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SMMPC (A): THE BEGINNINGS OF A COOPERATIVE

In 1991, Simbayanan 1 ni Maria Foundation, Inc. (SMFI) was registered as a nonstock, non-profit organization as the parish churchs response to poverty in Taguig. It offered programs on health service, nutrition, skills training, and job placement as well as college scholarships. This foundation spun off the Simbayanan ni Maria Multipurpose Cooperative (SMMPC) to develop and undertake socio-economic programs and activities for the improvement of the quality of life of the people of Lower Bicutan and adjacent villages in Taguig. Of the total cooperatives that had been established in Taguig since the 1960s, only 10 percent survived by 1996. 2 Of all the existing cooperatives in Taguig, SMMPC was the biggest in terms of assets, revenues, and membership equity. From 1991 to 1996, the cooperatives assets grew from Php445,575 to over Php26 million, while membership equity increased from Php316,426 to Php14 million and loan releases likewise went up from Php539,500 to almost Php15 million over the same period. In the last five years, the cooperative generated a surplus with its net income reaching Php 991,498 in 1996. Fr. Antonio C.T. Pascual, or Fr. Anton to his parishioners, a parish priest of Our Lady of the Holy Rosary from 1988 to 1992 and a member of the Board of Directors, looked back at SMMPCs early years and reflected:

The term simbayanan was a conjugation of two words: simbahan, which meant church; and bayan, which meant country. 2 Antonio C.T. Pascual, An Integrated Development Strategy for the Simbayanan ni Maria Multipurpose Cooperative, Management Research Report, Asian Institute of Management, 1997, p. 31.
This case was written by Asuncion M. Sebastian under the supervision of Prof. Francisco L. Roman, Jr. of the Asian Institute of Management with funding support from the Microfinance Management Institute, a joint venture of the Open Society Institute (OSI) and the Consultative Group to Assist the Poor (CGAP). This material was based on Management Research Report entitled An Integrated Development Strategy for the Simbayanan ni Maria Multipurpose Cooperative by Fr. Antonio C. T. Pascual, Master in Development Management 1997. All case materials are prepared solely for the purposes of class discussion. They are neither designed nor intended to illustrate the correct or incorrect management of problems or issues contained in the case. Copyright 2005, Asian Institute of Management, Makati City, Philippines, http://www.aim.edu.ph, e-mail: webco@aim.edu.ph. No part of this publication may be reproduced, stored in a retrieval system, used in a report or spreadsheet, or transmitted in any form or by any meanselectronic, mechanical, photocopying, recording, or otherwise without consent from the Asian Institute of Management. To order copies or request for the reproduction of case materials, write to Knowledge Resource Center, AIM, MCPO Box 2095 Makati City, Philippines or e-mail: krc@dataserve.aim.edu.ph

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Those years were characterized by slow growth because we gave more weight to sincerity than competence in the choice of directors. After pursuing higher studies in development, I came to realize that I myself lacked the competence to run the cooperative. Now, as we look forward to the next five years, we at the Board need a guide as to how we could enhance SMMPCs capabilities to realize its vision, mission, and objectives. I want SMMPC to be an effective and efficient social organization and business enterprisedoing good and doing well. However, how do I direct the organization towards this end? There is so much room for growth and expansion, but how do we ensure the cooperatives sustainability?

THE MUNICIPALITY OF TAGUIG Geography, Population, and Economic Activities SMMPC was located in Lower Bicutan, Taguig, a first class municipality bounded by Pateros and Pasig (north), Taytay and Laguna Lake (east), Muntinlupa, (south), Makati, Pasay, and Paraaque (west). (Annex 2 Map of Metro Manila) Primarily an agricultural plain, Taguig was divided into 18 villages with Lower Bicutan as its fourth largest village in terms of land area and the fifth highest in population density (Exhibit 1 1994 Population of Taguig). In 1996, the breakdown of its land use was as follows: military reservation (34 percent), residential (30 percent), and agricultural (19 percent). From 1990 to 1995, the average annual growth rate of 6.16 percent of the population of Taguig was higher than the National Capital Regions 2.95 percent. This high growth rate was partly due to the high rate of migration to Taguig. In 1994 alone, 20 percent of the surveyed population were new migrants, mostly coming from the Bicol and the Visayas regions. Corollary to this, the increase in housing units from 1970 to 1990 reached almost 600 percent. In 1991, only around 64 percent of Taguigs population was in the labor force because its composition was rather young. Almost 50 percent of the inhabitants belonged to the 0 to 19 age bracket while 47 percent of them were in the productive age range of 20 to 59 years. The unemployment rate in Taguig increased from nine percent in 1990 to 19 percent in 1992, during which period the National Capital Regions unemployment rate was 17.2 percent.

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Around 81 percent of the households in Taguig in 1991 had an annual average income ranging between Php20,000 and Php 29,999 while the national poverty threshold that year was set at Php7,302 per capita or Php36,510 for a family of five 3 . The main economic activities in the municipality were manufacturing, trading, and retailing via micro enterprises, which included sari-sari stores 4 and eateries. Around 37 percent of the households were engaged in agricultural activities: farming, fishing, and livestock-raising. Since income of the agricultural sector was relatively low, men tended to engage in other income-generating endeavors such as backyard gardening while women and children worked as garment/dressmakers, rag makers, and stuff toy makers to augment their household income. The children of farmers and fisherfolks, because of their households limited income, were generally unable to go to school and were compelled to take on their parents occupation, thus the vicious cycle of poverty. In Lower Bicutan, 38 percent of the working population lived on salaries and wages, while 34 percent had their own businesses. The rest relied on remittances from their relatives abroad. Based on a survey conducted in 1996, Lower Bicutan had an average monthly family income of Php5,562, with 24 percent of the residents earning a monthly family income ranging between Php5,500 and Php14,000. A source, who had been residing in Lower Bicutan since 1982, however, had the impression that actual unemployment rate must have been higher that statistics. She said that many people in Taguig, particularly in Lower Bicutan, were jobless. And while peace and order situation was generally okay, the youths often figured in gang fights.

