete payment.
Step 4. Remind the client to use the loan as

indicated in the Business Proposal or Loan
Utilization Plan.
It is critical that the Loan Officer remind the client to use
the loans according to the purpose upon which the loan
was granted to them, that is, for the acquisition of
additional products or fixed assets that

can help grow his or her enterprise. The
Loan Officer should remind the client not
to use the loan in non-productive
activities such as purchase of home
appliances for personal use, home
improvement, maintenance of family
vehicle, or payment of tuition.
5

The Loan Officer must remind the client that if he or she used the loans for purposes other than for the
improvement of the business, the client may not be able to meet the weekly loan repayments. The Loan
Officer should tell the client that the MFI would do the following if it finds out that the loan was used for
other purposes:
a. Ask the client to submit a written explanation of why he or she did not use the loan as indicated in the
Business Plan or Loan Utilization Plan;
b. Ask the client to submit a written explanation on how he or she intends to repay the loan; and/or,
c. Inform the client that improper use of loan may result to reduced loan amount in the next cycle or
termination of membership from the MFI. In addition, if the MFI officers find out that the client did not use
the loan, the client may be asked to return the loan to the MFI.
The Loan Officer must also remind the client that the MFI conducts random checks to monitor how clients
used the loan granted to them.
Step 5: Inform the client of the time and

place of loan release
The Loan Officer should inform the client of

the time and place of loan release. For
some MFIs, the loan release is set at a
definite time every day. For example, in
ASA Philippines Foundation, clients are
required to go to the Branch Office at one
o’ clock in the afternoon and attend the
borrowers’ orientation before their loans
could be released. The Loan Officer should
also remind the clients that failure to attend
the orientation would deprive them of
obtaining their loans. If this happens, the clients would have to wait for another week for the release of
their loan, after they have attended the required orientation. The Loan Officer’s script could be along the
following lines:
“Dapat po ala una ng hapon ay nasa branch office na kayo kasi 1:30 ng hapon po ang simula ng
orientation. Kapag nasarado na ang pintuan, wala na pong pwedeng kumatok at wala nang makakapasok
sa opisina. Hindi na maibibigay ang inyong loan. Sa susunod na linggo na lang maibibigay ang inyong
loan kapag nakadalo na kayo ng borrower’s orientation.”
(You should be at the branch officer by one o’ clock in the afternoon because the orientation will start at
exactly 1:30 in the afternoon. When we close the door of the branch office by 1:30pm, we will not allow
anyone to go inside the office. We will not release the loan to you. You will have to wait for another week
before you could get your loan after you have successfully attended the borrower’s orientation.)
Normally, first time clients would ask the Loan Officer the topics that would be discussed during the
borrower’s orientation. Thus, the Loan Officer should be able to answer this query.
6

The borrower’s orientation is one of the venues for explaining to the clients the products of the MFI, as
well as the responsibilities of the borrower. The background (Vision, Mission, and Objectives) and the
programs, policies and services of the MFI are also discussed during the orientation.
In performing all these tasks, the Loan Officer must be patient and respectful. The Loan Officer may meet
some clients who have difficulty understanding or are just plain sarcastic, thus, the he or she should be
tolerant and polite in dealing with them.
Informing Loan Applicants about Non-approval of

Loans
Sometimes if Credit Investigation resulted in a negative

rating of the loan
applicant, the approving committee or officer (either the
Loan Officer or Branch
Manager) may opt for any of the following decisions:
1. Disapprove loan - the loan applicant could not get any
loan from the MFI.
2. Approve loan but adjust the loan’s terms and
conditions such as the following:
a. Reduced loan amount (e.g. from PhP14,000 to
PhP8,000)
b. Change loan term (e.g. from 16 weeks to 23 weeks)
c. Change repayment schedule (e.g. from monthly repayment schedule to
weekly repayment schedule)
3. Approve loan but release of loan is deferred until the loan
applicant submits additional requirement (over and above
the basic requirement). The MFI may ask for any of the
following:
a. Additional co-maker who will guarantee the loan of the
loan applicant;
b. Collateral – This property (such as house or land) is
acceptable as security for a loan. These can also be assets
that are asked of a borrower to pledge in order to secure a
loan and are subject to seizure in the event of the borrower
defaults on his or her payments.
c. Other documents such as contract of rented space in the
public market, land title or any additional proof of residence,
or a document indicating the loan applicant’s voluntary
surrender of collateral in case of non-repayment; or,
d. Additional person to be interviewed for background check
7

The Loan Officer should be ready to explain any of these decisions to the loan applicant and the
reason/s for the decisions. See table below for the possible reasons for each decision:
Decision Possible reasons
Disapprove loan The approving committee is uncertain of the loan applicant’s
ability to repay the loan which may be due to the following:
- The business proposal may not be profitable
- The business proposal is difficult to manage
- The loan applicant does not possess the necessary skills to
operate the business - Character or reputation of the applicant is
questionable.
Approve loan but adjust the loan’s The requested loan terms and conditions do not match the
terms and conditions nature of business of the loan applicant.
For example, the Branch Manager or the approving authority
may decide that the loan applicant pay within 16 weeks instead
of 23 weeks since he/she saw that the loan applicant’s business
can generate income in a shorter span of time Or The Brach
Manager or approving authority may decide to reduce the loan
amount (from PhP25,000 to PhP15,000) because he or she saw
that the loan applicant’s business operation does need that
much capital investment.
Approve loan but release of loan is The approving committee still needs to firmly establish the loan
deferred until additional applicant’s ability to repay the loans, his or her character or
requirement is submitted by the reputation, or the viability of business proposal.
loan applicant
Before talking to the loan applicant, the Loan Officer should first consult with the Branch Manager or the
person who conducted the Credit Investigation and ask for his/her reason for the non-approval of loans
or the changes in the loan request of the loan applicant. This way, the Loan Officer will be well-formed
and will know how to approach and talk to the loan applicant.
LOAN UTILIZATION CHECK
What is a loan utilization check? Loan utilization check is an integral part of the operation of MFIs
because clients’ diversion of funds is one of the major causes of delinquency and default. The process
entails going back to the client’s area of business to inspect and monitor whether clients used the loans
according to the purpose upon which the loan was issued to them. Loan utilization check is undertaken
a week or several weeks after disbursing the loan to the client.
Why is this task important?

Due to the client’s diverse financial needs, MFIs have faced loan diversion, that is, clients using their
loans not for the purpose indicated on the loan application form, but for another purpose. Often loans are
diverted for “non-productive” purposes – to pay for emergency medical expenses or for education
expenses. Loans are also often diverted to making home improvements, buying home appliances or for
payment of other loans.
8

Checking how the clients used the loan issued to them is critical for a microfinance Institution because
MFIs put much emphasis on economic empowerment of their clients. For MFIs, lending is a tool to
empower clients. To ensure that the MFIs achieve this objective, it should closely monitor clients’ loan
utilization.
Administratively, loan utilization check ensures up-to-date repayment of loans. If the clients used the
loans for purposes other than the improvement of their business, the client will find it difficult to meet their
weekly loan repayments. Thus, tight supervision of loan utilization by the Loan Officer and other
concerned officers of the MFI ensure recovery of loans.
In addition, loan utilization check entails the Loan Officer frequent visit to the client’s house or place of
business, thus, the Loan Officer is able to build relationship with clients. The Loan Officer is also able to
observe patterns in the client’s cash flow and microenterprise operation. This allows the Loan Officer to
make significant recommendations on how the MFI could enhance its operation, services, or programs.
How should clients utilize loans?

Money borrowed from MFIs should be invested for increasing the working capital of the clients’ existing
business. It is intended for increasing inventory and/or fixed assets of the enterprise, and not for the
purchase of personal items or for the
conduct of non-income generating activities. Thus, clients may use the loan to buy more products for
their business, to purchase vehicles for their
business such as sidecars, carts, motorcycles,
or tricycles, or to buy other business assets.
How do clients usually use their loans?
MFIs are aware that the loans are not always

fully used for the purpose described in the
client’s loan application form or business plan.
For example, some borrowers use their loans
to retire more expensive debts taken from local
moneylenders or other MFIs. Some clients use
the loan to buy medicine for a sick family
member since most, if not all, micro
entrepreneurs and their families have no
health insurance coverage. Moreover, given
the client’s commitment to education, loans
are most often times diverted to finance
schooling costs for their children.
Some clients use the loan, at least part of it, for payment of electricity or water bills, home improvements,
and for purchase of household appliances. Some even use the loan to acquire personal assets such as
fashion accessories, and payment of placement fees for family members who want to work abroad.
Others use the loan to pay for pawned jewelry and other belongings. Some even use the loan for the
maintenance of their vehicle, payment of home amortization or even house rent, and renewal of taxi
9

license or driver’s license.
If the clients use the loan this way, there is huge possibility that they will not be able to improve their
microenterprise and consequently default on their loan repayment.
How do MFIs avoid loan diversion of clients?

Some MFIs offer microinsurance products in order to avoid loan diversions and to help their clients in
meeting their other financial needs. MFIs usually provide three microinsurance products to their clients:
life insurance, credit life insurance, or
also known as loan insurance and micro-health insurance.
(1) Life insurance policies are provided to the clients in order to give financial assistance to the
beneficiaries upon the death of a client. Benefits are given directly in cash to the client’s family upon his
or her death.
(2) Credit-life or loan insurance is imposed on borrowers in order to buffer the micro-finance institution
from financial loss in the event of the death of a borrower.
(3) Health insurance is offered by some MFIs so that clients could reimburse the cost of their
hospitalization and medicines purchased.
Premiums for these insurance programs are usually collected by automatically deducting premium
payments from the loan principal or by adding them to the client’s loan amortization payments.
Other MFIs provide other types of loans such as educational loans or emergency loans, which can have
different payment terms and interests, so that the MFI’s primary product (business loans) will only be
used for business purposes.
Procedure for Checking Loan Utilization

The Loan Officer should undertake loan utilization check a week or several weeks after the loan has been
released to the client. It can also be done before granting another loan to old clients to ensure that they
properly used the loan previously issued to them. The following are the usual steps followed in conducting
loan utilization checks.
Step 1: Obtain Loan Utilization Monitoring Form from the Branch Office.
In some MFIs, the Loan Officers are required to allot exclusive time for checking loan utilization. In other
MFIs, however, the Loan Officers may just check loan utilization while conducting weekly group meetings
(through an informal talk with clients) or during sit-down2 with clients in the afternoon (when the Loan
Officer visits the area of business of clients who fail to pay during the group meetings). In some MFIs,
loan utilization checks are done during Credit Investigations particularly for old clients. The Branch
Manager includes loan utilization among the factors that is considered when deciding over a client’s new
loan request. For UPLIFT Philippines, loan utilization checks are done during Credit Investigations as
part of the assessment for approving the loan of a client, particularly of repeat borrowers. Thus, their
Loan Utilization Monitoring Form is at the second page of their Loan Application Form.
Step 2: Conduct loan utilization check at the client’s business location.

After obtaining the Loan Utilization Monitoring Form, the Loan Officer can already schedule his or her
visit to the client’s area of business. It is important that the Loan Officer goes to the area unannounced,
unscheduled visits is an effective way of checking loan utilization. During the visits, the Loan Officer
10

should look at the changes in the enterprise’s inventory, fixed assets, or size of business operation.
Sometimes when borrowers diversified their loans, it is possible that they lie and deceive by making use
of their neighbor’s products, and parade them as their own in front of a visiting Loan Officer. During these
instances, the Loan Officer must be aware of these charades and report them accordingly.
Step 3: Ask the client how he or she utilized the loan issued by the MFI.
The Loan Officer should approach the client and conduct a personal interview. In doing the interview, the
Loan Officer must observe courtesy and not question the client in a rude manner. The Loan Offer should
also ask for supporting documents such as official receipts, statement of expenses, or any evidence that
would show how the client used the loan.
Step 4: Verify with the client’s

suppliers and customers, as
well as relatives and neighbors,
how the client used the loan
issued by the MFI.
The client’s suppliers and
customers can be a valuable
source of information for they are
the regular contact of the client in
the conduct of business. They
would be aware of any changes in
the client’s business operation.
The client’s relatives and
neighbors are also good source of
information. If clients used the
loan to purchase home
appliances, for home
improvements, or other personal
use, the relatives and neighbors
would be the first people to know
this.
Step 5: Fill-out the Loan

Utilization Check Form.
The Loan Officer can compare the items bought by the clients against his or her Business Proposal or
Loan Utilization Plan and make some conclusion as to how the client used the loan. In the Loan Utilization
Monitoring Form of the UPLIFT
Philippines, the Loan Officer may tick any of the following conclusions after conducting the loan utilization
check:
_ The loan has been properly used.
_ There are discrepancies between the business plan and the actual expenses.
_ The loan was used for non-business purposes.
11

Step 6: Submit the accomplished Loan Utilization Check Form to the Team
Leader or Branch Manager or Supervisor
After signing the loan utilization form, the Loan Officer should then forward the document to the Branch
Manager for further study and appropriate action.
LOAN UTILIZATION CHECK IN OTHER MFIs

For MFIs that follow the Grameen methodology, the procedure for monitoring loan utilization starts with
the group leader who writes down on a Loan Utilization Check Form how his or her members used the
loan. He or she then forwards the form to the Center Chief3 who then submits it to the Loan Officer. The
Loan Officer also checks on the utilization of the loan and submits a written description of the type of
investments made by the clients to the Branch Manager. The Branch Manager then randomly checks
loan utilization through field visits and then signs a form that is forwarded to a supervisor.
In other MFIs, there is no formal and systematic way of checking loan utilization, that is, the Loan Officer
does not allot an exclusive time for checking loan utilizations. The Loan Officer may ask about how clients
used the loans informally through interviews with clients during weekly group meeting, observing the
increase or decrease in the number of goods being sold by the client, and interviewing the client’s
suppliers and customers.
Exercise No. 1: Read the questions carefully. Then answer the questions briefly.
What are the responsibilities of a borrower?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
What are the responsibilities of a co-maker?

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
Who is qualified to be a guarantor?

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
12

___________________________________________________________________________
___________________________________________________________________________
Who is qualified to be a co-maker?

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________


Read each statement carefully. Put a check mark on the statements indicating the correct usage
of business loans.
______1. Aling Nena has a tailoring business. She used the loan to buy a new sewing machine, some
needles, threads, and fabric.
______2. Mina bought a new washing machine using the loan issued by the MFI. She owns a small
sari-sari store.
______3. Mang Andres trades fish. He bought weighing scales, pails, baskets, an icebox and a huge
umbrella using the loan from the MFI.
______4. Mang Tonyo used the loan issued by the MFI for the repair of their old family van. He
operated two fishball stands.
______5. Aling Trining used most of the loan from the MFI to buy dry goods for her sari-sari store, the
rest of the loan she used to treat her children to lunch at the nearest fast-food restaurant.
______6. Allan used the loan to rent a stall in the public market; he used to sell his products along the
sidewalk of the public market.
_____ 7. Aling Rose used the loan issued by the MFI to buy new cooking equipment or kitchen utensils
for her carinderia, the rest of the money she used to buy ingredients.
_____ 8. Nina built a piggery using the loan from the MFI. She operates a sari-sari store but wants to
venture into the piggery business.
13

C. LESSON WRAP-UP
A. Work Tracker
completed.

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
FAQs
1. What are the points to remember in loan utilization check?
• Loan utilization check is a critical task in any micro-finance organization because it is one of the
mechanisms employed by MFIs to ensure the recovery of loans.
• Micro-finance institutions avoid loan diversions by providing other types of loans with different
payment schemes and interest rates such as emergency loans and educational loans.
• Loan diversions are also avoided by providing clients with different insurance programs or
policies such as life insurance and health insurance.
• Loan Utilization Check is one of the primary tasks of a Loan Officer because it helps ensure that
clients can repay their loans in full and on time.
• The Loan Officer should ensure that the money borrowed from MFIs were invested for increasing
the working capital of the clients’ existing business, that is, for increasing inventory and/or fixed
assets of the enterprise, and not for the purchase personal items or for the conduct of non-income
generating activities.
14

KEY TO CORRECTIONS
Exercise No. 1
Proposed Answers:
1. The main responsibility of a borrower is to pay the full weekly amortization on the dates and terms
agreed upon with the MFI.
2. The responsibility of the guarantor and/or the co-maker is to shoulder a borrower’s missed or
incomplete payment.
3. The guarantor should be a relative of the borrower.
4. The co-maker should be a member of the MFI and not a relative of the borrower.

