TRANSACTION
COST AND THE VIABILITY
OF RURAL FINANCIAL INTERMEDIARIES
Teodoro S. Untalan and Carlos E.Cue vas WORKING PAPER SERIES NO. 88-18
This paper isalso beingcirculatedasACPC Working Paper SeriesNo. 88-10 by the AgriculturalCredit Policy Council.
October 1988
Philippine Institute for DevelopmentStudies
ACKNOWLEDGEMENT
We
wish
to acknowledge
Agricultural
Credit
Policy
tute
for
Development
(OSU)
and
the
United
financial
institutions
This
their
study
names
pape r has
was
here
(PIDS),
Crib
Jovellanos
(PIDS)
Graham
(OSU),
suggestions and
Dr.
for
of
Stephen
for
the
provided
by the
Phili'ppine
Insti-
Ohio
State
University
International with
in
this
the
Development cooperation
study.
We
of cannot
confidentiality.
from
from and
the
possible
benefited
B.. Lamberte
and
made
included
Mario
comments
Agency
support
(ACPC),
(PIDS),
States
This
financial
Council
Studies
(USAID).
enumerate
the
the
valuable
the
technical
Melanie
Milo
Dr.
Richard
Pollard
support
(PIDS),
Meyer
of
Dr.
provided
by
and
(OSU),.Dr.
(OSU).
The
comments
Authors
from
the
Douglas
Table of Contents,,
I.
Introduction
......................
1
II
Conceptual
III.
Methods and Procedures
IV.
r_pirical Results...................
15
V.
Skmmary and Conclusion ................
48
Issues
5 .......
......
8
References..........................
53
Appendix 1
54
2 ..........................
55
3..........................
56
List of Tables
9
i.
Time A/location and Personnel Compensation ........
2.
Weighted Time-Allocation and Bank's Income and Expense Statements . . . .....................
ii
3.
Transaction Cost
12
4.
Transaction Cost (in thousand pesos)
S.
Comparative_ Transaction Cost ...............
19
6.
Personnel Distribution ..........
2t0
7.
Personnel Time-A/location (percentage) ........
8.
Lending
9.
Loan Applications ..................
27
i0.
Number of Repeat Borrowers ................
28
ii.
Loan-to-collateral Ratio ..................
28
12 •
Guarantee Fees
13.
Risk-Related Expenses.............
32
14.
Punds-Mobilization Costs .................
34
15.
Deposit-Related Exponses ...............
36
16.
Deposit-Related Expenses .............
37
17.
Cost Per Outstanding Loan Account ...........
39
18.
Cost Per Loan..........
41
19.
Cost Per Peso Loan Outstanding ...........
43
20.
Cost Per Peso Lent ....
45
21.
Cost Per Deposit Account ............
45
22.
Cost Per Peso
47
•
............ ........
17
..... >.
2!
Costs....................
•
•
•
•
•
•
22
•
•
•
•
•
.............
................
Deposit ..................
•
•
a
30
TRANSACTION COST AND THE VIABILITY OF RURAL FINANCIAL INTERMEDIARIES* by Teodoro
I.
S.
Untalan
and
Carlos
E. Cueva8**
INTRODUCTION
1,
RATIONALE
AND OBJECTIVES
Transaction perform
the
cost role
of of
OF THE STUDY
banks
is
intermediator
the
cost
among
incurred
savers
and
as
banks
users
of
lending,
in
I
funds.
This.
mobilizing investments.
result
funds,
as
from well
Transaction
their as
cost
operations
from includes
other
in
operations,
administrative
e.g., costs,
*Paper presented during the ACPC-PIDS-OSU sponsored seminarworkshop on "Financial Intermediation in the Rural Sector: Research Results and Policy Issues" held on. 26-27 September 1988 at the Cuaderno Hall, Central Bank of the Philippines. This is part of a larger study on comparative Dank analysis jointly conducted by the Agricultural CreditPolicy Council (ACPC), Philippine Institute for Development Studies (PIDS), and Ohio State University (OSU). The project was coordinated by Dr. Mario B. Lamberte (PIDS) and Dr. V. Bruce J. Tolentino (ACPC).
The not
**RespectivelY, Research Associate, PIDS and-Professor, views expressed in this study are those of the authors necessarily reflect those of the Institute.
OSU. and do
2
i.e.,
personnel
that
are
and
normally
funds.
fixed
cost,
encountered
Transaction
financial
system
capability
and
as
in
well
dispensing
cost
is
a vital
because
this
affects
largely
as
determines
risk-related
and
keeping
aspect the
the
costs
of
the
bank's
bank's
these formal
operational
viability
as
an
intermediary,
The
process
comparative
intermediation
advantage
in
bringing claims
the
efficient
transfer
of
to
deficit
units.
High
rationale
and
allocation
impedes
and
Against credit =
of
to
of
of
the
only
the
credit
to
yet
of
Filipino
derive
In the
rural
the
the
runs
increasing
sector,
rural
the
sector
for units
against in
highlight
the
need
for
Over
the
to has
most
total
credit
remained
to
Filipinos
income
in from
past,
attempts
sector
through
continued
development
households.
of
oR
this
resource
the
be
lowest
existence
made
to
The
continuous the
the
supply
of
share
of
infuse
declined source
about
percent
financial
income sector
important
that
of
present
substantially
a very
30
provide
agricultural
(Tolentino,
formal
to
uplifting
years,
has
agriculture
were
the a
considering the
need
is necessary.
growth
families
their
banks'
surplus
efficiency
the
credit
for
of
economic
agriculture
livelihood
of
mechanism
from
cost
through
rural
agricultural and
the
families
to
resources
intermediary's
agricultural in
serves
on
a market
transaction
backdrop
Philippine
rural
about
result
distribution.
intermediaries thrust
the
is the
81
of
percent
income
class
1987).
cheap system
funds with
into the
3
hope
that
the.
development
avail&bility
of
providing
the,
cheap
effects
on
the
operations
The
recognition
of
changes.
Apart
the
sector,
rural from
(2)
development
sector
efficient vital
cost
is
which
future
be
based.
a method
intermediation
the
differences
and
commercial
need
and
of
the
important.
It can
changes
improvements
financial
to
rural
sector.
of
credit to
to
protect
costs.
cost
of
cost
cost,
the
funds.
banks
in turn
knowledge
induce
process
as
of a
ensuring
of
private
(RBs).
improvements
financial
system
banks'
policy
in the banks
(KBs),
introduce
formal
serve
composition
banks
rural
growth,
whole
policy
some.
transaction
to continually
functioning
may
to
seeks
lending
to economic
These
1984).
administration;
among
and
(Cuevas,
transaction
i.e.,
(PDBs),
the
the
estimating
activity,
cost
in the the
high
of
are:
of
general
affecting
flow also.
adverse
thus
led
policies
to examine
of
cost
viability
conti'nuou8
of
oDjectives
banks
Recognizing
set
attempts
explain
transaction
the
intention
Banks'
be high,
recently
the
its
banks.
could
unnecessarily
and
to
of
has
the
overlooks
their
problem
new
bank
mobilization
the
the
develop
each
loans
stimulate
While
it
cost
ensuring
specific
to
for
for
this
from
paper
Its
(1)
noble,
compromising
incurring
This banks.
is
transaction
and
could
sector,
donor-sourced
their
credit
agricultural credit
administering
banks
of
transaction benchmark
financial
to assume a stable
as a
system
a wider flow
of
on can role
credit
4
,2,
ORGANIZATION
Section
II
OF THE STUDY
discusses
detailed
presentation
estimating
the
the Section
sources
transaction and
IV
of
Finally,
Section
policy
implications.
components
of
the
methods
and
cost
limitations
presents
the
the
of
of data
empirical
V summarizes
the
banks are
and given
findings results
bank
a
A
procedures
of
description
of
in
Section
of and
cost.
the
discusses
III. study. some
5 II.
CONCEPTUAL
A bank funds.
incurs
These
is
the
costs
costs
Second,
are
for fines such
premises,
'as
J
be paid
the
the
process
grouped to
its
or
expenses
Finally,
banks
have
with or
as
loans,
as
administrative to
bank
etc.
interest cost
interest
cost
equipments,
total
First
• such
its
depreciation
the
lending
its
incurred for
and
and
categories.
depositors,
and
costs
three
premia
fixtures,
overall
mobilizing
insurance
salaries
together
of
• into
incidental
penalties.
costs the
the
deposits,
furniture,
These determine
its and
in
may cost
insurance .as
costs
interest
cost.
well
ISSUES
of
cost
of
funds
intermediation
for
bank.
The
bank's
transaction
cost
+
can
TCost
=
LCost
TCost
=
transaction
LCost
=
]ending
FCost
=
funds-mobilization
GCost
=
general
OCost
=
other
be summarized
FCost
+
GCost
of
the
as,
+
OCost
where,
1.
The payments on
funds
cost
bank
cost cost
administration operational
cost costs,
e.g.
investments
COST OF FUNDS
bank
incurs
paid
to
obtained
financial
depositors. from
expenses Similarly,
the
Central
in
the
the Sank
form bank
of
interest
pays
interest
rediscounting
window,
a
B
borrowings These
from
are
2'
the
its
costs
to
bank's
INCIDENTAL
In
for
come
other
in the
the
the
banks
bad
debts.
for
bad
expenses
The
pure
its
loan
form
of
as
cost
in the
lending
debts,
of
or
associated
also
paid
and
lending
interest
or
bank's
loan
programs.
cost.
the
as the
insurance
These
itself
foreclosing
incidental
bank
are
incur
may
it
on
times
applicable
necessary
costs as
at
participates
against
costs
defaults
in the
well
for or
provisions
as
litigation
l.oan collateral.
expenses
insurance, when
risk-related
premia
when
security
also
deposit
incurs These
portfolio
default
incurs
by
fees
banks
bank
recovery.
additional
with
such
penalties
or
the
programs.
In addition,
mobilization
special
funds
operations,
guarantee
a form
bank
of
delivery
loans
special
and/or
EXPENSES
lending
particular
With
banks,
in
and
it cannot
its
the
meet
funds-
fines the
and
reserve
requirements.
3, ADMINISTRATIVE
COSTS
In
funds-mobilization
banks
performing incur
mobilization paid
to
its
variable side,
variable
personnel
borrowing
involved
operations.
mobilization
are
and
its
fixed
share
On
correspond
in the
bank's
costs
of
lending
expenses.
expenses
Fixed
and
to
the
funds-
the
salaries
deposit-taking
associated
depreciation
operations,
costs
with on
and funds
building, ,!
fixtures overhead
and
equipments
expenses.
used
in the
bank's
operation
and
other
Similarly,
administrative
personnel and
involved
collection
These
depreciation well
as
overhead
are
of
terms
of
or
administration bank.
costs,
costs
for
monitoring,
the
fixtures
In the
bank's
lending in
and
which
are
manner
the
equipment
and
incurred
as
cannot
the
bank's
for
expenses
general
operations
by
and
lending
in
general
involved
cost
cost
costs
as
in other
personnel
other
clearly and
of
funds-mobilization
for
and
any
considered
depreciation
equipments
are
other
with
are
which
operations
Where
as
salaries
bank
lending
associated these
work,
and
the
its
then
same
include
administrative
of
to
specifically
costs
these
fixtures
salaries
counterpart
activities.
activities,
the
their
costs
deposit-mobilization
major
in
building,
administrative in
directly
as
supervision,
incurred
have
the
such
expenses.
are
identifiable
be
processing,
also
costs
There
its
loan
activities
operations.
to
in
expenses
the
building,
related
to
such
operations.
4.
OPPORTUNITY
Imputed funds be
locked
imputed
reserves cost
of
costs in
for
these
funds
of
loans
by some
consideration. study.
