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

CONTENTSFOREWORD _________________________________________________________________________ IACKNOWLEDGEMENT _______________________________________________________________ IPREFACE ___________________________________________________________________________IIISTRUCTURE OF THE MANUAL _______________________________________________________ IV1. INTRODUCTION TO MICROFINANCE STANDARDS _______________________________ 11.1 BACKGROUND ____________________________________________________________ 11.2 WHY IS THERE SO MUCH TALK ABOUT STANDARDS? ______________________________________ 11.3 HOW ARE MICROFINANCE STANDARDS DEVELOPED? _____________________________________ 31.3.1 Donor-led efforts ______________________________________________________ 31.3.2 Private sector-led efforts _________________________________________________ 31.3.3 MFI-led efforts _______________________________________________________ 41.4 SA-DHAN’S APPROACH TOWARDS BUILDING STANDARDS __________________________________ 51.4.1 Process Governing the Development of Standards _______________________________ 51.4.2 Strategy for Development of Standards _______________________________________ 51.4.3 Process Agreed for the Introduction of Standards for Indian MFIs ___________________ 61.5 CONCLUSION ________________________________________________________________ 62. FINANCIAL PERFORMANCE STANDARDS ________________________________________ 92.1 SPECIFIC FINANCIAL ASPECTS THAT TOGETHER DEFINE FINANCIAL PERFORMANCE _________________ 92.2 FINANCIAL PERFORMANCE INDICATORS _____________________________________________ 102.3 UNIFORM METHODOLOGY FOR CALCULATING INDICATORS _______________________________ 112.4 BENCHMARKS FOR FINANCIAL PERFORMANCE INDICATORS, LEADING TO STANDARDS _____________ 112.5 SA-DHAN RECOMMENDED MINIMUM FINANCIAL PERFORMANCE STANDARDS __________________ 123 FINANCIAL STATEMENTS OF A MICROFINANCE INSTITUTION ___________________ 173.1 INTRODUCTION ___________________________________________________________ 173.2 INCOME AND EXPENDITURE STATEMENT - KEY DEFINITIONS & INTERPRETATIONS ______________ 213.2.1 Income ___________________________________________________________ 213.2.2 Expenses ___________________________________________________________ 233.2.3 Treatment of Donor Grants ______________________________________________ 263.3 BALANCE SHEET - KEY DEFINITIONS AND INTERPRETATIONS ______________________________ 283.3.1 Source of Fund - Liabilities and Net Worth __________________________________ 283.3.2 Application of Fund - Assets _____________________________________________ 303.4 COST ALLOCATION - KEY ISSUES FOR PREPARING FINANCIAL STATEMNETS ____________________ 354. CONSTRUCTING LOAN REPAYMENT SCHEDULE, AGING SCHEDULE AND LOANPORTFOLIO REPORT FOR AN MFI_______________________________________________ 414.1 LOAN LEDGER AND REPAYMENT SCHEDULE __________________________________________ 414.2 ACCOUNTING FOR LOAN LOSSES - KEY ISSUES FOR STANDARD SETTING ______________________ 504.2.1 Allowances for Loan Losses ______________________________________________ 504.2.2 Calculating Loan Loss using Aging Analysis __________________________________ 514.2.3 Accounting Entries for Loan Loss Provision, Loan Loss Reserve and Write-offs __________ 534.3 LOAN PORTFOLIO REPORT - KEY DEFINITIONS & INTERPRETATIONS ________________________ 57