Question

Question 2:

You are given the following financial and non-financial reports for the Share Microfinance Institutions. You are asked to analyze its financial strength by calculating the following ratios for 2018 and comparing them to the Industry averages: [Note: you should show the formula and every step of your calculation] (20 Marks, 2 Marks for each ratio)

·         Nonperforming loans as of 30 days past due (NPL30)

·         Renegotiated loans ratio

·         Write-off ratio

 

·         Debt to equity (leverage)

·         Equity to assets ratio

·         Cost per active client

·         Active client per staff member

·         Liquid ratio (quick ratio or acid-test ratio)

·         Liquid assets to total assets

·         Loans to deposits ratio

 

Ratio	Industry averages (Given)
Nonperforming   loans as of 30 days past due (NPL30	3.15%
Renegotiated loans ratio	0.21%
Write-off ratio	1.16%
Debt to equity (leverage)	65.19%
Equity to assets ratio	70.65%
Cost per active client	1450
Active client per staff member	115
Liquid   ratio (quick ratio or acid-test ratio)	178.69%
Liquid assets to total assets	3.99%
Loans to deposits ratio	800.45%

 

 

                                                           SAMPLE INCOME STATEMENT                                                         

 

 

 

 

Account Name

From 1/1/2018 to

12/31/2018

From 1/1/2017 to

12/31/2017

 

Financial Revenue	9,488,449	5,260,864
Financial   Revenue from Loan Portfolio	8,526,834	4,651,246
Interest on   Loan Portfolio	6,933,784	3,747,232
Fees and   Commissions on Loan Portfolio	1,593,050	904,014
Financial   Revenue from Investments	798,915	501,778
Other Operating Revenue	162,700	107,840

 

Financial Expense	643,860	426,599
Financial   Expense on Funding Liabilities	519,860	398,935
Interest and   Fee Expense on Deposits	128,172	125,000
Interest and Fee Expense on   Borrowings	391,688	273,935
Other   Financial Expense	124,000	27,664
Net Financial Income	8,844,589	4,834,265
Impairment   Losses on Loans	219,986	81,431
Provision   for Loan Impairment	244,577	148,684
Value of   Loans Recovered	-24,591	-67,253
Operating Expense	7,536,122	3,316,594
Personnel   Expense	4,350,000	2,297,218
Administrative   Expense	3,186,122	1,019,376
Depreciation and   Amortization Expense	798,835	158,529
Other   Administrative Expense	2,387,287	860,847
Net Operating Income	1,088,481	1,436,241
Net Non-Operating Income/(Expense)	-701,571	-919,496
Non-Operating   Revenue	293,236
Non-Operating   Expense	-994,807	-919,496
Net Income (Before Taxes and Donations)	386,910	516,745
Taxes	380,408	366,153
Net Income (After Taxes and Before Donations)	6,502	150,592
Donations	2,291,000	1,721,493
Donations   for Loan Capital		629,146
Donations   for Operating Expense	2,291,000	1,092,348
Net Income (After Taxes and Donations)	2,297,502	1,872,085

 

SAMPLE BALANCE SHEET

 

 

 

 

Account Name

As of 12/31/2018

As of 12/31/2017

 

ASSETS
Cash and Due   from Banks	1,630,598	573,071
Trade   Investments	5,305,964	13,548,293
Net Loan   Portfolio	27,169,318	16,735,744
Gross Loan   Portfolio	27,804,655	17,350,981
Impairment Loss Allowance	(635,337)	(615,237)
Interest Receivable on Loan Portfolio	802,497	477,497
Accounts   Receivable and Other Assets	805,154	505,154
Other   Investments	582,710	582,710
Net Fixed   Assets	2,783,968	2,136,419
Fixed Assets	5,320,026	3,873,642
Accumulated Depreciation and Amortization	(2,536,058)	(1,737,223)
Total Assets	39,080,209	34,558,888

 

LIABILITIES
Demand   Deposits
Short-term   Time Deposits	1,711,939	515,434
Short-term   Borrowings	1,368,505	685,884
Interest   Payable on Funding Liabilities	118,589	68,589
Accounts   Payable and Other Short-term Liabilities	250,050	274,000
Long-term   Time Deposits	1,500,000	1,500,000
Long-term   Borrowings	8,330,875	8,330,875
Other   Long-term Liabilities	1,849,749	2,099,749
Total Liabilities	15,129,707	13,474,531
EQUITY
Paid-In   Capital	6,000,000	5,000,000
Donated   Equity	18,587,911	16,296,911
Prior Years	16,296,911	14,575,418
Current Year	2,291,000	1,721,493
Retained   Earnings	(700,839)	(457,342)
Prior Years	(707,342)	(607,934)
Current Year	6,503	150,592
Reserves	63,430	244,787
Other Equity   Accounts
Adjustments   to Equity
Total Equity	23,950,502	21,084,356

 

SAMPLE PORTFOLIO REPORT

	From 1/1/2018 to 12/31/2018		From 1/1/2017 to 12/31/2017
Account Name	Number of Loans	Value of Portfolio	Number of Loans	Value of Portfolio

Portfolio Activity

Loans Disbursed	16,074		79,801,719		13,495	121,456,864
Loans Outstanding	7,294		27,804,655		5,592	34,701,961
Movement   in		Impairment Loss	Allowance
Impairment Loss Allowance,   Beginning of Period			615,237				933,150
Impairment Loss Allowance, End of Period			635,337				1,230,473
Loans   Written Off		74	224,477	0			0
Provision   for Loan Impairment			244,577				297,368
Loans in   Recovery or Recovered		7	24,591	27			134,506

Portfolio Aging Schedule

	Number of Loans	Value of Portfolio	Loss Allowance Rate (%)	Impairment Loss Allowance
Current   Portfolio	4,365	25,577,502	0
Portfolio at   Risk 1 to 30 days	1,055	1,112,185	10	111,219
Portfolio at   Risk 31 to 60 days	1,011	556,093	25	139,023
Portfolio at   Risk 61 to 90 days	464	278,047	50	139,024
Portfolio at   Risk 91 to 180 days	278	83,414	75	62,561

Portfolio at   Risk more than 180 days	102	122,341	100	122,341
Renegotiated   Portfolio 1-30 days	14	27,805	50	13,903
Renegotiated   Portfolio> 30 days	6	47,268	100	47,268
Loans   Outstanding	7,295	27,804,655		635,337

 

SAMPLE NON-FINANCIAL DATA REPORT

Account Name

As of 12/31/2018

As of 12/31/2017

Operational Data

Number of   Active Clients	7,050	5,150
Number of   New Clients during Period	3,792	3,795
Number of   Active Borrowers	6,736	5,429
Number of   Voluntary Depositors	376	127
Number of Deposit Accounts	376	127
Number of Savers Facilitated	6,503	5,512
Number of   Personnel	48	45
Number of   Loan Officers	30	24

Macroeconomic Data

Inflation   Rate	2.80%	2.15%
Market Rate for Borrowing	4.75%	4.30%
Exchange   Rate (Local Currency: U.S. Dollar, Euro, or other)	24	22.5
Gross   National Income (GNI) per capita	6,000.00	6,000.00