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UDTF INSTITUTION BUILDING PROGRAM EVALUATION:

From Inception to January 2006

Prepared by:

ELEANORA E. TAN RFS Consultant

DEPARTMENT OF AGRICULTURE

UPLAND DEVELOPMENT PROGRAMME IN SOUTHERN

MINDANAO (UDP)

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5UDTF INSTITUTION BUILDING PROGRAM EVALUATION: FROM INCEPTION TO JANUARY 2006

Table of Contents

Page

EXECUTIVE SUMMARY List of Acronyms

1. INTRODUCTION 1

2. BACKGROUND 2 2.1. The UDP 2 2.1.1. Project Cost 5 2.1.2. Project Components 5 2.1.3. Pre-Completion Review Mission (PCR) Findings 5 2.1.4. PCR Recommendations 6 2.2. The RFS 7 2.2.1. Objective 7 2.2.2. Implementation Scheme 8 2.2.3. Achievements and Problems 8 2.2.4. GoP Credit Policy Shifted RFS Design 8 2.2.5. Credit Shifted from DFS to Mono Crop Plantation 9

3. UDTF IB PROGRAM EVALUATION: TERMS OF 10 REFERENCE

3.1. Main Tasks 10 3.2. Expected Outputs 10

4. COVERAGE AND EVALUATION METHODOLOGY 11 4.1. Coverage 11 4.1.1. 26 Cooperatives in 6 Provinces 11 4.1.2. Areas of Focus 11 4.2. Methodology 11 4.2.1. Review of Literatures 11 4.2.2. Field Visits, Interviews and Questionnaires 16

UDTF Institution Building Program Evaluation

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4.2.3. Evaluation Tools and Criteria 16 4.3. Limitations and Constraints 18

5. THE UDTF 20 5.1. UDTF Objective 20 5.1.1. At the PFI level 20 5.1.2. At the FSC level 20 5.2. UDTF Components 20 5.2.1. Credit Delivery 20 5.2.2. Institution/Capacity Building 21 5.3. Amount of Funds 23 5.4. UDTF Organization 23 5.4.1. UDTF Steering Committee 23 5.4.2. UDTF Secretariat 25 5.4.3. LandBank DAC and DAD 25 5.4.4. LandBank Lending Centers/Account Officers 26 5.4.5. IBS 26 5.5. IB Process Flow 26 5.6. UDTF Monitoring 27 5.6.1. Monthly monitoring reports 27 5.6.2. Regular External Audit 27 5.6.3. Detailed External Audits of PFIs and Other Conduits 27 5.6.4. Inspection of Records and Accounts by EC 27

6. CENTRAL CORDILLERA INSTITUTIONAL 28 BUILDING PROGRAM TRUST FUND (CCIBPTF)

6.1. Purpose and Organization 28 6.1.1. Grant Funds for IB 28 6.1.2. Program Executive Committee (PEC) 28 6.1.3. CCIBPTF Secretariat 28 6.2. CCIBP Implementers 29 6.2.1. LandBank for Cooperatives IB 29 6.2.2. PCFC for SLAs IB 30 6.2.3. LandBank as Fund Trustee 30


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6.3. Amount of Funds 30 6.4. Eligible Beneficiaries and Partner Organizations 31 6.4.1. Track l – IB Programs/Projects Conducted by 31

Beneficiary Organizations

6.4.2. Track ll – IB Programs/Projects Conducted by 31 External Service Providers

6.4.3. Track lll – IB Programs Conducted or Supervised 31 by Government Partners

6.5. CCIBP Mid-Term Performance Assessment 31

7. ASSESSMENT AND GENERAL FINDINGS 33 7.1. Overall Progress 33 7.2. IBS’ Deployment 33 7.2.1. Danielo Munda: Compostela Valley 33 7.2.2. Jaimes Rosal: Davao Oriental 33 7.2.3. Janeto Tansiongco: Davao del Sur 35 7.2.4. Ernesto Bacongco: SoCSKSarGen 35 7.2.5. Dante Tomaro: SoCSKSarGen 35 7.3. Viability and Future Sustainability of Cooperatives 35 7.4. IB Training Program for 2006 41 7.4.1. Training Priorities 41 7.4.2. Observed Needs of Model 2 Coops Not Among Priorities 41 7.5. No Total Absorption of FSCs by Model 1 BACs 41 7.6. Model 2 Cooperatives Have Low Maturity Levels 44 7.7. Installed PSPs Not Operational 44 7.8. Strategic Plans Prepared But Not Followed 44 7.9. Coops Lack Project Feasibility Evaluation Capabilities 44 7.10. Very Limited Coop Resources 45

8. UDTF OPERATIONAL CONCERNS 46 8.1. Remote and Relatively Dangerous Locations 46 8.2. Limited Time Spent By IBS to Nurture the Coops 46 8.3. Inadequate Support to Enhance Performance 46 8.4. Differences in Levels of Knowledge and Capacities of IBSs 46


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8.5. Non-Closure of FSC-Related Issues Constrain 47 Progress of Coops

8.6. No Definite Policies and Procedures for 47 Restructuring UDLF Loan

9. CCIBTF MODEL APPEARS BETTER FOR UDP 48 9.1. Trust Funds 48 9.2. Project Financing Focus 48 9.3. Oversight Function 48 9.4. Leaner PEC 48 9.5. Individual vs. Institutional Responsibility for Results 48 9.6. Secretariat Support 48

10. COOPERATIVE-SPECIFIC FINDINGS 50 10.1. CAMTRIMCO 50 10.1.1. UDTF Covenant of Growth with CAMTRIMCO 50 10.1.2. Cash-Flow Considerations Not Clear in Initial Covenant 50 10.1.3. Present Chairman and Acting General Manager 50

Will Not Lay Off Excess Personnel As Recommended

10.1.4. Misinformation Peddled Against Past and Present 50 Officials Erodes the Coop’s Integrity as an Organization

10.1.5. Former General Manager’s Side of the Issues 51 10.1.6. Branch Managers Confirmed Receipt of Funds 52 10.1.7. Manay Branch Manager Did Not Volunteer 52

Information to Set Records Straight

10.1.8. Desire for Manay Branch’s Representation in the BOD 52 10.1.9. 8 Criminal Cases Filed by CAMTRIMCO Dismissed 52 10.1.10. 2006 GA Schedule – 3rd Week of March 52 10.2. DTFMPC 53 10.2.1. DTFMPC NOT a Genuine Cooperative 53 10.2.2. 3 FSCs’ Resolve to Form Themselves Into a Real Coop 53 10.3. MAMPCO 53 10.4. MAVADECO 53 10.5. KILAMPCO 54


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10.5.1. Status Prior to Kilagding FSC and Cooperative Merger 54 10.5.2. Choice Based on Geographic Location 54 10.5.3. Present Situation of KILAMPCO 54 10.6. MBSC 55 10.7. CAMUPCO 55 10.8. CUFAMCO 55 10.9. MAFADEMCO 56 10.10. BUCO 56 10.11. SIDOUCCO 56 10.12. LUDOUCO 57 10.13. MADOUCO 57 10.14. MFMC 57 10.15. SKSMPC 57 10.15.1. Lending Operations and Loan Portfolio 58 10.15.2. Potential Projects 58 10.15.3. AICom Not Functional 58 10.16. MAINFARM 58 10.17. LUMAD 59 10.18. JASLUMPC 59 10.19. POLO 60 10.20. KALIAC 60 10.20.1. Model 2 in Poblacion, Tupi, South Cotabato 60 10.20.2. Basically a Linan Cooperative 60 10.20.3. Kablon FSC and Members 61 10.20.4. BOD Composition Not Reflective of Membership Base 61 10.20.5. Operational Losses and Deteriorating Financial Condition 61 10.20.6. Former Office at Barangay Linan Still Open to the Coop 62 10.20.7. Capital Generation and Business Opportunities 62 10.21. LPMPC 63 10.22. SACAPDA 63 10.23. NAGMABAUL 64 10.24. MALAUMON 64

11. GENERAL RECOMMENDATIONS 65


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11.1. UDP to Adopt the CCIBPTF Model 65 11.1.1. Only One Trust Fund Devoted to Institution Building 65 11.1.2. Adoption of the CCIBPTF Implementation Structure 65 11.1.3. Unified EC Approach to Ensuring Sustainability of 66

EC-Funded Completed Projects

11.2. Written Policies and Procedures for Restructuring 66 UDLF Loan

11.3. Provision of Technical Support to Production 66 11.4. Provision of Marketing Support 66 11.5. Completion of FSC and UDP PFI Audits and 66

Resolution of All FSC Issues

11.6. Rationalization of Each IBS’ Assigned Load 66 11.7. Streamlining of IBS Reporting/Monitoring System 68 11.8. Matching of IBS’ Skills and Technical Competence 68

with Clients’ Needs

11.9. Additional Support to IBSs 68 11.9.1. Insurance Coverage of IBS 68 11.9.2. Program-Issued Protective Gears 68 11.9.3. Other Logistical Support 68 11.10. Potential Coop Businesses 68 11.10.1. Model 1 68 11.10.2. Model 2 69 11.11. Motorcycles for Mobility and Operational Efficiency 69 11.12. Hand-holding Technique in Delivering IB Services 69 11.13. Priority Training Needs 69

12. COOPERATIVE-SPECIFIC RECOMMENDATIONS 71 12.1. CAMTRIMCO 71 12.2. KALIAC 71 12.2.1. Corrective Measure to Install a Legitimate BOD 71 12.2.2. Venue of General Assembly 71 12.2.3. Immediate Transfer of KALIAC Office to Linan 71 12.2.4. Establishment of Coop Branch in Acmonan 71 12.3. DTFMPC 71


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12.4. JASLUMPC 72 12.5. KILAMPCO 72 12.6. Inaccessible Model 2 Cooperatives 72

List of Figures Figure 1. UDP Covered Areas 3 Figure 2. UDP Organizational Structure 4 Figure 3. UDTF Program Management Organizational Structure 25 Figure 4. D. Munda: Location Map of Cooperatives Covered 37 Figure 5. J. Tansiongco: Location Map of Cooperatives Covered 39 Figure 6. E. Bacongco: Location Map of Cooperatives Covered 40 Figure 7. D. Tomaro: Location Map of Cooperatives Covered 42 List of Tables Table 1. List of Cooperatives Visited/Reviewed 13 Table 2. Consultant’s Itinerary of Travel 15 Table 3. LandBank’s 7 Pillars of Cooperativism 18 Table 4. LandBank’s Minimum Requirements For Potentially 43

New Accessing Cooperatives Table 5. Consultant’s Rating of Model 2 Cooperatives 44 Table 6. Training Program 6 Table 7. Commodity Marketing Study 70 Annexes Annex A. Terms of Reference for the Evaluation of the UDTF Institution Building Program: From Inception to 2006. Annex B. Summary Information of Cooperatives Annex C. Cooperative’s Membership, CBU, Savings and Loans Annex D. List of Upland Barangays of the UDP Covered Municipalities Annex E. Eligibility Criteria for PFIs and Other Credit Conduits Annex F. Eligible Projects and Credit Terms and Conditions Annex G. IBS Recruitment Procedures


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List of Acronyms ACPC Agriculture Credit Policy Council AFMA Agriculture and Fisheries Modernization Act AICOM Audit and Inventory Committee BAC Bank Assisted Cooperative BOA Books of Accounts BOD Board of Directors BUCO Banaybanay Upland Cooperative CAC Cooperative Accreditation Criteria CAMTRIMCO Cateel Mandaya Tribal Multi-Purpose Cooperative CAMUPCO Cabinuangan Multi-Purpose Cooperative CBDO Cooperative Bank of Davao Oriental, Inc. CBU Capital Build Up CCIBPTF Central Cordillera Institutional Building Program Trust Fund CDA Cooperative Development Authority CECAP Central Cordillera Agriculture Programme CFI Cooperative Financial Intermediation COMAT Core Management Team Coop Cooperative CRDB Cash Receipts and Disbursements Book CUFAMCO Cabuyoan Upland Farmers Multi-Purpose Cooperative DA Department of Agriculture DAC Development Assistance Center of LBP DAD Development Assistance Department of LBP DCP Directed Credit Program DTFMPC Demoloc Tagacaolo Farmers Multi-Purpose Cooperative EC European Commission to the Philippines FIDP Financial Intermediation Development Program FSC Financial Service Center FSW FSC Scoring Worksheet FTSS Financial Technology and Support Services GFI Government Financial Institution GL General Ledger IB Institution Building IBS Institution Building Specialist


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IBSP Institution Building Service Provider IEC Information, education and Communication J Journal JASLUMPC Jose Abad Santos Lowland and Upland Multi-Purpose Cooperative KALIAC Kablon Linan Acmonan Multi-Purpose Cooperative KILAMPCO Kilagding Multi-Purpose Cooperative LBP Land Bank of the Philippines LPMPC Landan People’s Multi-Purpose Cooperative LUDOUCO Lupon Davao Oriental Upland Cooperative LUMAD Lumad Don Marcelino Multi-Purpose Cooperative MADECO Maco Development Cooperative MADOUCO Mati Davao Oriental Upland Cooperative MAFADEMCO Manasa Farmers Development Multi-Purpose Cooperative MAINFARM Malalag Integrated Farmers Multi-Purpose Cooperative MALAUMON Malaumon Multi-Purpose Cooperative MAMPCO Mangloy Multi-Purpose Cooperative MAVADECO Maragusan Valley Development Cooperative MBSC Mabini Bagong Silang Cooperative MFMC Magsaysay Farmers Multi-Purpose Cooperative MIS Management Information System MOA Memorandum of Agreement NAC Newly Accessing Cooperative NAGMABAUL Nagkahiusang Mag-uuma sa Barangay Upper Lumabat Multi-Purpose

Cooperative OR Operations Review PFI Partner Financial Institution PMES Pre-Membership Education Seminar PNAC Potential Newly Accessing Cooperative POLO Polo Samahang Nayon Multi-Purpose Cooperative PSP Policies, Systems and Procedures RBDI Rural Bank of Digos, Inc. RFS Rural Financial Services SACAPDA Sangcayao, Abgangbalu, Campao, Patban, Datalbulol FSC Upland

Farmers Cooperative SC Steering Committee SIDOUCCO San Isidro Davao Oriental Upland Credit Cooperative


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SKSMPC Sinabadan Ka Sta. Cruz Multi-Purpose Cooperative SLG Savings and Loan Group SoCSKSarGen South Cotabato, Sultan Kudarat, Sarangani and General Santos SOP Standard Operating Procedure SRBI Sarangani Rural Bank, Inc. SSCFMPC Sufatubo Small Coconut Farmers Multi-Purpose Cooperative TFCC Tubaon Farmers Credit Cooperative UCPB United Coconut Planters Bank UDP Upland Development Programme UDTF Upland Development Trust Fund

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UDTF INSTITUTION BUILDING PROGRAM EVALUATION: FROM INCEPTION TO JANUARY 2006

Executive Summary The strategy of using institution building (IB) for rural financial system development is anchored on 3 basic assumptions. First, that availability of more and better financial services can improve the economic and social situation of a target group. Second, there is a need to develop and motivate institutions to supply the required financial services to the target group on a continuing basis. And third, an institution will provide adequate financial services to the poor only if: (a) it is financially viable, or can at least become financially viable over the medium term; and, (b) if the kinds of services it provides contribute to its financial viability. The Upland Development Programme (UDP) Rural Financial Services (RFS) component has the ultimate goal of establishing and developing village-based financial intermediaries. It was based on the assumption that the introduction of new crops and enterprises together with the other project interventions would lead to a considerable demand for credit and other financial services. From 2000 to 2004, UDP RFS set up Financial Service Centers (FSCs) composed of savings and loans groups (SLGs) - both informal associations of upland dwellers. Likewise, the project was able to establish links with banks and cooperatives that served as Partner Financial Institutions (PFIs). The PFIs served two purposes: assisting/training the FSCs in basic savings and loans practices including credit evaluation and record keeping; and extension of credits to the FSCs from the Upland Development Loan Funds (UDLF) invested in the PFIs by the UDP. The dramatic shift in government’s policy with the passage of the Agriculture and Fisheries Modernization Act and EO 138 necessitated the shift in the RFS implementation strategy. By 2004, the FSCs were functioning at low levels of efficiency. The Pre-Completion Review Mission reported that of the total 98 FSCs, 85% to 90% are not generating income and therefore have very doubtful sustainability in the future. To comply with the new government policy and at the same time address the still enormous task of strengthening the FSCs, the Upland Development Trust Fund

Executive Summary: UDTF IBProgram Evaluation

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(UDTF) was established in 2004. It has two interrelated components: Credit delivery and institution building. The UDTF IB support program is a serious attempt to sustain the inroads and gains achieved so far of the RFS component towards the fulfillment of its goal of establishing and developing village-based financial intermediaries. At the PFI level, the UDTF seeks to enhance the productivity and efficiency of PFIs to service the needs of upland communities, improve the PFI’s financial management systems as well as ensure the financial sustainability of their operation in the uplands. At the FSC level, the UDTF aims to develop and transform these informal groups into duly registered and viable cooperatives to serve as financial retailers in the uplands. Two approaches are being implemented. Model 1 entails the absorption of FSC members with identified existing cooperatives, preferably strong ones. Model 2 involves either (a) the transformation of one or more FSCs or (b) assisting an existing cooperative formed by an FSC or group of FSCs prior to UDTF, develop into a full-fledged and financially viable cooperative. The UDTF is managed by the LandBank. Eligible projects, credit terms and conditions, and the IB program implementation are all based on established LandBank policies, standards and procedures. The UDTF IB Program Progress Evaluation from Inception to January 2006 was conducted as part of the UDP’s regular external assessment of the UDTF IB program. The UDP RFS Consultant was engaged to undertake the appraisal and to make recommendations for modification/s and change as necessary. Focus was given on the assessment of potential business activities open to the Model 2 cooperatives and recommend the priority business they should concentrate on during 2006 and 2007. A total of 26 cooperatives (9 Model 1 and 17 Model 2) located in all 6 provinces covered by UDP were visited from February 7 to 28. In addition to the Models 1 and 2 cooperatives included in the official list of UDTF-assisted cooperatives, CAMTRIMCO and DTFMPC were likewise visited and evaluated as special cases in accordance with the request from UDP. The Consultant reviewed the structure, operation and accomplishments of the Central Cordillera Institution Building Trust Fund (CCIBPTF) and compared them with the UDTF. The former is the first trust fund established for the purpose of ensuring the viability and sustainability of rural based organizations established by an EC-funded project. The whole CCIBPTF is devoted to IB. No credit fund was put up in


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view of the apparent availability of credit for strong and financially viable/strong cooperatives with feasible project proposals. CCIBPTF is managed by the ACPC which serves as an oversight agency looking over the performance of the IB program implementers contracted: LandBank for cooperatives and PCFC for SLGs. ASSESSMENT AND FINDINGS The Consultant’s assessment and findings are grouped into general and cooperative-specific. The salient general findings are presented below while the latter are detailed in the full report. Overall Progress Overall, the IB program implemented had progressed very slowly towards the ultimate goals of developing the FSCs into viable and sustainable organizations under Model 1 and Model 2 approaches. Non-Closure of FSC-Related Issues The non-resolution and closure of FSC-related issues constrain the progress of the cooperative building and strengthening efforts under the UDTF. The reconstruction and/or independent audits of FSCs’ and PFIs’ UDLF financial records and the reconciliation of these financial records to establish accountabilities and remaining assets balances under the RFS, had fallen more than 6 months behind target completion date. Slow Integration of FSC Members Into Model 1 Cooperatives Model 1 resulted to a very slow integration or absorption of FSC members into existing strong cooperatives. The former have difficulties meeting the CBU and savings requirements of the latter which are generally beyond their financial capabilities. In addition, the strong cooperatives maintain their prerogative to screen and choose the members they will accept. 2006 IB Program Priorities vs. Observed Needs The 2006 IB program priorities did not jibe well with the expressed and observed training needs, particularly of the Model 2 cooperatives. For example micro finance trainings, trainings on CBU, SM and ME and credit operation and management were highlighted by those interviewed but are not near among the priorities. As a matter of fact, the first two have negligible (1.02%) and no budget at all, respectively.