The Financial Sector in Taguig A random ocular survey conducted in 1996 showed that there were three to four pawnshops, one investment house, and several 5/6 operators 5 in every village in Taguig. These credit providers were generally seen around the market stalls, busy intersections and thoroughfares, and places where there was heavy people traffic. There were also five commercial banks in Bicutan and one rural bank in Ususan; 39 multipurpose cooperatives and 12 credit cooperatives in the entire municipality.

National Statistics Office, Family Income and Expenditure Survey (1991, 1994, and 1997), http://stednet.sei.dost.gov.ph/surveys/DOLE/DOLE_Poverty_919497.htm. 4 Sari-sari stores were small storefronts that sold foodstuff and sachet-packaged products to villages or communities. They normally catered to the low-income group that could not afford bulk purchases in supermarkets. 5 These were the Indian immigrants in the Philippines who extended flexible short-term microcredit to the poor. Although they operated illegally as usurers, they had mastered the techniques of marketing and collecting from the debtors such that their their simple 5/6 business (that is, for every Php5,000 borrowed, they would collect Php6,000) flourished across generations.

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Commercial banks charged 18 percent per annum in interest and required collaterals for loans; lending investors and pawnshops charged three to five percent per month. In contrast, neither cooperatives which charged 1.5 percent per month nor the 5/6 operators who charged between 10 and 20 percent per month required collateral for loans. Friends and relatives were another source of credit for the people of Taguig. While they too did not require collateral, they sometimes also applied exorbitant interest rates on credit. In Lower Bicutan, SMMPC was the only cooperative that offered credit facilities. Since there were no banks in the village, major sources of financing in the area were pawnshops and two lending investors. These creditors offered short-term loans of up to Php100,000 for 90 days at five percent interest per month. Their commonly accepted collaterals were real estate and chattel mortgages. However, since most lands in Lower Bicutan did not have titlesonly tax declarations were used as proof of ownershipreal estate mortgage became problematic. In Taguig, people availed of credit facilities generally for the purchase of household appliances. Whenever a household did decide to buy an appliance, it was more particular about the monthly amortization than about the applied interest rate. SMMPC, for example, charged 32 percent over six months if payments were made daily, and 30 percent if made monthly. However, 70 percent of the residents preferred to buy from popular distributors outside Taguig using credit cards or loans from their friends and relatives. The top selling appliances in the area were television sets, followed by refrigerators (which were also used to store ice and ice candies that households sold to their neighbors), washing machines, electric fans, and karaoke.

The Cooperative Sector in Taguig Of the 73 registered cooperatives in Taguig in 1996, only three were located in Lower Bicutan. Most of them were situated in Western Bicutan (26 cooperatives) and Bagumbayan (10). In 1994, the Cooperative Development Council conducted a workshop among cooperatives to determine their areas of concern. The main issue raised during the workshop was the Local Government Unit (LGU) representatives lack of experience and initiative to organize the cooperatives, call a meeting, or even draft programs intended to rehabilitate the cooperative movement. As cooperatives were also often perceived as taking political sides, they presented a threat to the incumbents, making it difficult for the cooperatives to establish an alliance with the LGU. The common problems encountered by the cooperatives were the following:

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Cooperative Type Consumer Leadership

Specific Concerns

Management / Committees Members

Vested interests Irregular meetings Poor attendance in meetings Nonpayment of financial obligations Lack of management skills Management of collectors, resulting in late payments Lack of management skills Lack of commitment Refusal to patronize the services offered by their cooperatives Late payments of obligations Untimely withdrawal of funds Lack of coop education Collection of loans/ deposits Vested interests Lack of management skills Lack of value formation Late payments of obligations Lack of coop education Nonpayment of dues Non-attendance of meetings Nonperformance of other duties and obligations Dealing with competition Limited markets Collection Low quality / poor quality control Lack of capital

Credit Management/ officers

Members Service Members

Operations Producers Operations

Source: Adapted from Antonio C.T.Pascual, An Integrated Development Strategy for the Simbayanan ni Maria Multipurpose Cooperative, Management Research Report, Asian Institute of Management, 1997.

In 1992, the Samahan ng mga Kooperatiba sa Taguig (SANGKOT), a federation of cooperatives in Taguig, was established. It initiated programs for farmers and for existing and start-up cooperatives. The federation, however, lasted for only two years due to mismanagement, the lack of financial capability (despite funds generated from the members and the Cooperative Foundation of Taguig, Inc.), poor repayment rate, and the personal interests of the officers coming into play. Sources recalled that SANGKOT ventured into consumer goods trading the officers were said to be the first to avail of appliance loans but never got to pay back their debts.

