AMG Cooperative

Business Location

AMG Cooperative microcredit business shall be administered at its principal office

in Allah Valley Drive, Surallah, South Cotabato.

Area of Coverage

As of this writing, AMG Cooperative microcredit operations will be limited within

the 17 Barangays of Surallah, as provided in the cooperative’s existing bylaws and

articles of cooperation. In 2020, the general assembly has amended its bylaws and

articles of cooperation for the cooperative to be able to expand the coop’s area of

operation to cover the entire South Cotabato. AMG Cooperative microcredit operations

can only be carried out in the new expansion areas once the Cooperative Development

Authority (CDA) approves the cooperative’s application for amendments of its bylaws and

articles of cooperation.

Vision

To build loan services which will become the lead choice for individuals, smaller

businesses and corporate clients in Surallah and in whole South Cotabato.

Mission

To provide professional, reliable and trusted microloan services that assist

individuals, start-ups in achieving their goals with little or no stress and build a business

to become the of the leading firms in the micro loan services line.

Core Values

It shows the values, integrity, security, service, excellence and teamwork.

Brief Description of the Project

Microcredit is the extension of small loans to entrepreneurs too poor to qualify for

traditional bank loans. It has proven an effective and popular measure in the ongoing

struggle against poverty, enabling those without access to lending institutions to borrow

at bank rates, and start small business. Microcredit usually refers to small loans offered,

often without collateral, to an individual or through group lending. Microfinance, however,

refers to a broader range of financial products and services, including loans, savings,

insurance, transfer services and other financial instruments targeted at low-income

clients. Poverty reduction remains as the main challenge of the Philippine government.

Microcredit is considered as an innovative financial intermediation scheme aimed to

reduce incidence of poverty. In the Philippines, there are three major providers of

microfinance services: NGOs, rural banks, and cooperatives. The microcredit business

of the AMG Cooperative aims to provide access to small loans to its enterprising poor

members. A common characteristic of members of the is their exclusion from the

traditional banking system because of their perceived credit risks, inability to provide loan
collateral and generally, low incomes. The financial requirements of the informal sector

differ significantly from those of the formal sector and even from enterprises classified as

cottage or small. Loans are needed for start-up and working capital primarily in the trade

of goods and services. Loan size requirements are very small, starting from as low as

PhP1,000 or even lower. Opportunity windows can be seasonal and very short in

duration. Turnaround can normally be expected within the day or at most a week. Those

who sell barbecue on the streets, for example, borrow their capital in the morning to buy

the necessary materials and turns around at the end of the day to pay off his/her loan.

The AMG Cooperative shall charge interest rates on loans to members at 3 percent per

month. The cooperative will additionally charge an upfront service fee of 3 percent on

loans. Collection frequency on loans is weekly, bi-weekly or monthly. Total financial

requirement needed by the coop to be able to serve its existing and prospective members

is at least PhP100,000.00 and the proposed cost-sharing arrangement is that the

members’ savings/CBU will finance the total loan fund comprising 75% (PhP75,000.00)

of the total project cost, while the coop will allocate PhP25,000.00 from its annual

operating budget and net surplus from the microcredit business

One of the objectives of AMG Cooperative is to grant loans to the members. Loans will

be granted from the members' accumulated savings through capital build-up

contributions. Obviously, not all the members can take out loans, or obtain them

immediately or simultaneously. Members will be granted loans in accordance with their

seniority within the cooperative and the amount of their savings. The size of loans granted

to members does not exceed the total of their savings.

