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

Performance Standards - Concept, Definitions, Calculation and Methodological IssuesCalculation of Portfolio at Risk from Portfolio Report:Step 1 – The formula isSum of Unpaid Principal Balance of All Loans with Payments Past DueTotal Gross Outstanding Loan Portfolio (Sum of Principal Outstanding of All Loans)Step 2 - Take the Unpaid Principal Balance of Past Due Loans for Year 2003 – it is 40,000 (Please refer toPortfolio Report - Table 13, Row P8, Column III for Unpaid Principal Balance of Past Due Loans for Year2003)Sl. Description 2001 2002 2003P8 Value of outstanding balance of loans in arrears (End of period) 40,000 40,000 40,000Numerator of FormulaStep 3 - Take the Total Gross Outstanding Loan Portfolio for Year 2003 – it is 168,000 (Please refer toPortfolio Report, Row P5, Column III for total gross outstanding loan portfolio for Year 2003)Sl. Description 2001 2002 2003P5 Value of loans outstanding (End of period) 104,000 140,000 168,000Denominator of FormulaStep 4 - Divide Unpaid Principal Balance of Past Due Loans by Total Gross Outstanding Loan Portfolio asshown below and, we get Portfolio at Risk as 23.81% for year 2003Sl. Portfolio at Risk 2001 2002 2003P8 Value of outstanding balance of loans in arrears (End of period) (A) 40,000 40,000 40,000P5 Value of loans outstanding (End of period) (B) 104,000 140,000 168,000Portfolio at Risk Value = A / B = 38.46% 28.57% 23.81%Trend AnalysisLikewise, the portfolio at risk for Years 2001 & 2002 are respectively 38.46% & 28.57%The trend in portfolio at risk is decreasing, which is positive. During the period 2001-2003, Portfolio at Riskhas come down by nearly 14.65% (38.46% - 23.81%) While the Total Outstanding Loan Portfolio has grownby 62% {(168,000 - 104,000) / 104,000) from 2001 to 2003, Portfolio at Risk is reduced only by 38%{(38.46% - 23.81%) / 38.46%} during the same period (there is no change in terms of absolute value ofPortfolio at Risk). However, there have been loan write-offs as well during this period. Hence, reduction inPAR appears to be due to some collection of arrears, increase in total outstanding loan portfolio and loanwrite-offs.75