2004 Annual Report

K A B A L I K A T P A R A S A M A U N L A D N A B U H A Y , I N C . K A B A L I K A T P A R A S A M A U N L A D N A B U H A Y , I N C .

Annual Report2004

“People in communities live in abundance with strengthened faith in God and right

relationship with their fellowmen and the rest of creations.”

“Sustainable Christian development Organization that contributes significantly to a poverty-free and

Christ-centered Philippines.”

RespectIntegrity

StewardshipCommitment to the Poor

DisciplineInnovationExcellence

“To reach 150,000 Filipino families.”

VISION

MISSION

CORE VALUES

GOAL FOR 2006

3K A B A L I K A T P A R A S A M A U N L A D N A B U H A Y , I N C . K A B A L I K A T P A R A S A M A U N L A D N A B U H A Y , I N C .

Annual Report2004

Annua

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04Table of Contents

3

Messages 4

Looking Back 6

The Year In Review 8

Milestones 10

Performance Recognition 12

Audited Financial Report 14

Organizational Profile 28

Corporate Directory 29

KMBI Board of Trustees 31

K A B A L I K A T P A R A S A M A U N L A D N A B U H A Y , I N C .

Message

Congratulations, KMBI for a victorious 2004!

Truly it was a year marked by outstanding achievement

and recognition. The expansion from seven to 24

branches was an extraordinary feat, signifying growth and progress. Amidst the vast

development, we still managed to deliver excellent performance -- being hailed as

Opportunity International’s number one large-scale partner, not to mention bagging

the Gender Excellence award for the second time.

KMBI could not have gone this far if not for the valuable commitment of the board,

management and staff. Amidst all the challenges we faced, everyone showed

genuine dedication and passion for our work. Thus, I would like to commend

everyone for their noble hearts and diligent hands… for ours is not just a vocation,

but a God-given mission, seeking to bring about abundant life for our fellowmen.

To all the staff, I would like to express the board’s full support and gratitude.

Managers and key officers, thank you for exhibiting servant leadership. Program

assistants, I salute you for your perseverance and great love for our clients. I urge

you all to press on, and take part in our offered courses and trainings. Now is a time

of equipping, a time for gaining knowledge and skills -- to better serve our clients.

To our local and international partners, we thank you for your wholehearted support

and generosity. Because of you, we are able to reach an ever-increasing number

of Filipino families. We continue to uphold our strong partnership, for the Philippines

and beyond!

After a triumphant year, let us not remain complacent despite all the success. We

have a long way to go, a long run to take. Let us set fix our eyes on the vision and

mission of KMBI. Together, let us continue to pursue our purpose!

DR. AMELIA L. GONZALES, M.D.

Chairman

Board of Trustees

4 K A B A L I K A T P A R A S A M A U N L A D N A B U H A Y , I N C . K A B A L I K A T P A R A S A M A U N L A D N A B U H A Y , I N C .

Annual Report2004


Annual Report2004

Message

Year 2004 was a year of great increase for KMBI. It was

also a year of great grace. Stepping out in faith, we

courageously pursued the theme, “Going global, growing

local… for God’s glory.”

Beginning with 29,004 clients in 2003, we experienced a remarkable 195% growth

in outreach, attaining a total of 85,457 clients. Massive expansion also took place,

with the launching of 17 branches across all areas. Today, KMBI has 24 branches

serving program members in Southern Luzon and Southern Mindanao.

Aside from increasing in number, we also strengthened training and development

programs for our staff, as well as training programs for our local and international

partners. We continued to develop transformational tools that are being used to

enhance the lives of our program members. As a result, our centers have become

places of learning where people interact, discover and apply new knowledge.

Indeed, God has enabled us to touch lives, both here and on the other parts of the

world through some initiatives. One of those was the “Regalo mula sa Puso” project,

a gift-giving venture that benefited some 20,000 poor Filipino families. There were

also some recognitions from international partners but more than these, our hearts

are more concerned with the impact God has allowed us to create in the lives of

our people, families, and program members.

All this would not have been possible if not because of our staff - program assistants,

managers and key officers - who have committed their hearts towards achieving

the vision and mission of KMBI. I am deeply proud of you. On the other hand, I am

grateful to our Board of Trustees who generously supported and unwaveringly guided

us through all these years.

Today, as we continue to reap the fruits of our efforts, let us continue to plant seeds

of faith, hope and abundance for our people... and give back the glory to our Lord

and Savior Jesus Christ for all the things he has done, and he will continue to do out

of his love for our nation and people. Together, let us go global and grow local…

for God’s glory!

ROSEMARIE C. CASTRO

Execuitve Director


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Annual Report2004

Looking Back


Annual Report2004

abalikat para sa Maunlad na Buhay, Inc. (KMBI), a Christian microfinance and

non-government organization, had its humble beginnings on March 1985 as a

church-based credit program in a six square-meter choir room with only one

worker. The following year, KMBI was able to assist 37 micro-entrepreneurs

through loans totaling Php145,000. Twenty of them were also provided with training on

Cash Management. Since then, by God’s grace and sustenance, KMBI never ceases to

grow in realizing its vision.

K

EVOLUTION TO MFIFrom 1986 to 1997, which is the foundational

period of the organization, KMBI evolved into

a full-blown microfinance organization through

the leadership of the then Board of Trustees

(BOT) chairwoman Dr. Amelia L. Gonzales and

execurive director Noel M. Alcaide, catering to

poor families not only from nearby communities

in Valenzuela, but also in Bulacan, Caloocan and

Quezon City. In the middle of these foundational

years, KMBI conducted strategic planning and

carried out reengineering process to come up

with “branch scale up” model that would reach

significant number of clients, and design effective

and efficient system to achieve organizational

objectives.

Implementation, Expansion and RecognitionThe years 1998 to 2000 were the implementation years of KMBI in scaling up its branches.