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Viability and Future Sustainability of Cooperatives The Consultant’s evaluation of the cooperatives using LandBank’s 7 pillars of cooperativism showed that only 2 cooperatives, i.e., BUCO and MAINFARM seemed to meet the minimum requirements in terms of number of members, CBU, savings, profitability and other aspects. KALIAC and SACAPDA almost passed the minimum requirements. CAMUPCO, LUMAD, CUFAMCO, SKSMPC, SIDOUCCO, MADOUCO and NAGMABAUL are found to have the potential of passing the accreditation requirements within 2006 based on the members’ commitments and potential business operations observed by the Consultant. Constraints Posed by Model 2 Cooperatives’ Locations The locations of the cooperatives present tremendous operational problems. Most of them were remote with very poor roads. TFCC, MAFADEMCO and MALAUMON have the worst roads that are not passable when it rains. TFCC and DEMOLOC are reportedly infested by unfriendly forces which may present danger to the life of the IBS and service providers. As a consequence of the above, the number of IBSs’ visit to the cooperatives, particularly those in the far flung and remote barangays, averages only once a month. They effectively spend a maximum of approximately 2 days with the cooperatives while spending one to two days traveling to and from the areas. In addition, the “tedious”/extensive reporting and administrative paperwork required of the IBSs to accomplish every month take away a good number of hours that could have spent with the target beneficiaries. Logistical and Other Support to Enhance IBS’ Performance The UDTF does not provide the IBSs with health and accident insurance coverage despite the recognized risks attendant to the job. Likewise, the request for raincoats and rubber/plastic boots as standard protective gears during rainy season was denied. The traveling allowance of PhP3,000 per month inclusive of expenses for gasoline and board and lodging needs to be reviewed against the desired level of performance / frequency of visits to clients. Resource Limitations In the Uplands The upland location of Model 2 cooperatives had put almost all of them in disadvantaged position particularly in terms of natural resources limitation. Upland farmers have access to limited land area with limited potential for crop production. The situation is aggravated by the farmers’ insufficient knowledge of and lack of


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access to new production technology and lack of market exposure and information as well as limited if not totally absent support services from the government. The UDP-developed Diversified Farming System (DFS) model show great potential in uplifting the income base of the target groups. CCIBTF Model Appears Better for UDP The CCIBTF model appears to be better for achieving the viability and sustainability of the UDP RFS goal for the following reasons: Concentration of resources to IB activities may be the more logical track to follow as strong, financially viable and empowered cooperatives can already and at times, easily fend for themselves. There is no question as to the availability of credit funds in the market to finance feasible projects. At present, while only the Model 1 cooperatives are availing of the UDTF credit facilities, they seem to do so grudgingly not only because of the lengthy and perceived tedious UDTF processes involved but more so because of the higher interest rate charged vis-à-vis LandBank’s regular credit line. A class A or B cooperative may be given the option by LandBank to waive the 2% management fee added on to the interest rate of regular loans. The UDTF focus on funding plantation type agriculture seemed to counter the promotion of the UDP developed DFS model that is attuned to the needs of the upland beneficiaries and consequently, the activities of SAD, MED and RM components. On the other hand, the ACPC has more flexibility to package and implement innovative financing schemes since this is part of its regular agency activity and advocacy. The presence of an oversight function in the CCIBPTF model is another important consideration. The ACPC monitors and evaluates the conduct and effectiveness of the IB activities by PCFC, LandBank and other IB service providers to ensure that the desired targets are met and that activities are done according to the approved work plan. It has the option to suspend fund releases if the performances are deemed not satisfactory. In addition, in line with its monitoring and oversight functions, ACPC may conduct operational and financial audit of the project as it deems necessary. This kind of oversight function is not built-in in the UDTF model. Individual vs. institutional responsibility for results is another difference between the two models. UDTF has the IBSs individually responsible for delivering the intended results of the IB program. In contrast, the CCIBPTF has institutions like the PCFC


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and the LandBank contracted to deliver the desired outputs. Although the latter may cost more, the benefits of having the backing of one whole organization to provide added value to the intended work may likewise be worth it. RECOMMENDATIONS The evaluation conducted resulted to the following major recommendations. UDP to Adopt the CCIBPTF Model The adoption of the CCIBPTF model with only one trust fund for institution building is strongly recommended and as such the eventual shift or transfer of the existing UDTF credit funds to the IB program component. There are two compelling reasons for this. First, IB support delivery to the uplands requires considerable resources. Second, LandBank, PCFC and other financial institutions have available credit funds for lending to accredited financially viable cooperatives. As such, it follows that first and foremost, project “investment” should go to achieving the objective of strengthening and transforming the organizations into good bank credit risks. Adoption of the CCIBTF Implementation Structure Corollarily, the adoption of the CCIBTF implementation structure is recommended. The presence of an oversight body to monitor and ensure that progress of IB activities are delivered in accordance with schedule and quality of services required is a major consideration. ACPC has the experience, knowledge base and existing organization to support this function aside from its willingness to take on the challenge. Unified EC Approach to Sustainability The adoption of the CIBPTF model would result in the implementation of a unified EC approach to sustainability of RFS interventions common among EC-funded programmes. In addition, the transfer of fund management to ACPC will mean for the EC implementing a uniform set of policies for all its projects and dealing directly with only one organization. This will translate to operational and financial efficiencies for both the GoP and EC in the long run. Potential Coop Businesses Concentration on the financial services intermediation business, i.e. savings deposit taking and lending operations is recommended for Model 2 cooperatives. It is still premature to even encourage them to venture into other and/or bigger businesses


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when they still do not have the requisite resources and maturity level for these. Refresher courses on MF operations and additional IB support involving immersion, hand holding or on-the job trainings on financial services operations with particular focus on savings mobilization, loan product packaging, credit evaluation and operation of a check and balance system are suggested.

Promotion of UDP DFS Agricultural Production The UDP DFS model should aggressively be promoted in the Model 2 areas particularly where plantation type production will be very difficult or not feasible. The Marketing Efficiency Study on Key Commodities in Southern Mindanao report of 2001 contains a wealth of information that should prove useful in the choice of crops. Other Recommendations These include the following:

• Completion of the FSCs and UDP PFI audits and account reconciliations and accordingly, the resolution of related issues

• Written policies and procedures fro restructuring UDLF loans • Provision of technical and marketing support to production for improved

income generation opportunities

• Rationalization of each IBS’ work assignments, streamlining of the reporting and monitoring system and provision of additional support or incentives in the form of life and accident insurance coverage, program-issued raincoats and rubber boots, and review/adjustment of traveling expense allowances

• Provision (through grant or loan) by the IB program of motorcycles to improve the mobility and operational efficiency of Model 2 cooperatives in particular

Cooperative-Specific Recommendations CAMTRIMCO. The bail-out plan for the cooperative should be deferred until after the election of the new Board of Directors (BOD). This is to ensure that UDP/UDTF will be dealing with officers who have the fresh mandate and support of the cooperative’s general membership. The BOD should be made responsible for decisions on the streamlining and the consequent lay offs of personnel. The UDP-contracted manager should be insulated from this unpalatable job of firing people. KALIAC. Corrective measures to prevent further deterioration of the cooperative’s financial position should be implemented immediately. These include the installation


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or election of a legitimate BOD reflective of the members’ will; the transfer of KALIAC office to its former place in Barangay Linan; and, the establishment of a branch in Acmonan. DTFMPC. The formation of a new and legitimate cooperative out of the merger of the 3 FSCs initially made to join the DTFMPC is recommended. This new cooperative will fall under the Model 2 category. The resolve of the members and the presence of business opportunities in the area, e.g. coffee production for Nestle will contribute to the success of the undertaking. JASLUMPC. The cooperative, with the assistance of the IBS should engage the

services of a new manager and reconstitute the COMAT. It may be given more lead time (to be recommended by the IBS) to accomplish the milestones in the work program drawn out with the IBS in February. Thereafter, decision on its continuation in or dropping from the IB program should be made. KILAMPCO is recommended to be dropped from the IB program coverage. FSC members absorbed in this Model 1 cooperative should be encouraged to join MAMPCO just like what the other Kilagding FSC members had done already. Inaccessible Model 2 Cooperatives. It is recommended that IBS first concentrate on delivery of services to Model 2 cooperatives with greater chances of success as shown by the progress made over the last 12 months using the UDTF rating criteria. IB support to FSC members under the Model 1 category should be intensified as well to enable individual UDP clients lifted to the level of the more progressive cooperative members. Inaccessible Model 2 cooperatives have shown very little progress to date and as such should be considered for dropping from the program.

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UDTF INSTITUTION BUILDING PROGRAM EVALUATION:

FROM INCEPTION TO JANUARY 2006

1. INTRODUCTION Institution building (IB) for rural financial system development encompasses all of the activities involved in creating, modifying and supporting institutions to develop their capacities to: (a) provide financial services to the target group on a long-term basis; and (b) be motivated to do so. The strategy of using IB for rural financial system development is anchored on the following basic assumptions. First, that availability of more and better financial services to a target group can improve the economic and social situation of these people. Second, there is a need not only to develop but also to motivate institutions to supply the required financial services to the target group on a continuing basis. And lastly, an institution can provide adequate financial services to the poor only if: (a) it is financially viable, or can at least become financially viable over the medium term; and, (b) if the kinds of services it provides contribute to its financial viability. The Upland Development Trust Fund (UDTF) IB support program aims to improve the financial system servicing the upland communities, particularly those in the UDP-covered areas of Southern Mindanao, in such a way that there will be more and better qualified institutions to provide more and better financial services on a continuing basis to upland farmers and dwellers. The IB program is a serious attempt to sustain the inroads and gains achieved so far by the Upland Development Programme (UDP) Rural Financial Services (RFS) component towards the fulfillment of its goal of establishing and developing village-based financial intermediaries. The IB program progress evaluation from inception to January 2006 was conducted as part of the UDP’s regular external assessment of the UDTF IB program.


EETan, April 2006 Page 2 of 72

2. BACKGROUND 2.1. The UDP The UDP is a seven-year partnership project (1999 – 2006) between the European Commission (EC) and the Government of the Philippines (GoP). Its aim was to develop a replicable model for sustaining the upland resource base and improving the living standards and prosperity of communities who derive most of their income from upland farming. Its primary beneficiaries are the upland communities in the different municipalities covered. They include subsistence farmers, indigenous peoples, women’s groups, youth and cooperatives/peoples' organizations. The project executing agency is the Department of Agriculture (DA). The DA works with the both the local government units (LGUs), non-government organizations (NGOs), people’s organizations and private institutions in the implementation of the project in UDP covered areas in Southern Mindanao. The six provinces receiving development UDP interventions are: Compostela Valley, Davao Oriental, Davao del Norte, Davao del Sur, Sarangani and South Cotabato. (Figure 1) UDP works with the LGUs within the context of the Local Government Code which mandates the active roles of the LGUs in the delivery of basic services to the people with. the barangays and municipalities as the fronliners. The provinces support, manage and oversee the implementation of programs and projects in the lower level LGUs within their territorial jurisdiction. The UDP operates directly at the barangay and municipal levels and coordinates its project activities with the provincial governments. This implementation strategy is reflected in the UDP organizational structure. As shown in Figure 2, Municipal and Provincial Consultative Committees were created to ensure that project interventions are along the lines of the different levels of LGU’s overall plans but also to facilitate project activities at the ground level. The strong commitment and policy/political support of the LGU officials – barangay chairmen, mayors and governors were no doubt extended to the project. However, the realities of working with the poorest income classes of municipalities (4th to 6th) as partners with limited financial and manpower resources and technical capacity had their toll on the implementation of project interventions. Oftentimes, the inabilities of partner LGUs to put up the promised counterpart funds hindered project activities. Due to lengthy delays in implementation and considerable budget underspending, the project was granted 18 months extension from January 2006.



Figure 1. UDP Covered Areas

Compostela Valley

1. Laak

2. Mabini

3. Maco

4. Maragusan

5. New Bataan

6. Pantukan

7. Nabunturan*

Davao Oriental

1. Baganga

2. Banaybanay

3. Caraga

4. Cateel

5. Lupon

6. Manay

7. Mati

8. San Isidro

9. Tarragona

Davao del Norte*

1. Asuncion

2. Carmen

3. Kapalong

Davao del Sur

1. Don Marcelino

2. Jose Abad Santos

3. Magsaysay

4. Malalag

5. Malita

6. Santa Cruz

Sarangani

1. Glan

2. Kiamba

3. Maasim

4. Maitum

5. Malapatan

6. Malungon

7. Alabel*

South Cotabato

1. Tampakan

2. Tantangan

3. Tupi

4. Lake Sebu*

* Replication area

Source: UDP



Figure 2. UDP Organizational Structure

GOVT. OF THE

EUROPEAN PHILIPPINES COMMITTEES

COMMISSION

Dept. of

Agriculture

(EC) (DA)

Programme EXECUTIVE

Management STEERING

Office COMMITTEE

(PMO)

Provincial PROVINCIAL

Project CONSULTATIVE

Office COMMITTEE

(PPO)

Municipal MUNICIPAL

Project CONSULTATIVE

Office COMMITTEE



2.1.1. Project Cost Total project cost over the seven year period is about PhP1.946 Billion. Funding contributions come from the EC and the GoP. Partner Financial Institutions (PFIs), Local Government Units (LGUs) and the communities are partners in the actual implementation of activities and as such, they are considered beneficiaries as much as partners. The EC provided a grant of PhP732 Million (18.3 Million Euros) while the GoP committed counterpart funds amounting to PhP307.2 Million. Other contributions come from: LGUs, PhP384 Million; PFIs, PhP22 Million; and, equity contribution from the Farmer Beneficiaries, PhP500.8 Million.

2.1.2. Project Components The UDP has six (6) components: (a) Community and Institutional Development and Extension (CIDE); (b) Sustainable Agriculture Development (SAD); (c) Resource Management (RM); (d) Marketing and Enterprise Development (MED); (e) Agricultural Infrastructure Support (AIS); and, (f) Rural Financial Services (RFS).

2.1.3. Pre-Completion Review Mission (PCR) Findings1 The relevant findings of the recently concluded PCR are as follows:

2.1.3.1. Insufficient Integration Among UDP Components There is insufficient integration among the UDP components. The most serious and concrete cases were: (a) AIS and MED are not harmonized with RFS; and, lack of complementarities between RM and SAD.

2.1.3.2. UDP/UDTF Funds Still Outside the Reach of UDP Beneficiaries The RFS component had initial successes but lost most of the gains achieved due to a fundamental change in GoP credit policy. Making credit funds available to the UDP covered areas long after the project has ended is considered RFS’ main achievement. This was done through the establishment of the UDTF in Land Bank of the Philippines (LandBank) in March 2004 and the forging of a similar arrangement with the People’s Credit and Finance Corporation (PCFC). However, the funds lodged in the LandBank and PCFC are at present still outside the reach of the target farm households.

2.1.3.3. Reduction of Transport and Hauling Costs Not Achieved

1 EC, UDP Pre-Completion Review Mission Report



MED to date has been able to set up only 22 enterprises, most of them at barangay level with nearly all of them facing an uncertain future. The hoped for reduction of the marketing chain and better prices for the farmers is still out of reach for the majority of the farmers. The production increases attributable to the project so far are of a modest scale and have not led to sufficiently large marketable surpluses. The main potential improvement for the farmers - reduction of transport and hauling costs, was not achieved for lack of corresponding infrastructure investments.

2.1.3.4. Infrastructure Support Component Performed Poorly The AIS component performed poorly in quantitative and qualitative terms. The large allocation for road and trail improvement was only spent on spot improvements with insufficient money to bring the roads up to maintainable levels.

2.1.3.5. Income Potential in UDP Areas Modestly Achieved It is unlikely that the 60% higher incomes in UDP areas than in non-covered areas have been achieved already. The potential is undoubtedly there, but so far the effects have been modest. The project distributed half of the planned number of fruit trees, and none of them have as yet reached maturity.

2.1.3.6. Diversified Farming Systems (DFS) Model Promising The key Agriculture component on the whole performed well and has now achieved a well defined and promising model. The Diversified Farming Systems (DFS) and associated extension approach is critical for attaining both of the central objectives of the project. But at field level much remains to be done, in terms of expansion to many more learning sites and especially in terms of quality control.

2.1.3.7. Need For More Technical Support for Community Organizing Most LGUs in UDP-covered areas still need more technical support for the RM and community organizing aspects. The UDP-organized sitio and barangay level organizations have unclear status to date. In January 2005 CIDE component has no longer any staff and its tasks have been integrated in the other components.

2.1.4. PCR Recommendations2 The PCR made recommendations for UDP to focus on during the extension period. The most salient of these are:

2 Ibid.



• Continue with the project’s attempts to get a national upland policy adopted; • Further strengthening and replication of the following UDP-developed and

established model elements to upland development: good relations with the barangay and municipal LGUs; BDP; agricultural model and extension system; and a promising forestland co-management system;

• On the lack of integration of components, the PCR believes that it will take a big effort to make all the necessary changes to incorporate the concept on paper and it is not convinced that such an effort would be worthwhile. Staff time can be used far more efficiently on more urgent tasks. Integration of activities should be achieved at field level.

2.2. The RFS 2.2.1. Objective The 1999 logframe defined the objective of the RFS as “a savings-based credit delivery system established providing production and providential loans and savings services on reasonable terms to upland farmers, enterprises and communities through the establishment of provincial-level and community-level revolving loan funds”. The ultimate goal was to establish and develop village-based financial intermediaries. RFS implementation was based on the assumption that the introduction of new crops and enterprises together with the other project interventions would lead to a considerable demand for credit and other financial services.

2.2.2. Implementation Scheme The RFS scheme implemented in 2002 to 2004 was a Grameen-hybrid type with savings and loans groups linked to Financial Service Centers (FSCs) established by the 12 Partner Financial Institutions (PFIs), local cooperatives and rural banks, under contract with UDP. The FSCs are unregistered organizations that served as the links of the PFIs in the upland areas. The UDP provided subsidies in the form of co-sharing with the PFIs’ service costs related to their upland financial operations, credit as investment funds channeled to FSCs as seed capital funds and the municipality-based Upland Development Loan Funds (UDLFs) managed by the PFIs. Implementation of the RFS component was done against the following backdrop: very limited access of upland communities to financial institutions whether banks or cooperatives, with banks and other informal savings and credit associations rarely found in upland areas, particularly in tribal communities; savings do not often occur in the upland



areas with almost nobody having money to deal with emergency cases; most upland dwellers depend on ‘cash advances’ for both their production and subsistence needs until the next harvest time; and, financial institutions are very hesitant to expand their services in the upland because of high overhead cost and limited business opportunities.

2.2.3. Achievements and Problems The RFS has achieved the following inroads: (a) established links with the PFIs; set up the UDLF; and, extended loans to FSCs. Despite these however, “the real work of establishing an RFS system for the uplands had barely begun” with the FSCs functioning at low levels of efficiency.3 The RFS implementation was beleaguered by the following FSC-related problems:

• Lack of thorough understanding of Microfinance among members • Poor business/development financing concepts (dole-out mentality) • Inadequate, if not completely lack of experience on savings and/or credit

operations

• Minimal financial resources and capital • Limited market for growth • Board of Directors (BOD) incompetent/with limited training and education • Lack of full-time Core Management Team (COMAT) • Poorly trained and unqualified COMAT to manage and operate FSCs • Lack of management information system • Lack of accounting and internal control systems

Of the total 98 UDP FSCs, 85% to 90% are not generating income and therefore have very doubtful sustainability in the future. On the other hand, evaluation of 75 FSCs undertaken by the LandBank in terms of financial performance, measured against a standard number of points of 30 per FSC, showed: the average number of points per FSC was only 12 or only 40% of the standard; 16 or 21% of FSCs completely failed with 0 point; and only 18 or 24% of FSCs obtained 20 and above points. Other external and internal assessments done on the FSCs concluded that the FSCs are not in fact viable instruments for credit and savings delivery for the inhabitants of the uplands.4

2.2.4. GoP Credit Policy Shifted RFS Design After initial successes, albeit limited, the RFS component lost most of the gains achieved due to a fundamental change in GoP’s credit policy. The passage of Agriculture and 3 Ibid. 4 Ibid.



Fisheries Modernization Act (RA 3845) and the issuance of EO 138 ordered the termination of all government directed credit programs and abolishing all subsidies. Profitability and sustainability should now characterize savings and loan activities at all stages. Compliance with the laws and new government policy meant essentially altering the RFS design and reorienting all related activities. As a result, the Delegation of the European Commission to the Philippines (EC) and the Department of Agriculture (DA) agreed in early 2003 to establish the Upland Development Trust Fund (UDTF) in line with the UDP RFS concept. Responding to the new legal directives and redesigning the RFS scheme preoccupied the UDP RFS staff for the last two years. During this time almost all savings and loans activities of the FSCs have come to a standstill while the relationship of UDP and FSCs with the PFIs dramatically deteriorated. On the other hand, the build up of relations with the GFIs has been slow. Out of the original 13,695 FSC members only 1,540 or 11% have joined accredited cooperatives under the new UDTF scheme. Reasons are varied but the most common is the lack of the individual’s capacity and capability to meet the required CBU and savings.