You should have put a check before numbers 1, 3, 6, 7, and 8 only.
In numbers 2 and 4, the clients used the loan for their personal use, while in number 5 the client used
part of the loan for personal consumption.
15

Lesson title: Collecting Dues Materials:

2. 1. I can receive payments and collection reports. References:
Technology NC II
“A beautiful simile for any schoolroom: “The mind is not a vessel to be filled but a fire to be ignited” -- Plutarch
1) Introduction
Good morning/afternoon class! Congratulations, because you are about to finish the whole MF
Tech NC II module, you are almost done, because you now on the 6th Core Competency, and this
is the 2nd to the last core competency. But this core competency is one of the important. Are you
excited, let’s begin!!
lesson.

What do you know about Collecting Dues? Try answering the questions below by writing your
ideas under the What I Know column. You may use key words or phrases that you think are
related to the questions.
What is LOR?
What is a passbook?
1

What is a repayment schedule?
B. MAIN LESSON
RECEIVE COLLECTION REPORTS

COLLECTION PROCESS
In MFIs using the group methodology, loan repayments are collected during the Center’s weekly
meetings, which fall on the same day every week. Loan collection is more than just receiving of cash
payments by the Loan Officer. It involves a series of steps from receiving of group collection reports at
the field to turning over of cash collections to the Branch. Illustration 1 shows the collection process being
followed by Loan Officers of MFIs adopting group liability approach and individual liability approach.
For example, five members of Masinop Group had been attending the Center’s weekly meetings every
Monday for two weeks. The following Monday (June 15), they received their loans. Their first loan
repayment and the succeeding repayments will fall one week after loan release (June 22) and every
Monday thereafter during Center meeting, respectively.
This Learning Element covers the first step in the collection process - Receive Collection Reports
Loan Officers begin their collection activity with this task after the Center meeting proper. The following
describes this scenario:
In some MFIs using the group liability approach, Loan Officers begin the collection process by
validating the collection on Group Treasurer’s Register (e.g. ASA Philippines). Refer to Record
Typical Day of a Loan Officer

Malou, a microfinance Loan Officer, walks towards a modest house in Tondo, Manila. She is scheduled
to meet with her clients, composed of thirty women, who are members of Matiyaga Group. This is her
second meeting for the day. She does not notice the heat of the sun. She looks forward to seeing her
clients. She has been inspired countless times with stories from these women.
All of the members are already there when Malou arrives. She is greeted warmly as they see her. She
greets back and soon starts the meeting with a prayer. After the prayer, the group recites the Panata led
by the leader of the group. The singing of National Anthem soon follows. Seeing that the clients are not
in their usual lively mood, Malou urges everyone to forget their problems for a while and tells them to
spend the rest of the day with happy thoughts. She then enthusiastically leads a lively group singing and
watches with delight as her clients begin to dance and clap as they start to warm up. The meeting
proceeds smoothly. After about an hour, collection of payments is the next agenda of the day. Malou
2

starts distributing blank Group Collection Report forms to the Group Leaders. The said officers busy
themselves with filling out the forms and collecting cash and passbooks.
Collection Reports
The next part describes briefly the reports that are prepared before the Loan Officer receives the Group
Collection Reports.
1. Loan Officer’s Register (LOR)

LOR is a journal in which loans are recorded in chronological order, and consecutively numbered 3. In
Microfinance, it is a single sheet or bound forms used to record the flow of all cash transactions of every
member. Figure 1-a and Figure 1-b show the LOR’s cover page and inside page, respectively. The
details about LOR and how to fill it out are covered in Record
Collection on Loan Officer’s Register Learning Element.
FIGURE 1-A Cover Page of Loan Officer’s

Register
3

Source: ASA Philippines Foundation
FIGURE 1-B Inside Left Page of Loan

Officer’s Register
FIGURE 2-A
Cover Page of a Passbook
2. Passbook
This refers to a booklet, which contains the client’s cash transactions with the MFI. The client keeps the
passbook. He or she must bring it to the weekly meetings for updating. Updating of passbook is covered
in the Record Collection on Client’s Passbook Learning Element. Figures 2-a and 2-b show a passbook’s
cover page and inside page, respectively.
FIGURE 2-B Inside Page of Passbook

3. Repayment Schedule
A repayment schedule
is a form given to each
client during loan release.
It contains, among others,
the loan amortization
amount to be paid by the
client on a weekly basis.
The details about the
repayment schedule are
covered in the Sign
Repayment Schedule
Learning Element. Figure
3 shows a sample loan
repayment
schedule.
4

FIGURE 3
Sample Loan
Repayment
Schedule
Source: Form
used with
permission
from: ASKI
In some MFIs, the

passbook is used
instead of the
repayment
schedule.
What is a Collection
Report?
A Collection Report is a
manually prepared report,
which shows the actual
weekly loan repayment of
the group members 5.
The Group Leader
accomplishes this report
during the Center Meeting
6. Figure 4 shows a
sample of filled-out
Collection Report form 7.
FIGURE 4
Filled-Out Collection
Report
5

The contents of Collection Report vary among MFIs. However, it commonly contains the names of the
clients, date of collection, breakdown of collection, signatures of the Group Officers and the Loan Officer.
Refer to Figure 5 below, which shows a sample of blank Collection Report.
5 Group members refer to members in small groups within a Center.
6 Some MFIs allow the Group Leaders to accomplish the Group Collection Reports before the meeting
starts.
7 Content and name of the forms vary among MFIs (e.g. In CCT, the one-page form is called Care Group
Register).
FIGURE 5 Blank Group

Collection Report
Described here is a sample

of a group member’s
repayment transaction:
Matiyaga Group has five
members and each has
different loans with CNN
Microfinance. One member,
Nanay Juana Reyes
received her 5,000-peso
loan on April 27, 2009.
Today is May 4, 2009 and
Nanay Juana Reyes starts
the weekly repayment on her
loans together with the other
members of the Group.
Nanay Gloria Balata, the
Group’s Leader, has finished
recording on the Group
Collection Report.
She will submit the report to Nanay Eva De Dios, the Group’s Secretary for checking.
Later, Jonas Bernabe, the Loan Officer will receive the Report. Refer to Figure 6 and
study which columns or spaces on the Group Collection Report the information below is recorded.
Practice calculating for the totals:
1. Date of Collection : May 4, 2009
2. Name of Client : Juana Reyes
3. Principal payment : 209 pesos
6

4. Interest payment : 38 pesos

5. Capital Build-Up (CBU) : 21 pesos
6. Insurance : 30 pesos
7. Total Collection : 298 pesos
Steps in
Receiving
Collection Report
The Group
Collection Report is
the first report being
used by the Loan
Officer to detail the
payments of the
members.
Information in the
Passbook and
Loan Officer
Register are
dependent on the
information
indicated in the
Group Collection Reports. The Loan Officer should ensure that the forms are properly and correctly
filled-out by the Group Leaders.
Listed below are the steps one should follow in receiving the Group Collection
Report:
1. Prepare blank forms of Group Collection Report.
2. Distribute blank forms of Group Collection Report to the Group Leaders.
3. Receive Group Collection Report forms.
Following are detailed discussions of each:

a. Prepare the forms shown in Figure 5 at least one hour before you leave the office. Prepare 2 copies
for each group. 8 (If one is visiting 3 Centers with 3 groups each, prepare at least 18 blank forms of
Group Collection Report)
b. Bring carbon papers as well to duplicate copies easily.
2. Distribute the blank forms of Group Collection Report to the Group Leaders after the meeting 9.
7

Figure 7
Sample Cash Breakdown Slip
Cash Breakdown
1000 x 0
500 x 1 500
200 x 1 200
100 x 1 100
50 x 3 150
20 x 15 300
10 x 23 230
5x2 10
1 0
0.50 0
0.25 0
Total P 1, 490
a. Distribute 2 copies of blank Group Collection Report

forms to each Group Leader. Distribute carbon papers to each group as well.
b. Group Leader collects the repayment schedule 10 and cash payments from his or her group members
before recording.
c. Group Leader counts the cash payments in the presence of group members and he or she fills out a
cash breakdown slip. Refer to Figure 7 for the cash breakdown slip.
d. Group Leader fills out the 2 Group Collection Report forms indicating the details of payments of each
client.
e. Group members check and sign, one at a time, on the Group Collection Report. Their signatures serve
as proof of their payments and of their confirmation to the details on the report.
8 The Group Leader keeps one copy of the report and the other copy goes to the Loan Officer. 9 In some
MFIs, the forms are distributed before the meeting starts. 10 In some MFIs (e.g. Alalay sa Kaunlaran,
Inc) Group Leader collects passbooks instead of repayment schedule
3. Receive the filled-out Group Collection Report from the Group Secretary.
a. Group Leaders checks for completeness and accuracy of the report and signs it afterwards.
b. Group Leaders submit the 2 completely filled out forms to the Group Secretary together with the:
•Repayment schedule (or passbooks) of the group members.
•Cash payments (enclosed in passbooks).
c. Group Secretary checks and signs the forms.
d. Loan Officer receives the forms from the Group Secretary.
In some MFIs, cash payments are deposited directly by the Group Treasurer to the MFI’s depository
banks. In such cases, deposit slips are attached to the Group Collection Report instead of cash.
1. Review Collection Reports
• Group collection reports must be updated and filled out completely and accurately. Poor quality
reports lead to poor service.
8

• Group collection reports should contain the individual payments of the group members in a sub-
group.
• Group Collection Report is a source document. All other reports are dependent on it.
• The Loan Officer must update the Loan Officer’s Register (LOR) before the scheduled weekly
meeting.
• Loan Officer’s Register (LOR) contains the amount to be collected from each client or group.
• The Group Leader submits the repayment schedule (or passbooks) and cash payments (or
deposit slips) of the group members to the Secretary together with the Group Collection Report.
RECEIVE CASH PAYMENTS

Cash is the lifeblood of any MFI. When microfinance clients pay their loans, MFIs use the cash for re-
lending to others and for keeping their day-to-day operations running. Loan Officers play a major role in
supporting the goals of MFIs because they are the front liners involved in cash-handling activity during
loan collection.
On Receive Collection Reports Learning Element you have learned that cash payments are collected
first by the Group Leaders before they turn them over to the Group Treasurer1 together with the collection
reports. The Group Treasurer checks the collection report and count the cash before giving them over to
the Loan Officer.
Group Treasurer checks the

collection report and does cash
counting before
Steps in Receiving Cash

Payment
This Learning Element covers the

specific steps involved in receiving
cash payments, namely:
1. Verify the cash
breakdown.
2. Count the cash payment.
3. Secure cash received
Step 1: Verify Cash Breakdown

Upon receipt of cash payments, check the breakdown of cash collection. A cash breakdown is
a detailed recording of the peso bills according to denomination. That is, all bills or currencies of same
amount are grouped together (e.g. 1,000-peso bills go together).
This is recorded on the Group Collection Report by the Group Leader usually at the lower portion
of the report. In some MFIs, this is a separate small slip submitted together with the Group Collection
Report. Figure 1 shows a sample of cash breakdown that you should verify and refer to when counting
bills later on. The numbers should be clearly written to avoid confusion upon consolidation.
9

Denomination No. of Amount

Pieces (in PhP) FIGURE 1
P1000 x 0 0 Cash Breakdown
500 x 1 500
Step 2: Count Cash Payments
200 x 1 200 Once you have verified the cash breakdown, you can now
100 x 1 100 count the actual cash per denomination as indicated on the
50 x 3 150 report. Tick if the breakdown of cash per denomination is
20 x 15 300 correct (Figure 2 shows a sample of cash breakdown with
tick mark). Add up the total. You may use a calculator to
10 x 23 230 speed up the process.
5x 2 10
1x 0 0
.50 x 0 0
.25 x 0 0
FIGURE 2
Total 1,490 Ticked Cash Breakdown
Denomination No. of Pieces Amount (in PhP)
While counting the cash 1000 x 0 / 0
collections, be aware of your
500 x 1 / 500
surroundings. Be wary of
unfamiliar faces present in the 200 x 1 / 200
meeting. Acknowledge the 100 x 1 / 100
guest’s presence and inquire if 50 x 3 / 150
the guest is an invitee of the 20 x 15 / 300
client. Inquire about his or her
10 x 23 / 230
purpose in coming to the
meeting. Some “uninvited 5x 2 / 10
guests” of the meeting could 1x 0 / 0
pose as potential clients and put .50 x 0 / 0
your collections at risk or threaten .25 x 0 / 0
your security.
Total 1,490
Similarly, you must be also be
aware of the risks of receiving counterfeit (fake) paper bills. The discussion below gives you an idea on
how to spot fake paper bills.
How to Recognize Counterfeit Peso Paper Bills

Loan Officers are constantly exposed to handling cash when collecting payments from the
clients. With the proliferation of counterfeit (fake) peso paper bills nowadays, some fake peso bills
could land on your hands without your knowing it. Loan Officers must, therefore, be alert and careful
when counting cash. Aside from the fact that counterfeit bills are useless, they are also illegal. Fake
paper bills should be surrendered to banks and must not be allowed to return to circulation.
10

Loan Officers must take extra precaution especially when counting large denomination paper
bills such as P500 and P1,000. To be able to recognize counterfeit bills, you have to be completely
familiar with the security features of the genuine peso bills (you will need a P500 bill for the next
activity).
There are numerous ways to identify counterfeit paper bills.

However, for this module we will only discuss the common and the
easiest ways to spot fake bills. Follow the steps below to guide you
on how to differentiate counterfeit bills from genuine ones:
1. Hold the P500 bill up against a source of light and look for the
“watermark”. This is the silhouette portrait on the face of the
bill. You should be able to see the watermark from both sides
of the bill. The watermark should be the same person that is watermark
printed on the bill (e.g. Ninoy Aquino on P500 bill). The location
of the watermark on a P500 bill is shown here:
2. As you hold the bill up to the light, look for the

concealed value. You should see “500” on the
lower left portion of the bill. concealed
value (“500”)
1. Look for the security thread that is embedded on

the bill. This is the vertical “stitches” on the right side of
the bill. You should see “500” printed on
each stitch.
Security thread
2. Look at the portrait. The lines and
facial features should be sharp. There
should be very fine lines around the head
of the portrait. Be wary if the lines are
smudged or appear to be blurred.
portrait
Another way to find out if your bills are genuine is

to familiarize yourself thoroughly with the
“feel” of the genuine peso bill. Feel the
texture. It should be somewhat rough. Fake bills
are smooth and they feel exactly like a paper.
If any of the steps would lead you to
conclude that you have counted a fake bill,
bring up the matter to the Group Secretary/Group Treasurer who should then call the attention of the
Group Leader. The collection will be considered incomplete and the Group should find ways to replace
the counterfeit bills. You should then instruct the Group Leader to surrender the counterfeit bill to any
bank so that the fake peso bill will not circulate anymore.
11

In some MFIs, it is an “unwritten” policy to require Loan Officers to shoulder

incomplete payments resulting from receipt of fake bills.
Step 3: Secure Cash Received

When you have finished counting the bills and you have verified that the amount on the cash
breakdown is the same as the amount you have counted, place the cash in your bag immediately.
Loan Officer securing the cash collection in his

bag
Listed below are some of the security measures
adopted by MFIs to protect the collected cash in
the field:
On your way back to the office, after loan
collection, request a group officer or two to escort
you up to the area where it is safe to hire a public
transportation (e.g. jeepney, tricycle, etc.) to your
office. (Generally, though, the clients take
1. it upon themselves to escort you when they know the area is notorious for robbers).
2. Distribute the large bills (e.g. P100, P500, P1,000) in different parts of your body or clothes (e.g.
pants’ inner pockets, socks, shoes, etc.) before leaving the house of the client.
3. Request assistance from another Loan Officer to fetch you from the house of the client where
the meeting was held.
4. Request assistance from the Branch Manager to send you a “buddy” to accompany you from
the house of the client to the office.
. Receive Payments
• Loan Officers receive the cash payments after the Group Treasurer (or Group Secretary) has
checked the Group Collection Report and counted the cash.
• The steps involved in receiving cash payments are verifying the cash breakdown, counting the
cash, and securing the cash received.
• The breakdown of cash payments is recorded on the Group Collection Report. In some MFIs, it
is recorded on a separate slip of paper but submitted together with the Group Collection Report.
• Some of the risks involved in counting cash payments in the field include the risks of losing cash
through theft by some individuals posing as clients during the meeting. Another is the risk of
receiving counterfeit (fake) paper bills.
• The Loan Officer has to remember to spot fake bills. He has to check the security features of the
paper bills such as the watermark, concealed value, “genuine” look of the portrait, and security
thread. Another way to recognize a fake bill is to “feel” its texture. A genuine bill feels somewhat
rough.
Securing the cash payments means being alert and resourceful. Some of the ways adopted by Loan
Officers are keeping the cash inside a bag, requesting for assistance from the group members and from
the office.
12

Exercise No. 1: Below are the steps in receiving group collection report listed in no particular
order. Arrange the steps from 1 to 8.
_______1. Group Leader collects repayment schedule (or passbooks) and payments from the
members.
_______2. Group Secretary checks and signs the Group Collection Report.
_______3. Group Leader records the payments of the group members on the Group Collection Report
in two copies.
_______4. Group Leader submits filled-out forms to the Group Secretary.
_______5. Loan Officer prepares blank copies of Group Collection Report before leaving the office.
_______6. Group Leader counts cash collection.
_______7. Loan Officer receives the Group Collection Report from the Group Secretary.
_______8. Loan Officer distributes blank Group Collection Report forms to the Group Leaders.