Under the team of Aurelio C. Llenado, Jr. and Donato G. Alcoba, Jr., then chairman of

the board and executive director, respectively, daily branch reporting and monitoring

system were put in place; a tool for transformation program - the Road Signs Book 1

- was developed; expansions in Gen. Santos, Marbel, Davao, and Pasay/Pañaque were

undertaken; and a Memorandum of Agreement to establish Opportunity Microfinance Bank

(OMB) was signed.

The succeeding years (2001 - 2003) were spearheaded by two women, Dr. Amelia

L. Gonzales as BOT chair and Rosemarie C. Castro as executive director. Under their

teamwork, the transfer of five KMBI Metro Manila branches and some head personnel to

OMB as part of the MOA was approved. It was also during their stints that some major

highpoints were achieved such as devolution of Training department, creation of Research

& Development/Publication department, standardization and expansion of MF operations,

and recognitions from both national and international networks.

6


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The Year In Review

8

ecalling how God moved in the midst of the organization’s undertakings in

fulfilling its mission and duty, KMBI saw the year 2004 as an eon marked not only

of expansion, but also of evolution and recognition. After 18 years of committed

service in microfinance industry, God rewarded KMBI with 24 branches. From only

seven branches in 2003, God added another 17 branches into its fold as the year unfolded,

such as Naga, Legaspi, Iriga and Gumaca in Bicol; Lucena in Quezon; Lipa and Batangas

City in Batangas; Sta. Cruz, San Pablo, and Calamba in Laguna; Lower Cavite in Cavite;

Muntiparlas (Muntinlupa, Parañaque, Las Piñas) in Metro Manila South; Compostela Valley,

San Francisco and Surigao in Caraga; Kidapawan and Digos in Southern Mindanao. These

24 branches yielded some 85,457 clients and 2,683 Success Centers. Coming from its

number of clients in 2003, KMBI posted a remarkable growth in its performance compared

to the previous year .

Table 1 – Comparative Annual Performance

Aside from the expansions, KMBI evolved into a better and bigger organization. For the

year 2004, KMBI experienced an increase of 171% in its workforce, and that is a total of

486 committed and endowed individuals supporting the demand of the organization’s

expansion (see Table 2). A transition from decentralized support group (composed of

finance, administrative and human resource departments) to centralized system was also

put in place for the interest of enhancing asset and fund management, delivery of service,,

and monitoring and evaluation.

A mission-driven organization, KMBI operated silently and continued to work hard in

reaching out poor families, not expectant of any recognition. But God sees the works of

his people. After being awarded for

two consecutive years as top partner

of the Opportunity International (OI) in

small and large scales, respectively, OI

recognized KMBI again in 2004 for two

marks of distinctions, being the number

one microfinance practitioner among

its international partners in the large

scale category, and top advocate for

Gender Excellence.

PORTFOLIO DATA 2004 2003 VARIANCE GROWTH POSTED

Client Outreach 85,457 29,004 56,453 195%Loan portfolio (million Php) 232 M 89.9 M 142.1 M 158%PAR (%) 0.76% 0.89% 0.13% 0.15%Financial Self-Sufficiency 109.50% 109.86% (0.36%) (0.32)%Operations Self-Sufficiency 113.41% 114.65% (1.24%) (1.09%)

R


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Annual Report2004

The Year In Review

9

The Gender Excellence award, the second one for KMBI, was given after a selection

process done among the various microfinance institutions (MFI) from 36 countries.

Through the Women’s Opportunity Fund, OI chose KMBI to be its gender excellence

for the year 2004 recipient because of its tireless effort in empowering women in

poverty and facilitating holistic transformation. OI particularly gave premium to

the testimonies of KMBI’s program members whom they interviewed as part of the

selection process. They noticed from the interviewed program members, particular

from the southern Philippines, not only economic progress but also a change in

attitude among them through the KMBI success centers. The selection criteria for

the award revealed KMBI’s distinction from other MFIs, that is, aside from providing

financial assistance, KMBI is committed to facilitate holistic transformation in the

lives of its program members, and that speaks of values formation, restored family

relationship and a better view of faith in God.


Annual Report2004

Network

Opportunity International Network

Microcredit Summit Campaign

Fundacion CODESPA of Spain

Alliance for Philippine Partners

for Enterprise Development, Inc.

(APPEND)

Micro-Finance Council of the

Philippines, Inc.,

Philippine Council of NGO Certification

Mindanao Microfinance Council

Opportunity Microfinance Bank

KMBI is an active partner and network member of both local and international

microfinance institutions, such as:

500450400350300250200150100

50

2003 2004

Table 2 - Staffing Breakdown

Tota

l No

. of

Sta

ff (4

86)

MF

Op

era

tions

(414

)

MF

Op

era

tions

Support

Support

Staff (72)

Tota

l No

. of

Sta

ff (1

68)

Big-


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Milestones


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Bigger and Better Organization

Strengthened training and developmental program for the staff. KMBI invested

on 28 trainings for its staff, as well as for its local and international partners, and

MSI clients.

Provided exposure training to the international partners from OI-China, OI-Mexico

and Schmitz Stiftung.

Participated in the training and consultancy project for OMB staff under the

stewardship program.

Provided training for the local partner TPKI (Talete King Panyulung

Kapampangan, Inc. PKI) as tapped by PCFC to share experiences and

practices to the MFIs in the Northern and Southern Luzon and Mindanao.

Transformational Activities

Implemented nationwide transformation project called ‘Regalo Mula Sa Puso’

in its five areas of operations, namely Calabarzon 1, Calabarzon 2, Bicol,

Caraga, and Southern Mindanao.

Reached out to the typhoon and bombing victims in Bicol and General Santos.

Launched Road Signs Book 2 (in Tagalog and English version).

Implemented Purpose Driven Life book as staff’s devotional tool in all Branches.

10


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11

Milestones


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Improvements & Developments

Conducted training on Transformational

Tools Facilitation (Road Signs, PDL & PCL)

Researched on microinsurance

implementations through MBA or third

party insurer.

