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

Tracking Financial Performance Standards of Microfinance Institutions5.1.2 Current Repayment RateTotal Amount Received during period – Prepayments= _________________________________________________ x 100Total Amount Due 11 (to be collected during period)Trend – An increasing Current Repayment Rate is positiveStandard Proposed by Sa-Dhan – Current Repayment Rate should exceed 90%5.1.2.1 What does it measure?F Current period repayment rate helps in understanding the behaviour of clients and performance of theinstitution in the on-going period.F This can be especially useful when the institution has several years of micro-finance experience and a largeoverall disbursement, which can usually camouflage ‘poor’ performance in the current period.F In other words, an excellent repayment track record in the past can shroud current poor repayment performance,especially if the volume of money lent in the current period is quite small in comparison to that lentcumulatively. Having the current period repayment rate is useful in such cases.5.1.2.2 What minimum records are required for calculating the Current Repayment Rate?F Loan ledger with disbursement, schedule and repayment data on each individual loan backed-up a comprehensivecredit policy outlining various terms and conditionsF Aggregation of the loan ledger data with regard to delinquent and current loans – either a simple ageingtable or comprehensive portfolio reportF Key financial statements like the Balance Sheet and Income Statement, appropriately constructed5.1.2.3 How to calculate the Current Repayment Rate?F Create a loan repayment schedule, identify whether the loan is delinquent and age the loan in days withregard to past dues (refer Table 9)F Aggregate loan repayments schedules for all loans and summarise these in the form of a simple table (referTable 12)F Define the current period for calculating the repayment ratesF Sum the total principal amount paid so far by clients in current period (see table 12, last row, col. IX).F Sum the prepayments, if any made by them so far. Prepayment would have occurred if the total amountpaid by the client exceeds the amount due from the client (see table 12, last row, col. XI).F Sum the total amounts due from the client till date in the current period - today or date of aggregation etc(see table 12, last row, col. VI).F Then do the following calculation to get the Current Repayment Rate11Some MFIs include past dues from previous period to track past due payments that were to be collected84