pakistan microfinance review 2014
Transcription
pakistan microfinance review 2014
PAKISTAN MICROFINANCE REVIEW 2014 ANNUAL ASSESSMENT OF THE MICROFINANCE INDUSTRY FINANCIAL SERVICES FOR ALL Produced by Pakistan Microfinance Network Design and Layout by O3 Interfaces www.o3interfaces.com Pakistan Microfinance Review 2014 Annual Assessment of the Microfinance Industry Financial Services for all Editorial Board Mr. Ghalib Nishtar Chairperson Editorial Board President, Khushhali Bank Limited (KBL) Mr. Blain Stephens COO and Director of Analysis Microfinance Information eXchange, Inc. (MIX) Mr. Yasir Ashfaq Group Head, Financial Services Group, Pakistan Poverty Alleviation Fund (PPAF) Mr. Masood Safdar Gill Pakistan Microfinance Review 2014 Director Program, Urban Poverty Alleviation Program, National Rural Support Programme (NRSP) i Dr. Saeed Ahmed Director, Agriculture Credit and Microfinance Department, State Bank of Pakistan (SBP) Mr. Raza Khan Statistics & Results Adviser, Results & Evaluation TeamEconomic Growth Group, Department for International Development (UK) Mr. Abrar Mir SEVP & Group Executive Banking Products Group, United Bank Limited (UBL) Financial Services for all PMR Team Mr. Ali Basharat Author and Managing Editor Mr. Ammar Arshad Co–Author and Data Collection Ms. Khadija Ali Annual Assessment of the Microfinance Industry Co–Author and Data Collection ii Financial Services for all Pakistan Microfinance Review 2014 Acronyms and Abbreviations iii AC &MFD Agriculture and Microfinance Division ADB Asian Development Bank AMRDO Al-Mehran Rural Development Organization AML Anti-Money Laundering BPS Basis Points CAR Capital Adequacy Ratio CIB Credit Information Bureau CDD Customer Due Diligence CGAP Consultative Group to Assist the Poor CNIC Computerized National Identity Card CPP Client Protection Principles CPI Consumer Price Index CPC Consumer Protection Code DFI Development Financial Institution DFID Department for International Development, UK DPF Depositor’s Protection Fund ECA Eastern and Central Europe ESM Environment and Social Management EUR Euro FATF Financial Action Task Force FIP Financial Inclusion Program FMFB The First Microfinance Bank Ltd. FSS Financial Self Sufficiency FY Financial Year G2P Government to Person GBP Great Britain Pound GDP Gross Domestic Product GLP Gross Loan Portfolio GNI Gross National Income GoP Government of Pakistan IAFSF Improving Access to Financial Services Support Fund IFAD International Fund for Agricultural Development IFC International Finance Corporation JIWS Jinnah Welfare Society KBL Khushhali Bank Ltd. KF Kashf Foundation KIBOR Karachi Inter-Bank Offering Rate KMFBL Kashf Microfinance Bank Ltd. KP Khyber Pakhtunkhwa MCGF Microfinance Credit Guarantee Facility MCR Minimum Capital Requirement MENA Middle East and North Africa MFB Microfinance Bank MFCG Microfinance Consultative Group MF-CIB Microfinance Credit Information Bureau MFP Microfinance Providers MFI Microfinance Institution MIS Management Information System MSME Micro, Small and Medium Enterprises MIV Microfinance Investment Vehicle MO Micro-Options NADRA National Database and Registration Authority NGO Non-Governmental Organization NFLP National Financial Literacy Program NMFB Network Microfinance Bank Limited NPLs Non-Performing Loans NRDP National Rural Development Program NRSP National Rural Support Programme OPD Organization for Participatory Development OSS Operational Self Sufficiency P2P Person to Person PAR Portfolio at Risk PBA Pakistan Banks Association PKR Pakistan Rupee PMN Pakistan Microfinance Network PO Partner Organization PPAF Pakistan Poverty Alleviation Fund PRISM Programme for Increasing Sustainable Microfinance PRSP Punjab Rural Support Program PTA Pakistan Telecom Authority ROA Return on Assets ROE Return on Equity RSP Rural Support Programme SBP State Bank of Pakistan SC The Smart Campaign SDS SAATH Development Society SECP Securities and Exchange Commission of Pakistan SPTF Social Performance Task Force SME Small and Medium Enterprise SRSO Sindh Rural Support Organization SRDO Shadab Rural Development Organization SVDP Soon Valley Development Program Financial Services for all Annual Assessment of the Microfinance Industry Acronyms and Abbreviations iv Financial Services for all Pakistan Microfinance Review 2014 v TMFB Tameer Microfinance Bank Ltd UBL United Bank Limited USD United State Dollar USSPM Universal Standards for Social Performance Management VDO Village Development Organization WPI Wholesale Price Index Did you know? Pakistan Microfinance Industry has a dedicated and robust Credit Information Bureau (MF-CIB) PMN VISION Frontiers of Formal Financial Services reach out to all MISSION Pakistan is ranked among the top 10 countries to have an enabling environment for financial inclusion by the Economist Intelligence Unit’s Global Microscope report Support the financial sector, especially retail financial service providers, to enhance their scale, quality, diversity and sustainability in order to achieve inclusive financial services Did you know? Pakistan has been called the Laboratory of Innovation in Branchless Banking by CGAP Core Values Collaboration Innovation Diversity Empowerment Transparency Pakistan Microfinance industry now has assets over PKR 100 billion MACRO-ECONOMY Number of Active Borrowers 14 0.6 Percentage 2014 USD Billions of GLP 12 2.5 6 Months KIBOR 10 Discount Rate Consumer Price Inflation (Avergae) 08 06 2010 2011 2012 2013 03 02 1.5 Active borrowers in millions 3.5 16 2014 > 3 MILLION active borrowers 3x projected growth Historical and Projected Growth of Access to Clearing House Turnaround Time Active Borrowers Amount in Millions Retails Deposits Confidence of Regulator Availability of Funds for Mid-Sized MFPs Microfinance Credit Guarantee Facility 9.84 Yr 2019 Increase in Growth 7.87 Yr 2018 Investor Confidence Draft NBMFI Regulations Mitigate External Interference 6.30 Yr 2017 4.20 Yr 2015 Mainstreaming Non-Bank MFPs Policy & Regulatory Achievements 5.04 Yr 2016 3.14 Yr 2014 2.35 Yr 2012 2.83 Yr 2013 2.05 Yr 2010 2.07 Yr 2011 CLIENT PROTECTION 100% Appropriate Product Design & Delivery Channels 100 80% Mechanism for Complaint Resolution CAPITAL STRUCTURE 5.3 Million Depositors in 2014 Prevention of Over-Indebtedness 60% 40% 80 20% 44% 60 Deposits 0% Privacy of Client Data Transparency 40 Debt Fair & Respectful Treatment of Clients 33% Responsible Pricing 20 % of indicators that are not met 23% 0 Equity % of indicators that are partially met % of indicators that are fully met ACTIVE BORROWERS BY URBAN/RURAL AREAS Rural 2010 2011 2012 2013 2014 Center of Excellence Urban 0 10 20 30 40 50 60 Funding 58% female borrowers 42% Regulatory framework for NBMFIs male borrowers Disaster Risk Management Financial Services for all Highlights Year 2010 2011 2012 2013 2014 1.6 1.7 2. 0 2.4 2.8 PKR 20.2 PKR 24.8 PKR 33.1 PKR 46.6 PKR 61.072 0.8 0.9 1.3 1.4 1.6 1,405 1,550 1,460 1,606 1,747 12,005 14,202 14,648 17,456 19,881 Total Assets (PKR billions) 35.8 48.6 61.9 81.5 100.7 Deposits (PKR billions) 10.1 13.9 20.8 32.9 42.72 Total Debt (PKR billions) 27.5 38.3 24.9 26.9 31.1 Total Revenue (PKR billions) 7.5 10.1 12.5 17.3 24.3 99.7 108.4 109.5 118.1 120.6 81.7 100.5 107.5 116.5 119.6 4.1 3.2 3.7 2.5 1.1 Active Borrowers (in millions) Gross Loan Portfolio (PKR billions) Active Women Borrowers (in millions) Branches Total Staff OSS (percentage) FSS (percentage) Pakistan Microfinance Review 2014 PAR > 30 (percentage) xi Financial Services for all Contents 01 10 THE YEAR IN REVIEW INDUSTRY PERFORMANCE Macro-economy and Microfinance Industry 01 Section 2A: Industry Performance 11 Policy and Regulatory Environment 02 Section 2B: Social Performance 27 Microfinance Industry Initiatives 04 Conclusion 07 THE WAY FORWARD 50 ANNEXURES Inclusive Finance and Microfinance Industry 41 Performance indicators of industry Towards Accelerated Growth 42 Performance indicators of individual MFPs 59 Adapting Government Credit Schemes 42 103 Impact Investment 43 Social Performance Indicators of Individual MFPs Diversifying Funding Sources 43 Regional Benchmarks 140 Capacity Building Program 44 Sources of Data 141 Micro, Small & Medium Enterprise (MSME) Lending 45 Adjustment to Financial Data 152 Terms and Definitions 155 Anti-Money Laundering (AML), Customer Due Diligence (CDD) and Terrorist Financing 46 Agriculture Value Chains 46 51 Annual Assessment of the Microfinance Industry 40 xii Section 1 The Year in Review Financial Services for all Section 1 The Year in Review The year 2014 saw the industry achieve a major milestone by crossing the 3 million active borrowers mark for the first time. Overall, the industry witnessed double digit growth in not only credit but also in savings and insurance. Although the national economy grew at a modest rate, the macroeconomic stability ensured a favorable environment for the players. Despite the persistent energy crisis and security challenges, positive economic indicators like lower inflation, falling interest rates and uptake on private credit led to a positive impact on the sector in terms of growth and sustainability. On the policy and regulatory side, the microfinance banks (MFBs) have been allowed to become members of the national clearing house which will greatly enhance their ability to mobilize their retail deposits. In addition, to facilitate mid-tier players to raise funds from commercial sources, risk coverage under the Microfinance Credit Guarantee Fund (MCGF) was enhanced to 60 percent by the State Bank of Pakistan (SBP). One of key challenge facing the industry has been the lack of a regulatory umbrella for the nonbank microfinance providers (MFPs). In this regard, the last year saw the