2007 Annual Report

Preparing the Way for Greater Impact

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WHO WE ARE KMBI’s vision is to see people in communities live in abundance with strengthened faith in God and in right relationship with their fellowmen and the rest of creation.

The organization and its people is driven by its mission of being a Christ-centered development organization existing to help in transforming the lives of its clients and develop its human resources who will provide sustainable microfinance, training, and demand-driven non-financial services.

All of KMBI’s programs and projects are anchored on the values of Respect, Integrity, Stewardship, Commitment to the Poor, Discipline, Innovation, and Excellence.

In 2007, it began its journey towards Goal 25.250 to reach out to 250,000 clients on its 25th year.

Table of Contents 4 6

Messages

2007 Performance Highlights 8 2007 Accomplishments

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2007 Annual Report

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Stories of Transformation

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Awards and Recognitions

The CHAIRMAN speaks DR. AMELIA GONZALES Chairman and President

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t is my pleasure to announce that 2007 has been a successful year for KMBI. Its seven strategic directions that charted its path to full action leading to greater impact in the next five years are being crossed into and the road map is being followed. We have remained focused on accomplishing our mission towards poverty alleviation. More than that, the organization’s determination in seeing transformation beginning with the lives of the program members and staff up to the communities has increased as plans were realized. The task of the organization is unique and vital since we are maximizing women capacities through the delivery of financial and non-financial products and services, forging into community development, enhancing potentials of our human resources and building symbiotic relationship with local and international partners.

Based on the performance updates, our organization is at par if not above the other players in the industry.

It has almost reached the final lap of the goal it has set. One of its significant achievements during the year was the First Microentrepreneurs’ Summit which was attended by almost 10,000 microentrepreneurs from Luzon. On the other hand, we were moved to remain steadfast as different challenges in the operation and with the establishment of the bank were encountered.

As what our Executive Director said, this is our journey.

I enjoin my fellow board members and the management and staff to fulfill our Goal 25.250. As Ephesians 4:11-13 says, “Christ chose some of us to be apostles, prophets, missionaries, pastors, and teachers, so that his people would learn to serve and his body would grow strong.

This will continue until we are united by our faith and by our understanding of the Son of God. Then we will be mature, just as Christ is, and we will be completely like him.” Let us not be focused in numbers but in transformed lives. Let’s hold on to this promise because if God is with us, who can be against us? God has called each and every one of us to have a heart for the poor.

Let us continually be obedient to the call and I know God will never leave us nor forsake us.

To God be the glory!

Preparing the Way for Greater Impact

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EDGARDO MERCEDES KMBI Executive Director

The EXECUTIVE DIRECTOR confirms

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would describe the year 2007 not only as another productive year in the last 21 years of KMBI, but also as a year of confirmation. By the grace of God, KMBI was able to accomplish things which to my mind

can only be done by “big boys” in the profit sector. They were also confirmations of what the organization, by completely depending on God, can do. One of these was the ME (Microentrepreneurs) Summit held at the Araneta Coliseum and attended by almost 10,000 women-microentrepreneurs. It was the first, and another milestone, in the organization’s history!

The success of the ME Summit is a confirmation because it is the epitome of what KMBI is envisioning in fighting the problem of chronic poverty. During the summit, you would see that almost every sector was represented – the government, business, media, church, women, youth, and the civil society. All the stakeholders gathered together and contributed to the success of the event. To me, it is a picture of collective effort against the complex problem of poverty. Surely, poverty can be made history when there is the presence of God and the participation of all the stakeholders.

KMBI never claimed that it can eradicate poverty alone. It always acknowledges not only its dependence on God, but also its many limitations and need for partners. When we came up with the theme for the year 2007, “Preparing the Way for Greater Impact,” we had in our minds doing the tasks along with others doing them. Preparing the way, especially for God’s Kingdom, can never be monopolized by any earthly entity. We can only choose to take the opportunity to be used by God as His instrument in facilitating holistic transformation for His Kingdom and thereby create greater impact.

As we leave 2007, my prayer is that the accomplishments KMBI had will serve as confirmations to many of us – not of what we can do, but of what God can do – in continuously doing the work of readying the way for greater impact for it is only then that we can stride the year 2008.

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2007 Annual Report

2007 Performance Highlights

Operational Highlights

In 2006, KMBI decided to slow down in expanding and instead focus in maintaining its clients and harnessing their loyalty.