COST
OF
FUNDS
funds
result
overdue.
banks banks.
applied However,
from
Similarly,
due
to
the
the
this
opportunity
may
total cost
opportunity
differences
Computation to
the
be
is not
costs
in the
based
volume
cost
of
on
of may
required
the
market
funds
under
considered
in
this
8
III.
METHODS AND PROCEDURES
This
section the
estimating
presents
the
transaction
methods
cost
of
and
banks
procedures
from
the
used of
set
in
primary
data.
1.
TIME-ALLOCATION
A table bank
was
of
time-allocation
completed
to give,
by
in percentages,
identified
bank
compensation
salary
each
for
From
bank
these
transaction
cost
to
the"percentage
the
.salary
of
(Table
for
each the
time
table
data,
for
each
bank
of
time
alloc.ated
that
personnel
I).
This
is
his
corresponding
to
reduce
data,
bank
having
one
variable
Appendix
From
the
staff each
I).
the
for
or
2).
A
in
was
of
a
asked
the
pre-
corresponding
with
the
first,
monthly
values
giving by
functions guidelines
the
bank
time
activities
I-B).
variables
positions
using
compensation
multiplying
(Table
for
weights
personnel
different
of or
the
personnel
by
the
similar
of
by each the
number
The
by
salary
personnel
same
(Appendix
is done
done
by
classes
to
estimation,
from
(Table
the
Each
allocated
initial
personnel
cessing
functions
staff.
one
order
staff.
was-completed
of
In
different
(Appendix
allocation I-A)
COST
the
bank
activities
personnel
table
AND TRANSACTION
needed were and
in
grouped were
followed
prointo
assigned
are
given
in
provided
by
3.
the
weighted
percentages
of
time-allocat4on /
each
bank
personnel
for
the
different
bank
functions,
a
horizon-
.
9
Table
A.
Time-Allocation
I
Table
Bank Activity/ Function_
Bank Manager
A.
Lending
(1-10)
B,
Investments
C.
Trust
D,
Funds-Mobilization
E.
Gene,
(1-5)
B,
Accountant
Teller
50%
70%
50%
30%
100%
100%
100%
Administration
Total:
See
Personnel
100%
Appendix
1 for
Personnel
breakdown,
Compensation
Table
1,
Manager
_1,000
2.
Accountant
B
700
3.
Teller
_
500
10
tal
summation
made.
for
Using
activity,
the
total
(Table
pesos
time
this
weighted
percent
share
(1),
for
(2),
the
(5)
activity
The
specific
these
i.e., the
the
expenses each
example,
each
bank
taken
from
the
bank
bank's
column
expense
are
each
and
share bank
of
the
gives
in are of
the given
costs
premia
is
bank's in
in bank
to
the
income
identifiable
particular
this
a
directly
attributed
each
bank
salaries, case,
coaumn in
manner,
non-personnel
of
of
bank
operations
same
specific
guarantee
i.e.,
lending
(3).
with
or
share
In
column
i.e.,
statements
in
'that
the
allocate
costs,
personnel,
In
bank
each
expense
activity.
personnel.
used
insurance
bank's
all
of
appearing
deposit
bank
share
clearly
on
weighted
percentages
non-personnel
the
for
The
were
items
expenses
the
(4).
(1)
taxes
insurance
the
income
Column
activity
allocation
(4).
taking
up
allocation
across
to
the on
depreciation, direct
was
time
activity
allocated
bonuses is
weighted
immediately
total
of
was
Summing
and
e.g.,
in
total
personnel for
percentages
activities,
activity
A)
in
which
are
the
column
in
statements
3).
item
by
given
other
(Table
(1,
in
salaries,
activity
benefits,
show
given
as
For
bank
fees,
bank
function
bank
shares
from
expense
(3)
derived
total
costs
2-B).
and
then
the
depreciation (Table
each
positions.
is
resulting
personnel
all
time-allocation
each
total
are
to
and
for
this
column
across
of
different
allocation
personnel,
function
2-A).
Columns in
each
the
share
expenses, Column
bank
(2)
activity. to
lending
the
i.e., is
the For cost
11
Table
A.
Weighted
Time-Allocation
Table
Bank Bank Activity/ Function
A,
Lending
B,
Investment
C,
Trust
D,
Funds-Mobilization
E,
Gene,
Bank's A. B.
Personnel
Manager (1)
Accountant (2)
_500
_490
_500
_210
_1000
_700
Total Teller _.. (3)_(4)
(5) _990
45%
_500
_1210
55%
_500
_2200
100%
Administration
Total:
B.
2
Income
and
Expense
Salaries and Wages Depreciation/Other (Non'Personnel)
Statements (Personnel) Operating
Expenses
12
Table
3
Transaction
Bank Activity/ Function
Personnel
Cost
Non-Personnel.Cost Exclusive (2)
(1) A,Lending
_
B,Investment
Cost
Total
Non-exclusive ,(3)
insurance premia
P (4)_(5)_
_
A
_
_
B
C,Trust
_
_
C
%
D,Funds-Mobi,
P
_
D
%
E..Gene.-Admi.
P
B
E
%
deposit insurance
Transaction
Cost
%
=
100_
i
since
these
personnel in
and
column
from
are
costs
non-personnel
(4),
the
The
total
Thus,
related
is
from
Transaction
costs
]ending,
for
each
corresponding
given
the
to
shares
in column
The bank
of
sum
activity
each
is
bank
(5).
foregoing:
Cost
(TCost)
=
A +
B +
C +
the
bank;
D +
where, A
is the
total
cost
of
lending
by
B
is the
total
cost
for
investment
C
is the
total
cost
for
trust
operations;
operations;
I,
D
is the
total
cost
for
funds-mobilization;
E
is ..thetotal
cost
for
general
and
administration.
of
E.
both given
activity
13
The
allocation
major
bank
these
activities
2,
activity
can in
study
classified number
used
of
which
rural
of
were
Metro-Manila
or
urban
(See
setting
The
data.
responses
to
document8
such
Raw
17 are
are
give
private
of
the
The
for
the
each
shares
of
out
of
total
class,
study.
of
Two
information
of
related
Of
development
as
the
this
are
operating
sample, 25
located
in
the
to the
banks,..and
sampled
66
a rural
22 are
outside or
sub-
4).
were
qualitative
QuestionnaiFe
income data
taking
and
any
banks
considered
survey
as
banks
in this
Appendix
the
64
location,
not
gathered
descriptions, December
type_
did
All
by
cost
OF DATA
of
considered
banks.
transaction
be derived
a sample
banks
the
costs,
to
banks,
commercial
statements,
was
from
and
quantitative
augmented _alance
a single
year
by
supporting
sheets, from
and January
job to
1986,
data
personnel,
for
personnel
was
were the
obtained di-Fferent
represented
time-allocation percentage
then
total
accordin9
aspects are
breakdown
SOURCES AND DESCRIPTION
This
total
or
table, of
the
rimeof
as The each
on
the
time-allocation
functions everyone basic
of is
a
made
information
personnel
allocated
of
bank. to
Each
respond
obtained per
each bank
to
the
was
the
function.
14
3.
LIMITATIONS
OF
Quantitative collected on the
partly
considered
as
In
This
were bank
asked
best
of
bank
records
were
not
Lastly,
data
on
actual
costs
particularly may
properly biased
done
at
accounted estimates.
the
question
primary
these
of
at
depend
hand
and
where
their
their
data
may
true
allocation
Nevertheless,
to
such
time
the to
responses
readily
bank
the maybe
for
head by
repeat
loan
as
borrowers
respondent
although
statements,
for
since the
by the
expenses
KBs
of
as
a
serviced
in .cases
where
available.
expense
for
questions
and. number
incurred
undervalued
are
as
particularlY
estimates
and
true
be
loan
best
income
of
nature
of
the
answer
based
banks'
set
estimates.
were
the
abeut
collateral, on
in
maybe
activities.
addition,
percentage
the
interpretation
time-frame.
different
from
qualitative
respondent's
respondents
DATA
responses
maybe
the
THE
and part
some PDBs of
office the
liftedstraight may
bank where
branch.
exactly
activities. loan
activities but
not
these These
costs might
reflect This
processing of
from
is costs
processing may have
._ot
a be
produced
15
IV.
EMPIRICAL
This
section
section the
IV.I
The
costs
different the
major
types.
of
and
across
Sub-sections mobilization deposits,
providing
these
provide types
in
indication in
1,
providing
TOTAL
49
banks,
and
19 are
the
these
of
the
time-allocation
Total nine
to
banks
16 are
rural
commercial
COST:
66
the
banks
PDBs,
and
the
two
lending
among • the
the
composition
of
the
differences
per
banks
in
this
bank
and
banks,
14 are
and
of
unit
loans
cost
and
per
of
different
of
deposit bank
customers.
A COMPARATIVE
and
lending
value
per
loan
advantage their
of
and
the
costs
to
costs
number
tables
income
ANALYSIS
branches
in the
statements.
private
Of
development
sample these banks
banks,
transaction combined
present
determine
services
and
KBs,
focus-on
the
comparative
TRANSACTION
Forty-nine reported
order
of
costs
respectively,
relate
respective
The
sub-
types.
to the
services.
among
IV.3,
to explain
IV.5
First,
transactions
costs
and
results.
funds-mobilization,
three•bank
and
the
sub-sections
attempt
IV.4
of
costs,
and
the
of
these
IV.2
Th_se
lending
operations,
composition
and
of
sub-sections,
bank
sets
overview
funds-mobilization
costs
funds
an
composition
next
and
discusses'several
provides
different
RBs.
of
RESULTS
are
cost
for
the
due
primarily
overall to
sample
of
forty
funds-mobilization
16
J
activities, with
49.8%
(see
Table
4).
Transaction
lending
operations
account
only
total.
Bank
activities
related
to administrative
services
account
while
for
the
rest
investment,
0.71
percent,
of
banks.
resources
is
operations.
these
banks only
3.1
parity
in
these
banks
from the
shares
to
source
sources,
Central
Bank
their
account
lending
It its
efforts
is
and
The
latter
She
banks'
noteworthy
]ending
exert
effort
other
hand,
that
activities.
This
to attract incur
higher
of is
usually
incur
minimal
suggests
that
assumed,
to
loan cost.
attributed
to
cautious to
banks
in do
funds.
promoting
not
Banks, to
loan
attitude
recover
costs
borrowers. relative
from
transaction
a effort
than
funds
related
is
by
rather
mobilizing
total
dis-
preference
public
greater
costs
for
The
the
costs
prospective
banks
cost.
suggests
banks
public
account
percent.of their
the
bank
other
activities
of
of
and
operations,
(11.5%)
for
between
a8
8.5
represent
transactions
negligible,
for
A larger.proportfon recovery
not
as
to
the
cost
such
clients
from
from
the
cost,
proportion
underlines
funds
general
activities
transaction
costs
the
percent.
funds
total
in
and
operations
important
(CB)
of
transaction
and
related
However, is
an
Bank
their
lending
processing
towards
of
bank
associated
percent
total
0.70
raising
Central
percent
these
other
In
the
27.9
funds-mobilization
Activities
and
other
that t,o
the
depositors of
indicates,
allocated
their
for
costs
of
trust,
bank
the
This
to
and
with
one-half
these
percent
corresponds
Transactions almost
20.9
for
cost
their
really on
the total
17
Table
4.
TRANSACTION (in
.......................
.££ .... l ....