Initial research on another financial

offering, the individual loan, was also

conducted.

Funds

Received a grant of US$35,000 from

Opportunity International - United States for

Kidapawan branch.

Granted with US$500 through the Gender Excellence 2003 award.

Obtained an increase in loans from People’s Credit and Finance

Corporation and OIKO Credit from PhP33.0M during 2003 to almost 99.1M in

2004.

Performance Recognition

TOP PERFORMERS

BEST PROGRAM ASSISTANT: Jeanmar Labanero

Jeanmar of General Santos branch surpassed all the

others in overall perrformance. As of the fourth quarter,

she had a total client outreach of 344, loan portfolio of

PhP1.28M, 0% PAR and 3.38% client turnover. In 1999,

Jeanmar started in KMBI in the Bula branch. She was

transferred to Marbel Unit at General Santos Branch in 2002.

With the Best PA award, she is now reaping the prize of her

hardship and efforts. To her co-workers, especially the PAs,

she says,”Whatever challenge you encounter, don’t give up.

Make it your stepping stone in life. Be strong and take courage for God is always at

your side.”

Suzette Madayag, program unit supervisor at Marbel, shares a few things about

Jeanmar. According to her, “Jeanmar interacts well with other people. She is

trustworthy, and fully supports the endeavors of KMBI.” General Santos branch

manager Evelyn Francisco praised her diligence and perseverance.

“Jeanmar really loves her work,” she says. “She deserves the recognition.”

BEST BRANCH MANAGER: Enrique Maca

Butuan branch’s manager was named the Best Branch

Manager of 2004. His branch catered to 4,316 clients

and had a loan portfolio of PhP 15.7 million. From the

time he assumed the position, he was able to increase

the total number of clients by 19.64% and loan portfolio

by 49%. Aside from this, he managed records well and

implemented transformation activities effectively. He

also modeled good values, such as discipline, integrity

and commitment.

Enrique started with KMBI in May 1999 as a program

assistant. He was assigned to several branches before

becoming the program unit supervisor of Butuan, and eventually branch

manager. To other staff, Enrique shares a few words of wisdom: “Everyday,

do something that you don’t like but you have to. You will surely learn from the


Annual Report2004


Annual Report2004

Performance Recognition

experience. Aside form this, whatever the position we hold; it is our responsibility to

create positive change. Let us be initiators, not just reactors.”

Rhanny Barrera, area manager of Caraga, where Butuan Branch is located, believes

that Enrique is a good leader. “Enrique brings out the best in people, encouraging

them to perform to their full potential. As a person, he’s got a great sense of humor

-- you will really appreciate his companionship.”

BEST BRANCH SUPPORT STAFF: Harry Dalanon

Harry was hailed as the Best Branch Support Staff of the year. Having been with KMBI

since January 2002, he was assigned to several branches in Mindanao and Luzon,

before being transferred to the Head Office in November 2004. His performance

showed brilliance in terms of job knowledge,

dependability and quality. Aside from this, he

participated actively in transformation activities.

He is also respectful, a good steward and

committed to his work.

Hailing from Koronadal City, Harry graduated

from Mindanao State University with a bachelor’s

degree in Business Administration, major in

Accountancy. He describes his experience with

KMBI as “challenging and fulfilling.” By God’s

grace, he cites that he has learned how to deal

with people, adjust to living in different places

and handle tasks responsibly. To other staff, he

shares, “God loves to use ordinary people like us to do extraordinary things. He wants

us to have a heart that is willing to obey, to follow Him and to depend on Him.”

SERVICE AWARDEES:

Four employees received the Service Award, in recognition of their five years of

dedicated service to KMBI, namely:

1. Rhanny P. Barrera (Area Manager, Caraga)

2. Vencent A. Abraham (Area Manager, Calabarzon 2 & Bicol)

3. Ma. Margarita J. Robles (Branch Manager, Upper Cavite)

4. Beniefe J. Tungala (Accounting Associate, Kidawapan)


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Annual Report2004

Laya Mananghaya & Co.Certified Public Accountant & Management Consultants22/F, Philamlife Tower, 8767 Paseo de RoxasMakati City 1226, Metro Manila, Philip-

K PMG pines

Telephone +63 (2) 885 7000 +63 (2) 893 8507Fax +63 (2) 894 1985 +63 (2) 816 6595e-Mail [email protected]

PRC-BOA Registration No. 0003 SEC Accreditation No. 0004-F BSP Accredited

REPORT OF INDEPENDENT AUDITORS

The Board of TrusteesKabalikat Para Sa Maunlad Na Buhay, Inc.

We have audited the accompanying balance sheet of Kabalikat Para Sa Maunlad Na Buhay, Inc. (a non-stock, non-profit organization) as of December 31, 2004, and the related statements of revenues and expense, changes in fund balance and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. The accompanyingfinancial statements of the Kabalikat Para Sa Maunlad Na Buhay, Inc. as of and for the year ended December 31, 2003, were audited by other auditors whose report thereon dated March 16, 2004, expressed an unqualified opinion on those statements, before the restatement described on Note 13 to the financial statements.

We conducted our audit in accordance with auditing standards generally accepted in the Philippines. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides reasonable basis for our opinion.

In our opinion, the 2004 financial statements referred to above presented fairly in all material respects, the financial position of Kabalikat Para Sa Maunlad Na Buhay, Inc. as of December 31, 2004, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the Philippines.

We also audited the adjustments described in Note 13 that were applied to restate the 2003 financial statements. In our opinion such adjustments are appropriate and have been properly applied.