Securities and Exchange Commission of Pakistan (SECP) sharing a draft of proposed regulations with players for comments. Among other major developments in the sector last year an industry risk register is being developed by the Pakistan Microfinance Network (PMN). In addition, branchless banking continues to witness growth and the Microfinance Credit Information Bureau (MFCIB) is fully operational with most of the MFPs generating enquiries. The PM Interest Free Loan Scheme announced in 2013 was formally launched last year through the Pakistan Poverty Alleviation Fund (PPAF), with an aim of reaching out to 1 million clients in the next three years. As part of the responsible finance initiative, client protection assessments were carried out under the SMART campaign. Pakistan Microfinance Review 2014 Macro-economy and the Microfinance Industry 1 The year 2014 was a better year for Pakistan’s economy as it witnessed lower than expected inflation, reduction in fiscal deficit and improvement in private sector credit. In addition, the overall economy grew by 4.1 percent compared to the 3.7 percent in 2013. However, this was less than the target of 4.4 percent for the year 2014. Inflation for the year clocked at 8.6 percent - higher than the previous year’s 7.4%, but lower than the expected rate of 11-12 percent. However, despite the lower inflation, the central bank took a cautious approach to monetary policy with the policy rate remaining constant for the better part of the year. The end of the year saw the policy rate cut by 50 bps taking it from 10 percent to 9.5 percent as shown in Exhibit 1.1. This trend which continued in early 2015, would likely result in the lowering of borrowing costs of Microfinance Providers (MFPs). Another positive for the year was the uptake in private sector credit growth which registered a double digit growth of 11.4 percent. This increase which was the highest in the last six years came on the back of an increased supply of loanable funds, improvement in business confidence and lower effective cost of borrowing. This augurs well for MFPs which are witnessing increased dependence upon commercial borrowing to meet their funding needs. Financial Services for all The Year in Review Discount Rate 6 -Months KIBOR Consumer Price Inflation (Average) 16 Percentage 14 12 10 8 6 4 2 2010 2011 2012 2013 2014 Exhibit 1.1: Policy Rate, 6-Month KIBOR and CPI Policy and Regulatory Environment SBP is among the pioneer regulators who rolled out regulations for branchless banking in 2008. These regulations spurred a growth in the branchless banking arena. Over eight branchless banking systems are in operation in the country which are providing a wide array of services including savings, Government to Person and Person to Person payments leading to Pakistan being called the ‘Laboratory for Innovation’ in Branchless Banking . The key developments on the policy and regulatory environment for the year 2014 are as follow: Clearing House Membership A key challenge faced by the MFBs in mobilizing deposits has been the absence of membership of the national clearing house. Lack of membership of the clearing house meant that MFBs had to rely on commercial banks for clearance of their payments which led to increased turnaround time. This had badly affected the practitioners’ ability to mobilize retail deposits and forced them to rely on expensive and volatile fixed deposits acquired at above market rates. Clearing house membership has been on the agenda of policy makers for a while and early this year, MFBs have been allowed to become part of the clearing house under a special category by the central bank. This will enable MFBs to reduce the processing time for payments and be able to attract retail deposits in an effective manner. Moreover, it would lead to growth in deposits and reduce reliance of MFBs on expensive fixed deposits resulting in reduction in cost of funds. Non-Bank MFP Regulations A key challenge facing the microfinance industry in Pakistan has been the absence of regulatory and legal cover for the non-bank MFPs. Though these organizations are among the pioneers of microfinance in the country they have witnessed their market share shrink over the years. One of the main reasons for Annual Assessment of the Microfinance Industry Pakistan’s regulatory environment for microfinance continues to be ranked among the best in the world. Microfinance Banks (MFBs) established under the MFI Ordinance 2001 and regulated by the State Bank of Pakistan (SBP) currently account for 70 percent of the asset base of the microfinance industry and have witnessed huge investor interest as evident from the series of acquisitions that have taken place over the last few years. In order to create a level playing field for the industry, non-bank microfinance providers are also being brought under the regulatory umbrella. This would allow non-bank MFPs to grow, transform into stronger institutes and attract investments for further expansion. The details of these proposed regulations are discussed in a subsequent section. 2 Financial Services for all Section 1 this has been lack of regulatory umbrella. Due to this non-bank MFPs have found it difficult to attract commercial financing. Moreover, this has resulted in a lack of recourse mechanism for clients and practitioners and the non-bank MFPs have remained vulnerable to the risk of external interference. Pakistan Microfinance Review 2014 Keeping in view the above, a steering committee was formed in 2012 chaired by Chairman Securities and Exchange Commission of Pakistan (SECP) that included all key stakeholders of the industry like SBP, Pakistan Poverty Alleviation Fund (PPAF), PMN and key MFPs to extend legal and regulatory cover for the non-bank MFPs. Last year a draft of proposed regulations were shared with the players for their feedback. A summary of the main points raised by the players and PMN is as follows: 3 • It is hoped that SECP shall play a stewardship role post-regulations similar to that of SBP in case of MFBs. • A liberal interest rate regime for non-bank MFPs should be followed that focuses on market instruments of competition and full disclosures as followed by SBP. • The current and proposed Non-Bank Financial Companies (NBFC) laws do not adequately cater to the microfinance sector as they do not provide for micro-financing as a distinct form of business carried out by NBFCs. Certain conditions and requirements of the NBFC Laws are not realistic when taken in the context of the working microfinance industry in Pakistan; thus, there is a need for microfinance to be treated as a distinct class of NBFCs and specific regulations applicable upon them are required. • With the exception of one non-bank MFP, all others are not for profit entities and many of them would like to continue as non-profit under the proposed regulatory framework. Therefore the proposed regulatory framework, in addition to designating NBMFIs as a specific class of NBFCs, should allow for the creation of a further distinction in the NBFC Laws between “for profit” non-bank MFP and “not for profit” non-bank MFPs. • Since the proposed regulations cater for the establishment of a consultative group with representatives of the sector to review the regulations and restrictions, limits, requirements, criterion, etc. it has been proposed that the consultative group meet with SECP every six months to bring the regulator and the industry on the same page and to revise the regulations as the industry evolves. It is hoped that regulations will come into effect by the end of 2015 with adequate time being provided for non-bank MFPs to conform to their requirements. These regulations will play a role of catalyst for this segment of the microfinance industry to attract both debt and equity capital from the private sector and be recognized as a mainstream part of the financial landscape in Pakistan. Amendments in Microfinance Credit Guarantee Facility (MCGF) MCGF was launched in 2009 under the auspices of the Financial Inclusion Program (FIP) with the aim of boosting commercial funding to the industry by offering partial risk coverage to lenders. In order for the sector to become sustainable and grow into a viable part of the financial industry, commercial funding is undeniably important. Initially MFBs and later, MFIs and RSPs were allowed to utilize the facility to obtain loans from commercial banks and also issue redeemable capital. However, the uptake of the facility among small and mid-sized MFBs was low as many had riskier profiles compared to their larger, more established peers. SBP recently revised guidelines regarding the MCGF in order to facilitate and promote lending from commercial financial institutions for small to mid-sized MFPs. In this regard, a tiering criterion has been developed and the risk coverage for the lender has been enhanced. Initially under the MCGF, 25 percent first loss guarantee or 40 percent partial guarantee was provided in case of bilateral loans or redeemable capital to the lenders. However, now in the case of bilateral loans to Tier 2 MFPs, 60 percent partial guarantee is now being provided. Tier 2 MFPs are defined as those entities that have been in business for 3 years instead of 5 years which is a criterion for Tier 1 MFPs and have a GLP above PKR 500 million as compared to PKR 3 billion for Tier 1. Among other conditions, the Tier 2 MFP needs to have an improving trend in its return on assets (ROA) for the past three years and for last year the ROA needs to be greater than -10 percent. In addition, the Portfolio at Risk (PAR) > 30 days also needs to below 10 percent. These amendments will likely lead to enhancement in lending to