J_____
.......
thousand
pesos)
___ ....................
_LL_AHKS
Pesos
COST _ ......................................
kBs
PDBs
_
Pesos
Z
Pesos
TOTALLEX_IXGCO_TS:
20694,47
27.85
9503.3_
}9,72
540t.50
Planning _ PrograHing Ads _ Promo Oisburselent
1469,17 440.33 ]054,60
1.98 0,59 ].42
902;52 162,58 412,11
1.87 0.34 0,86
233.83 115.65 286.98
UnspeciFied
2886.99
3,89
1128.10
2.34
LoanProcessing: ]ntervie_ of Applicants Credit Investigation Evaluation _ _nalfsis
1646.16 2_56.23 2_05,38
2,22 3.]7 3,]0
693,84 1186.04 }229.27
1,44 2,46 2.55
6307.760
8,49
3}09.15
6.45
1054.95 1526.89
].42 2.06
641.08 5]8,33
1.33 1.08
Record-keeping/Report-writing 2886.19 Hgt, of bad debts 3068,59
_,88 4,1_
i148.54 }480,91
8536.63
11.49
569.19 522.72
RBs
Z
5789,64
47.83
1,67 O.B_ 2.05
331.82 162,10 _55,51
2,74 1._4 2.94
677.B5
4.84
1081.04
_.9_
446.38 709._2 382.41
3,19 5.06 2.7_
505,94 460,87 69_.70
4.18 3,81 5.73
|O.q8
1660.50
[S.72
212.43 560.96
1.52 4,00
201.44 447.60
I._6 3,70
2,_ 3,07
880,90 894,79
6.29 6._9
856,75 692.89
7.OB 5.72
3788.86
7.86
2549.08
18.}9
2]98.68
18,]6
0.77 0.70
83.71 402,09
0.}7 0.83
272.89 }12,]8
1,95 0.80
212.59 8,46
1,76 0,07
TOTAL FUNDS-_OBILIZAT]ON COSTS:37010,2] Transactions .ith CO,other banks 2335.82 Transaction_with Depositors 176_6.44 Record-keeping 8589,63 Funds-Transfer ]529,69 Ads _ Promo 2250,03 Unspecified 4663.80
49.81 3.}4 23,74 ]1.56 2.06 _,03 6.28
27241.05 }250o52 14223,77 6443.$9 1098._1 ]552,7_ 2671.77
56.53 2,60 29.52 13,37 2.28 3.22 5.54
5146.21 274.40 2250.75 ]293.56 355.90 380.58 586.75
36.73 ].96 16.07 9.23 2.54 2,72 4.19
4622.95 8}0.90 1161.92 852.68 75.48 316,70 ]405.27
38.]9 6.70 9.60 7.04 0.62 2.62 1].61
GENERAL _BNINISTRATION/SERVICES 15502,65
20.87
[0954.44
22.73
3077.32
2i.97
1470.88
12.15
]00.00
48184.6!
100.00
14010.]
]00.00
LoanRecovery: Honitoring Collection
}_UESTMEHTS TRUST OPERATIONS
TRi_tS_CTIONS COSTS:
74299.23
Source:ComparativeBankStudy,1987.
}53B,]!
38,55
Pesos
}2]04.51
}OO.O0
18
transaction
cost
indicating
that
in
banks
depositors
than
-in
transaction
total
its make
a more
borrowers.
This
cost
to
loans
specific
to
deposits
(3.0%).
types
banks,
highest.among the
then
surveyed have
have
expected
36.8
transaction
transaction
of
Kgs
(see cost
percent
cost
cost since
_.79M,
#IM
have
above or"
and
bigger
average
are
with 5).
among
KBs,
the
cost cost
the
_IM,
RB8
having
•There
i8
Most
by banks
PDBs
respectively.
operations
and.
This
than
a
followed
commercial
P2.5M.
less,
shares
promotions
Table
of
attracting
promotions
on
PDBs,
in
relative
and
cost
transaction
About
by the
advertising
by
activities,
effort
advertising
transaction
cost, in
RBs.
serious
followed
transaction
mobilization
is shown
against
_2.5M,
dispersion
POBs
be
of
KBs,
lowest
greater
(0.6%)
of
specific
.Among
deposit
RB8
is
PDB8 and
to RBs.
I
They
have
more
personnel
to
their
clientele.
22
with
PDBs
management
i.e,,
Another
on
When types
transaction
serves
to
of
KB
their
magnitude
the
composition
(Table of
of
that
its
of
the
al.so
the
transaction
4),
it is found,
KBs
come
more
a staff
size
relatively
PDBs
of
the
fixed
equipments.
the
either
and
higher
and is
of
officers
have
building
than
services
average
including
transaction
from
various
factor
personnel
underscore
the
cost
KBs
contributing
scale
on
16
6).
for
providing
has
RBs
(Table
depreciation
to KB
16 and
important
only
bearing
bank
having
salary
This
A typical
personnel
costs,
higher
allocated
and
bank
RBs. .has
a
cost.
cost than
i8 compared half
funds-mobilization,
(56.5%)
among
Only
of 19.7
19
Table
5.
COMPARATIVE (in
TRANSACTION thousand
COST
pesos}
KBs PDBs RBs KBs PDBs R_s TRAX_ACT]0_S ...................................................... R0_ ........................... COST Number 1 Number Z Nulber Z TOTAL Z _ 7.
500 _ less 1000 _ less 1500 _ less 2000 _ less 2500 _ less 2500+
0 1 I 4 6 7
0.00 5.26 3.26 21.05 51.58 _6.84
.................................
TOTAL.'
AVG: SP: V_fl:
3 6 2 2 0 l ,......
19
2336.032 1020,332 1041078
100
? ..........
14
1000.721 640.038 409649
Source_ Co_paraHveBaneStudy_1987.
21.43 42.86 14.29 14.29 O.OO 7.14
3 8 3 0 0 0
18,75 50.00 31.25 0.00 0.00 O.OO
- .........................................................
100
16
798.582 343.788 119569
lO(I
6 15 8 6 6 8
O.OO 6.67 12.50 66.67 lO0.O0 87.50
50.00 40.00 25,00 33.33 0,00 12.50
50.00 53.33 62.50 0.00 0.00 0.00
Table
Ill lCode* Indez luber
1 2 3 & 5 6 7 8 9 L 10 P 11 t 12 P 13 F 14 L 15 L 16 5 17 P 18 19 20 L 21 L 22 23 L 24 25 26
TOTAL:
I
6.
P_SONNE_.
pus
Ills
Juber
t
luber
DISTRIBUTION
Ih |
Yotol |Total
O 0.00 O 0.00 O 0.00 0 O.OO 2_ 6.30 17 3.05 27 _.8_ 17 3.05 5 0,90 121 21.68 28 5.02 63 11,29 24 L3O 20 3.58 12 2.15 8 0.00 11 1.97 2 0.36 178 31.90 2 0.35 0 O.O0 O O,OO 0 0.00 1 0.18 6 1.08 0 O.O0
5 5 20 5 16 5 15 18 6 33 1 21 9 15 13 1 3 1 _8 _ 5 O 1 2 0 0
1.98 1,98 7.91 1.98 6.32 1.98 5.91 7.11 2,37 13.04 O,+O 8_30 L56 6.32 5.14 O.iO 1.19 0.40 18.97 1.58 1.98 O.O0 O._O 0.79 0.00 O.O0
12 4.38 IO 3.65 50 18.25 12 4.38 16 5.0+ _ 1.&6 30 10.95 20 7.30 6 2.19 12 L38 2 0.73 16 5.8_ 0 O.OO 21 7.65 14 5.11 11 5.11 O O.O0 5 !.02 19 6.93 5 1.82 4 1._6 1 0.36 O 0.00 I 0.36 O 0_00 O O.OO
17 1.57 15 1.38 70 5._5 17 1.57 56 5.16 26 L+O 72 6.6_ 55 5.07 17 1,57 166 15.30 31 2.86 100 9.22 33 3,0_ 57 5.25 39 3.59 15 1.38 16 1.29 8 0.7& 245 22.58 I1 1,01 9 0.83 1 0.09 1 0.09 6 8.37 6 0.55 O O.OO
558 I00.00
253 100.00
274 100,00
1085100.00
22
16
15
F- strictly rods-relatedactivities L- strictly loans-relatedactivities - see persoooelclassificationcodefor description (Appendix 2). : Comparative BankStudy,1987.
t
Ills
Ih
S
|
O,O0 2931 70,59 0.00 33.33 SL67 0.00 28,57 71._3 0,00 29.&1 70.59 _2.86 28,57 28.57 65.38 19.23 15.30 37,50 20.83 H.67 30.91 32.71 36.36 29,_I 35,29 $5_29 72.89 19.88 7.23 90,32 3,23 6.&5 63.00 21.00 16.00 72.71 27,27 O.O0 35.09 28.07 36.8_ 30.77 33.33 35,90 O.O0 6.67 93.33 78,57 2133 0.00 25.00 t2.50 62.50 72.65 19.59 7.76 18.18 36.36 &5.45 0.00 55.56 44.44 0,00 0.00 100.00 O.O0 100,00 O.OO 25.00 50.00 25.00 100.00 O.OO O.O0 0.00 0.00 O.O0
21
percent RBB,
of on
their
the
transaction
other
hand,
cost
in
lending,
their
funds-mobilization
transaction
its
of
and
Relampagos
[1988]).
funds
RBs
being
bank
raising
from
Obviously,
the
unit
public
banks
and
lending
Furthermore,
RBs
rely
the
lending
Central
transaction bank
cost
their
only.
On
transaction
percent,
in
more
obtaining
The
above
time-allocation
percent
mobilization
to
costs
of
2.6
total against
or
have
funds
further
personnel
of
lending
personnel only
15.6
the
a higher
the
(see
for
KBs
the.
9.6
CB,
KBs,
incur
the
public
Bank.
types
devoted
of 6.7
percentage
Table
lending
with
RBs
like
bank
by KBs are
percent
special of
Central
different
funds
percentage
with
by the
activities time
from
from
supported
on
to dealings
_DBs
from
funds latter.
against
dealing
percent.
of
percentage
percent,
as
contrast,
PDBs,
and
related
by (see
onthe
on deposit-mobilization
is
and of
o_ly
In
emphasis KBs
only
generate
operation
by a bigger
RBs
and
offices
is to
window
29.5
same
stations
offices.
than
in activities
KBs
finding
with
hand,
rediscounted
funds-mobilization 60
other
collecting
dual
activities
clients,
cost
compared
substantially than
the
a fully
the
percent,
head
head
heavily,
from
as
for
KBs being
emphasis
their
is shown
coming and
the
rediscounting
This
depositors
percent
more
38.6
their
operations
Bank's
programs.
for
perform
mobilization
from
for
percent
almost
percent.
act
transaction
38.2
operations,
network
operations.
their
only
36.8
funds
of
PDBs have
activities,
_mobil_zing
much
against
lending
a nationwide
lending
bulk
activities.
for
from
a greater
percent,
mobilization
a part
have
47.8
cost
deposit
cos b comes
of
between
7). to
About funds-
operations.
22
Table
7.