March 28, 2005Makati City, Metro ManilaPhilippines


Audited Financial Report


Au

dit

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inan

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Rep

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KABALIKAT PARA SA MAUNLAD NA BUHAY, INC.(A NON-STOCK, NON-PROFIT ORGANIZATION)

BALANCE SHEETDECEMBER 31, 2004

(With Comparative Figures for 2003)

2004

2003(As restated in

Note 13)

ASSETS

Current AssetsCash and cash equivalents (Note 3) P24,186,666 P23,870,811

Marketable securities - net (Note 4) 198,987 198,987

Receivables - net (Note 5) 239,479,401 93,925,375

Prepayments 4,144,399 789,834

Total Current Assets 268,009,453 118,785,007

Property and Equipment - net (Note 6) 11,167,991 6,071,597

Investment in Opportunity Microfinance Bank (Note 7) 15,900,000 15,900,000

Other Assets 2,287,654 1,146,800

P297,365,098 P141,903,404

LIABILITIES AND FUND BALANCE

Current LiabilitiesAccounts payable and accrued expenses (Note 8) P15,641,732 P5,898,411

Current portion of long-term debt (Note 9) 45,549,841 9,166,667

Total Current Liabilities 61,191,573 15,065,078

Long-term Debt (Note 9) 56,517,526 23,833,333

Capital Build-up (Note 10) 97,631,216 35,934,164

Fund Balance 82,024,783 67,070,829

P297,365,098 P141,903,404

See Notes to Financial Statements.

K A B A L I K A T P A R A S A M A U N L A D N A B U H A Y , I N C . K A B A L I K A T P A R A S A M A U N L A D N A B U H A Y , I N C . 15K A B A L I K A T P A R A S A M A U N L A D N A B U H A Y , I N C . K A B A L I K A T P A R A S A M A U N L A D N A B U H A Y , I N C .

Annual Report2004


STATEMENT OF REVENUES AND EXPENSESFOR THE YEAR ENDED DECEMBER 31, 2004


2004

2003(As restated in

Note 13)

REVENUES

Service income P110,755,456 P46,264,402

Donations and contributions 1,974,031 130,357

Other 1,673,619 1,445,555

114,403,106 47,840,314

EXPENSES

Operating expenses (Note 11) 84,977,471 26,158,569

Administrative expenses (Note 12) 14,471,681 13,917,866

99,449,152 40,076,435

EXCESS OF REVENUES OVER EXPENSES P14,953,954 P7,763,879


STATEMENT OF CHANGES IN FUND BALANCEFOR THE YEAR ENDED DECEMBER 31, 2004


2003(As restated in

2004 Note 13)

FUND BALANCE

Balance at beginning of year

As previously reported P65,433,450 P59,538,805 Prior period adjustment (Note 13) 1,637,379 (231,855)

As restated 67,070,829 59,306,950

Excess of revenues over expenses 14,953,954 7,763,879

P82,024,783 P67,070,829





STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 2004(With Comparative Figures for 2003)

2003

(As restated in 2004 Note 13)

CASH FLOWS FROM OPERATING ACTIVITIES

Excess of revenues over expenses P14,953,954 P7,763,879 Adjustments for: Depreciation and amortization 3,044,015 1,480,846 Provision for doubful accounts 398,181 - Write - off of receivables (684,449) - Prior period adjustment 1,637,379 (231,855)

Excess of revenues over expenses before working capital changes 19,349,080 9,012,870 Increase in: Marketable securities - (240) Receivables - net (146,905,137) (43,285,536) Prepaid expenses (3,354,565) (455,128) Increase (decrease) in: Accounts payable and accrued expenses 9,743,321 (4,328,994) Capital build-up 61,697,052 17,156,323

Net cash used in operating activities (59,470,249) (21,900,705)

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisitions of property and equipment (8,204,372) (1,984,203)Proceeds from sale of property and equipment 63,963 - Increase in other assets (1,140,854) (496,811)

Net cash used in investing activities (9,281,263) (2,481,014)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from long-term debt 83,000,000 33,000,000 Payment of long-term debt (13,932,633) -

Net cash provided by financing activities 69,067,367 33,000,000

NET INCREASE IN CASH -

AND CASH EQUIVALENTS 315,855 8,618,281 CASH AND CASH EQUIVALENTS

AT BEGINNING OF YEAR 23,870,811 15,252,530 CASH AND CASH EQUIVALENTS AT END OF YEAR P24,186,666 P23,870,811 See Notes to Financial Statements.


Annual Report2004


KABALIKAT PARA MAUNLAD NA BUHAY, INC.(A Non-Stock, Non-Profit Organization)

NOTES TO FINANCIAL STATEMENTS

1. Organization

Kabalikat Para Sa Maunlad Na Buhay, Inc. (“the Organization”) is a non-stock, non profit

microfinance and development organization which was organized on November 4, 1986

with the objective of assisting the low-income Filipinos in their pursuit for education, culture,

civic, physical and economic advancement with the end in view that they will become

responsible members and assets of society. To attain these objectives, the Organization

conducts seminars, lectures and trainings by inviting resource persons who have expertise

and knowledge in specialized fields and extends financial assistance at reasonable

interest rates to economically active poor people.

On September 18, 2002, the Organization was certified by the Philippines Council for NGO

Certification as a qualified donee institution in accordance with Revenue Regulations No.

13-98 for a period of three years. Accordingly, it is exempt from payment of income tax

on income it received and the filing of income tax return covering such income. Such

exemption, however, does not apply to income of whatever kind and character derived

from the use of the Organization’s properties, real and personal, or from any of its activities

conducted for profit regardless of the dispositions made of such income.

The Organization has 473 and 168 employees as of December 31, 2004 and 2003,

respectively, and holds its office at No. 12, San Francisco St., Karuhatan, Valenzuela City.

2. Summary of Significant Accounting Policies

The following summary explains the significant accounting policies which have been

adopted in the preparation of the financial statements:

Basis of Preparation

The financial statements are prepared in conformity with accounting principles generally

accepted in the Philippines and on the historical cost basis.