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THE SMMPC IN FOCUS Brief History of the Cooperative The provision of financial services to the poor started as part of the Parish Churchs ministryworship, education, social services, temporalities, and youth development under the social services arm. The Church workers believed that We could not preach the Gospel to empty stomachs. As the parish priest of Lower Bicutan, Fr. Anton first ventured into microcredit in 1989 when a benefactor granted him Php1 million to be given out to individuals as micro loans of Php5,000 each. However, only Php100,000 in repayments was collected. Mr. Edgardo Contreras, then a Church volunteer worker, recalled, We attributed this phenomenon to the members lack of value formation and sense of obligation to repay whatever they owed. Because of this experience, putting up a cooperative was conceived. We consulted the parish and participated in a cooperative seminar conducted by the San Dionisio Credit Cooperative in Paranaque. By establishing SMMPC in 1991, Fr. Anton formalized the extension of various services and the provision of loans to small-scale entrepreneurs. SMMPC had the following objectives: 1. To promote the cooperative among its members and create funds to be able to grant loans for productive and providential purposes; 2. To procure and distribute commodities to members and non-members; 3. To undertake joint agricultural or industrial production; 4. To supply production inputs to members and help market the product; 5. To promote an integrated cooperative system as a way of life so as to improve the social and economic well-being of the people; 6. To undertake any related activity leading to the members self-government and to improve the peoples social and/or economic well-being under a truly just and democratic society; 7. To work with the cooperative movement, non-government and government organizations in the promotion and development of cooperatives and in carrying out government policies; and 8. To undertake other activities for the effective and efficient implementation of the provisions of the Cooperative Code.

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Its vision and mission were expressed thus:

VISION A self-reliant community in Lower Bicutan and the adjacent villages through its cooperative integrated development programs.

MISSION SMMPC shall develop and undertake socioeconomic programs and activities for the improvement of the quality of life of the residents.

Mr. Contreras, who became the cooperatives first elected Chairman, recalled that Mt. Pinatubo erupted right after the cooperative was established, covering most parts of Central Luzon and Manila with ashes. He said that the resulting economic crisis from the disaster made it doubly difficult for a start-up cooperative like SMMPC to pursue its objectives. The cooperative had started with only 33 members and a capitalization of Php16,000. As Chairman, Mr. Contreras had to grapple with several issues. He recounted, I had to establish the credibility of the cooperative. The recruitment of members was done by promoting the newly-formed cooperative during Sunday mass and through the use of guerilla tactics, that is, we moved around the four nearby villagesLower Bicutan, Bagumbayan, North Daang Hari, and Sitio de Asis. However, people were too afraid to put their resources into something that they feared was not stable. Since there were many fly-by-night cooperatives, people were afraid SMMPC might run off with their money. Aware of what it was up against, SMMPC thus hired managers whom the people could trust. These managers were existing volunteers in the cooperative. It issued its first loan of Php1,000 in September in 1991. Mr. Contreras said, Initially, very few members wanted to avail of loans, which they found too small to begin with. Thus, SMMPC increased the minimum loan size to Php5,000 to make the service more marketable. SMMPC also had to compete with the 5/6 operators who did not require any investment or membership to any one prior to granting a loan. According to Mr. Contreras,

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These operators also did not require attendance in seminars during the loan term and neither did they impose any limit on the loan amount. The cooperative limited the allowable loan to three times the savings amount or share capital of the borrowing member. Moreover, these operators were able to release the loan within the day it was applied for. In contrast, since the SMMPC staff was composed of volunteers who did not necessarily have any banking experience and were thus not used to processing financial transactions, it took them two weeks to release the loans. Realizing the need to build the management capabilities of its officers, SMMPC used the cooperative education and training fund (CETF) 6 for skills training and personal development seminars of the volunteer staff. Finally, Mr. Contreras had to deal with some very enterprising members who lent out the loans they obtained from SMMPC to non-members who were not subjected to a background investigation nor screening vis--vis the selection criteria, thus causing SMMPCs past due account to rise. Since SMMPC was a parish-based cooperative, its Board then was composed of members of the Parish Pastoral Council who had good leadership because of instilled values of service and sincerity, but simply took directives from the parish priest. In a way, it was really the parish priest who ran the show, Fr. Anton said, referring to himself. In 1992, Fr. Anton was assigned to Makati City. Believing that the cooperative would collapse if the next parish priest did not have social orientation, the Board decided to take SMMPC out of the jurisdiction of the parish church and transformed SMMPC into a community-based cooperative. The SMMPC Board-cum-Pastoral Council was maintained while a new set of officers was appointed to the Parish Pastoral Council. Though still in Makati in 1995, Fr. Anton was elected SMMPC Chairman.

Products and Services Credit Service Credit Service was the lifeblood of the cooperative which offered two major types of loans, namely, regular and special loans, which had the following features:

Equal to 10 percent of the cooperatives net income.

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Type of Loan

Use

Loan Size (at 1.5 percent interest per month)

Loan term

Service fees (loan period and applicable service fee rate)

Capital Build Up 7 Required and Interest Rate

Regular Productive loans For additional capital needed by the borrower for his/her business venture Calamity or educational needs Illnesses, accidents, thefts, or fire Maximum Php20,000 Maximum of one year Php1,500 to Php5,000 3% Php6,000 to Php10,000 3.5% Php11,000 to Php15,000 4% Php16,000 to Php20,000 4.5%

One to four months 2% Maximum of Php7,000 75 percent of fixed deposit but not exceeding Php20,000 Maximum of Php3,000 Php50,000 to Php500,000 Maximum of Php 500,000 Maximum of Php100,000 Maximum of three years Maximum of one year 3% Maximum of one year Maximum of two months Five to eight months 3% Nine to 12 months - 4%