2.2.5. Credit Shifted from DFS to Mono Crop Plantation Additional concerns surfaced in the shift to the LandBank-managed UDTF. Firstly, despite the LandBank being into agricultural lending, it favors more the financing of mono crop plantation agriculture using cooperatives as bulk loan conduits. In contrast, the DFS model that UDP promotes has shown great potential in developing the Southern Mindanao uplands which are generally not suited for plantation agriculture. Therefore, the potential demand in the uplands is more for micro credit to meet the needs of DFS production, agri-products processing, other non-traditional income generating activities and other household needs and not much for mono crop credit.



3. UDTF IB PROGRAM EVALUATION: TERMS OF REFERENCE The UDP Rural Financial Services Consultant was engaged to undertake the evaluation of the progress of the UDTF IB program from inception to January, 2006 and to make recommendations for modification/s and change as necessary. With particular focus on Model 2 Cooperatives, the Consultant will assess potential business activities open to the cooperatives and recommend the priority business they should concentrate on during 2006 and 2007.

3.1. Main Tasks The Consultant’s main tasks included the following activities:

• Review and analysis of documents and data provided by LandBank/UDTF and UDP on the RFSS and UDTF programs;

• Together with the UDTF IB Secretariat and UDP, schedule a program of field visits to cooperatives and PFIs to assess the IB program, its effect, impact so far and its future directions;

• Assess the viability and future sustainability of Model 2 cooperatives, in particular;

• Recommend the priority type of business Model 2 cooperatives should concentrate on in 2006 and 2007 and the corresponding IB focus;

• Discussion of field visits findings and recommendations with concerned UDP, UDTF and LandBank officials for validation and feedback;

• Preparation and presentation of draft report; and • Preparation and submission of final report.

3.2. Expected Outputs The Consultant is expected to deliver a summary paper for the Steering Committee review containing information on the actual achievements of the IB program to date and recommendations on the following, among others: the viability of the cooperatives, Model 2 in particular; the priority business/s cooperatives should concentrate on; IB priority requirements; and, budget for the remainder of 2006 in line with the priorities set. Tables, graphs, figures and annexes will be included in the report to provide further elucidations. Annex A shows the Terms of Reference for the Evaluation of the UDTF Institution Building Program from Inception to January 2006.



4. COVERAGE AND EVALUATION METHODOLOGY

4.1. Coverage

4.1.1. 26 Cooperatives in 6 Provinces A total of 26 cooperatives located in all 6 provinces covered by UDP were visited from February 7 to 28. In addition to the Models 1 and 2 cooperatives included in the official list of UDTF-assisted cooperatives, the Cateel Mandaya Tribal Multi-Purpose Cooperative (CAMTRIMCO) and the Demoloc Tagacaolo Farmers Multi-Purpose Cooperative (DTFMPC) were likewise visited and evaluated as special cases in accordance with the request from UDP: All in all, 9 Model 1 and 17 Model 2 cooperatives were visited in the course of the review. Tables 1 and 2 show the list of cooperatives visited and the consultant’s schedule of field work, respectively.

4.1.2. Areas of Focus The following were looked into in the course of the IB program evaluation: mode of delivery (service providers and IBS), substantive content of interventions, adequacy and frequency of service/s delivery, achievements, effectiveness and impact on the cooperatives’ viability and future sustainability. Assessment included potential business/s each cooperative (particularly Model 2) may engage in. All in all, focus was given on the program’s overall effect/impact on the maturity level (ML) of each cooperative to date keeping in mind the goal of having the coop fully accredited with the LandBank at the shortest possible time.

4.2. Methodology 4.2.1. Review of Literatures The Consultant reviewed relevant documents, statistics and other data from the UDP, UDTF Secretariat, IBSs and DA/ACPC. These included the following: UDP in-house regular monitoring/performance and program reports with particular focus on the RFS component; UDP Mid-Term and Pre-Completion Review Mission Reports; reports of international and local UDP RFS Consultants; Memorandum of Agreement for the establishment of the UDTF; UDTF Operating Guidelines and Procedures; minutes of meetings of UDTF Steering Committee (SC); UDTF Secretariat monthly monitoring reports; available records and financial reports/statements of cooperatives visited; AFMA and EO138; Memoranda of Agreement, Trust Fund Agreement and related documents for



Table 1. List of Cooperatives Visited/Reviewed

Province / IB Specialist / Name of Cooperative

Model Maturity Level

Compostela Valley: Danielo Munda

1. 2.

3. 4. 5. 6. 7.

8.

Mangloy Multi-Purpose Cooperative (MAMPCO) (a) Maragusan Valley Development Cooperative (MAVADECO) Maco Development Cooperative (MADECO) Kilagding Multi-Purpose Cooperative (KILAMPCO) Mabini Bagong Silang Cooperative (MBSC) (b)

Cabinuangan Multi-Purpose Cooperative (CAMUPCO) Cabuyoan Upland Farmers Multi-Purpose Cooperative (CUFAMCO) Manasa Farmers Development Multi-Purpose Cooperative (MAFADEMCO) (c)

1 1

1 1 1 2 2

2

B C

C D D D D

D

Davao Oriental: Jaimes Rosal

1. 2.

3. 4. 5.

Banaybanay Upland Cooperative (BUCO) San Isidro Davao Oriental Upland Credit Cooperative (SIDOUCCO) Lupon Davao Oriental Upland Cooperative (LUDOUCO) Mati Davao Oriental Upland Cooperative (MADOUCO) Tubaon Farmers Credit Cooperative (TFCC) (d)

2 2

2 2 2

C D

F D F

Davao Del Sur: Janeto Tansiongco

1.

2.

3.

4.

5.

Magsaysay Farmers Multi-Purpose Cooperative (MFMC) Sinabadan Ka Sta. Cruz Multi-Purpose Cooperative (SKSMPC) Malalag Integrated Farmers Multi-Purpose Cooperative (MAINFARM) Lumad Don Marcelino Multi-Purpose Cooperative (LUMAD) Jose Abad Santos Lowland and Upland Multi-Purpose Cooperative (JASLUMPC)

1

2

2

2

2

A

D

D

D

D



Table 1. List of Cooperatives Visited/Reviewed, cont’d.

SoCSKSarGen: Ernesto Bacongco 1.

2.

3. 4.

5.

6.

Polo Samahang Nayon Multi-Purpose Cooperative (POLO) Kablon Linan Acmonan Multi-Purpose Cooperative (KALIAC) Landan People’s Multi-Purpose Cooperative (LPMPC) Sangcayao, Abgangbatu, Campao, Patban, Datalbulol FSC Upland Farmers Cooperative (SACAPDA) Nagkahiusang Mag-uuma sa Barangay Upper Lumabat Multi-Purpose Cooperative (NAGMABAUL) Malaumon Multi-Purpose Cooperative (MALAUMON)

1

2

1 2

2

2

B

C

A C

F

F

Other Cooperatives / Province

1. Cateel Mandaya Tribal Multi-Purpose Cooperative (CAMTRIMCO) / Compostela Valley

1

2. Demoloc Tagacaolo Farmers Multi-Purpose Cooperative (DTFMPC) / Davao del Sur

1

(a) The first attempt to visit the main office of MAMPCO was not successful because the road was blocked by a

stalled logging truck. A successful visit was made on another day to a MAMPCO’s branch instead. (b) Attempt to visit the cooperative was not successful due to very bad roads made impassable by heavy rains.

The 4-wheel drive vehicle got stuck in deep mud for almost an hour until help arrived. (c) Bad and impassable roads prevented the Consultant from reaching the area. (d) The Consultant was advised not to proceed to the area because the roads were not passable by all types of

vehicle.



Table 2. Consultant’s Itinerary of Travel

DATE DAY DESTINATION OFFICE / PF I / COOP

Feb. 7 Tues PMO - Compostela Valley UDP PPO 1

PMO - LBP Tagum LBP Tagum Branch

Tagum - Laak MAMPCO

Laak - Kilagding KILAMPCO

Sleep in Compostela Valley

Feb. 8 Wed Nabunturan - New Bataan CAMUPCO

New Bataan - Maragusan MAVADECO

Sleep in Tagum City

Feb. 9 Thurs Tagum City - Maco MADECO

Maco - Mabini MBSC

Sleep in Tagum City

Feb. 10 Fri Tagum - Mabini Money Mall RB

Mabini - Cabuyo-an CUFAMCO

Mabini - Tagum LBP Tagum Branch (Mtg

with LBP DAS & AO)

Feb. 11 & 12 Sat. & Sun Tagum City

Feb. 13 Mon Davao City - Banaybanay BUCO

Banaybanay - San Isidro SIDOUCCO

San Isidro - Mati

Sleep in Mati

Feb. 14 Tues Mati - Lupon LUDOUCO

Lupon - Mati MADOUCO

Mati - LBP Branch

Sleep in Mati

Feb. 15 Wed Mati - Cateel CAMTRIMCO

Sleep in Cateel

Feb. 16 Thurs Cateel - Davao City

Sleep in Davao City

Feb. 17 Friday Davao City - Sta.Cruz SKSMPC

Sta. Cruz - Digos

Digos - Malalag MIFMPC



Feb. 18 & 19 Sat. & Sun Sleep in Digos

Feb. 20 Mon Digos - Malita

Malita - Don Marcelino LUMAD

Don Marcelino - Jose Abad Santos (JAS)

Sleep in JAS

Feb. 21 Tues Meeting in JASLUMPC JASLUMPC

JAS - Malita

Sleep in Malita

Feb. 22 Wed Malita - Demoloc DTFMPC

Demoloc - Malita

Malita - Digos

Sleep in Digos

Feb. 23 Thurs Digos - Magsaysay MFMC

Magsaysay - LBP Digos Branch

Digos - General Santos (GenSan)

Sleep in GenSan

Feb. 24 Fri GenSan - Polomolok LPMPC

Still in Polomolok POLO

Polomolok - LBP Polomolok Branch

LBP Polomolok - Tupi KALIAC

Tupi - GenSan

Feb. 25 & 26 Sat. & Sun Sleep in GenSan

Feb. 27 Mon GenSan - Rio del Pilar, Glan MALAUMON

Rio del Pilar - Sufatubo, Glan SACAPDA

Glan - GenSan

Sleep in GenSan

Feb. 28 Tues GenSan - Malungon NAGMABAUL

Malungon - LBP GenSan Hi-way

LBP GenSan Hi-way - LBP Koronadal

LBP Koronadal - GenSan

Sleep in GenSan



the implementation of the Central Cordillera Institutional Building Program Trust Fund (CCIBP); ACPC CCIBP accomplishment reports; and independent evaluation report on the CCIBP.

4.2.2. Field Visits, Interviews and Questionnaires Primary data were collected through personal interviews, observations and use of questionnaires. Extensive field trips/site visits to Models 1 and 2 cooperatives were conducted for purposes of consultations/interviews with FSC, cooperative officers and members, and LandBank and PFI officials. Likewise interviews/discussions with UDP, UDTF, ACPC and EC officials and staff were held. Interview information was supplemented by personal observations and inspection of the coop/FSC facilities, records and actuations of interviewees. The IB Coordinator and the IBSs assisted in the preparation of the field visits program and were with the Consultant during discussions with cooperative officers and members and other interviewees/resource persons. In addition, the IBSs were requested to accomplish 2 questionnaires to aid in the data gathering. These are shown as Annexes B and C. The UDTF MIS was likewise requested to accomplish the Table on Membership, CBU, Savings and Loan for each cooperative covered.

4.2.3. Evaluation Tools and Criteria 4.2.3.1. 7 Pillars of Cooperativism The LandBank’s Cooperative Accreditation Criteria (CAC) 5 aimed at promoting the growth of quality, world-class cooperatives were used by the Consultant in conducting an independent evaluation of each coop’s viability and future sustainability. This supplemented/validated the reported ratings of the cooperatives as of December 31, 2005 done by the IBSs and approved by the LandBank. The CAC recommended pillars of cooperativism are: membership, capital build-up and savings; leadership and management; business operations, books of accounts and financial statements and affiliations. Cooperatives were rated by the IBSs annually and classified according to maturity levels. They are categorized as A, B, C, D, and F based on an established point system (Table 3). The CAC is aimed at encouraging cooperatives to

5 The implementation of the revised Cooperative Accreditation Criteria was prescribed under LandBank Executive Order No. 008 issued in 1997.



continuously improve their operations so they can graduate to higher levels of accreditation, avail of higher loans and undertake more projects.

Table 3. LandBank’s 7 Pillars of Cooperativism

Points No.

Indicators Maximum Minimum

1. MEMBERSHIP 10 2.50 a. Size

b. Patronage of Business 8 2

2.000.50

2. CAPITAL BUILD-UP & SAVINGS MOBILIZATION 20 5.00 a. Average CBU per member

b. Average Savings per member 10 10

2.502.50

3. LEADERSHIP & MANAGEMENT a. Board of Directors

i. BOD Meetings ii. Patronage of Business

b. Core Management Team c. Coop Policies, Systems & Procedures d. Plans and Programs e. Internal Performance Review

25 8

4 4

3 8 3 3

6.25 2.00

1.00 1.00

0.752.000.750.75

4. BOOKS OF ACCOUNTS 6 1.50 5. BUSINESS OPERATIONS

a. Livelihood / Enterprise b. Providential Services

6 3 3

1.50 0.750.75

6. FINANCIAL PERFORMANCE a. Repayment of LandBank obligations b. Profitability (Return on Equity) c. Debt-Equity Ratio d. Liquidity Ratio

30 12

5 8 5

7.50 3.001.252.001.25

7. AFFILIATION IN FEDERATION / CLUSTER / CHAMBER / ORGANIZATION

3 0.75

TOTAL SCORE 100 25



Based on LandBank’s set of criteria, cooperatives’ Maturity Levels are categorized between Class A to D with A being the highest and D the lowest. F is given to those who will not meet the minimum requirements for accreditation. Class A should have: 500 or more members all of whom are patronizing the coops business/s; average PhP 1,500 CBU per member; average savings per member of PhP 1,500 or more; with full time core management team (COMAT); installed all the required operational policies, standards and procedures (PSPs); with written and continuously refined long-term plan supported by business plans, action plan and annual budget; and with computerized books of accounts, among others. Presently, Class A cooperatives have around PhP 100 million resources. On the other hand, Class D should have at least 100 members 90% of whom patronize the coop business; average CBU of PhP 500 per member; average savings of PhP 500 per member; with complete COMAT; and basic installed PSPs on records-keeping, savings and credit, among others.

4.2.3.2. Basic Good Management and Business Standards The use of basic good management and business standards to evaluate chances of success of an organization were applied. Looked into were the following: basic organizational structure and qualifications of the BOD and COMAT; presence or absence of basic internal control; awareness of markets and the various forces affecting the coop’s product/s and market/s; accounting records and reports and coop officers’ understanding of their content and operational implications; extent of managerial skills available within the coop; understanding and/or acceptance of the coop’s vision and mission; understanding and use of the strategic plans prepared, if any; and understanding and adherence to the coop established policies, systems and procedures (PSPs).

4.3. Limitations and Constraints During the interviews, it was observed that the interviewees relied on their memories in recalling their FSC’s and/or coop’s past activities and performances. The record keeping practices were mostly below par both in terms of completeness, accuracy and timeliness. Inconsistencies were observed within the set of data provided by the IBSs, between the set of data from the IBSs and from the UDTF Secretariat, and between the data from the cooperatives and data provided by the IBSs. The preparation of budget estimates for the IB program for the remainder of 2006 is constrained by first and foremost the Consultant’s recommendation on the shift of the UDP model to that of CECAP’s which has drastic financial implications. Also, the exercise may



not be practical and useful in the light of interrelated recommendations with financial chain reaction effect. Budget estimates will only be as useful as the assumptions backing them up.



5. THE UDTF The UDTF is premised on both the long-term utilization of credit funds in accordance with the laws and the provision of parallel institution building support to participating financial service institutions and the cooperatives formed out of the UDP FSCs. The qualifying recipients of UDTF services include UDP’s existing PFIs and LandBank accredited and potentially new accessing cooperatives (PNAC) operating in the 6 UDP-serviced provinces. The Memorandum of agreement among the, EC, DA, the LandBank and the UDP was signed on March 24, 2004 setting up the UDTF and spelling out the implementation arrangements and guidelines for operating the fund.

5.1. UDTF Objective The UDTF is intended to provide the continuity of credit or flow of financial resources in the upland areas assisted by UDP. The ultimate goal is to improve productivity, income levels and capital base of targeted upland families.

5.1.1. At the PFI level At the PFI level, the UDTF seeks to enhance the productivity and efficiency of PFIs to service the needs of upland communities, improve the PFI’s financial management systems as well as ensure the financial sustainability of their operation in the uplands.

5.1.2. At the FSC level At the FSC level, the UDTF aims to develop and transform these informal groups into duly registered and viable cooperatives to serve as financial retailers in the uplands. As such, UDTF will work on improving selected FSCs’: membership; capital formation and savings mobilization; leadership and management; financial management and controls; and, enterprise development knowledge and skills.

5.2. UDTF Components The UDTF has two interrelated components: Credit delivery and institution building.

5.2.1. Credit Delivery This component will provide loans to qualified PFIs, FSCs and other lending conduits accredited by Land Bank.



Under the UDTF operating guidelines and procedures (OGP), LandBank shall extend credit support to PFIs (cooperatives and rural banks), and other accredited credit conduits (non-traditional under the innovative financing scheme or IFS) operating within the selected UDP areas. The target borrowers or ultimate end-users of UDTF credit fund shall be the households in the upland barangays of the covered municipalities in the six (6) UDP provinces. (Annex D) Eligibility criteria for PFIs and other credit conduits are based on LandBank’s present standards. (Annex E) Eligible projects and credit terms and conditions are all based on LandBank guidelines and procedures. These are shown in Annex F.

5.2.2. Institution/Capacity Building The IB component provides services to build up capacities of PFIs and FSCs based on cooperative models of LandBank well as other village banking prototypes developed by various self-help promoting institutions specifically for remote and at times inaccessible upland areas.6 Two models are being pursued: Mode1 and Model 2.

5.2.2.1. Model 1 and Model 2 Cooperatives Model 1 is an existing viable and strong organization to service or accept the FSC members as regular members. It may be a PFI, an existing Bank Assisted Cooperative (BAC) 7 or BAC is a cooperative with existing loan availments with and receives regular

development a potentially new accessing cooperative (PNAC) 8 . FSCs located within accessible distance are encouraged to join the identified Model 1 cooperatives in the same municipality. On the other hand, there are 2 types of Model 2: Type 1 is a new coop organized by consolidating FSCs within accessible distance from each other and whose area has no existing PFI/coop to join with. Type 2 includes an FSC that has already converted and registered itself with the CDA as a cooperative prior to the UDTF establishment; and, an

6 Ibid. 7 BAC is a cooperative with existing loan availments with and receives regular development

assistance from LandBank. 8 Not receiving loans or being assisted by LandBank yet but has the potential for accreditation.



independent FSC geographically remote or very far from other FSCs or PFIs/cooperatives in a particular municipality and had opted to be converted into a separate cooperative.

5.2.2.2. Employment of IB Specialists in 2004 Five (5) IB Specialists (IBS) were employed in 2004 to coordinate cooperative formation and support service-provider inputs to make sure that these cooperatives get accredited by the LandBank at the earliest possible time. Technical assistance grants are provided to PFIs and other accredited credit conduits to improve their capacity to expand their coverage in the UDP Program areas.

5.2.2.3. IB Grant Priority Given priority for grant financing is IB activities ascertained to contribute major improvements in improving capacities of target institutions prior to UDP closure in 2006. Grants are based on an approved UDP-LandBank IB Program for the year.

5.2.2.4. Types of IB Assistance Funds for IB are divided into two. First is the financial technology and support services (FTSS) funds which are given in the form of trainings, action researches and consultancies. Second is the institutional fund to finance the procurement of software and other assets related to management information system as well as (on exceptional basis) equipments that will enhance productivity and efficiency of PFIs, FSCs and other lending conduits. IB grants include the engagement/hiring of professional cooperative managers paid by the UDTF IB program for assignment to specific FSC/coop during the organizational phase and until the coop has completed its operational systems. UDTF had already tapped and funded the services of roving bookkeepers to guide the FSCs and cooperatives in establishing the required financial documentations for the shift from UDP RFS to UDTF. In addition, UDTF IB may support attendance of PFI/FSC officers and relevant staff to short term management-related courses.