Adoption of New Accounting Standards Effective 2004

Effective January 1, 2004, the Organization adopted the Statement of Financial

Accounting Standard 17/International Accounting Standards 17, Leases, which

prescribes the accounting policies and disclosures for finance and operating leases.

Additional disclosures required by the new standard were included in the financial

statements, where applicable.




New and Revised Accounting Standards Effective 2005

Several new accounting standards are due to take effect in 2005 to complete the

Philippines’ transition to international-based accounting standards. Accordingly, the

Accounting Standards Council (ASC) approved the issuance of new and revised

accounting standards, which are based on IAS, revised IAS and new International

Financial Reporting Standards (IFRS) issued by the International Accounting Standards

Board (IASB). The new standards are effective for annual periods beginning on or

after January 1, 2005. Accounting standards issued by the ASC were re-named to

correspond better to the issuances of IASB. Philippine Accounting Standards (PAS)

correspond to adopted IAS, while Philippine Financial Reporting Standards (PFRS)

correspond to adopted IFRS.

The Organization will adopt beginning January 1, 2005 the following new and

revised accounting standards which are relevant to its operations:

New Accounting Standards

PAS 19, Employee Benefits, prescribes the accounting and disclosures by

employers for employee benefits, including short-term employee benefits,

post-employment benefits, other long-term employee benefits and termination

benefits. For post-employment benefits classified as defined benefit plans, the

standard only allows the use of the projected unit credit method to measure

the organization’s obligations and costs and requires a sufficient frequency of

measurement. The standard requires as a minimum the recognition of a specific

portion of net cumulative actuarial gains and losses when the net cumulative

amount exceeds 10% of the greater of the present value of the defined benefit

obligation or the fair value of the plan assets, but also permits the immediate

recognition of all actuarial gains and losses.

PFRS 1, First-time Adoption of Philippine Financial Reporting Standards, sets out

all transitional requirements and exemptions available on the first-time adoption

of PFRS.

Revised Accounting Standards

PAS 1, Presentation of Financial Statements, provides a framework within which an

entity assesses how to present fairly the effects of transactions and other events

and the criteria for classifying liabilities as current or non-current; prohibits the

presentation of “extraordinary items” in the financial statements; and specifies

the disclosures about the key sources of estimation, uncertainty and judgments

management has made in the process of applying the entity’s accounting

policies.


Annual Report2004


PAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, removes

the concept of fundamental error and the allowed alternative to retrospective

application of voluntary changes in accounting policies. It defines material omission

or misstatements, and describes how to apply the concept of materiality when

applying accounting policies and correcting errors.

PAS 10, Events After the Balance Sheet Date, prescribes the guidelines for events after

the balance sheet date that requires adjustments and disclosures.

PAS 16, Property, Plant and Equipment, provides additional guidance and clarification

on recognition and measurement of items of property, plant and equipment. The

standard also requires that each significant part of an item of property, plant and

equipment should be depreciated separately.

PAS 17, Leases, provides a limited revision to clarify the classification of a lease of land

and buildings and prohibits expensing of initial direct costs in the financial statements

of the lessors.

PAS 24, Related Party Disclosures, provides additional guidance and clarity in the

scope of the standard, the definitions and the disclosures for related parties.

PAS 32, Financial Instruments: Disclosure and Presentation/PAS 39, Financial

Instruments: Recognition and Measurement. PAS 32 deals with the presentation and

disclosure of financial instruments. PAS 39 provides recognition and measurement

requirements covering most financial instruments other than assets and liabilities arising

from employee benefit plans, own equity instruments, certain guarantees contingent

consideration in business combinations and other exceptions. PAS 39 requires that

all derivatives are recognized on the balance sheet and measured at fair value and

requires all financial assets to be classified into “loans and receivables” “held-to-

maturity”, “fair value through profit or loss” or “available-for-sale” categories. Loans and

receivables and held-to-maturity financial assets are measured at amortized cost. All

other financial assets are measured at fair value (with limited exceptions). Also, PAS 39

permits hedge accounting only when strict documentation and effectiveness testing

requirements are met.

PAS 36, Impairment of Assets, establishes the frequency of impairment testing for

certain intangibles and provides additional guidance on the measurement of an

asset’s value in use.

Under prevailing circumstances, the adoption of the above new and revised standards

will not result in substantial changes to the Organization’s accounting policies in 2005

except for PAS 19 and 39, the effect of which to the 2005 financial statements has yet to

be determined.




Cash and Cash Equivalents

Cash equivalents are short-term highly liquid instruments purchased with the maturity of

three (3) months or less from date of acquisition and are subject to an insignificant risk of

change in value.

Receivables

Receivables are stated at face value, net of allowance for doubtful accounts maintained

at a level considered adequate to provide for potential uncollectible account.

Investments in stocks

The Organization’s investments in stocks are carried at the lower of its aggregate cost or

market value determined at the balance sheet date. The amount on which aggregate

cost of the portfolio exceeds market value is accounted for as allowance for decline in

value of marketable equity securities, which is charged to current operations.

Revenue Recognition

Revenue is recognized when it is probable that the economic benefits associated with

the transaction will flow to the Organization and the amount of the revenue can be

measured reliably. Revenues from loans and other related fees are recognized based on

the accrual method of accounting.

Property and equipment

Property and equipment are carried at cost less accumulated depreciation and

amortization and impairment losses, if any.

Initially, an item of property and equipment is measured at its cost, which comprises

its purchase price and any directly attributable costs of bringing the asset to working

condition. Subsequent expenditures are added to the carrying amount of the asset

when it is probable that future economic benefits, in excess of the originally assessed

standard of performance, will flow to the Organization. All other subsequent expenditures

are charged to operations as incurred.

