During the three-year project implementation, in general group members of different women's associations have utilized their loans for the intended uses. Most of them made use of their loans as working capital for various trading projects. A few others have invested in assets such as engines for fishing boats and fish nets.
It cannot be denied, however, that there have been instances of fund diversion which should be prevented in the future for greater program outreach and project sustainability. The analysis of loan fund use, therefore, has been conducted with the end in view of formulating appropriate strategies, safeguards and control measures to ensure proper use of loan funds.
To generate the information necessary for analysis, interviews with women members and project staff were undertaken with the aid of guide questions (Appendix 2).
The basic premise of the program is that a credit line extended to the women members can make any or a combination of the following happen:
a) It will enable the member to engage in her chosen IGP which will harness and develop her capability to generate more income;
b) It will expand her existing project to generate more income and thus, with the enhancement of her project management capability , enable her to diversify her livelihood project and support other microenterprises and in the process generate employment opportunities in the community;
c) As a result, the level of her household income will increase, thus improving her capability to service loan obligations and generate savings. In time, the member will become bankable and sought after by the bank, for both savings and credit, even after termination of the lending program.
The analysis, therefore, intends to address the following key questions:
a) Were there clear understanding and appreciation of the loan purpose as indicated by the actual use of the loan funds?
b) Were there enough safeguards against fund diversion as part of the program management support system?
c) What can be recommended in the future as pro-active approaches/strategies to forestall any occurrence of fund diversion?
The study is not intended as a comprehensive one. Only random survey and interviews were conducted with group members and project staff. Initially, 13 questionnaires were distributed to the two Area Supervisors for distribution to each Area Coordinator and project participants. Four of them were interviewed while two answered the questionnaires on their own. The results are presented in the next section.
4.1 Background of Respondents
The respondents consisted of two group members, three Area Coordinators (ACs) and One Area Supervisor (AS). Three of them come from District I and three from District II.
4.2 Purpose of Loan
All the respondents said that the loans were intended for working capital for the selected IGPs: three commodity trading, one fish trading and two hog fattening projects.
4.3 Understanding of Loan Purpose
In general, the group members have a clear understanding of the intended purpose of the loans. This has been transmitted to them during the team-building, organizing and training seminars conducted by the Project Management Staff, as well as the orientation seminar undertaken by the Land Bank personnel.
It appears, however, that a few association officers, members and former Area Coordinators had been overpowered by personal interests to the point of diverting/misusing the associations' loan funds.
4.4 Loan Fund Use
In general, the loan funds were utilized for the intended purpose. Safeguards/measures that have been adopted to ensure proper use of loan funds including:
a) Regular monthly meetings to coincide with the schedule of loan amortization payment)
b) Close monitoring, spot checking and frequent follow-ups by Area Coordinators/Supervisors and Community Development Specialist.
4.5 Fund Diversion
There are however a few instances of fund diversion. Among the six respondents, five cited cases of diversion of loan funds: three cases of diversion to IGPs other than what had been approved by the bank and two cases involving misuse of loan funds by the assigned ACs (please see Appendix 3 for case studies.
4.5.1 Extent of Fund Diversion
Among cases of fund diversion to other IGPs, two respondents reported that 100 % of the loan funds were diverted, only one had partial (20%) fund diversion.
4.5.2 Reasons for Fund Diversion
The following were cited as reasons for the diversion of funds:
a) The project timetable for chosen IGP has lapsed due to long/delayed processing of loans;
b) Lack of transparency/consultation between and among officers and members of the women's association paving the way for unilateral decisions by association officers and AC.
c) Difficulty in getting fish stock for sale during lean months;
d) Lax monitoring by former Area Supervisors/ Coordinators; and
e) Too much hurry to increase income.
4.5.3 Actions Taken
As part of the project monitoring system and standard operating procedures of the Land Bank, the following measures were taken:
a) The fund diversion incident was included in the Monthly Assessment Report of the Area Supervisor concerned stating, among others, the name of the participant, outstanding balance and IGP to which funds were diverted;
b) Upon notification, the LBP investigated the incident and notified the concerned participant that her loan was due and demandable;
c) The participant executed a promissory note to pay the loans and interest immediately;
d) Upon payment of previous loan, the bank may allow a renewal of the loan provided a resolution is obtained from the women's association and the participant undergoes another team building and orientation seminar)
e) In the case where the AC took a portion of the loan funds, the members were made to assume the responsibility for payment of the funds through execution of a promissory note on top of their individual loan amortizations;
f) The ACs guilty of personally divesting the loans were terminated and replaced by others;
g) The association officers found to have diverted loan funds were replaced by other group members.
h) A Special Savings Deposit (SSD) arrangement was adopted by the LBP to accommodate deferred releases of group members whose projects' timetables have lapsed. SSDs may be withdrawn by their respective owners at a later date.
Although there were few cases of fund diversion, the following recommendations may be looked into in order to avert such malpractices in the future:
a) Timely loan processing and releases in consideration of the production/operating schedules of the IGPs;
b) Checking of availability of materials/products/ commodities required for project operations;
c) Allowing participants a certain degree of flexibility in utilizing earned income/generated savings for supplementary livelihood activities (in addition to their IGPs) especially during lean months;
d) Group rather than individual project implementation;
e) Advisory to participants to request in writing the LBP/Project Management Office for a change in IGP, to be accompanied by an approved resolution from the women's association; and
f) Conduct of orientation seminar and value formation (self-discipline' strong determination and perseverance).