But in fulfilment of

its mandate of holistic transformation and in compliance to its strategic direction, KMBI set out once again in 2007 and expanded its reach in Bulacan and Metro Manila.

This resulted

to positive development in the organizational performance.

From almost 89,000 clients in

2005, KMBI added to its fold more than 37,000 women microentrepreneurs or a 41% growth in its outreach. This brought the organization greater opportunity to facilitate holistic transformation in the lives of its clients, and eventually see ripples of effect happening in their respective families and communities.

37,000 women microentrepreneurs... brought the organization greater opportunity to facilitate holistic transformation in the lives of its clients, and eventually see ripples of effect...

Comparative Organizational Performance 2007

2006

INCREASE (DECREASE)

126,294

89,628

36,666

P375.98 M

P277.83 M

P98.15 M

P1.19 B

P0.92 B

P0.27 B

P5,966.55

P6,187.23

(P220.68)

Portfolio-at-Risk

2.78%

3.34%

0.56%

Total Capital Build-up

P212 M

P162 M

P50 M

Financial Self-sufficiency

131.21%

149.29%

(0.18)

Operational Sustainability

133.07%

150.54%

(0.17)

37

29

8

473

367

106

4,017

2,845

1,172

INDICATORS Client Outreach Loan Portfolio Total Amount Disbursed Average Loan Size Disbursed

Number of Branches Number of Program Assistants Number of Centers

Preparing the Way for Greater Impact

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Trekking the Road to Goal 25.250

Financial Highlights Stewardship is one of KMBI’s core values and it makes sure that it is always observed in managing all its resources. For the year 2007, KMBI managed well not only its operations but also its finances. It achieved a rate of 131.21%, surpassing the industry PESO standard of 100% for financial self-sufficiency. Another encouraging result of the institution’s well managed resources is the 37% increase in its asset, which is brought by the 97.22% repayment rate on the loans it extended to women microentrepreneurs. The efficiency in the mainstream operation and effective support system were contributory to the growths achieved during the year.

It may still be a long way to go in seeing Goal 25.250

fulfilled (that is, “Reaching out to 250,000 clients on its 25th

Stewardship...is always observed in managing all its resources.

year of existence”) but by continuously exercising prudence and good stewardship in managing its resources, KMBI’s prospect to facilitate holistic transformation in its borrowers’ lives is brighter than ever.

Comparative Financial Performance INDICATORS Operational Income

2006

INCREASE (DECREASE)

67,223,450

71,055,236

(3,831,786)

Asset

620,975,639

452,085,485

168,890,154

Liability

310,083,397

209,225,538

100,857,859

Fund Balance

310,892,242

242,859,947

68,032,295

9,699,494

5,231,000

Grants

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2007

2007 Annual Report

4,468,494

2007 Accomplishments

Trekking the Road to Goal 25.250 Taking aggressive initiative to fulfill its core mission, the organization commenced its journey towards Goal 25.250 in 2007. New ventures and projects under the seven-fold strategic directions were started for the organization to withstand whirlwinds of change in the industry, to be financially independent and to beef up its economic and non-economic programs for current and prospective program members and staff. Through blending market-based initiatives with strong management capacity and unparalleled commitment from its staff, the organization has prepared to produce a powerful force of 250,000 transformed individuals ready and able to impact positive change in Filipino communities all over the archipelago.

TAKING THE VERTICAL PASSAGE FIRST STOP. Active sharing of Christ and the promotion of Christian values KMBI believes that without true spiritual transformation in terms of the staff’s and program members’ relationship with God, genuine transformation cannot take place. Remaining focused on accomplishing this primary mission, KMBI provided venue for its workforce to deepen their relationship with God and with fellow workers through accountability or devotion groups, monthly family fellowships, area-wide retreats, leadership training, opportunity ministries and Christmas outreaches to abused and disabled children.

Aside from these, the staff meet to pray and hear the Word of God before they visit the centers. This is elemental since they would facilitate transformation activities in the communities where they are deployed. Through this, succession of spiritual intake takes place as the Word is openly discussed during center meetings.

The staff therefore acts as the member’s mentors and guide to godly living. With constant and persistent input coupled with fervent prayers, spiritual transformation happens in the lives of the members and their families.

In 2007, the organization started developing a more organized transformation module for the members to use every week. This would be a developmental series discussing broad range of topics that would lead to holistic transformation.

SECOND STOP. Providing demand-driven and sustainable non-financial services for the members.