Depreciation is computed using the straight-line method over the estimated useful lives

of the assets. Leasehold improvements are amortized over the estimated useful life of

the improvements or the term of the lease, whichever is shorter. The estimated useful lives

are as follows:

Number of Years

Building and improvements 40

Leasehold improvements 3

Furniture and equipment 1-5

Transportation equipment 1-5


Annual Report2004


Au

dited

Finan

cial Rep

ort

The useful lives and depreciation and amortization methods are reviewed regularly to

ensure that such are consistent with the expected pattern of economic benefits from

those assets.

When an asset is disposed of, or is permanently withdrawn from use and no future

economic benefits are expected from its disposal, the cost and accumulated

depreciation, amortization and impairment losses, if any, are removed from the accounts

and any resulting gain or loss arising from the retirement or disposal is reflected in current

operations.

Asset Impairment

The carrying amounts of the Organization’s property and equipment and other non-

current assets are reviewed at each balance sheet date to determine whether there

is any indication of impairment. If any such indication exists, the asset’s recoverable

amount is estimated. An impairment loss is recognized whenever the carrying amount of

an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses,

if any, are recognized in the statement of revenues and expenses.

Use of Estimates

The preparation of the financial statements in conformity with accounting principles

generally accepted in the Philippines requires management to make estimates and

assumptions that affect the reported amounts of assets and liabilities and disclosure of

contingent assets and liabilities at the date of the financial statements and the reported

amounts of revenues and expenses during the reporting period. Actual results could differ

from those estimates.

3. Cash and Cash Equivalents

This account consists of:

2004 2003

Cash on hand and in banks P24,186,666 P23,068,196

Short-term investments - 802,615

P24,186,666 P23,870,811

Short-term investment represents thirty days cash placements on various dates. These

placements earn income based on interests ranging from 4% to 6.5% in 2003.

4. Marketable Securities


2004 2003

Marketable equity securities at cost P686,895 P686,895

Less allowance for decline in market value 487,908 487,908

P198,987 P198,987




Au

dit

ed F

inan

cial

Rep

ort

5. Receivables


2004 2003

Loans receivable P231,989,325 P89,871,036

Interest receivable 3,930,790 1,637,379

Accounts receivable 3,810,803 2,954,745

239,730,918 94,463,160

Less allowance for doubtful accounts 251,517 537,785

P239,479,401 P93,925,375

Certain loans receivable are used as collateral for the Organization’s long-term debt (See

Note 9).

6. Property and Equipment

For the Year Ended December 31, 2004

Land

Building and

Improvements

Office Furniture

& Equipment

Transportation

Equipment

Leasehold

Improvement Total

Gross carrying amount:

Beginning balance P1,050,000 P5,184,211 P4,371,587 P848,352 P528,169 P11,982,319

Additions - 774,000 4,246,181 - 3,184,191 8,204,372

Disposals - (754,345) (1,860,616) (104,551) - (2,719,512)

Ending balance 1,050,000 5,203,866 6,757,152 743,801 3,712,360 17,467,179

Accumulated depreciation and amortization:

Beginning balance - 1,813,921 3,218,403 791,024 87,374 5,910,722

Provisions during the year - 123,021 1,514,614 34,692 1,371,688 3,044,015

Disposals - (754,345) (1,796,653) (104,551) - (2,655,547)

Ending balance - 1,182,597 2,936,364 721,165 1,459,062 6,299,188

Carrying amount:

Beginning balance P1,050,000 P3,370,290 P1,153,183 P57,328 P440,795 P6,071,597

Ending balance P1,050,000 P4,021,269 P3,820,786 P22,636 P2,253,298 P11,167,991

Certain above properties are used as collateral for the Organization’s long-term debt (see

Note 9).


Annual Report2004


Areas o

f Op

eration

s/Directo

ry

7. Microfinance Bank Project

In the year 2000, the Organization, together with the other member-partners of the Alliance

of Philippine Partners in Enterprise Development, Inc. (APPEND) established a micro-finance

bank wherein the Organization will fully participate as a lead partner with an initial cash

outlay of P100,000.

As part of the Securities and Exchange Commission (SEC) requirement, Opportunity

Microfinance Bank (OMB), with an authorized capital stock of P800 million, invested P58

million representing its initial paid-up capital into a trust account. Immediately thereafter,

the Organization invested a total amount of P8.3 million representing 83,000 shares of

stocks to OMB. To date, the Organization has a total investment of P15.9 million or 159,000

shares of stocks in OMB.

8. Accounts Payable and Accrued Expenses


2004 2003

Account payable P4,188,294 P2,534,445

Unearned income 4,047,025 1,430,550

Accrued expenses 7,406,413 1,933,416

P15,641,732 P5,898,411

9. Long-Term Debt

Loan from Oiko Credit Foundation

In a meeting held on April 1, 2002, the Board of Trustees approved the availment of a

P33 million loan from Oikocredit Foundation Philippines, Inc., (Oikocredit) payable in three

(3) years at 10.67% interest per annum on the first year; succeeding annual interest rate

shall be the average interest rate paid on the 91-day Philippine Treasury Bills for all issues

during the 6 months period preceding Oikocredit’s review plus five percent (5%) provided

that the interest rate for the loan shall at no point be lower than 10%. The loan was used

to fund the expansion projects of the Organization.

The loan is secured by the following:

a. a first mortgage on real estate property of the Organization located in Karuhatan,

Valenzuela with an area of three (300) square meters and improvements thereon;

b. a first mortgage on the shares of capital stocks of the OMB, a partner, equivalent to

158,999 total shares with a par value of P100 each;

c. assignment of loan portfolio and related securities which, at all times, shall have a

face value of at least P9 million;




d. a promissory note in form and substance acceptable to the lender.

Another loan was availed from Oiko Credit Foundation amounting to P55 million. The loan

agreement was issued on June 23, 2004. The interest for the loan during the first year is

12.16% while the succeeding interest payments will be on a monthly basis calculated

using treasury bill rates. Repayment is done in semi-monthly payments over a period of

three years. The first payment was done on February of 2005, eight (8) months after the

disbursal of the loan.