PERSONNEL TIME-ALLOCATION (percentage}
1558AIO
ras
Nqe
Rishted sbres Zlt
2085
08
]m
--
wilt|Led Jst
Ihfel
"Rilrkted _[t
tst
shrel
_
t
H_
geiskted _Jt
|it
Ibtel
_8t
Y0fil,UliIlS: 721782.6 23.97 100 _lauiu | rrosraiiu 58016.60 1793 8.# Adst hoe 19338.62 0.56 2,50 [tterviesof Aplliust8 63890.10 2.12 0.85 Credit Ztustintiot 77260.&3 2.5| 10.70 balutiot &iulysi8 8N7.51 2.76 11,62 Jish[mtett 61556.07 1.65 5,03 Ilotitotits 3_50.63 1.11 5.67 ¢ollectioa 61279.38 2.03 0.69 hcord-keepitsltelort-witiu 111525.2 3.70 15,65 Hit,of hd debts 50816.81 1.59 7.0_ gupecified 1t6018.9 3.79 15.80
319797.0 15.57 358#,83 1.75 7551.925 0.37 20031,90 1.16 39566.30 1.93 62#2.9! 2.05 16361.57 0.80 26621,50 1.20 21683.13 1.05 66352.52 2.16 1_132.67 0.69 65379.08 2.21
100 175512.0 11.77 11,22 9039.119 1,76 2.60 5109.275 0.98 8,77 16099.04 3,10 12.60 17723.77 3.61 13.15 11630.92 2,26 5.11 12736,60 2.65 7.70 7699.025 1.68 6.70 21776.17 6,19 13,87 32107.63 |.17 4.62 16372.38 3,15 1219 25322.10 6.87
100 225172,5 51.76 5.15 13090.65 2.99 2.91 5567,229 1.50 9.17 19759.16 6,52 10,09 19852.55 6.56 5.62 28773.67 5,58 7.25 16680,68 3.11 6.30 7138.100 1.63 12.60 17822.07 6.07 18.28 350fl.# 8,01 9.12 20331.97 _.&5 16.62 63317.85 9,90
IlVflt'GIt8 98U?0NtAt[0J8
3330.115 0.15 13111.56 0.55
7587.65 1.68 6781.55 0.92
7666.0_9 1.75 271.5695 0.08
18661.81 0.52 10372.66 0.61
bt
100 5.78 L95 8.73 8.77 12.71 6.60 1.15 7.87 15.69 8,90 19,16
1_ILPOIDS-If0Izr.T_AtZOI 1577807. 52.39 100 hauaetiou silk ¢i,otkerhtb 108607.6 3.61 5.89 hamctiou silk Depositors 737788.3 26.50 66.78 hcord-keepiu 3712#.I 12.31 23.53 bade-hauler 79859.79 3.65 5.06 Ads&hum 101167,6 3.37 6,62 Oulecifitd 1785|8.3 5.93 !1.32
1222778, 59.53 100 210_75.1 60,51 100 166353.932.99 100 70763.56 3.66 5.79 13858,79 2.66 |.50 26085.31 5.50 1&.68 607136.7 29.56 69.55 95360.32 18.33 65.25 35313,21 8,07 _.6& 2905fl.6 16.15 23.76 53091.58 10.21 25.20 27629.61 6.31 19.16 65379.52 3.18 5.15 11850.63 2.28 5.62 2629.835 0.60 1.82 75365,69 ).57 6.16 16769.73 3.22 7,95 9212,212 2,11 6.38 113565 5.53 9.29 19519.62 1.75 9.22 _5_83.71 10.39 31.55
OIIItALAJHIZIKfTItATZ01/811tVIC08 575016.1 22.51
696773.0 26.09
121330.5 23.33
58910.52 13,66
Irad 1_A5
3053991. 100
520093.0 108
6375525
1011638.108.00
SoLe:It - Irid total st: m_-_tll htrce : ¢oalmtivedetk8tdy,1987,
100
23
In
contrast,
RBs have only
in
funds-mobilization
in
lending
their to
operations.
personnel lending Zn
more
of
44.2 But
but
time
of
their
total
In
in
only
time
51.7
percent
of
total
personnel
time
PDBs also to
only 11.0
lending
to
have a
(see
7.0 percent
percent of
This
is
more in
supported
PDBs have a more balanced
distribution
between
offices
to the extent
amount
of authority
strong emphasis RBs
as
.special-lending
lending
have
activities. involved
percent
their
lending
favor
RBs'
of
in their
operations
on the latter. and
programs
by their
equal
For. KBs and
PDBs,
This is explained PDBs, Bank.
head
level of regional
RBs are unit
and lending perhaps
of the Central
funds-
are shared with the
the decision.
to some extent
lending
between
in lending beyond which only their assume
time
their
as evidenced
and activities
activities
personnel
of
these two operations.
funds-mobilization
conduits,
KBs
that they are given only a certain
already
performingboth,
in
lending operations
lending operations
or head offices
than
activities,
23.4
by
operations.
their
6),
personnel
against
and
in costs
Table
in
their
allocation
share
of
(40.5_)
in funds-mobilization
RBs concentrate
and
portion
operations.
KBs
mobilization
greater
funds-mobilization
distribution
activities
summary,
compared
personnel
personnel
funds-mobilization personnel
total
(33.8_).
and
have
of
personnel
percent, RBs
percent
allocated
operations terms
33.0
banks with
by the role
for
.the
a of
various
24
2.
TRANSACTION
The into
transaction
two
recovery
41.3
percent
of
such and
as
interview
30.5
percent
28.7
credit
total
49
for
debts.
Loan
and
cost
noting
is
almost
the
hand,
about
percent
indicates
that
before
It
is
having
and
important
the
total
lending
from
credit
Compared accounted and
KBs
approval
13.1
to
32.7
loan
processing
devote
more
to note, loan
cost,
there
recovery recordactivities
investigation, account
loan
percent
for
total
processing for
difference
of
lending
KBs'
resources
PDBB
in their
loan On
costs
are
This
to
and
costs.
lending
activities.
and
more
by credit
percent
from
however,
processing
that
loan
and
PDBs
have
contrast processing
RBs
their
against
and
relative
in their
PDBs
to
costs
evaluation/analysis
investigation, PDBs,
despite
costs
is a difference
investigation KBB
about
disbursement.
same
RBB,
loan
processing
of
no
to their
by
lending
collection,
28.5
in relation
for
loan
sample
from
contribution
costs
accounted
the
disbursement
processing other
and
total
credit
loan
decomposed
costs.
lending
RBs,
the
in.
mainly
applicants,
the
total
banks
loans,
be
cost of
of
lending
types,
to
bad
may
processing
comes
analysis
bank
percent
of
of
of
activities
the
cost
a bank
composition
monitoring
and
By
of
lend_ng
by
loan the
8)
management
evaluation
lending
Considering Table
keeping
of
components:
(see
efforts
from
cost
major cost.
coS,ts
COST OF LENDING
their arising
of
loans.
loan
processing
costs
12.5
percent
only
8.0
for
percent
KBs for
25
Table.
8.
LENDING (in
ALLBANKS Pe_s
TOTALLENDING C_TS:
_
20&94,47 100.00
KBs Pe_s
PDBs t
Pe_s
Z
IW._
RB_ Pe_s
IO0.W
5401,W
902.52 162._ 412,11
9._ 1.71 4.$4
2SS.BS 115,65 2_.9B
I|28.i0
11.87
_77.85
I2._
7.95 11._ 11,14
bfl_,84 11B6,04 1229.27
7._ 12.4_ 12,94
44&._ 709.$2 _2.41
8.26 13.1_ 7.0g
b_07,7_
S0,48
_109,15
_2.72
15_.11
28.48
1054.95 1526.B9
5.10 7._8
641.08 518.15
6.75 5.45
212.45 5b0.%
_.95 10,$9
201.44 447.60
3,48 7.75
2886.[9 ,_068.59
IS.95 14.8_
1148.54 1480.91
12.09 15.58
880.90 894,79
16.$1 1b.57
856,75 692.B9
14.80 11,97
8556.6_
41,25
_78B.86
39.87
2549.08
47.19
219_.b_
_7.9_
1469.17 440.33 1054,&0
_ecified
28_.99
1%95
Loan_ocessing: lntervieN of _plicants ffediL lnveeti_ation Evaluation_ _nalysis
Jb4fi.16 2556.25 2505,_B
Record-keeping/_epor t-Nriiin_ flgt. of b_d debts
pesos.}
9503._S
Planning 5Pr_ramming _s _ Pro_ Disbursement
LoanFiecovery_ lSn_ii_in_ CoLlection
COSTS
thousand
Source: ComparativeBankStudy,1987.
7.09 2.13 5.10
4.Z_ 2.14 5.$1
57_,64
IOO.W
351,82 1_2,10 $55,51
5,7_ 2;_ &.14
1081,04
18.67
505.94 460.87 _L70
8.74 7.?b 11,9g
16_,50
28._
2B
RBs
(see
emphasis
Table to
G{ven serve a
8).
the
to explain
comparison
since
it
repeating
the
already
spend the
is
the
same
loan
not
to
other
than
PDBs.
borrowers
granted that
on
may cost,
to
a bank
credit
security
he
mention
the
repeat
with
more
investigation
.offered
as when
important
more
investigation
loans
less
give
their
expected
that
knows
loans
of
of
is
would is likely
for
bank
It
borrowers
applied
of
RBs
in credit
number
made.
borrowers
cost
hand,
analysis
difference
the
of
other
characteristic
the
was
repeat
the
the.evaluation/
that
borrowers
On
by
the
has
previously
fact
that
characteristics
the
of
the
24
and
borrower.
61 an on
Table
9 shows
that
repeat
borrowers
per
average the
of
641
average
were
received
repeat out
percent.
Given
the
other
banks"
cost is not
borrowers 38
loan RBs
per
have
be
between
KBs
the
on
1,023
.the average
compared
year.
an
similar
it can
to
have
of
average
RBs
of
which.24 of
repeat
said
that
thedifference
and
PDBs
on
of
one
repeat
hand
with
10,
a
KS.
(63.1_)
641
repeat
Ioanapplications,
ratio
frequency
to
In Table
applications
of
almost
due
PDBs
respectively,
an average
applications,
investigation the
of
and
year
borrowers.
borrowers
total
repeat
KBs
or
borrowers
.62 to
in credit and
RBs
borrowers
on
in the
portfolios.
Table
11
to-collateral percent
of
indicates ratios
the
that
than
collateral
KBs
RBs. for
and
PDBs
The
average
KBs
and
require loan 58
higher
loan-
amountis
percent
of
61 the
27
Table
9.
LOAN
RLLII_NKS NO.OF LOi_NSHumber
IO0 300 500 700 900 !moo i300 1500 1500+
TOTAL:
AU8: SO: 9_R: NIN: HAX:
1_
3i 5 4 2 2 3 i ! 4
58,4q 9.43 7,55 3.77 3,77 5,6_ !.89 J.89 7.55
53
100,00
382 530 2B07%
APPLICATIONS
Pi)Ss
KBs Number
lq 2 0 0 0 0 O 0 0
2i
3B 57 3274 4 1_54
Source: Comparative Bank_tudy,1987,.
1
Number
90,48 9.52 O.OO O,O0 0.00 0.00 0.00 0.00 0.00
11 3 0 ! O 0 0 0 0
100.00
15
]bl I87 34922
Y.
7_,33 20.O0 O,00 6,_s7 0,00 .0.00 O.O0 0,00 O.OO
]00.00
RBs Number,
%
! 0 4 1 2 ,3 I | 4
5.88 O,00 23,53 5. BB !1.7b 17._5 5,88 5,88 23,53
17
.100,00
J023 507 257477
28
Table ---_
...........
i0.
NUMBER
OF
REPEAT
BORROWERS
& ....................................................................................
ALLB_NKS KBs PDBs ,REPEAT ................................................................................... BORRONERS Humber % Humber % Humber Z
RBs Nu¢ber
%
....................................................................................................
0 50 lO0 150 200 250 300 300
3 26 2 1 2 0 0
6.B2 59.09 4.55 2.27 4.55 0.80 O,OO 22,73
...................................
44
T8TAL:
2 15 } 0 0 0 0 8
ll.ll 8_._3 5.56 0.00 8.08 0,80 0.00 0.80
0 l! 0 0 2 0 0 0
0.00 84,62 8.00 0,08 15.38 0.00 8.80 8.00"
! 8 ] 1 8 8 0 I0
7.69 8,80 7.69 7._9 0.00 0.00 8.00 76.92
13
I00,80
--................................................................
