Draft Microfinance Financial Reporting Standards
2011/GFPN/WKSP/030Session 5Session 5 – Additional Reading: Pocket Guide to theMicrofinance Financial Reporting Standards:Measuring Financial Performance of MicrofinanceInstitutionsSubmitted by: Opportunity InternationalWorkshop on Microfinance Best PracticesHa Noi, Viet Nam7-8 April 2011
Pocket Guideto theMicrofinance Financial Reporting StandardsMeasuring Financial Performance ofMicrofinance InstitutionsThis document is a condensed version of the Microfinance Financial Reporting Standards (MFRS): MeasuringFinancial Performance of Microfinance Institutions that will be published by The SEEP Network in 2011.
An Overview of What’s New in theMicrofinance Financial Reporting Standards 2010A maturing microfinance industry needs standardized methods to measure and analyze financial performanceand risk management. Microfinance Financial Reporting Standards: Measuring Financial Performance ofMicrofinance Institutions (hereafter the MFRS) addresses this need. When published, the MFRS will update TheSEEP Network’s 2005 financial performance publication, Measuring Performance of Microfinance Institutions:A Framework for Reporting, Analysis, and Monitoring.1 The MFRS is designed for use by all microfinanceinstitutions (MFIs): non-governmental organizations (NGOs), non-bank financial institutions or companies,commercial banks, rural banks, credit unions, and cooperatives. An overview of the ratios and tables thatmakeup the MFRS is presented below.The Core Financial Ratios and TablesRatio typeAnalytical focusProfitability(7 ratios)Will the MFI have the financial resources to continue serving clientstoday, as well as tomorrow?Capital adequacy and solvency ratios(2 ratios)Does the MFI have the ability to meet its obligations and absorbunexpected losses?Liquidity ratios(1 ratio)Does the MFI have the resources to meet its obligations on a timely basisas they come due?Asset quality and portfolio quality(3 ratios)What is the quality of the MFI’s main asset, its loan portfolio?Efficiency and productivity(8 ratios)Is the MFI serving as many clients as possible at the lowest possible cost?Asset-liability management tables(4 tables)What are the risks inherent in an MFI’s asset and liability structure?Note: Ratios designated as “core” apply to all MFIs, regardless of size, maturity, product offerings, or legal form (bank, non-bankfinancial institution, NGO, cooperative, etc).The Non-Core Financial RatiosRatio typeAnalytical focusFor regulated financial institutions(2 ratios)Is the quality and solvency of the MFI’s capital base strong enough toleverage growth internally? To meet obligations? To absorb unexpectedlosses? How does this compare with the Basel Guidelines?For deposit-taking MFIs(4 ratios)How important are deposits in the MFI’s funding mix? Is the MFI providinguseful deposit services for a range of client financial needs, whilebalancing the need to manage the liquidity and security of deposits?Note: “Non-core” ratios are supplemental ratios that apply to a smaller set of MFIs, such as regulated institutions and/or those thattake deposits.1This document, known as The SEEP Network Framework, detailed 18 financial performance ratios. A history and role of the MFRSmay be found at the Microfinance Financial Reporting Standards Initiative page on The SEEP Network website (www.seepnetwork.org).The SEEP Network Framework may be downloaded from there as well.1
Wait! What did the MFRS do with ?Due to evolution in microfinance reporting, a select number of ratios included from the SEEP Network Framework has beenphased out of the MFRS. In addition, the MFRS uses mainstream terminology where possible to be more consistent with thevocabulary and language of the commercial banking sector. Finally, some ratios have been renamed to reflect industryevolution.Ratios eliminated or renamedRationaleOperational self-sufficiency (OSS) andfinancial self-sufficiency (FSS)OSS and FSS ratios, which evolved as early and important sustainabilityratios, are omitted in this edition. While OSS and FSS were helpful, oncean MFI exceeded 100% sustainability or the breakeven point, the ratiobecame less helpful as a measure of profitability. Return on AverageAssets (R3) and Return on Average Equity (R4) are commercial measuresbetter suited to analyze an established MFI's profitability.PAR30PAR30 (portfolio at risk more than 30 days) has been replaced by NPL30,which is the abbreviation for “non-performing loans greater than 30 dayspast-due.” NPL30 includes the value of all renegotiated loans.IntroductionThe Microfinance Financial Reporting Standards (the MFRS) uses