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CONCLUSIONS
7. Clearly, legal form is not significant determinant of operating self sufficiency.
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8. Year to year performance of CDFIs shows operating self sufficiency doubling between FY 2004
and FY 2005, reaching a very high level that has petered down in FY 2006 to remain positive but a
level lesser than the level of FY 2004.
9. Within the overall sample of 117 CDFIs, performance of 25 CDFIs (core sample) is broadly similar.
These CDFIs have better current repayment rate but higher costs.
10. On a year to year basis, the core sample of 25 CDFIs show that quality of assets have substantively
improved as PAR > 60 days has halved from 3% to 1.55% and current repayment rate has further
improved from 95% to 97%. Cost has gone up, especially on the aspect of financial costs and loan
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loss provisioning. Operating costs have increased marginally; total costs have steadily increased
and significantly by 7.6% (Total cost ratio of 18.74% in FY 2004 to 26.34% in FY 2006). Active
borrower to Credit officer ratio increased significantly between FY 2004 and FY 2005 but has
marginally come down in FY 2006. This reflects process adjustments during the FY 2006.
11. Operating costs across the three categories of CDFIs are closely similar with a band of 15.36% to
15.60%.
12. Cost has gone up, especially in the aspect of financial costs and Loan loss provisioning. The
operating costs have increased marginally; total costs have steadily increased and significantly by
7.6% (Total cost ratio of 18.74% in FY 2004 to 26.34% in FY 2006).
13. Active borrower to Credit Officer Ratio increased significantly between FY 2004 and FY 2005 but
has marginally come down in FY 2006. This reflects process adjustments during the FY 2006.
14. Combining the peer-groups of CDFIs by their gross loan portfolio and client outreach, it is found that
‘Large’ CDFIs are most efficient in managing their loan portfolio. Medium CDFIs have highest level
of risky assets. Small CDFIs are marginally better than medium CDFIs. Portfolio at risk has direct
relation to combination of gross loan portfolio and client outreach. Larger CDFIs are able to manage
asset risks very efficiently.
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15. The contrasting scenario emerging from CDFIs based on their operating self sufficiency is clear. The
CDFIs that have achieved operating self sufficiency of 100% or more, have performed well on all
parameters. Importantly, performances of these CDFIs are evenly comparable across all of the
performance parameters of asset quality and efficiency besides being operationally self-sustainable.
16. CDFIs with incremental age show better repayment rates. Aggregate current repayment rate of
CDFIs is 94.04%. Combining CDFIs by the dual peer groups of Gross loan portfolio and Client
outreach, the ‘Large’ CDFIs have current repayment rate in the range of 88% and 97% with median
of 93%.
17. Evidently, the analysis of High-growth CDFIs reveals that high growth affects repayment rates.
18. Size is important in controlling costs. Operating costs ratio of CDFIs at 15.43 % is much a quarter
better compared to upper limit of less than 20% given in Sa-Dhan recommended benchmark. The
median operating costs ratio is 13.16%.
19. CDFIs that are ‘large – GLP’ have operating costs ratio of 15.42%, while ‘Large – Client outreach’
CDFIs have operating costs ratio of 17.29%. There is probably an indication to average size of loans
as the differentiator to explain this difference of 1.87% in operating costs ratio among large CDFIs.
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Chapter 4 provides in-depth understanding of financial performance of CDFIs in FY 2006 through analysis focused on
each of the six benchmarks.
The Total Cost Ratio (TCR) comprises of operating costs, financial costs and loan loss provisioning.
Sa-Dhan The Association of Community Development Finance Institutions