Read each statement carefully. Encircle the best answer.
1. In group loan methodology, loan officers collect clients’ payments ______________.

a. twice a week c. weekly
b. monthly d. daily
2. Five members of Masayahin Group received their loans on May 11 (Monday). When is their first
payment if the mode of payment is weekly?
a. May 19 (Tuesday) c. May 21(Thursday)
b. May 18 (Monday) d. May 17 (Sunday)
3. It is past 9:00 PM and Nanay Rose wants to know the exact amount of her savings. Where will she
find it?
a. Loan Officer’s Register c. Group Collection Report
b. Passbook d. Group Treasurer Register
13

4. The record that details the loan repayment dues and exact dates of the repayment dues can be
found in the ____________________.
a. Group Collection Report c. Passbook
b. Repayment Schedule d. Loan Officer Register
5. The journal that records the flow of cash transactions of the clients is called the
____________________.
a. Group Collection Report c. Passbook
b. Repayment Schedule d. Loan Officer Register
6. Which of the following steps should the Group Treasurer do next after the Group Leader has turned
over the cash payments to him or her?
a. Turn over the cash to the Loan Officer
b. Record the cash collection
c. Deposit the cash collection
d. Keep the cash in the collection box
7. The task of receiving the cash collection comes after ________________.

a) signing of repayment schedules
b) receiving the Group Collection Reports
c) validating the Group Treasurer Register
d) recording Collection on Client’s Passbook
8. Which of the following is NOT a step in the task of receiving cash payments?
a. Count cash payment
b. Verify cash breakdown
c. Collect cash payment from members
d. Secure Cash received
C. LESSON WRAP-UP
A. Work Tracker
completed.
2


___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
FAQs
1. Why are the MFIs interest rates higher than traditional banks?
Interest rate in MFIs tend to be higher than loans from traditional banks because small loans tend to be
more expensive to process than larger ones (as offered by traditional banks). Moreover, MFIs loans are
collateral free and require a more hands-on and time-intensive assessment to determine the
creditworthiness of a potential client. Microfinance clients tend to reside in remote areas and since MFIs
travel to clients, there is also a high cost of operations which is also reflected in the interest rate for MFI
loans
KEY TO CORRECTIONS
Exercise No. 1
1. 3 3. 5 5. 1 7. 8
2. 7 4. 6 6. 4 8. 2

1. C
2. B
3. B
4. B
5. D
6. B
7. B
8. C
2


2. 1. I can record collection on group Treasurer’s Register and on References:
client’s passbook. Competency Based Learning
Technology NC II
Life is short. Live it. Fear is natural. Face it. Memory is powerful. Use it.
1) Introduction
Good day Bankers! For this day, you are going to study about the continuation of the Core
Competency 6. I know that you are very excited. In this module, you are about to do a lot of
practice exercises, so that you will be more exposed with the actual work of a Loan
Officer/Account Officer.
lesson.

What is the purpose of repayment

schedule?
What is the content of Group

Treasurer’s Report?
1

How will you record collections on

the clients’ passbook?
B. MAIN LESSON
WHAT IS A REPAYMENT SCHEDULE?
A Repayment Schedule is a form, which details, among others, the weekly loan amortization to be paid
by the client and the exact dates when the client should repay. The client receives the copy of the
Repayment Schedule from the Branch Accounting Assistant during loan release. The Repayment
Schedule must be brought to the Center meetings weekly.
Purpose of the Repayment Schedule

The Repayment Schedule is used in checking the Collection Report1 and is also used by the client in
keeping track of his or her repayments.
Take note of the encircled information in the Repayment Schedule below which you will check
against the collection report later.
In checking the Collection Report the following information from the Repayment Schedule will be used:
1. Name of the Client 3. Principal payment 5. Capital Build Up (CBU)
2. Due Date 4. Interest payment 6. Total Payment
Steps in Preparing the Repayment Schedule

1. On the day of loan release, the Branch Accounting Assistant (BAA) inputs the client’s loan details2
individually in the MFI’s computerized loan system.
2. The BAA prints 2 copies - one copy for the client and the other copy go to MFI’s file.
3. If the client agrees to the entry of the schedule, he or she signs on the Schedule under “Conforme” as
shown below:
Sign Repayment Schedule

If the information in the collection report and Repayment Schedule are inconsistent, the succeeding
reports would be erroneous as well (e.g. Loan Officer’s Register and Group Treasurer Register).3 When
this happens, the records would not be order and the Loan Officer will have to go back from the beginning
to correct the records. Spending time correcting errors on the record books is too costly for any MFI.
Because the valuable time of Loan Officer should be used for more productive purposes like planning for
next day’s center meeting. Thus, it is important for the Loan Officer to check the reports (e.g. collection
reports) thoroughly for completeness and accuracy before signing.
2

You learned in the Receive Cash Payments Learning Element that the Group Leader accomplishes the
collection reports and forwards it to the Group Secretary or Group Treasurer for checking. Then, the
collection reports are turned over to the Loan Officer together with the cash and the Repayment Schedule
(or passbooks).
You also learned in the same learning element that cash collection is counted immediately after its
receipt. After the Loan Officer counted the cash collection, the next task is to sign the Repayment
Schedule of each client. Signing repayment schedule is a task practiced mostly by MFIs using the
“individual liability” approach (e.g. Alalay sa Kaunlaran, Inc.). Refer to Illustration 1 for the full process of
collection of dues.
There are mainly two steps involved in signing the Repayment Schedule:
1. Validate the collection report; and,
2. Sign the Repayment Schedule.
Step 1: Validate the Collection Report against the Repayment Schedule

Before the Loan Officer sign the Repayment Schedule, he or she must ensure that the collection reports
contain the correct information. To do this, the Loan Officer need to compare the collection reports against
the Repayment Schedule of the client.
For example, the Masinop Group, composed of 5 members, received their loan on May 1, 2009. The first
repayment is on May 8, 2009. The collection report prepared by the Group Leader is shown in Figure 4.
The specific steps on how to validate

each entry in the collection report
against the Repayment Schedule are
illustrated below.
3

4

5

6

The illustrations show that the cash collected based on the group collection report is the same as the
actual cash received.
Step 2: Sign Repayment Schedule

After validating the group collection report and the Loan Officer is already certain that that all the
information is complete and accurate, he or she can already affix his or her signature in the Repayment
Schedule.
Figure 5 shows
where the Loan
Officer should affix
his or her signature.
Sign Repayment
Schedule
1. The
Repayment
Schedule is
used in
checking the
collection
report, and
is also used
by the client
in keeping
track of his
or her
repayments.
2. The client
receives the
copy of the
Repayment
Schedule
from the
Branch
Accounting
Assistant
during loan
release.
3. The
Repayment
Schedule
should be brought to the weekly Center meetings.
7

4. Before the Loan Officer sign the Repayment Schedule, he or she must ensure that the collection
reports contain the correct information. To do this, he or she needs to compare the collection
reports against the Repayment Schedule of the client.
Recording Collection on the Group Treasurer’s Report

Equally important in the collection of payment is the recording of transactions through the
different official forms. It makes all
information known to the clients and the
microfinance institution. Records make
the transaction official and valid. It also
helps in monitoring details about the
loan.
One required document is the
Group Treasurer’s Report (GTR)1. This
is a summary of the collections from the
group 2 . In some MFI’s, payments are
summarized in the Fellowship/Center
Collection Summary 3 . There are
subgroups or “care groups” which take
care of payment collection per subgroup
of members. A subgroup is composed
of a minimum of 5 members. There is a
minimum of 4 subgroups per big group.
8

FIGURE 1
Process of Collection of Dues
In some MFIs, a center or a big group is divided in to

sub-groups. At the Center for Community
Transformation, for instance, the groups are called
“care groups.”
The name of the form may differ from one MFI to the
other, but the main purpose of the GTR is to
summarize the collections received during the weekly
group meeting. Instead of the GTR, ASKI4 uses the
Group Collection Reports while CCT uses the Care
Group Register.
Recording of collections on the GTR is part of the

whole collection process. Below is a review of the
process, which aims to also locate where the GTR
recording is placed.
“Be careful with consolidated cash

collection and your personal
belongings while doing the
recording of transactions. Be on
guard.”
9

Steps in Recording Collection on the Group

Treasurer’s Register
After the collection report and each client’s individual
passbook with enclosed payments are given to the
Loan Officer, the Group Treasurer/Secretary
proceeds to the recording of collection on the Group
Treasurer’s Register (GTR) or Fellowship/Center
Collection Summary (CCS)5.
The GTR is a form prepared by the group
summarizing the cash payments given by each client
to the Loan Officer. Breakdown of payments (i.e
savings, insurance, principal, interest, etc.) is also
included. Similarly, the CCS summarizes the
payment per sub-group of clients.
The GTR promotes responsibility and ownership on
the part of the group as they themselves write the
entries about their payment. This is their own record
of payments and promotes transparency where all
transactions are open to all. It gives the group
accountability in keeping track of payments and in
collection of dues. The signatures of the Group as well as the Loan Officer mean that the entries are
correct.
Steps in Receiving Group Collection Report

2. Distribute blank forms of Group Collection Report to the Group Leaders.
3. Group Leader collects the repayment schedule and cash payments from his or her group members
before recording.
4. Group Leader counts the cash payments in the presence of group members and he or she fills out a
cash breakdown slip.
5. Group Leader fills out the 2 Group Collection Reports forms indicating the details of payments of each
client.
6. Group Leaders submit the 2 completely filled out forms to the Group Secretary together with the:
Repayment schedule i(or passbooks) and Cash payments
7. Group Secretary checks and signs the forms.
8. Loan Officer receives the forms from the Group Secretary.
10

Group Treasurer’s Register
11

Recording collection on client’s passbook

What is a client passbook?
Some MFIs issue a passbook to every client of their group-lending program. It is a record of the client’s
cash transactions with the MFI. These transactions are payment of the weekly amortization6 (consists of
payment for the principal and interest of the loan, mandatory and voluntary savings or capital build-up7,
and microinsurance 8 ), and approved withdrawal from the client’s savings under agreed terms and
conditions.
From the client’s standpoint, a passbook is the most important document issued to him or her. It
is his or her proof of how much money he or she gives to and receives from the MFI. He or she can follow
the movement of his or her loan balance, savings, and microinsurance contribution in the passbook.
There are MFIs enforcing group liability who do not issue a passbook. Instead, they print out a
repayment schedule 9 for the client, which the Loan Officer signs upon receipt of the weekly loan
amortization.
Some MFIs charge a minimal fee of P15.00 for the passbook. Others, such as ASA Philippines, issue it
free and charge P20.00 as replacement fee when a passbook is lost, damaged, or completely filled out.
The client presents the passbook during weekly meeting,10 for updating and remains with the client. MFIs
using individual liability validate the passbook against the Loan Officer Register (LOR)11, which is the
Loan Officer’s own record of the detailed financial transaction of each client. Healey (1998) explains that
a quarterly checking of the passbook against the LOR ensures that the records in the passbook are
accurate.
12

When the old passbook is completely filled-out, the Loan

Officer issues a new passbook to the client. The Branch Manager
signs the old passbook and files it in the office. Some MFIs, on the
other hand, file only the filled-out passbooks of those who will not
borrow or save anymore. Healey (1998) also stated that after
doublechecking the LOR and the previous passbook, the Loan
Officer transfers the savings, microinsurance contribution, and loan
balances to the new passbook.
The different parts of the client’s passbook

1. The front cover of the passbook;
2. The back cover of the passbook;
3. The first page of the passbook; and,
4. The main pages of the passbook.
We will consider the first part now.

1. The front cover of the passbook
Like any other book, the passbook has a front cover. The front cover is where the MFI’s name and logo
are printed. Figure 1 shows a sample front cover of a client’s
passbook from the Association for Social Advancement Philippines
Foundation (ASA Philippines).
FIGURE 1
Sample Front Cover of the Passbook with the Name and
Logo of the MFI Source: ASA Philippines Foundation
13

If you turn the front cover, you will see some personal information about the client, his or her photo,
passbook number, and the signatures of the Loan Officer (LO) and Branch Manager (BM). Please refer
to Figure 2 for the sample.
Sample Back Page of the Passbook Front Cover

Highlighting the Client’s Photo
Source:ASA Philippines Foundation
How to fill-out the back page of the front cover?

Let us look at the information contained in the back page of the front cover one by one.
a. The client’s personal information. The client’s personal information in the passbook should
always match with the information in his or her application form 7. You can get the personal information
about the client from this document.
Refer to Figure 3 for a sample portion of the application form.
A Portion of a Loan Application Form
FIGURE 3
b. The client’s photo.