small and mid-sized MFPs which are largely reliant on funding from the national apex and Financial Services for all The Year in Review have yet to initiate commercial borrowing relationships. This would allow them to not only enhance but also diversify their funding sources leading to in- crease in outreach and upscaling of loan sizes. Microfinance Industry Initiatives Risk taking is an inherent element of financial services, and like all financial institutions, microfinance providers (MFPs) face risks that they must manage effectively to achieve their financial and social objectives. Poorly managed risks can lead to losses endangering the safety and soundness of microfinance institutions. Hence, it is imperative for microfinance providers to have a formal risk management structure in place to counter potential threats. As part of PMN’s long term strategy to achieve sustainable growth in the Pakistan microfinance sector, the Network is taking constructive steps to promote sound risk management practices among microfinance practitioners. One initiative PMN has underway is the development of a comprehensive risk register for the microfinance sector in Pakistan. A risk register is a tool widely used by organizations for the identification and assessment of risks. The tool is considered a vital component of the risk management process which serves as a central source for the organization’s risk information and acts as a risk directory. The tool is used by organizations to list various risks, highlighting their probability and severity of impact, along with possible risk mitigation steps and strategies. PMN is of the opinion that such a tool will enable MFPs (especially those with no existing risk management structures in place) to understand the nature of risks faced by the institutes at the departmental and strategic level. The risk register will provide management and key stakeholders with significant information on various threats, which can be utilized to design risk management strategies to mitigate potential threats. Prime Minister Interest Free Loan Scheme The Government of Pakistan (GoP) launched an interest-free microloan scheme last year to address the issues of poverty and rising unemployment in the country. Under the scheme, PKR 3.5 billion were earmarked for the poor and destitute segments of the population. Initially, the industry stakeholders were apprehensive about the scheme as it could have distorted the market for conventional microfinance. However, in order to safeguard the interest of the MFPs it was decided that the funds for the scheme would be routed through the national apex, PPAF and loans will be extended to those individual who fall below 40 on the poverty scorecard. In order to mitigate the overlap between interest free loans and conventional microloans, the loans under this scheme would only be extended in Union Councils that have low or no penetration of conventional microfinance. Currently, 24 MFPs have partnered with PPAF in extending interest free loans under this scheme. It is hoped that the scheme would lead to over 1 million additional active borrowers over the next three years. Since this scheme is targeted toward those areas where conventional microfinance has little or no penetration, it provides MFPs an opportunity to expand outreach in newer geographic markets. Moreover, it has the potential to allow for borrowers of interest free loans to graduate to conventional microfinance. This is ensured as the interest free loan would be provided only once to an individual and after the completion of the first cycle he/she would be eligible only for a conventional microfinance loan. Lastly in an industry that views funding as one of the key constraints to growth, it is felt that despite the skepticism, this scheme can be useful for the industry with change in design and understanding that the interest free loan program can help in graduation of clients to the next level and mainstreaming them into the microfinance segment. Client Protection Assessments in collaboration with the SMART Campaign Third-party client protection assessments using the SMART Campaign’s Smart Assessment Tool were conducted for six MFPs during the year in review. In total, 18 assessments have been conducted since the inception of the Client Protection Initiative (CPI), cov- Annual Assessment of the Microfinance Industry Risk Register 4 Financial Services for all Section 1 ering over 70 percent of the market in terms of overall outreach to active borrowers. These assessments were made possible with funding support from the SBP through the DFID-sponsored FIP. The assessments provide a unique opportunity for PMN to observe the state of practice in client protection among member MFPs; for some of the key findings see Box 1.1. For participating MFPs, the assessments provide an opportunity to evaluate their practices in comparison with globally accepted standards of client protection, and seek recommendations for institutional improvements to better comply with the standards. They also indicate whether an institution is ready to pursue SMART Certification, a designation recognized across the global market that an institution successfully integrates Client Protection Principles into their practices. After undergoing an assessment through the CPI project and acting on its results, one MFP be- came the first in Pakistan to achieve SMART Certification in 2014. Microfinance–Credit Information Bureau (MF-CIB) The Microfinance Credit Information Bureau (MF-CIB) was launched nation-wide in 2012, with the support of SBP, PPAF, Department for International Development (DFID) and International Finance Corporation (IFC). It was aimed at mitigating the various challenges faced by the microfinance sector ranging from information asymmetry, adverse selection, and moral hazard to over-indebtedness due to multiple borrowing. The delinquency crisis in India’s Andhra Pradesh (2009) and Pakistan’s Punjab (2008-9) also served as stark reminders for the industry to institutionalize Box 1.1 State of Practice in Client Protection In 2014, PMN conducted analysis of the state of sector in client protection. It is based first 10 third-party assessments of member MFPs, out of which 5 were for MFIs and 5 were for MFBs. To arrive at this summary, an average was taken for scores against each client protection principle across these MFPs. This first look at the state of the sector in client protection provides substantial evidence that clients are kept at the center of microfinance in Pakistan. At the broad level, the results indicate that MFPs are performing well on the client protection principles of [1] appropriate product design and delivery, [2] prevention of over-indebtedness, [3] transparency, and [4] responsible pricing (see: graph below). At the same time, the results also reflect weakness in certain areas, particularly CP principles of privacy of client data and mechanisms for complaints resolution. There are opportunities for improvement in these principles, as well as in certain indicators within the principle of fair and respectful treatment of clients. Appropriate Product Design & Delivery Channels 100% 80% Mechanism for Complaint Resolution Prevention of Over-Indebtedness 60% 40% Pakistan Microfinance Review 2014 20% 5 0% Privacy of Client Data Transparency Fair & Respectful Treatment of Clients % of indicators that are fully met Responsible Pricing % of indicators that are partially met % of indicators that are not met Financial Services for all The Year in Review the use of the Bureau as an integral part of the loan approval process in order to manage credit risk and assess credit worthiness. it allows for provision of financial services at lower costs than the traditional banking structures making it an ideal channel for reaching out to the unbanked. Over the past three years, the MF-CIB has gradually matured into a reliable risk mitigation tool and has been gradually integrated into the ecosystem of the sector. The enquiry numbers in the year 2014, barring a seasonal decline, showed an upward trend as shown in Exhibit 1.2. Branchless banking in Pakistan continued to expand in the year 2014 with over 60% increase in the value of transactions which reached PKR 375.9 billion as compared to PKR 234.6 billion in December, 2013. The number of transactions exhibited over 23% increase reaching to 66.8 million from 54.1 million in at the end of 2013. A 35.6% increase was also observed in Enquries in Thousands 160 140 120 110 80 60 40 20 Jan 14 Feb 14 Mar 14 Apr 14 May 14 Jun 14 Jul 14 Aug 14 Sep 14 Oct 14 Nov 14 Dec 14 Exhibit 1.2: Yearly trend in MF-CIB enquiries Attention is also being paid to improve the governance structure of the Bureau and make it more inclusive and representative. The Credit Bureau Act, which is expected to be ratified by the Parliament this year, will also result in increased transparency from the service provider’s perspective. The pricing mechanism is being scrutinized and PMN is working with the Bureau and MFPs to create a framework for determining prices in future. PMN is also conducting a financial literacy program aimed at raising awareness amongst the clients visà-vis the Bureau’s importance and utilization. Moreover, a grievance addressing mechanism delineating the rights and obligations of MFPs, Bureau and Clients is also being worked out. Branchless Banking Branchless banking is an important tool available to the microfinance industry to expand outreach by leveraging cellular technology infrastructure. Moreover, the number of m-wallet accounts which reached 4.7 million from 3.4 million in the same time period. Pakistan’s branchless banking market is still in an evolutionary phase with eight players competing for market share of agents, number and value of transactions, etc. With the agent network currently standing at 186,000 agents exhibiting a 49% increase from 125,000 in the year, there are concerns about the quality of agents due to a widespread sharing phenomenon. At present, the market is focused on Over the Counter (OTC) transactions. This fuels a commission war to lure agents hence dictating the process of agent acquisition and a nominal addition of new access points which would be, in real terms, expansion of the agent network. A few players are, however, bringing innovation to build business cases around mobile wallets. The SBP has continued to facilitate efforts for a broader vision financial inclusion through strengthening the ecosystem for digital transaction accounts. The SBP signed an MOU with NADRA in November 2014 according to which, biometric verification cost has been brought down to PKR 10 for each m-wallet account opening at the industry level. The placement of biometric verification apparatus across all telecom operators’ offices enables account opening within a Annual Assessment of the Microfinance Industry Currently, 70% of the organizations are actively generating enquiries (35 out of 50 members) and it is expected that enquiry numbers would grow even more after the complete rollout as some MFPs are currently in a partial rollout state. 