PHASE I.

COMPANY SELECTION

Company Background

Fernando Air Base Savings and Loans Association, Incorporated or FABSLAI was

established on 11 May 1962 to help military personnel especially the soldiers alleviate their

problems on household finances and set them free from usurious way of financing in the

community of Fernando Air Base, Lipa City. It started with 230 members and Php 30,000.00

initial capital. It was first registered with the Securities and Exchange Commission (SEC) on July

23, 1965 and re-registered in 1991 for another twenty five (25) years.

FABSLAI is governed by RA 8367, otherwise known as the “Revised Non-Stock

Savings and Loan Association Act of 1997”. It was the first savings and loan association that

offered housing project to its members. The Fernando Air Base Airmen’s Barrio Housing Project

was designated pilot project by the Central Bank of the Philippines and the housing units were

inaugurated by then President Ferdinand E. Marcos in 1967.

FABSLAI is managed by seven (7) Board of Trustees who are elected (No Proxy Voting)

by the regular members every second Friday of February of each year. Its day to day operations

are handled by an efficient workforce headed by the General Manager.

COMPANY LOGO
TYPES OF MEMBERSHIP

1. Regular Members (with voting power)

- Officers, enlisted personnel, and civilian employees assigned in Fernando Air Base

2. Honorary Members (without voting power)

- Officers, enlisted personnel, and civilian employees assigned in other units of

Philippine Air Force, spouses and dependents of regular members

Product Description

Savings

A. Capital Contribution (CapCon)

- Minimum of P1,000.00 (maintaining balance) deposit

- earns dividend every July and February of each year

- has an average rate of 14% per annum as per approval by Bangko Sentral ng

Pilipinas

B. Savings Deposit

- earns interest every month with 4% interest rate per annum

Loans

- Offered to all members on short – term and medium – term basis, ranging from one

(1) month to a maximum of five (5) years

Kinds of Loans

1) Salary Loan

2) Collateral Loans

3) Back to Back Loans

Mode of Payments

1) Payroll Deduction (Sec 7, RA 8367 & Sec 4307S, BSP Cir 192)

2) Post Dated Checks (for loans not covered by payroll deduction)

Loan Insurances are covered by:

1) BenLife Insurance – up to 80 years old

2) GrepaLife

Alay sa Pamilya Program (APP)

- entitles members to a death benefit of Php 15,000.00

Community Involvement

- Maintains scholars in elementary and high school (dependents of FABSLA

members)

- Livelihood trainings

Eligibility requirements for loan for an individual

• Must be a member of the Philippine Air Force, wether enlisted or official.

• Must be a Civilian employees, wether casual or permanent.

 • Must be retired Philippine Air force

• Must be a member of the association, wether regular or honorary.

Purposes of loans

• Repayment of past due loans

• Starting small business

• Housing – new or house improvement

• Medical assistance

• Educational assistance

• Emergency loans

• Calamity loans

FABSLAI OFFICES:

• Main at Fernando Air Base, Lipa City

• Villamor Branch at Airmen’s Mall, Villamor Air Base, Pasay City

• Back-Up Processing Center at Clark Air Base, Pampanga

• Help Desk at AFP Finance Center, GHQ, Camp Aguinaldo, Quezon City

• Liaison Office at EAAB, Zamboanga City

• Liaison Office at Mactan Benito Ebuen Air Base, Lapu-Lapu City

PHASE II. INDUSTRY OVERVIEW

 The rapid growth of financial institutions in the area calls for a more competitive

challenge for the association.

Major Competitors

1. Armed Forces of the Philippines Savings and Loans Associations,

Inc .(AFPSLAI)

The major player in the industry, was founded in 1972 and is based in Quezon

City, the Philippines. It serves members from the AFP, PNP, BJMP, and BFP. It

operates branches in Isabela, Baguio, Clark, Aguinaldo, Crame, Bonifacio, Sangley,

Lucena, Legaspi, Catbalogan, Tacloban, Iloilo, Cebu, Palawan, Butuan, Cagayan De

Oro, Pagadian, Davao, Zamboanga, Cotabato, and General Santos, the Philippines.