IB
tO0.08
lO0.O0
13
I08.08
....................................................................................................
i
AVG: SD: VAR:
24 47 2t_9
MIN: _AX:
641 465 21596B
61 t13 }2744
0 1590
Source: ComparativeBank_tedy,igB7.
Table Ii. LOAN TO COLLATERAL RATIO ..... j...... -_fL ........................................................................... .ALLBANKS gBs PI)Bs RBs Loanas Z of ........................................................................ Col]ater al Xember % Xe8ber % Nu_er .% Nueber %
0 25%or less 58Zor less 75/. or less 108%or less I00+• .....................
t I 14 . 22 5 0
2.33 2,3.1 _2,56 5t,l_ tI,_X 0,00
0 0 6 B 2 0
0.00 0.88 _X7.50 50,00 12,50 0.80
l l 3 '6 3 0
7.14 7,14 21.43 42.86 21,43 0,00
0 8 5 8 0 0
0.00 8.00 38.4/_ 61.54 0,00 8,00
.J.....................................................................
TOTAL:
43
AUG: SD:
59 20
tO0.O0
_o_rce_ Co_par_live Ban]:SLudy,t987,
16
61 t6
tO0.O0
14
5B 26
tO0,O0
.t3
57 15
I00.00
29
collateral of
57
for
that
percent,
KBs
usually explain
and
PDBs
of
larger
the
to
credit
and
Part
of
other
of
the
collateral
amounts of
in
credit
in
their
and
12.4
respectively,
shown
inspection of
in
of
percent
against
.probably
authenticity
percentage
activities,
fact
portfolio,
loan8
As
higher
values The
i.e.,
value
banks.
ioan
offered.
agricultural
true
a
give
investigation,
these
allocated
PDBs,
hand,
loans
than
the
investigation
KBs
the
commercial
ascertain
PDBs
on
more
offered
and
for
have
importance
collateral
to
RBs,
on average,
and'appraisal
KB8
PDBs.
the
Table
7,
personnel
and
time
10.1
percent
only
8.8
percent
of
loan
processing
for
RBs.
also
the
credit
accounted
these
banks
shows
that
to
the
programs
other
hand,
P20,O00
to
as
guarantee
or KBs
and
PDBs
high
as
further
participation
additional
credit again
" in
loan
are
KBs to
pay
contribute
KBs and
to
these
from
cost.
may
require
programs
the
higher
PDBs
compared
were
mostly
fees
to
the
crop
insurance
of
guarantee
which personnel
to
RBs;
$/ These
the
_21,707
This
these
in
On
investigation
by to
12
fees
programs
work
Table
all.
PDB8 pay
credit these
among
at
#11,608.
their
by
participated
guarantee
On average,
investigation
processing
paid
is
paid
fees
not
accredited
have
in
partially
guarantee have
not
Âą/
programs.
paid
they
#160,000.
while
contribute
would
that they
premia
lending
RB has
that
fees
cost insurance
special
a single
Likewise,
cost
by
indicating
these
fees
for
not
programs
investigation
program.
3O
Table
12.
GUARANTEE (in
ALLBANKS GuaranLee ................................... Fees Number %
0 20 _ less 40 & Jess 60 E less 80 _ ] es,_ 100_ le___ 120_ less 140 & less 160_ le_s
43 1 5 2 0 0 0 1 I
81.13 1.89 9,43 3,77 O.O0 0.OO O.O0 1.89 _.Sg
...............................
TOTAL:
AVG_ SD_ VAR:
FEES
thousand
KBs Number
]I 0 4 2 0 O ¢ 0 0
7,
pesos)
PDBs "+ .................. Number 7.
64.71 O.O0 23,53 11,7_ O,O0 O,OO O.OO 0.00 0.C,0
}0 1 I 0 0 0 0 I 1
71+43 7.14 7.14 0.00 O,O0 0.00 0.00 7,14 7.14
? .........................................
53
g.457 27,057 7+2.072
100.00
17
100.0(_
11.&08 0,27b 266.615
S_urce : Inco_e _nd E_pense5tatements,Oec. 198b.
RBs ,-'+................ Number Z
22 O 0 0 0 O O 0 0
100.00 O.OO 0,00 0.00 O,O0 0.00 O,OO 0,00 0,00
. .................
14
21.707 _b._84 2151.444
100,00
22
0.000 _._0 0.000
10%00
31
Table8 total
showed
lending,
higher
costs
for
banks,
that is
PDBs
service
.more or
KBs,
KBs and
PDBs
is
due
these
banks
due
commercial
loans
than
larger
amount.
= in
risk-related
PDB and Table
a RB
values
possible
for
guarantee
difference
higher
record-keeping debts
for.
recovery
costs exposure
types.
relative the
Further,
PDBs may
be
branches
for
due
may
cost
the to
collection
the
PDBs compared
to
the
higher bythe
and
PDBB.
to
the
guarantee higher
total
loan
.dependence and
the.
is
higher Another
of
cost the A
attributed
management
lending
costs
among
recovery
managementof
a
(see
recovery
the.
of
On
whereas
RBs.
incur
programs
as
report-writing.
and PDBs
such
requirements
cost
writing,
higher
debts.
to
loan
.and
recovery
incur
bad
to
being
respectively
due
that
loans
debts
_12,759,
by
PDBs
costs
be
loan
report
KBs
to
in
and
PDBs
for
than
operations
former
of.bad
rural
incurred
KBs
risk-related
monitoring
of
both
in
be dictated
for
and
the
provisions
and
is
percentage
by
much
value,
recovery
KBs and
_18,68.2
KBs and
programs
types,
loan
costs
loan
loans,
m46,665
PDBs may
recovery
in
and Although
in
exposure
and
about
for
(38.0_).
of
costs
KBs-(39.9_)
tomanagement
litiga.tion
explanation
especially
more
.related
incur
The
larger
recovery
smaller
importance
the
a KB incurs
13).
loan
loan
Among bank
expenses,
average,
higher
agricultural
costs
default the
to
RBs
but
the
loan
for
for
accounts, the
to
of
higher than
loan
PDBs
incidence
slightly
(47.2_)
either
to
the
the
head loan
of
bad
highest
loan
as
have
the
cost
:to
they three
among offices
accounts.
KBs on
bank and their
32
Table
13.
RISK-RELATED (in
EXPENSES
thousand
pesos)
................................... ._.. ............... ................... _.._ ............ .......
ProvisionsFor ALLB_S [_s PO_s RBs Litigation _ ..................................................................... =._ SadDebtsE_pensesNuober _ N_ber _ Number _ Number Z
0 25or less 50or less 75 or less 100or less 125or les_ 1SOo_ les_. 2_0_r less _00_r less 2[_ or le_
TOT_L_
AVfi_ 5_ V_
25 2_ 6 _ _ _ 0 _ I
_9.06 _5.94 ?,_B 4._? 4,_9 0,OQ O,OQ O.O0 _.5_
ij 7 2 ! ] 0 _ O I
42,_J 26.92 7,_9 L85 _.85 O,O_ O.OO 0._0 _,85
2
S.J_
2
7,69
_4
lOO,OO
2_
100,00
27,577 55,818 _!I5,_S
4_,665 80,S_1 b4_l,gS0
Coerce_ |nooseand_penseSteLelenLs_ _e_, 19_.
,
8 4 ! l 2 0 0 0 0
SO,O0 25,00 _,25 _.25 12,50 0.00 0,00 O,O0 0,00
6 12 _ l 0 0 O 0 O
27.27 54,55 1_,64 4,55 O,O0 O.O0 O.OO 0,00 0,00
0
O.O0
0
O.O0
_6 |O_,OO
22
lO0,O0
_8,682 3_.378 984.549
12,759 |S,5bB 242,.'_9
33 3.
TRANSACTION COST OF FUNDS-MOBILIZATION
As
shown
mobilization (47.7_)
in
cost and
accounted
only
bank types,
accounted
the
a
banks
record-keeping
are
mainly
II
14,
greater
6.4
portion
come from
to
percent
of
(23.2_).
transactions
of
funds-
deposit-mobilization
and withdrawal
related
activities
rediscounting By
by all
from by
Table
Costs
funds-mobilization
KBs'
and PDBs'
by
deposit-mobilization
CB
with cost.
funds-mobilization
costs
are
activities
as
I
transactions cost
with
accounts
compared have
for
to
only
bank depositors. 52.2
43.7
25.1
deposit-mobilization.
the
RBs,
This
is
of
the
on
the
CB
percent funds
far
from
window
rediscounting
from
costless.
personnel
has time
higher
5.3
been is
on the
to
since
other
cost of
cost hand,
coming
KBs'
and
from PDBs'
record-keeping
this
cost
is
and
related
to
by clients.
hand,
have a higher
from
activibies
window,
17.5
fact,
shown above
percent,
This the
reflects fact
to
cost that
percentage
related
dependence
an important
allocated
RBs,
due
be expected
percent.
In
funds-mobilization
percentage
also
CB, and highlights
may represent
It
PDBs.
deposits
cost
and PDBs'
on
to
of
deposit-mobilization
funds-mobilization
is
other
funds-mobilization with
of
cost
servicing
for
A
funds-mobilization withdrawal.
percent
percent
percent
KBs'
for a
that from the greater
deposit-mobilization
of
to
transactions
against
KBs'
the
RBs'
this
4.6
reliance
reliance
CB
_ts
is
rediscounting
banks. percentage activities,
of
34
_
_
o ._. Z 0
_
=..'
_ _,,..: _ _; _ _,,. N_e_--
Q.a .._
,=.==.
.
¢,.
,_
•._ ._ _ _
.-
-4.,i
_-_-__
35
49.6
percent
24.4
percent
personnel by
KB8
by
_he
for for
and
RB8
45.2
percent
(Table
7).
is alsoass.igned and
PDBs
greater
compared
RB8.
accounts,
Overall,
the
activities,
as
and
costs. time
CB,
percent
A
(Table
8).
serviced
factor
of
the
is allocated against
POB8
compared
greater
contribute
and
to
of
activities i8
explained
both
KBs
and
PDB8
PDB8
have
' unlike
RBs.
KBB
and
deposit-mobilization higher
a greater
3.44
deposit-
percentage
transaction
PDBs
only
Thi8
to their
hand,
by RBs KBs
on
to
proportion
to. service
personnel
other
by
is that
time-deposits,
PDB8 On
RB8
deposits
Another
such
KBs
personnel 16.7
of
for
deposit-mobilization
to
concentration
by
mobilization
to
compared
volume
to
other
KBs
cost
and
with
2.44
of the
percent
respectively
Fines the
CB
and
and
penalties
.in meeting..the
greater
percentage
average,
this
cost
is
_6,757
(see
Table
POBs' percentage insurance POBs average (see
have is Table
related
.of
of
KB8
for
their
16).
_40,071
and
15).
requirements
requirement
for
cost.
RBs compared
On the
other
to
hand,
KBs,
This of
is
deposits
_15,514
for
with
contributed
funds-mobilization
PDBs.funds-mobilization
volume for
reporting
reserve
deposits.
a greater J66,468
RBs'
to
On
KB8' a
_4,504
a the and
considerable
cost
comes
expected
since
compared
to
PDBs and
_12,709
KB8 RB8. for
from and The RBs
36
Table
15.