6 Financial Services for all Section 1 few seconds via fingerprint verification, and coupled with PTA’s directive of mandatory biometric mobile SIM verification, this will result in the country’s mobile clientele ready to be inducted in the branchless banking arena. This has also proven to be a catalyst for the explosive growth of m-wallets since the beginning of 2015. Over 12 microfinance institutions are currently providing disbursement and recovery services to their clients through digital channels. Some players have also started extending insurance services to their clients through branchless banking channels. The industry is poised to witness accelerated growth in future in volume and variety of financial services. Branchless banking can serve as a growth driver owing to its capacity to increase outreach by lowering delivery cost and aiding profitability of institutions. Conclusion The microfinance industry in Pakistan having witnessed continuous growth over the last few years in not only credit but also savings, insurance and remittances, is ideally positioned to play an important role in the inclusive finance sphere. It can offer a wide variety of financial services to the unbanked particularly at the base of the pyramid. The current macroeconomic stability in the country provides an ideal environment for the sector to grow and expand. Falling interest rates on the back of lower inflation and uptake on private credit provides an opportunity for the microfinance sector to reduce costs and fund their expansion by borrowing from commercial sources. Pakistan Microfinance Review 2014 With major policy and regulatory initiatives like clearing house membership for MFBs and enhanced risk coverage for lenders to mid-tier MFPs being taken, 7 players are better poised to address funding challenges. Also, the launch of non-bank MFPs regulatory framework will lead to strengthening of these institutes and provide them with an opportunity to expand. Branchless banking continues to gain popularity and provides opportunities to not only expand outreach and reduce costs but also expand the variety of financial services on offer. MF-CIB is fully operation with enquiries being generated by MFPs and remains a key catalyst for future growth of the industry. In addition, significant steps towards ensuring responsible inclusive finance, by working towards global best practices in client protection have been taken. Establishment of an industry risk register will allow members to identify risks and take steps to mitigate their impact. Annual Assessment of the Microfinance Industry Financial Services for all The Year in Review 8 9 Pakistan Microfinance Review 2014 Financial Services for all Section 1 Annual Assessment of the Microfinance Industry Financial Services for all Industry Performance Section 2 Industry Performance 10 Financial Services for all Section 2 Industry Performance The section is divided into two parts. Section 2A covers the financial performance of the microfinance industry whereas Section 2B deals with the social performance of the industry. Section 2A: Industry Performance This section provides a detailed analysis of the financial performance of Pakistan’s microfinance industry in 2014. Performance has been assessed on three levels: industry wise, across peer groups and institution wise. The analysis is backed by 88 financial indicators, calculated from the audited financial statements of the reporting organizations. These indicators have been compared across time and regions to develop a reliable and fair assessment of sector. Detailed financial information is provided in Annex A-I and A-II of the PMR. Aggregate data has been reproduced for five years, whereas, the peer group and institution specific data has been made available only for the year 2014. A total of 42 MFPs submitted their audited financial statements for PMR 2014. During the period, five new respondents provided their dataset for the first time. For a complete list of reporting organizations refer to Annex B. Industry players are categorized into three groups for benchmarking and comparison purposes: Microfinance Banks (MFBs), Microfinance Institutions (MFIs) and Rural Support Programmes (RSPs). See Box 2A.1 for detailed definitions. Box 2A.1 Pakistan Microfinance Review 2014 Peer Groups 11 Microfinance Institution: A non-bank non-government organization (NGO) providing microfinance services. Organizations in this group are registered under a variety of regulations, including the Societies Act, Trust Act, and the Companies Ordinance. The MFI peer group includes local as well as multinational NGOs such as BRAC-Pakistan and ASA-Pakistan. Microfinance Bank: A commercial bank licensed and prudentially regulated by the SBP to exclusively service the microfinance market. The first MFB was established in 2000 under a presidential decree. Since then, ten MFBs have been licensed under the Microfinance Institutions Ordinance, 2001. Eight of them are operating at national level, while two at the provincial level. MFBs are legally empowered to accept and intermediate deposits from the public. Rural Support Programme: An NGO registered as a non-profit company under the Companies Ordinance. An RSP is differentiated from the MFI peer group based on the purely rural focus of its credit operations. As a group, the RSPs are registered with and supervised by the Securities and Exchange Commission of Pakistan (SECP). Financial Services for all Industry Performance The distribution of respondents (number of reporting organizations) by peer group is given in Exhibit 2A.1. The MFI peer group comprises of the largest number of respondents followed by MFBs and then RSPs. portfolio increased significantly by 31 percent from PKR 46.6 billion to PKR 61.1 billion (Exhibit 2A.2). Among the MFPs, growth in active borrowers was led by National Rural Support Program (NRSP) which RSP, 5% MFI, 27% MFB, 9% Exhibit 2A.1 Distribution of Respondents by Peer Groups Scale and Outreach: Breadth added 101,000 borrowers to its portfolio in 2014 – depicting an increase of 26 percent year-over-year. Khushhali Bank (KBL) and ASA Pakistan (ASA-P) also witnessed significant growth, with borrowers increasing from 409,000 to 469,000 and 180,000 to 221,000 respectively. In the current year, Kashf Foundation (KF) saw a significant reduction in borrowers (by 26 percent) from 312,000 in 2013 to 230,000 in 2014. This reduction was primarily due to write-offs of non-performing loans. Outreach witnessed growth in all key indicators in The industry in terms of outreach was dominated Scale and outreach This section focuses on outreach indicators to provide performance analysis of the industry in terms of credit growth and composition, deposit mobilization, depth of outreach and gender. Active borrowers 60 2.50 50 2.00 40 1.50 30 1.00 20 0.50 10 2009 2010 2011 2012 2013 2014 Exhibit 2A.2: Growth in Number of Active Borrowers and GLP 2014 – active borrowers grew by 15 percent from 2.4 million to touch 2.8 million, whereas, the gross loan by nine MFPs that accounted for 79 percent of the outreach as shown in Exhibit 2A.3. During the period, Annual Assessment of the Microfinance Industry 70 GLP in PKR Billions Active borrowers in millions GLP 3.00 12 Financial Services for all Section 2 2014 FINCA TRDP 39 76 71 110 FMFB 130 149 172 194 180 NRSP Bank ASA-P 2013 198 TMFB KF 221 227 312 231 409 KBL 469 391 NRSP 100 200 300 492 400 500 600 Exhibit 2A.3: Active Borrowers of Nine Largest MFPs NRSP surpassed KBL to become the largest provider of microcredit in terms of active borrowers. NRSP’s client base crossed 490,000 after witnessing a substantial growth of 26%. KF maintained its position as the third largest provider of microcredit, despite a reduction in active borrowers by 81,000. witnessed the largest increase in GLP (by PKR 8.7 billion) primarily on the back of KBL, FINCA and FMFB as their loan portfolios increased by PKR 3.4 billion, PKR 2.0 billion and PKR 1.0 billion respectively. Moreover, the average loan size of MFBs remained the highest among peer group (PKR 35,699), indicating a greater RSP MFI MFB 100% 90% 80% 28% 27% 25% 27% 28% 34% 35% 31% 40% 44% 39% 40% 42% 2010 2011 2012 2013 2014 35% 70% 60% 50% 25% 40% 30% 20% 10% Pakistan Microfinance Review 2014 Exhibit 2A.4: