Banking with the “Unbankables”

My name is Teresa Ganzon and I’m currently a Director of Bangko Kabayan, Inc. countryside Private Development Bank located in the province of Batangas, in the Philippines. When my husband, Francis and I heard Chiara’s challenge in 1991 to re-orient businesses to be at the service of the common good, especially for the marginalized, in society,  to institutionalize the culture of giving and to grow such businesses for sustainability, we were inspired to expand the one unit rural bank we were managing, even if we were not bankers ourselves. Guided mostly by intuition and inspiration, a lot of faith and courage, and also helped by another new EOC enterprise which specialized in management training,  we managed to open 8 branches of IRB as it was known then, in 6 years and grow the resources 20x over, making it to the list of the Top 10 in the rural banking industry. We did this by  building relationships, within the organization and with our clients, establishing a reputation for transparency, integrity and professionalism, thus earning the trust and support of the communities we operated in. 

But the financial crisis of 1998 left the bank with a lot of failed loans and foreclosed properties, and we understood that we had to think out-of-the box and introduce new services or type of loans because collateral lending had proven to be a false assurance of repayment of loans.  

We needed to find a new strategy, a new product to help bring about recovery and transformation in the bank. 

We heard about microfinance in 2000, though it was, in those years, a financial activity that was largely undertaken by NGOs financed by grants because the primary goal was developmental rather than viability or profitability. Very few banks had ventured into providing this as a regular service because it was tedious to monitor, seen to be high risk because the loans were unsecured, involved community-building and field work which bank workers were unaccustomed to. But after a year of piloting the service through our foundation, we realized that if we would commit ourselves to changing our mindset, learning and understanding a method and structure that could build social capital of the lower income families to substitute hard collateral, if we worked hard to train not only a new breed of account officers who would be inspired community organizers as well, but also credit managers with eyes that recognize that values such as trust and reciprocity could be guarantees for repayment – then we would have finally discovered a product that could transform, not only the bank but the whole organization and  community as well.

It was the Economy of Communion that gave us courage and confidence to pursue the development of microfinance in the bank as we felt we were living out the true vocation of a financial institution as an enabler of development in the countryside, even as we remained strictly within prudential banking standards. Continuing experiences strengthened the belief that not only could the poor pay, they could also save, given a mechanism that would facilitate their depositing small but regular amounts in a bank.  

We began microfinance in 2000 and by 2019, we had reached almost 11,000 “unbankables” , with an exposure of about US$6.6M , and a Past due rate of 1.89%. Their loans financed working capital for their micro-businesses, helped send their children through school, improve their houses, one room at a time. Through the years, our clients even learned the value of insurance. 

The year 2020 began with a volcano eruption, followed by the African Swine Flu that drastically reduced the livestock population of many of our clients, then the pandemic – which ushered the worst recession in recent history. To top it all, three strong typhoons hit our area just before the year ended. A number of our microfinance clients had to close, mostly because their age and type of livelihood (peddling) was no longer allowed under the ‘new normal’. We had to write off about 4.7% of our exposure that had grown to US$ 5.4M. 

But the bank’s willingness to reduce its margins, to allow the micro-clients to recover through longer terms of repayment, has kept at least 70 % able to remain open, able to pivot into providing other necessities under the new normal, able to survive the harsh economic environment. 

So contrary to being “unbankable” – the lower income, often marginalized, largely women sector of society – if recognized, not for what they lack but for the wealth they have – integrity, industriousness, persistence, resilience, ability to care and support one another, the ability to recognize and reciprocate trust that an institution has given to them – the so-called “unbankable” can be one of the greatest assets of a financial institution. Their numbers create a mass, loyal base of clients in the community. They contribute a healthy income to the bank. And their reciprocal relationship with a bank is proof that an economy of communion is indeed be possible.

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