The client usually provides the
photo in the passbook. Some
MFIs such as ASA Philippines
require both the client and his
or her spouse to be in the
photo.
14

FIGURE 4
c. The passbook number. The

passbook number has ten digits (refer to
Figure 5), pertaining to the following:
1st to 4th digits - year of loan
release
5th and 6th digits - month of loan
release
7th and 8th digits - group number
that corresponds to the day and period
the group meets with their Loan Officer. In the case of ASA
Philippines, a Loan Officer meets with 3 groups per day or 15
groups per week. The schedule of group meetings is
arranged in chronological order based on the group number.
For example, every Monday, the Loan Officer will meet with
group 1 first, group 2 second, and group 3 third. For Tuesday,
the Loan Officer will meet with group 4 first, group 5 second,
group 6 third, and so on, until Friday.
9th and 10th digits - represent the client’s serial number
(SL#). This is the number assigned to the client based on
what is the next available SL# in the Group Treasurer’s
Register (GTR) for his or her particular group. For example,
10 clients form themselves into one group. Each one of
them can choose his or her SL# from numbers 1 to 10,
provided no number is chosen twice. However, if another
client later joins this group, then the SL# that will be
assigned to this new client is 11.
Steps in recording collections in the client’s passbook

Garbage In, Garbage Out is a saying in the field of information technology. It is used to mean
that the quality of output the computer will produce depends on the quality of input data. Bad input will
result to bad output.
The same is true in recording payments and withdrawals in the client’s passbook. Wrong or
incomplete entries will result to incorrect weekly balances. This brings incorrect information to both the
client and the MFI because the weekly balances represent how much the MFI owes the client (savings
or CBU and microinsurance), and how much the client owes the MFI (loan).
15

Here are specific steps to follow in recording the client’s transactions in his or her passbook:
Step 1: Write the client’s serial number;
Step 2: Write the client’s loan cycle;
Step 3: Write the loan amount plus interest;
Step 4: Write the date of transaction;
Step 5: Refer to the
FIGURE 23 GTR and copy the
Computing Collection
payments (savings
or CBU, micro-
insurance, loan) and
withdrawal written
across the client’s
serial number;
S
Step 6: Compute the
ending balances;
and,
Step 7: Sign the

Step 6 – Compute You will notice that there is a passbook.
P11,500 balance recorded in the
Compute the balance for savings or CBU, micro-insurance,
second transaction. This amount
and loan: In this section, we
Savings or CBU– Add last week’s balance to this week’srepresents the loan amount
payment and subtract withdrawal if any. released to the client that day. will discuss the 6TH
– Add last week’s balance to this week’s
Micro-Insurance AND 7TH STEPS.
payment
Loan - Subtract this week’s payment from last
week’s balance
Figure 6
Client’s Passbook Signing
Step 7
Sign the client’s
passbook
16

Important for a Loan Officer to be able to gain the trust of both the clients and the MFI. The clients
are happy if the Loan Officer and the MFI have done a good customer service, this means that their hard-
earned money is well accounted for. Operationally speaking, processing of future repeat loans and other
transactions is more efficient if records are accurate.
The Loan Officer should not

leave the weekly meeting without
signing the passbooks. It will only
give the clients the opportunity to do
something dishonest like
manipulate the entries and forge
your signature. If the Loan Officer
has doubts with any transaction, he
or she should discuss it with the
group before signing any document.
In some MFIs, the client also signs in the passbook every week. Other MFIs, especially those
implementing the ASA methodology, the client signs in the passbook only during loan release, withdrawal
or offsetting of savings, and termination of membership.
The Loan Officer should return the passbooks to the clients after he or she have counted the
consolidated cash collection to make sure it matches the total collection recorded in the GTR and LOR.
As a safety measure, the Loan Officer shall continue to be vigilant and alert, as he or she records
collections in the clients’ passbooks. Many MFIs have experience actual incidence of snatching inside
the weekly meeting venue. In most cases, the snatcher’s target is the Loan Officer’s personal belongings
such as bag, cellphone, or wallet.
Exercise No. 1: Read each question carefully. Write your answer on the space provided.
1. What is a passbook? Explain briefly.
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
17

2. Why is it important to issue a passbook to a client?

________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
3. How often does the loan officer check the client’s passbook against the LOR? Why is this
important?
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
4. Nanay Rosa asks you if she can leave her passbook at home when she goes to the weekly
meeting. How will you answer Nanay Rosa?
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
5. What happens when the passbook is completely filled out?

________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________


Read each statement carefully. Write True if the statement is correct and False if it is not.
__________1. The client can write some notes at the inner page of his/her passbook’s back cover.
__________2. The back cover of a client’s passbook usually contains the MFI’s address.
__________3. The Loan Officer signs in the inner page of the back cover of a client’s passbook.
__________4. Important policy reminders are found in the inner page of the back cover of a client’s
passbook.
__________5. The inner page of the back cover of a client’s passbook must be properly accomplished
not later than the date of loan release.
18

C. LESSON WRAP-UP
A. Work Tracker
completed.

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
FAQs
loans
KEY TO CORRECTIONS
Exercise No. 1
Proposed Answer:
1. A passbook is a record of the client’s cash transactions with the MFI, which include payment of
weekly amortization, deposits to mandatory and voluntary savings, microinsurance contribution, and
approved withdrawals from the savings or capital build-up.
2. The passbook is the client’s proof of how much money he or she paid to and received from the
MFI. He or she can monitor his or her loans and savings or capital build-up balances from the passbook.
19

3. To ensure that records are accurate, the Loan Officer needs to check the passbook against the
LOR every quarter.
4. Nanay Rosa has to bring her passbook to the weekly meeting for updating. It is for her own
protection if she will always have her weekly transactions and balances recorded in her passbook.
5. When the old passbook is completely filled-out, the Loan Officer issues a new passbook to the
client. The Branch Manager signs it and files it in the office or kept by the member (except when the
member stops to borrow or save money with the MFI anymore). After double-checking the LOR and the
previous passbook, the Loan Officer transfers the savings, microinsurance contribution, and loan
balances to the new passbook.

1. False - The client cannot write some notes at the inner page of his/her passbook’s back cover.
2. True
3. False – The loan officer signs on the main pages of the client’s passbook.
4. True
5. True
2


2. 1. I can issue cash receipts or official receipts. References:
3. 2. I can consolidate total collection. Competency Based Learning
Technology NC II
Don’t let what you cannot do interfere with what you can do.- John Wooden
1) Introduction
Good day Bankers! For this day, you are going to study about the continuation of the Core
Competency 6. I know that you are very excited. In this module, you are about to do a lot of
practice exercises, so that you will be more exposed with the actual work of a Loan
Officer/Account Officer.
lesson.

What is the difference between

group and individual liability?
What is the importance of Loan

Officer Register?
1

How do you consolidate total

collection?
B. MAIN LESSON
GETTING TO KNOW THE LOAN OFFICER REGISTER
What is a Loan Officer Register?
The Loan Officer Register (LOR) is a journal in which loans, CBU, and microinsurance are
recorded in chronological order, and consecutively numbered1. In microfinance, it is a single sheet or
bound forms used to record the flow of all cash transactions of every member for a period of one year.
Transaction for proceeding year is recorded in a new LOR, balances then are reflected in the new LOR.
The LOR is generally used by ASA. Other microfinance institutions use other term to refer to this
form like Cash Collection Sheet (CCS), Billing Statement, or Collection Tally Sheet.
Importance of Loan Officer Register
The LOR is an important part of the bookkeeping systemi of a microfinance institution. It shows
the detailed financial transaction of each client like amount of principal and interest being paid, savings,
loan balance, microinsurance payment, etc.
In some MFIs, the Loan Officer brings the LOR to the weekly group meetings to record the
payments during field collection. In other MFIs, the LOR is left at the office and the Loan Officer updates
it when he or she arrives from fieldwork.
Parts of the Loan Officer Register. The LOR has four (4) parts: a) the front cover, b) the Frontispiece1
backside of the front cover, c) sub-sections, d) the left page, and the e) right page. Each part will be
described in the next pages.
a) The Front cover

In some institutions, the front cover (see Figure 1) of the LOR is color coded, to easily identify which
LOR to bring to the group meeting each day.
2

Figure 1. Figure 2. Figure 3.

b) The Frontispiece (backside of the front cover)

The frontispiece (see Figure 2) of the LOR contains the names of Loan Officers who have served the
Group. It also reflects the period, which they served, and their signature, as well as the Branch
Manager’s signature.
c) Sub-sections
The LOR usually has three sub-sections (see Figure 3). This represents the number of group meetings
a Loan Officer facilitates each day. In ASA Philippines Foundation, the sections are by the time of
meeting of the group.
d)The Left Page

The left page has a heading “Loan Register and CBU2,” and other products or services being paid by
the members (see Figure 4). It also shows the name of the group, the barangay location of the group,
and the meeting day. The first column has numbers 1-30. It represents the number of members in a
particular group. All information about that member will be written across that number. This information
often includes date of admission, co-makers, record of previous release, and record of current release.
e) The Right Page

The right page has the same heading as the left page. The information in each column pertains to the
financial transactions of the member. This information includes savings or capital build up (CBU), LCBU,
3

loan payment, interest on savings, withdrawals, and other products and services being paid by the
member (see Figure 5).
Record Collection on Loan Officer Register (LOR)

For MFIs implementing the methodology with individual liability, recording of collection on LOR
starts after the Loan Officer has recorded the collection on the members’ passbooks. MFIs using the
group liability methodology do not use LOR, instead they use other forms to ensure due diligence in
recording transactions. Illustration 1 shows the process of collecting payment for both individual and
group liability.
ILLUSTRATION 1
Collection of Payments Process Flow
Individual Liability Group liability
Receive collection Validate collection on

Report Group Treasurer’s
Register
Receive cash payment & breakdown
of collection from Group Leader or
Treasurer Record collection on
clients’ passbook
Check collection
report
Receive and compare total collection vis
collection report per group
Sign repayment Record collection

schedule on Client Issue cash receipt
Passbook
Consolidate total collection
Issue cash receipt
4

1. Consolidation of payment involves receiving the cash payment form the Group Treasurer or
Secretary and making sure that the transaction is recorded.
2. Documents that are part of consolidation of payments is the Group Treasurer’s Register (GTR) (or
Center Collection Summary-CCS in other microfinance institutions) and the Loan Officer’s Register
(LOR).
3. The GTR/CCS is a summary of the payment made by subgroups within the big group/center. Upon
verifying the accuracy of the recording in the GTR/CCS, cash payments are also re-counted.
4. When records tally with the cash-on-hand, the Loan Officer & Group Treasurer/Secretary signs on
the CCS/GTR. Receipts are issued and the LOR is accomplished and signed by the Loan Officer.
5. Consolidation of payment per group is done during the weekly meeting. Another is conducted at the
Branch Office for final consolidation of all collections from various groups before turnover to Branch
Cashier.
6. Safety precautionary measures need to be observed in handling collection.
Figure 4 Left Page of LOR in ASA
FIGURE 5 Right Page of LOR in

ASA Philippines Foundation
5

Steps in Recording Collection

on Loan Officer Register.
There are four (4) main
steps to follow in
recording collection on
LOR:
1. Refer to the signed
Collection Report or
Member’s Passbook,
and ensure that
entries to the above
documents match
those in the LOR.
2. Write Members
Information on the
Left Page of the LOR.
3. Write Transactions on
the Right Page of the
LOR.
4. Validate LOR with the
Actual Cash
Collected.
CONSOLIDATE TOTAL COLLECTION

Lending money is a risky business. Therefore, it is the goal of the microfinance institution (MFI)
that 100% of the money borrowed by clients should be fully repaid. The Loan Officer who is directly in
contact with the borrowers, uses the weekly group meeting in collecting and consolidating payment.
Illustration 1 shows a review of the collection process.
Before the Loan Officer issues an Official Receipt to the clients, he or she must make sure that
the cash payment and records tally. (i.e Group Treasurer’s Register, Passbook, Loan Officer’s Register).
This is part of consolidation of payments. Figure 1 is a detailed flow of tasks of consolidation during the
weekly group meeting and at the branch office.
6

Summary of Steps in Consolidation of Payment
Consolidate Total Collection

• Consolidation of payment
involves receiving the cash
payment form the Group
Treasurer or Secretary and
making sure that the transaction
is recorded.
• Documents that are part of
consolidation of payments is the
Group Treasurer’s Register
(GTR) or Center Collection
Summary-CCS in other
microfinance institutions) and
the Loan Officer’s Register
(LOR).
• The Group Treasurer
Register or Center Collection
Summary is a summary of the
payment made by subgroups
within the big group/center.
Upon verifying the accuracy of
the recording in the Group
Treasurer Register or Center
Collection Summary, cash
payment is also re-counted.
• When records tally with the
cash-on-hand, the Loan Officer
and Group Treasurer or
Secretary signs on the Group
Treasurer Register or Center
Collection Summary. Receipts
are issued and the Loan Officer
Register is accomplished and
signed by the Loan Officer.
• Consolidation of payment per
group is done during the weekly meeting. Another is conducted at the Branch Office for final
consolidation of all collections from various groups before turn-over to Branch Cashier.
• Safety precautionary measures need to be observed in handling collection.
Safety Measures for the Loan Officer

The Loan Officer, on the average, handles 4 meetings in a day. Per group, the
Loan Officer collects the weekly amortization. Once he or she issues an Official Receipt to the Group
Treasurer, he or she is solely responsible for bringing the full cash payment to the Branch.
7

The safety of the Loan Officers who go around in target communities is a big concern. Some
group meetings are held in very remote places which are security risks. Here are precautionary
measures that can be followed:
1) Be familiar with the designated area. Be aware of danger spots.
2) Make sure that at least one group member is with the Loan Officer until he or she reaches the
transportation terminal or an area which is considerably safe.
3) If possible, take different routes/ways to and from the group meeting place. Robbery is easier
when the criminal establishes a pattern of the victim.
4) Be alert of the happenings around. Be aware if there are suspicious looking persons around the
place of the group meeting. Avoid being alone.
5) Secure the cash collection in a cash envelop/box/wallet. Separate the collections per group,
including the documents. The Loan Officer should distribute the collections in different places
(i.e. safe keep in clothing). In cases of hold-up, there is a likelihood that not everything will be
taken.
6) When the Loan Officer encounters a
hold-up, he or she should hand over the
ISSUE CASH RECEIPTS
IMPORTANCE OF RECEIPTS
Have you ordered and paid for

burger and fries in a fastfood restaurant
but only the burger was served at your
table? Have you experienced buying
food in the grocery which is spoiled? Or
purchased a television set only to find
out that it is not functioning?
How will you have the lacking order be given to you at the fastfood? Can you demand the grocery
to replace the spoiled food item you bought from them? How will the appliance store give you free service
for the new television set which is not working?
Your problem will be solved by presenting to them a very important document - the official receipt. So,
what is a receipt?
The definitions.uslegal.com defines a receipt as follows:
8

Different types of receipt commonly issued to clients
Thus, a receipt is a proof of payment received for goods delivered and/or services
rendered. When it comes to transaction that deals with exchange of goods or
money, an oral contract is not enough. A written official receipt is a must.
When riding on a bus, the ticket given by the conductor is a proof of payment. The
bus is responsible for bringing the passenger to his destination. It is a problem if
you have no proof that you paid. Thus, the conductor can demand another
payment from you or ask you to get off the
bus.
In microfinance, the Official Receipt

is a legal document that completes the payment transaction
between the group and the loan officer. It also:
• monitors the amortizations completed by the group;
• keeps track of the performance of the loan officer in terms
of collection; and,
• serves as guarantee for the group that their payment has
been officially received by the loan officer.
Take note that MFIs that practice the group methodology deal with the group and not on a per
client basis. On the other hand, a client uses the passbook as proof that he or she has paid.
The receipt is a written document that proves that goods, money or services has been received and duly
paid.
a. There are three kinds of receipts that are usually common in the official transactions between the
loan officer and the group: 1) official receipt 2) provisional receipt 3) acknowledgment receipt—
for exchange of goods
b. Official Receipts in microfinance serve to monitor the payments of the groups of clients, keep
track of the performance of the Loan Officer in terms of collections, and to guarantee that the
group really paid their weekly dues.
c. Issuing Cash or Official Receipts is part of the whole process of collecting payments. It is important
to locate it in the flow of activities to understand it better.
d. Issuing receipts follows a step-by-step procedure. It involves receiving payments and verifying
related documents in terms of accuracy and completeness.
e. Guidelines are followed as part of control of data.
f. The Loan Officer must be knowledgeable in filling-out the entries in the Official Receipt. Wrong
entries will have a negative effect if not addressed immediately.
9