a financially conservative and prudentapproach to measuring financial performance, due to the fact that many MFIs are exposed to volatility in theiroperating environments (natural, political, economic, or a combination). Specific implications of this financiallyconservative approach are reflected in several ratios. For example, in some ratios, a committed credit line waspreviously considered for liquidity; the MFRS no longer doessince committed credit lines may not be available in a financialCreating the Microfinance Financialstress scenario. Liquid assets are defined as cash only becauseReporting Standardscash-like line items, such as “due from banks,” may beThe Microfinance Reporting Standardsencumbered and not available as liquid assets.The MFRS encourages maximum disclosure and transparency offinancial information by MFIs to make reporting financialperformance as explicit as possible. New ratios reflect themicrofinance industry’s growing attention to measuring andanalyzing risk. Finally, a more robust set of financialperformance standards have been added to account for thegrowing number of MFIs that are regulated, capture deposits, andhave complex capital structures.It is important to note that central bank regulators are lessinterested in obtaining calculated ratios from MFIs than they arein receiving good source data from which to derive their ownratios.2 Nonetheless, the ratios included in this handbook are auseful set of tools for unlicensed and licensed MFIs alike to usein monitoring their current performance and, if applicable, theirprogress toward becoming licensed and regulated.One of the primary goals of the MFRS is to ensure thatmicrofinance financial performance ratios are calculated in a2Working Group (MFRS WG), a subcommitteeof the SEEP Network’s Financial ServicesWorking Group, represents a variety ofindustry stakeholders and is endorsed by over100 organizations, such as CGAP, MIX Market,and Planet Rating. In creating the MFRS, theworking group used a collaborative process. InJune 2010, it revised The SEEP NetworkFramework and sent this draft to a wide rangeof stakeholders. The revision was also madeavailable for public comment and review onthe Internet for a four-month period. TheMFRS WG compiled and reviewed allsubmitted comments in order to determinewhat ratios and tables would be included inthe MFRS, as well as the standard definitionfor each. In 2011, the final update to the 2005SEEP Network Framework, on which thisPocket Guide is based, will be published. Forupdates on the progress of the MFRS, pleasevisit the MFRS WG website,www.reportingstandards.org.Every effort has been made to approach these ratios in a manner consistent with regulatory financial reporting requirements andcompliance. It is important to note, however, that individual regulators have the mandate to define the regulatory ratios applicable in theircountry.2
consistent manner. MFIs, microfinance associations and networks, regulators, donors, lenders, investors, raters,researchers, and others are all encouraged to use them. Please note that these standards only addressmicrofinance financial performance. Standards beyond the scope of this publication address other aspects ofmicrofinance, such as social performance3 and impact investing,4 among others.The New MFRS Ratios and Asset-Liability TablesFor the sake of ease, the MFRS ratios and asset-liability management (ALM) tables of this pocket guide havebeen organized as follows: Table 1: Microfinance Financial Reporting Standards RatiosThis table presents the 21 “core” and 6 “non-core” ratios that make up the MFRS. Ratios designatedas core apply to all MFIs, despite their size, maturity, product offerings, or legal form (bank, non-bankfinancial institution, NGO, cooperative, etc.). Non-core ratios are supplemental ratios that apply to asmaller set of MFIs, such as regulated institutions and/or those that take deposits. It is recommendedthat MFIs belonging to these sub-sets, as well as those that plan to transition into these sub-sets, utilizeall non-core ratios that apply (those designated for regulated MFIs, for example.) Table 2: Asset-Liability Management (ALM) TablesThese four tables, focused on liquidity risk, repricing risk, foreign exchange risk, and foreignexchange liquidity, are important components of MFI financial risk-management strategy andmonitoring. ALM tables provide a visual and useful presentation of financial information to assess risksinherent in an MFI’s asset and liability structure. For institutions that are compliant with InternationalFinancial Reporting Standards (IFRS),5 the first three