Percentage Share in Active Borrowers by Peer Group 13 Among the peer groups, MFBs continue to dominate the sector by holding 42 percent of the total market share followed by RSPs (35 percent) and MFIs (31 percent) as shown in Exhibit 2A.4. The market share of MFBs and RSPs increased by 2 percent in 2014, whereas in the same period, the share of MFIs decreased from 35 percent to 31 percent. The increase in share of RSPs can be attributed to the increase in borrowers by NRSP and TRDP (both RSPs collectively added 140,000 microcredit clients) non-inclusion of Akhuwat in the dataset. In terms of GLP, MFBs account for 60 percent of the total GLP, followed by MFIs with a share of 21 percent and RSPs with a share of 19 percent. The overall GLP of the sector has increased by PKR 14.5 billion to touch PKR 61.1 billion in 2014 (Exhibit 2A.5). MFBs GLP. The share of RSPs in the overall gross loan portfolio has increased from 18% to 19% - this too was on the back of NRSP which contributed PKR 2.1 billion worth of loan portfolio. Furthermore, approximately 82 percent of the industry’s GLP is accounted for by nine MFPs (Exhibit 2A.6). KBL continues to dominate the market in terms of portfolio size by having a GLP of PKR 12.2 billion – depicting an increase of 38 percent compared to the previous year. This is reflective of the active borrowers of KBL (second highest in the sector) coupled with a shift towards higher average loan size (PKR 21,600 in 2013 to PKR 26,100). During the year, FINCA Microfinance Bank saw the greatest percentage increase in GLP (by a remarkable 98%) from PKR 2.0 billion to PKR 4.0 billion. The growth in portfolio was mainly Financial Services for all Industry Performance RSP MFI MFB 70 PKR in Billions 60 11.4 50 10 5.3 5.0 6.6 3.9 9.8 28.1 18.7 14.6 2010 10.2 6.7 7.6 30 20 12.9 8.4 40 2011 2012 2013 36.8 2014 Exhibit 2A.5: GLP (PKR billions) by Peer Group 2013-14 supported by a large deposit base of the bank. TMFB, backed by its above average loans sizes, remained the second largest player in terms of portfolio size with a GLP of PKR 9.0 billion. In the year under review, the sector witnessed a staggering rise in the number of depositors (by 150 percent) from 2.2 million in 2013 to 5.7 million in 2014. Similarly, the value of deposits grew by 30 percent in the same year, from PKR 32.9 billion to PKR 42.7 billion (Exhibit 2A.7). Resultantly, deposits now rep- growth in depositors can be attributed to the surge in branchless banking activities, especially the opening of m-wallet accounts, along with increasing government disbursements for safety net programs such as the Benazir Income Support Program (BISP). TMFB was followed by KBL and NRSP Bank which contributed 226,000 and 219,000 depositors respectively in the reporting year. In terms of growth in value of deposits, FINCA was the largest contributor to the value of deposits; by adding PKR 1.9 billion worth of deposits to increase 2014 ASA-P 1.1 1.2 1.9 KF FINCA FMFB NRSP Bank 2.0 2.7 3.5 3.8 3.5 4.0 4.5 4.8 NRSP 5.2 5.6 TMFB KBL 7.7 8.3 9.0 8.9 12.2 10 5 15 Exhibit 2A.6: GLP of Nine Largest MFPs resent 78 percent of the total liabilities of the MFB peer group – an increase from 72 percent in the previous year. Moreover, deposits continue to outgrow the loan portfolio of MFBs, as is evident from the deposits-to-gross loan portfolio ratio which currently stands at 116.1%. The largest increase in the number of depositors came from TMFB which added 2.65 million new depositors (an increase of over 300 percent). The hefty its deposit base from PKR from PKR 2.7 billion in 2013 to PKR 4.7 billion in 2014 (Exhibit 2A.8). FINCA was followed by TMFB whose deposits grew by PKR 1.6 billion to close its balance sheet at PKR 12.3 billion deposits. The Deposit-to-GLP ratio for MFBs remained stagnant in the current year; the ratio decreased by 1 percent from 117 percent in 2013 to 116 percent in 2014 Annual Assessment of the Microfinance Industry SRSO 2013 14 Deposits Outstanding Depositors 50 Depositors in thousands 6,000 5,000 40 4,000 30 3,000 20 2,000 Deposits outstanding in billions Financial Services for all Section 2 10 1,000 2010 2011 2012 2013 2014 Exhibit 2A.7: Growth in Deposits and Number of Depositors 2014 POMFB Ubank 0.03 0.02 0.21 WMFB 0.70 0.65 0.76 AMFB 2013 1.29 1.19 2.74 FINCA 3.62 NRSP-B 4.66 5.16 KBL 7.13 7.81 FMFB 8.68 8.75 10.63 TMFB 12.26 10 5 15 Exhibit 2A.8: Deposit Growth by MFB (Exhibit 2A.9). The current ratio depicts MFBs heavy reliance on deposits as a primary source of financing as it keeps their cost funding at reasonably low levels. During the year, the cost of funds of MFBs stood at 6.7 percent as compared to an average of 8.9 percent of non-bank MFIs. The liquidity position of MFBs can also be determined by the deposit-to-GLP ratio; a high ratio implies that MFBs have excess funds at hand and are adequately liquid. Moreover, the cost of funds has remained in single digits despite mobilizing deposits at above market rates. Deposit-to-GLP Deposits 45 In PKR Billions Pakistan Microfinance Review 2014 120% 35 100% 30 25 80% 20 60% 15 40% 10 5 20% 2010 2011 2012 2013 Exhibit 2A.9: Deposit-To-GLP Relation for MFBs Feb 2014 Deposit-to-GLP Ratio 140% 40 15 GLP Financial Services for all Industry Performance Policy Holders 70 4.20 60 3.70 50 3.20 40 2.70 30 2.20 Sum Insured in PKR Billions Policy Holders in millions Sum Insured 20 1.70 10 2010 2011 2012 2013 2014 Exhibit 2A.10: Growth in Number of Policy Holders and Sum Insured Micro-insurance indicators – number of policy holders and sum insured – both showed a significant improvement in the year 2014. The number of policy holders grew by 23.8 percent over the year, rising from 3.0 million to 3.8 million, while the sum insured increased by 50.0 percent from PKR 40.3 billion to PKR 60.4 billion (see Exhibit 2A.10). The greatest increase in micro-insurance came from the MFB peer group whose policy holders and sum insured increased by 46 percent and 80 percent re- Scale and Outreach: Depth The depth of outreach in microcredit operations is measured by a proxy indicator: average loan balance per borrower in proportion to per capita Gross National Income (GNI). A value below 20 percent is assumed to mean that the MFP is poverty focused. Except for KBL and NRSP Bank, all of the other MFBs fall above this benchmark (Exhibit 2A.11). Comparison across peer groups shows that the ratio of average loan balance to per capita GNI for MFBs has been on the rise Cut-off Industry RSP MFI MFB Average Loan Balance Per GDP 25% 20% 15% 10% 2009 2010 2011 2012 2013 2014 Exhibit 2A.11: Depth of Outreach by Peer Groups spectively. During the year, MFBs enhanced the coverage of their insurance products by securing more credit clients, along with their spouses. However, among individual institutes, NRSP remained the largest providers of micro-insurance; holding a market share of 22 percent and 24 percent in terms of policy holders and total sum insured, respectively. Among the types of insurance policies, health insurance constituted almost 51 percent of total insurance policies followed by credit life at 49 percent. for the past four years. MFBs tend to target the upper end of the market through relatively larger loan sizes, and hence have a ratio of 20 percent compared to MFIs and RSPs which have a ratio of 10 percent each. The ratio of average loan balance to per capita GNI witnessed a modest increase for MFBs (by 2 percent) and MFIs (by 1 percent), while the ratio for RSPs remained stagnant at 10.0 percent. This could be interpreted as the sector continuing to target the poor but also has implications for appropriate loan sizes in the Annual Assessment of the Microfinance Industry 5% 16 Financial Services for all Section 2 were the main drivers for the increase in the share of individual borrowing from 24 percent in 2013 to 27 percent in 2014. context of Pakistan’s inflationary environment. Erosion in the value of money means that a loan worth PKR 30,000 in one year would be considerably lower in value in the following year. Gender Distribution Lending Methodology The proportion of women borrowers depicted a downward movement in the current year, decreasing from 60.3 percent in 2013 to 58.0 percent in 2014 (Exhibit 2A.13). The proportion of women borrowers In the Pakistan microfinance sector, majority of MFPs follow the group lending methodology – in 2014, 68 percent of the active borrowers represented group Group Borrowing Individual Borrowing Active Borrowers in Thousands 3,500 3,000 2,500 2,000 76% 1,500 1,000 78% 90% 88% 10% 12% 22% 2011 2012 500 2010 73% 24% 2013 27% 2014 Exhibit 2A.12: Lending Methodology lending (see Exhibit 2A.12). However, over the past four years, the share of individual lending has been increasing gradually, as many MFPs which were following the group lending methodology, also started focusing on Individual lending methodology. In the for MFBs and MFIs increased slightly by 1 percent, whereas, the proportion of women borrowers for RSPs remained unchanged. Out of the three peer groups, the client base of MFBs is mostly composed of male borrowers, while MFIs and RSPs are more Female Borrowers Male Borrowers 100% 90% 25% 80% 70% 60% 89% 50% 40% 74% 58% 75% Pakistan Microfinance Review 2014 30% 17 20% 10% 11% MFB MFI 26% RSP 42% Total Exhibit 2A.13: Gender Distribution of Credit Outreach by Peer Groups period under review, individual lending showed an increse of 8 percent, whereas, group lending has decreased from 76 percent to 68 percent. During the reporting year, FINCA, Kashf Foundation and TMFB oriented towards women borrowers. Women borrowers remain an integral part of the Pakistan microfinance sector and lending to women Financial Services for all