Exercise No. 1: Read the situation below. Then perform the necessary actions.
Manuel Perez is a new Loan Officer of the XYZ Microfinance Institution. Today, he will collect the first
payment from his first batch of members. They are seven stall owners from Pinyahan Public Market. They
were admitted to the program on February 13, 2009. They decided to name their Group Pineapple, the
English translation of their Barangay.
Manuel has prepared two sheets of information about his group members. Help him post the significant
information on the LOR worksheets provided in the next page. There are four LOR worksheets provided
for you to work on.
Information Sheet #1
` Member Birthday Address Comaker Address
113 Rizal St, Brgy.
1 Lourdes Quijano Feb 3, 1964 Brgy.Pinyahan, 2 Pinyahan,
Malabon Malabon
Rizal Ext. Brgy. Rizal Ext. Brgy.
2 Ana Lopez Oct 2, 1969 Pinyahan, 5 Pinyahan,
Malabon Malabon
Rizal Ext. Brgy. Rizal Ext. Brgy.
3 Eva Mendez Apr 9, 1970 Pinyahan, 4 Pinyahan,
Malabon Malabon
2B Loreto St. 3B Loreto St.
Brgy. 7 Brgy.
4 Risa Simon May 1, 1965
Pinyahan, Pinyahan,
Malabon Malabon
121 Brgy. 111 Brgy.
5 Elsa Solis Mar 2, 1973 PInyahan, 6 Pinyahan,
Malabon Malabon
Mabini St., Brgy. Mabini Ext.
Pinyahan, Brgy.
6 Tess Isip Jan 7, 1970 3
Malabon Pinyahan,
Malabon
Mabini Ext. Mabini St., Brgy.
Brgy. Pinyahan,
7 Lyn Sese Dec 6, 1968 1
Pinyahan, Malabon
Malabon
10

Information Sheet #2
Loan Disbursed
No. Type of Business Principal Interest Loan
Date
Amount Term
1 Dry goods February 27, P3,000 15% 23 weeks
2009
2009
3 Various February 27, P3,000 15% 23 weeks
Merchandise 2009
4 Poultry supply February 27, P3,000 15% 23 weeks
2009
5 Rice February 27, P3,000 15% 23 weeks
2009
2009
2009
LOR Worksheet #1s

Group Name:_____ Brgy: ________
SI No Name of Member Date of Birth Co-Makers Date of Admission
1
2
3
4
5
6
7
8
30
11

LOR Worksheet #2
Group Name:_____ Brgy: ________
SI No. New Member Date of Birth Co-Makers Date of Admission
1
2
3
4
5
6
7
8
10
11
Group Name: ________Brgy: ________
SI No Loan Disbursed with Service C harge
Record of Previous Release
Date Amount Cycle
1
2
3
4
5
6
7
8
30
12

LOR Worksheet #4
Record of Current Year Rele ase
Date Amount Cycle
1
2
3
4
5
6
7
8
30
Loan Officer Manny has posted entries on the LOR, using the given group loan information below.
Please check his output by encircling incorrect entries and writing the correct entries, or the missing
entries in the blank LOR provided after every page of Manny’s LOR. You will need 2008 and 2009
calendars, and a calculator for this exercise.
Group Loan Information
Last Entry in the LOR- January 5, 2009
No. of Members - 10
Loan Release - October 13, 2008
Loan Term - 23 weeks
CBU- P50 (all 10 members)
LCBU - P10
Active Loan - P5,000.00 (principal)

Interest on Loan - 15% (for 23 weeks)
Interest on CBU- P1/week, since the first loan repayment on October 20, 2008
Withdrawal on CBU- Client 1- P500 on January 5, 2009 and Client 5- P500 on
January 5, 2009, Client 1 returned the full amount on January 26, 2009, Client 5- returned P250.00 on
January 19, 2009.
13

Date Today-March 2, 2009

Manny’s LOR
SI No Balance Forwarded
CBU LCBU Active Loan Loan Balance
1 P50 P10 P5,900.00
2 P50 P10 P4,800.00
3 P50 P10 P5,750.00
4 P80 P10 P5,900.00
5 P50 P10 P5,900.00
6 P50 P10 P5,750.00
7 P50 P10 P5,750.00
8 P70 P10 P4,800.00
9 P50 P10 P4,800.00
10 P50 P10 P5,750.00
30
Your Revised LOR

SI No Balance Forwarded
CBU LCBU Active Loan Loan Balance
1
2
3
4
5
6
7
8
9
10
30
14

Continuation of Manny’s LOR

SI CBU, LCBU and Loan collections for the month of May
No Date: January 5 Date: January 12 Date: January 19
CBU LCBU Loan CBU LCBU Loan CBU LCBU Loan
1 P50 P10 P200 P50 P10 P200 P50 P10 P200
2 P60 P10 P200 P60 P10 P200 P60 P10 P200
3 P50 P10 P200 P50 P10 P200 P50 P10 P200
4 P70 P10 P200 P70 P10 P200 P70 P10 P200
5 P50 P10 P200 P50 P10 P200 P50 P10 P200
6
7
8
9
10
30
Your Revised LOR
SI No CBU, LCBU and Loan collections for the month of May
Date: January 5 Date: January 12 Date: January 19
CBU LCBU Loan CBU LCBU Loan CBU LCBU Loan
1
2
3
4
5
6
7
8
9
10
30
15

Continuation of Manny’s LOR

SI Interest CBU LCBU Info. On Full
CBU withdrawals
No. on CBU return refund Payments
Amt/ Amt/ w/date w/date w/date
Date Date
1 P500/Jan. 5. 09 P1 P250.00
2 P1
3 P1
4 P20
5 P250.00/Jan 5, 2009 P20 P250.00
6 P20
7 P1
8 P1
9 P1
10 P1
30
Your Revised
LOR
SI CBU withdrawals Interest CBU return LCBU Info. On Full
No. on CBU refund Payments w/date
Amt/ Amt/ Date w/date w/date

Date
1
2
3
4
5
6
7
8
9
10
30
16



Read each statement carefully. Write True if the statement is correct and False if it is not.
___________1. The recording of collection on the LOR usually starts after the Loan Officer has recorded
collection on members’ passbooks, or validated and signed the Collection Report.
___________2. The Loan Officer uses the signed Collection Report or Member’s Passbook as
reference while posting the entries to the sub-sections of the Loan Officer Register.
___________3. If the institution is using the Collection Report as reference for the LOR, the Loan Officer
has to recount the cash and post the entries.
___________4. If the Loan Officer has clarifications about the Passbook, he or she discusses this with
the Group Leader and the Group Secretary.
C. LESSON WRAP-UP
A. Work Tracker
completed.

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
17

FAQs
loans
KEY TO CORRECTIONS
Exercise No. 1
LOR Worksheet #1
Group Name: Pineapple Brgy: Pinyahan
SI Name of Date of Birth Co-Makers Date of
No Member Admission
1 Lourdes Feb 3, 1964 2 Feb. 13, 2009
Quijano
2 Ana Lopez Oct 2, 1969 5 Feb. 13, 2009
3 Eva Mendez Apr 9, 1970 4 Feb. 13, 2009
4 Risa Simon May 1, 1965 7 Feb. 13, 2009
5 Elsa Solis Mar 2, 1973 6 Feb. 13, 2009
6 Tess Isip Jan 7, 1970 3 Feb. 13, 2009
7 Lyn Sese Dec 6, 1968 1 Feb. 13, 2009
8
30
18

LOR Worksheet #2
SI New Member Date of Birth Co-Makers Date of Admission
No.
1
2
No entry, since no new members were recruited
3
4
5
6
7
8
10
11
30
LOR Worksheet #3
Record of Previous Release
Date Amount Cycle
1 No entry yet, since this is the first release
2
3
4
5
6
7
8
30
2

LOR Worksheet #4
SI No Loan Disbursed with Service Charge
Record of Current Year Release
Date Amount Cycle
1 Feb. 27, 2009 P3,450.00 1st
2 Feb. 27, 2009 P3,450.00 1st
3 Feb. 27, 2009 P3,450.00 1st
4 Feb. 27, 2009 P3,450.00 1st
5 Feb. 27, 2009 P3,450.00 1st
6 Feb. 27, 2009 P3,450.00 1st
7 Feb. 27, 2009 P3,450.00 1st
8
Note: According to the case the last entry on the LOR was January 5, 2009, therefore
the entry should start on January 12, 2009. The active loan is principal and the 15%
interest (for 23 weeks). The weekly amortization or repayment of the group is P250.00
and P200.00. The payment will end on March 23, 2009.
3


1. True
2. False - The Loan Officer uses the signed Collection Report or Member’s Passbook as reference
and no entries are posted in the sub-sections of the Loan Officer Register.
3. False - If the institution is using the Collection Report as reference for the LOR, the Loan Officer
has to validate before posting the entries.
4. True
4


2. 1. I can investigate reasons for delayed payments. References:
3. 2. I can execute plan of actions to settle delinquent accounts. Competency Based Learning
Technology NC II
There is no substitute for HARD WORK!! -Thomas Edison
1) Introduction
Good day Bankers!! On this module, we are going to finish the 6th core competency. It’s been long
time to finish this one, because this is the most critical part of being a Loan Officer and also of
having an MFI. To know why, let start studying this.
lesson.

What are the common reasons for

non-payment of loans?
How do loan officers deal with

delinquent members?
What are the ways to execute

plan of actions to settle delinquent
accounts?
1

B. MAIN LESSON
TURNOVER/DEPOSIT COLLECTION
After making sure that all the entries in the Group Collection Report or Group Treasurer’s Report (GTR)
and the Loan Officer Register, the Loan Officer turns over the cash payment to the Branch Teller or
Cashier, declaring the exact amount handed over.
The Branch Teller or Cashier counts the cash payment in the presence of the Loan Officer. He or she
makes sure that the amount is the same with what is reported on all the documents presented by the
Loan Officer. For security purposes, the Loan Officer and the Branch Teller or Cashier has to make sure
that the doors of the branch are closed while counting the cash collection.
For most ASA implementing institutions, counting of cash collection is done on a long table shared by
all staff. However, ASA Philippines suggests that it should be done inside the room of the staff to secure
the cash in case of hold up.
Safety Measures for the Loan Officer Who Collects Cash
The Loan Officer, on the average, handles four meetings in a day. Per group, the Loan Officer collects
the weekly amortization. Once he or she issues an Official Receipt to the Group Treasurer, he or she is
solely responsible for safely bringing the full cash payment to the Branch.
The safety of the Loan Officer who goes around in target communities is a big concern. Some group
meetings are held in very remote places, which are security risks. Here are precautionary measures that
can be followed:
1. Be familiar with the designated area. Be aware of danger spots.

2. Make sure that least one group member is with the Loan Officer until he or she reaches the
transportation terminal or an area considered safe.
3. If possible, take different routes or ways to and from the group meeting place. Robbery is easier when
the criminal establishes a pattern of the victim.
4. Be alert of the happenings around.
5. Secure the case collection in a cash envelop, bag or wallet. Separate the collections per group,
including the documents.
6. When the Loan Officer encounters a hold-up he or she should hand over the money. Security of life
is more important.
7. In cases of hold-up, the Loan Officer shall immediately communicate with the Branch Manager/Officer,
report to the police, and file an incidental report at the Branch. Designated officers form the MFI shall
make a corresponding investigation.
2

Turn-over Collection to Branch Teller/Cashier
• There are two different modes of collecting payment in various microfinance institutions (MFIs) -
1) cash collection and 2) bank deposit.
• In cash collection, the Loan Officer receives consolidated payment of all the member’s weekly
dues. He/she is responsible for safely bringing the cash from the area to the Branch. This is risky
so safety measures are suggested.
• In other microfinance institutions, the group members are responsible in bringing to the bank the
consolidated cash payment of the group. The Deposit Slip which serves as proof that payment
has been made through the bank, is then given by the Group Treasurer to the Loan Officer during
the group meeting.
• Upon validation of data in the Deposit Slip, the Loan Officer issues a Provisional Receipt (PR) to
the Group. The Group Secretary and the Group Leader sign on the Group Collection Report and
Provisional Receipt, and submit all the documents to the Loan Officer. The Loan Officer signs the
Group Collection Report to confirm that all the entries are correct.
• The Loan Officer submits the Group Collection Report, with the DS and PR, to the Senior Loan
Officer or Supervisor. He or she ensures that entries are complete and accurate and the endorses
the documents to the Branch Manager for approval.
• The Branch Teller/Cashier checks and revalidates the documents, then encodes the entries in
the accounting system in the computer if the MFI has automated recording system.
• The Branch Teller/Cashier files the documents to include the PR and Group Collection Report. A
corresponding Official Receipt (OR) is also prepared as final proof of payment and collection for
that week. The OR is given to the group on the next meeting.
3

INVESTIGATE REASON/S FOR DELAYED PAYMENTS
4

5

6

7

DEAL WITH DELINQUENT MEMBERS
8

9

RECOMMEND/EXECUTE PLAN OF ACTIONS TO SETTLE DELINQUENT ACCOUNT/S
Computing for CBU Offsetting, Loan restructuring, and STRATEGIES FOR DELINQUENT
loan refinancing ACCOUNTS
OPTION 1: CBU offsetting is done

MFI-Initiated at the center level and
CBU Offsetting the client voluntarily
surrenders hi/her CBU,
it applies to extreme
cases, because the
client’s savings
depletes.
OPTION 2: It involves extending the

Loan loan term and/or
Restructuring reducing the amount of
amortization of a client
who is willing but unable
to pay.
OPTION 3: A process of developing

LOAN a new loan agreement
REFINANCING before a previous one is
completed. MFI
provides additional loan
amount to be added to
the original loan amount.
May have a negative
impact on the principle
of disciplining the
clients.
OPTION 4: It is done after the series

LEGAL of demand letters have
ACTION been served and the
client has no response.
10

11

12

EXECUTE THE PLAN, once the

recommended action has been
approved by the immediate superior,
proceed with the execution
Step 1. Present the recommended option

to the client.
Step 2. Get the consent of the client
Step 3. Inform your supervisor or the

concerned office
SUBMIT INCIDENT REPORT
Incident Report
In the previous learning element, you have learned that in case the client will not respond to any of the
options you offered in order to pay his or her balance you need to document his or her responses and
submit it to your immediate supervisor so he or she can make appropriate actions
However incident reports are not only written for this purpose it is also written in case you have discovered
fraudulent acts during your investigations. These fraudulent acts involving clients usually include:
1. Defalcations
2. Loan sharing
3. Deposit slip alternation
4. Non-remittance of payment of co members
5. Payment swapping
Purpose of Writing an Incident Report

The main purpose of the incident report is to document any even that is not within the policy or any
untoward incident. This is also used to come up with action plans so that the same incidents will be
avoided. Other than this incident report should be written for the following purposes:
13

• Serves as a basis for judging the incidence and its conclusions

• Documents whether the allegations were substantiated or unsubstantiated
• Presents an organized and verified information so that anyone ca read and understand the report
• Documents the findings in an important and accurate manner and
• Provides responsible authority with information to assist in making a determination whether to
take corrective, remedial, or disciplinary action.
Characteristics of a Good Incident Report

• It must be complete and tell the whole story of the incident
• It must stand alone because it lists the interviews and documents you reviewed in the
report and provides your immediate supervisors or the whole MFI the information they
need to reach a fair decision.
• It must be clear and logical. Any reader, even someone who has no knowledge of the
case should understand how you reached your conclusions based solely on the report.
• It must have proper style of tone. It is not what you say but also how you say it that
contributes to a “good” report.
• Avoid emotional judgmental or value- laden words to describe events. Use active voice
to let the reader know who performed the action. Use a simple direct approach.
Concentrate on using the correct format punctuation, vocabulary, and grammar
Remember that your information about the incident will be the basis of the decision of your
immediate supervisor or your MFI thus “it is important that the report does not convey negative
image of you or the other person”
Writing and submitting incident Report
THERE is really no standard format for an incident report. However, you should know the 3 basic actions
that must be present when writing an incident report
Section 1 – Background and Summary. This is the part where you discuss the complaint/findings in
general terms
• Include a paragraph explaining the purpose of the incident report and who how where and when
information facts for the incident report were gathered
• A half summary of the report which must answer these questions about the case who, what,
where, when, why, how, and how much, as well as your conclusions and recommendation.
• You may also use this section to discuss any problems you encountered during the date gathering
phase
Section 2 – Explanation of the Allegations. This is the “meat of your report”. It introduces in details the
allegations. State the allegations to include regulations and whether it was substantiated or
unsubstantiated. You must also present the facts. You may organize your presentation using these
guidelines:
14

• Present in chronological order, if the timeline of events is essential to the overall understanding
and flow of report.
• Begin with substantiated allegations and then un substantiated allegations
• More serious to less serious or sensitive subject matter
• State the standard/regulations first the chronology of events
• State the facts supporting the allegation and or the facts refuting the allegation
Section 3 Conclusions and Recommendations. Discuss your conclusion make a recommendation

and state the disposition to document the corrective action the responsible authority must look regarding
any substantiated allegations
Submission of INCIDENT Report
Step-1 Make Two Copies of Your Incident Report. When you print your incident repot make sure to make
two copies, one is a receiving copy which you will keep, the other copy is for your immediate supervisor.
Step – 2 Signature of immediate supervisor or receiver. Make sure that your receiving copy has been
signed and marked with date by immediate supervisor or whoever has received it.
Step- 3 File your receiving copy. Put your receiving copy inside an envelope. Label it with “Confidential
Files “and put it inside your Drawer
It is important that you keep your receiving copy in a secure place, if others will see it, they might
spread the word and cause harm than help to both of you and the client involved.
Exercise No. 1: Read the situation below. Then perform the necessary actions.
With your group, make a skit presenting how you will deal a delinquent account. In should not exceed 10
minutes. Prepare a written script and submit.
Performance Criteria: Student will be able to identify the Nature and causes of delinquent accounts,
Procedures on settling delinquent accounts, Problem solving and decision-making process, Conflict and
Negotiation, Policies and practices in recommending/executing plan of actions to settle delinquent
account/s
15



Read each statement carefully. Arrange the following tasks in payment turnover. With 1 as the
first step and 8 as the last step.
Step Task
#
The Loan Officer re-checks the breakdown of the cash payment according to denomination.
The Group Treasurer gives the weekly group payment to the Loan Officer and gets the Official
Receipt.
The Loan Officer recounts, validates and secures the cash payment and brings it to the
Branch.
The Branch Teller/Cashier counts the cash payment in the presence of the Loan Officer.
The Group Treasurer collects the weekly cash payments of all the members.
After making sure that all the entries in the Daily Collection Sheet and Group Treasurer
Register and Loan Officer Register tally, the Loan Officer turns over cash payment to the
Branch Teller/Cashier, declaring the exact amount handed over.
The Loan Officer completes the entries on the Daily Collection Sheet where the breakdown
of money is indicated.
C. LESSON WRAP-UP
A. Work Tracker
completed.