Providential loans Emergency loans

Over-thecounter Special Loans Real estate Chattel

One month

2%

All loans bore an interest rate of 1.5 percent per month. Every loan transaction required a service charge and capital build-up, both of which were deducted upon the release of the loan. An additional service or extension fee of three percent was also charged for every petition to extend the maturity of the loan, payable upon the approval of the petition. All loans bore an interest rate of 1.5 percent per month, the payment for which was included in the monthly amortization. For all loans amounting to Php50,000 or below, an amount equivalent to one percent of the loan was deducted and placed in the SMMPCs loan guarantee fund; any loan amount higher than Php50,000 required an insurance of Php12.50 per Php1,000 of loan.
Refers to the members share of equity or ownership in the cooperative and the corresponding interest or earnings on investment. This amount adds up to the fixed deposit investment of the membercooperators which is used for the cooperatives working capital.
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Regular loans did not require collateral but the borrowers had to undergo a series of graduated credit packages (i.e. loan limit increases with the number of loan cycles) to gauge their creditworthiness before the loan approval. On the other hand, special loans required either chattel or real estate mortgage. In addition to the abovementioned charges, special loans required an annotation fee of Php750 per Php50,000 of the loan amount, but not to exceed Php3,000. From 1991 to mid-1996, SMMPCs total loan releases rose from Php539,500 to almost Php15 million (Exhibit 2 SMMPC Loan Releases, 1991-1996). Its capital buildup stood at Php342,448 while its repayment rate was at 96 percent as of June 1996. (Exhibit 3 SMPC Repayment Rates, 1996) Approval of a loan application depended on the cooperators actual need, credit standing in the cooperative and the community, earning capacity, paying capacity, the solvency of his co-makers or the value of his/her collateral, and the ageing of deposits (30 days after attending the pre-membership education seminar or full payment of the Php500 fixed deposit). The Credit Committee reviewed and approved or rejected all the loan applications. To match competition, especially the 5/6 operators, SMMPC tried to process regular loan applications within a week, and applications for special loans within two weeks. (Exhibit 4 Comparison of Services, SMMPC and Competitors) Of the 117 cooperators who Fr. Anton interviewed, 83 percent had availed of SMMPCs credit services. Of this number, 48 percent borrowed for productive purposes (often, for additional capital to finance existing trading and micro enterprise activities and for renovating houses to be rented out), 33 percent for providential needs, 14 percent for emergencies. The remainder borrowed for special purposes such as business operations requiring large capitalization (higher than the maximum amount under the productive loans). From among the Taguig residents, however, only 30 percent of the survey respondents had borrowed from SMMPC as most of them either relied on personal savings and income, or borrowed from 5/6, rural banks, lending investors, family or friends, or from SMFIs micro-lending program. Aside from loans, SMMPC also offered life insurance to cooperators who had fully paid their share capital.8 This program was called the Damayan Trust Fund whereby on the day of a beneficiarys death, each member contributed Php10.00 if the deceased person was the member himself/herself, or Php5.00 if the deceased person was only a members beneficiary.

For a fee of Php500, a cooperator could become a lifetime, full-fledged member of the cooperative.

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Consumer Service SMMPCs Consumer Service Department, which handled the sale of consumer goods and appliances, was organized only in 1995 that it had to grapple with procedures, the reporting, and delivery systems. There were cases of goods lost in transit or lost deliveries, unknown signatory and/or unknown receiving party so loan could not be collected accordingly, and borrowers running away with the loaned appliances and goods. Appliance sales were the Consumer Services bread and butter but the Department had to fine-tune yet its relationship with the Credit Service Department, particularly in assessing the creditworthiness of the member-cooperators. SMMPCs two main competitors in Taguig were located outside the cooperatives area of operation and did not offer delivery services. SMMPCs 10-percent mark-up on every product made its cash sales less competitive than the competitors but the interest rate it imposed on credit was lower than the competitors, giving SMMPC a decided advantage (Exhibit 5 Comparison of Prices, SMMPC and Competitors). Still, SMMPC faced stiff competition from the big corporations outside Taguig such as those from Makati, Paranaque, Pasay, and Las Pinas. In the sale of rice, on the other hand, SMMPC competed with the local dealers. SMMPC sold appliances through its sales force of 32, most of them women, who conducted door-to-door direct marketing. Their incentives included commissions equivalent to 30 percent of gross profit and cash awards given to top sales performers who also served as collectors. Based on the survey conducted by Fr. Anton in 1996, only 36 percent of the 117 respondents bought appliances from SMMPC, while 32 percent bought outside the cooperative despite the fact that they found the price offered by SMMPC right for them (81 percent), its delivery system efficient (86 percent), its terms of payment acceptable (74 percent), and the quality of products satisfactory (74 percent). Based on another survey by Fr. Anton in 1996, he found out that of the 100 randomly selected samples, only 18 percent bought appliances from SMMPC on installment, while 75 percent bought appliances in cash in the commercial areas outside Taguig. The commercial establishments charged extra for delivery but the buyers perceived the goods supplied by these stores to be of better quality and at lower prices; they also thought that since SMMPC also sourced its supplies from these stores, they might as well buy directly from them.

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Membership Only those who had resided in Taguig for at least three years, either as homeowners or lessees, could become members of SMMPC. In June 1996, SMMPCs membership reached 1,220, of which 1,153 (94 percent) were regular members, 198 were special depositors 9 , and the rest, associate members 10 . Seventy-six percent of the members were from Lower Bicutan, where they covered less than two percent of the total population. Other members came from seven other villages in Taguig. In the last five years, a total of 429 patrons (24 percent) withdrew their membership from the cooperative either because they transferred residence outside SMMPCs area of jurisdiction or could no longer attend meetings and activities due to business and/or personal reasons. Emergencies forced some members to withdraw their funds. Some members who were unable to pay their dues on time opted to terminate their membership. (Exhibit 6 SMMPC Membership, 1991-1996) The same survey conducted by Fr. Anton among the cooperators revealed that 28 percent of the members participating in the study joined SMMPC in the hope that the cooperative could help improve their economic plight. Another 19 percent intended to borrow capital from SMMPC to be able to start their business or increase the capitalization of their existing businesses. Still others (17 percent) joined the cooperative for various financial reasons: the low interest rate imposed on loans, the savings facilities available, and the availability of emergency funds. According to the Pre-Membership Education Seminar forms, the average monthly income of members ranged from Php5,875 to Php7,889. Around half of the members were salaried workers and 23 percent were microentrepreneurs. The family size of members ranged in number from five to six. Fr. Antons survey also showed that only 15 percent of the members were able to finish college; the rest were college undergraduates, vocational course certificate-holders, and high school and elementary levels. Of the total members, 30 percent were housewives who simply cared for the children and did the chores at home. They simply had no chance to go out of their house to find work. This last segment thought that SMMPC could help them through livelihood programs that would enable them to augment their income even in the confines of their homes. Aside from economic matters, health and water supply were the primary concerns of the members. Common illnesses were colds, fever, and headache. Water was mostly sourced from deep wells (45 percent) or from commercial sources (41 percent), which imposed monthly charges ranging from Php150 to Php1,000. When asked if SMMPC was able to live up to its mission of helping its members uplift their economic conditions, 97 percent of the survey respondents answered positively, saying that the cooperative helped their family financially through its credit services and low interest charges on loans.
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Non-members who were willing to place fixed deposits in the coop. Members who could avail of all coop services except loans and had no voting power.