tables are required as disclosures of market risk inannual audited financial statements. Furthermore, the MFRS Working Group views them as crucialsupplementary indicators of liquidity, given the difficulty and limitations of ratios in measuring liquiditywith standard balance sheet ratios.6 (These are “point-in-time” indicators that do not adequately capturethe dynamic feature of the liquidity profile of a financial institution.)Table 1Microfinance Financial Reporting Standards RatiosPROFITABILITY RATIOSRatio no.R1(R4 in 2005edition)*TermPortfolioyieldFormulaCalculation notesUseInterest, fees, and commissions in loan portfolio/Average gross loan portfolioMFRS assumes that accruedinterest receivable is backed outor reversed if not received.**As the ratio is calculated usingaveraging, it eliminates theeffect of seasonal highs andlows.***Indicates the MFI’s ability togenerate cash from interest,fees, and commissions in theaverage gross loan portfolio.A decreasing trend meanslower earnings in theportfolio, either from achange in product pricing,product portfoliocomposition, or foregonerevenue due to rising arrears.Earning assets are those thatgenerate financial revenue,including the gross loanMeasures the MFI’s marginafter paying funding sources.A declining trend meansCORER2 (new)CORENet interestmargin(NIM)Interest income – Interestexpense/Average earningassets3Information about microfinance social performance is available at www.themix.org/standards/social-performance.Please see the Global Impact Investment Network’s Impact Investing and Reporting Standards at http://iris-standards.org.5Further information about IFRS may be found at www.iasb.org.6Deposits included in the ratios are assumed to be voluntary, not compulsory.43
portfolio, trade investments, andother investments.R3(R2 in 2005edition)CORER4(R3 in 2005edition)Return onaverageassets(ROA)Net income after taxes andbefore donations/AverageassetsMeasures how the MFI ismanaging its assets tooptimize its profitability. Amature MFI should generatea positive ROA.Return onAverageEquity (ROE)Net income after taxes andbefore donations/AverageequityROE is a core measure ofprofitability. It measures anMFI’s ability to build equitythrough retained earnings. Amature MFI should generatea positive ROE.FinancialexpenseratioInterest and fees expense onfunding liabilities/Averagegross loan portfolioMeasures the total financialexpense the MFI incurs tofund its portfolio.ImpairmentexpenseratioImpairment expense†/Average gross loan portfolioOperatingexpenseratioOperating expense/ Averagegross loan portfolioCORER5 (new)CORER6 (new)CORER7(R12 in 2005edition)smaller margins to coveroperating and provisioningexpenses.This ratio can also be measuredas a proportion of NPL30†† withNPL30 in the denominator.Measures the impairmentexpense as a proportion ofthe average gross portfolio,which represents the cost ofcredit-related losses or writeoffs in the portfolio. Changesin this ratio may be due tochanges in delinquency or toprovisioning policies.Measures the administrativeand overhead costs incurredto deliver loans. Decliningtrend, while a sign of anMFI’s improving efficiency,may also reflect a risingaverage loan size.CORE* R1: Those wanting to trace new ratios to their original source in The SEEP Network Framework should do so using the referenced rationumber, as some of the terms and formulas have changed.** R1: The SEEP Network Framework contains a discussion of the treatment of accrued interest on loans past due in box 3.6, “Adjustment forAccrued Interest Receivable,” on page 20Performance%20of%20MFIs%20Framework.pdf.*** R1: The SEEP Network Framework contains a discussion of the use and calculation of averages in section 1.6.3,Averaging,” on page 6, erformance%20of%20MFIs%20Framework.pdf.†R6: The impairment expense is a noncash expense item charged to an MFI’s earnings to offset an increase in the impairment loss allowancefor possible bad debt and is reported on the income statement††R6: NPL30 means “non-performing loans 30 days past-due” including the value of all renegotiated loans. NPL30 was previously calledportfolio at risk as of 30 Days (PAR30). The MFRS use mainstream terminology where possible to be more consistent with vocabulary andlanguage of the commercial banking sector.4