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
16

___________________________________________________________________________
___________________________________________________________________________

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
FAQs
loans
KEY TO CORRECTIONS

Step Task
#
4 The Loan Officer re-checks the breakdown of the cash payment according to denomination.
2 The Group Treasurer gives the weekly group payment to the Loan Officer and gets the Official
Receipt.
3 The Loan Officer recounts, validates and secures the cash payment and brings it to the
Branch.
7 The Branch Teller/Cashier counts the cash payment in the presence of the Loan Officer.
1 The Group Treasurer collects the weekly cash payments of all the members.
6 After making sure that all the entries in the Daily Collection Sheet and Group Treasurer
Register and Loan Officer Register tally, the Loan Officer turns over cash payment to the
Branch Teller/Cashier, declaring the exact amount handed over.
5 The Loan Officer completes the entries on the Daily Collection Sheet where the breakdown
of money is indicated.
17

Lesson title: Updating Financial Records Materials:

2. 1. I can record daily collection on daily collection sheet. References:
3. Competency Based Learning
Technology NC II
“Make your life a masterpiece; Imagine no limitations on what you can be, have or do”---Brian Tracy
1) Introduction
Good day Bankers!! On this module, we are now on the last CC which is the 7th core competency
(Update Financial Records/Performing Bookkeeping). It’s been long time to finish this one,
because this is the most critical part of being a Loan Officer and also of having an MFI. To know
why, let start studying this.
lesson.

What do you know about Updating Financial Records? Try answering the questions below by
What is bookkeeping?
What is the importance of

bookkeeping in MFI?
1

What is CBU?
B. MAIN LESSON
PERFORMING BOOKKEEPING IN MICROFINANCE INSTITUTIONS
Bookkeeping is the systematic process of recording and maintaining of an organization’s financial

transactions. Its purpose is to track a company's expenditures, profit and loss, cash flow, and other
financial activities. In business firms, it involves the preparation of financial books or book of accounts
such as journals and general ledgers.
Most business firms hire a bookkeeper to verify and enter into ledgers the details of their firm's financial
transactions. The bookkeeper summarizes these financial details in a general ledger and then periodically
balances the books. Balanced books show at a glance how much cash has been spent and received by
the firm, what the company owes and what is owed to the company, and whether the company has made
a profit or suffered a loss. Thus, bookkeeping makes decision makers aware of the losses and the profits
of the organization because it brings the result of the company’s economic activities to their awareness.
In MFIs, the bookkeeping process can be different. The bookkeeping process includes two major
activities: (1) the preparation of source documents1 such as Daily Collection Sheets, Loan Officer
Register and Debit Vouchers, and (2) the preparation of book of accounts or the summarizing of financial
transactions into Daily Cashbooks2 and General Ledgers3 (see Illustration1 in the next page).
This Learning Element will first illustrate the bookkeeping process typically followed in MFIs. Then, it
discussed the different types of reports and records that need to be accomplished for bookkeeping
purposes, particularly in remitting collection. Lastly, this Learning Element will discuss the steps in
remitting collection.
1 Source documents or what is also termed as accounting documents are evidences of financial
transactions and are the basis for the preparation of financial reports.
2 A record of cash inflows, outflows and cash balance based on the day-to-day operations of the MFI.
2

3 A summary of accounting entries during a given period (usually one month) and presents balances per
account title. For a more detailed
discussion of Cashbook and General
Ledgers, refer to the modules “Update
Cashbook” and “Update General Ledger.”
Steps in Remitting Collection
Step 1. Before leaving for fieldwork,

compute for the target savings, life
insurance, and loan collection for the
day.
Before going to the group meetings, the
Loan Officer should compute for his or her
target collections. A Loan Officer usually
has three major items to collect from clients
on a daily basis: (1) savings or what is
referred to in most MFIs as Capital Build-up
(CBU), (2) life insurance premium or the
Locked-in Capital Built-up (LCBU), and (3)
loan repayment.
(1) Compute Target Capital Build Up collection for the day.

Capital Build Up (CBU) or savings is a service offered by MFIs in tandem with loan services in order to
instill the values of thrift and fund accumulation among their clients. MFIs usually require a minimum
weekly savings amount (e.g. PhP50 every week). Other MFIs require a percentage of the total approved
loan to be deposited at the start of each loan cycle and to keep that amount saved while a loan is still
outstanding or until the client terminates membership in the MFI. Below is the formula for calculating
Target CBU to be collected for the day.
Formula 1. Calculation for Target Capital Build Up. Let us assume that a Loan Officer handles three
groups in a specific day. The first group named Vietnam has a total of 21 members, the second group
Cambodia has a total of 17 members, and the last group Laos has a total of 29 members. The total
number of clients from all three groups is 67. The MFI requires that each client save PhP50 a week.
Below would be the computation for Target CBU collection
Given:
Number of active clients = 67
Minimum required CBU
payment = PhP50
3

Calculation:
Target CBU Collection = 67 clients x PhP50
Target CBU Collection = PhP3,350
A Loan Officer should be able to collect a total of PhP3,350 from all 67 clients included in the three groups
he or she is handling for that day.
(2) Compute Target Life Insurance Premium Collection or Locked-in Capital Build
Up (LCBU) Collection for the day.
Most MFIs provide life insurance package to their clients. In order to provide this service they require
clients to pay a certain premium4 each week. Premium for life insurance is usually collected by either
automatically deducting the premium amount from the loan principal or by adding the amount to the
client’s loan amortization. For example, a particular MFI requires that clients pay a premium of PhP10
every week, which should be given together with the weekly loan repayment.
In other MFIs, clients are required to pay a set amount (say PhP300 for every loan disbursed) or a
percentage of loan principal (say five percent of approved loan) as premium payment for life insurance.
Below is the formula for calculating Target LCBU premium collection for a day if the MFI collects the
premium each week together with the loan repayment.
Formula 2. Calculation for Target LCBU premium collection. Let us assume that a Loan Officer
handles three groups in a specific day, and the total number of clients from all three groups is 67. The
MFI provides a life insurance program, which requires clients to give PhP10 per week as premium
payment. Below would be the computation for Target LCBU collection.
Given:
Number of active clients = 67
Required LCBU payment =
PhP10
4 Premium is money paid for insurance
Calculation:
Target CBU Collection = 77 clients x PhP50
Target LCBU Collection = PhP 670
Thus, a Loan Officer should be able to collect a total of PhP670 from all 67 clients of the three groups as
loan insurance premium payment.
(3) After computing for target CBU and LCBU collection, compute for Target Loan
Collection or Daily Loan Due.
Providing loans is the main service of MFIs, thus collecting loan repayments should be one of the main
responsibilities of the Loan Officer when he or she visits the groups. Below is the formula for calculating
target loan repayment collection.
4

Formula 3. Calculation for Target Loan Collection. Figures for calculating

the target collection for loan repayment is obtained from the Loan Officer Register (LOR). All information
that is entered in the Daily Collection Sheet (DCS) is obtained from the LOR. An LOR is a journal in which
loans, CBU, and microinsurance are recorded in chronological order, and consecutively numbered. In
microfinance, it is a bound form used to record the flow of all cash transactions of every member for a
period of one year. The Loan Officer brings this to the weekly group meetings and records the payments
during field collection5 (see Figure 1).
The formula can also look like this:
5 For a more detailed discussion on how to use and fill up the Loan Officer’s Register read Module 6.6
Record Collection on Loan Officer’s Register.
Below is a discussion of the elements needed

for calculating target loan collection for
March 9, 2009:
• Active Loan is the outstanding loan of all clients

in a group. It is on the fourth column of the LOR. Looking at the LOR in Figure 1, the total active loan of
Vietnam group is PhP146,050.
• Current Releases is the total amount of loans released to the clients the previous week. There were two
loan releases the previous week for Vietnam group: PhP8,050 was released to client no. 22 and
PhP4,600 was released to client no. 24. The total loan releases for Vietnam group is PhP 12,650.
5

• Full Repayment
is the amount of
loans fully paid by
clients the
previous week.
Three (3) clients
fully paid their
loans the previous
week: Client no.
15 (with a total
loan of PhP8,050),
client no. 19
(PhP5,750), and
client no. 22
(PhP5,750). The
total fully paid
loans for Vietnam
group is PhP
19,550.
• Loan excused or
exempted from
repayment is the
amount of loan
amortization,
which will be
excused for collection for the current week. A member should have a notice and given his or her valid
reason to the Loan Officer for not paying his or her loan amortization for the week before he or she could
be excused for repaying. Valid excuses for not paying the loan are the following: death in the family,
hospitalization of any immediate member of the client’s family, or hospitalization of the client himself or
herself6. However, the excused amortization(s) of clients will still have to be repaid when the client
becomes capable of paying again.
For the Vietnam group, client no. 25’s loan will be exempted from collection as signified by the letter E
(exempted) on his or her LOR; his or her active loan is PhP6,900.
6 For a detailed discussion on acceptable reasons for loans excused for repayment, refer to Check
Clients’ Attendance Learning Element.
• The Loan Term is the number of weeks in which the loan amortization plus savings and life insurance
premium will be collected in installment from clients. Loan term in MFIs usually range from 12 weeks (3-
month loan period) to 23 weeks (6-month loan period). The MFI in our example uses a 23-week loan
term.
6

The Collection Information Board

gives the Branch Manager and all
Loan Officers daily collection
information at a glance, and
shows the daily performance of
each Loan Officer in terms of
collecting payments. The
description of each item written on
the board is discussed below.
A. Target CBU Collection is

calculated as the number of active
clients of the MFI multiplied by the
minimum CBU amount required
from each member.
B. Actual CBU Collection is the
exact CBU amount collected from
the clients.
C. Target LCBU Collection is
calculated as the number of active
clients multiplied by the premium set by the MFI.
D. Actual LCBU Collection is the exact amount of LCBU premium collected from clients on a specific
date.
E. Target Loan Collection is calculated as Active Loan plus Current Loan
Release less Full Repayment less Loans Exempted from Repayment divided by loan term or the period
within which loan repayments or installments will be collected on a regular basis.
F. Advance Payment is the loan amount collected in excess of the target and is calculated as Actual Loan
Collection less Target Loan Collection.
G. Actual Loan Collection is the exact amount of loan installments collected from clients.
H. Administrative Fees or membership fees are money paid by a new client in order to be a member of
the MFI or money paid for a new passbook.
I. Loan Insurance Premium is money paid in order to avail of the benefits of loan insurance program of
the MFI. In the Collection Information Board of ASA Philippines Foundation shown above, the Loan
Insurance Program is called the LRF or Loan Redemption Fund.
J. Others are other fees that may be collected from clients such as payment for lost passbook.
K. CBU Withdrawal/Return
• CBU Withdrawal is the total CBU amount withdrawn by all clients.
• CBU Return is the amount of CBU returned to clients who terminated their membership from the MFI.
L. LCBU Return or refund is the total amount of LCBU returned to clients who terminated their
membership from the MFI.
M. Net Collection is computed as the sum of all collection less CBU withdrawal/ return and LCBU Refund.
Below is a visual illustration of the information gathered using the Collection Information Board.
7

What happens during fieldwork of the

Loan Officer?
A Loan Officer usually visit two to three group

meetings each day, and collects payment
from the groups. The clients’ payments are
recorded on each client’s passbook, on the
Group Treasurer’s Register or Group
Collection Report, and the Loan Officer
Register (LOR). As a proof of receipt of the
group’s payments, the Loan Officer issues
Cash Receipt Slip or Official Receipt to the groups7.
Step 3. Upon arriving at the Branch Office, write down the total morning collection on the
Collection Information Board.
The Loan Officer must write all morning collection information on the Collection Information Board, as
well as the CBU Withdrawal/Return and LCBU Return upon arriving at the Branch Office. The Loan
Officer may use the data on the Cash Receipt Slip and the LOR that contains new entries for the week
as reference (see Annex 1 for the LORs of the three groups with new entries for March 9, 2009). The
Cash Receipt Slip8 is a document issued by the Loan Officer upon receiving cash payment of a group. It
is usually accomplished in two copies: The Group Treasurer receives one copy and the other is retained
with the Loan Officer. It contains information on the savings, premium, and loan amortization payment of
a group (see Exhibit 8). Most information written on the Collection Information Board is obtained from the
Cash Receipt Slip such as Actual CBU, Actual LCBU, Actual Loan Collection and the Admin fees
collected for the day (see Exhibit 8). However, data on CBU Withdrawal/Return and LCBU Return is
obtained from the Loan Officer’s Register (LOR). Shown on the next page is the process of completing
the Collection Information Board using information from the Cash Receipt Slip.8
8

9

10

11

The net collection from all three

groups for March 2, 2009 was
PhP30,250. The
Loan Officer will remit this amount to
the cashier or Cashier-in-charge on
March 2,
2009.
Below is the completed Collection

Information Board for March 2, 2009
of Loan
Officer:
12

13

14

In some MFIs, the clients or the group treasurer

gives a deposit slip as proof of payment, thus,
the Loan Officer does not remit cash to the
cashier. In some MFIs, the clients or the group
treasurer gives a deposit slip as proof of
payment,
thus, the Loan Officer does not remit cash to the
cashier.In some MFIs, the clients or the group
treasurer gives a deposit slip as proof of
payment, thus, the Loan Officer does not remit
cash to the cashier.
Below is a discussion of the elements

needed for calculating target loan collection
for March 9, 2009:
• Active Loan is the outstanding loan of all
clients in a group. It is on the fourth column of
the LOR. Looking at the LOR in Figure 1, the
total active loan of Vietnam group is
PhP146,050.
15