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Organizational Structure The general assembly was the highest decision-making body of the cooperative. Under this body was the Board of Directors (BOD), the highest-policy making body elected by the general assembly. SMMPCs BOD, all working on voluntary basis and did not get paid for holding their posts, took on an active role in the cooperative: they participated in decision- and policy-making and coordinated with the committees as often as possible. The board had four working committees, as follows: 1. Education Committee. As of 1996, the Committee conducted only one program, the Pre-Membership Education Seminar, for the members-cooperators. 2. Audit and Inventory Committee. Having one only certified public accountant on board, the Committee failed to audit SMMPC religiously. 3. Election Committee. Members of this Committee lacked planning and organizing skills. Previous records showed that the committee did not screen the candidates for positions properly. 4. Credit Committee. The most active committee despite its being understaffed; its members needed further training in credit and collection. As of 1996, the Committee had not had regular meetings with the management staff. Composed of eight personnel, the management team reported to the BOD (see Exhibit 7 for their profiles). Fr. Anton observed: The BOD, which is supposed to be legislative in nature, is tasked to monitor and evaluate the operations of the cooperative. Majority of the BODs are also directly involved in operations. Further, since the committees are in the same level as the BOD and work independently from the BOD and from each other, non-coordination among these committees is inevitable. There is also a gap between the BODs and the management staff. A number of policies approved by the BOD have not been properly channeled to the managers, resulting in conflicting decisions and the overlapping of old policies already superseded by new policies. But generally, the working relationship in SMMPC is healthy, although occasional conflicts arise due to work pressure. One good thing about the Board and the management staff is their openness to change.

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At the grassroots level, the cooperators were organized through the Pook Tulungan 11 (PT), which was under the Credit Committee. A PT group composed of five to ten members elected their PT leader whose functions included the calling of PT meetings, the signing of loan applications, recommending possible cooperative members, and assisting in loan collection. The PT members monitored one another and assisted management in the dissemination of information, particularly BOD policies. Fr. Anton commented, Because most PT leaders were not sufficiently informed of the policies and procedures of SMMPC, they caused miscommunication and confusion among the members. Many cooperators had also lost contact with their PTs because of the leaders oversight. The PT structure has proven to be too bureaucratic that members have difficulty getting their loans approved by their respective PT coordinators 12 .

Systems and Procedures SMMPC did not maintain efficient records of its inventory facilities, property, membership profile, and other pertinent cooperative memoranda. Thus, delinquency status of loans had not been properly monitored since the cooperatives establishment. Even the suggestion box, which is intended to get feedback and suggestions from the members, has been missing for quite sometime now, Fr. Anton said in dismay. The cooperative hoped to install a computerized system for its consumer and credit services soon. Fr. Anton added, Each committee is supposed to submit its list of proposed annual programs and budget to the BOD, which would then assess and evaluate the proposals according to the general assemblys approved programs. However, not one of the SMMPC committees have submitted an annual program and budget to the BOD in the last five years. Monitoring and evaluation were undertaken either by the committee heads or by the committee as a group. The BOD then called all the committee heads and managers for the monthly monitoring and evaluation of their performance. If the BOD saw it fit, it made the necessary recommendations, gave suggestions, or issued new policies.

A phrase which meant in a place for mutual help. Elected representatives of the PT leaders. Both PT Leaders and Coordinators worked on voluntary basis and were not treated as coop employees.
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Fr. Anton opined, The cooperative needs additional personnel, especially those with accounting background and sales experience. Although it conducts external sourcing of candidates for the various positions, priority is given to cooperative members and their beneficiaries who reside within the area of SMMPCs operation. The managers and/or directors evaluate the applicants based on the latters knowledge, expertise, and experience. At present, SMMPC suffers from a lack of performance appraisal mechanisms of its full-time staff, a competitive salary structure, an incentive scheme, and career development plans for its personnel.

Performance From 1991 to 1996, SMMPCs assets grew from Php445,575 to over Php26 million (Exhibit 8 SMMPC Financial Performance). Of this amount, Php10 million was invested in the Metro South Cooperative Bank. As of June 1996, SMMPC had total loan disbursements of more than Php9 million, broken down as follows: 51 percent from special loans, 42 percent from productive loans, 6 percent from providential loans, and one percent from emergency loans. At the end of each fiscal year, SMMPC distributed its net surplus as follows: 10 percent for its reserve fund; 10 percent for the education and training fund; 10 percent for lands and buildings, community development, etc. The remainder was made available to the members in the form of patronage funds and interest on their share capital, the rate of which was not to exceed the normal rate of return on investments prescribed by the Cooperative Development Authority.