ORGANIZATIONAL AND MANAGEMENT PLAN

Form of Business

The microcredit project will be managed by the AMG Cooperative. In the

cooperative, member share capital represents individual member commitment to the

cooperative form of business. It also identifies the individual member’s financial stake. It

is withdrawn only when the member leaves the cooperative. Some other forms of member

contributions, usually related to patronage, are more variable but once given cannot be

withdrawn and hence are a particularly useful form of cooperative capital. The structural

characteristics of the cooperative show how the microcredit business will be managed

and how it differs from other types of business:

- Nature of the coop enterprise

a) User-benefit principle: benefits are transferred to the members based upon the

percentage of use or patronage

b) User-ownership principle: members own the organization and they are obliged to

provide financing (CBU) in proportion to their use of the coop services because their

organization has to acquire assets in order to operate and expand

c) User-control principle: governance of the coop remains with the owner-member

implying that the members have to be aware that the achievement of their coop’s

objectives does not depend solely on the hired managers but also on their own behavior

and active participation

- The coordination process: coordination is attained through the flow of information as

having a continuity that is stable (the cooperative is organized to provide goods and

services to its members who delegate power to the Board of Directors (BOD) who in turn

hire and delegate power to the general manager)

- Democratic decision making: ensures that the coop operates in members’ interest.

Organizational and Management Structure

The General Assembly (GA) is the highest policy-making body of the cooperative.

The general assembly has the following powers:

- To determine and approve amendments to the articles of cooperation and by-laws

- To elect or appoint the members of the board of directors, and to remove them for cause.

- To approve developmental plans of the cooperative

Personnel

General Manager

Is the one who will be managing all the work aspects inside the business. He/she

a graduate of any business-related course. Must have 2 years’ experience in managerial

field. He/she will receive a salary of Php 20,000.00 monthly.

Administrative Officer

He/she a graduate of any business-related course. Must have 2-year experience.

He/she will receive a salary of Php18,000.00 monthly.

Responsibilities

• Monitoring and reporting on the progress of training project, impact and areas for

improvement

• Preparing and submitting monthly status reports capturing critical activities and

achievement

• Interacting on a frequent basis with colleagues and external partners

• Managing workflow on training projects by ensuring that deadlines are met and

work is completed promptly

• Creating and maintaining comprehensive project documentation, plans and

reports

• Ensuring standards and requirements are met through periodic monitoring and

evaluation
 • Escalating all related project issues beyond immediate control

• Generating emails and reports when appropriate

• Respond to questions and requests for information

• Undertake additional or other duties as necessary to meet the needs of the

business

• Developing and maintaining internal relationships to help maintain business flow

and meet agreed targets

• Contributing to the smooth running of the technical administrative function within

the organization

• Scheduling and preparing for meetings and teleconferences, including invitations,

collation of responses

• Database maintenance and preparation of presentations and reports.

Accountant

Prepares special financial reports by collecting, analyzing, and summarizing

account information and trends. Maintains customer confidence and protects operations

by keeping financial information confidential. Minimum of 2 years of relevant experience.

Familiarity with financial services sector preferred. Good command over Microsoft Office.

Pro-active, logical reasoning ability, problem solving, analytical and detail focused. Ability

to work independently and multi-task and handle communication across various level.

He/she will receive a salary of 16,000.00 monthly.

Bookkeeper

maintains records of financial transactions by establishing accounts; posting

transactions; ensure legal requirements compliance. He/she should have completed

basic accounting courses and some post-secondary math classes. Minimum of 2 years

of relevant experience. He/she will receive a salary of 15,000.00 monthly.

Cashier

Their duties cover assisting customers with daily cash inquires which includes

accepting credit slips, sorting of checks and ensuring a balance in all transactions at the

end of the working period. Other tasks they perform are handling complaints and requests

from customers and resolving the issues. He/she should have completed basic

accounting courses and some post-secondary math classes. Minimum of 2 years of

relevant experience. He/she will receive a salary of 10,000.00 monthly.

Clerk/Staff

Maintains accounting records by making copies; filing documents. Reconciles

bank statements by comparing statements with general ledger. Updates job knowledge

by participating in educational opportunities. must have excellent communication and

social skills. Skills in computers and basic math are also helpful. He/she will receive a

salary of 8,000.00 monthly.

 Marketing

Main Customers

The cooperative’s regular members will be the main customers of the cooperative’s

microcredit business. The economically active in Surallah especially eligible women’s

who are not yet regular members of the coop will be recruited to the coop. They constitute

a large and potentially lucrative market segment to serve because they constitute the

significant mass of the population in the community and can provide economic viability to

the microcredit project of the coop.

