The ECLOF Philippines expansion strategy is based on the belief that it is only feasible to open a branch office in an area if at least 50% of the business in that area is in one specific activity.

Another key strategy not only for expansion but also for normal programme operations is to coordinate programme expansion with local government. ECLOF Philippines requires new applicants to register their business with the barangay (local government). The barangays refuse to register clients with bad business records. The registration fee is a token one when compared to the high interest rates charged by loan sharks that small-scale entrepreneurs customarily have used.

Another ECLOF Philippines strategy is to deal with people at grass roots level, to make mainly solidarity group loans, and for the whole process to be simple and legitimate. This approach has made ECLOF Philippines unique among other Filipino microfinance institutions. Besides helping to build good relations with local government, the tactic has also helped to restore client respect and confidence in ECLOF Philippines, which is now seen as a serious and principled lending institution with a mission that goes beyond profit making. Another result is that the primary way by which new clients hear of ECLOF Philippines is through word of mouth.

Antipolo celebrates first anniversary
In September 2001, ECLOF Philippines opened its first branch office in Antipolo City, which is a squatter area of half a million inhabitants on the outskirts of Manila. ECLOF's Antipolo branch achieved operational sustainability at the end of April 2002, five months ahead of schedule.

Anniversary celebration
On 10 September 2002, ECLOF Philippines organised a client assembly to mark the first anniversary of the Antipolo programme. In the end, the assembly turned out to be more of a party and an opportunity to strengthen links between ECLOF Philippines and its clients. The 200 plus clients paid a small fee to attend but were adequately compensated with colourful T-shirts, food and refreshments, prizes, entertainment and the opportunity to socialise and have a good time with fellow clients and ECLOF Philippines staff. After the festivities, clients took part in a session of questions and answers, and experience sharing.

Aquino and Partners run a chicken dressing business.
After repaying their first ECLOF loan, the group received
a second for PHP80,000 (US$1,450).

As her sole means of income, Mrs Merlyn Cristales,
the leader of Cristales and Partners Solidarity Group,
raises and sells turkeys and pigs.

Mrs Tita Baesa sells the water she pumps
from a well she had sunk in her yard with the
help of an ECLOF loan. Thanks to her business,
Mrs Baesa can now afford to send her children to school.

Mr Luis Onggon used his ECLOF loan to buy more used
clothes which he tears into strips and weaves into doormats.
Demand for mats has grown so much, including orders from
some big shops, that Mr Onggon has started to contract
out to partners. Now, Mr Onggon can afford to send his
daughter to university.

Ms Angelina Marcial raises pigs and also runs a small shop.
She was one of ECLOF's first clients in Antipolo and is now
on her third loan, which she is using to expand her store and
to buy more pigs. Before coming to ECLOF Philippines,
Ms Marcial used to get credit from the '5 to 6 lenders', a
euphemism for moneylenders who lend five pesos on one day
and get back six on the day after. The difference between the
interest rate charged by the '5 to 6 lenders' and the rate charged
by ECLOF Philippines was enough for Ms Marcial to buy two extra piglets.

On to La Trinidad
On 1 March 2002, ECLOF Philippines opened its newest branch in the town of La Trinidad, which is situated in the mountains about 250 km north of Manila. This new branch will service the area of La Trinidad, Baguio City and Abatan.

Baguio City, a growing summer resort city, is seeing an increase in the creation of new businesses of all sizes. The ECLOF Philippines programme there is modelled on the Market Vendor Loan solidarity group programme in Antipolo in which people trade either from their homes or in one of the town's market places.

In La Trinidad and Abatan, ECLOF Philippines have opened a Vegetable Farm Loan programme, so-called because this area supplies 80% of all the vegetables sold in Manila.

Underlying all ECLOF strategy are the concepts of commitment and respect by ECLOF Philippines. Clients are expected toreciprocate. This is the best way to instil a sense of ownership in everyone, clients and ECLOF staff alike.

The loan application process for La Trinidad is an example of this in that it was a learning experience for both clients and ECLOF Philippines. The committee began to offer orientation sessions in La Trinidad to inform vegetable growers about ECLOF Philippines and how to make an application for a loan. The sessions were largely a flop because only a few clients attended. That is when Larry Millan decided ECLOF Philippines needed to "go to the mountain".

The majority of vegetable growers live in the area of Abatan, some 80 km from La Trinidad. Because of the rough and winding mountain roads, the trip to La Trinidad from Abatan takes about four hours. Larry spoke to farmers in Abatan and discovered that they were not travelling to La Trinidad because of high transport costs and that they also had to miss at least one full day of work. So, ECLOF Philippines organised meetings where the farmers live and work. Attendance shot up with from 15 to 20 farmers at each session. In return, the farmers were more than willing to chip in to cover the cost of transport from La Trinidad to Abatan for the ECLOF Philippines staff.

