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

Performance Standards - Concept, Definitions, Calculation and Methodological IssuesProductivity Ratio1. By calculating and comparing productivity ratios over time, MFIs can determine whether they are indeedmaximizing (optimizing) the use of their resources2. Productivity refers to the volume of business (output) that is generated for a given resource (input) – e.g.20 field workers (input), managing 7,000 clients (output) that are generating income for MFI.3. These ratios focus on the productivity of the credit officers {see section 4.3 (12) for definition}, because,they are the primary generators of revenue. In fact, increasingly, credit officers are getting to be viewed asprofit centers (by MFIs), whereby they are expected to generate revenue in excess of all their expenses(direct and allocated to them).5.2.3 Active Borrowers Per Credit OfficerAverage Number of Active Borrowers_____________________________________________Average Number of Credit OfficersTrend – An increasing number of active borrowers {see section 4.3 (3) for definition} per Credit Officer ispositive. This again is based on the experience curve phenomenon according to which, with passage of time,the staff get more efficient at what they have been doing and therefore, will be able to do more of this workwithout (negatively) affecting quality.Standard Proposed by Sa-Dhan – Active borrowers/credit officer should be 250-350 Clients5.2.3.1 What does the ratio Active borrowers Per Credit Officer mean? - Simple DefinitionF Active borrowers per credit officer is a number (#) ratioF In simple terms, it highlights the “number of active clients serviced by a credit officer”F It measures the overall productivity of the MFI’s total human resources in managing clients who have anoutstanding loan balance and are thereby contributing to the financial revenue of MFI.F This indicator is valuable for monitoring staff productivity and for determining institutional operatingefficiency. The caseload is determined by the methodological aspects of the institution, with well-designedinstitutions capable of reaching higher numbers of borrowers per loan officer.5.2.3.2 What does it measure?F It captures the productivity of staff – the higher the ratio the more productive the institution.F Indirectly, the ratio says a fair amount about how well the MFI has adapted its processes and procedures toits business purpose of lending to micro-finance clientsF Low staff productivity usually does not mean that staff work less, but that they are tied up in excessive andtime-consuming paperwork and procedures (like filling-up of SHG records etc)F The no. of active borrowers per credit officer varies depending on the method of credit delivery andwhether or not loans are made to individuals, to individuals as group members, or to groupsF For each MFI there is an optimal no. of clients that each credit officer can manage effectivelyF While salary costs may appear lower when credit officers carry a large no. of clients, too many clients mayresult in higher loan losses, which can be more than offsetting lower administrative costs.95