Industry Performance Manufacturing/Production Services Trade Livestock/Poultry Agriculture Housing Other 100% 90% 08% 0% 07% 08% 0% 09% 80% 11% 07% 09% 0% 09% 09% 70% 60% 15% 15% 0% 09% 0% 09% 08% 08% 36% 38% 35% 14% 15% 16% 16% 16% 23% 23% 22% 22% 23% 2010 2011 2012 2013 2014 50% 30% 29% 40% 30% 20% 10% Exhibit 2A.14: Active borrowers by sector agriculture sector which made up 23 percent of the borrowers, while the livestock sector continued to be a distant third accounting for only 16 percent of the borrowers. has been encouraged by various donor and regulatory bodies. The national apex – PPAF – provides funding to MFPs based on a commitment that at least 40 percent of the borrowers will be women. Large players such as NRSP, ASA Pakistan, and SRSO have portfolios that mostly constitute of women borrowers, whereas, Kashf Foundation only lends to women borrowers. Rural- Urban Lending The share of rural borrowers continued to dominate the sector; out of total borrowers, 57 percent belong to rural areas while 43 percent belong to urban areas (Exhibit 2A.15). Majority of the borrowers of the two dominant players (NRSP and KBL) belong to the rural segment of the population. However, in the year under review, the share of urban borrowers saw a modest increase of 1 percent. This increase can be attributed to growth seen by FINCA, TMFB and ASA Portfolio Distribution by Sector The credit portfolio distribution showed insignificant change as compared to the previous year (Exhibit 2A.14). The share of trading sector declined by 1 percent in 2014 but continued to dominate the sector-wise distribution of microcredit with an overall Rural Urban 100% 90% 80% 70% 52% 46% 48% 54% 56% 58% 57% 44% 42% 43% 2012 2013 2014 50% 40% 30% 20% 10% 2010 2011 Exhibit 2A.15: Active Borrowers by Urban/Rural Areas share of 29 percent. The trade sector primarily comprises of general stores, karyana shops, stall hawkers, fruit vendors, etc. Trade was followed by the Pakistan, as more than 50 percent borrowers of these institutes belong to urban regions. Annual Assessment of the Microfinance Industry 60% 18 Financial Services for all Section 2 Financial Structure Among the players, KBL is the largest MFP by asset size with PKR 16.7 billion of assets closely followed by TMFB with assets over PKR 16.4 billion as shown in Exhibit 2A.17. At third place is NRSP Bank with an asset base of PKR 11.8 billion. Among the MFIs, KF is the largest player by asset size with assets of PKR 5.3 billion followed by ASA-P with assets of PKR 2.8 billion. In the RSP peer group, NRSP is the largest player with an asset base of PKR 9.8 billion followed Asset Base The asset base for the industry stood at over PKR 100.71 billion in the year 2014, an increase from PKR 81.55 billion in the previous year showing a year on year increase of 23 percent. RSP MFB MFI 80 PKR in billions 70 60 50 40 30 20 10 2010 2011 2012 2013 2014 Exhibit 2A.16: Total Asset Base by Peer Group MFBs accounted for 69 percent of the asset base of the industry followed by MFIs at 16 percent and RSPs by 15 percent. The asset size of MFB peer group stood at PKR 69.2 billion compared to PKR 55.4 billion in the last year (see Exhibit 2A.16) showing an by PRSP with assets of PKR 2.5 billion. Overall the industry continued to remain concentrated with nine large MFPs, which include five MFBs, making up 83 percent of the industry. 2014 PRSP ASA-P 2.0 2.8 2.5 2.8 4.6 Kashf FINCA 4.0 5.3 6.4 NRSP 7.3 FMFB 9.8 9.5 9.8 NRSP Bank 10.7 11.8 15.2 TMFB 13.3 Pakistan Microfinance Review 2014 KBL 19 2013 5 10 16.4 16.7 15 20 Exhibit 2A.17: Asset Base of Larger MFPs increase of more than 24 percent. The MFI and RSP peer groups witnessed an increase of 20 percent in their asset size as compared to the previous year. Asset base for MFIs and RSPs stood at PKR 16.2 billion and PKR 15.3 billion in 2014, respectively. Asset Composition The asset utilization ratio which had remained range bound over the last few years showed notable improvement rising to 60.6 percent in 2014 as compared to 54.5 percent in 2013 as shown in Exhibit Financial Services for all Industry Performance Asset Utilization Ratio 70% 60% 50% 40% 30% 20% 10% 2010 2011 2012 2013 2014 Exhibit 2A.18: Asset Utilization Trend 2010-14 2A.18. Improvements were witnessed in the asset utilization ratio of the MFI and RSP peer group which stood at 79.2 percent and 74.7 percent respectively whereas the MFBs experienced an increase from 50.7 percent in 2013 to 53.2 percent in 2014. entire peer group. Over time, as these re-established players grow and achieve scale, there will be further increase in the ratio for MFBs. 100% 80% 60% 40% 20% Africa East Asia and the Pacific Eastern Europe Latin America and and The Central Asia Caribbean Middle East and North Africa South Asia Pakistan Exhibit 2A.19: Regional Comparison of Asset Utilization Ratio Asset composition remained varied across the industry. MFIs accounted for the highest advances to total assets ratio closely followed by RSPs as shown in Exhibit 2A.20. Improvement in the ratio for MFIs and RSPs is largely due to increase in grace period being offered by the national apex. MFB peer group has lower advances to total assets as a number of players have recently been acquired and their credit business is in formative stages. In addition, one of the larger players, FMFB, has only been able to deploy half of its deposit base leading to lower value for the Funding Profile The capital structure of the industry continued to witness the trend of increasing deposits and decrease in debt in 2014 as shown in Exhibit 2A.21. Deposits now make up 44 percent of the total funding of the sector as compared to 39 percent in 2013. Debt has fallen to 33 percent of the funding from 39 percent in the same time period. Equity witnessed a slight increase to account for 23 percent of the total funding on the back of increasing profitability among the practitioners. The capital structure continues to be differ among the peer groups with non-bank MFPs relying on debt and equity for funding as they are prohibited to mobi- Annual Assessment of the Microfinance Industry Despite the improvement in the asset utilization ratio in the year 2014, it was below its regional peers as shown in the Exhibit 2A.19. For the industry to improve its bottom line there is a need to improve their utilization ratio through better liquidity management. 20 Financial Services for all Section 2 Cash and Bank Balance Fixed Assets Investments 100% Proportion of Total Assets 19% 80% 20% 20% 4% 3% 4% 0% 22% 24% Advances 18% 16% 14% 3% 0% 5% 4% 7% 9% 60% 40% 55% 53% 2013 2014 76% 79% 2013 2014 75% 70% 20% MFB 2013 MFI 2014 RSP Exhibit 2A.20: Asset Composition among Peer Groups lize deposits. Meanwhile, MFBs continue to witness notable success in deposit mobilization which is reflected in their increasing reliance on deposits as a deposit base larger than their GLP. In addition, two thirds of the deposits are accounted for by three MFBs namely, TMFB, KBL and FMFB. Equity, 23% Deposits, 44% Debt, 33% Pakistan Microfinance Review 2014 Exhibit 2A.21: Capital Structure of Microfinance Industry 21 source of funds. Profitability and Sustainability 64 percent of the MFBs funding is made up of deposits up from 62 percent in the previous year as shown in Exhibit 2A.22. In case of MFI peer group, debt continues to make up 80 percent of the funding whereas in the case of RSPs debt accounts for 70 percent of the capital, slightly up from 69 percent in the preceding year. The total net income and total revenues for the industry stood at PKR 3.5 billion and PKR 24.3 billion in the year 2014 respectively. The unadjusted ROA and ROE for the industry stood at 4.2 percent and 20.7 percent for the year. Out of the total profit for the industry the MFB peer group accounted for 47 percent of the profit whereas the MFI and RSP peer groups made up 25 percent and 28 percent. While MFBs are relying on deposits to meet the bulk of their funding needs, it is pertinent to note that out of nine MFBs reporting for PMR only six have a The industry continues to be sustainable with Operational Self Sufficiency (OSS) and Financial Self Suffi- Financial Services for all Industry Performance Deposits Debt Equity 90% 80% 70% 60% 50% 40% 30% 20% 10% 2013 2014 2013 MFB 2014 2013 2014 RSP MFI Exhibit 2A.22: Capital Structure by Peer Group ciency (FSS) not only above 100 percent but also show an improving trend as seen in Exhibit 2A.23. Out of the 41 reporting organizations 35 have an OSS above 100 percent. Improvement in OSS and FSS is fuelled primarily by increasing GLP and growth in outreach. This points towards the increasing maturity of the practitioners business models. In addition, MFPs are Compared globally, the yield on gross portfolio (nominal) continues to be on the higher side (see Exhibit 2A.25). However, the higher yield is largely as a result of high operating costs which are a function of the relatively smaller loan sizes offered by the industry. As the loan sizes increase over time especially after the start of lending to microenterprises it is antici- Operational Self Sufficiency (OSS) Financial self sufficiency (FSS) 140% 120% 100% 80% 60% 40% 20% 2011 2012 2013 2014 Exhibit 2A.23: OSS and FSS Trend now ideally geared towards accelerated growth and innovation. The total revenue ratio for the industry increased to 28.5 percent from 24.8 in 2013 on the back of increasing GLP and income generated from branchless banking operations. In addition, the yield on gross portfolio remained stable, (shown in Exhibit 2A.24) to close at 34.6 percent. pated that operating costs will decline resulting in reduction of yield on loan portfolio. Annual Assessment of the