Bearing fruit
The ECLOF Philippines strategy seems to be working. In one year, the La Trinidad programme made loans worth a total of PHP13.9 million (US$262,264). Of that, PHP7,685,000 (US$153,700) went to 20 vegetable farmers groups. Each of the 112 individual farmers making up these groups received the equivalent of around US$1,380. The average loan amount per member is relatively high because many of the groups are on their second loan.

Another assembly
On 10 March 2003, a La Trinidad Client Assembly was called to celebrate the branch’s first anniversary and its success. Like the Antipolo event, this gathering also turned out to be a standing-room-only affair. There were plenty of speeches and awards, entertainment by the clients themselves, plus food and refreshment. George Petty from the ECLOF International Secretariat was on hand to answer some of the questions from ECLOF clients.

Some of the well tended terraced fields belonging
to vegetable farmers in the Abatan area.

ECLOF clients had the opportunity to ask questions
and exchange experiences at the first La Trinidad Client Assembly

Members of one of the groups at the La Trinidad
assembly receiving their “accumulated rebate"
from Joy Lumbag, member of the boards of ECLOF
Philippines and ECLOF International. Part of the
ECLOF Philippines programme strategy is to encourage
clients to pay their loan instalments on time. In order
to do this, as well as to foster a savings mentality, an
additional 1% interest is added on to the normal rate
of interest. If the loan is repaid on time and in full, clients
receive back the entire extra amount.

Tricks of the trade

Living within our means
By Larry Millan, Executive Director, ECLOF Philippines

Looking back, it seems as though many of the cost savings 'tricks' (I use the word in the positive sense, of course!) we have adopted at ECLOF Philippines are simply the product of common sense and good stewardship.

When I began as Executive Director, there seemed to be more loans in arrears than those being repaid on time. It did not take me long to realise that before we could continue lending we would have to start collection proceedings, not only to recover overdue loans but also to re-establish our reputation and credibility as a lending institution. The challenge was how to go about this without spending more than we might recover.

Since each court operation is similar, we devised pro forma ways of preparing the necessary paperwork. We no longer need lawyers at this stage because the content is more or less the same. All we do is change the name of the defendant, the dates, name of bank, amount, and so on. The lawyers only have to read these details and sign. When we have enough complaints filled out, we schedule a number of court cases to be tried together in one session. This further reduces costs in terms of lawyer fees and staff time.

We require applicants to register their businesses with the local government and to present the registration documents to us before we will process their loan applications. The cost for clients is minimal. The advantage for ECLOF Philippines is that the registration document shows if the client is in good standing or not. This has proved to be an effective preventive measure and one that keeps down costly follow up.

Daily costs.
We save on telephone and postal costs by exchanging information between offices via e-mail and text messages.

We also use modern technology to follow up on late payments. When we know that late paying clients have a cell phone, we send them text messages as a first reminder for payment rather than calling or sending a registered letter.

We keep down special courier mailing costs to our branch offices by using the local bus system. Buses between the main offices and branches run several times a day, including weekends. The special courier services, as well as the post office, make only one run per day. The bus system is faster than special courier services and the post office, and just as secure because deliveries must be signed for.

To save on staff costs, we contract out many tasks that are not part of the daily routine and are required only a few times a year. This eliminates the need to hire new personnel.

We rent a studio near each branch office for visiting staff to use, and in that way avoid high hotel expenses.

And lastly, the best 'trick' is to hire people who are committed to the ECLOF mission, have integrity and are willing to work for a fair salary that can be covered from interest income. We have found that one committed staff member is worth at least two uncommitted people.

Ghana initiative

Development finance & deposit collecting

"It sounds to me like the frontier is on the move", says a microfinance expert about a new project in Ghana that encourages saving.

Dr Russell Mask is International Microenterprise Development Coordinator at the Chalmers Center for Economic Development at Covenant College, in Georgia, USA, and he made his positive comment in response to information in an assignment from Emmanuel Kwas, one of Dr. Mask's microfinance distance students in Ghana.

Mr Kwas reported that the Ghana Commercial Bank, which is the most widespread commercial bank in the country, has recently begun a "deposit collector" system.

According to Mr Kwas, the bank sends its staff into the markets and informal work places as deposit collectors. The deposits earn interest for the savers and allow them to secure loans from the bank against the security of their savings.

The bank's collectors are serious competition to private deposit collectors. In advertisements, the bank points out that it will never abscond with contributions, as some private deposit collectors do.

This venture is now being advertised on national television. The scheme is, however, limited to communities where the Ghana Commercial Bank has branches.