MOVING FORWARD As Fr. Anton looked forward at SMMPCs prospects, he expressed thus, SMMPC is bullish in the entrance of the third millennium. By capitalizing on its strengths and overcoming its weaknesses, the cooperative can become a major socio-economic player in the municipality of Taguig and a potent catalyst in the development of other key actorsthe government organizations, the non-government organizations, or people s organizations. But with what has been happening to SMMPC and its environment in the last five years, how do we grow the cooperative while ensuring its sustainability?

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Exhibit 1
Population of Taguig, 1994 Name of Village Signal Village Upper Bicutan Lower Bicutan Western Bicutan Bagong Tanyag Bagumbayan Hagonoy Ususan Sta. Ana Ibayo-Tipas Tuktukan Wawa Napindan Calzada Palingon-Tipas Bambang Ligid-Tipas Maharlika Village Total Area (has.) 110 144 235 355 217 362 162 145 22 156 31 198 270 177 117 92 68 51 2,912 Male 28,488 24,656 20,158 16,826 13,661 12,994 7,830 6,830 5,498 4,998 3,998 3,665 3,332 3,165 3,165 2,832 2,666 1,833 166,595 Female 29,650 25,663 20,981 17,513 14,218 13,525 8,149 7,109 5,772 5,202 4,162 3,815 3,468 3,295 3,295 2,948 2,774 1,907 173,446 Total Households 58,138 11,628 50,319 10,064 41,139 8,228 34,339 6,868 27,879 5,576 26,519 5,304 15,979 3,196 13,939 2,788 11,270 2,244 10,200 2,040 8,160 1,632 7,480 1,496 6,800 1,360 6,460 1,292 6,460 1,292 5,780 1,156 5,440 1,088 3,740 748 340,041 68,000
Density (Total pop'n/area)

529 349 175 97 128 73 99 96 512 65 263 38 25 36 55 63 80 73 117

source: Taguig Municipal Planning and Development Office

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Map of Taguig

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Exhibit 2 SMMPC Loan Releases, 1991-1996

Year 1991 1992 1993 1994 1995 1996 Total

Table 2.1 Loan Releases from June, 1991 to June, 1996 (in pesos) Productive Providential Emergency Special/Character 377,000 81,000 2,376,890 461,710 122,265 17,050 3,194,210 580,570 33,370 41,300 2,856,955 1,056,128 106,599 11,950 5,274,500 1,209,500 152,258 3,375,000 4,001,198 730,185 176,170 9,973,600 18,080,753 4,119,093 590,662 13,418,900

Total 458,000 2,977,915 3,849,450 4,031,632 10,011,258 14,881,153 36,209,408

Year 1991 1992 1993 1994 1995 1996

Table 2.2 Number of Persons Granted Loan Releases from June, 1991 to June, 1996 Productive Providential Emergency Special/Character 113 56 595 214 45 58 624 219 24 140 388 338 45 39 568 379 50 129 408 207 40 151
Table 2.3 Average Loan Size from June 1991 to June 1996 (in pesos) Productive Providential Emergency Special/Character 3,336.28 1,446.43 3,994.77 2,157.52 2,717.00 293.97 5,118.93 2,651.00 1,390.42 295.00 7,363.29 3,124.64 2,368.87 306.41 9,286.09 3,191.29 3,045.16 26,162.79 9,806.86 3,527.46 4,404.25 66,050.33

Total 169 912 1,007 810 1,126 806

Year 1991 1992 1993 1994 1995 1996

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Exhibit 3 SMMPC Repayment Rates, 1996

Amount of Delayed and Past Due Accounts 664,538.06 805,035.78 742,701.65 895,643.77 9,377,019.87 538,991.79 Estimated Balance on Receivable 5,547,882.72 6,479,579.94 8,064,764.66 8,587,672.47 10,849,914.51 13,240,363.49

January February March April May June

Outstanding Receivable 6,212,420.78 7,284,615.72 8,807,466.31 9,483,316.24 11,786,934.38 13,779,355.28

Repayment Rate 89% 89% 92% 91% 92% 96%

Exhibit 4 Comparison of Credit Services, SMMPC and Competitors

Rates Service fee documentary stamps SMMPC 3% regardless of term none Rural Bank A 3% P105 deduction for P120,000 loan None according to loan bracket Lending Investor 3% P200 for a P20,000 loan P400 for a P20,000 loan 1% 5/6 none none

notary fee credit life insurance

none 1% - P50,000 and below 1.25 - above P50,000 none P1,000 to P4,000 none none 1.5% 34% annually

none

none

processing fee annotation charge E-VAT application fee interest rate effective annual interest rate

0.25% None 10% P2,000 5% per month 116% annually

none none 10% input tax none 2% 39% annually

none none none none 20% per month 76% payable weekly 93% daily payments

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Exhibit 5 Comparison of Consumer Service, SMMPC and Competitors

Comparison of Cash Prices of Appliances Competitor Appliance Model SMMPC A G.E. Refrigerator GT08 P13,365 P12,150 National Uprigh Freezer NR2201F P8,735 P8,850 National Washing NAS40A3 P2,860 P2,880 Machine G.E. Refrigerator GS06 P8,965 P7,480 National Washing NA35A1 P4,840 P4,448 Machine Panasonic Karaoke RQK640 P8,910 P8,548 National Aircon 3/4 HP P13,167 P12,700 Comparison of Price of Appliances on Credit Basis Credit Terms 1 - 3 mos 4 - 6 mos 7 - 9 mos 10 - 12 mos. Over 1 year SMMPC 1.5% interest members 2% interest members 2.5% interest members 3% interest members maximum credit Competitor A 6% month interest 6% month interest 6% interest 6% interest 6% interest Competitor B none - cash basis none - cash basis none - cash basis none - cash basis none - cash basis Major Credit Cards 3% interest 3% interest 3% interest 3% interest 3% interest