2. Air Material Wing Savings and Loans Association, Inc.

(AMWSLAI)

Air Material Wing Savings Loan Association, Inc. AMWSLAI is a non-stock

savings and loan association legally established and operating since June 13,

1956 . We are a P15 Billion organization authorized by the Bangko Sentral ng

Pilipinas. Currently, it already have 38 branches and liaison offices nationwide.

As of December 2003, they have 239,355 members.

3. ACDI Savings and Credit Cooperative

ACDI is a duly registered cooperative in accordance with RA 9520. Its

members are active PAF, PN, PM military, civilian personnel, all AFP pensioners

and dependents of ACDI members.

4. Composite Wing Savings and Loans Association, Inc. (CWSLAI)

 5. Air Cavalier Credit Cooperative (ACCC)

6. Other lending investors

Market Definition/Segmentation

FABSLAI’s market is made up of members of the Philippine Air Force (PAF) wether it

enlisted personnel or officer, PAF Civilian employees, and retired PAF. PAF enlisted or officer

are considered to be a regular member as long as their unit assignment is at he Fernando Air

Base, Lipa City. The legal wife of the PAF enlisted or officer who are assigned in Fernando Air

Base can also be a regular member of the association. Each regular member can sponsor a

their dependents to be a member but the status of their membership will now be considered as

honorary.

OPPORTUNITIES

On 21 September 1999, the 100th Training Wing was deactivated and the Air Education

and Training Command was established with a greater responsibility and wider scope of training

task. The company needs to coordinate and develop good relationship with PAF higher officials

in order to establish possible connections in order to gain access on the training camp.

Collection agency is another opportunity option for the association to lessen the

increasing past due loan accounts. These agencies will strengthen the collecting power of the

Collection department that will pursue payments on debts owed by the member /borrower.

Engage in a community involvement. The reason for this is because when people are

looking for services involved with their personal well-being or their businesses, personal word-
of-mouth referrals carry a lot of weight. It would also raise your personal and business profile in

your local community within your target market.

Increasing demand for financial assistance. The cost of living has been continuously

increasing, so the need for financial support also increases. Clients are most likely attracted by

the lowest possible interest rates a financial institution can give.

People now are more inclined in the sophistication of modern technology and the need

to embrace this technologies to improve products and services would be one of the

opportunities for the company.

THREATS

One of the major threats of the company is the continuous increase of other institutions

who are catering to the same market as the savings and loans societies. Major players tend to

outcompete rivals with powerful strategies. The company must aim at developing a sustainable

competitive advantage rather than a temporary in order to improve the company’s financial

performance and strengthen its long-term competitive position.

The restrictive policy of the Philippine Air Force regarding the Single Borrowers Limit

(SBL). This rule prevents the association to increase their credit exposure to the clients that

need huge financial assistance or support to cover up unexpected huge expenditures even if

they still have the capacity to repay the loan.

Regulatory policies of the Bangko Sentral ng Pilipinas regarding the dividend

declaration. Dividend rates are subject to the approval of the BSP depending on the evaluated
capacity of the company. These regulations make dividend declaration policies more

inconsistent and this inconsistencies threatens investors/depositors to invest on the association.

PHASE III. THE COMPANY

Financial services are essential to the well functioning of any thriving economy. All

individuals have time in their lives when they need to save money. They may need a larger sum

of money during financial urgencies such as, wedding or funeral, to pay for their children’s

education, to provide for themselves in old age, to provide in their business or in case of an

emergency in the future. Access to credit facilities such as banks or financial institutions is

equally important.

Financial institutions have emerged in response to the needs of the military personnel in

Fernando Air Base to lessen their problems on household finances and set them free from

usurious way of financing in the community. Fernando Air Base Savings and Loans

Association, Inc. is one of the institutions engaged in this type of activity. It is an organization

engaged in savings and small credit schemes. Through the establishment of savings and the

distribution of small loans, the association help their members improve their standard of living.

Each member of the group contributes the same amount to the group savings. In this

way, no group member has a disproportionate amount of power and the interest is divided

equally between members

Sizes of loans to individuals

A member/borrower can lend money from the association depending on the individuals

Single-borrower-limit (SBL) as assessed by the PAF Finance Center. Loans above

P300,000.00 will be subject to the approval of the Board of Trustees.