CAPITAL ADEQUACY AND SOLVENCY RATIOSRatio no.TermFormulaCalculation notesUseDebt toequity ratio(leverage orgearingratio)Total liabilities/Total equityEquity toassets ratioTotal equity/Total assetsThe denominator should excludegoodwill and intangible assetsfor MFIs that include these lineitems on their balance sheet.A measure of the solvency ofan MFI, this ratio helps anMFI assess its ability to meetits obligations and absorbunexpected losses.Capitaladequacyratio (CAR)Total capital/Risk-weightedassetsTotal capital is a broaderdefinition of “equity” andincludes equity plus preferenceshares plus some forms ofsubordinated debt andmandatory convertible debt. Thedenominator should excludegoodwill and intangible assetsfor MFIs that include these lineitems in their assets. The MFRSrecommends that MFIs use thestandardized approach incalculating their risk-weightedassets. See appendix 1 of es/FinancialReportingStandardInitiative.aspx) forfurther information on thisapproach.This is a more accuratemeasure than the equity-toassets ratio (in accordancewith Basel II calculations),‡the MFI’s amount of capital,and the risk level of assets.R11 (new)Uncoveredcapital ratioNPL30 – Impairment lossallowance/Total capitalNONCORE(UCR)See R10 for information on totalcapital. See R6 note forinformation on NPL30.Indicates the impact ofpotential portfolio losses onan MFI’s capital base. Thelower the ratio the better,which means the less capitalat risk.R8(R7 in 2005edition)CORER9 (new)CORER10 (new)NONCORE(forregulatedMFIs)Indicates the extent to whichan MFI has leveraged its ownfunds to finance its portfolioand other assets. Excessiveleverage increases the riskprofile of an MFI, as theinstitution may have limitedability to absorb unexpectedcredit losses or it may haveborrowed more than it canrepay in times of troubles.(forregulatedMFIs)‡R10: In September 2010, the Bank for International Settlements announced the framework of Basel III, which will replace Basel II. For moreinformation, see www.bis.org.5
LIQUIDITY RATIOS(Also see table 2 below, “Asset-Liability Management,” that addresses liquidity.)Ratio no.TermFormulaCalculation notesUseR12Cash ratioUnrestricted cash and cashequivalents/Demanddeposits Short-term timedeposits Short-termborrowings Interestpayable on funding liabilities Accounts payable Othershort-term liabilitiesUnrestricted cash and cashequivalents are defined toinclude cash, governmentsecurities, and other assets.These may be assets that can besold, repossessed, or used ascollateral in the market, or areeligible as collateral in thecentral bank's normal openmarket operations. (They areeligible only if such central bankborrowings will not jeopardizecustomer confidence). Alsoincluded secured and unsecuredcredit lines that are establishedand committed with no materialadverse change clauses fromsimilar or higher rated banks.Indicates level of cash andcash equivalents the MFImaintains to cover shortterm liabilities. The MFI mustensure that it has sufficientliquid funds to meet all itsshort obligations.SavingsliquidityReserves against deposits asrequired by regulators Unrestricted cash/Totaldemand depositsGenerally the national regulatorwill require a statutory reserveagainst demand deposits thatmay directly affect this ratio.MFIs should note suchrequirements in accountingstatements and financial reports.Loans todepositsratioGross loan portfolio/DepositsProvides information on thecash available to meetwithdrawals in demanddeposit accounts. Highresults indicate great cashliquidity cushions, but mayalso reflect an inefficientallocation of resources toearning assets.Measures the relativeportion of the MFI’s portfoliothat is funded by deposits.This ratio aids analysis of therole of deposits as a fundingsource (in addition to beingan important client product.)Calculation notesUseThe most common internationalmeasurements of NPLs aregreater than 90 days. Based onthe microfinance business modeland short-term tenor of loans,30 days is a more appropriatetime horizon for this ratio, as itwas for PAR30.This ratios measures currentrisk in the portfolio at a pointin time. Changes to this ratiomay reflect changes in risk,but should be read inconjunction with the writeoff ratio, as the level ofreported NPLs can bereduced via write-offs.(R8 in 2005edition)CORER13 (new)NONCORE(for deposittaking MFIs)R14 (new)NONCORE(for deposittaking MFIs)ASSET QUALITY RATIOS (PORTFOLIO QUALITY)Ratio no.R15(R9 in 2005edition)CORETermNPL30 dayspast dueFormulaNPL30/Gross loan portfolio6