The loan is secured by the following:

a. 50% guaranty from Interchurch Organization for Development Cooperation (ICCO)

equivalent to P27.5 million;

b. Continuing deed of assignment of loan portfolio and related securities equivalent to

120% of the outstanding loan balance; and

c. Promissory note in form and in substance acceptable to the lender.

As of December 31, 2004, total balance of loan from Oikocredit amounts to P74.25

million.

Loan from People’s Credit and Finance Corporation (PCFC)

The Organization has an outstanding loan from PCFC amounting to P15 million. This

loan shall be used for the granting of sub-loans to finance micro-enterprise or livelihood

projects of qualified sub-borrowers.

The interest rate for investment loan is at 12% and 3% for institutional loan. These loans

are secured by the following:

a. Assignment of loans receivable for which the proceeds was used;

b. First mortgage on all acquired properties and equipment using the proceeds; and

c. Post dated checks.

Loan from Taytay sa Kauswagan, Inc. (TSKI)

On May 1, 2004, the Organization obtained loan from TSKI amounting to P11 million of

which P10 million was already received as of December 31, 2004. The interest rate is at

10% for the first two (2) years, 11% for the third year and 12% for fourth and fifth years.

The agreement requires KMBI to open a microfinance branch in Parañaque in behalf of

TSKI, calling it Kabalikat sa Kaunlaran Project.


Annual Report2004


10. Capital Build-Up

This represents initial membership contribution of P200 and the mandatory weekly savings

amounting to P40 per member that earns interest at the rate of 6% per annum.

11. Operating Expenses


2004 2003

Salaries and wages P45,416,628 P12,176,459

Financing cost 7,731,584 2,238,493

Transportation and travel 6,031,562 1,624,315

Rent 4,737,147 1,148,744

Communication, light and water 3,579,747 1,750,316

Meetings, trainings and conferences 3,254,200 1,879,762

Depreciation and amortization (Note 6) 2,505,110 1,036,592

SSS, Medicare, ECC and Pag-ibig contribution 2,442,421 687,861

Supplies 2,336,701 697,566

Printing 2,256,518 648,203

Representation and entertainment 1,222,848 134,112

Insurance 461,682 163,533

Doubtful accounts 398,181 566,868

Repairs and maintenance 380,541 99,035

Legal, audit and other professional fees 264,164 369,424

Taxes and licenses 127,739 121,150

Donations and contributions 43,973 19,141

Security services 30,175 205,800

Miscellaneous 1,756,550 591,195

P84,977,471 P26,158,569




12. Administrative Expenses


2004 2003

Salaries and wages P5,941,859 P8,170,740

Transportation and travel 1,417,487 696,135

Communication, light and water 1,404,739 750,135

Non MED expense 1,177,824 398,943

Meetings, trainings and conferences 814,348 805,612

Depreciation and amortization (Note 6) 538,905 444,254

Retirement expense 522,294 531,150

Representation and entertainment 328,022 57,476

Legal, audit and other professional fees 297,767 158,325

Supplies 295,542 298,957

Taxes and licenses 294,931 51,921

Security services 249,000 88,200

SSS, Medicare, ECC and Pag-ibig contribution 228,824 294,797

Advertisement and promotion 194,374 32,973

Donations and contributions 111,885 8,203

Printing 83,600 277,801

Gasoline and oil 74,428 11,204

Insurance 56,627 70,086

Repairs and maintenance 29,303 42,443

Miscellaneous 409,922 728,511

14,471,681 P13,917,866

13. Prior Period Adjustment

Certain revenues pertaining to 2003 were incorrectly included in 2004. The financial

statements of 2004 and 2003 have been restated to correct this error. A corresponding

adjustment amounting to P1,637,379 was reflected in the 2003 result of operations.

14. Authorization for Issuance of the Financial Statements

The Organization’s financial statements as of and for the year ended December 31, 2004

were authorized for issue by the Board of Trustees’ authorized representative on March 28,

2005.

15. Reclassification

Certain accounts in the 2003 financial statements were reclassified to conform with

the 2004 presentation.


Annual Report2004


egistered as a non-stock, non-profit organization in the Philippines Securities

and Exchange Commission, KMBI envisions “People in communities live

in abundance with strengthened faith in God and right relationship with

their fellowmen and the rest of creations.”

It works primarily for spiritual transformation and poverty alleviation through offering

microfinance products and other services to the poor sector both in urban and

rural locales. Relatively, KMBI’s mission is to become a “Sustainable Christian

development organization that contributes significantly to a poverty-free and Christ-

centered Philippines.”

Operations, Products, and ServicesKMBI operates 24 branches located in the regions of Calabarzon and Bicol in Luzon,

and Caraga and some southern provinces in Mindanao. KMBI provides group

loan product to more than 85,000 “entrepreneurial poor” clients amounting from

Php4,000 to Php20,000. Aside from this, KMBI also provides business development

assistance, entrepreneurship training, and transformational activities facilitation. Very

soon, KMBI shall offer other products such as microinsurance, individual loan, and

housing loan.

Structure and CompositionThe organization has a total workforce of 486

personnel: 414 for the operations, while 72

are in the support group. Aside from the

Operations group, seven other departments

are working hand-in-hand with them, namely

the Human Resources, Administration, Finance,

Audit, Business Development, Research &

Development/Publication, and Management

Information System. All these, including

Operations, are reporting directly under the

office of the Executive Director. KMBI also has

ad hoc committees that function as think-tank

and recommendatory body for the different

aspects of the organization’s operations like

product development, purchasing, budget,

recruitment, systems and policy improvement,

and transformation. A formal committee,

called Management Committee which is

composed of department heads, assists the executive director in planning and

implementation, through the guidance and governance of the Board of Trustees.