Target Borrowers

One of the objectives of the AMG Cooperative is to grant loans to all its members.

Loans will be granted based on the members’ accumulated savings. Obviously, not all

the members of the cooperative can take out loans, or obtain them immediately or

simultaneously. Members are granted loans in accordance with their seniority within the

cooperative and the amount of their savings. Existing coop members and prospective

applicants who meet the following criteria will be the target clients of the cooperative’s

microcredit services:

Legal age but not more than 60 years old

Engaged in business activities that regularly generate daily or weekly sales/income

Operates a small business for at least one (1) year

Business location is within the coop’s area of operation

 A bonafide resident of the coop’s area of operation for at least three (3) years

Has some form of valid identification card (e.g. SSS/GSIS, Philhealth, BIR/TIN, Driver’s

License, Voter’s ID, employer’s ID)

Must have savings account and CBU with the AMG Cooperative

Possesses good community standing

Other target beneficiaries are the low-income eligible women and men from the

community where the coop will recruit new members who are willing to join and actively

participate in the affairs of the coop. These men and women may or may not be formally

employed, or may or may not have any visible income-generating activity at the time of

joining the cooperative. As a minimum requirement, the household should be receiving or

earning cash income from any source, regardless how small or irregular.

Marketing and Recruitment Strategy

The coop shall carry out recruitment campaigns all throughout Surallah and

neighboring communities through conduct of coop pre-membership education seminars

(PMES) and promote its microcredit services to prospective members. Posters shall be

posted in strategic locations throughout Surallah and neighboring Municipalities that

indicate the schedule and venue of PMES and the coop products and services, including

microcredit.

Project Benefits

Cooperatives with microcredit activities have established themselves to be

effective vehicles in the improvement of the social and economic conditions of their
members. By providing their members access to financial services including savings,

cooperatives have encouraged thrift and opened opportunities to the poor that other

formal financial institutions may not be willing to provide. Microcredit has successfully

enabled the enterprising poor, especially women, to increase their household income

above the poverty threshold, improve their living conditions and enabled them to graduate

into having continuous access to commercial banking facilities. However, microcredit is

not designed to respond to the daily survival needs of the non-enterprising poor, the

poorest and most vulnerable sectors. Thus, the success of microcredit as a tool for the

eradication of poverty is limited only to the credit needs and financial capabilities of the

enterprising poor.

Loan Products and Services

There shall be two (2) kinds of loans to be offered to coop members: a) regular loan, and

b) enterprise loan or small business loan.

Regular Loan

The coops regular loan facility is intended for household needs or for starting a small

income-generating activity (IGA) of members of the cooperative. Regular loan amount

depends on the savings balance of the member. The maximum loan shall be based on

the total CBU contribution of the member, with a 1:3 maximum ratio (or depending on the

coop’s existing lending policy). Salient features include:

- Eligible member-borrower should have paid in full at least the minimum amount of

his/her subscribed share, based on the coop bylaws.

- Interest rate of three percent (3%) per month.

- Minimum loan size of P1000.00.

- Maximum loan cycle is four (4) months.

- Service charge is 2% of the approved loan amount for loan cycle of less than six months.

- Penalty charge of three percent (3%) every month for delayed payment of weekly

amortization for all loans.

- Loan payment on weekly basis: Fixed weekly installment but there will be some flexibility

in the weekly payment. The weekly installment may vary depending on the income of the

member but at the end of every thirty (30) days, the whole installment due for that period

should be repaid. Otherwise, the account will be considered “delinquent”.

Small Business Loan

The small business loan is intended for the existing small business or micro-enterprises

of the coop members. This will enable member-entrepreneurs to expand or improve their

existing business. Requirements and loan terms will be:

- Eligible member-borrower should have paid in full at least the minimum amount of

his/her subscribed share, based on the coop bylaws.

- Member-borrower has an existing business where the cash flow has been verified.