R16(R10 in 2005edition)Write-offratioValue of loans writtenoff/Average gross loanportfolioAn MFI's write-off policies varyboth in terms of timing andfrequency. In addition, nationalregulators may require that theMFI adopt a defined write-offratio at specific dates.Measures the percentage ofthe MFI’s loans that has beenremoved from the balance ofthe gross loan portfoliobecause they are unlikely tobe repaid. Changes in thisratio should be read inconjunction with the NPL30ratio, as MFIs may maintainrisk on their balance sheets.NPL30 write-offsratioAverage NPL30 Value ofloans written off/Averagegross loan portfolioIn order to ensure comparability,the value of loans written off iscalculated over a rolling fourquarter period.This ratio gives the mostcomprehensive measure ofasset quality because itshows the combined impactof NPL30 and loans writtenoff on asset quality. In thepast, troubled loans could beshifted among thesecategories.Calculation notesUseCORER17 (new)COREEFFICIENCY AND PRODUCTIVITY RATIOSRatio no.TermR18Portfolio toassetsGross loan portfolio/TotalassetsCost incomeratioOperating expense/TotalrevenuesCost peractiveclient Operating expense/Averagenumber of active clients(R5 in 2005edition)CORER19 (new)FormulaThis ratio measures howmuch an MFI allocates to itsprimary business—lending—and, in most cases, to itsmost profitable activity—Portfolio to AssetsGross Loan Portfoliomaking loans. Low resultsMeasures the MFI’s allocation of assets to its lending activityconsideredto beusethe core activitymay indicateinefficientof assets, and high resultsmay indicate insufficientliquidity levels.A common efficiency metricin the commercial bankingsector, this ratio measuresthe extent to which grossrevenues absorb an MFI’sdelivery costs. Decliningtrends reflect improvingefficiency of revenue use.CORER20(R13 in 2005edition)CORE“Client” should be interpreted asa “unique client" for this ratio,since an MFI client may accessmultiple products. Each MFIshould clearly define whatconstitutes an “active client,”such as a client that has used anMFI’s lending, savings, orinsurance product in the last 12months. This distinction helpsset apart active clients from“dormant” clients, which may sitout one or more loan cycles, butare still satisfied with the MFI'sproducts and services.7Measures an MFI’s averagecost of maintaining an activeclient. Costs per client mayvary significantly dependingon the type of product beingserviced by the MFI.Declining trends reflectimproved efficiency ofservice delivery.
This ratio will vary both byproductivity and by the nature ofthe MFI’s products and servicesmix.R21(R14 in 2005edition)Borrowersper loanofficerNumber of activeborrowers/Number of loanofficersThis ratio will vary both byproductivity and by the mix of anMFI’s products and services.Measures the averagecaseload of the averagenumber of borrowers managed by each loanofficer. Improvedproductivity supports moreefficient cost delivery, butexceptionally highproductivity levels mayindicate staff strain, whichcan lead to staff turnover orrising credit risk throughpoor due diligence in loanunderwriting.Activeclients perstaffmemberNumber of active clients/Total number of personnelThis ratio will vary both byproductivity and by the mix of anMFI’s products and services.Measures the overallproductivity of the MFI’spersonnel in managingclients, including borrowers,voluntary depositors, andother clients. Readers shouldinterpret trends as bothproductivity and workload,paying attention to workquality at very high levels.Client dropout(Number of active clients,beginning of period Number of new clientsduring period) – Number ofactive clients, end ofperiod/Number of activeclients, beginning of periodThis formula does notdifferentiate between new andrejoining clients.Measures the percentage ofclients who had notransaction with the MFI forthe period. It is used as onemeasurement of clientloyalty and satisfaction. Thisratio may overstate dropoutin high-growth MFIs.Averageoutstandingloan sizeGross loan portfolio/Numberof active borrowersWhile median or monthlyoutstanding gross loan portfoliosize is a preferred indicator ofloan size (rather than using theaverage), these metrics maybemore difficult to obtain thanaverage figures, which requireonly beginning and end of periodamounts. In an effort toapproximate the relativeprecision of a median value,MFIs using average calculationsshould, at the very least, removehigh loan-balance outliers fromtheir calculations in an effort toapproximate more closely thetrue average loan size of itsclient base.Measures the averageoutstanding loan balance perborrower, an indication ofthe typical outstandingfinancing accessed by clients.CORER22(R15 in 2005edition)CORER23(Revision ofR16 in 2005edition)CORER24(Revision ofR17 in 2005edition)CORE8