• Current Releases is the total amount of loans released to the clients the previous week. There were two
loan releases the previous week for Vietnam group: PhP8,050 was released to client no. 22 and
PhP4,600 was released to client no. 24. The total loan releases for Vietnam group is PhP 12,650.
• Full Repayment is the

amount of loans fully paid by
clients the previous week.
Three (3) clients fully paid
their loans the previous week:
Client no. 15 (with a total loan
of PhP8,050), client no. 19
(PhP5,750), and client no. 22
(PhP5,750). The total fully
paid loans for Vietnam group
is PhP 19,550.
• Loan excused or exempted

from repayment is the amount
of loan amortization, which
will be excused for collection
for the current week. A
member should have a notice
and given his or her valid
reason to the Loan Officer for
not paying his or her loan
amortization for the week
before he or she could be
excused for repaying. Valid
excuses for not paying the
loan are the following: death in the family, hospitalization of any immediate member of the client’s family,
or hospitalization of the client himself or herself6. However, the excused amortization(s) of clients will still
have to be repaid when the client becomes capable of paying again.
For the Vietnam group, client no. 25’s loan will be exempted from collection as signified by the letter E
(exempted) on his or her LOR; his or her active loan is PhP 6,900.
6 For a detailed discussion on acceptable reasons for loans excused for repayment, refer to Check
Clients’ Attendance Learning Element.
16

• The Loan Term is the number of weeks in which the loan amortization plus savings and life insurance
premium will be collected in installment from clients. Loan term in MFIs usually range from 12 weeks (3-
month loan period) to 23 weeks (6-month loan period). The MFI in our example uses a 23-week loan
term.
17

PREPARE LOAN DISBURSEMENT MASTER

ROLL
18

FIGURE 1
SHOWS AN EXAMPLE OF LOAN
DISBURSEMENT MASTER ROLL AND ITS
19

MAJOR PARTS
STEPS IN PREPARING THE LOAN DISBURSEMENT MASTER ROLL
1. Collect from all Loan Officers the Loan

application forms and Passbook of clients who will
avail of a loan.
2. Enter information in the Loan Disbursement
Master Roll
3. Ask each client to sign in the Loan Disbursement
Master Roll and to put their thumb mark/signature
on the loan application form, afterwards, ask the
cashier in charge and the manager to affix his/her
signature on the Loan Disbursement Master Roll.
4. Summarize all loan releases (amount) and the
number of loans released see figure 3
Prepare Loan Disbursement Master Roll

• The Loan Disbursement Master Roll (LDMR) is a document that summarizes daily loan
disbursement of microfinance institution. It has three major parts: (1) Client information, (2) Loans
Disbursement Information, (3) the last part is where the promissory note number and signatures
of the client, the Loan Officer and the Branch Manager are entered.
• Before borrowers arrive at the Branch Office for the disbursement of their loans, the Loan Officer
assigned to prepare the Loan Disbursement Master Roll should have finished entering the client
information and the Loans Disbursement information on the Loan Disbursement Master Roll.
• After clients have attended the borrowers’ orientation and before the release of their loans, the
Loan Officer should ask the clients to sign the Loan Disbursement Master Roll and to put their
thumb mark on the Loan Application Form. The Cashier-in-charge and the Branch Manager
should also affix their signatures on the Loan Disbursement Master Roll after loan disbursements
to signify that loans have already been released to the client.
• After acquiring the necessary signatures, the Loan Officer should summarize all loan releases
(amount) and number of loans released. The Loan Officer should compute for the total number of
clients who acquired loans, total principal amount disbursed, and the total repayable loans. The
total should be written in red ink.
20

RECORD DAILY COLLECTION ON DAILY COLLECTION SHEET
THE DAILY COLLECTION SUMMARY OR DAILY COLLECTION SHEET
The Daily Collection Sheet or Daily Collection Summary (DCS) is the form or document used to record
all Loan Officer’s collection for the day. This is where savings, usually called Capital Build-up or CBU in
most MFIs), life insurance premium (referred to as Locked-in Capital Build-up or LCBU in some MFIs),
loan amortization and other collected fees from the clients are recorded. All cash outs of the Loan Officer
from each group he or she is handling in a day are also recorded in the DCS. Some of the cash outs are
the savings or CBU withdrawals, number, and amount of savings or CBU returned, and loan insurance
premium refund.
Each Loan Officer is required to record their collections on the DCS every day, while the Branch Manager
and all Loan Officers have to check the accuracy of all entries on the DCS.
Different MFIs have different forms for

recording daily collection. Shown below
are the forms used by UPLIFT Philippines
Inc.(Figure 1). The Daily Collection
Summary of UPLIFT Philippines Inc. has a
portion for recording cash breakdown (on
the right side of the form), total amount
collection, total amount deposited, and a
space for writing the difference between
the two items, if there are any.
Parts of the Daily Collection Sheet
The Daily Collection Sheet may be

divided into five major parts:
(1) MFI information and group information

• Area, Name of Branch, Date and Day
• Group number
• Complete Name of Loan Officer
• Name of group
(2) Collectibles or Cash In

• Client’s CBU Collection column
21

Target CBU Collection is calculated as the number of clients of the MFI multiplied by the minimum savings
or CBU amount required from
each member.
FIGURE 3
The five major parts of the
Daily Collection Sheet of
ASA Philippines
Foundation
Actual CBU Collection is the

exact savings or CBU amount
collected from the clients.
• LCBU Collection column

Target LCBU
Collection is calculated as the
number of active clients
multiplied by the premium set
by the MFI.
Actual LCBU Collection is the
exact amount of LCBU
premium collected from
clients.
• Clients’ Loan Collection column

Target Collection is calculated as Active Loan Plus Current Loan Release less
Full repayment less Loans Exempted from Repayment divided by total number of weeks the loan has to
be repaid or the loan term.
Advance Collection is the loan amount collected in excess of the target and is calculated as Actual
Collection less Target Collection.
Actual Collection is the exact amount of loan amortization collected from clients.
Admin Fees - the money recorded in this column are membership fees from new clients, or usually
the payment for passbook of newly admitted clients.
Loan Insurance Premium is money paid in order to avail of the benefits of the
MFI’s loan insurance program.
Total Collection is the sum of all collections for that day including CBU
Collection, LCBU Collection, Loan amortization collection, Admin Fees, Loan Insurance premium and
other fees. Thus, Total Collection has the following formula: Column N = E+G+J+K+L+M
22

(3) Deductibles or Cash Out
• CBU Withdrawal is the total CBU amount withdrawn by all clients during the day.
• Number of CBU Return the number of clients who terminated their membership from the MFI
and withdrew the CBU they deposited.
• Amount of CBU Return is the amount of CBU returned to clients who terminated their
membership from the MFI.
• LCBU Refund is the total amount of LCBU returned to clients who terminated their membership
from the MFI for that day.
• Net Collection is computed as Total Collection less CBU withdrawal less Amount of CBU Return
less LCBU Refund. It has the following formula in the DCS:
Column S = N-O-Q-R
(4) Information on Full Payment

• Number is the number of clients who paid the entire amount of their loans for a
particular day.
• Amount is the exact amount of loans fully paid by clients on a particular day.
(5) Receipts and Payments Column
This part is filled-up by the Branch Manager and shows the summary of daily inflow and outflow
of cash into the MFI.
All information that is entered in the DCS is obtained from the Loan Officer’s
Register (LOR), is a journal in which loans, CBU, and microinsurance are recorded in
chronological order, and consecutively numbered. In microfinance, it is a bound forms used to record the
flow of all cash transactions of every member for a period of one year. The Loan Officer brings this to the
weekly group meetings and records the payments during field collection1 (see Figure 4).
23

24

Figure 5 shows that the DCS

gathers three (3) major set of
information:
(1) Data on target and actual

collection is gathered to show
the Loan Officer’s performance
in terms of collecting payments
from clients, one of the major
tasks of the Loan Officer;
(2) Cash in and cash out

including net collection is
gathered to show on a daily
basis the inflow and outflow of
cash in all groups being
handled by the Loan Officer;
(3) Data on Full Payment, both

data on the number of clients
who fully paid their loans and the amount of fully paid loans.
FIGURE 5 Sets of information gathered using the Daily Collection Sheet
STEPS IN RECORDING DAILY

COLLECTION
Step 1. Write down Area, Name of

Branch, Day and Date of Meeting,
group names and name of the Loan
Officer on the spaces provided on the
DCS
Step 2. Record Target CBU collection,
Target LCBU Collection, and Target
Loan
Collection for each group
a. Target CBU collection is calculated
as the number of clients multiplied by
the minimum required CBU amount or savings amount from each member. Looking at the LOR of
Vietnam group on Exhibit 4, and by counting all rows with client information, the total active clients totaled
27. In addition, since the MFI requires a minimum savings amount of PhP50, the Target CBU collection
would be PhP1,350 (see calculation below).
25

Formula 1. Calculation for Target CBU collection

Target CBU collection = number of clients X minimum savings
For example:
Target CBU collection = 27 clients X Php50
Target CBU collection = PhP1,350
b. Target LCBU Collection is calculated as number of clients multiplied by the
LCBU premium. Since the Vietnam group has a total active clients of 27 and the MFI charges PhP10 as
premium payment for LCBU, calculation for Target LCBU collection, looks like this:
Formula 2. Calculation for Target CBU collection
Target LCBU collection = number of clients X minimum savings
For example:
Target LCBU collection = 27 X Php10
Target LCBU collection = PhP270
c. Target Loan Collection is computed as follows:
Formula 3. Calculation for Target Loan Collection
Target Loan Collection
Active Loan
Add: Current Loan Release
Less: Full Repayment
Equals: Total Outstanding Loan

Less: Loans Exempted from Repayment
Equals: Total Loans that can be collected from

clients
Divide by: Loan Term
Equals: Target Loan Collection (for the group)
Below is the calculation for Target Loan Collection using data from the LOR of Vietnam Group in Figure
3 and given that the MFI requires that clients pay the loan in 23 weeks.
Active Loan + Current Loan Release

Target Loan Collection = – Full Repayment – Loans Exempted from Repayment
Loan Term
Target Loan Collection = PhP127,650 + PhP 0 – PhP 0 – PhP0
23 weeks
Target Loan Collection = PhP5,550
FIGURE 7
Filled-out Target CBU, Target LCBU and Target Loan Collection columns
26

Step 3. Record Actual CBU

collection, Actual LCBU
collection, and Actual Loan
Collection
All entries for the DCS can be
obtained from the Loan Officer’s
Register (LOR) of each group.
Below is the filled-up Actual
Collections for Vietnam group
using information from the group’s
LOR on Figure 3.
FIGURE 8
Filled-out Actual Collections columns
Step 4. Compute for Advance
Payment
Advance Payment is the difference
between Actual Loan Collection
and Target Loan Collection for the
day. Thus, computing for Advance
Payment of Vietnam Group:
Formula 4. Calculation for
Advance Payment
Advance Payment = Actual Loan Collection –
Target Loan Collection
In this example, no member gave any advance payment for her
loan amortization. In some instances, clients can give more For example:
money than the required amount of loan amortization so that Advance Payment = PhP5,550 – PhP5,550
they could re-pay their loans in advance. Advance Payment = PhP0
Step 5. Record Administrative Fees, Loan Insurance

Premium collection, and other fees collected from the clients.
Administrative Fee or often called Admin Fee that is recorded in the DCS is usually the payment for
Passbook of newly admitted clients. For Vietnam group, there is no new member admitted for March 9,
2009 (no NM sign in the LOR) thus there is no entry under the Admin Fees column. Information on admin
fees can also be obtained from the Cash Receipt Slip2, it is a document issued by the Loan Officer to the
group upon receipt of cash payments including admin fees (see Figure 9). From the Cash Receipt Slip
below, there is no entry under the Admin Fees column (7th column).
27

FIGURE 9 Sample of a
Cash Receipt Slip
Premium for Loan

Insurance is usually
calculated as a
percentage of approved
loans or a fixed amount
set by the MFI. In our
example, the MFI
charges one percent
(1%) of approved loan as premium for loan insurance. Data on Loan Insurance Premium can be obtained
from the Cash Receipt Slip. Looking at the above Cash Receipt Slip, members of Vietnam group who
would be released with loans for the day paid a total of PhP400 as Loan Insurance Premium (6th column).
This means that the MFI will disburse a total of PhP40,000 to the members of Vietnam group.
2 Note: For a more detailed discussion on how to use and fill up the Cash Receipt Slip read the modules
on
“Receive Collection” and “Issuance of Cash Receipts.”
Step 6. Sum total collection. After recording all required information, add up the following items: Actual
CBU collection, Actual LCBU Collection, Actual Loan Collection, Admin Fees, loan insurance premium,
and other fees. On the bottom part of the Daily Collection Sheet, the formula for computing Total
Collection is written as follows:
Column N = E+G+J+K+L+M
Formula 5. Calculation for Total Collection (Vietnam Group)

Total Collection = Actual CBU Collection + Actual LCBU
Collection + Actual Loan
Collection + Admin Fees + loan
insurance premium + Others
For example:
Total Collection = PhP2,710 + PhP250 + PhP 5,550 +
PhP400
Total Collection = PhP 8,910
After computing the total collection, write the figures on the Total Collection column of the Daily Collection
Sheet.
Step 7. Record all deductibles such as CBU withdrawals, Number and Amount of CBU Return,
and LCBU Return
All information to complete these columns can be obtained from the LOR. Looking at the CBU Withdrawal
column of the LOR of Vietnam group (see Figure 12 below), only CBU Withdrawals released on March
09, 2009 (date of the DCS) should
28

be counted and included in the DCS. For example, there are five entries under the CBU Withdrawal
column, but only two entries will be included in the DCS of March 9, 2009: PhP160 CBU withdrawal of
client no. 11 and the PhP900 CBU withdrawal of
client no. 17. These are the only withdrawals
released on March 9, 2009 as indicated by the (9)
symbol after the numbers. There are no other
entry on the CBU Return and LCBU Refund for
the Vietnam Group.
FIGURE 12 Filled-out deductibles columns
for Vietnam group
Step 8.
Compute for
Net
Collection
Compute for
Net
Collection by
subtracting
CBU
withdrawals,
Amount of
CBU returns,
and LCBU
refund from
the Total
Collection.
Formula for
Net
Collection is
as follows:
29

Formula 6. Calculation
for Net Collection
Net Collection
Total Collection
Less: CBU Withdrawals
Less: CBU Return
Less: LCBU Refund
Equals: Net Collection
Net Collection = Total

Collection - CBU
withdrawals - Amount of
CBU returns - LCBU
refund
For example:
Net Collection = PhP8,910 –
PhP1,060 – PhP0 – PhP 0
Net Collection = PhP7,850
Step 9. Record Information on Full Payment

Information on Full Payment can be obtained from the LOR, from the right most side of the LOR sheet.
For the Vietnam group, no member gave full payment for their loans on March 09, 2009, thus there are
no entry on the Full Payment column of the group.
Step 10. Add up all columns

Add up all columns of the DCS and write your answers on the sub-total row. The sub-total should be
written using a red ink for easy viewing.
Step 11. Have the Entries on the DCS checked by another Loan Officer, and check the DCS Entries
of another Loan Officer, as well.
It is important to ask a fellow Loan Officer to check the entries that has been
made on the DCS. This will ensure that entries and computations on the DCS
are correct. After checking the entries of a fellow Loan Officer on the DCS, copy
the entries on a piece of paper and wait for the “recitation” or the time when all
Loan Officers and the Branch Manager gather and check each other’s entries
on the Daily Collection Sheet.
Step 12. Sign the Daily Collection Sheet

It is important that a Loan Officer sign the Daily Collection Sheet because this
signifies that the Loan Officer stands by the correctness of his or her entries on
the document.
Step 13. Participate in the Cross-checking of Entries on the Daily Collection Sheet
30

The last step in completing the Daily Collection Sheet is the “recitation” or the crosschecking of the DCS
entries by all Loan Officers and the Branch Manager.
Before the recitation or cross-checking, Loan Officers should write down on a piece of paper the DCS
entries of another Loan Officer that they have cross-checked.
During the recitation, the Branch Manager and all Loan Officers sit down around a table. The Branch
Manager holds the completed DCS and calls on each Loan Officer to recite the DCS entries of another
Loan Officer. Each Loan Officer will have to recite the DCS entries of another Loan Officer, and not the
content of their own DCS. This method will ensure that entries on the DCS are correct.
SUBMIT DAILY MONITORING REPORT
DAILY MONITORING REPORTS IN MICROFINANCE INSTITUTIONS