- Member-loan applicant is actively involved in an income generating activity or business.

- Member-loan applicant is of legal age and is not a known loan defaulter.

- Member-loan applicant should have successfully completed at least one regular loan.

- Interest rate of three percent (3%) per month shall be charged.

- Minimum loan size is P1,000.00.

- Maximum loan cycle is four (4) months.

- Service charge is 2% of the approved loan amount for loan cycle of less than six months.

- Penalty charge of three percent (3%) every month for every month of delayed payment

of weekly amortization for all loans; wherein, a fraction of a month is considered as one

month.

- Loan payment on weekly basis: Fixed weekly installment but there will be some flexibility

in the weekly payment. The weekly installment may vary depending on the income of the

member but at the end of every thirty (30) days, the whole installment due for that period

should be repaid. Otherwise, the account will be considered “delinquent”. The basis for

the small business loan size is the balance in the member’s CBU account and on verified

needs based on the business plan or proposal with a maximum ratio depending on the

cooperative’s existing lending policy.

Table 1. List of Loan Interest and Other Charges

Loan Interest and Charges Remarks

3 % interest per month Add on

2% service charge for loans less than six months Add on

4% compulsory savings based on the loan amount Add on

5% compulsory CBU retention based on the loan amount Add on

Computation of Loan Interest and Other Charges

The tables below show the computation of interest and other charges for a loan of

PhP10,000.00 loan with 3% interest to be paid weekly in four months.

Table 2. Computation of Loan Interest and Other Charges

Rate Months Weeks Weekly Repayments

Interest 3% per month 4 16 (10,000*3%*4)/16 = 75

Service Charge 2% per cycle 4 16 (10,000*2%)/16 = 12.50

Savings 4% per cycle 4 16 (10,000*4%)/16 = 25.00

CBU Retention 5% per cycle 4 16 (10,000*5%)/16 = 31.25

Table 3. Sample Amortization Schedule and Payment

Date Principal Interest Service Savings Insurance CBU Balance

Charge

0 10,000.00

1 625 75 12.5 18.75 6.25 31.25 9,375

2 625 75 12.5 18.75 6.25 6.25 8,750

3 625 75 12.5 18.75 6.25 6.25 8,125

4...16 625 75 12.5 18.75 6.25 6.25 0

The cooperative shall charge 3% penalty per month calculated on all missed

payments from the time of first missed payment until the loan amount is fully paid.

Loan Application

The credit investigation (CI) is conducted within three (3) days after the filling up

of the application form was accomplished. The purpose of the CI is to verify whether the

information provided by the client in his/her loan application form is true and correct;

gather information about the borrower’s character and credit history; and to analyze the

borrower’s cash flow and loan repayment capacity. The loan officer should plan the first

interview at the borrower’s place of business. Conducting the interview at the borrower’s

place of business serves two purposes. First, it puts the loan applicant to be at ease

because he/she is in his/her own familiar environment, and it also gives the loan officer

the opportunity to observe the business and assess whether and how the cooperative
should assist the applicant by providing him/her with a loan for his/her small business. A

visit to the applicant’s residence is also necessary if it is located separately from the place

of business. The loan officer should be able to determine the applicant’s type of housing,

its structure and condition, household fixtures and appliances (or lack thereof) as an

indicator of the applicant’s permanency of residence in the community. If possible, the

applicant’s spouse or other family members should be present during the home visit and

interview.

Credit Investigation

First time borrowers shall accomplish the loan application form by providing

information to the coop loan officer. The loan application form for first time borrowers shall

focus on character-based lending which measures the stability and responsibility,

entrepreneurship, repayment behavior and reputation of the member-borrower in the

community. The loan officer fills out the application form as he/she interviews the

applicant. After the interview, the loan officer will summarize the contents of the loan

application form and asks the loan applicant to sign the loan application form. The loan

officer assesses whether the applicant is eligible for the loan. If the applicant is eligible to

apply, then, the loan officer schedules a visit to the applicant’s home and place of

business within three (3) days from the date of the loan interview. The loan applicant will

also be given a checklist containing the following requirements:

Any form of identification

Business license or registration, if any

 Stall holder lease agreement, if any

Last three months utility bills for light and water as proof of residence

Loan Approval

The loan officer reviews all documentary requirements for accuracy of information

and its completeness. All required documents must be signed and completed to merit

approval. It is best that the cooperative develops a checklist of all the loan application

requirements and activities for quicker loan processing. The loan officer also files all

documents in the applicant’s credit folder: Loan Application Form; Completed CI Form;

Proof of Payments and other supporting documents. The approval committee composed

of the chairman of the board or chairman of the credit committee, loan officer and general

manager reviews the loan application folders, checks the credit investigation report, cash

flow analysis, and adjusted repayment capacity that were accomplished by the loan

officer. The approval committee must carefully inspect any missing information that may

affect the loan application. In cases where information is incomplete, the loan officer

should go back to the field to obtain the required information about the loan applicant and

his/her business. The approval committee shall meet at least once a week or more often

as the need arises. The approval committee should focus on the following when

approving loans:

- Review the loan applicant’s credit history, business performance, management skills

and standing in the community. The applicant must, of course, meet the established

eligibility criteria.
- How did the applicant and his business perform financially? Is the business growing,

with a strong market potential? Are there risks to the business (supplies, sales, etc.)?

- Is the revenue currently generated by the applicant’s business and his/her family

sufficient to meet expenses inclusive of the weekly loan payment? Are there risks that

might affect the borrower’s repayment capacity (e.g., being a widow/widower or single

parent, illness, sole income earner of the family, etc.)? The approval committee may

approve, defer, or disapprove the loan application. All members of the approval

committee must agree unanimously.

Loan Disbursement

Once a decision to approve the loan has been handed down, the loan officer will

facilitate the opening of savings account of the borrower. At the same time, the

bookkeeper shall prepare all the necessary accounting documents such as individual

ledgers for savings and loans of every borrower. The loan officer then requests for the

release of the loan to the borrower, in cash (or in check if available). Loan disbursement

shall be conducted inside the premises of the coop office only. In this manner, there is no

need for the loan officer to carry cash outside the coop office and at the same time, the

loan disbursement done inside the coop office becomes an opportunity to conduct the

loan pre-release counseling and make reminders regarding the loan terms and

conditions.
Loan Collection

The loan officer should visit the borrower at his residence or place of business

within a week after the loan was released to convey a message to the concerned borrower

that the cooperative is serious in the loan collection and keeping a close eye on the

borrowers. It is important that all borrowers realize the importance of making loan

repayments on time. The loan officer must monitor his/her loan portfolio closely,

particularly those of the new borrowers, to ensure that they do not become delinquent in

their amortization. Once the amortization schedule is set and agreed between the

cooperative and the borrower, the loan officer should strictly enforce it by reminding the

borrowers that late payments through poor cash flow management will not only negatively

impact his/her own credibility and chances for loan renewal but also his/her ability to build

up his/her asset base.

Loan Renewal

Repeat borrowers are the best clients, and therefore deserve priority service.

Borrowers who request for a repeat loan and who have maintained a sound credit history

shall be given the special privilege of access to additional loan. Processing of repeat loans

will be much quicker than the first loan which shall commence before the maturity of the

previous loan. The loan officer should meet with the borrower at least one week before

the end of the existing loan cycle to start the processing of the new loan application.

Provided that the clients request continues to fall within established criteria, processing
of repeat loans will be much shorter than the first loan. Increase in loan amount on

succeeding loans shall be based on, but not limited to, the repayment behavior of the

client. The table below shows the repayment behavior of the client and the corresponding

increase in loan amount.