5.2.2.5. General Eligibility Criteria PFIs and other accredited conduits, except non-traditional conduits are eligible to receive grants from UDTF. Grant assistance is limited to all IB-related activities specified in the IB Program.



5.3. Amount of Funds PhP 25 million was provided to fund new UDTF credit lines. An additional PhP 30 million was added in July 2005 in anticipation of increased demand for new credit funds. An initial PhP 5 million was provided from UDP funds to start-up and operate the IB program geared to winding-up all FSCs activities using the UDTF Model 1 and Model 2 approaches. In early 2005, UDP added PhP 6.152 million to the IB funds to take care of demand for support services. Equity participation of FSCs/PFIs is explored and encouraged whenever necessary to defray part of IB activities. The income of IB Trust Account B is used to pay for salaries of the core UDTF Secretariat staff and the locally recruited Technical Assistants and service providers.

5.4. UDTF Organization LandBank was designated as fund administrator and given the full authority to implement the UDTF based on the approved UDTF Operating Guidelines and Procedures to facilitate the continued servicing of PFIs and other accredited credit conduits operating in the UDP-covered municipalities in line with the RFS concept.9 For its part, LandBank “agreed to support the delivery of credit and institution building services in accordance with the existing delivery infrastructure or present field units of LandBank”.10 In addition, it shall implement the approved UDP-LandBank Institution Capacity Building (IB) Program to benefit to PFIs, FSCs and other accredited conduits. The UDTF IB funds shall be provided as grants to beneficiaries. The UDTF Program Management support organizational and functional structure is shown in Figure 3.

5.4.1. UDTF Steering Committee The Steering Committee (SC) was formed to oversee the UDTF implementation. It provides the policy directions in accordance with the AFMA and UDLF implementing guidelines. Its composition is as follows:

9 UDTF Operating Guidelines and Procedures, September 23, 2004 Version 10 Memorandum of Agreement on Upland Development Trust Fund

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Figure 3. UDTF Program Management Organizational Structure

UDTF STEERING COMMITTEE

UDTF Secretariat based in LandBank MBG

LandBank Regional Head DAD LandBank Regional Head

Region XI SocSKSargen Branches AOC LC DAC DAC LC AOC Branches AOs IBSs TAs IBSs TAs AOs

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Agency/ Representative Designation

1. LandBank - Mindanao Group Head Chairperson 2. EC Delegation (representative) Co-Chairperson3. DA – Undersecretary (representative) Co-Chairperson4. UDP National Co-Director Member 5. UDP European Co-Director Member 6. DA – SPCMAD TWG Head Member 7. DA – ACPC Deputy Executive Director Member 9. LandBank – DAD IDD Head Member 10. LandBank - Regional Head, Region 11 Member 11. LandBank - Regional Head, SoCSKSarGen Member 12. UDP Provincial Project Office - (representative) Member 13. Quedan Corporation – President Member

The SC meets on a quarterly basis or as the need arises. Extra-ordinary meetings may be called but will require one week’s notice. The agenda and documents to be approved are distributed at least seven (7) days in advance. A quorum constitutes 50% plus one (1) member. Any agenda decision made in the absence of any of the following principal parties – EC, DA, LandBank, UDP and Quedan Corporation, requires the endorsement of the missing party to complete its ratification. 11 5.4.2. UDTF Secretariat The UDTF Secretariat based in the office of the LandBank Mindanao Branch Group (MBG) in Davao provides backstopping support to the SC. Composed of only two (2) personnel reporting directly to the LandBank MBG Head, the Secretariat is primarily responsible for IB Activities and is financed by the UDTF Capacity Building Fund. It started operations in August 2004.

5.4.2.1. The IB Coordinator is responsible for the following:

• Support to IB Specialists (IBSs) in the provision of IB services; • Coordination/ support to other related activities in DAC Regions XI and

SoCSKSarGen; • Facilitation of the regular program assessment of the Steering Committee;

and • Necessary accounting and administrative support.

5.4.2.2. The MIS Specialist is responsible for: • MIS related to the IB Program, in coordination with the IBSs; and • Generation of various reporting requirements of UDTF, including issues and

concerns, monthly program status report, and minutes of the UDTF Steering Committee meetings.

5.4.3. LandBank DAC and DAD Responsibilities of the LandBank DAC and DAD include the following:

• Selection and hiring of IBSs; • Orientation and skills training of IBS. DAD shall prepare the training design

and DAC shall facilitate the trainings with the assistance of DAD; • Supervision and monitoring of the performance of IBSs; • DAC shall be in-charge of hiring management technical assistance for the

Cooperatives and FSCs;

11 UDTF Operating Guidelines and Procedures, September 23, 2004 Version



• Reporting of implementation issues and concerns to the UDTF Secretariat; • Submission of monthly progress reports to the UDTF Secretariat.

5.4.4. LandBank Lending Centers/Account Officers The Lending Centers/Account Officers are responsible for the implementation of the UDTF Credit Fund based on LandBank/UDTF-approved guidelines and procedures presented in Annexes E and F above. 5.4.5. IBS 5.4.5.1. Duties and Responsibilities Under the direct supervision of the LandBank Regional DAC, the IBS undertakes the following:

• Establishment of baseline data and information on the target FSCs/PFIs/Cooperatives in coordination with the UDTF IB Coordinator and UDTF MIS Specialist.

• Implementation in a cost-efficient manner of the various capability development interventions for FSCs/ PFIs/ Co-ops;

• Reporting of implementation issues and concerns to the DAC; and • Submission of monthly progress reports to the DAC.

5.4.5.2. Qualification Requirements The following are the prescribed qualifications for an IBS:

• Graduate of a course related to cooperatives, community or rural development and/or other courses such as but not limited to Agriculture, Business Administration, Accounting.

• With at least two (2) years experience in any of the following: - Cooperative organizing and development - Cooperative bookkeeping - Financial analysis - Conduct of training - Marketing - Linkaging/networking

• At least 25 years old • Can drive a motorcycle and possesses a driver’s license • Familiar with area and culture of the people and has basic knowledge of the

local dialect The recruitment procedures for UDTF IBS are shown in Annex G.

5.4.5.3. Orientation and Skills Enhancement Training for IBS Prior to fielding, the IBS underwent trainings which included orientation and further skills trainings emphasizing the interventions that will be provided to the target FSCs / PFIs. These are conducted and/or facilitated by LandBank’s DAD and DAC working together. 5.5. IB Process Flow Operation of the UDTF IB program involves the following processes:

• DAD and DAC Heads prepare and submit an Annual Work Plan and Budget to the UDTF Steering Committee, through the UDTF Secretariat.



• UDP advises the LBP-Trust Banking Group to release funds to the Deposit Account for IB Activities maintained in CM Recto Branch in Davao City on a quarterly basis.

• The individual IB training design as endorsed by the beneficiaries is submitted by the IBS through the DAC Head/ Regional Head to the UDTF Secretariat, who will facilitate the release of funds.

• UDTF Secretariat facilitates the release of funds on a per activity basis and, subject to approving and signing authorities as approved by the UDTF-SC, liquidates the same in accordance with Generally Acceptable Accounting Procedures.

• DACs manage the implementation of approved IB activities. • UDTF Secretariat prepares and submits monthly fund and operations status

report to UDP. 5.6. UDTF Monitoring 5.6.1. Monthly monitoring reports These are prepared and submitted by the UDTF Secretariat to UDP within 10 days after the end of each month. The reports are in the prescribed LandBank formats with the addition of a section/information required by the UDP/UDTF-SC. 5.6.2. Regular External Audit Evaluation and auditing of the UDTF program are undertaken as part of the UDP’s regular external audit. 5.6.3. Detailed External Audits of PFIs and Other Conduits These shall be undertaken when requested by the UDTF SC with the cost chargeable against the IB Program. 5.6.4. Inspection of Records and Accounts by EC LandBank shall allow EC/European Court of Auditors or their designated representatives to inspect relevant records of the UDTF Trust Account and all related accounts and records at anytime during office hours at their request.



6. CENTRAL CORDILLERA INSTITUTIONAL BUILDING PROGRAM

TRUST FUND (CCIBPTF)12 The CCIBPTF is the first trust fund established for the purpose of ensuring the viability and sustainability of rural based organizations established by an EC-funded project. As such, a discussion and comparison of its organization, operating guidelines and procedures were presented in this report as they may have a bearing on the succeeding recommendations of the Consultant. 6.1. Purpose and Organization 6.1.1. Grant Funds for IB The CCIBPTF was established through a Memorandum of Agreement (MOA) signed on April 29, 2003 by the DA, EC, Central Cordillera Agricultural Programme (CECAP) and the Agricultural Credit Policy Council (ACPC). Its purpose is to provide grant funds to finance institutional building projects/activities to support and strengthen 31 CECAP formed and/or assisted organizations composed of 22 cooperatives and 9 savings and loans associations (SLAs). Referred to as the Mother MOA, it identified the EC as Trustor, the LandBank as Trustee Bank and the DA and ACPC as beneficiary. It also designated the DA, through ACPC as the fund manager and supervisor of the Central Cordillera Institutional Building Program (CCIBP) after the CECAP closure in July 2003.13 6.1.2. Program Executive Committee (PEC) The PEC was set up to perform the following functions:

• Review of Annual Work Plans and Budget for approval of DA and EC; • Render advisory functions with respect to the management of the CCIBPTF; • Appointment of the members of the Secretariat and supervision of its functions;

and • Approval of the review and of monitoring and management reports prepared by

the Secretariat prior to submission to the respective agency’s managements. The composition of the PEC is as follows:

• ACPC Executive Director – Chairman • CECAP Co-Directors, members (until July 9, 2003 only) • DA Representative, member • EC Representative, member • Head of the Secretariat for the Fund within ACPC, member

6.1.3. CCIBPTF Secretariat A Secretariat within ACPCA was set-up for CCIBPTF. It is composed of ACPC IB Division Staff. It is tasked with the following functions:

• To handle the administrative and secretariat aspects of the PEC meetings, e.g. preparation of discussion materials, minutes, etc.

• Conduct monitoring and review of the IB projects/activities assisted by the Fund; • Prepare monitoring and review reports; • Evaluate IB proposals and conduct validation of proposed projects/activities;

and, • Perform other functions as may be mandated by the PEC.

12 Source: ACPC, CCIBPTF Memoranda of Agreement and other related documents 13 The CCIBPTF was managed by CECAP from April 29 to July 9, 2003.



6.2. CCIBP Implementers The ACPC was tasked to implement the CCIBP to capacitate and transform the identified 31 organizations (beneficiaries) into viable and sustainable entities. The ACPC, on the basis of the Mother MOA14, forged three (3) other agreements to implement the CCIBP. These are: MOA with Peoples’ Credit and Finance Corporation (PCFC), CECAP and DA; MOA with LandBank and CECAP; and Trust Agreement between EC and CECAP, and LandBank. 6.2.1. LandBank for Cooperatives IB 6.2.1.1. Institution Development Project for CECAP Cooperatives (IDPCC) The MOA with LandBank provides for the implementation of the IDPCC. ACPC and LandBank jointly manage the institutional partnership through the Project Coordinating Committee (PCC) and the Project Management Unit (PMU). The PCC was created to serve as the coordinating and monitoring body of the project. It is also tasked to address and find solutions to project operational issues/problems. Lastly, it shall monitor implementation progress and institute courses of action to improve project performance. It is composed of 3 members from the LandBank (1 from DAD and 1 each from the Regional Offices with jurisdiction over the 22 cooperatives); CECAP Co-Directors; and 2 from ACPC with the rank of Director. On the other hand, PMU performs the following functions: supervises the day to day implementation of the project; provides secretariat support to the PCC; engages the services of technical experts/consultants/service providers; initiate the conduct of workshops/conferences to monitor the overall performance of the project; and prepares management reports and maintain the data base for all aspects of the project. The PMU is under the supervision of the DAD of LandBank. 6.2.1.2. Services and Funding IDPCC is designed to upgrade the institutional capacities of 22 CECAP assisted cooperatives to transform these organizations into active and viable change agents in the community providing relevant economic and social services that will lead to increased productivity an income for the end beneficiaries. This involves providing the cooperatives, over a 3 years period, with:

• direct technical and management assistance; • trainings on systems installation, project identification and planning, internal

resource mobilization, fund utilization and management; • internship development; and • credit assistance.

On the first year of the project, CECAP provided PhP1 million to fund the capability building activities for the 22 cooperatives. LandBank committed the amount of PhP458,000 from the LandBank Cooperative Development Funds (LBCDF) as its share in the first year of the project implementation. Likewise, ACPC made available PhP360,000 as its share. Releases of funds are made in accordance with the pre-defined activities and availment procedure agreed upon by the parties. For the second year onwards of project implementation, funds shall be sourced from CCIBPTF and LBCDF based on the approved Work and Financial Plan submitted by LandBank to ACPC and approved by the PEC.

14 The mother MOA of April 29, 2003, which identifies the ACPC as the Fund Manager, forms an integral part of all the other 3 agreements.



6.2.1.3. Key Result Areas At the end of the 3-year period, LandBank should have upgraded the institutional capacity of the 22 cooperatives in the following key result areas:

• Leadership and organizational management; • Business operations and management; and • Financial resources management.

The project indicators were formulated by LandBank based on the benchmark organizational assessment of the cooperatives it undertook within 3 months after the effectivity of the MOA. The targets and indicators including the annual project results and targets need the concurrence/approval of the ACPC. The approved targets and indicators serve as the basis for the annual evaluation of the project performance. 6.2.1.4. Monitoring and Evaluation The ACPC monitors and evaluates the conduct and effectiveness of the IB activities by LandBank to ensure that the desired targets are met and that activities are done according to the approved work plan. ACPC shall conduct an annual evaluation of the IDPCC through an internal performance evaluation team or through a third party. It shall have the option to suspend fund releases if the performance of LandBank is deemed not satisfactory. In addition, in line with its monitoring and oversight functions, ACPC may conduct operational and financial audit of the project as it deems necessary. 6.2.2. PCFC for SLAs IB The MOA with PCFC covers the engagements of PCFC as: (a) administrator and implementer of the SLA institution building program (for 9 CECAP formed SLAs) for a period of up to 3 years; and, (b) as collection agent for CECAP/DA term loans to SLAs financed from the RLF/CCIBPTF for a period of up to 5 years. The MOA has 3 component activities separately financed over a period of 3 years, namely: PCFC SLA Institution Building, PhP7.323 million; PCFC Collection of RLF/CCIBPTF-Sourced Loan Funds, PhP6 million; and DA-ACPC Monitoring and evaluation, PhP0.370 million. Under the agreement, DA monitoring and evaluation services including employment of a full-time M&E officer, related transportation, daily subsistence allowances, lodging, office supplies and communications/networking costs for concerned staff shall be provided by ACPC from its Head Office for a one (1) year period at a cost not exceeding PhP370,000. Subsequent allocation shall be fixed in line with the provisions of the mother MOA establishing the CCIBPTF. 6.2.3. LandBank as Fund Trustee The trust agreement created the CCIBPTF and designated the EC and CECAP as Trustor and LandBank as Trustee of the fund. The latter’s main responsibility as Trustee is to hold in trust, administer and manage the Fund for the exclusive use and benefit of the CCIBPT. As such, it was given all the powers generally conferred upon a fund Trustee by law. This includes the discretionary authority to invest and reinvest the undisbursed or unreleased portion of the CCIBPTF in high-yielding investments guaranteed by the GoP. In relation to the management of the CCIBPT, LandBank’s authority is limited to those related to the physical handling of fund receipts and disbursements of CCIBPTF. 6.3. Amount of Funds The CCIBPTF was set up using the assets and liabilities of the CECAP Credit Revolving Loan Funds (RLFs) including repayment recoveries due and past due from cooperatives and SLA borrowers. Upon the termination of CECAP on July 9, 2003, EC and CECAP



committed to deliver the full value of the CECAP RLF calculated to include all credit draw downs from the EC CECAP project grant, interest and service fees earned on loaned funds and bank interest paid on RLF deposit accounts. In 2003 it was estimated that the total fund will amount to PhP33,828,53215. An initial PhP1 million was deposited to the LandBank to open the trust account on May 2003. Additional remittances to the funds from CECAP and loan collections of LandBank and ACPC amounted to PhP19,742,373 as of December 31, 2005. 6.4. Eligible Beneficiaries and Partner Organizations Only organizations formed and assisted by CECAP are eligible for IB assistance from CCIBPTF, directly or indirectly. On the other hand, eligible partner institutions or resource providers for the delivery of IB assistance to targeted beneficiaries / organizations are classified into 3 tracks. 6.4.1. Track l – IB Programs/Projects Conducted by Beneficiary Organizations These are the identified CECAP formed and assisted organizations that have the capability to implement the identified activity and pass the qualifying criteria for resource providers. 6.4.2. Track ll – IB Programs/Projects Conducted by External Service Providers These are:

• Educational and/or training institutions/organizations who have the proven capability in developing, implementing and conducting training programs and IB activities intended to strengthen the management and technical capability of the target organizations.

• Organizations that have the proven track record in developing, implementing and conducting training programs and institution building activities to strengthen the management capability of target organizations. Non-government organizations fall under this category.

• Federation of SLAs and cooperatives who have the proven IB expertise and who are willing to provide the IB services to identified SLAs and cooperatives.

6.4.3. Track lll – IB Programs Conducted or Supervised by Government Partners These are DA, ACPC, PCFC and LandBank. Additional government institutions or agencies may be identified and accredited as may be determined by the fund Trustor. 6.5. CCIBP Mid-Term Performance Assessment An independent mid-term performance assessment of the CCIBP was carried out in mid 200516. It showed that improvements/changes in collection, management, credit policies and financial management were made because of the trainings conducted under the CCIBP. Specifically, these include:

• Strict implementation of collection policies and installation of account collection strategies.

• More critical client selection; faster loan processing; disallowing credit on consumer goods for members with outstanding loan; and, lower loan ceiling to accommodate more borrowers.

15 Amount indicated on the MOA. It is based on the estimated amount to be collected and used for CCIBP. 16 Conducted by Multi-Sectoral Management and Development Corporation



• Installation of performance evaluation and conduct of monthly PMES; installation of management operations manual; monthly reporting of credit committee to BOD; and, conduct of annual business development planning.

• Close monitoring of the trends in financial operations; establishment of a loan bracketing system; strict implementation of accounting policies; and, submission of monthly internal report to BOD.

All in all, 90% of the training participants cited the following impacts to them:

• improvements in the lending services; availability of more consumer goods; • enhanced transparency and accountability as financial reports are made available

on a monthly basis; and • better performance from the officers of the cooperatives/SLAs.

It was reported that “ACPC has effectively managed the program albeit with minor lapses (in the coordination of trainings) which have been corrected early in the program implementation”. Overall accomplishment for the year 2005 was impressive in terms of the following: membership expansion, 1,413 new members; CBU, PhP12.39 million; and savings mobilization of PhP13.51 million. These are equivalent to 127%, 147% and 126% of targets, respectively.17

17 Multi-Sectoral Management and Development Corporation, CCIBPTF Evaluation Report



7. ASSESSMENT AND GENERAL FINDINGS 7.1. Overall Progress Overall the IB program implemented had progressed very slowly towards the ultimate goals of developing the FSCs into viable and sustainable organizations under any of the Model 1 and Model 2 approaches. Delays in the hiring of IBSs, setting up of the UDTF Secretariat and all other factors attendant to any start-up operations reportedly caused tremendous delays in the implementation of the IB Program. As a result, it was only sometime in June 2005 that recognizable results/impact started to manifest. 7.2. IBS’ Deployment Deployment and coverage of five IBS to cover the six UDP provinces started in mid 2004. Each IBS is backed up by relevant educational background and job experiences called for under the UDTF OGP. However, variations in the mode of deliveries of IB services and consequently, impacts on the cooperatives assisted were observed. Also, geographic assignments and the availability of support facilities/incentives were noticed to have affected the quality and quantity of services delivered. 7.2.1. Danielo Munda: Compostela Valley The assignment covers 8 Cooperatives in Compostela Valley. 5 of these belong to Model 1 category servicing a total of 10 FSCs among them. 3 Model 2 and 2 Model 1 cooperatives, KILAMPCO and MBSC, are rated D or not meeting the minimum LandBank requirements for accreditation. MBSC’s problem seemed to be its location which is in one of the remotest barangay with reportedly not enough population base to allow for the expansion of the coop’s membership. Mr. Munda has business and accounting educational background. He used to work with the UDP prior to UDTF. However, it was observed that accounting and record keeping concerns/problems of cooperatives he covers are not addressed sufficiently. This may be caused by his preoccupation with the organizing aspect of his work, and/or reliance on the UDP/UDTF-hired bookkeepers to do this work aspect. In addition, his time and resources seemed to be spread too thinly because of the perceived heavy workload in relation to the number and widely dispersed locations of cooperatives he assists. Figure 4 shows the location map of the Cooperatives he covers. 7.2.2. Jaimes Rosal: Davao Oriental The assignment covers 5 Model 2 cooperatives with the following maturity levels: 1 C, 2 Ds and 2 Fs or failed. Except for TFCC, Davao Oriental Model 2 cooperatives are geographically closer to one another for easier delivery and monitoring of IB services vis-à-vis the other areas18. Mr. Rosal’s educational background is in agriculture. He used to work with UDP prior to his employment as IBS. The common problem observed in the cooperatives under his care are production and marketing related. The cooperatives need more assistance in identifying and/or accessing markets, information and trainings on appropriate production technology to meet the quality demanded by the market, and hands-on trainings on doing simple project evaluation and financial analysis.