First Microentrepreneurs’ Summit. Spurring women to renewal, KMBI hosted “BAGO: Babae, Negosyo, Pag-unlad,” a summit that convened 9,200 microentreprenuers all over Cavite, Laguna, Batangas, Quezon, Bulacan and National Capital Region in Araneta Coliseum on October 22, 2007. (See page 12 for more.)

Community-Based Enterprise Development Project (CBEDP). A tripartite Preparing the Way for Greater Impact

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Trekking the Road to Goal 25.250

relationship between KMBI, Opportunity International Australia (OIA), and Indophil/SMI was established to bring sustainable community and microenterprise development to the entrepreneurial poor in Koronadal City and its surrounding barangays. It is believed that microenterprise development (MED) has an important role to play in the economic and social development of Koronadal City. And among the three, KMBI and the OIA is keen on implementing interventions that will address the following: 1. Build entrepreneurial capacity through MED (both agricultural and non-agricultural related); and 2. Formation of positive values and character through spiritual-socio-political enhancement.

By synergizing the efforts of the two organizations, it is expected that the community development initiatives will enable the target communities to become more vibrant and resilient with empowered and responsible members. Further, if the partnership will prove to be successful, opportunities to expand throughout SOCSKSARGEN and to offer diversified services are potential possibilities for both organizations.

As agreed upon by representatives last January 2006, KMBI is to render interventions to the area by means of:

1. Piloting a model that would support community and microenterprise development in the area (COMPONENT 1); and 2. Establishment of its Koronadal Branch that would include Tampakan through the Trust Bank Method, integrating in full Transformation and Business Development Services (COMPONENT 2).

In 2007, residents of the area underwent community organizing, participatory planning, community appraisal, proposal making, linkaging to different organizations and partnership with local government units. It resulted with the identification of seven (7) flagship programs, namely: Livelihood Development Program, Sustainable Development Program, Environment Development Program, Market Development Program, Infrastructure Development Program and the Administrative Development Program.

Under the livelihood program, a reflexology training, designed as a viable livelihood option for the residents or a stable source of income for their families, was conducted in cooperation with Asian Institute of Alternative Medicine. A total of 51 residents participated. The training, which ran for three months, included alternative medicine principle, reflexes and its functions, health tips, shiatsu massage and the Swedish massage. From this, the Barangay Carpenter Hill Therapeutic Massage Association was created.

Center Leaders’ Conference (CLC). To power up the delivery of Enterprise Development Services (EDS) in the communities, a Center Leader’s Conference was initiated in Koronadal City. Inputs on basic entrepreneurial skills, effective management of centers, and add-on knowledge on finance management and other innovations sought to equip center leaders to become co-facilitators of EDS since they have the best access and influence in the communities.

EDS Unit also began the Entrepreneurship and Community Organizing Workshop to equip the staff as they partner in the delivery of entrepreneurial development services. A program to recognize successful microentrepreneurs, the KMBI Entrepreneur of the Year Program, was started in the same year.

EDS are non-financial services that aim to increase the business skills and market access of resource-poor entrepreneurs to improve their income generation and assetbuilding capacity. The desired end is a more vibrant enterprise environment in terms of 8

2007 Annual Report

2007 Accomplishments

increased profitability and productivity, increased ability to withstand market variability, and faster growth.

Microinsurance program. In 2007, a total of Php19.3 million was disbursed to 284 beneficiaries. The microinsurance program referred as the Karamay sa Buhay Program (KBP) is a service given to all program members aging up to 63 years old. This is intented to provide financial aid in case the client or any member of her family dies.

Annual Mass Wedding. As regular transformative intervention, KMBI spent PhP377,000 to facilitate mass weddings in its branches all over the country. 108 program members benefited from the activity. KMBI designed this to lead members to morally upright lives, to promote the sanctity of marriage and family life, and to assist in acquiring legal documents for their future lawful purpose.

Facilitating scholarship for children of program members. Liberating students from the constraints in pursuing tertiary education, the organization facilitated the “Knowledge for Inspiring Leadership Opportunities and Spirituality” or KILOS scholarship. This grants free college education and other value-added programs to children of program members under the Alliance of Philippine Partners in Enterprise Development, Inc. (APPEND) network. Garnering excellent scores during the elimination process, five children of KMBI members made it to become part of the ten scholars accepted for the given school year.

Gordon V. and Helen C. Smith Foundation opened this program to provide constructive assistance to talented people in need.

