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

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Tracking Financial Performance Standards of Microfinance InstitutionsCalculation of Portfolio at Risk by AgeLook at the aging analysis of loans in the table below (bottom part of Table 13)Sl.NoAging Analysis of Outstanding Loans for Year Ending March 2003Type of LoanI II III IV V VI VIIP16 Regular Loans 2810 128,000 76.19 % 0% -P17 Less than 30 Days past due 400 17,500 10.42 % 10% 1,750P18 Between 31- 60 days past due 150 10,000 5.95 % 25% 2,500P19 Between 61- 90 days past due 120 5,000 2.98 % 50% 2,500P20 Between 91- 180 days past due 50 3,500 2.08 % 75% 2,625P21 Between 181- 365 days past due 40 2,500 1.49 % 90% 2,250P22 > 365 days past due 30 1,500 0.89 % 100% 1,500P23 Total 3,600 168,000 100.00% - 13,125PAR > =1 day (past due) is sum ofPAR < 30 days (past due) – 10.42% (Row P 17, Column V) PLUS (+)PAR 31 – 60 days (past due) – 5.95% (Row P 18, Column V) PLUS (+)PAR 61 – 90 days (past due) – 2.98% (Row P 19, Column V) PLUS (+)PAR 91 – 180 days (past due) – 2.08% (Row P 20, Column V) PLUS (+)PAR 181 – 365 days (past due) – 1.49% (Row P 21, Column V) PLUS (+)PAR > 365days (past due) – 0.89% (Row P 22, Column V)= 10.42%+ 5.95% + 2.98% + 2.08% + 1.49% + 0.89% = 23.81% for the year 2003Similarly, PAR > 30 days (past due) is sum ofPAR 31 – 60 days (past due) – 5.95% (Row P 18, Column V) PLUS (+)PAR 61 – 90 days (past due) – 2.98% (Row P 19, Column V) PLUS (+)PAR 91 – 180 days (past due) – 2.08% (Row P 20, Column V) PLUS (+)PAR 181 – 365 days (past due) – 1.49% (Row P 21, Column V) PLUS (+)PAR > 365days (past due) – 0.89% (Row P 22, Column V)= 5.95% + 2.98% + 2.08% + 1.49% + 0.89% = 13.39%Likewise, PAR > 60 days (past due) is sum ofPAR 61 – 90 days (past due) – 2.98% (Row P 19, Column V) PLUS (+)PAR 91 – 180 days (past due) – 2.08% (Row P 20, Column V) PLUS (+)PAR 181 – 365 days (past due) – 1.49% (Row P 21, Column V) PLUS (+)PAR > 365days (past due) – 0.89% (Row P 22, Column V)= 2.98% + 2.08% + 1.49% + 0.89% = 7.44%Similarly, PAR > 90 days (past due) is 4.46%Similarly, PAR > 180 days (past due) is 2.38%Similarly, PAR > 365 days (past due) is 0.89%OutstandingNo. of Loans Value ofLoans(IV) as a % ofTotal LoanOutstandingProvisionRateProvisionAmount76
Performance Standards - Concept, Definitions, Calculation and Methodological Issues5.1.1.5 What events/activities affect (distort) PAR?Sl.No.Events/Activities thataffect PARImpact onNumeratorImpact onDenominatorImpact on PAR1 ReschedulingDecreasesNumeratorNone• Reduces the whole PAR Ratio, whiledefault risk still exists2 RefinancingDecreases, assumingoverdue amountsare rescheduledIncreases, ifadditional amountsare given to sameclient• Reduces the whole PAR Ratio, whiledefault risk still exists3 Write-offsDecreasesNumeratorDecreasesDenominator• Reduces the whole PAR Ratio, whiledefault risk still exists4 Fresh Loandisbursements for whichrepayments are yet tobegin (including thosewith a long grace /moratorium period)NoneIncreasesDenominator• Reduces the whole PAR Ratio, whiledefault risk still exists5 Incorrect ageing of pastdues, based on theinstallment method ofaging (see Box next page)NoneNone• Distorts the age of past dues and affectsprovisioning, reserve and sustainability6 Sequence of payments,Principal first and interestnextDecreases thenumeratorNone• Reduces the whole PAR Ratio, whiledefault risk still exists• Distorts the age of past dues and affectsprovisioning, reserve and sustainabilityand through reduction of interestpayments (yield)7 Weekly RepaymentsNoneNone• Distorts the age of past dues and affectsprovisioning, reserve and sustainability• Here, PAR > 30 days will have tointerpreted differently as for a loan withweekly repayments, it means that atleast 4 installments have become pastdue and are at risk. This is very differentfrom the conventional PAR > 30 daysused for loans with monthly repayments8 Balloon Repayments, asin case of agricultureloans (> 90 Days orequal to a quarter)NoneNone• Distorts the age of past dues (over dues)and affects provisioning, reserve andsustainability• Here, PAR > 30 Days, > 60 Days, > 90Days, etc. have to be redefined andinterpreted accordingly77
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TECHNICAL TOOL SERIES 1TRACKING FIN
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INTRODUCTION TOMICROFINANCE STANDAR
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5. PERFORMANCE STANDARDS - CONCEPT,
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ACKNOWLEDGMENTSThe need of the oper
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Tracking Financial Performance Stan
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TermStatement of Profit and LossStr
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REFERENCESBarrel, Margaret, Michael
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