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

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Tracking Financial Performance Standards of Microfinance InstitutionsSeveral practitioner networks such as Women's World Banking and ACCION establish a specific target toreach, or a set of reference values within whose range their affiliates will need to fall.Table 3 illustrates some performance benchmarks that are in use in the international microfinance sector today.Table 3 - Some Illustrative Performance Benchmarks(Women's World Banking & ACCION)Indicator Target TrendMonthly reimbursement rate >90%, >95% IncreasingCost per unit lent 35%, 15% DecreasingPortfolio at risk (> 31 days) 1 day) < 15% DecreasingLoan loss
Financial Performance StandardsTable 4 – Sa-Dhan’s Minimum Standards with Indicators and Values1. SUSTAINABILITY PERFORMANCE STANDARDSIndicator # 1 ProposedNameOperational Self-SufficiencyOperating Income (from Loans + Investments)Formula 3Operating Costs + Loan Loss Provisions + Financing CostsStandard Operational Self-Sufficiency at 100%2. ASSET QUALITY PERFORMANCE STANDARDIndicator # 1 ProposedNamePortfolio at Risk > 60 Days Past DueFormulaUnpaid Principal Balance of Past Due Loans (with overdue > 60 days of age)Total Gross Outstanding PortfolioStandard PAR > 60 Days at less than 10%Indicator # 2 ProposedNameCurrent Repayment RateFormulaTotal Amount (Principal) Collected for the Period - PrepaymentsTotal Amount (Principal) Due 4 (to be collected during period)Standard Current Repayment Rate at greater than 90%3. EFFICIENCY PERFORMANCE STANDARDSIndicator # 1 ProposedName Operating Cost Ratio 5Formula 6Total Operating CostsAverage Outstanding PortfolioStandard Operating Cost Ratio at less than 20%Indicator # 2 ProposedName Total Cost Ratio 7FormulaTotal Costs (Operational Costs + Loan Loss Provision + Cost of Funds)Average Outstanding PortfolioStandard Total Cost Ratio at less than 30%Indicator # 3 ProposedName Active Borrowers Per Credit Officers 8FormulaStandardAverage Number of Active BorrowersAverage Number of Credit OfficersActive Borrowers Per Credit Officer at between 250-350 clientsTo summarise, Sa-Dhan through its sub-group on standards, adopted a intensive participative methodology toidentify performance standards; define and apply them, outline a common methodology for their calculationand establish benchmarks for a minimum set of standards given in the Table above. In effect, this operationalmanual is result of this entire process of practice-led standard setting by Sa-Dhan.4Some MFIs include past dues from previous period to track past due payments that were to be collected5Also called as Administrative Efficiency Ratio6What to include in the numerator and denominator of the formula and what to exclude have been dealt with extensively inChapter 5 as also other methodological issues7Includes Operating Costs + Cost of Funds + Loan Loss Provision8Also called as client to staff ratio with staff being loan officers primarily23
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TermStatement of Profit and LossStr
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REFERENCESBarrel, Margaret, Michael
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