2022 Business Plan

Improving Lives, Creating Opportunities 2022 Business Plan

Our Vision We want to see thriving socially responsible SMEs creating sustainable employment opportunities and improving the lives of people and the communities. Our Mission To provide pro-SME credit that are reasonably priced, simple, responsive and delivered excellently. Improving Lives, Creating Opportunities

A Look at our 2021 (Performance review vs 2021 target and previous year) Indicators 2021 2020 vs 2021 vs last Actual Target Target year 1 SME Served 2 SME Loan Released 44 52 57 85% 77% 3 Total Collection 4 Funds Accessed 59.6 65.9 45.0 90% 132% 5 Funds Repaid 6 PAR Rate 45.6 59.2 47.1 77% 97% 34.7 34.3 29.6 101% 117% 29.3 25.8 19.8 114% 148% 7.30% 7.28% 9.73% 100% 75% Note: Amounts are in Php Million

Philippine SME Context, Post-Covid: • An estimated 40,000 SMEs in NCR stopped operations (temporarily and permanently) due to lack of capital. • A large share of firms reported not having enough cash and had fallen behind in loan repayments. • 66 percent of firms did not have enough cash to pay all costs and payments such as payroll, suppliers, taxes or loan repayment beyond 1 month. • Two thirds of firms had adjusted loan repayment terms, and 48 percent of firms were in arrears. • All banks registered all time high NPLs and are now hesitant to lend to SMEs. Citation: “World Bank. 2021. Impacts of COVID-19 on Firms in the Philippines : Results from the Philippines COVID-19 Firm Survey conducted in November 2020. World Bank, Washington, DC.

SME Bounce Back Strategy: 1. Restructure – make the existing loan more affordable bearable for the SME clients (longer tenor, lower interest rate, lower amort.) 2. Re-plan the business - Assist the entrepreneurs in reviewing, adjusting and strengthening their business plan 3. Re-finance - Extend a new loan to SMEs that have clear business recovery plan. 4. Re-enforce – help SMEs tap non-financial business support by linking them to related agencies.

• Restructure • Rehabilitate • Refinance • Rebound

Onward to 2022 Indicators 2022 2021 %age Target Actual Increase 1 SMEs to be Served 2 Loans to be Disbursed 54 44 122.7% 3 Loans to be Collected 65.8 59.6 110.4% 4 Funds to be Accessed 57.3 45.6 125.7% 5 Funds to be Repaid 34.5 34.7 99.4% 6 Expected PAR Rate 34.9 29.3 119.1% 5.44% 7.30% 74.5%

Strategies for the Company 1. Loan Portfolio Management a. Quality – cure the existing past due loans by helping the SMEs recover. Restructure the loan if needed/requested with better terms for them. b. Growth – bigger loan average for old clients and smaller average for new clients, except if projects are special or high-impact. c. Mix – Restructured loan shall be longer and new loans will have shorter term. Old loans will be higher but with lower interest rate.

Strategies for the Company 2. Funding • Maintain 100% on-time repayment to all funders by keeping them as top priority in disbursements. • Replenish loan repaid thru re-availments. All funders of SME-ICC remain still on-board. • Increase transparency and funders engagement thru regular reports and updates. • Aim to increase funding with longer loan tenor and less frequent loan repayment.

SME-ICC Current Funding Notes: 1. Local funds are with more frequent loan repayment (monthly interest and quarterly principal). 2. Shortest loan tenor is 6 months and longest is 2 years.

Our Impact Strategy 1. Review, sharpen Impact KPIs and reporting format/template. 2. Link with SDG expert available in the market to learn the latest trends, issues and insights. 3. Prepare and share to interested parties SME-ICC quarterly Impact Report 4. Feature 1 SME per quarter to tell impact story.

