Session 3 measuring perf 2011.05.23

Session 3: Measuring Performance of MFIsSession 3: Measuring Performance of MFIs

Practical Microfinance Course, Session 3 Microfinance

Sadrudin Akbarali, FCA

Session 3: Measuring Performance of MFIs

Financial Structure Outreach Indicators Overall Financial Performance Revenue Expenditure Efficiency Productivity Risk & Liquidity

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Understanding Financial StatementsUnderstanding Financial Statements

What are/were your fears about financial statements?

Why is it necessary to understand financial statements?

1. 1.

2. 2.

3. 3.

4. 4.

5. 5.

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Actions for understanding Financial Statements

Actions for understanding Financial Statements

Actions for improving understanding of financial statements

a. Resources: Rural Finance on-line, ‘Buddy’, others

b. BY WHEN

1. 1a1b

2. 2a2b

3. 3a3b

4. 4a4b

5. 5a5b

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Financial ratios for NOWHEREFinancial ratios for NOWHERE

List 5 KEY ratios Comments

1. 1.

2. 2.

3. 3.

4. 4.

5. 5.

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Nowhere Ltd 1 Balance Sheet at 31.12: 2007 2008 2009 %

$ $ $

Net Fixed Assets 130,000 140,000 120,000

Gross Loan Portfolio 3,350,000 3,800,000 4,600,000

Less Impairment Loss Allowance 100,000 114,000 138,000

Net Loan Portfolio 3,250,000 3,686,000 4,462,000

Cash at Bank or in Hand 330,000 473,000 558,000

Debtors 35,000 50,000 58,000

Total assets 3,745,000 4,349,000 5,198,000

Donated Capital 25,000 125,000 420,000

Capital 3,500,000 3,500,000 3,500,000

Retained Profit -218,800 -142,000 -92,000

Equity 3,306,200 3,483,000 3,828,000

Long Term Loans 300,000 250,000 200,000

Other Liabilities 63,800

66,000

70,000

Liabilities and equity

3,745,000

4,349,000 5,198,000 08/04/23

Income & Expenditure for Y/E 31st December: 2007 2008 2009

$ $ $

Income

Interest from Loan Income 670,000 980,000 1,150,000

Fees 100,000 98,000 115,000

Investment Income 1,300 1,800 18,000

TOTAL Income 771,300 1,079,800 1,283,000

Less: Financial Expense 13,000 11,000 9,000

Operating income 758,300 1,068,800 1,274,000

Net impairment loss, gross loan portfolio 55,000 45,000 48,000

Operating Expenses 680,000 950,000 1,180,000

Personnnel 440,000 620,000 770,000

Administrative 200,000 280,000 350,000

Depreciation 40,000 50,000 60,000

Net Operating Income 23,300 73,800 46,000

Non Net operating Income 2,500 3,000 4,000

Net Income before Taxes & Donations 25,800 76,800 50,000

Net Income After Taxes,before Donations 25,800 76,800 50,000

Net Income after Taxes & Donations 25,800 76,800 50,000

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Nowhere Ltd 2

Data 2007 2008 2009 %

$ $ $

No of Branches 6 8 8

Personnel 159 169 175

Loan Officers 94 98 105

Outreach

No of Active Borrowers 14,552 17,818 18,390

Male 7,062 7,639 7,810

Female 7,490 10,179 10,580Portfolio at Risk (PAR) Nos

Less than One month 14,131 17,390 17,939

One to three months 245 278 248

Three to Six months 176 150 203Delinquency Gross Portfolio 3,350,000 3,800,000 4,600,000

Less than One month 3,442,254 3,731,135 4,528,449

One to three months 33,621 45,744 37,364

Three to Six months 24,125 23,121 34,187

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Nowhere Ltd 3

Balance Sheet: Statement of Affairs

ASSETS (Use of Funds)• ? ..................

• ? ..................

• ? ..................

• ? ..................

• ? ..................

---------------Total ---------------

Source of Funds• ? ................

• ? ................

• ? ................

• ? ................

................Total ................

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Income & Expenditure Account

Summarised Income & Expenditure $ %

Income Interest Income & Fees ?

Less: Interest on Loan Fund ?

Impairment Loss re Loan Portfolio ?

Net Income ?

Operating Expenses ?

Personnel ?

Administrative ?

Depreciation

Net Surplus/Deficit ?

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MIX MarketMIX Market

• http://www.mixmarket.org/• Examples: Grameen, CASHPOR • Assignment: Look on the MIX Market at a MFI

in your case study country.– List which of the key ratios are reported– What are the pros and cons of the MIX Market for

finding data on MFIs?

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8. Financial Planning & Budget

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Session 3: assignmentPreparation for Session 4 and Your MFI case studyRural Finance on-line Lesson 7. Understanding the

accounts of financial service providershttp://www.microfinancelessons.com/about/lesson7.html

Read Power Point handout: Session 3 Assignment: Building Blocks for MF

Pair up with a ‘buddy’ to work on your microfinance case study

Course assignment: step 1Choose a country, region or city you want to

research for a microfinance project. You will produce a report to present to the group in

Session 7

Summary Session 3: Measuring Performance Financial Structure Outreach Indicators Overall Financial Performance Revenue Expenditure Efficiency Productivity Risk & Liquidity

08/04/23 Practical Microfinance Session 3/7: MF Building Blocks 13