Table 4. Loan Repayment Behavior of Borrowers and Implication on Loan Renewal

Loan Repayment Behavior Implication on Loan Renewal Application

No missed payment and no delayed Maximum of 20% increase from the last loan amount

payment approved

1- 2 delayed payments Maximum of 15% increase from the last loan amount

approved

1-2 missed payments or 3-4 delayed Maximum of 10% increase from the last loan amount

payments approved

3 missed payment or 5 delayed No increase in loan amount or decrease in loan approved

payments

> 3 missed payments or > 5 delayed Not qualified to get a new loan

payments
Loan Monitoring

Information System Requirements Loan reports and documents must be designed

to be able to:

- track the status of the microcredit portfolio in a timely, accurate and comprehensive

manner;

- ensure better monitoring of the loan officer’s portfolio;

- assist the approval committee to make timely and well-informed operational, strategic

and policy decisions;

- enable loan officers to provide more efficient services to a greater number of members;

- enable the general manager to monitor progress of the microcredit operations and to

send alarm signals on borrowers that need immediate attention.

Bookkeeping All daily loan transactions shall be posted before the end of office hours to

ensure accuracy and timely tracking of the cooperative’s microcredit operations. The

bookkeeping system need not be automated. Manual bookkeeping system may be

adopted as long as the system generates relevant, accurate and timely information to aid

the cooperative in decision-making. The bookkeeping process should also be able to

follow generally acceptable accounting standards. At the minimum, the four books of

accounts should be maintained (cash receipts book, cash disbursement book, general

journal and general ledger) and individual/subsidiary ledgers are updated on time.
Savings Account

The cooperative shall offer four kinds of savings accounts, namely: a) budget

savings account, b) capital build-up account, and c) investment savings account. Budget

savings account It is mandatory for all members. This is a demand deposit account, where

one can deposit any amount at any time, and withdraw any amount at any time. See

features below:

- Account opening fee: P50 per passbook

- Withdrawal fee: P10 per withdrawal

- Earns interest at 5% per annum

- Fee for replacing a lost budget savings passbook: P100

- Maintaining balance: P100

Capital build-up (CBU) account

This is mandatory for all coop members, as prescribed in the coop bylaws, The CBU will

also be the basis for determining the maximum loanable amount that a member can apply

for, as provided by the coop microcredit policy. Any amount of CBU contribution, on top

of the subscribed share, can be made. If a member has an outstanding loan, his/her CBU

shall be “frozen”; a “lien” is placed on it and no withdrawals are allowed until the loan is

fully paid.

Investment Savings Account (ISA) This is optional for members to open. The purpose is

to allow members to save up for major investments. It works like a time-deposit.

- Account opening fee: P50 per passbook

- Withdrawal fee: P10 per withdrawal

- Earns interest at 8% per annum

- Fee for replacing a lost budget savings passbook: P100

- Maintaining balance: P500

Printouts of statements of accounts on any of the savings accounts can be made upon

request by the member for a fee of P20 per statement.

FINANCIAL PLAN

Savings Mobilization/Capital Build Up Component

AMG Cooperative microcredit business must promote a savings mobilization or

capital build-up program. The savings performance of borrowers will manifest their

savings discipline and readiness to assume the responsibilities of a good borrower. Thus,

equity contribution shall be established and required from the borrowers. The savings

mobilization/capital build-up (CBU) component may provide the mechanism for borrowers

to be able to raise an equity counterpart for the project. Such contributions lessen the

debt burden of the borrowers, and also increase the probability of repayment.

Financing Plan and Project Cost

AMG Cooperative shall charge interest rates on loans to members at 3 percent per

month. The cooperative will additionally charge an upfront service fee of 3 percent on

loans. Collection frequency on loans is weekly, bi-weekly or monthly. Total financial

requirement needed by the coop to be able to serve its existing and prospective members
is at least PhP100,000.00 (see table 5) and the proposed cost-sharing arrangement is

that the members’ savings/CBU will finance the total loan fund comprising 75%

(PhP75,000.00) of the total project cost, while the coop will allocate PhP25,000.00 from

its annual operating budget and net surplus from the microcredit business.

