Tracking Financial Performance Standards of ... - Sa-Dhan

More documents

Recommendations

Info

Tracking Financial Performance Standards of Microfinance InstitutionsSl.No.Name ofTool/InstitutionBroad performance areaIndicators to measure performance5. PEARLS, WorldCouncil of CreditUnions (WOCCU)PEARLS is a systemof 45 financial ratiosthat the WOCCUuses worldwide tomonitor the performanceand creditunions. It wasoriginally designedand implementedwith Guatemalancredit unions in thelate 1980s.The WOCCU nowuses it to create auniversal financiallanguage that eachcredit union canspeak and understand,to generatecomparative creditunion rankings, andto provide theframework for asupervisor unit at thesecond tier. Each ratiohas a standard targetor goal that eachcredit union shouldstrive to achieve.1. P - Protection (7 ratios). Refers toadequate protection of assets.Protection is measured by comparingthe adequacy of the provision for loanlosses against the amount of delinquentloans. Protection was deemed adequateif a credit union had sufficientprovisions to cover 100 percent of allloans delinquent for more than 12months and 35 percent of all loansdelinquent for 1-12 months.2. E - Efficiency financial structure (9ratio). Determines growth potential,earnings capacity, and overall financialstrength. Ratios measure assets,liabilities, and capital, and theirassociated targets constitute an idealstructure for credit unions.3. A - Asset quality (3 ratios). Ratiosmeasure the impact of assets that donot generate income.1. Allowance for loan losses / Allowancesrequired for loans delinquent > 12 months2. Net allowance for loan losses / Allowancesrequired for loans delinquent < 12 months3. Total charge-off of delinquent loans >12months4. Annual loan charge-offs5. Accumulated loan recoveries/Accumulated loan charge-offs6. Solvency7. Allowances for investment losses/Non-regulated investments1. Net loans/Total assets2. Liquid investments / Total assets3. Financial investments / Total assets4. Non-financial investments / Total assets5. Savings deposits / Total assets6. External credit / Total assets7. Member share capital / Total assets8. Institutional capital / Total assets9. Net institutional capital/ Total assets1. Total loan delinquency / Gross loanportfolio2. Non-earning assets / Total assets3. Net institutional & Transitory capital +Non interest-bearing liabilities / NonearningassetsContd. next page108
Performance Indicators of Microfinance Institutions : Some Popular Tools used WorldwideSl.No.Name ofTool/InstitutionBroad performance area5. PEARLS, WOCCU 4. R - Rate of return and costs (12 ratios).Disaggregates the essential componentsof net earnings (by investments to helpmanagement calculate investmentyields and evaluate operating expense.The result more clearly indicatewhether the credit union is earning andpaying market rate on its assets,liabilities and capital.5. L - Liquidity (3 ratios). Reveals if thecredit union is administering its cashto meet deposit withdrawalrequirements and liquidity reserverequirements, while minimising theamount of idle funds.6. S - Signs of growth (11 ratios).Measures both financial andmembership growth. By comparingasset growth to other key areas it ispossible to detect changes in thebalance sheet structure that could havea positive or negative impact onearnings. Growth of institutionalcapital is the indicator of profitabilityand success, particularly if it isproportionately greater than the growthin assets.Indicators to measure performance1. Net loan income / Average net loanportfolio2. Total liquid investment income /Avg. liquid investments3. Total fin. investment income /Avg. fin. Investments4. Total non-fin. investment income /Avg. non-fin. investments5. Total interest cost on savings deposit/Avg. savings deposit6. Total interest cost on external credit /Avg. external credit7. Total dividend paid on shares /Avg. member shares8. Total gross income margin /Avg. total assets9. Total operating expenses /Avg. total assets10. Total loan loss provision expense /Avg. total assets11. Non-Recurring Income or Expense /Avg. total assets12. Net income / Avg. total assets1. (Short-term investments + Liquid assets- Short-term payables) / Savings deposits2. Liquidity reserves / Savings deposits3. Non-earning liquid assets / Total assets1. Growth in loans to members2. Growth in liquid investments3. Growth in financial investments4. Growth in non-financial investments5. Growth in savings deposits6. Growth in external credit7. Growth in share capital8. Growth in institutional capital9. Growth in net institutional capital10. Growth in membership11. Growth in total assetsSource:: Richardson, 2001109
Page 2 and 3:
TECHNICAL TOOL SERIES 1TRACKING FIN
Page 4 and 5:
INTRODUCTION TOMICROFINANCE STANDAR
Page 6 and 7:
5. PERFORMANCE STANDARDS - CONCEPT,
Page 8 and 9:
ACKNOWLEDGMENTSThe need of the oper
Page 10 and 11:
Tracking Financial Performance Stan
Page 12 and 13:
Page 14 and 15:
Page 16 and 17:
Page 18 and 19:
Page 20 and 21:
Page 22 and 23:
Page 24 and 25:
Page 26 and 27:
Page 28 and 29:
Page 30 and 31:
Page 32 and 33:
Page 34 and 35:
Page 36 and 37:
Page 38 and 39:
Page 40 and 41:
Page 42 and 43:
Page 44 and 45:
Page 46 and 47:
Page 48 and 49:
Page 50 and 51:
Page 52 and 53:
Page 54 and 55:
Page 56 and 57:
Page 58 and 59: Tracking Financial Performance Stan
Page 136 and 137: TermStatement of Profit and LossStr
Page 138 and 139: REFERENCESBarrel, Margaret, Michael
show all

Tracking Financial Performance Standards of ... - Sa-Dhan

Create successful ePaper yourself

Delete template?

Save as template?