THIRD STOP. Maintained microfinance operations of the NGO Areas of concentration were thoroughly defined to build strategic bases to further address poverty in Luzon. From this, three new areas were created - National Capital Region (NCR), Bulacan and Calabarzon 3.

In NCR and Bulacan areas, eight new branches were opened. From this expansion came a projected increase of 33 percent for total client outreach, 22 percent for manpower, and 34 percent for loan portfolio. The new branches under NCR area are in Camarin, Pasig, Marikina, Tandang Sora, and West Avenue, while branches under Bulacan are in Meycauayan, San Jose, and Valenzuela. KMBI allocated Php184 million for this expansion. This also prepared the organization for the establishment of its proposed bank.

For Calabarzon, a third area was established to focus on Quezon and Batangas.

Branches under this area are Batangas, Gumaca, Lipa, and Lucena. This makes monitoring manageable given the area’s geographic breadth, as well as allows operation to study and concentrate on the area better. Calabarzon 1 and 2 areas focused on Cavite and Laguna, respectively.

Another bold move to prepare for the 2008 expansions in the Visayas area was through creating partnerships with private financial institution, and commercial and thrift banks. Before the year ended, KMBI signed a PhP330 million line with Landbank of the Philippines, Planters Development Bank, Development Bank of the Philippines, Bank of the Philippine Islands, United Coconut Planters Bank and Oikocredit EDCS UA. This will support the Php176 million pre-operating and loan fund requirements for that particular expansion. Aside from this, the amount will be invested on more proposed projects such as housing, Management Information System (MIS) computerization, capacity building Preparing the Way for Greater Impact

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Trekking the Road to Goal 25.250

and asset acquisition.

In the same year, KMBI maintained partnership with the funder of Butuan branch which is W.P. Schmitz-Stiftung, and funder of the CBEDP which is Opportunity International Australia.

FOURTH STOP. Prepared for the Bank Establishment The organization completed the requirements of Bangko Sentral ng Pilipinas for it to open its own bank in 2008. Its bank shall provide a bridge for sustainable development for its program members ushering them to formal economy, which is one of the goals of microfinance. Hence, the members’ increasing financial needs brought by the growth of their businesses will be catered to. This signifies that members are graduating from being microentrepreneurs to become small and medium entrepreneurs, an indicator that the organization’s mission of seeing economic transformations in its members is being realized.

FIFTH STOP. Trained and equipped Board and staff for the challenges To intensify development of its human resources towards achieving Goal 25.250, Php3.1 million was invested to train the Board and staff through the conduct of six in-house, 16 local, and three international training. These training focus on leadership and management towards technical expertise and social responsibility.

SIXTH STOP. Provided for the personal development of Board and staff Supporting the educational advancement of the staff, the Microfinance SUCCESS Institute (MSI) enrolled 22 staff in the Master in Business Administration (MBA) program in coordination with Philippine Christian University. KMBI primarily established MSI to train and further develop the staff and clients in various respects in order to achieve holistic transformation. This is done in collaboration with like-minded networks or institutions in developing and delivering training packages.

To refresh the Board and staff physically and mentally, and to strengthen their bond with one another, two area-wide retreats were conducted. For Luzon operations, the retreat was in Island Cove Resort and Leisure Park in Cavite, while for Mindanao, it was in Waterfront Resort Hotel, Davao City.

SEVENTH STOP. Prepared for the establishment of the Training Institute The training unit was separated from the Human Resource department to focus on the development of framework and systems for the upcoming institute.

BREAKS. Other Accomplishments A systems review and evaluation (SR&E) was conducted to identify strengths and weaknesses of the organization in terms of delivering services to the program members.

The output will become reference to its policy development in 2008. Also, licenses for all computer software/applications were acquired. Lastly, the 4HG Multipurpose Cooperative was registered to the Cooperative Development Authority during the year.

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2007 Accomplishments

Awards and Recognitions

Opportunity International Certificate of 100% Financial Sustainability, for demonstrating Excellence in Financial Sustainability in 2006 Given on 22 May 2007, during the 2007 Global Conference, Santo Domingo, Dominican Republic Plaque of Recognition from People’s Credit and Finance Corporation, for KMBI’s 21 years of quality service to the marginalized sector, valuable contribution for the growth and development of the microfinance industry and unwavering support and strong partnership with PCFC.

Given on 22 October 2007, during the 2007 Microentrepreneurs’ Summit, Araneta Coliseum, Quezon City

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