R25(R18 in 2005edition)AverageloandisbursedValue of loans disbursed/Number of loans disbursedWhile median or monthly loansdisbursed is a preferredindicator, these metrics may bemore difficult to obtain thanaverage figures that requiresonly beginning and end of periodamounts.Measures the average valueof each loan disbursed. Thisratio can be used to projectdisbursements. It can becompared to gross nationalincome per capita or as apercentage of a nationalpoverty line as an l deposits/Number ofdeposit accountsThis denominator is best used tomeasure efficiency and is morereadily available (compared tonumber of depositors) than thedenominator in R27. As withR25, users may want to stratifyresults or remove high balancedeposits to approximate the trueaverage deposit balance forretail microfinance clients.Can provide information onthe socio-economic level ofthe client base.Averagedepositaccountbalance perdepositorTotal deposits/Number ofdepositorsCORER26 (new)NONCORE(for deposittaking MFIs)R27 (new)NONCORE(for deposittaking MFIs)Compared to R26, R27 is thepreferred ratio to use formeasuring and analyzingclient outreach, assumingthat the depositors' data isavailable. R20: MFRS recognizes that this ratio may be used for a given service and its related cost (cost per borrower, cost per depositor, etc.). Readersshould note that variations of the ratio may be calculated by product anywhere the term “client” is used in this document. R21: As with “active client,” “active borrower” should be interpreted as a “unique borrower” for this ratio, since a borrower may accessmultiple products. See R20 for further guidance.Asset-Liability Management TablesIn addition to the new ratios, this edition introduces four asset-liability management (ALM) tables to the MFRS.7These tables are important components of MFI financial risk-management strategy and monitoring. ALM tablesprovide a visual and useful presentation of financial information to assess risks inherent in an MFI’s asset andliability structure. For institutions that are IFRS-compliant, the first three tables are required as disclosures ofmarket risk in annual audited financial statements. The range of upper and lower limits for ALM tables varieswith the institution, its context, and appetite for risk. The challenge is to balance prudent management withinvestment opportunities.7 Table 1 (ALM1) details liquidity risk, disclosing mismatches in maturities in an MFI’s assets andliabilities through an analysis of the time frames (tenor buckets) in which each asset or liabilitymatures. Table 2 (ALM2) presents repricing risk, measuring the time frames in which interest rates on assetsand liabilities reset and may reprice.The ALM tables may be found in appendix 2 (page 7) in the Microfinance Reporting Standards at www.reportingstandards.org.9
Table 3 (ALM3) breaks out MFI foreign exchange risk exposure for institutions holding assets orliabilities in foreign currency or currencies. It measures this risk exposure as a percentage of anMFI’s equity. 8 Table 4 (ALM4) measures liquidity risk per foreign currency, combining foreign-exchange riskexposure in tenor buckets, plus the components of tables 1 and 3 on a per-currency basis. Thisinformation details the maturation of assets and liabilities and thus an MFI’s exposure to foreignexchange risk in each time frame.Sample ALM tables follow the description of each table. A further description of how to create ALM tables,accompanied by a pro forma example of each table, may be found in appendix 2 (page 7) in the MicrofinanceReporting Standards at www.reportingstandards.org. The full tables are in the Excel file, “Asset-LiabilityManagement Tables,” also available at www.reportingstandards.org.Table 2Tableno.8Microfinance Financial Reporting Standards Asset-Liability Management TablesTable nameExplanationALM 1Liquidity risk(maturity risk)Measures the maturities of assets and liabilities on an MFI’s balance sheet. Thistable helps an MFI to determine where funding gaps exist, allowing it to adjustmaturities as possible and plan for liquidity needs. In line with the MFRS’conservative and prudent approach, this table should be based on asset andliability contractual maturity dates. An MFI may also model this table using theexpected behavior approach of depositors in terms of deposits’ maturityassumptions.ALM 2Interest rate risk(repricing risk)Looks at any mismatch when an MFI’s assets and liabilities interest rates reprice.An interest-rate repricing mismatch affects cost of funds, the rate charged onclient loans, and institution profit. Repricing can occur when an asset or liabilitymatures, or when a variable rate changes (such as loans based onLIBOR/EURIBOR). For a conservative and prudent approach, this table should bebased on contractual repricing dates, as opposed to actual behavioral maturityof depositors.ALM 3Foreign currency risk(F/X risk)Provides information regarding aggregate exposure to foreign