Microfinance Industry 2010 22 Financial Services for all Section 2 Total Revenue Ratio Yield on Gross Portfolio (Nominal) Yield on Gross Portfolio (Real) 40% 35% 30% 25% 20% 15% 10% 5% 2010 2011 2012 2013 2014 Exhibit 2A.24: Total Revenue Ratio & Yield on Gross Portfolio Trend Yield on Gross Portfolio (Nominal) 35% 30% 25% 20% 15% 10% 5% Africa East Asia and the Pacific Eastern Europe Latin America and and The Central Asia Caribbean Middle East and North Africa South Asia Pakistan Exhibit 2A.25: Regional Comparison of Yield on Gross Portfolio (Nominal) The total revenues for the sector stood at PKR 24.3 billion up from PKR 17.3 billion in the previous year. Out of the total revenue, 76.9 percent is made up from earnings from loan portfolio followed by 15.5 percent from financial services including branchless banking and 7.6 percent from earnings on the financial assets (see Exhibit 2A.26 ). The total income from branchless banking stood at PKR 2.3 billion in 2014 as compared to PKR 2.0 billion in the previous year. The increase is partially due to the addition of Waseela MFB in the dataset for the first time. Financial Assets Financial Services Loan Portfolio 25 PKR in billions Pakistan Microfinance Review 2014 30 20 15 10 5 2010 2011 2012 Exhibit 2A.26: Revenue Streams 23 2013 2014 Financial Services for all Industry Performance Adjusted Total Expense / Total Assets Adjusted Financial Expense/ Total Assets Adjusted Operating Expense/ Total Assets Adjusted Loan Loss Provision Expense/ Total Assets 30% 20% 10% 2010 2011 2012 2013 2014 Exhibit 2A.27: Expenses to Asset Ratio Trend Operating Expense / Assets 20% 15% 10% 5% Africa East Asia and the Pacific Eastern Europe Latin America and and The Central Asia Caribbean Middle East and North Africa South Asia Pakistan Exhibit 2A.28: Regional Comparison of Operating Expense Expense to asset ratio witnessed a slight increase in the 2014 as shown in Exhibit 2A.27. The total expense ratio increased to 21.9 percent as compared to 20.7 percent in the previous year. The increase was driven by the increase in the operating expenses which was partially due to inclusion of a number of smaller and growing organizations in the dataset and partially due to increasing administrative expenses. Personnel Expense/ Gross Loan Portfolio Admin Expense/ Gross Loan Portfolio 30% 25% 20% 15% 10% 5% 2010 2011 2012 2013 2014 Annual Assessment of the Microfinance Industry Operating Expense / Gross Loan Portfolio Exhibit 2A.29: Operating Expense to GLP Trend 24 Financial Services for all Section 2 Personnel Allocation Ratio 52% 50% 48% 46% 44% 42% 40% 2010 2011 2012 2013 2014 Exhibit 2A.30: Personnel Allocation Ratio Trend with the lowest value at 37.8 percent. The operating expense was on the higher end as compared to other regions as seen in Exhibit 2A.28. This points towards the fact that MFPs in Pakistan have yet to achieve scale and only then costs can be reduced. Branchless banking can play a crucial role in bringing down the operating costs of the industry. The productivity indicators of the industry continued to exhibit improvement in the year 2014. Loans per staff and loans per loan officers rose to 152 and 342 as compared to 144 and 327 in the previous year. Depositors per staff increased to 293 as compared to 269 in the same time period (see Exhibit 2A.31). Operating expense to GLP also witnessed an increase in 2014 after exhibiting a declining trend over the last few years as shown in Exhibit 2A.29. Operating expense to GLP stood at 23.0 percent as compared to 22.1 percent in the previous year. The increase in the expense was due to rise in the administrative expense. Loan per staff officer continued to vary among the peer groups. MFBs had the highest number of loans per staff with 369 loans followed by RSPs with 348 and MFIs with 308. Risk Productivity Credit Risk The personnel allocation ratio for the industry saw a modest improvement in 2014. The ratio increased to 44.5 percent compared to 44.0 percent in the previous year (see Exhibit 2A.30). The personnel allocation ratio continued to vary among the peer groups. RSPs continued to have the highest value with 52.2 percent, followed by MFIs with 48 percent and MFBs Portfolio at Risk (PAR)>30 days decreased to 1.1 percent in 2014 as compared to 2.5 percent in 2013 (see Exhibit 2A.32). However, write-offs in the same period increased to 2.3 percent from 1.1 percent. The increase in the write-offs was primarily due to increase Loans per Loan Officers Depositors per Staff Loans per Staff 400 Pakistan Microfinance Review 2014 350 300 250 200 150 100 50 2010 2011 2012 Exhibit 2A.31: Productivity of MFPs 25 2013 2014 Financial Services for all Industry Performance Cut off Write Off Portfolio at Risk >30 days 7% 6% 5% 1.8% 2.6% 4% 2.3% 1.5% 3% 2% 4.1% 1% 2.9% 3.7% 2.3% 2.5% 1.1% 2010 2011 2012 2013 2014 Exhibit 2A.32: PAR>30 Days & Write Offs Trend Overall, the PAR > 30 days continues to remain below the 5.0 percent cutoff point reflecting positive portfolio quality of the industry. However, it also may point towards the fact that players are risk averse and there is still plenty of opportunity in the market for growth in outreach. Risk coverage ratio for the industry stood at 180.0 percent in 2014 up from 61.2 percent in the previous year. This high value for the risk coverage ratio was largely due to the requirement of national apex for its funded institutes to have loan loss provision equal to 5.0 percent of their total outstanding portfolio. Conclusion On the whole 2014 was a good year for the industry. It witnessed double digit growth in outreach in all areas including credit, deposits and insurance. The growth in the number of depositors was more pronounced due to the opening of a large number of m-wallet accounts. Female borrowers continued to constitute a majority of the borrowers and group lending re- mained the dominant approach to lending. However, individual lending was becoming increasingly popular with practitioners. Majority of the lending activities continued to target the trade and agriculture sector. In addition, rural borrowers continued to account for the majority of the borrowers for the industry. The total asset base of the industry stood over PKR 100 billion with MFBs making up nearly 70 percent of it. MFBs continued to rely on deposits as their main funding source whereas MFIs and RSPs are dependent on debt for on-lending. The industry continues to remain sustainable and out of 41 reporting organizations, 35 MFPs are sustainable. Operating costs remained high for MFPs and there is room for improvement in this area. In addition, the productivity indicators continued to exhibit an improving trend. PAR>30 days continued to remain below the 5 percent cut-off point reflecting positive portfolio quality. The industry continues to remain concentrated with nine MFPs dominating the market out of which five are MFBs. On the whole the industry is poised for growth and can play a crucial role in the inclusive finance sphere. Annual Assessment of the Microfinance Industry in the ratio by one player, namely KF. Write off ratio stood at 16.5 percent for KF in 2014. 26 Financial Services for all Section 2 Section 2B: Social Performance Introduction The last few years have seen a dedicated effort on behalf of the microfinance industry, both globally and in Pakistan, to focus on social performance (SP) along with financial sustainability. Microfinance is a double-bottom line industry, where sustainability is not an end in itself; but rather a means to achieving social goals. These goals can differ: some MFPs may have a vision of poverty alleviation, others of women empowerment, while yet others may be working for increasing access to formal financial services. In order to better attain an institution’s intended goals, microfinance stakeholders around the world now believe that an MFP’s systems, activities and outputs must be deliberately geared towards its social vision, to make the impact that the institution is aiming for. For an MFP, therefore, social performance management means focusing simultaneously on its financial and social bottom lines. The following section will outline key social performance indicators as monitored across the Pakistan microfinance landscape. We will attempt to analyze industry trends across various SP indicators, including social goals, poverty target, governance & HR, diversity in financial and non-financial service provision, client protection, pricing norms and environment. hensive set of indicators on institutions’ social goals, target segments and other services. As self-reported data, the MIX framework allows MFPs to select multiple categories that are applicable to their respective institution. For example, within the ‘poverty targeting’ sub-section, an MFP may report to targeting all or none of the ‘very poor’, ‘poor’ and ‘low income’ client categories if those are applicable to their practices. At the time of this publication, 27 PMN member MFPs reported on the new MIX Social Performance framework, including 5 MFBs (out of 9 MFB members), 19 MFIs (out of 35 MFI members) and 3 RSPs (out of 6 RSP members). The number of reporting MFPs is expected to increase once the new reporting framework has been mainstreamed; all responses will be published on the MIX market website for each successive reporting MFP. Target Market Identifying their target markets helps to focus MFP efforts and optimize the limited resources available. Providing services that are relevant, client oriented and effective in serving an organization’s mission requires a clear understanding of the population that an MFP aims to reach. MFPs target markets by peer group are highlighted in Exhibit Exhibit 