Table 5. Cooperative’s Microcredit Project

Cost Purpose Pesos (PhP)

Loan fund 500,000.00

Planned capital expenditures 200,000.00

Operating and administrative costs 1,500,000.00

(Wages and supplies)

Training and capability building program 100,000.00

Total financial resources needed 2,300,000.00

Operating and administrative costs include all personnel and non-personnel expenses

incurred in the course of providing the service. Cost of capital includes not only actual

costs incurred on borrowings but also the imputed cost of capital. Imputed cost of capital

accounts for inflation indicating the extent to which the real value of capital employed is

maintained.
Security for Loan

AMG Cooperative member-loan applicants are required to submit the following securities

for their loans:

Spouse’s signature as a co-borrower. For single or widowed applicant, a relative as a

co-borrower

Two (2) co-makers who can be anyone of the following:

i. Individuals (friends, neighbors, and relatives) not living with the member-loan applicant

who are willing and have a sufficient and stable source of income to repay the loan, in

case the client is unable to do so.

ii. Other clients receiving loans through AMG Cooperative’s microcredit services

Deed of assignment of savings account and/or CBU

The cooperative is authorized by law to collect savings and capital build-up (CBU)

from its members. The CBU will also be the basis for determining the maximum loanable

amount that a member can apply for, as provided by the coop’s microcredit policy. Any

amount of CBU contribution, on top of the subscribed share, can be made. If a member

has an outstanding loan, his/her savings/CBU shall be “frozen”; a “lien” is placed on it and

no withdrawals are allowed until the loan is fully paid. Lending to Women AMG

Cooperative may predominately lend to women members because of a mission to serve

the very poorest, most marginalized, sectors of society and because of the common

conception that women spend more money on their children than men do, which benefits
societal development. Nonetheless, lending to women also takes on a business

motivation. Microfinance institutions (MFIs) have discovered that women are more likely

to pay back loans than men and are more responsible in how they use the money.

Furthermore, women borrowers are said to be less physically threatening, less arrogant,

and less mobile, so they can be found more easily if they do not pay.

Loan Repayments and Restructuring

The profitability and sustainability of AMG Cooperative microcredit business will

depend on the full repayment of small loans by the non-bankable but creditworthy

borrowers. Ultimately, microcredit and public support services will enable the graduation

of beneficiaries from the poverty trap and will facilitate their participation in the

mainstream commercial banking system. The cooperative shall use continued access to

credit and mandatory savings/CBU to help ensure repayment. In the event a borrower

defaults on his/her loan, the money in his/her savings account and CBU will be garnished

and used to repay the loan. Loan restructuring will not be regularly practiced by the

cooperative except in cases of major, unexpected natural disasters such as strong

earthquakes and typhoons; and serious illness or accident that required the member-

borrower to close or slow down his/her small business over an extended period of time.

AMG Cooperative shall recognize all the events described above. Restructuring shall be

approved by majority of the board of directors (BOD) together with the general manager

(GM). The cooperative can only restructure a loan once.

Financial Analysis

For the cooperative’s microcredit business to succeed, interest income from loans

and related fees and charges must be greater than total operating costs, the cost of the

capital employed, and the cost of bad loans. Operating costs include all personnel and

non-personnel expenses incurred in the course of providing the service. Cost of capital

includes not only actual costs incurred on borrowings but also the imputed cost of capital.

Imputed cost of capital accounts for inflation indicating the extent to which the real value

of capital employed is maintained. Viability is thus a function of pricing (interest rates and

fees), operational efficiencies, cost of capital, and quality of the loan portfolio. Except for

the cost of capital, the other three variables are within the control of the cooperative as

the microcredit service provider. Over-all financial and operational self-sufficiency is

expected to be achieved on or before the 18th month of microcredit operations.

Thereafter, the cooperative would be able to cover all operational costs of the project.
HOLY CHILD COLLEGE OF INFORMATION TECHNOLOGY, INC
Allah Valley Drive, Surallah, South Cotabato

In
Partial Fulfillment
Of the Requirements
In (Mgt. 3)
MICROFINANCE

March 23, 2019

Submitted to:
JOEL SARILLO

Submitted by:
AIRAH M. GOLINGAY