Summary of 2022 Workplan Assumptions: Indicators Actual 2021 Conservative Best Case Worst Case A.1 Operational Highlights Medium High Low A. CONSERVATIVE SCENARIO 7 6 a. No. of Staff 56 70 61 1 To tap P 34.5Mn worth of funds (or 1.0% lower than 2021) b. No. of Loans Released mostly additional loans from existing lenders c. Amount of Loan Released 54 63 74,050,000 54,850,000 d. Loans Outstanding, Current 44,656,230 37,903,063 2 Collection Efficiency is only 90% due to covid-19. 59,925,000 65,800,000 3 Write-off of 0.35% of total loan disbursed for the year. Past Due 2,744,593 3,347,507 Restructured 32,147,162 43,222,461 2,851,255 2,269,900 B. BEST CASE SCENARIO e. Loans Outstanding, gross 50,252,077 43,520,470 f. Loans Loss Provision 3,150,715 2,637,497 (1,680,719) (1,483,644) 1 To tap P 38.5Mn worth of funds (or 16.0% higher than 2021) g. Loans Outstanding, net 48,571,359 42,036,826 from existing and new lenders. h. PAR Rate 5,016,667 2,667,939 A.2.Financial Highlights 5.46% 7.69% 2 Collection Efficiency is 95% as if covid-19 has no impact to a. Total Assets 40,314,544 48,527,897 the SME clients. b. Total Liabilities c. Total Equity (1,231,394) (1,629,094) 3 Write-off of 0.35% of total loan disbursed for the year. d. Net Income e. Total Funding mobilized 39,083,151 46,898,803 C. WORST CASE SCENARIO f. Total funding repaid A.3.Ratios 7.8% 5.44% 1 To tap P 28.5Mn worth of funds (or 17.0% lower than 2021) a. Current Ratio with no new lender. b. Debt to Equity Ratio 60,319,945 64,853,109 66,541,875 59,988,060 c. Risk Coverage Ratio 36,099,859 36,552,844 37,985,215 29,864,528 2 Collection Efficiency is only 85% due to severe impact of d. Return on (ave.) Assets 24,220,086 28,300,265 28,556,661 28,123,532 Covid-19 to SME clients. e. Return on (ave.) Equity f. Operational Self-Sifficiency 1,469,867 2,080,179 2,336,574 1,903,446 3 Write-off of 0.5% of total loan disbursed for the year. 33,696,000 34,500,000 38,500,000 28,500,000 29,253,073 34,860,771 37,631,465 33,417,426 1.88 1.98 1.95 2.31 1.49 1.29 1.33 1.06 39.1% 61.8% 61.2% 44.3% 2.4% 3.1% 3.68% 3.2% 6.1% 7.4% 8.9% 7.3% 117% 136.6% 136.4% 130.6%

Revenue and Indicators Actual 2021 %age Proposed %age Inc.(Dec.) Expense Share 2022 Share 21 vs 22 Budget Revenues: Interest Income 6,655,421 68.5% 9,172,495 80.4% 37.8% Service Fee 1,689,770 17.4% 1,316,000 11.5% -22.1% Other Income 1,363,806 14.0% 8.0% -32.7% Total Revenue 9,708,997 100.0% 917,976 100.0% 17.5% 11,406,471 Expenses: 16.5% Interest Expense 2,415,681 31.8% 2,813,756 32.6% 30.0% Other Loan Charges 193,250 2.5% 251,250 2.9% 28.9% Administrative Expenses 33.3% -14.9% Operating Expenses 2,226,951 29.3% 2,871,427 14.9% -14.3% Depreciation Expenses 1,513,246 19.9% 1,288,142 2.1% 18.5% Gross Tax Receipt (5%) 6.6% 19.6% Bad Debt Expense 210,000 2.8% 180,000 7.6% 13.7% Total Expenses 481,419 6.3% 570,324 100.0% 30.9% Net Income Before Tax 550,000 7.2% 658,000 6.9% Less: Corporate Income Tax 7,590,548 100.0% 8,632,899 8.0% 41.5% Net Income After Tax 2,118,449 2,773,572 41.5% Cumulative Net Income (648,583) 8.5% (693,393) 1,469,867 2,080,179 1,469,867 2,080,179

Thank you for joining our journey. “Improving Lives, Creating Opportunities” SEC Registration No. CS2017-14804, dated May 8, 2017 No. 77-C Sumulong Highway, Barangay Mayamot, Antipolo City, Philippines, Zip Code 1870 Tel. No. (+632) 356-2205; +6397 142 0387; E-mail: [email protected]; website: smeimpactcrcedit.com