DEPOSIT-RELATED (in thousand
•EXPENSES pesos}
......................... '----.---......... _.--n_---u-.......................... _.°
ALLBANKS
Kgs
PDgs
RDs
Fines& Penalties•
Nu_er
_
0
24
4).64
20 _ less
20
3b,)6
40 & less 60 &.less
2 5
_.64 9.09 "
Number
_
Number
10 52,6) 7
)6,84
Z
1!
78.57
_
21.4)
_
1L64
|0
45.45
0,00 0,,00
I 4
4.55 18,i8 4,55
1
5.26 5.26 .
O
0.00
0
0.00
|
0.00
0
,0.00
O
"I
O 0
Number
80 [iess
1
1.82
]00:&less
0
0.00 .
[00+
_
5.45
0
0.00
0
0.00
3
I3.64
TOTAL)"_"•
55
100,00
19
100,00
14
JO0.O_
22
|00,00
0 ..
_V6: i7,849 5D: 40.676
4,504 ]I.554
VAR:1654.575
13S.500
' HIN:
HAI:
6.757 16.767 •281.117
0
198.6
Source: Income andExpense Statezents_Dec,1966.
40.071 59,125 _495.921
0.00
37
•Table
16.
DEPOSIT-RELATED •(in•thousand
EXPENSES pesos•)
eOJs _osit Insurance ksber
.... Z
Nu_er
X
Nnber
Z
_sber'
Z
............................. .o.., ..... ,..__ .... ---.......... .... ............................ 0 20 _ less 40_ less 60 _ less BOt, less lOOt, less lOO*
1 _2 lO 2 4 2 ,_
......................
- .....
TOTAL: -.
....
-..
1.85 59.26 18.52 _.70 7.4| 3.70 5.56
...........
54
- .....
0 _ 4 2 4 2 _ ._... .........
lO0.O0 . ...........
AVG, 3|;356 SO: S6.826 VAR:1356.14l
0.00 t6.67 22.22 1i.11 2L22 |l.ll 16.67 _...-_. ......
18 10_.00 .-,._.
_...._
.......
66.468 45.490 2069.37g
7.14 64.29 28.57 0.00 0.00 0.00 0.00
i 9 4 0 0 0 0
.-._. .....
]4
. ..........
.-
.............
100.00 ...........
15.514 .11,216 . 125.80_
Source:|nooseandExpense Stateeents,Dec.1986
,....,,...
0 • 20 2 0 0 0 0
.-
0.00 90.91 9.09 O.OO 0.00 0.00 0.00 ,*............
22 100.00 ..
................
12.709 6.277 _%_99
.. ......
38
4.
Cost
PER UNIT
Per
Loan
Given
overall
and
in
_1,380 cost
AccQunt_Outs.tandin_
the
operations loans
COST OF LENDING
their, per
per
account
period
(see
loans
in
banks
This
the
to
its
of
outstanding
comes
other
of
this
granted
f-r_
loans
about
.represents
Part loans
lending
is
amount
new
part
in
outstandingloan
combined.
a bigger
addition
banks number
per
17).
processing and
by
total
cost.
Table
the
from
considered
new
the the
by i all
comes
incurred
considering portfolio,
loan
account
cost
the
cost
per
'for
the
servicing that
these
are
already
loan
account,
outstanding.
By (_473) big
type than
do
that
they RBs
they
loans
loan
between
cost
have
less
accounts
to
less
total
service
more
most
than
predominantly
per
RBs
RB8 are
costs
although agricultural
commercial
in the
less
per
(see
Table
and
RBs. i8
lending
that
of
operations
but
among
compared
to
but
in. Nest
KB8
rural
small,
accounts KBs.
but only
are
than
.not
not
is typical
number
The
operations
lending
portfolio
greater
17).
In"contrast,
This
loans loans.
KBs
service.
in their
have
cost
in their
accounts.
loans also
lowest
KBB (P14,500)
higher
PDBs
by
cost
and
the
incur
where
portfolio
have
KBs
incur
numerous.
RBs
(Pl,839)
in
also
banks
bank,
PDBs
difference
only
do
of
which
their of
the have
39
Table
17.
COST
PER
OUTSTANDING (in
_LL BA#KS
TOTALLENDING COST=
LOAN
ACCOUNT
pesos}
KBs
PDBs
R_s
1379.92
14500,28
1839,24
473.04
Planning_ Progra_zing _ds _ Promo
93,96 30,54
1136,09 201,34
99,79 58,71
29,02 l_.5q
lntervieN of Applicants Credit Investigation Evaluation & Analysis Disbursement
94.76 172.27 152,76 72.78
777.69 1894.99 IB21.55 681.54
153,48 291,% 81.36 123.60
3%50 3%45 67.47 2_,88
Unspecified
198.56
1681.87
258.66
94,14
67.92 107.42
986.29 937.21
78.41 197.00
%46 36,04
185,7_ 20_,2_
1724.72 2656.98
328._7 167,91
58,B0 61.69
6305.20
771.69
165,99"
Loan Recovery_ Ronitoring •Collection
,-
Record-keepinglReport-writing HOt, of bad debts
.............................................
564,29 ...............................................................................
So_rce : Coep_rative _ankStudy,J987.
40
Recovery
cost associated
with all
_564 per account
for all of the banks.
cost
per
is
all
aspects
account
collection¢ KBs
of
_166
loan
record-keeping
and management
put
more
@9.41 for RBB. emphasis
greater exposure lend.
recovery
and
17).
For
recovery
RBs
do not.
The
and
the requirements
and stricter
in
difference
due
loans
the in
of these guarantee
management
of
these
cost
per
for
that KBB and PDBB
operations
participate
and
example,
i8 P78 for PDBB and _986
loan
KBs
In
monitoring,
they
their
loan
of
loan
programs
accounts
to
guarantee
cost per account may be due to the importance
supervision regular
PDBs
whereas
servicing
i.e.,
as a resulb of the larger commercial
Further,
programs
KBB' _6,305,
It must be recalled
on their
is
of bad debts, PDBs
incur more costs than RBB (see -- Table
KBs against
for
compared
to
accounts.
Table
18 reports
year.
cost
It
per
#120.
is
loan
As in
the
shown
that
and _6,744,
the
banks'
loan
from
evaluation
is
higher
would
be the
loan
PDBs and KBs have
_1,023
cost
example
average
at
processing
loans
_772and
operations,
each account
loans,
For RBB the loan recovery
PDBs'
recovery
the cost of monitoring
the
against
outstanding
to
higher
respectively,
recovery
screening
granted
cost,
credit
Total loan recovery outstanding.
ir_vestigation,
cost divided
processing
against
all
aspects
investigation
among PDBs and KBB compared credit
cost
during
to
per
by the total
RBs'
of
loan
and
loan
RBs.
account
An .for
number
of
number
of
.3/ loans
Total granted.
loan
processing
cost
divided
by
total
Table
18.
COST (in
...........
. .............................
LOAN
pesos
)
--. ...............................
ALL _AHkS
TOTAL LENDING COST: Planning _ Pr_Jremmin9 Ads _ Proem Disbursement Monitoring Collection
PER
kDs
. ..........
PODs
RBs
1237,30 7].87 25,_2 b8.88 64.97 95.79
20i76,99 1355.47 283_70 998.83 }52b,]3 1238,90
3573.81 155.57 76.95 190.94 141.34 373.23
37J,02 23.|9 J].9_ 2b.bO l_.59 2_.30
Record-keeping/Report-.riting Hgt. _f bad debts Unspecified
178,41 192,35 152.75
2540,00 34_0.20 2049.01
58b.Oq 595._4 451.00
59.90 47,3_ b0,92
Lo_nProcessing: Interview of Applicants Credit Investigation Eveluetion _ Analysis
103.B3 142.88 140._4
15B3.50 2543;b7 2617.58
29b.99 471.93 254,43
36,68 32.15 5|째44
396.75
b744.74
1023.3b
120,27
_ource : Colp_ratiye _an_ Study,1987.
2
loan the
processing need
for
guarantee
Cost
activities extensive
programs
,Per
As
Peso
credit that
regards
these
Considering
all
the
_0.03
Table
peso
bank for
of
of
direct
loan
KBs
have
to
of
the
is
means is
and
keep
of
may
be partly
and
partly
due
to
to
the
due
participated
loan
in.
per
about
have
as
they
are
in
their
for
to
keep
For
PDBs
each
and
_0.02
advantage a
than
is
maintaining
centavos.
portfolio of
emerges.
of
comparative
able
loans
outstanding
cost
PO.03
the
amounts
loan
three
RBs,
PDBs
larger
the
and
picture
peso
that
for
granted
different
cost
#0.06
RBs
the
peso
a totally
This
KBs
they
effect
banks,
cost
compared
peso
per
banks,
Overall,
]ending
and
outstanding
this
KBs.
cost
19).
loan
type,
This
investigation
PDBs
the
for
(see
RBs,
Lent
outstanding
each
than
lower
RBs.
outstanding
in
cost
This loans,
per is
a
in
KBs'
in
the
I
and
PDBs'
number per
portfolio
of
loan
accounts,
cost
of
in they
RBs. make
What it
PDBs
up
by
and
KBs
a higher
lack loan
amount
account. The
each
bank.Js
for
KBs,
recovery dictated
loans
than
recovering
_0.023 _0.008 cost
by
the
(see per bigger
Total loan outstanding.
for
each
RBs, Table
peso
19). for
volume
recovery
#0.014
peso for
cost
loan
PDBs
Again,
KBs and of
of
the PDBs
loans
divided
outstanding and
very
slightly compared
they
for negligible lower
to
loan RBs
is
service.
by
the
total
value
of
43
Table
19.
COST
PER
PESO
LOAN
(in .......................................
OUTSTANDING
pesos)
-_.......................................
ALL B_NKS
K_s
PDBs
RBs
TOTE LEAPING COST: Planning 5 P_ograuing P_s_ Proeo Interview of Applicants CreditInvestigation Evaluation _ Analysis Oisburse_ent Unspe_ilied
0.02_ 0.002 O.OOl 0.002 0.003 O,O0_ O,OOl 0.004
0.0]8 0.001 0.000 0.00! 0,00_ 0.002 0.001 0.002
0,030 0.00! 0.¢01 0,002 O.OO& 0.002 0;002 0.004
0,0_0 0,003 0,002 0.005 0.005 0,007 0,004 O.OIi
LoanRecovery: _oni_oring C_llection Record-_eepinglReport-writing _gt. of baddebts
0,00! 0.002 0.004 0,004
0.00! 0.00! 0.002 0,003
0.001 0,003 0.005 0.005
0,002 0.005 0.009 0,007
0,014
0,023
............................................
O.OlI
s_fce _ Co_arative_ankSt_dy_1987_
0.008
44
As banks
do
RBs, the
regards not
B0.015 sample
their
of
per
peso
PDBs
banks,
RBs
of
that
RBB,
KBs
Overall an
although
important
operations lent,
compared
5,
Per
PER
the
public
transactions per
deposit
largely
cost
of
loan
in their since
it
COST
OF
value
hand,
than
RBs
value
processing per
Among
PDBs
given
per
peso
higher
cost
is due of
to the
loans
compared
to
lent.
This
peso
that
measured
for
20).
lower
to
total
across
B0,013
sl.ightly
suggests
PDBs.
to
slightly
cost
KBs
and
in
a higher
loan,
Table
compared
to
than RBs. is
current
by
costs
cost
of
per
RB peso
DEPOSIT-MOBILIZATION
Account
all
the
_87
the
(see
cost
with
bank
loan
to
by
overall
of
new
each
activities
clients
or
deposit
directly
depositors,
this
to
servicing
divided
account
and
by
the
from
related
amounting
deposit-mobilization
record-keeping
processing
accounts
mobilizing
21).
mobilizing
Likewise,
for
their
opening Table
in
due
account.
banks,
i.e.,
is
accounted
Total granted.
other
KBB'
granted
(see
the
efficiency,
is
of
of
differ
account,
Most
loan
the
of
amounts
loans
similar
Deposit
account,
On
peso
KBs
of
Considering
each
explains
higher
UNIT
each'deposit
which
finding,
are
for
more
a
donor
per This
granted
KB8
incurred
granting
_0.015
loan.
granting
they
and
costs a
of
significant.
for
granting
fact
cost
appear
respective
cost
Cost
the
to
to
_52
cos_
is
withdrawal..
total
value
of
loan
45
Table
20.