18 Mr. Rosal did not submit the location map of the cooperatives he covers as requested by the Consultant.

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Figure 4. D. Munda: Location Map of Cooperatives Covered

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7.2.3. Janeto Tansiongco: Davao del Sur Five widely dispersed (geographically) cooperatives are covered in this province. The 4 Models 2 have maturity levels of D while the only Model 1 assigned to him is a class A cooperative. Davao del Sur is characterized by more geographically dispersed cooperatives compared with the other provinces. Long travel time to reach LUMAD, JASLUMPC and DTFMPC for instance would require overnight stay in the areas because of distance, bad roads and security considerations particularly when traveling after dark. Mr. Tansiongco’s commitment to helping the cooperatives under his care is laudable. The good rapport he had developed with the officers and members as well as the mutual respect developed between them was observed. His good community organizing and problem solving skills were evident during the field visits. A holder of an engineering degree, he used to work with the Philippine Coconut Authority prior to his employment with UDTF. Figure 5 shows the location map of the Cooperatives he covers. 7.2.4. Ernesto Bacongco: SoCSKSarGen Seven cooperatives are covered. Six of these are Models 1. 2 have maturity levels B, 3 are class C and 1 D. The remaining coop, KALIAC is classified as Model 2 C but had been experiencing operational problems at the time of the evaluation study. Mr. Bacongco has an educational background in accounting and has worked for more than a decade with the then Bureau of Cooperative Development (now CDA). Figure 6 shows the location map of the Cooperatives he covers. 7.2.5. Dante Tomaro: SoCSKSarGen Seven cooperatives are included in the assignment: 3 Models 2 of which 2 are rated F and 1 C. The four Models 1 have maturity levels of A, B, C and D, respectively. The 2 rated F cooperatives, NAGMABAUL and MALAUMON are both in very hard to reach locations – distance wise and worst roads condition. Despite these, the former has shown promise of success under the guidance of the IB. Mr. (a) Tomaro has an accounting background with good community organizing skills. He was observed to be one of the more conscientious IBS. Figure 7 shows the location map of the Cooperatives he covers. 7.3. Viability and Future Sustainability of Cooperatives Report of the IBSs on the progress and status of the cooperatives they cover using the 7 pillars of cooperativism showed that except for KALIAC and SACAPDA which were rated C and LUDOUCO, TFCC, MALAUMON and NAGMABAUL which were rated F or failed, all the rest of Model 2 cooperatives (10 cooperatives) had D ratings or barely meeting the minimum accreditation requirements. Using available data as of January 31, 2006, a separate rating was prepared by the Consultant. Performances of Models 2 cooperatives under the program were compared to the minimum requirements for PNAC (Table 4). As shown in Table 5, only 2 cooperatives, i.e., BUCO and MAINFARM seemed to meet the minimum requirements in terms of number of members, CBU, savings, profitability and other aspects. The former has the

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Figure 5. J. Tansiongco: Location Map of Cooperatives Covered



Figure 6. E. Bacongco: Location Map of Cooperatives Covered

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Figure 7. D. Tomaro: Location Map of Cooperatives Covered



Table 4. LandBank’s Minimum Requirements For Potentially New Accessing Cooperatives

No.

Indicators

Minimum Requirements For Newly Accessing Cooperatives

1. MEMBERSHIP c. Size

d. Patronage of Business a. 100 members b. 90% of total membership

2. CAPITAL BUILD-UP & SAVINGS MOBILIZATION c. Average CBU per member

d. Average Savings per member a. Php 500 b. Php 500

3. LEADERSHIP & MANAGEMENT b. Board of Directors

i. BOD Meetings ii. Patronage of Business

b. Core Management Team c. Coop Policies, Systems &

Procedures d. Plans and Programs e. Internal Performance Review

a. BOD

i. 6 meetings ii. 90% of BOD members

c. Complete Core Management Team d. Basic/Installed Policies on records

keeping, savings and credit e. Basic written plans & programs,

including business plans for projects being financed

f. At least monthly review by BOD

4.

BOOKS OF ACCOUNTS With installed General Ledger & Journals; Depending on coop business, shall include cash receipts & disbursement and sales & purchase journals

5. BUSINESS OPERATIONS c. Livelihood / Enterprise d. Providential Services

a. Mostly relending for crop production b. At least one service to members

6. FINANCIAL PERFORMANCE e. Repayment of LandBank

obligations f. Profitability (Return on Equity) g. Debt-Equity Ratio h. Liquidity Ratio

a. Not applicable yet b. At least break-even c. 6:1 d. 1:1

7. AFFILIATION IN Federation / Cluster / Chamber / Organization

Not applicable yet

Source: UDTF

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Table 5. Consultant’s Rating of Model 2 Cooperatives Based on the 7 Pillars

Cooperative

Member ship (a)

CBU

(b)

Sav- ings (c)

Leadership & Mgt.

Trainings

Books of Accounts

Business Operations Financial Performance

Affiliation

1. CAMUPCO 80 718 106 BOD & COMAT GL, J, CRDB MF & Bamboo trading No FS avail. na 2. CUFAMCO 70 344 885 BOD & COMAT GL, J, CRDB MF & banana Trading (d) 23,832 na 3. MAFADEMCO 42 846 1,360 Area not reached by Consultant due to impassable bad roads. No FS avail. na 4. BUCO 269 731 830 BOD & COMAT GL, J, CRDB MF 56,844 na 5. SIDOUCCO 115 1,489 0 BOD & COMAT GL, J, CRDB MF (e) (31,773) na 6. LUDOUCO 55 921 0 BOD & COMAT GL, J, CRDB MF (22,893) na 7. MADOUCO 96 645 0 BOD & COMAT GL, J, CRDB None as of Feb. 2006 (8,480) na 8. TFCC 54 823 0 Area not reached by Consultant due to impassable bad roads. (d) 525 na 9. SKSMPC 202 260 438 BOD & COMAT GL, J, CRDB MF No FS avail. na 10. MAINFARM 132 1,344 1,968 BOD & COMAT GL, J, CRDB MF No FS avail. na 11. LUMAD 118 542 190 BOD & COMAT GL, J, CRDB None as of Feb. 2006 No FS avail. na 12. JASLUMPC 28 899 924 BOD & COMAT GL, J, CRDB None as of Feb. 2006 No FS avail. na 13. KALIAC 132 1,096 915 BOD & COMAT GL, J, CRDB MF (853) na 14. SACAPDA 141 329 468 BOD & COMAT GL, J, CRDB MF, consumer store 12,887 na 15. NAGMABAUL 82 588 593 BOD & COMAT GL, J, CRDB None as of Feb. 2006 No FS avail. na 16. MALAUMON 53 506 0 BOD & COMAT GL, J, CRDB MF No FS avail. na

(a) Regular members only GL - General Ledger na – not applicable yet (b) Total CBU divided by total regular members only J - Journal (c) Total Savings divided by total regular members only CRDB - Cash Receipts and Disbursements Book (d) As of June 30, 2005 (e) As of September 30, 2005 FS – Financial Statement MF – Micro Finance

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highest number of regular members at 269 with CBU and savings per member averages of PhP 731 and 830, respectively. It also registered the highest net income for 2005 of PhP56,844. MAINFARM, on the other hand, has 132 regular members and recorded CBU and savings of PhP1,344 and 1,968, respectively. KALIAC and SACAPDA almost passed the minimum requirements except for the following: the former suffered a net loss of PhP853 in 2005 mainly due to uncontrolled overhead expenses, a reversible situation though; and, the latter fell short of the minimum required CBU and savings per member which were PhP329 and PhP468, respectively. However, SACAPDA registered PhP12,887 net income for the year. CAMUPCO, LUMAD, CUFAMCO, SKSMPC, SIDOUCCO, MADOUCO and NAGMABAUL are found to have the potential of passing the accreditation requirements within 2006 based on the members’ commitments and potential business operations observed by the Consultant. 7.4. IB Training Program for 2006 Total IB training budget for 2006 is Php8,047,800 broken down as follows: Php6,624,000 for all Models 1 and 2 cooperatives included in the IB support program and Php1,423,800 for CAMTRIMCO’s rehabilitation. These represent 82% and 18% of total, respectively. The bulk or 56% of the training budgets for all Models 1 and 2 cooperatives goes to contracted services. (Table 6) 7.4.1. Training Priorities Prioritization or concentration of training subjects was gleaned from the budgetary allocations for the year. For Model 2 cooperatives, technology and small enterprise development were the top 2 with 20.91% and 14.27% of total. These are followed by credit inventory and property appraisal, 9.82%; pre-membership expansion seminars, 9.66%; and leadership and management trainings at 9.22%. For Models 1 technology trainings likewise get the top priority with almost 25% of total budget allotted to it. This is followed by pre-membership expansion seminars, 14.96; strategic development planning workshops, 12.84%; leadership and management trainings, 9.02%; and seminar on internal control, 7.52%. 7.4.2. Observed Needs of Model 2 Cooperatives Not Among Priorities The above prioritizations did not jibe well with the expressed and observed training needs, particularly of the Model 2 cooperatives. For example micro finance trainings, trainings on CBU, SM and ME and credit operation and management were highlighted by those interviewed but are not near among the priorities. As a matter of fact, the first two have negligible (1.02%) and no budget at all, respectively. 7.5. No Total Absorption of FSCs by Model 1 BACs There was no total absorption of any UDP FSC by an established Model 1 BAC as initially intended. As it turned out, these BACs are selective in admitting new members. Each FSC member was required to put up fresh funds for CBU contribution, membership fee and savings in addition to meeting all the standard requirements to join any of these cooperatives. If at all Model 1 resulted to a very slow integration or absorption of FSC members into the existing BAC. This is shown in Table 7.

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Table 6. UDTF IB Program 2006 Training Budget

Model 2 Model 1 Service Service Training IBS Provider Total IBS Provider Total

1 Trainers' Training in Conducting PMES & MES 100,000 0 100,000 75,000 0 75,0002 Pre - Membership Expansion Seminar 330,000 0 330,000 480,000 0 480,0003 Membership Education Seminar 120,000 0 120,000 50,000 0 50,0004 Training on CBU, SM & ME 35,000 0 35,000 35,000 0 35,0005 Member Savings Operation 0 0 0 50,750 0 50,7506 Small Enterprise Development 0 426,000 426,000 0 0 07 Strategic Coop Marketing 50,750 0 50,750 50,750 0 50,7508 Microfinance Training 0 0 0 101,500 0 101,5009 Technology Training 114,188 600,000 714,188 190,312 600,000 790,312

10 Leadership & Mgt Training 139,381 175,000 314,381 114,369 175,000 289,36911 Credit Operation & Mgt Seminar 85,000 206,500 291,500 55,000 143,500 198,50012 Credit Inv. & Property Appraisal 107,844 227,500 335,344 44,406 122,500 166,90613 Seminar on Internal Control 98,125 185,500 283,625 76,875 164,500 241,37514 Training on Audit & Inventory 67,375 206,500 273,875 37,625 143,500 181,12515 Strategic Dev't Planning Workshop 25,375 115,500 140,875 177,625 234,500 412,12516 Accounting Automation 0 0 0 35,000 0 35,00017 Training on Financial Management 0 0 0 50,750 0 50,750

Total 1,273,038 2,142,500 3,415,538 1,624,962 1,583,500 3,208,462

Summary of Cooperative Trainings/Interventions:

IBS Budget 2,898,000 44% Service Provider 3,726,000 56% Total 6,624,000 100% 82% CAMTRIMCO 1,423,800 18% Grand Total 8,047,800 100%

Source of Data: UDTF



Table 7. Model 1 Cooperative’s Absorption of FSC Members

Target % FSC Members CBU Savings FSC Members Absorbed UDP FSC Absorbed Attributed to FSC

Cooperatives ML As of 12/31/05 As of 12/31/05 Regular-

Asso- ciate Total

Members 6/30/'04 Regular Assoc In Pesos

Potential Business For FSC Members

Compostela Valley 1 MAMPCO B na na na 824 na na na na Oil Palm , Cassava, FI 2 MAVADECO (a) C 0 446 446 535 0% 83% 356,800 na Soy beans, yellow corn 3 MADECO C 13 2 15 107 12% 2% 37,131 8,386 Oil Palm, Fin’l Intermediation 5 MBSC D 6 51 57 58 10% 88% 6,010 30,071 na

Davao del Sur

6 MFMC A 80 274 354 292 27% 94% 475,935 316,643 Oil Palm, mango processing, Cassava, livestock

South Cotabato

7 POLO SN B 11 2 13 121 9% 2% 81,274 0 Pineapple, cassava, cardava Salad vegetables

8 TIAC B 20 52 72 80 25% 65% 208,966 0 9 LPMPC A 8 3 11 64 13% 5% 115,159 63,048 Pineapple, sugarcane

10 TAPIMCO D 13 1 14 97 13% 1% 6,700 0 Sarangani 11 LUMULCO C 18 0 18 122 15% 0% 9,000 0 Not visited by Consultant 12 KAMULCO C 0 23 23 104 0% 22% 4,220 0 Not visited by Consultant 13 UVAMULCO C 91 21 112 356 26% 6% 68,069 113,875 Not visited by Consultant 14 UMFPMC D 37 74 111 86 43% 86% 37,785 3,700 Not visited by Consultant 15 KIMALAKA C 28 5 33 36 78% 14% 145,158 2,305 Not visited by Consultant TOTAL 377 1,043 1,420 3,047 12% 34% 1,963,322 621,467

(a) Data based on interviews with MAVADECO account officer na - not available Source of basic data: UDTF Secretariat

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7.6. Model 2 Cooperatives Have Low Maturity Levels Of the 16 Model 2 cooperatives, 12 are still in their lowest level of maturity (D), 4 received failing marks of F (LUDOUCO, TFCC, NAGMABAUL and MALAUMON) and only 2 have reached maturity level C (KALIAC and SACAPDA). However, after the assessment of the two cooperatives concerned, the C rating of KALIAC is put to question. The cooperative has management problems and is continuously losing money in the light of very limited revenues from its lending operations versus its uncontrolled operating expenses. Those with Maturity Level F failed to meet the prescribed minimum regular membership number of 100 as of the end of December 2005. Consequently, their CBU and savings records were likewise low. All reportedly suffered losses from operations. 7.7. Installed PSPs Not Operational Most Model 2 cooperatives were reported to have their PSPs installed. However, it was observed that “installation” simply meant having the PSPs “written down” for the cooperative. There was very little understanding and effective application and use of adopted PSPs. Lapses in the implementation and enforcement of PSPs on credit operations were evident. The preparation of the household cash flow as an evaluation tool to determine an applicant’s capacity and ability to pay was not being used. Problems related to bookkeeping/record keeping were generally observed among Model 2 cooperatives despite the fielding of program-contracted roving bookkeepers. There was evidently little transfer of technology and knowledge to the cooperatives. Except for those few who are willing and able to pay for the services of “professional” bookkeepers, most Model 2 cooperatives do not have a functioning accounting system. 7.8. Strategic Plans Prepared But Not Followed All cooperatives visited had their respective strategic plans prepared. However, those interviewed have forgotten that they have such a document. Only upon prodding by the IBS did they remember they prepared one but in most cases could not recall what the plans contain. As such, it was evident that the BOD and COMAT of most have little appreciation of the value of the plans in charting the course of the cooperatives’ success. 7.9. Cooperatives Lack Project Feasibility Evaluation Capabilities Almost all cooperative officers and COMAT are largely dependent on the IBS and UDP assistance to do simple project feasibility evaluation. The cooperative leaders’ lack of exposure to markets, relevant technical, financial and other important business information and opportunities was evident. To date, only Model 1 cooperatives have viable commercial activities. Model 2s are mostly in the lending business which has been carried on from their FSC days. But even this microfinance/lending business had not been making money for them to date. There is an apparent need for retraining on microfinance operations among the Model 2 coop officers and members. It is unlikely for a good number of Model 2 cooperatives to establish one (1) viable commercial activity within six (6) months from the conduct of strategic planning workshops as required under UDTF SC resolution 08-54. Therefore, they will be faced with the possibility of expulsion from the IB program unless credit operations regardless of the bottom line results, will be considered to satisfy the set criteria.



7.10. Very Limited Coop Resources The geographic location of the Model 2 cooperatives had put almost all of them in a re disadvantaged position particularly in terms of natural resources limitation. Upland farmers have access to limited land area with limited potential for crop production. Therefore, the need for technical assistance to determine the appropriate package/s of production technology that will improve levels of production and income in the uplands while at the same time conserve and maintain the integrity of the watershed is very much needed. For their financial services operations, the problem of reaching the members to collect savings deposits and loan amortizations was repeatedly articulated. A motorcycle will provide the necessary mobility to the cooperative’s account officer to help the cooperative improve its CBU, savings deposit and loan services to its members. Cooperatives are keen on obtaining at least one unit either through grant or loan from UDTF.



8. UDTF OPERATIONAL CONCERNS 8.1. Remote and Relatively Dangerous Geographic Locations The locations of the cooperatives present tremendous operational problems. Most of them were very remote with very poor roads, if at all. In one or two areas, the situation is aggravated by the presence of unfriendly elements like insurgents and bandits. TFCC, MAFADEMCO and MALAUMON have the worst roads that are not passable when it rains. TFCC and DEMOLOC are reportedly infested by unfriendly forces which may present danger to the life of the IBS and service providers. Location maps indicating the distances traveled, types of roads (with approximate length for each type) and present condition (passable or not passable during rainy days) are shown in Figures 5 to 8 above. 8.2. Limited Time Spent By IBS to Nurture the Cooperatives As a consequence of the remote and far in between locations of the cooperatives, the IBSs could only visit them once a month effectively spending only about 2 days with the cooperatives while spending one to two days traveling to and from the areas. The IBSs mentioned the “tedious”/extensive reporting and administrative paperwork they are required to accomplish every month take away a good number of hours that they should have spent delivering services to their clients. For Model 2 cooperatives that need a lot of nurturing in view of the qualifications of its officers and members, more time is necessary to have an effective capacity building interventions to reach the goal of LandBank accreditation.. 8.3. Inadequate Logistical and Other Support to Enhance Performance Despite the physical risks faced by the IBSs, UDTF does not provide them with any insurance coverage. Also, it was learned that the request for raincoats and rubber/plastic boots which are standard protective gears during rainy season was denied. The traveling allowance of PhP 3,000 per month is inclusive of the cost of gasoline and board and lodging expenses. Considering the required time going to and from the office base of the IBSs to each cooperative and the need to spend a night or two in the areas, the amount of allowance was reportedly not enough to motivate the IBSs to increase the frequency of visits to clients. 8.4. Differences in Levels of Knowledge and Capacities of IBSs Educational backgrounds, trainings and capacities of IBSs vis-à-vis the needs of client cooperatives vary. For example, one IBS is a very strong community organizer but was observed to have limited knowledge of bookkeeping and financial statements preparation and interpretation. Another IBS with business/accounting educational background and extensive knowledge of the cooperative law and its application based on his work experience was found to be wanting in leadership and problem solving qualities. For one, he dispensed the cooperative rule on the election of the BOD, i.e., only a regular member has the right to vote, by allowing associate members not only to vote but also be elected to the board simply because of the suggestion/desire to have the 3 FSCs/barangays comprising the newly formed cooperative equally represented in the BOD. As a result, the FSC/barangay with the most number of regular members (84%) in the cooperative has only 43% representation in the board.



