Bank improvement program : summary and evaluation

The report covers the period 11/94-9/95. The pilot approach, which included creditworthy lending, vigorous deposit mobilization, and improved bank and client services, was tested in one PBDAC branch bank (BDAC) and two village banks (VBs) in each of three governorates (Daqahliya, Gharbiya, and Beni Suef). The program provided intensive training to the PBDAC"s technical advisors, who in turn trained the staffs of the participating BDACs and VBs. A transportation incentive program for those required to travel, as well as follow-up monitoring were also provided. Preliminary results indicate that the approach is working and desired targets are being reached. The banks are expanding their credit portfolios, and increasing savings deposits as well as the numbers of new depositor clients. The bank units have demonstrated their capability to prepare accurate financial reports and are using the improved accrual accounting procedures. All the units are upgrading customers records with streamlined new bank operations practices. All of the pilot banks have significantly improved the physical appearance of their offices. The program has been responsible, thus far, for obtaining significant gains in investment loan outstandings. This has been due principally to intensive training provided by the BIP and secondarily to the active credit marketing by BIP field staffs and counterpart BDAC and VB employees. Successes have included the following. (1) Mahallah Abu Ali VB increased its average monthly investment loan volume by 150%. (2) Batra VB increased its average investment loan volume by 99% and Talkha VB increased its by 94%. (3) All participating VBs made increases much in excess of the non-participating banks in the same areas. In Beni Suef, Nasser, and Dandil, VBs averaged 31.3% growth in investment lending while in the other VBs under the same branch growth in investment lending decreased by 16%. The BIP"s deposit mobilization activity has been measurably effective. Using the average outstanding indicator rather than the fiscal year end balance to screen out distortions due to seasonality and partly to temporary fictitious increases, it is apparent that for the 9 units combined, the average level of deposits increased 26% under the pilot project period. For each BDAC separately, the increase in their average level of deposits was 30%, 24%, and 19%, for Gharbiya, Daqahliya, and Beni Suef, respectively. For each unit alone, the increase averages were as follows in order of highest to lowest performance: Talkha VB 43%; Mahallah Abu Ali VB 41%; Mahallah BDAC 32%; Nasser BDAC 25%; Batra VB 23%; Talkha BDAC 19%; Dandil VB 18%; Nasser VB 15%; Amereya VB 13%. The number of additional depositor clients in the three governorates increased by 5% in Beni Suef, by 2% in Gharbiya, and by 4% in Daqahliya. It should be noted that Beni Suef"s figures are somewhat suspect with respect to real savers because some might have been forced to save in order to get loans. For this program to be continued it must be given full support by PBDAC top-level management following the project"s termination of technical services on 4/30/96. The Board of Directors must approve the new revised Credit Manual for full application in all of the PBDAC/BDAC banks (this will permit the principle of creditworthy lending to apply); the functions and formal approval to establish appropriate organization units for deposit mobilization must be taken; and the official job titles for deposit mobilization officers must be created.