exchange risk bypotential exchange rate movements. The risk exposure is measured by looking atforeign currency amounts held in an MFI’s assets and liabilities. It includesdisclosure for each foreign currency held. If the MFI operates 100% in one localcurrency, this table is not needed. Matching assets and liabilities lessen currencyrisk exposure. ALM4 details full currency foreign exchange risk analysis factoringin asset and liability tenors.ALM 4Liquidity risk per foreigncurrency(currency maturity risk)This table breaks out balance sheet assets and liabilities by maturity and bycurrency into tenor buckets, showing when foreign currency obligations comedue. It can help an MFI with exposure plans how to hedge exposure. At aminimum, this risk should be closely monitored. This table is important becauseforeign exchange risk exposure is eliminated only if the duration of the assetsand liabilities are fully matched.Equity refers to total equity on the balance sheet.10
ALM1: Liquidity Risk (Maturity Risk)31-Dec-2011Expressed in local currencyFormula explanations123456789101112131415AssetsCashDemand DepositsTerm DepositsInvestmentsLoan Portfolio, netFixed assetsOther assetsTotal AssetsLiabilitiesDemand Savings AccountsTerm DepositsLoans payableOther liabilitiesTotal LiabilitiesTotal EquityTotal Liabilities & Equity 1 month1-2 months2-3 months4-6 months6-12 months1-3 years4-5 years 5 yearsNo maturityTotalSum of Rows 0001000100000000000000000000018514531906086100Sum of Rows 9-12123000202100100112202220211011Row 13 Row 1430210122211022474900486534710016 Asset-Liability Gap [A- (TL E)]17 Asset-Liability Gap as a % of EquityRow 8 - Row 15Row 17/ Total .3%18 Cumulative Asset-Liability Gap19 Cumulative Asset-Liability Gap as a % of EquityCumul
Pocket Guide to the Microfinance Financial Reporting Standards Measuring Financial Performance of Microfinance Institutions This document is a condensed version of the Microfinance Financial Reporting Standards (MFRS): Measuring Financial Performance of Microfinance Institutions that will be published by The SEEP Network in 2011.
very late. Microfinance is often credited with putting an end to the interest rate debate for the poor. A host of players have entered microfinance space, each having a reason of its own. It is believed that, Microfinance, unlike other developmental efforts, gives quick and tangible results (Srinivasan et al., 2006).
3.2.1Differences between microfinance and conventional lending 10 3.2.2Types of microfinance lending methodologies 11 3.3Types of institutions providing microfinance 13 3.4Decentralized operations and internal controls 15 3.5Fraud issues 15 Chapter 4 Planning the Audit 19 4.1Gaining knowledge of the business 19 4.1.1Meetings 19 4.1.2Visits 21
1,335 microfinance institutions between 2005 and 2009, jointly serving 80.1 million borrowers, to calculate the costs of microfinance and other elements of the microfinance business model. It calculates that on average, subsidies amounted to 132 per borrower, but the distribution i
microfinance can be profitable (usually following years of subsidies for start-up and innovation) and an increasing number of banks have entered the microfinance market, literature and data on the profitability of microfinance in commercial banks are essentially nonexistent. This is due to the
informalisation of the economy. Formal microfinance institutions have been facing competition from the informal microfinance institutions, the banking sector, and the mobile network operators. In light of these developments the current study evaluated competition in the microfinance industry in Zimbabwe.
financial management courses to microfinance institutions (MFIs), based on industry-wide observation that the greatest constraint to the development of microfinance in the region was the lack of management capacity. The Pilot initiative had two complementary long-term objectives: 1) to improve
Microfinance for decent work action research : microfinance and risk management: impact evaluation of a financial education programme, AMK Cambodia / Markus Froelich, Niels Kemper, Robert Poppe, Valerie Breda and Patricia Richter ; International Labour Office, Social Finance Programme & Mannheim University. .
Tom Sawyer’s observations of his environment and the people he encounters. In addition, students will make their own observations about key aspects of the novel, and use the novel and the journal writing activity to make observations about their own world and the people they are surrounded by. This unit plan will allow students to examine areas of Missouri, both in Hannibal, and in their own .