Competitor B P12,150 P8,850 P2,600 P8,150 P4,400 P8,100 P11,970

Regular M em bers NewM em bers Subtotal % age increase W ithdraw nM em bers % age of w ithdraw al Total % age change of total
source: Adapted fromPascual, 1997

Exhibit 6 - M em bership, 1991-1996 1991 1992 1993 1994 385 791 968 387 428 202 83 387 813 993 1,051 111% 26% 9% 2 22 25 84 1% 3% 3% 8% 385 791 968 967 105% 22% 0%

1995 967 225 1,192 23% 162 14% 1,030 7%

Jun-96 1,030 324 1,354 31% 134 10% 1,220 18%

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Exhibit 7
Mrs. Zeny Alvarado Chairperson Board of Directors, 1996 One of the incorporators of SMMPC Attended seminars and training programs in the University of Asia and the Pacific, Planters Development Bank, and Polytechnic University of the Philippines on subjects related to cooperative management Licensed non-life insurance agent Marketing Executive of a realty company With accounting background Ordained priest of the Archdiocese of Manila Executive Director of Simbayanan ni Maria Foundation Had a Certificate in Program for Development Management, Asian Institute of Management Candidate 13 , Master in Development Management, Asian Institute of Management Businesswoman Medical technician by profession Businessman Worked as an Operations Manager in two shipping companies Certified Public Accountant Attended seminars and training programs at the Executive Development Academy, Technology, Livelihood and Research Center (TLRC), and Development Management Consultants Former military officer Managed own distributorship of beverage Graduate of business administration major in accounting Graduate of Bachelor of Science in Cooperatives Assisted SMMPC in conducting the Pre-Membership Education Seminar Management Staff, 1996 Certified Public Accountant Retired bank manager with 12 years of banking experience Handled finance and administrative functions of SMMPC Graduate of Business Administration major in Marketing and Accounting College graduate Managed own business in Taguig Former officer of Rustans Corporation and Duty Free Philippines Commerce graduates

Mr. Jessie Ramos

Fr. Antonio C.T. Pascual

Mrs. Teresita Franco Mr. Ely Bisco Mrs. Tess Cahanding

Mr. Ador Coloma Mrs. Vicky Ungco Treasurer Ms. Hilda Tinampay Secretary

Mrs. Baby Mariano Management Consultant Ms. Liberty Felipe Credit Service Manager Mrs. Stella Jacob Consumer Service Manager

Ms. Concepcion Mariano Mrs. Aida Pascual Bookkeepers Mrs. Nida Arizabal Ms. Mary Anne Teodosio Ms. Pinky Amarga General Clerks
13

College graduates

At the time of the case, he was a candidate of MDM. He graduated in 1997.

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SMMPC Organizational Chart, 1996

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Exhibit 8
Statement of Financial Condition for the Years ending 1991 to 1996 ASSETS Simbayanan ni Maria Multipurpose Cooperative Assets Petty Cash Fund Cash on Hand Cash on Bank Accounts Receivable-trade Merchandise inventory beg. Loan Receivable Productive Providential Character Special Emergency consumer Store Total Advances receivable Cash advances Health care receivable CISP receivable SSS receivable Penalty receivable Interest receivable Special loans receivable Miscellaneous receivable Prepaid rent Prepaid insurance investment Delivery equipment Leasehold improvement Less: amort. Of lease. Imp. Office supplies on hand Office materials on hand Office fur. & equipment Less: accumulated dept. Land and building Total Assets 1991 1992 1,000.00 7,073.84 64,578.49 1993 1,000.00 4,858.01 60,928.11 1994 1,000.00 3,611.63 52,674.24 1995 1,000.00 117,698.24 330,231.53 155,852.53 32,278.00 3,239,531.43 554,804.59 1996 2,000.00 160,501.93 797,144.87 3,415,652.13 65,240.72 6,117,166.09 615,324.97

37,606.55

320,912.50 52,406.00

1,049,526.00 1,646,118.11 2,024,172.84 141,762.30 244,481.67 490,873.30 3,600.00 7,400.00 2,585.00 7,774.00 12,253.00 47,380.00 18,000.00 1,220,662.30 1,910,252.78 2,565,011.14 3,157.09 1,169.00

2,433,681.65 19,064,685.34 76,771.45 169,334.72 6,304,789.12 25,966,511.12 6,765.86 43,602.03 16,466.64 11,339.80

373,318.50 2,450.00

3,844.96 749.10 17,510.50 4,531.37 2,350.00 705.35 400.00 13,624.52 3,000.00 16,000.00 2,163.79 7,089.12 5,350.00 13,350.00 4,547.67 10,030,000.00 11,129,300.00 313,584.00 261,965.30 13,227.00 41,688.53 9,927.00 3,300.00 6,514.40 6,514.40 288,851.48 77,439.44 211,412.04 3,605,200.00 17,392,634.34 45,713,290.10 112,986.48 38,272.24 74,714.24

6,000.00

6,000.00 15,000.00

6,181.45 658.50 7,284.00 183.84 7,100.16 445,574.76

8,362.20 24,404.30 9,135.64 15,268.66

9,723.29 28,079.30 16,392.89 11,686.41

8,014.20 62,399.30 24,855.17 37,544.13

1,332,983.95 2,021,722.95 2,700,479.86

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LIABILITIES, RESERVE AND MEMBERS' EQUITY Simbayanan ni Maria Multipurpose Cooperative

