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

Constructing Loan Repayment Schedule Aging Schedule and Loan Portfolio Report for an MFIChapter4CONSTRUCTING LOAN REPAYMENT SCHEDULE, AGINGSCHEDULE AND LOAN PORTFOLIO REPORT FOR AN MFIThe two statutory financial statements viz. Balance Sheet and Income & Expenditure Statement have beenunderstood in detail in the earlier chapter. Now the other dimensions need to be discussed in same spirit. Inthis chapter, we will deal with construction of Loan Ledger, classifying the loans as per their performance and basedon that construction of Loan Portfolio Report of an MFI.4.1 LOAN LEDGER AND REPAYMENT SCHEDULEFor an MFI, (a) Individual Loan Ledger, (see Table 9, 10 & 11) and (b) Aggregated Loan Ledger (see Table 12) are thebackbone of all financial transaction recorded in the organisation. These two are among the most important documentsin any MFI and their proper and timely maintenance is must.Loan ledger of an MFI is basically repayment schedule of loan outstanding that keeps record of repayment of loanand its various status. Before disbursement of loan, the terms must be finalised (and recorded) and made very clearto the client with regard to:(a) Loan Disbursed Amount(b) Disbursement Date(c) Loan Term in Number of Installments – 10, 20, 30 etc.(d) Frequency of Repayment of Installment – Weekly, Monthly etc. must be clearly stated(e) Due Date for 1 st Installment – exactly 1 week or month from date of disbursement OR any specified datein a month (like on the day of group meeting or last/first day of each month) OR if any grace/moratoriumperiod exists it needs to be mentioned upfront (for example, an MFI is following a policy where month endis considered as due date of loan repayment. A loan was disbursed on January 21, 2002. As per the policyof MFI, the first installment should be due on January 31, 2002, which is only 10 days after the disbursement.However, in this case, the MFI give a grace period of one month to the borrower. It means that thefirst installment is now due on the last date of February 2002, instead of end of January 2002).(f) Sequence of Payment – which is to be taken first. The suggested sequence is Interest Overdues, InterestDue, Principal Overdues and Principal(g) Definition of Overdues - When does a loan become overdue or pastdue is an aspect that must be clearlyspecified. It is suggested that the day after an amount is due, the amount if not paid becomes overdue. Suchas, if on April 30, 2002, an amount of Rs. 100 is due and it is not paid, then, on May 1,2002, this amountis in arrears or overdueHaving understood that loan terms need to be defined upfront, now we will try to understand the process of constructionof individual loan ledger through an illustrative example. Please look at the Key data/facts given below:Loan Amount Disbursed (Rs.) 1000Disbursement Date 23/7/2002Number of Installments 50Weeks in a Year 52Interest15% per annumMethod of Interest CalculationFlatTotal Interest (Rs.) 144.23 {1000 * (15/100) * (50/52)}Interest per Installment 2.88 (144.23/50)Interest Rounded-off to nearest whole no. (Rs.) 3.00Principal to be paid per Installment (Rs.) 20 (1000/50)Now, based on the above information, a repayment schedule is drawn – See Table 9 (next 2 pages).49