Methods of Payment/ Modes of Payment

Loan monthly amortization of the individual borrower is automatically deducted from their

salary through payslip deduction as authorized by BSP under Sec 7, RA 8367 & Sec 4307S,

BSP Cir 192. In the case of the retired PAF borrowers, their monthly amortizations are

automatically deducted from their pension through billing. The monthly billing is forwarded by

the Collection department to the Philippine Air Force Finance Center (PAFFC) for proper billing

and adjustments of deductions. Other methods of payment can be made thru an issuance of the

post dated checks (PDC).

Institutional Impact

1. Human Resources

FABSLAI is managed by seven (7) Board of Trustees who are elected (No Proxy Voting)

by the regular members every second Friday of February of each year. Its day to day

operations are handled by an efficient workforce headed by the General Manager. The

Board of Trustees(BOT) who are the decision making body and approves the general

policies, rules and regulations of the association. All elected BOT’s are long-time residents

of FAB who knows the clients and the environment in which FABSLA operates. It also

composes of three other department heads aside from the General Manager. Each

department also composed of department supervisors who reports directly to the

department heads. The rank and file employees are categorized as permanent and

contractual employees.
 ORGANIZATINAL CHART

Board of Trustees

General
Manager

Departme Departme Departme

nt nt nt
Head Head Head

Superviso Superviso Superviso Superviso

r r r r

Rank & File

2. Operations and Systems

FABSLA’s operations are conducted systematically with the use of the DOS base

system. Individuals fill in loan application form and submitted to the front line employees

together with the complete requirements. Further assessment are done by the front line

employees on the filed application form and informed immediately the member once there

has been a problem or additional requirements needed. The loan application will then be

forwarded to the loan processing section once it has been properly assessed and no other

problems occur.

3. Marketing
 Knowledge of the services provided by the association spreads throughout the

community by word of mouth. Other means are also been using like the use of tarpaulin

advertising which are mostly located on the key areas within the Fernando Air Base. It also has

a quarterly issue of its newsletter to inform the public the accomplishments and the projected

programs of the association.

4. Feedback Mechanism

There is a scheduled once week board meeting which are attended by the seven Board

of Trustees together with the General Manager to tackle on issues and concerns of the

members and its employees.

Profitability ratios
2008 2007

Gross Profit Margin

81,806,837 74,044,321

116,862,322 105,500,449

= 70% = 70%

Admin expense ratio

16,032,519 22,742,942

116,862,322 105,500,449

= 13.7% = 21.5%

Sales & services expenses

Ratio
35,055,485 31,456,128

116,862,322 105,500,449

= 30% = 29.8%
 It is revealed that the company, for the past two years of its operation, has shown an

overall efficiency in its operating performance as being presented in the result of its margins.

Operating expenses has been maintained in a lower ratio. A decrease in the administrative

expenses on the second year of its operation is due to the adjustment of the salary grades of

the regular employees.

Liquidity Ratios
2008 2007

Current ratio
765,676,831 748,953,412

162,483,892 134,479,823

= 4.71 = 5.57

764,443,965 748,227,686
Acid test ratio
141,506,742 121,511,285

= 5.40 = 6.16
 The company has a minimal decrease of its ratio on the calendar year 2008.

Nevertheless, the company’s financial position in the past two years of its operation has been

relatively in a good standing. Although there has been a substantial increase in the current

liabilities on the calendar year 2008 the company also has increased its collection due to the

improvement of the collection department and also the implementation of the adjusted loan

interest rates increased the loan releases of the company which later affects the current assets

for the calendar year 2008.

Balance Sheet Trend Analysis and Vertical Analysis

The analysis shows that a substantial increase in the other current assets portion of the

balance sheet and the acquisition of real and other properties results to an increase of 3.1% of

the total assets on the next calendar year. An increase in the non-current assets of the

company are acquired from the embarked properties of the creditors. The company adjusted its

loan interest rates at a lower percentage and conducted an on wheels project that results to a

2% increase of its receivables.

Capital contributions decreased by 3.5% due an increase of the withdrawals and

resignation of membership.

Surplus (free) has substantially increased to back up an increase of the company’s past

due loans.
 The vertical analysis shows that on the past two years of its operation of the company

there has been no significant difference from the composition of its balance sheet except that

there has been a nominal change on the capital contribution portion of the balance sheet.

Income statement trend analysis and vertical analysis

The company’s income increased by 14.5% as an end result of the decrease in the

admin expenses of the company.