In the previous Learning Elements on Performing Bookkeeping, the following forms or documents were
discussed, and the steps on how to prepare or update them.
a. Cash Receipt Slip or Deposit Slip shows the client’s deposit of cash to the micro-finance
institution.
b. Daily Collection Sheet or Daily Collection Summary is a report that sums up payments
received from clients including savings or capital build-up, loan insurance premium, loan
collection and other fees.
c. Loan Disbursement Master Roll (LDMR) is a document that summarizes daily loans released
to clients. It is accomplished daily by a Loan Officer assigned by the Branch Manager and
should be completed before the clients come to the branch office for orientation and releasing
of loans.
d. Loan Officer’s Summary Book is a record of the cash inflow, cash outflow and loan balance
based on the day-to-day collection activity of a Loan Officer.
Why is it important to prepare these documents? Why should reports be prepared and
submitted daily?
It is important to properly update financial records because it is a pre-requisite in the preparation of the
MFI’s books of account (such as Cashbooks and General Ledgers) and financial reports (such as Balance
Sheet and Income/Loss Statement).
Financial reports are important because it shows the financial position and results of operation of the MFI.
It also shows the overall financial viability of the lending services of the MFI, the state by which the lending
services is effectively reaching its clients, and the state by which the MFI is able to cover and recover the
operational costs of providing such services.
Financial report is also one of the tools used for management planning, control and decision-making.
Thus, it is important that a Loan Officer should accomplish and submit financial records on a daily basis.
In addition, these records are used to monitor and measure the overall performance of the MFI along the
following key result areas1 and performance indicators:
31

TABLE 1
Three major key result areas of MFIs
(1) Effectiveness (2) Efficiency (3) Sustainability
• Impact • Operational efficiency • Financial sustainability
• Outreach • Financial efficiency • Operational
• Responsiveness sustainability
A.Effectiveness is the extent by which an organization is able to achieve desired results. For MFIs,
effectiveness is measured through the impact it created in the communities, its outreach to its intended
clients, and responsiveness to the needs of their clients. Impact is the extent to which the micro-finance
institution has contributed to poverty alleviation.
B. Outreach is the MFI’s ability to reach large numbers of clients, as well as its ability to effectively
identify and reach the poor and other marginalized sectors.
C. Responsiveness is the ability of the MFI to design and deliver products and services that meet the
needs of the poor and other marginalized sectors. In other words, how the MFI is able to ‘respond’ to the
financial needs of the poor.
D. Efficiency is the ability of the MFI to maximize output per unit of input, or how well the MFI uses its
resources (financial or otherwise) to achieve desired results.
E. Sustainability refers to the MFI’s capacity to continue to provide services over the long term. An
important aspect of sustainability is financial sustainability, which is the ability of the MFI to continuously
meet the financial requirements of its operation. There are three ways by which this is measured:
1. Are cash receipts from customers enough to cover salaries and administrative costs?
2. Are cash receipts from customers enough to cover financial costs?
3. Can the microfinance gradually decrease reliance on outside sources of funds?
Steps in Submitting Daily Monitoring Reports

Step 1: Accomplish the Daily Monitoring Reports.
The steps in accomplishing different reports were discussed in the previous Learning Elements.
It is important to note, however that different MFIs have different forms for keeping various data and
records, thus a Loan Officer must familiarize himself or herself with the underlying principles or the basis
for the formulation of the different reports to avoid confusion.
If the Loan Officer failed to completely accomplish the reports, this will result to incomplete and
inaccurate information for the management and decision-makers of the MFI. Consequently, the decision-
makers would fail to accurately assess the performance of the MFI.
32

Step 2: Check the Accuracy of the Entries Made in the Daily Monitoring Reports.
It is important that entries and computations made on the daily
monitoring reports are checked to ensure that they are complete and
accurate. In some MFIs, Loan Officers ask their fellow Loan Officers to
check the entries on the documents and reports. This is an effective way
of ensuring that entries and computations are correct.
Another valuable mechanism for checking the accuracy of reports is the
“recitation” or the cross-checking of the reports by all Loan Officers and
the Branch Manager or Supervisor2.
Step 3. Submit the reports to the Branch Manager or Supervisor.

After ensuring that entries and computations of the reports are
correct, the Loan Officer then submits the reports to the Branch Manager
or Supervisor who then ensures that the reports are properly filed and stored in safe and secure place.
Failure to submit the reports may result to the reports being lost or misplaced.
In some MFIs, the entries on the different reports are even encoded in a computer to ensure that
they have a back-up file, and this encoded file is saved in a compact disc (CD) and submitted to the Head
Office for safekeeping.
Exercise No. 1: Read the questions below carefully. Write your answers on the space provided.
1. Why is it important to affix one’s signature on the Daily Collection Sheet after completing
the entries?
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
2. Why is it important to have one’s Daily Collection Sheet checked by another Loan Officer?
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
33



Read each statement carefully. Match the definition on Column A on the corresponding terms on
Column B.
Column A Column B
____1. The amount collected in excess of the target a. Full Payment (amount)
loan collection. b. Receipts and Payments column
_____2. Money paid in order to avail of the MFI’s loan c. Advance Loan Collection or Advance
insurance benefits. Payment
_____3. Number of clients who paid the entire amount d. LCBU Refund
of their loans. e. Target CBU collection
_____4. The exact amount of loans fully paid by f. CBU Withdrawal
clients. g. Full Payment (person)
_____5. Shows the summary of daily inflow and h. Loan Insurance Premium
outflow of cash into the MFI. i. Capital Build-up
_____6. Calculated as the number of clients multiplied j. Total Collection
by the minimum CBU amount required from each k. Actual LCBU Collection
member. l. Actual CBU collection
____7. The exact CBU amount collected from clients. m. CBU Return (Amount)
n. Admin fees
_____8. The exact amount of LCBU premium o. Ad CBU Return (no.)
collected from clients. p. Target LCBU Collection
_____9. Total CBU amount withdrawn by clients
____10. The total amount of LCBU returned or
refunded to clients who terminated their membership
from the MFI.
____11. Calculated as the number of active clients
multiplied by the loan insurance premium or LCBU
premium set by the MFI.
____12. Amount of CBU returned to clients who
terminated their membership from the MFI.
____13. Sum of all collections.
____14. Number of clients who terminated
membership from the MFI and refunded their CBU
deposits from the MFI
____15. The common term used by MFI for savings.
34

C. LESSON WRAP-UP
A. Work Tracker
completed.

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
FAQs
1. What are the things to remember in reviewing transaction report?
✓ A Loan Officer usually has three major items to collect from clients on a daily basis: (1) savings
or what is referred to as Capital Build-up (CBU) in most MFIs, (2) life insurance premium or the
Locked-in Capital Built-up (LCBU), and (3) loan repayment installment.
✓ The Loan Officer should write the target savings, loan insurance, and loan collection for the day,
as well as his or her actual collections on the Collection Information Board in order to know his
or her rate of achievement in terms of collecting payments.
✓ The Collection Information Board gives the Branch Manager and all Loan Officers daily collection
information at a glance, and shows the daily performance of each Loan Officer in terms of
collecting payments.
✓ Data written on the Collection Information Board is obtained from the Cash Receipt Slip and the
LOR. Data on Actual CBU, LCBU, Loan Collection, and the Admin fees collected are obtained
from the Cash Receipt Slip, while data on CBU Withdrawal/Return and LCBU Return is obtained
from the LOR.
35

✓ Total money collected by the Loan Officer should be counted carefully and recorded at the back
of the Daily Collection Sheet (DCS), a form or document used to record all Loan Officer’s
collection for the day.
✓ After writing complete and accurate data on the Collection Information Board and the Daily
Collection Sheet, the Loan Officer has to remit money collected to the Cashier, an assigned Loan
Officer who handles and records collections of all Loan Officers within the same branch.
✓ The Cashier should then ensure that the money remitted to him or her and the entries written on
the Daily Collection Sheet are the same by counting the money and checking the entries on the
DCS.
✓ After remitting collection, the Loan Officer should affix his or her signature on the DCS to signify
that he or she has already remitted the money, and that the money remitted and the entries on
the DCS are the same.
✓ In cases when the Loan Officer has to go back to the field because some clients failed to give
their payment during the group meeting, the Loan Officer has to also record the total afternoon
collections under the Afternoon Remittances at the back of the Daily Collection Sheet, and remit
the afternoon collection to the Cashier.
✓ In other MFIs where the clients or groups directly deposit their weekly dues directly to the bank,
the Loan Officer does not handle nor remit any cash to a cashier or the MFI.
KEY TO CORRECTIONS
Exercise No. 1
1. It is important to ask a fellow Loan Officer to check the entries that has been made on
the DCS to ensure that entries and computations are correct.
2. It is important that a Loan Officer sign the Daily Collection Sheet because this signifies that the Loan
Officer stands by the correctness of his/her entries on the document.

1. C 6. E 11. P
2. H 7. L 12. M
3. G 8. K 13. J
4. A 9. F 14. O
5. B 10. D 15. I
36
FIN 055: Microfinance Operations & Management

Self-Assessment Guide Materials:

1. FLM Student Activity Sheets
Qualification: MICROFINANCE TECHNOLOGY NC II

PERFORM MICROFINANCE LOAN OFFICER
Project: WORK ACTIVITIES FOR ENTREPRENEURIAL
DEVELOPMENT
• SELECT POTENTIAL AREA FOR MICROFINANCE OPERATION
• PROMOTE MICROFINANCE PRODUCTS AND OTHER
SERVICES
• FORM GROUP OF MICROFINANCE CLIENTS
Units of Competency Covered: • FACILITATE CENTER MEETING
• PROCESS APPLICATION FOR LOANS AND OTHER SERVICES
• COLLECT DUES
• UPDATE FINANCIAL RECORDS
Can I? YES NO
* Conduct area scanning/mapping
*Coordinate with concerned government office
* Review barangay profile
* Conduct area survey
* Conduct interviews
* Process survey and interview data
* Conduct orientation and briefings on microfinance products and services

* Facilitate/Coordinate microfinance training program
* Assist clients in promoting their products
* Administer survey on enhancement of MFI products and services

* Orient target clients
*Schedule and conduct family background investigation/
CCI /BI of prospective clients
*Organize group/center/ cluster
*Orient group officers/center/ officer on their roles and responsibilities
1

Can I? YES NO
*Facilitate group /center officer meetings
Present scheduled topic/s
*Facilitate group discussion
*Check clients’ attendance
*Counsel clients on personal/family problem/s
*Issue applications for loans and other products/services
*Gather applications for loan and other products/services
*Evaluate loan applicant and /or insurance applicant/claimant
*Evaluate loan and /or insurance documents
*Prepare summary of loan applications and/or insurance
*Recommend qualified loan applicants and/or insurance claimant
*Inform clients about loan application and/or insurance status
*Check loan utilization
*Receive collection reports
*Receive payments
*Sign repayment schedule
*Record collection on group treasurer’s register
*Record collection on clients’ passbook
*Record collection on loan officer’s register
*Consolidate total collection
*Issue cash receipts/official receipts
*Turn-over/deposit collection
*Investigate Reason/s for Delayed Payments
*Deal with delinquent members
*Recommend/execute plan of actions to settle delinquent account/s
*Submit incident report
*Review transaction report
*Prepare loan disbursement master roll
*Record daily collection on daily collection sheet
*Submit daily monitoring report
*Summarize collection on Loan Officer’s summary book
*Prepare monthly plan
*Prepare annual development action plan
I agree to undertake assessment in the knowledge that information gathered will only be used for
professional development purposes and can only be accessed by concerned assessment personnel and
my manager/supervisor.
2

Candidate’s Name: Date:
3

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FIN 055:Microfinance Operations and Management

Student Activity Sheet Module #1

Name: _____________________________________________________________ Class number: _______

Lesson title: Overview of Microfinance Materials:

2) Activity 1: What I Know Chart

What I Know Questions: What I Learned (Activity 4)

Who are the clients of

What are the types of products

Name: _____________________________________________________________ Class number: _______

A. In class, face-to-face, (4 days)

B. At home, self study, (10 days)

Name: _____________________________________________________________ Class number: _______

Tips for an Effective Home Study

Now, it is time to move to our main discussion.

Name: _____________________________________________________________ Class number: _______

Types of Microfinance Products and Services

Features of microfinance loans

Microfinance Lending Methodologies

Examples of Group Methodology

Examples of Individual Methodology

Name: _____________________________________________________________ Class number: _______

Differences between Individual and Group Methodology

Feature Group Individual

What are the competencies needed in the microfinance industry?

These core competencies will be discussed in detail on the following modules.

Name: _____________________________________________________________ Class number: _______

2) Activity 3: Skill-building Activities

_____1. Which of the following best describes a microfinance?

_____3. Financial services of microfinance include ___________.

_____4. The following are characteristics of a microfinance client, except __________.

_____5. Microfinance is important because ___________.

Name: _____________________________________________________________ Class number: _______

Competencies Basic Common Core

3) Activity 4: What I Know Chart

4) Activity 5: Check for Understanding

__________1. Micro enterprise Access to Banking Services (MABS) is a microfinance model

Name: _____________________________________________________________ Class number: _______

1) Activity 6: Thinking about Learning

B. Think about your Learning

2. What question(s) do you have as we end this lesson?

2. Where can we access microfinance?

Name: _____________________________________________________________ Class number: _______

Check for Understanding

Name: _____________________________________________________________ Class number: _______

Lesson title: History of Microfinance Industry Materials:

2) Activity 1: What I Know Chart

What I Know Questions: What I Learned (Activity 4)

What is the difference of a bank &

Who are the clients of

What are the benefits of

Name: _____________________________________________________________ Class number: _______

Important Features of the Definition:

Who are the MF Clients? The**Entrepreneurial Poor**

The Benefits of Microfinance

Name: _____________________________________________________________ Class number: _______

Microfinance Institutions (MFIs)

Where Can I Access Microfinance?

MFI products & services

Name: _____________________________________________________________ Class number: _______

2) Activity 3: Skill-building Activities

_____1. Which of the following best describes what a microfinance is?

Name: _____________________________________________________________ Class number: _______

3) Activity 4: What I Know Chart

Name: _______________________________________________________ Class number: _

Name: _______________________________________________________ Class number: _

Name: _______________________________________________________ Class number: _

Name: _______________________________________________________ Class number: _

Name: _______________________________________________________ Class number: _

Name: _______________________________________________________ Class number: _

_3. Financial services of microfinance include _______.

_4. The following are characteristics of a microfinance client, except ______.

_5. Microfinance is important because _______.

Name: _______________________________________________________ Class number: _

Name: _______________________________________________________ Class number: _

Name: _______________________________________________________ Class number: _

Name: _______________________________________________________ Class number: _

Name: _______________________________________________________ Class number: _

Who are the MF Clients? TheEntrepreneurial Poor

Name: _______________________________________________________ Class number: _

Name: _______________________________________________________ Class number: _

Name: _______________________________________________________ Class number: _

Name: _______________________________________________________ Class number: _

Name: _______________________________________________________ Class number: _

Name: _______________________________________________________ Class number: _

Name: _______________________________________________________ Class number: _

Name: _______________________________________________________ Class number: _

Name: _______________________________________________________ Class number: _

Name: _______________________________________________________ Class number: _

Name: _______________________________________________________ Class number: _

Name: _______________________________________________________ Class number: _

Name: _______________________________________________________ Class number: _

Name: _______________________________________________________ Class number: _

Name: _______________________________________________________ Class number: _

Name: _______________________________________________________ Class number: _

Name: _______________________________________________________ Class number: _

Name: _______________________________________________________ Class number: _

Name: _______________________________________________________ Class number: _

Name: _______________________________________________________ Class number: _