In addition, for whatever reason/s, the IBS failed to influence the present BOD and COMAT on prudent business management. The discrepancy between the average monthly revenue flows of PhP 3,800 against total controllable expenses of at least PhP 10,780 per month was very glaring. However, despite the continuous monthly losses, the IBS has not been successful in advising the BOD to act on the matter. 8.5. Non-Closure of FSC-Related Issues Constrains Progress of

Cooperatives The problems related to the resolution of claims and counter claims between the FSCs and their respective PFIs were observed to be a major stumbling block to the progress of most cooperatives. The members’ faith and belief in the future success of the new organization seemed to be hinged on the “recovery” of their FSC’s CBUs and savings from the PFIs. The resolution of the seed capital, UDLF investments and outstanding overdue loans recovery of FSCs need to done at the earliest possible time. However, no visible concerted effort to put closure to the FSC issues was observed. Discussions and/or negotiations with PFIs were intermittently done and with hardly visible and time-bound action program. UDP has already dissolved its RFS units with the former head PFIs at PMO already given a new assignment at MED. The SC agreed upon during its 5th meeting that “UDP shall complete new initiative to ensure FSC and UDLF account audit and closure by November 30, 2005” had not been met. Activities are still in process as of February 28, 2006. There was confusion as to the extent of responsibilities on the matter between the UDTF and UDP. There was the perception on the part of a good number of FSC borrowers that UDP loans are government grants and because UDP as a project is about to end, there is no longer any pressure to collect the loans as in the case of most government directed credit programs in the past. In some areas, the borrowers pointed out that they were made to believe that the RFS component was like the rest of UDP interventions given to the community as grants. In the second case, a good number of borrowers acknowledge their liability. However, they clamor for more loans to give them opportunities to engage in productive activities needing borrowed capital so much so that it now becomes a chicken and egg situation. 8.6. No Definite Policies and Procedures for Restructuring UDLF Loan The absence of written policies and procedures for restructuring UDLTF loan deter the access to UDLF credit funds of concerned Model 1 cooperatives. MAMPCO complained about the difficulties it has been encountering in connection with its overdue outstanding loan from UDLF. As of the 3rd week of February, no answer to MAMPCO’s October 14, 2005 letter addressed to UDP requesting guidance on the matter has been received. UDP informally told MAMPCO to settle the issue with LandBank who in turn pointed at UDP as the one responsible for issuing the mechanics. In the meantime, the release of the PhP 12 million loan of MAMPCO has been on hold.



9. CCIBTF MODEL APPEARS BETTER FOR UDP 9.1. Trust Funds The UDTF has two Trust Funds: one for credit and the other for IB established by a MOA among the DA, EC, UDP, and LandBank. LandBank serves both as the Trustee and Manager of the fund. In contrast, the CCIBPTF created 11 months ahead of the UDTF, involved only one trust fund devoted to IB. It was established by a mother MOA among the DA, EC, CECAP and ACPC. No trust fund was set up for credit. The ACPC serves as the trust fund manager and implementer of the IB program in areas whose terrains and road conditions are similar to the UDP-covered areas. A separate Trust Agreement appointed LandBank as fund Trustee. A separate MOA was signed by ACPC with the LandBank and PCFC for the provision of IB program services to CECAP cooperatives and SLAs. 9.2. Project Financing Focus The UDTF focus on funding plantation type agriculture seemed to counter the promotion of the UDP developed DFS model which is more attuned to the needs of UDP beneficiaries and consequently, the activities of SAD, MED and RM components. On the other hand, the ACPC has more flexibility to package and implement innovative financing schemes since this is part of its regular agency activity and advocacy. 9.3. Oversight Function Under the CCIBPTF model, the ACPC provides the oversight function. It monitors and evaluates the conduct and effectiveness of the IB activities by PCFC, LandBank and other IB service providers to ensure that the desired targets are met and that activities are done according to the approved work plan. It has the option to suspend fund releases if the performance of PCFC and LandBank are deemed not satisfactory. In addition, in line with its monitoring and oversight functions, ACPC may conduct operational and financial audit of the project as it deems necessary. This arrangement is not built-in in the UDTF model. 9.4. Leaner PEC The CCIBPTF has a leaner PEC membership than the UDTF SC. In addition, members of the former are all based in Metro Manila. These results in faster and more simplified consultation and decision making process as it is easier to convene less people based in the same geographic area. ACPC provides the secretariat support to PEC. As such, CCIBPTF may take full advantage of the support from the whole organization whose function is more in line with the implementation, monitoring and evaluation of credit policies and programs including innovative financing schemes. 9.5. Individual vs. Institutional Responsibility for Results UDTF has the IBSs individually responsible for delivering the intended results of the IB program. In contrast, the CCIBPTF has institutions like the PCFC and the LandBank contracted to deliver the desired outputs. Although the latter may cost more, the benefits of having the backing of one whole organization to provide added value to the intended work may likewise be worth it. 9.6. Secretariat Support The CCIBPTF Secretariat is lodged with the ACPC and as such benefits from ACPC’s institutional resources and experiences. Program progress monitoring of one institution is done by another institution. On the other hand UDTF’s Secretariat is composed of two hardworking young ladies physically located at the LandBank MBG office but seemingly



functionally detached from the operations of the rest of the office (except through the MBG Head). Despite their young age (both are around 22 years old) and lack of or insufficient actual job related experiences, the two had to work extra time to cope with the demands of their jobs. In addition, “supervision” by the IB Coordinator of the much older and experienced IBSs may at times get compromised. Despite the professionalism of all concerned, the Filipino culture of deference to an older and much experienced person always come into play.



10. COOPERATIVE-SPECIFIC FINDINGS 10.1. CAMTRIMCO CAMTRIMCO is not among the listed IB-supported cooperatives. It is now in a critical situation with some PhP 8 million of UDP funds invested in it with questionable chances of recovery to date. CAMTRIMCO likewise owes UCPB Foundation more than PhP 2.4 million. The cooperative is presently beset by problems brought about by the dismissal and/or resignations of key management personnel:

• Rapid deterioration of loan portfolio quality; • Continuous decline of its liquidity position • Degeneration of the general membership morale, trust and patronage of the

cooperative 10.1.1. UDTF Covenant of Growth with CAMTRIMCO As of February 15, 2006 (Consultant’s visit), the CAMTRIMCO Chairman denied having agreed to the UDTF Covenant of Growth for the cooperative. He mentioned that the failure of the UDP/UDTF/LandBank representatives to meet with him as promised on January 15, 2006 sent him the signal that the covenant will not be implemented. 10.1.2. Cash-Flow Considerations Not Clear in Initial Covenant The post-dated check issued by the cooperative was not honored because the money was used to meet the production loan needs of the members. This was is in the light of the expected non-infusion of the “promised” PhP 1 million from UDP/UDTF. According to the Chairman, the date of the check coincided with the planting season of rice and the consequent need of the members for production loans. If the loans were not granted on time, collection of past due accounts to these farmers will be jeopardized. 10.1.3. Present Chairman and Acting General Manager Will Not Lay Off Excess

Personnel As Recommended CAMTRIMCO’s present Chairman and General Manager is not amenable to trimming down the present workforce to the barest minimum in order to arrest the mounting losses of the cooperative. Even the suggestion to decrease the present level of salaries of regular staff was also acceptable to him. He would rather wait for the prospective Manager to be fielded by the UDP to do the firing of personnel. This would result to unnecessarily exposing the new person to the risk of getting the ire of people who would be laid off from work. 10.1.4. Misinformation Peddled Against Past and Present Officials Erodes the

Coop’s Integrity as an Organization Charges and countercharges between the former General Manager and the camp of the Chairman and his present COMAT and staff are numerous and were much publicized. Three (3) members randomly picked and interviewed by the Consultant expressed disillusionment over the affairs of CAMTRIMCO. One even made a generalization that cooperatives are not good organizations one can trust so she had already given up on it. However, when posed with the question of who they think can run CAMTRIMCO’s affairs better, they cast their votes in favor of the former general manager despite having said that “they are all the same anyway”.



10.1.5. Former General Manager’s Side of the Issues To get both sides of the case, the Consultant together with the UDTF IB Coordinator interviewed Mr. Feliper Edar, Jr. The following are the highlights: 10.1.5.1. Results of Operations Review Not Discussed with General Manager Mr. Edar claimed that LandBank did not discuss with him the results of the operations review (OR) prior to its release to the BOD19. The standard operating procedures (SOP) call for the discussion of whatever findings, adverse or not, with management first to enable those concerned to clarify issues and provide needed supporting documents, if any. According to Mr. Edar, the OR triggered the conflict between management and the BOD as represented by the present Chairman. LandBank DAC Head and IBS concerned refuted the above and insisted the OR was presented and discussed with CAMTRIMCO management in the presence of Mr. Edar.

10.1.5.2. Mr. Edar’s Side Not Heard by UDP Consultant and Officials Mr. Edar stated having tried to reach and set appointments with UDP RFS Consultant Virginio Jamon and other UDP officials during the height of the controversies to present his side of the issues. He said he was not successful and had not talked to any of them until the time of the Consultant’s visit. 10.1.5.3. Quick Background Check On the query about his alleged malversation cases in Cebu prior his relocation to Cateel, Mr. Edar denied the “rumors” and challenged the Consultant to do some background check on him. He gave names of prominent cooperative leaders based in Cebu who could vouch for him. A quick check by text message with Mr. Romy Villamin, former Executive Director of NATTCO did not result in any adverse finding. The Region 11 DAC Head informed the Consultant that the simple background check she did on Mr. Edar (through telephone with the help of her LandBank colleagues in Cebu) long before the problems erupted also did not yield any adverse finding. 10.1.5.4. “Excessive” Expenses and Bar Receipt On the “excessive” expenses incurred in Davao City as supported by a Bar’s receipt for wines and liquors, Mr. Edar admitted having incurred the expenses but added that all the branch managers and the BOD Chairman were with him and partook of the food and drinks. He added that they were in Davao City that time for an officers’ meeting with the Branch managers to coincide with the withdrawal of the loan proceeds from UCPB Foundation and its subsequent distribution to the CAMTRIMCO Branch Managers. 10.1.5.5. Charges and Countercharges Mr. Edar provided the Consultant copies of the Cateel Municipal Circuit Court’s decisions on the criminal charges filed by CAMTRIMCO against him as well as criminal and administrative countercharges the latter filed against the cooperative and some of its officials and staff.

19 Operations review is a management audit regularly conducted by DAC to BACs. Intervention will be provided based on the identified weaknesses of the BAC.



10.1.6. Branch Managers Confirmed Receipt of Funds Separate interviews with the Banganga and Manay branch managers and verification of the respective branch records resulted in the confirmation that the proceeds of UCPB loans were indeed received and used by the two branches. 10.1.7. Branch Manager Did Not Volunteer Information to Set Records Straight Manay Branch Manager, Roland Vidoy admitted to having received from Mr. Edar PhP 300,000 of the PhP 2.2 million loan from UCPB Foundation. His answer to the query as to the reason why he did not come out in the open to tell the truth that the said amount was received by him and was being used for the Branch business operations, his curt answer was a simple “I was not asked to”. When told of the perceived importance of the information he withheld in helping to diffuse the tension adversely affecting CAMTRIMCO at the time, he repeated his line that he was not asked about his receipt of the fund. He added that he would not want to take sides in the squabble going on at that time. 10.1.8. Desire for Manay Branch’s Representation in the BOD Mr. Vidoy expressed his desire to have his branch represented in the BOD of CAMTRIMCO. He mentioned his suspicion that the present Board was behind foiling his attempt to field Manay candidates in last year’s GA. The exact date of the GA was withheld until the very last minute so much so that there was no more time for them to complete and submit the requirements on time. He mentioned that they will try again in the forthcoming GA which is scheduled on the 3rd week of March this year. Mr. Vidoy has already implemented the required staff reduction to minimize overhead costs of Manay branch. It was observed that the present bookkeeper is the wife of the branch manager. In the proposed bail out plan for CAMTRIMCO, Mr. Vidoy was highly praised and recommended to be assigned as Manager of both Manay and Caraga branches. He shall likewise spearhead the continuation of the coop’s copra trading operation. 10.1.9. 8 Criminal Cases Filed by CAMTRIMCO Dismissed Eight (8) criminal cases involving charges of fund malversation filed by CAMTRIMCO against Mr. Edar were “ordered dismissed for lack of probable cause” by the 1st Municipal Circuit Trial Court of Cateel-Boston on November 25, 2005. The decision further stated that “let the records of these cases be forwarded to the Provincial Prosecution Office, Mati, Davao Oriental for whatever action it may take on the matter considering that all these cases are cognizable by the Regional Trial Court in view of the amounts involved in each case and the corresponding penalties therefore”.20 The Consultant sought the opinion of a lawyer who stated that CAMTRIMCO’s case may not prosper in the upper courts citing the principle of double jeopardy as a ground. 10.1.10. 2006 GA Schedule – 3rd Week of March The regular GA of CAMTRIMCO is scheduled on the 3rd week of March.

20 Joint Resolution on The People of the Philippines vs. Felipe A. Edar, Jr. Criminal Case Nos. C-3112, 3113, 3118,3119, 3120, 3121, 3122 and 3123,



10.2. DTFMPC 10.2.1. DTFMPC NOT a Genuine Cooperative DTFMPC was registered with the Cooperative Development Authority (CDA) in 2001. It was organized by the Municipal Agriculturist (MA) to legitimize the release of the corn sheller grant from the DA. DTFMPC was not and can never be considered a genuine cooperative for the following reasons: the Treasurer’s affidavit supporting its registration with CDA was prepared/fabricated ( as admitted by the MA) by the UDP technician and signed by the listed coop members without really paying a single centavo for their stated CBUs.21 DTFMPC with a good number of “ghost members”, never had actual capital or assets aside from the donated corn sheller to operate a business. Thus, the cooperative’s moribund state to date.

10.2.2. 3 FSCs’ Resolve to Form Themselves Into a Real Coop The officers and members of the three (3) FSCs merged with DTFMPC showed their resolve to form themselves into a viable cooperative. They are willing to start all over again, this time doing things the right way and by the book so to speak. The consensus arrived at with the Consultant and the IBS was for the group to organize the FSCs into a Model 2 cooperative following the work plan prepared in that meeting with the UDTF IBS. The important milestones to be hurdled prior to recommendation for UDTF IB coverage include the following: conduct of organizational meeting on March 4, 2006; conduct of PMES; registration with the CDA within March following all the legal requirements this time; and, submission of the new cooperative’s resolution requesting for UDTF IB assistance.

10.3. MAMPCO The main issue with MAMPCO is the completion and approval of the restructuring plan for the past due UDLF loan of the cooperative in order to facilitate the release of the PhP12 million loan for the palm oil production project. According to coop officials interviewed, delays in the approval and release of loan funds from UDTF was caused by the lack of clear cut guidelines and procedures on how to restructure UDLF loans. When approached, UDP referred MAMPCO to the LandBank for the procedures. When approached, LandBank pointed back at UDP. This resulted in the coop’s confusion, diminished interest in settling its UDP obligation and overgrowth of the oil palm seedlings caused by the delays in planting schedule. Due to the non-resolution of the UDLF issue and the fact that MAMPCO oil palm loan application had already passed LandBank’s own credit evaluation, LandBank MBG decided to make partial release for the oil palm project to get started. During the meeting with UDP and LandBank on March 22, 2006, MAMPCO’s Chairman expressed his coop’s desire to take out the full amount of the loan from the latter instead. 10.4. MAVADECO The decline in the quality of FSC loan portfolio was attributed to the “abrupt” shift from the UDLF to UDTF. The PFI got confused with the new instruction to return the UDLF when the funds are in fact with the communities. There was conscious decision on the part of the FSC borrowers to stop repaying their loans for fear of not having the needed capital when the planting season comes. The security of getting a new loan (a potent incentive) if one is a good payer is no longer there.

21 This was reportedly the case in all Upland Barangay Associations (UBAs) in the area which converted into cooperatives under the UDP.



386 FSC members are still in their associate status with MAVADECO despite the fact that they have already paid their PhP 800 CBU requirement. The only things lacking to make them regular members are the following: accomplishment of the membership application form; attendance to PMES training; and payment of the PhP50 membership fee. Another 60 FSC members from Pamintaran, Cambagan and Katipunan merely had to pay the PhP50 membership fee each to become MAVADECO regular members. The cooperative is looking forward to the following potential projects with possible tie up with San Miguel Corporation: soybeans and yellow corn production. An initial 50 hectares will be planted to these commodities. 10.5. KILAMPCO 10.5.1. Status Prior to Kilagding FSC and Cooperative Merger KILAMPCO was hardly operational and had been in a very bad financial position for the last three years prior to its absorption of Kilagding FSC – lock, stock and barrel. It had almost PhP 1 million in overdue loans receivables which were not properly documented and unsecured. Two Board Members had overdue loans. The cooperative’s consumer store had very little inventory and was not operational. In contrast, Kilagding FSC was one of the best performing FSCs of UDP as evidenced by its net income earnings and good loan portfolio with high repayment rate.

10.5.2. Choice Based on Geographic Location The choice of KILAMPCO as the absorbing cooperative of Kilagding FSC was simply based on the fact that it was the same area as the FSC. Also, the FSC and the cooperative have board members common to both. 10.5.3. Present Situation of KILAMPCO 10.5.3.1. Coop Borrowed FSC Funds KILAMPCO “borrowed” funds from the FSC for production loans granted to coop members including those who did not come from the FSC. Some FSC members expressed dissatisfaction over this move.

10.5.3.2. 2005 Net Loss KILAMPCO registered a net loss of P230, 924.42 for the year-ended December 31, 2005. Of this amount, 99% or P229, 024.09 were attributed to the “old” KILAMPCO. 10.5.3.3. High Overhead Expenses KILAMPCO’s high overhead expenses were caused by payments of honoraria amounting to P114, 849.15 or 35% of total. Of this amount, P72, 849.15 and P42, 000.00 were incurred by the “old” KILAMPCO and FSC, respectively. On the other hand, provision for bad debts of PhP149, 096.94, wholly attributable to the “old” cooperative, accounted for 45% of total expenses for the year 2005. 10.5.3.4. Present and Potential Business Constraints KILAMPCO’s present and potential business is constrained by its very limited funds. Its microfinance and production loans are dependent on reflows or collections from outstanding loans. Its consumer store is already closed. Its cornsheller needs major repair which the cooperative cannot afford. Its solar dryer gives limited revenues.



10.5.3.5. Poor Loan Portfolio KILAMPCO’s loan portfolio is weighed down by long past due loans with questionable chances of collection despite having been “restructured” (debtors were made to sign new promissory notes with penalty charges written-off and some interest waived). Most members of the board have past due loans with the cooperative. 10.6. MBSC The Consultant was stranded on the way to the cooperative. The road condition leading to the barangay was so bad that the wheels of the vehicle got stuck in deep mud and had to be manually pushed back by around 8 men. There were no trees around to tie the vehicle’s “wings” to as the only tree nearby had already fallen because of what looked like a landslide. Roads leading to the barangay reportedly become impassable whenever it rains. These limit the delivery of IB services to the coop.

10.7. CAMUPCO The cooperative is composed largely of women with only 2 male members. The coop only accepted FSC members they call MIGS or members in good standing. The group was able to exceed its December 2005 target CBU of PhP 50,000 by actually raising PhP 56,695 from its 116 members.

The cooperative’s initial activity was the continuation of the FSC’s financial operations. To date, the loan portfolio quality is good with high loan repayment rate. On the prodding of its male member who is also a member of the BOD, the coop has ventured into the buying and selling of bamboo poles which are supplied to Dole Phils. The business was previously a personal business of the latter that used to borrow funds from the coop to finance the same business. He was able to convince the coop management and BOD to take it on as the coop’s business. He will manage the business for CAMUPCO who will provide the required capitalization at no cost to him in exchange for the coop’s share of the profits. There is a need to provide CAMUPCO’s COMAT and BOD trainings to develop their skills to do simple project evaluations with particular attention on the financial viability aspect.

10.8. CUFAMCO The cooperative was registered with the CDA on May 26, 2005. It is composed of both upland and lowland dwellers. The two coop members/officers interviewed said that they are really from the lowland that were made by the UDP RFO to join the upland FSC so they will be eligible to borrow money later on. They were made to give fictitious upland addresses to quality. However, with the formation of a new Model 2 cooperative, they have now listed their real addresses in the lowland.