The reduction of the company’s expenses from 21.6% to 13.7% play a significant

role on the increase of the company’s income.

STRENGHTS

The association’s outstanding reputation over the community. The image the

association established has been sustained over the years. The image that the association will

be regarded as a reliable, credible, trusthworthy and responsible financial institution in the area.

The ongoing diversification of the association’s clientele. FABSLA has been attempting

to branch out into other Air Base’s to reach and cater the needs of other PAF personnel

assigned to different bases nationwide.

All Board members are long-time residents of FAB who know the clients and the

environment in which they operate very well.

Institutional advantages of the institution in mobilizing deposits. The strong community

orientation and private of the association suggest that institution are an effective type of financial

institution to mobilize savings in rural areas. Management, the staff, shareholders and clients

are largely from the same region and know each other well. This is a decisive factor because

people only deposit their money in institutions they know and trust. In contrast to financial
institutions owned by the public, the private ownership normally ensures at least a certain

minimum level of efficiency.

WEAKNESSES

Insufficiency of human resources not in quantity but in quality, especially as the key

functions of control, education and training, and informatics. There has been a sufficient

number of manpower but the problem is that its manpower has lack of proper training to perform

his/her tasks efficiently and effectively.

Another weakness of FABSLA is that it is using an obsolescence computer program that

enables it to process transactions at a lower accuracy level. Manual updating of the members

loan subsidiary ledgers is still practiced by the association thereby errors are not immediately

eliminated. The insufficiency of the program promotes duplication of process to check and

recheck.

Increasingly poor monitoring of loans thereby increase in the number of past due loans.

There is no clear policy regarding the monitoring of loan payment.

PHASE IV STRATEGIC ISSUES IDENTIFICATION

In an industry wherein processes are standardized, the best strategic plans to gain

competitive advantage is that to develop a more attractive customer service that would entice

more customers and retain its existing ones.

Good customer service is the lifeblood of any business. If you're a good salesperson,

you can sell anything to anyone once. But it will be your approach to customer service that

determines whether or not you’ll ever be able to sell that person anything else. The essence of
good customer service is forming a relationship with customers, a relationship that the

individual customer feels that he would like to pursue.

Proper monitoring of loans must also be taken into consideration in order to level down

the number of past due loans. The collection department should formulate a clear collection

policies or have another party to do the collection activities.

PHASE V STRATEGIC FORMULATION/IMPLEMENTATION

The need for a periodic review of customer services needs such as speedy attention to

resolve clients’ complaints cannot be overemphasised. Efficient and effective credit and savings

mobilization by management so as to retain existing customers and attract new ones are also

advocated for.

Build up a positive image of the association in the community: Apart from the actual

services provided by the bank to its customers, the image is determined through a series of

factors such as the good reputation and credibility of the individual members of the

management and of the shareholders. Thus, the selection of the management as well as the

broadening of the shareholder base must be done cautiously and should include criteria such as

personal integrity.

Install an effective computerized system: Efficient hardware and software are a

prerequisite to cope with the high number of cash transactions. They will lower operating costs

and contribute to improving the general management information system of the financial

institution.

Improve service orientation: Customers expect rapid services from a financial institution.

In addition to qualified staff and modern technologies, the localities of the institution should have

sufficient space and seating possibilities. The extension of banking hours over the weekend is a

major step towards realizing the concept of an institution as a service center.

Maintain a liquidity above the commercial banks' average: Financial institutions with a
small capital base engaged in mobilizing microdeposits should maintain a high liquidity

ratio. This means maintaining a liquidity at least above the banking industry's average. In

the Filipino context, a 20% liquidity ratio for microfinance institutions appears to be

sufficient to meet unexpected situations.

Price savings products above the competitors' rates: In a relatively competitive

environment, microfinance institutions should consider offering their customers a savings

interest rate above the rate of the competitors. This policy can contribute to increasing the

bank's deposits.

Conduct careful fund management on a daily basis: To satisfy the liquidity needs of a

microfinance institution and to improve financial efficiency, the fund monitoring should be done

daily. In case of urgent liquidity needs, rapid access to a liquidity pool is very important.

Conduct careful risk asset management: The composition and performance of the bank's

assets should be monitored constantly through the analysis of key ratios, such as the net

worth to risk assets ratio and the past due ratio.