Liabilities & Members' Equity Accrued expenses Damayan Fund Accounts payable Trade Time Deposit Saving deposit Customers deposit Interest on savings/capital Loans payable Unearned income Insurance SSS payable Health care payable WTX payable Dues to CDA/CETF Div. & Patronage refund Rent payable Total Current Liabilities Total Long-Term Liabilities TOTAL LIABILITIES RESERVE, SHARE CAPITAL & SURPLUS Share Capital Subscribed Capital Stock (7141 shares-P40/share) Paid-in Capital Stock Capital Build-up Total Share Capital Undivided earnings Retained earnings Net surplus 1991 1992 849.00 103,384.53 752,128.60 7,399,707.42 1,030,643.14 3,480.00 10,179,751.40 468,547.74 14,310.05 721.60 8,851.12 941.31 41,198.81 1993 1994 1995 1996

104,533.45 360.35 110.00

221,034.56

340,559.98 59,903.21

355,320.77 100,109.59

2,189,051.00 484,338.70 2,010.00 1,013,584.00

20.00 5,088.70

105,003.80 105,003.80

3,000.00 224,903.56 224,903.56

10,562.75 25,672.81 5,000.00 441,698.75 441,698.75

16,328.01 42,904.11 618,047.01 618,047.01

41,198.82 321,623.13 4,056,894.35 4,056,894.35

19,900,281.19 5,500,000.00 25,400,281.19

357,050.00 310,269.00 6,157.68 316,426.68 24,144.78

1,034,362.47 64,858.75

1,555,042.29

1,980,191.95

12,895,669.79 14,428.82

16,375,646.19 14,451.89 3,317,594.70

Annotation Textile CETF fund KB guarantee fund Reserved educational fund General reserved fund Reserved optional fund Damayan Fund Social Fund Loan guarantee fund Miscellaneous fund Total share CapitalEarnings and Res. Fund Total Liab., Res. And Capital

70,628.70 800.00 6,612.75 3,452.20 2,414.48 4,030.21 2,414.48 23,086.18 21,125.50 10,250.26 5,404.37 45,030.25 41,556.02 24,870.82 99,414.94 91,297.64 195,402.22 13,808.68 23,780.00 1,054.12 1,796.76 79,723.12 91,297.64 216,821.50 184,191.22

445,575.26

1,108,080.39 1,332,983.95

2,051,017.67

2,700,479.86

17,416,367.26

45,753,487.03

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Statement of Operations For the Years Ending 1991 to 1996

1991 Sales Less Sales discounts Net Sales Less cost of sales Inventory beg. Purchases Freight in Freight out Delivered cost of purchases Less purchase discounts Goods available for sale Less inventory end Cost of goods sold Gross profit on sales Financial charges Gross income - consumer Add income from loans: Interest Income on loan Member Counterpart Bank Interest on Deposits Service fee Penalty Filing fee Seminar fee Membership fee Other income Gross income - credit Gross operating income Less expenses: Salary & allowances Commission Interest/savings/time Rent SSS, MED. & EC. Office supplies Seminar/PMES Depreciation fur. & fixtures Repairs and maintenance Representation Bad debts Amort. Of lease improvements Telephone and telegraph Bank charges Damayan Fund Transportation Advertising expense Souvenir magazine Light and water Gasoline Professional fee Membership Sangkot/MMCC Withholding Tax Insurance KB guarantee fund Miscellaneous expenses Total Expenses Add Prior period adjustments Operating income Other income and expenses Commission Interest income Interest expense Documentation Miscellaneous INCOME Less prior period adjustments NET INCOME SURPLUS Less prior period adjustments Add other income Less administrative expenses NET SURPLUS 25,919 63,410 126,998 1992 1993 1994 1995 1,575,631 1,545 1,574,086 Credit 1996 Consumer 10,726,497 15,007 10,711,490 37,278 9,897,979 3,049 9,901,027 3,615 9,928,593 65,241 9,863,352 848,137 294,472 1,142,610 2,336,473

1,523,147 1,500 544 1,525,191

37,278 1,487,913 86,172

20,895 960 1,154 10,985 771 980 6,093 9,400 2,026 53,264

79,525 2,535 69,461 8,052 5,080 7,100 9,420 2,198 183,372

192,489 1,274 100,681 33,780 4,281 4,115 4,300 4,299 345,220

316,135 1,148 130,122 70,114 3,620 3,750 3,750 11,798 540,437

631,002

324,818 72,183 16,921 15,650 13,150 38,113 1,111,836 1,198,008 288,133 99,666 72,200 25,127 23,165 18,642 13,417 11,750 10,567 9,927 8,515 8,217 6,300 5,710 2,600 1,829 1,750 1,000 305

1,197,113 173,393 21,226 23,125 3,751,329 4,893,939 296,588 982,415 51,700 9,054 86,740 18,003 12,193 192,956 112,118 126,744 68,100 276 42,248 64,280 9,904

1,400 183

44,850 6,475 9,000

128,963 8,757 24,000 16,819 3,041 7,257 1,391 3,578 300 482 1,701 3,300 264 2,000 100

232,531 10,067 24,000 23,399 5,928 8,462 5,026

10,153 394 8,555 2,200 17,624 8,952 9,578

2,192

9,107

382

1,048 3,000 500 1,422 14,872 48

3,247

863

1,539 1,500

216

412 8,953

231 361 368 27,345

400 5,694 119,963

400 3,452 12,417 218,222

5,404 14,650 337,946 1,814

47,002 655,820

1,466,015

627,237

5,100 2,805 2,404 202,492 542,188 44,772 497,416

2,000 2,788,379 12,309 2,776,070

25,919 (868) 1,241,723 683,284.81 3,334,508

25,052

9,000

24,000

202,492

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