COST
PER
PESO
(in
pesos}
ALL 9ANKG
KBs
LENT
PDBs
gBs
TOTAL LENDING COST:
0.046
0.643
0.053
0.043
PJannin9_ Programming Ads_ Proto gisb,rsement
0,003 0.001 0.003
0,003 O.OOl 0.002
0,002 0.001 0.003
0.00_ 0,00! 0,003
Monitoring Collection Record-keepinglReport-writing B_t. of b_d debts Unspecified
0.002 0,004 0,007 0,007 O,OOb
0.003 0.003 0,005 0.007 0.004
0.002 0,OOb 0.009 0.009 O.OOT
O.0Ot 0.00_ 0,007 0.005 0.007
0,004 0.005 0,005
0.00_ 0.005 0,0%
0.004 0,007 0,004
0.004 0,004 0.006
0,014
O,OIS
0,015
0.013
Loan Processing: Intervie. of Applicants _-edit lnvestigati_ Evaluation _finalysis
5ource : ComparativeDankStudy,1987,
Table
21.
COST
PER
DEPOSIT (in pesos}
ALL B_K$
KBs
Total Oel_osit-l_bilizaLion Cost
87.47 120.4]
Transactions ,ith Depositors Record.keepin 9 Funds-Transfer Ads5 Proso
52.25 23.49 4.49 7.23
Source: Coiparative DankStudy,1997o
ACCOUNT
PDBs
RBs
7_.2!
28.94
7S.b_ _b.71 30.1b 22.92 5. b5 b, 50 8.97 7,01
JL97 10,25 O.91 3.91
46
By
type
is
higher
for
to
RBs
(#28).
their of
higher
of
bank
of
transactions
cost
RBs
come
from
cost
per
deposit
each
deposit
accourY_
respectively) for
compared
KBs
relative
and
accounts
with
depositors,
comes
to
from
the
to
each
keeping
each by
number
of
have
for
2.3
centavos
all
_76
the
RBs
the
Maintaining KBs
account
second
account
over-the-counter
banks,
per
have
and
highest
each an
a
cost
#14
and
_10
over-
recordwith
transactions
have
the new
includes
to
over-the-counter
record-keeping.
servicing
depositor
withdrawal. For
all
depositor's
clients
i.e.,
PDBs
to
for
_36 with
per
account
activities.
Mobilized
the
KBs
(#0.035) mobilizing
bank
new
cost
_30.
accounts
related
record-keeping.
of
deposit
activities
Servicing
contrast, for
of
#73,
mobilizing
new
Peso
of
peso
and
deposit-mobilization
Per
This
of
clients
and
these
lowest
cost
respectively,
depositors
In
mobilizing
deposit-mobilization
transactions
#23
Costs
this
involves
the-counter
for
of
(._120
higher
in
bank.
opening
keeping
cost
PDBs
The
or
the
and
KBs and
types
depositors
account
the
attracted.
Much
with
bank,
cost
deposits
three
of
(_0.018
(see
and
deposit.
per
Table
each
again
cost
peso
RBs
3.4
of
peso),
22). o_
mobilizing
This deposit
per
followed
by
means is
peso
that
1.8
of
PDBs for
centavos
deposit (_0.023)
KBs,
is and
the
cost
against
PDBs
centavos.
shows
KBs'
comparative
This
can
be explained
advantage by
the
in larger
raising deposit
a
47
Table
22.
COST
PER PESO DEPOSIT (in pesos)
_LL B_S
KB_
PDB5
RBs
Total Deposit-I]obiJi-zati_n +Cost 0,021
0,018
0.023
0.0_5
Transactions with Bepositors Record-keeping FmKIs-Tr ans(_, Ads& Prm
O.Oll 0,005 O.O0! 0.00!
O,OJl 0,008 0.002 0.002
O,OU 0.012 ¢.00! 0,005
0.012 0.006 O,O01 .0,002
Source: ColparativeBankStuelyt1987.
balances
per
deposit
accounts.
situated
in
off from
more
communities. businesses.
RBs which value.
account
.have
in
KBs,
Normally, prominent In
this locations,
addition,
PDBs, more
although
most
likewise,
deposit
accounts
.they is
have
smaller
expected such
KBs hold have
the
than
as
of in
number
KBs which
relatively
commercial same
are well-
accounts
advantage
PDBs although
of
over small
in
48
V.
SUMMARY AND CONCLUSION
This and
section
discusses
The
part
some
major
1,
KBs
contributed
by
KB
lending
processing
more
intensive
KBs. familiar
a small
Loan
credit
their
exposure,
given
as
the
study
RBs.
follows:
account all
of
than
for
for
banks
their
their This
a
greater
than
lending
transaction lending
while
operation
cost
operations
emphasizes
units
a balanced
of
the
their
lending and
investigation smaller
area
KBs and these
of
of
RBs
the
fact
are
more
on
both
funds-
small
cost
on
lending,
cost
RBs.
accounted
This
collateral per
loan,
borrowers
may
be
for
by
due
to
offered RBB
KBs
among
are
having
more
only
to
borrowers.
also
accounts
PDBs banks
predominance
of
amounts
clientele
by
transaction
to PDBs
cost
among
efforts
among
portion
bank's
compared
service
recovery
portfolio.
the
recovery
cost
cost
have
granting
with
are
funds-generating
percentage
Besides
from
lending.
-Considering
loan
study
larger
PDBs
and
a higher
lending
are
obtained
activities
is true
oriented.
have
the
funds-mobilization
branches
2.
of
a
opposite
mobilization
serve
have
results
implications,
transaction
operations.
that
the
mobilization
total
the
policy
findings
Funds
of
while
summarizes
perhaps
for
a
greater
due
to
the
intensive
of
their
as
a result
of
commercial
loans
share
of toan
higherin
their
49
3.
As
greater
part
specially
is attributed
among
portion
of
from
regards transaction
the
KBs
The
highest
is
KBs.
for
lowest
for a
although
the
higher the
.loan,
cost for
differences
lowest
among the
lowest cost of mobilizing
the
contrast
underline a
mobilizing
types
mobilization. expect
portion
shown to
for
of
be
RBs
banks
is
than not
and
loan
is
a loan
peso cost pDBs
of
or
KBs,
significant.
each peso of deposit account to RBs.
a
RBs
granting
The per
In contrast,
per peso of deposit,
is
KBs obtain
followed
by
to the higher volume
particularly
network,
of
of transaction KBs and
of their operations.
units for their
larger
raise funds
branch
funds
by both KBs and PDBs.
the direction
larger
are
outstanding
KBs.
for
in the composition
bank
greater
mobilizing
lowest
This may again be attributed
mobilized
different
is
The cost
PDBs or
a
cost.
peso of
RBs.
either a.lso
loan
per
for KBs and PDBs compared
The
only
the
is
cost
a
activities
hand,
come from
This
outstanding
The cost of mobilizing
of deposits
the
But
RBs than
PDBs than RBs.
of
per
cost
other
RBs funds-mobilization
KBs and highest
granting
5.
On the
window.
of
cost
for
lowest
and PDBs.
CB redi.scounting
funds-mobilization,
deposit-mobilization
RBs funds-mobilization
substantialcomponent, 4.
to
cost on
KB
branches
head offices. their
cost
RBs
as
cost
deposit-
in
to source
banks
funds
by
funds-
with less incentive
but more inclined
to part
Thus, this is shown
On the other hand, RBs which are unit
from deposits
serves
Being only a serve
transaction
to sorve a limited clientele
among
can to from
50
CB.
As
channel
despite
the
fact
for
stark
remains
measured
Primarily, financial
sector.
The
per
peso
RBB
indicates
of
in
their
order
to
reduce
related
study
lending
is
these
serve
of
especially financial
peso
comparative
that
peso
cost.
per
Untalan
1988)
that
a factor
as evidenced
economies
of
Unit
intermediaries
operatiops.
and
and
the lower
fundsnot
lending
in of
transaction
of operations
cost
per the
a
agricultural
bank
leeway
than
results
that
of
to
agricultural
the
of
finding
most
does
scale
In fact,
delivery
by the
unit
study
by for
of
the
scale.
capitalization
among
extent
in the
this
reveals
cost
both
mostly
determinant
the
in
large
rural
mobilized
But
into
of
services
deposit
carry
their
a
lending
relatively
advantage
go
as
have
activities. banks
hold
viability
bank
PDBB
per
the
and
transaction
bringing
need
their" performance in their
cost
operations,
Operations
is the
KBsland
But
delivery.
lower
portfolio
more
Additional
of
of
of
a significant
services
existence
and
smaller
not
It seems
that
lending.
funds-mobilization cost
cost
lending
(see
larger
addressed
unit
loan
that
loans
peso
is on
in their
with
in terms
fact
and
necessitate
bank
per
their
mobilization
PDBB
problem
per
emphasis
of emphasis
and
intermediaries
cost
a
by
the
their
in either
the
specifically
cost.
KBs
advantage
operations
funds
contrast
that
comparative
rural
such
requirements
banks,
would
to expand
viability _igger
by
permit
their
these
operations
exploiting
operating
for
capacity
smaller
banks
small
rural
and
economies for
improve of
scale
smaller
banks
51
would
lower
their
average
cost
could
increase
their
25 percent
their
limit
Liberal in
at
Perhaps of
lowest
entry
the
Likewise,
to
expand
their provide
unit
in terms
of
and
for
these
strengthen
than
just
effectively of
lower
deposits
deposit. expand
of In
their
advantage
of
Perhaps, intermediarie8 factors
the other
the
directly
same
would
provide
these
cost
cost
present
could
services
profitable, to
of
the
a chance
unit
banks
.for
when
and
transaction
the
cost
provided
their of
expanded areas
cost.
by
rather funds higher
thus
per
volume peso
of
incentives by
to
taking
scale.
addressed
improvements
like
other
performance
viabil..ity of
faced
A
to
banks
special
cost.
lack
competition.
banks
for
lower
economies
risk
bank
by serving
banks
be directly
the
competition
deposit-mobilization
improve
of
beneficial
be due
for
these
loans
banks
is through lowers
for
their
can
also
may
absence
words,
bank
RBs
be
remain
in the
profitability
can
among
of
to
these
to
funds-mobilization
presence
the
produce
order
as conduit
operations
affecting
transactSon This
their
in
number
serving
banks
the
since
.Wider operations
lending
merely
lower
these
of
prove
long-run
to
incentives
the
remoyal
costs
operatjx_n_-_
to
in the
cost
entry
additional
by which
likewise, •
cost
minimize
.free bank
way
effectively
subscriptions.
cost
per
thus
is the
intermediaries
higher
and
One
base
will,
possible
incentives
RBs
capital capital
rural
cost
delivery.
transaction
force
the
of
on
bank
reducing
would
transaction
by
One in
rural
banks.
looking
way
farm
financial i-nto
of...lowering productivity. It
Is
common
•52
knowledge in
that
this
thi.s
case
the
risk
rural
comes
from
households
the in
beneficiaries
the
form
of
of
credit,
lower
repaying
capacity.