Organizational Profile

R


Annual Report2004


HEAD [email protected]

OFFICE OF THE EXECUTIVE [email protected] C. CastroExecutive Director

OPERATIONS DEPARTMENTEdgardo S. MercedesDirector

Area Managers Carmela N. Porras (Calabarzon 1) Vencent A. Abraham (Calabarzon 2) Enrique B. Maca (Bicol) Rhanny P. Barrera (Caraga) Nemwell P. Arzaga (S. Mindanao) ADMINISTRATION DEPARTMENTConcepcion B. ParantarAdmin. Officer

AUDIT DEPARTMENTSancho A. Montaos IIAudit Officer (Luzon)Madelyn P. Frijillano Audit Officer (Mindanao)

BUSINESS DEVELOPMENT SERVICESHazel Christine Z. RosaciaBDS Officer (Luzon)Marifel C. SuplementoBDS Officer (Mindanao)

FINANCE DEPARTMENTAnnalie D. ConcepcionManager

Finance Officer Joselito S. Penalosa (Fund Mgt./Gen. Acctg.)

HUMAN RESOURCE DEVELOPMENTLiza D. EcoManager HR Officers Arthur N. Gonzaga (Training) Mary Grace M. Burgos (Admin.)

RESEARCH & DEVELOPMENTRizaldy R. DuqueManager

CALABARZON 1BATANGAS2nd Floor Ferrel II Bldg.Dy Silang St., Batangas City (043) 722.2443

CENTRAL CAVITE3rd Floor Lolo Berong BldgNueno Avenue, Imus Cavite (046) 471.4205Fax (046) 472.0423

LIPA2nd Floor Ornasco Trading Bo.Marawouy, Lipa City (043)-756-5104

LOWER CAVITE3rd Floor Orchids Bldg.Daang Amaya ITanza Cavite (046) 885.2378Fax (046) 85.2379

METRO MANILA SOUTH 12nd Floor Rudex Bldg.Baclaran St., Pasay City (02) 851.3582

METRO MANILA SOUTH 22nd Floor B.Nenita Bldg.8124 Dr. A. Santos Ave.Sucat, Paranaque (02) 820.0271

UPPER CAVITE2nd Floor MBC Bldg.Governor’s Drive, Old BulihanSilang Cavite (046) 890.0742Fax (046) 890.1473

CALABARZON 2CALAMBA3rd Floor Sajite Bldg.National Road Brgy ICalamba , Laguna (049) 545.5875

LUCENA3rd Floor HR Bldg.Quezon Ave., corner Gomez St., Lucena City (042) 710.8775

San Pablo3rd Floor Jaojoco Bldg.Burgos St., San Pablo City (049) 562.1308


Annual Report2004


Annual Report2004

Corporate Directory

BICOL REGIONGUMACA2nd Floor AQC Bldg.Barangay PenafranciaGumaca, Quezon (042) 655.0065

IRIGA2nd Floor Tan’s Bldg.San Roque , Iriga City (054) 456.6012

LEGASPI2nd Floor Rosario Salvador Bldg.Rizal St. , Legaspi City (052) 481.3441Fax (052) 820.4547

NAGA2nd Floor Thomas Enrile Bldg.Penafrancia Ave., Naga City (054) 811.8116

CARAGA REGIONBUTUAN2nd Floor Lucebinino Bldg.J.C. Aquino Ave., Butuan City (085) 342.1816

COMPOSTELA VALLEY2nd Floor Mico PharmacyArabejo st., NabunturanCompostela Valley Province (084) 376.0802

SAN FRANCISCO2nd Floor Gift GalleryBrgy. 1 Bravo Comp.San Francisco , Agusan Del Sur (085) 839.1113Fax (085) 839.3348

SURIGAO2nd Floor Elipe Bldg.Corner Narciso & Kaimo St.Surigao City (086) 826.2442

SOUTHERN MINDANAODAVAO PROVINCE2nd Floor ERGB Bldg.Dalisay Gante Road (084) 218.5643Fax (084) 218.5644

DIGOS2nd Floor JMC Bldg. Rizal Ave., Zone II Digos CityDavao del Sur (082) 553.9084

GENERAL SANTOSDoor # 1 & 2 Aquino Bldg.J. Catolico Ave.General Santos City (083) 554.5908Fax (083) 554.6048

KIDAPAWAN2nd Floor Prudenciado Bldg.Jose Abad Santos St.Kidapawan City, North Cotabato (064) 278.3129

MARBEL2nd Floor Del Rosario Bldg.Gen.Santos Drive cor. Aquino St.Koronadal City (083) 228.6298

METRO DAVAODoor 31 & 32 Carlos Villa AbrilleJ.P. Laurel St., Quirino Ave.Davao City (082) 224.5905 | 225.3850Fax (082) 224.6514


Corporate Directory

K A B A L I K A T P A R A S A M A U N L A D N A B U H A Y , I N C . K A B A L I K A T P A R A S A M A U N L A D N A B U H A Y , I N C .K A B A L I K A T P A R A S A M A U N L A D N A B U H A Y , I N C . K A B A L I K A T P A R A S A M A U N L A D N A B U H A Y , I N C .K A B A L I K A T P A R A S A M A U N L A D N A B U H A Y , I N C . K A B A L I K A T P A R A S A M A U N L A D N A B U H A Y , I N C .


Annual Report2004

Corporate Directory


Annual Report2004

The Board of Trustees

Dr. Amelia L. GonzalesCHAIRWOMAN

Aurelio C. Llenado, Jr. CORPORATE TREASURER

Emmanuel M. de Guzman VICE-CHAIRMAN

Eduardo C. JimenezMEMBER

Damiana D. ExiomoMEMBER

Atty. Servillano C. MendozaCORPORATE SECRETARY

Dr. Ricardo B. JumawanMEMBER

Kabalikat para sa Maunlad na Buhay, Inc.12 San Francisco St., Karuhatan

Valenzuela City, 1441 Philippines (632) 291.1484 to 86 | e-mail: [email protected]

2004 Annual Report

Documents

Transcript of 2004 Annual Report