It has 117 members to date, 70 of whom are considered active and 47 inactive. Total share capital and members’ savings by end January 2006 were PhP24, 100 and PhP 61,926, respectively.

CUFAMCO continued its rural financial services with a loan portfolio amounting to PhP 240,000 almost all of which are past due. Total recorded loan repayments as of January was only PhP 3,000.

The cooperative has ventured into the lacatan and latundan banana trading for the local market. The business is managed by one of its officials under a similar arrangement as that of CUFAMCO. The only difference is that CUFAMCO’s products are sold to another



middleman. The perennial problems of: lack of capital; difficulty of finding direct buyer/s; and the lack of support from members (with loans and cash advances from traders) who are beholden to other banana traders, plague the coop/s trading operations.

10.9. MAFADEMCO Like in the case of MBSC, the difficulty of reaching the area of the cooperative particularly during rainy days hinders the delivery of IB services to the clients. 10.10. BUCO BUCO is a Model 2 cooperative registered with the CDA on May 27, 2004. By the end of year 2005, it has on record 346 members 266 of whom are regular. It is presently engaged in micro financing, a continuation of its FSC activity. Most of the members’ reason for joining the cooperative was to avail of additional capital. The closure of the Cooperative Bank of Davao Oriental (CBDO) had a negative impact on the members. They claim to still have receivables from CBDO amounting to about PhP27, 000. The members have a center pledge to deposit PhP10 weekly to the cooperative as non-withdrawable savings. This is to finance their planned copra and charcoal trading business. BUCO needs assistance in the design of its credit scheme and one-on-one (tutorial) on doing market research, evaluation of business alternatives and for its BOD and COMAT, leadership trainings. Refresher courses on financial services operation are also needed. 10.11. SIDOUCCO SIDOUCCO is the best example of the upland people’s tenacity and willingness to work hard to improve their lot. It was formed and registered with the CDA on October 2001, way ahead of the other Model 2 cooperatives. As of January 31, 2006, it has a total of 228 members of whom 115 are regular. All members are farmers with some 30% of them engaged in other micro businesses. Total share capital amounted to PhP171, 228. The cooperative has no recorded savings because they claimed that they lost their money deposited with the closed CBDO. The initially identified potential income generating activities of the group were: micro finance, cassava production, food processing (mango puree), cardava production and trading, rubber production and copra trading. The group engaged in cardava banana planting but was hit by the latest closure of their institutional buyer last 2005. As a result, the coop stopped the listing of potential cardava planters. The need for IB assistance on evaluation of projects is direly needed by the BOD and COMAT. SIDOUCCO is listed as a PNAC. However, an analysis of the 2005 financial statement presented to the Consultant showed an error in the preparation of the income statement. A net loss of PhP11, 161.79 was reflected because the bookkeeper and auditor failed to recognize the proceeds from the sale of cassava planting materials amounting to PhP17, 850. In effect, the cooperative realized a net income from its 2005 operations. Therefore, there is a need to amend the financial statements submitted to the CDA to enable the cooperative to obtain its certification of good standing which is a prerequisite to LandBank accreditation. In addition, the cooperative had to pay PhP12, 000 total penalties to the Bureau of Internal Revenue for its failure to register the books of accounts for four (4) years (2001-2004).



10.12. LUDOUCO The cooperative is a Model 2 registered with the CDA on November 26, 2004 with initial members of 56. The coop continued the micro financing started by the FSCs. By the end of January 2005, LUDOUCO has a total of 101 members 55 of whom are regular and/or active. Total share capital raised was PhP50, 645. It has no recorded members’ savings. Loans numbered 35 amounting to a total of PhP70, 000, all overdue. The main problem of the cooperative members is related to their tenurial status which affects their potential for the oil palm production project. To date, the coop would like to focus on financial intermediation but it lacks enough seed money to generate enough revenues to support its operations. LUDOUCO also suffered from CBDO closure. Its FSC claims to have about PhP100, 000 remaining collectibles from the PDIC from its CBU, savings and investments in UDLF. 10.13. MADOUCO MADOUCO was registered with the CDA on October 26, 2005. It registered a net loss of PhP8, 480.38 by the end of 2005, mostly due to organization and registration related expenses. It has a total of 120 members to date: 96 regular and 24 associate. Total membership share capital amount to PhP 61,909, almost double the PhP33, 600 recorded on October 2005. The cooperative is not engaged in any business activity at present. Its plan is to engage in the following: financial services, vegetable and cardava banana production and trading. It needs assistance though in finding and developing the markets for these commodities. 10.14. MFMC The cooperative is a Model 1 Class A BAC. As a UDP PFI, it has helped in the development of the FSCs which it intends to support and strengthen so they can continue to serve their purpose to MFMC as their collecting agents in the uplands. The cooperative is not keen on having the FSC members become regular members of the cooperative. On the other hand, very few from the FSCs will be able to meet the membership requirements of MFMC. 10.15. SKSMPC SKSMPC falls under the Model 2 scheme. It was meant to be a merger of the FSCs from the following barangays: Zone II, Coronon, Saliducon and Sibulan. The cooperative is basically the Zone II FSC. The initially planned consolidation of the four FSCs’ assets and liabilities into the SKSMPC has not been completed to date. Except for Zone ll FSC, the accounts and records of the other 3 have not yet been settled and reconciled with the Rural Bank of Digos, Inc. (RBDI). Those from other FSCs who wish to join the coop are asked to put up to put up their own fresh CBUs and pay the required membership fees. As of January 31, 2006, SKSMPC reported a total membership base of 337 of whom 281 are from FSC Zone ll members absorbed by the coop. 56 new members recruited put up capital amounting to PhP34, 480.00 and savings of PhP21, 360.38. Total accumulated Capital Build-up and Savings as of end January are PhP52, 510.00 and PhP88, 520.01, respectively. Sibulan FSC opted to operate on its own and will no longer join the SKMPC.



10.15.1. Lending Operations and Loan Portfolio SKSMPC is presently engaged in the following lending operations: Micro-Finance, Agri-Finance (production), honorarium loans and emergency loans. Capitalization for these come from internally generated funds from membership fees and collection of outstanding FSC loans, members’ savings, CBU and the seed capital from UDP. A review of the cooperatives and the FSCs’ loan portfolios showed that a good number of the SKSMPC’s members of the BOD, COMAT and Credit Committee as well as what seem to be their relatives (the same family names) have existing loans with the coop. Some of these loans are past due with a number more than one year overdue. 10.15.2. Potential Projects Identified potential income generating projects are Coop Financial Intermediation (CFI) and Marketing of Agricultural products. The Coop key officers have already undergone training on CFI operation. The coop management is in the process of preparing the business plan for the proposed agricultural products marketing business.

10.15.3. AICom Not Functional The AICom is not yet functional. The operational policies are not well defined and seemingly not well understood by members including the credit committee members. The decision to grant big loans (PhP10, 000) with maturity period of 300 days need to be reviewed and the policies (if any) revisited. Also, the cooperative members still need to internalize the trainings they received on the basics of cooperative as an institution and as tool to help the members reach their goal of economic empowerment, among others. 10.16. MAINFARM MAINFARM was registered with the CDA on April 20, 2005. It has a total of 902 members representing the total membership of the four FSCs merged: Pitu, Bolton, Ibo and Tagansule. The majority (770) are still associate members. Only 132 are regular members who have each paid the required PhP 500 capital shares, PhP500 savings and PhP50 membership fee. The associate members are being asked to pay PhP40 and PhP25 per month for savings and CBU, respectively.

Total CBU as of January 31, 2006 amounted to PhP 164,379. Cash in Bank was PhP106, 426 and petty cash with each account officer was PhP3, 000 for a total of PhP12, 000. The amount was to take care of small withdrawals in the 4 barangays. The cooperative continues the financial services started by the FSCs. Total loan portfolio as of December 31, 2005 amounted to PhP925, 735. Of this amount, 58% are current, 10% are 1 to 30 days overdue and only 0.5% are more than 1 year past due. It was observed that the records of the cooperative have not yet been audited as of mid February 2006. Non-filing of audited financial statements to the CDA by February 20 of each year will mean imposition of penalty of PhP1, 000 to the coop.

Almost all of MAINFARM’s members have fruit bearing mango trees so much so that the cooperative plans to go into mango production business – from flowering to harvest. This means engaging in the chemical spraying business to induce fruiting and mango trading.

The coop is composed of members with a relatively better asset base thus, the potential to accelerate its CBU collection and savings from members.



10.17. LUMAD LUMAD is a merger of 3 FSCs from the following barangays: Lapuan, Mabuhay, Dalupan and West Lamidan. It was registered with the CDA on June 15, 2005. The office of the newly formed cooperative is in Lapuan within the property of its present Manager, Mrs. Meden Joyce Mallari, a former Vice Mayor of Don Marcelino. Although the coop is located in the center of all the member barangays, the distances and cost of transportation to and from the coop to the barangays are as follows: Mabuhay, PhP300 roundtrip plus about 2 hours walking; Dalupan, PhP300 roundtrip; and West Lamidan, PhP600 roundtrip.

At present, the coop has 108 members. As of December 31, 2005 it has total share capital of PhP63, 939, savings of PhP22, 420 and loans outstanding to 61 members of PhP326, 562. Most of the loans were transfers from the FSC. These loans were restructured with moratorium on interest until February 1, 2006 declared to entice the FSC members to pay and join the cooperative. The Manager and its members are all in agreement that servicing the needs of the geographically dispersed members is daunting and not physically and financially viable. Despite this, the strategic plan of the cooperative calls for the eventual development of the member FSCs as LUMAD branches in the respective barangays. The driving force of the group is its manager who has already provided the cooperative not only with her invaluable time and managerial talent but also material support. The small coop concrete one-storey building was built from construction materials mostly donated by the Manager and labor provided partly by its members. The commitment of the coop members to the success of their coop was evident during the meeting.

Aside from its financial services operation, other opportunities open to the cooperative include production of coco coir and coco peat from the voluminous by-products of coconuts growing abundantly in the area, coffee production and trading, and banana production and processing. The development plan of LUMAD calls for extensive IB support initially focused on financial services operation as well as support to the mobility (motorcycle) of the cooperative’s account officer. Priority training needs are the following: on-the-job training on record keeping and accounting/bookkeeping for non-accountants and cross visits to successful cooperatives. The fielding of UDTF-contracted bookkeepers was most welcome by the group.

10.18. JASLUMPC Organization of JASLUMPC was started on December 2004 but was officially registered at CDA on June 15, 2005. As of February 2006, no visible progress in terms of membership, CBU, savings nor business opportunities was made by the cooperative. Total number of members as of December 31, 2005 was 110 regular and 74 associates. Share capital raised amounted to PhP 25,179.47 and savings, PhP 25,866.25. Outstanding loans to 37 members from Caburan Small was PhP25, 866.25 of which 89% are more than 1 year past due. There was a noticeable lack of leadership and initiative among the BOD and members of COMAT particularly the appointed manager. A list of requirements and a work program was drawn up by the group with the Consultant and the IBS. It was agreed upon that should the JASLUMPC not be able to comply or achieve the targets, the IBS will recommend their exclusion from the UDTF IB program. Considering the distance and the difficulty of reaching the area, the cost of IB delivery to



this cooperative is relatively much higher than the other more accessible ones. In addition, the evident lack of initiative on the part of the beneficiaries would warrant the dropping of the group from the program. 10.19. POLO POLO is a Model 1 BAC with existing credit line with the LandBank. It has a pineapple growing contract with Dole Phils. involving 1,199 hectares. It is also into cassava production and processing. It has a marketing contract with San Miguel Corporation. Presently 125 hectares are planted by coop members to cassava. POLO has agreed to accept members from FSC Amsipit A and Kablacan but on a case to case basis. The usual membership criteria and requirements have to be met by an individual FSC member before he/she gets accepted as a regular member of the cooperative. Most FSC members find it difficult to become regular members of POLO because of the CBU and savings requirements. 10.20. KALIAC 10.20.1. Model 2 in Poblacion, Tupi, South Cotabato KALIAC Multi-Purpose Cooperative (KALIAC) was registered with the CDA on April 28, 2005. It falls under the Model 2 category and was meant to be a merger of three FSCs namely, Kablon, Linan and Acmonan. Its office is in Poblacion, Tupi, South Cotabato. Poblacion is the business center of Tupi and is central to all three barangays where the three merged FSCs are located. The choice of the present office is part of the cooperative’s strategy of tapping more people to patronize its services primarily because of its convenient location. Approximate distances and cost of transportation to and from Poblacion, Tupi are as follows: Acmonan, 4.5 kilometers (km) and P15 one way; Linan, 9km and P20 one way; and, Kablon, 7km and P40 one way. 10.20.2. Basically a Linan Cooperative Despite the fact that KALIAC was meant to be a merger of 3 FSCs, for all intents and purposes, it is basically a Linan cooperative. Of the 77 initial co-operators 72 were from Linan, 4 from Acmonan and only 1 from Kablon. To date the cooperative has 182 members composed of 153 (84.1%) from Linan, 28 (15.4%) from Acmonan and 1 (0.5%) from Kablon. Members from Linan and Acmonan are all regular members, i.e., they have already paid their required share capital. The lone listed member from Kablon is still an associate member having paid for only one share (P100) and nothing more to date. Among the 3 FSCs, Linan had the best record. It had consistently been reporting profits with very minimal monthly operating expenses. It had only one employee who is paid a monthly honorarium of PhP 500 as posting clerk. Transportation and other expenses were likewise minimal as no rental is being paid for the FSC’s office in the barangay hall of Linan. The FSC paid PhP 50 only for its share of electric bill.

As a result of its healthy financial position, all Linan FSC members were “absorbed” into KALIAC. The membership shares were paid out of the CBUs and savings in the FSC whose assets and liabilities were transferred - lock, stock and barrel to KALIAC.

FSC members from Acmonan and Kablon were required to put up new capital to be able to join the cooperative.



10.20.3. Kablon FSC and Members Kablon FSC has the worst case of non-repayment of loans. Those interviewed mentioned that Kablon FSC members do not show interest in joining KALIAC for “fear of being made to pay for their existing past due loans from UDP”. The latter do not have any intention of paying back these loans which they have already regarded as grant from the government. As such, members of the cooperative are adamant to have more members from Kablon FSC. They would rather expand in other barangays, even the non-UDP areas. Kablon farmers seem to have an infamous reputation. They are blacklisted by Dole, Philippines (Dole) because of their “pole vaulting” practices22. The Polo Samahang Nayon Multi-Purpose Cooperative (POLO) is presently saddled by long overdue pineapple production loans from Kablon farmers who “pole vaulted” in 2001. A total of more than PhP 7million in production loans remain uncollectible to date. The cooperative was saved from huge losses because 95% of the total amount was guaranteed by Dole.23 According to Mr. Diorito E. Bitantos, POLO Manager, residents of Kablon are indigenous people belonging to the B’laan tribe whose values and upbringing influenced their attitudes towards loans and contracts.

10.20.4. BOD Composition Not Reflective of Membership Base The lopsided membership of the cooperative in favor of Linan is not reflected in the composition of KALIAC’s Board of Directors (BOD): 3 from Linan, 3 from Acmonan and 1 from Kablon. As such, there was a seeming disinterest on the part of the BOD majority to work harder for the success of the cooperative. The election to the BOD of an associate member from Kablon can be considered anomalous as it was done against CDA rules. The UDTF IB Specialist admitted that this was caused by the result of “relaxing” (more of disregarding) the CDA rules during the general assembly in order to accommodate the AFFIRE suggestion to have the 3 merged FSCs represented in the BOD of the new cooperative. Instead of limiting the selection and voting to regular coop members only, all FSC members who attended the organizational meeting/general assembly were considered associate members and were allowed to vote. 10.20.5. Operational Losses and Deteriorating Financial Condition To date, KALIAC’s resources are mostly derived from Linan members so much so that members from this barangay are worried about the coop’s mounting operational losses. Against average monthly revenues of only P3, 800 and total expenses amounting to at least P10, 780 a month (with honoraria accounting to a whopping P8, 000) monthly losses amount to around P7, 000. The move to forego BOD members’ honoraria to trim down expenses was outvoted by members from Acmonan and Kablon. To date, it was perceived that the BOD majority composed of those from latter 2 barangays are not really after the welfare and success of KALIAC. No additional new members, CBU nor savings from these areas have been recorded to date.

22 Pole vaulting is the term used when farmers whose crops are financed under a production and marketing agreement reneged on the terms of the contracts during harvest time and instead sell their produce to outside buyers unmindful of their obligations to the cooperative and the other contracting party. 23 After the bad experience with Kablon farmers, Dole stopped giving guarantees to production loans in its production and marketing contracts with cooperatives.



KALIAC registered a net book loss of PhP 853.41 for the 6-month period ending December 31, 2005. With depreciation and amortization (non-cash expenses) of PhP 4,257.20, the cooperative still had a positive cash flow from operations. However, starting January 2006, KALIAC’s financial position has been headed to deterioration. Management is seemingly unmindful, if not losing complete control, of the cooperative’s operating expenses vis-à-vis its limited revenues. Monthly rental of its present office at the second floor of a concrete building in Poblacion, Tupi is PhP2, 000. The office has an air conditioning unit. In 2005, average monthly expenses for power, light and water amounted to PhP869.67. As a cost-saving measure, starting January 2006 the air-conditioner is turned on only on special occasions, according to the Chairman. Thus, reducing electricity cost to an average of PhP280 a month. KALIAC pays the following salaries and honoraria every month: Treasurer, PhP1,500; Manager, PhP500; Bookkeeper, PhP500; Posting clerk, PhP500; Secretary, PhP500; Credit committee members,PhP1,500 (3 @ PhP500); Board of Directors, PhP3,500 (7@PhP500). These totals to PhP10,780 per month. Transportation, motorcycle fuel and maintenance, office supplies and other miscellaneous operating expenses are not yet included in this total. Against an average monthly income of only PhP3,800, KALIAC will definitely fold up within the year if it does not act immediately to put its house in order.

10.20.6. Former Office at Barangay Linan Still Open to the Coop The Barangay Captain of Linan welcomes the “return” of the FSC now KALIAC to Linan. To date, the office is still being used to wind-up the operations of the FSC. He expressed his full support to the coop until such time that it can already afford to maintain and pay for a more expensive office space such as the one in Poblacion, Tupi.

10.20.7. Capital Generation and Business Opportunities 10.20.7.1. Fund Raising Plans KALIAC wishes to raise at least PhP500,000 fresh capitals for its micro finance and production loans business. According to its bookkeeper who used to be work with UDP as a Rural Finance Officer, this amount will generate revenues (from interest and service fees), enough to cover expenses and earn income for the cooperative. However, the cooperative has not really come up with detailed action plan to carry out the following fund raising activities:

• Solicit savings deposits from both members and non-members; and • Encourage children to save and deposit their money with the cooperative in

preparation for their graduation this coming April. In this connection the IB Specialist advised the coop to record in its books non-member savers as “associate members” of the cooperative despite the intention (to join or not to join the cooperative as member) of those depositors.

10.20.7.2. Business opportunities

• Organic banana production Cooperative members have among themselves at least 40 hectares of land (8 barangays @ 5 hectares) to produce the Bungulan variety of banana using organic farming methods. The Chairman and some of the coop members used to sell their produce to the Tupi Balangon Growers Association who in turn sells to Alter Trade Corporation. The farmers encountered the problem of meeting the quality standards required by the buyer. The previous experience was only 5 out of 20 bunches delivered were approved and bought. KALIAC needs technical assistance to improve the quality of bungulan bananas that they will produce by organic farming.



• Lacatan banana production

The local market has a big demand for lacatan bananas. Until 1996, banana traders from Manila used to purchase around 7,000 kilos per week at PhP 6 to PhP 7 per kilogram. The fruits are brought by the farmers to the sitio buying station. Business was beset by the infestation by the banjee tops disease which destroyed the banana plants of the farmers. The farmers did not have the technology or the financial resources to abate the banjee tops problem. To date, there are no more available disease-free lacatan banana planting materials in the barangays. Farmers also need capital to finance at least 1,000 pieces of plantlets per hectare. Likewise, they need technical training on the control of diseases.