Improvements
in
infrastructure
such
as
farm
farm
inputs
to
market
_oads, B
irr_-gation, better
availability education
marketin.ÂŁ tong
ru_ral
to
in
of
and
incr.easing
rural
financial
incentives
for
translated the
.Both delivery
have
farm
these not
banks
but
decreasing for
these
of
households in
an
terms
increase effects
rural
of
the
in financial
the
the
their
transacCion
more
increased size
of
unit
intermediaries.
the and
go
a the
costs
of
cost.
income
theeconomy
for
per
will
risk-related
of seek
farming,
improving
household
to
in
and
thus
rural
of
policies
reduce
and
equipments,
techniques
productivity
dormant-sector
only
and
pricing
These
improvement an otherwise
modern
appropriate
intermediaries,
"monetize"
by
of
households.
Further,
be
better
farmers
assistance,
'way
incomes
of
would
thus
giving
credit
which
number
of
loans
loan
as
well.
0er
peso
can
cost
of
53
References
•
Cuevas, Carlos Regulations: Mimeographed
E,
"Costs of Commercial (September,
Cuevas, Carlos E. and Transaction Costs Credit Allocation," Graham, Doug]as. Unpublished
Financial Banks and 1984).
Intermediation Development
Umder Banks'_
Graham, Douglas. "The Importance in Domestic Resource Mobilization Mimeographed (April, 1984).
"Notes (December,
on Comparative 1987).
Lamberte, Paper,"
Mario PIDS
B. "Comparative Working Paper
Lamberte, Markets: Series
Mario B. and Lim, Joseph A Review of Literature;" No.87-02, (January,1987).
Bank
Bank Study: A No. 87-04, (April, Y.
of a_qd
Study."
Background 1984).
"Rural F'inancial PIDS Staff Paper
Relampagos, Julius. "Funds Transfer Mobilization Among Branch Banks M.A. Thesis (forthcoming), U.P. 1988.
Operation in the School
and Savings Rural Areas," of Economics,
Tolen_ino, Bruce. "Current Philippine Agricultural (March, 1987).
and Policy,"
Development In Mimeographed
Imperatives Credit
Untalan, Teodoro _. "Transaction Comparative Study," M.A. Economics, 1988.
Cost •,•Thesis,
of U,P.
Banks: School
A of
54
Appendix
A.
i
LENDING OPERATIONS: I. Planning and Programming (e.g. setting-up of loan targets/programs) 2. Advertising and Promotions 3. Interview of Credit Applicants/Examination of Loan Applications 4. Credit Investigation (e.g. inspection/appraisal of collateral; examination of bank) 5. Evaluation/Analysis and Approval of Loans 6. Disbursement of Loan 7. Monitoring of Loans Including Technical Assistance 8. Collection of Loans 9. Record -keeping and Report-writing i0. Management of Bad Debts
B.
INVESTMENTS
C.
TRUST OPERATIONS
D.
FUNDS-MOBILIZATION: 1. 2. 3. 4. 5.
E.
Transactions with the Central Bank/other Transactions with Bank Depositors Record-keeping and Withdrawal Funds-Transfer Operations Advertising and Promotions
GENERAL
banks
ADMINISTRATION/SERVICES (e.g. typing, delivery/messengerial maintenance/utility)
activities,
55
Appendix Personnel
Code 1 2 3 4 5 6 7. 8. 9. i0.
11. 12,
13. 14.
15. 16. 17. 18. 19 20 21 22 23 24 25
Bank
2
ClasSification
Code
Personne_Positions
Chairman Vice-Chairman Directors/President Board Secretary/Treasurer Manager/President-Manager Assistant Manager/Branch Operations, Manager/ Branch Operations Officer Cashier/Assistant Cashier/Cash Clerk Branch Accountant/Accountant/General Bookkeeper/ Assistant General Bookkeeper Loans Officer/Account Officer/Credit Administrator Senior Teller/Head Teller/General Teller/PR Teller/Field Teller New Accounts/Savings Pro/Customer Relations Assistant FX Clerk/CTD Clerk/Sundries Clerk CA Bookkeeper/SA Bookkeeper/Supervising Bookkeeper/Junior or Senior Bookkeeper/Liability Bookkeeper/CTD Bookkeeper/Posting Clerk./ Proofsheet/Accounting Clerk (Funds) Clearing Clerk/Batching Clerk/Distributlllg Clerk Loans Analyst/Loan Processor/Loan Clerk/Credit Investigator/ Credit Analyst/Financial Analyst/ Clerk/Loans-Rediscount Clerk Loans bookkeeper/Accounting Clerk (Loans)/ Subsidiary-ledger Bookkeeper/Filing Clerk Inspector/Technician/Farm or Credit Technician/ Production Technician Settling Clerk/Branch Courier/Messenger/Utility Clerk Secretary/Clerk Typist Driver/Janitor/Messenger/Security Guards Appraiser/Costing Clerk Collector Property-Liaison Clerk Acquired Asset Administrator Administrative Assistant/Personnel Pro Money Shop Manager/Money Shop Supervisor
56
3
APPENDIX
A.
Where
the
personnel/position
more
or
less
together
similar
as
one
differs
functions,
by name these
classification
but
are
and
having grouped
assigned
one
variable. r
B..
ex.
I
Senior
ex.
2
Loans
Where
the
functions
but
function
or
i.e.
Teller, Analyst,
Head
Teller,
Loans
processor,
personnel/position can
deposit-taking,
these these
as one
are are
Clerk
slightly general
assigned grouped
Teller
Loans
differe
be categorized
activity
General
one
in office
variable,
together
in one
classification.
ex.
I.
Senior Clerk,
ex.
2.
Teller, Savings
ex
3.
Current
Teller,
New
Account
Personnel
Inspector, Technician,
Field
Farm
Technician,
Production
Account
Technician
Bookkeeper,
Bookkeeper,
Certificate
Bookkeeper,
Posting
Credit
of
Clerk
Savings Time
Account
Deposit
(Savings)
57
C.
For
personnel/positions
classification differ file,
ex.
in
as
to
rank,
these
are
Branch
i.e.
D.
For
Jr.
or
the
lending, vs.
General
Bookkeeper
but
rank
and
Bookkeeper, vs_
(8)
Bookkeeper,
and
same
variable.
Accountant,
S.A.
Sr.
C.A.
Supervising
Bookkeeper,
Accounting
(Deposit).
positions
that
involving
completely
activity,
segregation
time
one
General
Bookkeeper,
to
officer-positions
assigned
Bookkeeper,
belong
deposit-taking
Accountant,
Assistant
Clerk
that
devoted
have
general
different is made
to the
major
descriptions office
by noting
functions
but
function the
on
i.e.
% of
their
deposits
or
lending.
ex.
E.
Other
Accounting
Clerk
(Deposit-taking)
Accounting
Clerk
(lending
positions
particular avoid
bank
arbitrary
ex.
PCIB
The
above
performing activities
which
Money
are
are
Shop
insures
belong
or
to
attributed
separate
to
variables
a to
classification.
Manager/PCIB
that
similar
distinctly
assigned
lumping
operations)
the
Money
grouping
or
slightly
the
same
major
Shop
Supervisor
of
personnel
different office
office functions
58
activity
as
Lending,
(B)
General on
noting
office
of
corresponding whatever values
A.
Investiment
of
amount
of
guidelines
of of
above each
missing
do
such on
these
data
were
and/or of
by the
have
banks
a
complete
against
the
In order
that
can
be
generated
used,
and
the
followed:
compensation
I.
-
averaging
all
particular
position
taking
into
resulting salary i.e.
but
with
time-allocation
range
across
for
is
the
bank
of RB1.must
the
compensation
same
bank.
not of
be
the
computed range.
and
that
the
within
the
in
question for
higher
cashier
than of
the
re-calculation
is
deleting value
RBs
compensation
Otherwise,
compensation
that
all
consideration
computed
by
for
compesation
compensation
the
teller
salary
not
personnel.
no
the
were
each
personnel
with
made
to
(A) (E)
guidelines
personnel
Positions RBs
table
- (E).
each
information
were
Deposit-taking,
surveyed
time-allocation
these
(C)
allocated
(A)
banks
compensation
allocation
of
time
function,
the
time
The
descriptions
existing for
following
job
the
Majority matching
in the
Administrative.
based
major
required
the in
highest
compensation
the_samp.le is within
until RBI
59
2.
KBsl PDBs
-
.averaging
all
particular
positionsusing
values
branches
of
compensation
consideration San of
Pablo other
of
only that
i.e.
teller
generated
using
teller
for
positions
that
existing
bank
under
position
BPI
compensation of
other
BPI
branc-hes.
B.
Positions
w th
no. time-allocation
I.
-
averaging
time-allocation
particular
positions
i..e.
allocation
RBs
time
by
computed
2.
KBs/ PDbs
-
RBs
of
time-allocation
with
for
time
no
the
same
J
is
RBs.
for
that time-
from
other
bank.
time-allocation of
Board
allocation, time
lending
RBs,
time
using
personnel
positions
equal
by all
position
of
all
all
all
of
that
manager
averaging
Chairman,
'
across
managers
Positions -
of
for
b_anches
I.
compensation
allocation
allocation
Officer
with
averaging
particular
C,
but
Members values
allocation and
mobilization.
Chairman, that are of
50 percent
Vicehave
given
50 percent for
no
using for
deposit-
PIDS WORKING PAPERS ,
,m ,,
WJLNo. 88-01
A General Assessment of Foreign Trade Barriers to Philippine Eyyports. ErltndaM.MedaUa (P23.00)
W.P.No. 88.02
Economics of Upland Resource Depletion: Shifting Cultivation in the Philip. .pines Marian S. delos Angeles (P23.00)
W.F.No.88-03
: W.P.No.88-04
WP.No. 88-05
AIJI
The Size, Financing and Impact of the Public Sector Deficit, 1975-1984. Rosario G. Manasan
ml
In
WP.No.88.09
W.P.No. 88.10
W.P.No.88-11
0_7.00 ) An Analysb of the Role of Pawnshops in the Finan. elal System. Marie 11. Lamberte (P14.00) The Financial Markets in Low-Income Urban Cornmunities: The Case of Sapang Palay. Marie B. Lamberte (P23.00)
Informal Savings and Credit Institutions in the Urban Areas: The Case of Cooperative Credit Unions, Marlo B. Lamberte and Joven Z. Balbosa (P37.00) W.P.No. 88-07 The Manufacturing Sector and the Informal Credit Markets: The Case of Trade Credits in the Footwear Industry. Matte B. Lamberte andAnita Abad Jose 0*31.00) Japan's Aid to ASEAN. Present Realities and Future Challenges. b'_lologoPante, Jr.. (P12.00)
W_. No. 88.12
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W.P.No. 88-06
WP.No.88.08
The Effect of an Exchange Rate Devaluation on a Small Open Economy with an External Debt Over. hart8. JosefT. Yap
A Review of Policies Impinging on the Informal Cre_t Markets. Mdiza H. Agab/n(P27.00) Flex_le Ftmcttonal Form Estimates of Philippine Demand Elasticities for Nutrition Policy Simula. tion, Agnes Qutsumblng Political Economy of Credit Availability and Financial Liberalization: Notes on the Philippine Experience. • V. Bruce Y. Tolenffno fPll.00) Rural Deposit Mobiliza. tion in the Philippines, 1977.1986.Rhenee Blanco andRiehatd Meyer (P13.00) The 1989 Program of Government Expenditurel in Perspective, Rosario G. Manasan 0"t 4,00) A Review of Investment Incentives in ASEAN Countries. Rosario G. Mana_m 0"14.00) Science and Technology and Economic Develop. m0_tt. Marie 11. Lamberte R] 0.00)
i