Financial Ratio Analysis of Micro-Finance Institutions
Edgcomb, E.
Publication Date: Oct 1995
Published by: Calmeadow
Document Type: Book
A guide for improving efficiency in microfinancing
The primary objective of this paper is to introduce managers to the interpretation of financial ratios. The second objective is to contribute to the development and adoption of financial reporting standards within the micro-credit community
The financial ratio is a tool that helps managers of micro-finance institutions answer questions about the financial sustainability of every institution regardless of context or design
Presents sixteen key ratios to apply under the three relevant categories of: - Financial sustainability: return of performing assets, financial cost ratio, gross financial margin, loan loss provision ratio, net financial margin, operating cost ratio, operating margin, imputed cost of capital, net margin, donations and grant ratio, net results
- Operating efficiency ratios : cost per unit of money lent, cost per loan, number of active borrowers per loan officer
- Portfolio quality ratios: portfolio in arrears, portfolio at risk, loans loss ratio, reserve ratio
Concludes that micro credit institutions are complex and require a cautious approach in interpreting data
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