• Organic fruits and vegetables growing The trade and industry office of the local government of Tupi is establishing linkages with organic food buyers in Makati, Metro Manila. KALIAC is interested to pursue this lead but needs technical assistance/trainings in organic farm practices, aside from production capital financing. 10.21. LPMPC LPMPC is a Model 1 Class A BAC where the FSC Miasong is attached to. Just like in the case of POLO and MFMC, admission of the FSC members to the coop is being done on a case to case basis. Strict compliance with membership requirements is enforced. The cooperative has a pineapple production and marketing contract with DOLE Phils. 10.22. SACAPDA SACAPDA was registered with the CDA on January 6, 2004. At present it has 142 regular and 23 associate members. A good number of SACAPDA members are also members of the Sufatubo Small Coconut Farmers Multi-Purpose Cooperative (SSCFMPC). The offices and places of the two cooperatives are just almost across one another. Five (5) of the FSC/SACAPDA members borrowed PhP 30,000 each from Sarangani Rural Bank, Inc. (SRBI) for a total of PhP 150,000 guaranteed by the FSC in accordance with the UDP RFS guidelines. The bulk of the said amount was purportedly invested by the 5 with the SSCFMPC for the purchase of a vehicle with the understanding that the latter will make the amortization payments to SRBI on behalf of the former. According to SRBI, the loans with outstanding balance of PhP 127, 000 as of February 2006 are personal loans of the 5 FSC members carrying with it the guarantee of the FSC (now SACAPDA). As a result SRBI will not issue a certificate of good standing to SACAPDA which in turn jeopardizes the cooperative’s accreditation with the LandBank. A mediation meeting between SACAPDA and SSCFMPC with all the 5 members, to settle and resolve the issue of the outstanding loans with SRBI was scheduled on March 10, 2006 at the barangay hall. This was upon the recommendation of the Consultant. During the time of the Consultant’s visit, the cooperative had just inaugurated its consumer store and started its copra trading operations. The IBS assisted the coop bookkeeper in installing its new books accounts for these new businesses.



Upon the intervention of UDP MED, the coop is being considered for assistance by the Peace and Equity Foundation to be the recipient of a PhP150,000 seed fund and technical assistance for copra trading business. SACAPDA reported PhP12,886 net income in 2005. The salary structure of its manager and other members of the COMAT are based on performance, i.e., 30% of net income to be divided among the manager and his team. 10.23. NAGMABAUL Nagmabaul was registered with the CDA on November 6, 2004. It has a total of 114 and 82 regular and associate members, respectively. To date, the cooperative is concentrated on increasing its membership base and capital. Its plan includes the continuation of financial services of the UDP FSC and engaging in the trading of copra, corn, banana, peanuts, ginger and livestock like chicken, goats and pigs. To show its determination to succeed and entice new members to join, the coop constructed its own building in a strategic place visible to travelers using the main road to adjacent barangays. The use of the land was donated by one of its members. Some materials were purchased but the bulk of construction requirements including labor was provided free by members also. The coop building was inaugurated on February 28, in time for the 2006 General Assembly (GA) of NAGMABAUL. The plans and programs of the coop including the financial services PSP were presented for the consideration and approval of the GA. The occasion attracted good attendance from both members and non-members from adjoining barangays. 10.24. MALAUMON MALAUMON was registered with the CDA on April 2005. The cooperative is in barangay Rio del Pilar. Aside from its very remote location, the roads going to the cooperative is in very bad condition. Cost of transportation from the barangay to the FSC’s PFI Sarangani Rural Bank, Inc. (SRBI) in Glan, amounts to PhP463 one way only. The banana production business opportunity of the coop is constrained by the transportation problem. The coop manager laments the fact that despite the abundance of bananas, lacatan and cardava in the barangay, they cannot transport these to the market because they will get spoiled during the transport process because of the very rough roads. Other business opportunities face the same constraint. Similar to JASLUMPC, the cooperative has weak COMAT. Records were not updated since SRBI stopped servicing the coop in 2004. As of February 2006, it has only 53 regular members and 61 associates. Its lending operation is limited to the extension of honorarium loan for barangay officials and salary loan. The loans are payable when the honoraria and salaries of the debtors are received. No penalty or additional interest is charged for delayed payments due to delayed releases of honoraria and salaries. According to the Manager, the reason for this is that these delays are beyond the control of the borrowers. The barangay and consequently the coop suffer from the following inherent constraints to growth: very bad roads with no prospect of improvement within the medium term, limited packages of technology available, poor resource base of population in the area and limited prospect of membership and capital expansion.



11. GENERAL RECOMMENDATIONS The following include recommendations involving drastic policy and structural changes in UDTF as well as suggested operational changes that can immediately be adopted or implemented to improve the IB program delivery to the target beneficiaries. 11.1. UDP to Adopt the CCIBPTF Model Detailed discussions of the UDTF and CCIBPTF models were presented above. Comparisons of their basic features were made and served as basis for the recommendations that follows. 11.1.1. Only One Trust Fund Devoted to Institution Building 11.1.1.1. IB Requires Considerable Resources IB requires a considerable input of resources, particularly in resource poor and upland areas. IB encompasses all of the activities involved in creating, modifying and supporting the target upland cooperatives and allied institutions: to make them capable of providing financial services to the target group on a long-term basis; and, to be motivated to do so. Developing viable and sustainable organizations requires considerable time which is always beyond the scope of any programme/project life as in the case of UDP. There is always the challenge of sustaining gains made by transforming these organizations into viable and sustainable entities even after the life of the programme. 11.1.1.2. Credit Funds Available to LandBank Accredited Cooperatives On the other hand, there is no debate as to the amount of credit funds available in the market at present both from government and private financial. The problem is one of eligibility and accessibility to credit of the upland institutions/cooperatives. There is therefore the nagging need to insure the continuation of IB support until the target groups are accredited with the LandBank as a Bank Assisted Cooperative (BAC) and be eligible for both technical and funding support. Once a project is approved by the LandBank’s Lending Center for funding support, the source of the money, i.e., whether from UDTF or LandBank’s regular loan funds, becomes irrelevant. This is shown in the case of the Mangloy Multi-Purpose Cooperative (MAMPCO), a UDTF Model 1 cooperative and Class B BAC. MAMPCO has a P12 million palm oil production project loan approved by LandBank’s Lending Center based on the merit of the project. Due to its unsettled UDLF account, MAMPCO is disqualified from accessing credit from UDLF. Nevertheless, since LandBank Lending Center has already approved the project for financing, credit funds will be released out of the bank’s regular funds. To date, UDTF credit funds utilization has been slow and limited. 11.1.1.3. Shift Credit Funds to IB Program The limited/slow utilization of the UDTF credit funds due to the low maturity and slow level of development of the target cooperatives, the dwindling balance of the UDTF IB funds and the need for infusion of more technical assistance to the cooperatives to promote their growth and maturity levels, it may be more prudent to shift the resources from credit funds to IB funds. 11.1.2. Adoption of the CCIBPTF Implementation Structure The adoption of the CCIBPTF implementation structure is recommended with ACPC acting as the IB Program Fund Manager and LandBank as Trustee of the fund. The merit of having an oversight agency to focus on the program implementation is shown by the results of the independent operations review of the CCIBTF mentioned above.



11.1.3. Unified EC Approach to Ensuring Sustainability of EC-Funded Completed Projects

The adoption of the CIBPTF model would result in the implementation of a unified approach to sustainability of the rural financial services interventions common among EC-funded projects. In addition, the adoption of the same organizational structures would enable the EC to deal with only one organization and implement a uniform set of policies for all its projects. 11.2. Written Policies and Procedures for Restructuring UDLF Loan Written policies and procedures for restructuring UDLTF loan should be established, approved and made available to all concerned like MAMPCO as soon as possible. A meeting among the LandBank/UDTF, UDP (represented by Mr. David Baillie and Mr. Virginio Jamon, RFS Consultants) and the PFIs was held on March 22, 2002 to discuss and settle the issues on UDLF loan restructuring and reconciliation of records. 11.3. Provision of Technical Support to Production The cooperatives need technical assistance to determine the appropriate package/s of production technology that will improve levels of production and income in the uplands while at the same time conserve and maintain the integrity of the watershed is very much needed. This should include information and trainings on the control of pest and diseases. 11.4. Provision of Marketing Support Marketing support should include provision of market information on the following: list of products and corresponding identified demand in terms of quantity and quality; prices of commodities; distribution channels or possible buyers; and terms of the trade for each commodity. In addition, assistance in contract negotiations should be provided to help protect the interest of the farmers/coop members. The commodity marketing study conducted in 2001 identified potential crops for each UDP covered province and specific recommendations for each problem areas encountered. The details are shown in Table 8. 11.5. Completion of FSC and UDP PFI Audits and Resolution of All FSC

Issues The completion of the audit of all UDP FSCs and UDLF accounts with PFIs and the corresponding reconciliation of balances should be made at the earliest possible time. The full time assignment of the former PMO RFS Coordinator (now assigned to MED) to this endeavor immediately and until the closure of all UDP RFS issues, is recommended. Extent of responsibilities between UDTF Secretariat and UDP staff should be well defined. 11.6. Rationalization of Each IBS’ Assigned Load In order to ensure more frequent and meaningful visits to cooperatives for the delivery of IB support, there is a need to rationalize each IBS’ assignment and work load vis-à-vis the target improvement in maturity level of each institution per period of time. Allocation of cooperatives to be assisted by each IBS should take into consideration not only the number of institutional assignment but more so the following: geographic location/distance from the base office; condition/s of the roads to and from the coop areas; level of maturity / development of each coop; and presence or absence of other factors that will mitigate or prevent the the IBS from achieving his set target (for example, limitation of travel after dark because of presence of bad elements in the area).

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Table 8. Commodity Marketing Problems and Recommendations Province/Commodity Common Problems Identified For All

Commodities Common Recommendations For All Commodities

1. Compostela Valley a. Cardava banana

b. Durian c. Coffee

2.

Davao Oriental

a. Copra b. Tomato c. Abaca

3.

Davao del Sur

a. Carrot b. Mango c. Abaca

4.

Sarangani

a. Chicken b. Corn c. Lacatan

5.

South Cotabato

a. Peanut b. Potato c. Swine

1. Market Information a. No regular information on price, demand and

supply of commodities in respective relevant markets.

b. No information on prices and quantities offered by competitors.

2. Market Structure a. Long marketing chain for commodities as a

result of small production volume. b. Need for consolidation for economies of scale in

transportation & other mktg costs. 3. Grading

a. Lack of knowledge on quality requirements of buyers lead to low-quality production.

b. Lack of knowledge on grading practices. 4. Post-harvest Practices & Technology

a. Use of antiquated post-harvest practices reduce productivity and costly.

b. Technological developments do not reach farmers

5. Packaging a. Use of poor and traditional packaging materials

cause losses 6. Transportation

a. Poor road conditions make areas unreachable, transportation costs high and other marketing facilities inaccessible to farmers.

b. Cause high losses to farmers and traders. 7. Production Techniques and Technology

a. Lack of knowledge on input use, cultural management practices in production

1. Market Information a. Regular info on prices & buyers of commodities posted

on barangay bulletin boards for farmers to see. b. Info on changes in demand for related product/s and

prices of competitors to be regularly provided. 2. Market Structure

a. Encourage a collective marketing system. Larger volume will give farmers bargaining leverage.

b. Consolidation of produce & trade tie-up with processor will ease the problem of the long mktg chain & increase buying prices of commodities.

3. Grading a. Info on different grades & respective qualifications

should be made available & taught to the farmers. b. Institutional buyers, processors, regulating agencies &

major traders should be tapped to lead trainings & seminars on product grading.

4. Post-harvest Practices and Technology & Packaging a. Innovations & practices should be properly

disseminated and made available to the farmers through training and seminars.

b. New technologies could be sourced from FIDA, DOST, Bureau of Post-Harvest Research and Extension, institutional buyers and processors.

5. Transportation a. Assistance in building or improving farm-to-market

roads, municipal, provincial roads and national roads. b. Teaching farmers & farmers’ groups do advocacy work

will go a long way. 6. Production Techniques and Technology

a. Delivery of regular extension services to farmers on proper production techniques & technology.

Source: Upland Development Programme in Southern Mindanao (UDP), “A Summary Report on the Marketing Efficiency Study on Key Commodities in Southern Mindanao”, Marketing Series: Number 09 May 2001

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11.7. Streamlining of IBS Reporting/Monitoring System The frequency and content of the required operational monitoring and administrative reports should be reviewed, streamlined and kept to the minimum to give the IBSs more time to do their substantive work of delivering support services. It is recommended that monitoring forms design be made in consultation with the IBSs to determine the ease or difficulty of accomplishing them, the amount of time required to get the information and alternative ways and means of getting the data as against the expected benefit/s of the information required. 11.8. Matching of IBS’ Skills and Technical Competence with Clients’

Needs As assessment of each IBS’ strengths and weaknesses in relation to the requirements for IB support needed by clients should be conducted and the corresponding skills, technical trainings or subject matter familiarization are provided to them to the extent possible. This is to insure that the IBS will be able to effectively make follow through after each training from service providers. Problem solving and negotiating skills are two of the more important abilities the IBS should possess. 11.9. Additional Support to IBSs 11.9.1. Insurance Coverage of IBS The provision of both health and accident insurance coverage to IBSs is strongly recommended in view of the dangers (to health and person) they face in the performance of their functions. 11.9.2. Program-Issued Protective Gears It is recommended that the program provide the IBSs with durable raincoats and rubber/plastic boots which are considered necessary protective gears during rainy days. These will be part of the benefit package for one year. In the event the IBS leaves the service for whatever reason, he will be made to pay for 50% of the actual cost if he has used it for only 6 months or less. 11.9.3. Other Logistical Support A review of the adequacy of the present PhP3,000 traveling allowance in relation to each IBS’ geographical assignment, the cost of gasoline and the frequency of spending for board and lodging in the course of performing their duties. 11.10. Potential Coop Businesses 11.10.1. Model 1 Model 1 Cooperatives with maturity levels of A, B and C are the only ones with capabilities to access the UDTF credit funds for plantation type agricultural production projects with marketing tie-up with established buyers. The potential businesses identified are palm oil, cardava banana, and pineapple and cassava production and marketing. The cooperatives may engage in any of the following: production loans, inputs trading, commodity trading, transport/hauling, and processing of these commodities.



11.10.2. Model 2 11.10.2.1. Concentration on Savings Mobilization and Lending Operations Model 2 cooperatives are advised to limit themselves to savings mobilization and lending operations, micro-financing and small production loans in particular. While the FSC / coop members and officers may already be familiar and have acquired from UDP RFS days some degree of proficiency in operating a lending business, their present levels of operation need a lot of improvements. The majority of those interviewed requested for refresher and additional trainings on MF operations. To date, it is still premature to even encourage them to venture into bigger businesses when they still do not have the requisite resources and maturity level for these. Refresher courses and additional IB support involving immersion or on-the job trainings on financial services operations with particular focus on savings mobilization, loan product packaging, credit evaluation and operation of a check and balance system are recommended. 11.10.2.2. UDP DFS Model for Model 2 Agricultural Production It is recommended that the UDP DFS model be aggressively promoted in most of the Model 2 coop areas. The report on the Marketing Efficiency Study on Key Commodities in Southern Mindanao conducted by UDP in May 2001 contains a wealth of information that should prove useful in the choice of crops. Notable are the cost estimates and indicative profitability prospects of each commodity in particular areas. In addition, as mentioned above, marketing issues and problems and corresponding recommendations will serve as invaluable guide to implementation. 11.11. Motorcycles for Mobility and Operational Efficiency Requests for motorcycles to provide the necessary mobility and improve operational efficiency of financial services to members of cooperatives were aired by those interviewed. These were seconded by the IBSs. It is recommended that a motorcycle loan facility be designed as part of the IB support program. 11.12. Hand-holding Technique in Delivering IB Services The observed training needs of the cooperatives in accordance with the LandBank -prescribed and UDTF-approved development program are already included in the operational plans submitted by the IBSs to the UDTF Secretariat. However, what is more important is the mode of delivery of these training needs. It is recommended that hands-on and on-the job approaches be employed more. Nurturing the clients to maturity will require a lot of hand holding techniques in consideration of the educational level, limited if not total lack of business exposure and experiences of current officers and staff of cooperatives. Training topics and methodologies need to be tailor-fitted to the absorptive capacity of the cooperatives and the participants. 11.13. Priority Training Needs The identified priority training needs are: record keeping and bookkeeping; basic internal control measures including operationalization of the audit and inventory committee; refresher courses on financial services operation including savings mobilization and credit evaluation; project evaluation techniques; leadership training; and negotiation techniques. In as much as all of the Model 2 cooperatives provide credit as a primary service to members, immediate focus of IB interventions should include training modules on loan delinquency control, capacity-based lending and financial management. Hands-on training and cross-visits to cooperatives with high repayment rates are recommended. The latter



will enable the participants to observe successful loan collection strategies for adoption in their own cooperatives. The BOD and COMAT need tools for understanding the financial position and sustainability of their cooperative. They need follow-up trainings that will equip them with basic knowledge on:

• the components, purpose, relationships and importance of the main financial statements;

• the formats of income statements and balance sheets to easily separate the effect of various sources and uses of funds;

• financial statements / ratio analysis to monitor profitability, efficiency, and portfolio quality;

• identification of critical factors to a cooperative’s financial sustainability; and • basic internal control

Familiarization of COMAT with legal registration and reportorial requirements to avoid penalties is also recommended. Leadership and problem solving techniques can be enhanced by giving the COMAT and BOD alternative ideas to recruit more members, raise additional capital/funds and engage in other businesses other than micro finance and credit. They should be taught how to translate these ideas into time bound and executable plan of action.



12. COOPERATIVE-SPECIFIC RECOMMENDATIONS 12.1. CAMTRIMCO It is strongly recommended that negotiations for any bail-out plan be deferred until after the election of a new CAMTRIMCO BOD scheduled on March 2006. This is to insure that whoever will negotiate with UDP and UDTF will really have the mandate and support of the general membership of the cooperative. Background checks on the people that will be entrusted with the management and handling of fresh funds from UDP/UDTF should be made prior to their appointments and fielding. The BOD should be made responsible for decisions on the streamlining and the consequent lay offs of personnel. The UDP-contracted manager should be insulated from this unpalatable job of firing people. 12.2. KALIAC 12.2.1. Corrective Measure to Install a Legitimate BOD KALIAC’s general assembly is scheduled in March 2006. It is strongly recommended that the UDTF IB Specialist immediately implement corrective measures to install a BOD duly elected by the coop’s regular members. He must insure that CDA rules will be strictly followed in the election of a new set of BOD in the forthcoming general assembly of KALIAC. This is to insure that the will and decisions of the general membership will prevail.

12.2.2. Venue of General Assembly The forthcoming KALIAC General Assembly should be held in Linan since most of the regular members are from this barangay. This will lead to tremendous savings in transportation cost as well as insure better attendance of the majority of regular members. 12.2.3. Immediate Transfer of KALIAC Office to Linan The immediate transfer of KALIAC to the FSC’s former office in Barangay Linan is strongly recommended. This move will result in the following cost savings:

• Monthly rental of P2, 000. • Electricity cost of around P200 • Cost of transportation, gasoline and depreciation of motorcycle since most of

the members/clients of KALIAC are from Linan. • Personal cost savings of COMAT and credit committee members most of

whom are from Linan

12.2.4. Establishment of Coop Branch in Acmonan With the transfer of the coop’s office to Linan, the establishment of a small coop satellite/branch office in Acmonan to service the needs of the members in this barangay is likewise recommended.

12.3. DTFMPC The formation of a new and legitimate cooperative out of the merger of the 3 FSCs who were initially made to join the DTFMPC is recommended. This new cooperative will fall under the Model 2 category. The resolve of the members and the presence of business



opportunities in the area, e.g. coffee production for Nestle will contribute to the success of the undertaking. 12.4. JASLUMPC It is recommended that the IBS assist the coop in engaging the services of a new manager and make a review of the COMAT composition with the BOD. After the reconstitution of the new COMAT, JASLUMPC may be given more lead time to accomplish the milestones in the work program drawn out with the IBS last February. 12.5. KILAMPCO It is recommended that KILAMPCO be dropped from the IB program coverage. FSC members should be encouraged to join MAMPCO just like what the other Kilagding FSC members had done already. 12.6. Inaccessible Model 2 Cooperatives It is recommended that IBS first concentrate on delivery of services to Model 2 cooperatives with greater chances of success as shown by the progress made over the last 12 months using the UDTF rating criteria. IB support to FSC members under the Model 1 category should be intensified as well to enable individual UDP clients lifted to the level of the more progressive cooperative members. Inaccessible Model 2 cooperatives have shown very little progress to date and as such should be considered for dropping from the program.

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