2B.1. All 5 reporting MFBs cited three multiple targets, including women, clients living in rural areas and clients living Reporting to MIX SP framework 2014 Total PMN Membership MFB 5 09 MFI 19 35 RSP 3 6 Total 27 50 Pakistan Microfinance Review 2014 Table 1: Number of Reporting MFPs for Social Performance 27 Analysis of the Sector’s SP Indicators The Microfinance Information eXchange (MIX), in collaboration with the Social Performance Task Force (SPTF), has developed an annual social performance reporting framework for MFPs. This framework has recently been formatted to better suit the reporting needs of the industry, and includes a new compre- in urban areas. Of the 19 reporting MFIs, the majority 18 target women and clients in rural areas respectively, while one also reported targeting the youth. Overall, clients are targeted based on gender and location. While the focus on rural areas is relatively greater, there is also a growing emphasis on urban clients, particularly among MFPs providing individual loans. Financial Services for all Industry Performance RSPs MFIs MFBs 30 No. of Responses 25 2 3 18 18 16 5 5 5 Women Clients living in rural areas Clients living in urban areas 2 20 15 10 5 2 Adolescents and youth Exhibit 2B.1: MFPs’ Target Markets Development Goals ‘marginalized’ and expanding economic opportunities emerged as more common amongst the non-bank MFPs. Support to start-up businesses, which is generally considered a risky initiative for microfinance, has also seen growing interest amongst some MFPs. A focus on women is quite common in the sector as well. As indicated in the previous reporting period, all MFPs have some social development goals built into their mission and these rarely change on an annual basis. These are social goals towards the accomplishment of which the MFPs have explicitly designed products, services, and procedures. Interestingly, there are commonalities across MFPs stated social goals across peer groups i.e. regulated microfinance banks, These broad themes translate into a range of development objectives for service providers. The most RSPs MFIs MFBs 30 2 3 3 15 19 19 10 13 5 5 In cr fin ea an se ci d a al cc se es rv s ic to P es ov er ty re du ct io n 5 1 2 7 2 3 14 1 10 5 3 3 1 2 1 2 Exhibit 2B.2: Development Goals microfinance institutions and multi-dimensional rural support programmes. For example, mission statements of the microfinance banks are relatively more focused on expanding access to quality financial services to low income population and as a result improve their quality of life, economically and socially. Themes of poverty alleviation, empowerment of the common objectives are increased access to financial services and poverty reduction, with all 27 reporting MFPs citing these are their objectives. The other mostly commonly cited development goals across all peer groups are growth of existing businesses, employment generation, and gender equality and women’s empowerment (Exhibit 2B.2). Annual Assessment of the Microfinance Industry 20 Em ge plo ne ym ra e tio nt st n ar D t- ev up e l en op te me rp n ri t o se f G s ro w th o bu f e si xis ne ti ss ng Yo es ut h op po rt un iti H es ea lth im pr ov em w G en om e t en nd 's er em eq po ua w lity er a W m n at en d er t an d sa ni ta tio n No. of Responses 25 28 Financial Services for all Section 2 Poverty Targeting poverty level assessments serve multiple purposes like guide client targeting and selection for MFPs, establish baselines of client poverty for subsequent impact evaluations, appraisal of financial services to better suit needs of clients and overall measurement of the program’s effectiveness. In terms of poverty level of targeted clients, all of the reporting institutions target more than one segment of the poor. Overall, the most common target market for the sector in terms of income is low income cli- RSPs MFIs MFBs No. of MFP responses 25 2 20 2 15 16 11 10 5 1 3 5 5 Very poor clients Poor clients Low income clients Exhibit 2B.3: Poverty Targets While some MFPs employ only one method to measure poverty levels, others use multiple assessment tools, as shown in Exhibit 2B.4. MFPs report use of their own proxy poverty index, as well as Grameen Progress out of Poverty Index (PPI) and per capita household income and expenditure. While the MIX SP framework does not cover the poverty scorecard prescribed by the Pakistan Poverty Alleviation Fund (PPAF) designed by The World Bank, this is predom- ents, closely followed by poor clients. Only 3 reporting MFIs and 1 RSP reported targeting very poor clients. MFIs and RSPs are largely targeting both poor and low income clients as seen in Exhibit 2B.3. Poverty Measurement Tools MFPs that measure client poverty collect econom- RSPs MFIs MFBs 12 2 8 6 9 4 29 1 2 1 t 1 2 1 po O ve wn rt p y ro in x de y N x on e of th e ab ov e 2 te s 1 1 G of ra P me ov e er n ty Pr In og de re x ss (P o P er P ut I) ca pi ta ex ho pe u nd seh P itu ol er re d ca pi ta ho u in seh co o m ld e w Pa ea r lth tic i ra pa nk to in ry g H ou si ng in de Fo x od se cu ri ty in de x Pakistan Microfinance Review 2014 1 ns 2 3 1 3 M ea No. of responses 10 Exhibit 2B.4: Poverty Assessment Tools used by MFPs ic, social, and/or other types of wellbeing indicators from clients for the express purpose of determining and/or tracking these clients’ poverty levels. Client inantly used by MFIs as partner organizations of PPAF. Financial Services for all Industry Performance Box 2B.1 Poverty Scorecard used by PPAF Partner Organizations (POs) The Poverty Scorecard for Pakistan developed by The World Bank is a tool to measure change in poverty in an effective way and to support the management of development programmes that focus on alleviating poverty. It is also a useful tool for social investors that need to measure results according to the triple bottom line objectives i.e. financial, social and environmental results. By ranking targeted households relative poverty, it helps managers target the poor, track changes in poverty, and manage depth of outreach. One of the ways that the apex lender for microfinance practitioners in the country (PPAF) has ensured incorporation of SPM into partner organizations is through the use of a standard poverty scorecard. All PPAF partner organizations are required to complete the poverty scorecard system for new/repeat clients, and submit reports on these scorecards to the PPAF. While analysis based on poverty research needs to be strengthened, these scorecards provide an important foundation for the industry to work toward standardized measurement of what is perhaps the most predominant social goal of microfinance practitioners, i.e. targeting the poor. Governance & HR be understood broadly as referring to any experience or training related to managing social performance at MFPs. Governance and Human Resource (HR) policies related to social performance allow MFPs to gauge commitment to their social development goals at the institutional level. Governance refers to Board members receiving orientation on the social mission of the MFP, the presence of a SP champion or committee at the Board level, and Board level experience in SPM. During orientation, Board members are provided with an explanation of (or training on) the institution’s social mission and goals. Social performance champions are members of the Board of Directors that are assigned to oversee integration of social performance management practices within an institution while SP committees are formal entities within the Board that meet on a regular basis to discuss topics related to institutional SP. SP-related work experience should Exhibit 2B.5 shows all 5 of the reporting MFBs responded positively to Board members receiving SP orientation on a routine basis and 4 of the 5 MFBs have Board members with experience in SP management. Moreover, it is primarily MFBs with social investors on their Board who reported to having a SP champion or committee, with regular meetings and updates on the bank’s progress on SP management. RSPs MFIs No. of responses 25 20 2 3 15 16 15 10 1 4 5 5 4 3 Board orientation of social mission SPM champion/committee at Board Board experience in SPM MFBs Annual Assessment of the Microfinance Industry The strong performance of 15-16 MFIs on Board orientation of social mission and experience in SPM relates to a number of initiatives taken by the Pakistan Poverty Alleviation Fund. PPAF has conducted numerous institutional level trainings for its part- Exhibit 2B.5: Social Performance Management at the Board 30 Financial Services for all Section 2 ner organizations (primarily MFIs) on social performance management, good governance and risk management for different levels of the institutions’ – including Board members, senior management and staff. The aim is to create greater awareness on social performance management, through structured knowledge sharing and capacity building on various SPM tools and techniques and ensure effective compliance with the double bottom lines of these institutions. Good governance workshops and corporate Staff incentives at MFPs relate to the number of clients entertained by the field staff, the quality of interaction with clients based on client feedback mechanisms, quality of social data collected and/or the portfolio quality maintained by field staff. Exhibit 2B.6 shows that across the Pakistan microfinance industry, portfolio quality is the most cited factor for staff incentives, both for MFBs and non-Bank MFIs. This means that MFPs have incentives and/or bonus systems designed to reward staff based (in whole or in Portfolio quality 52% Number of clients, 37% Quality of interaction with clients based on client feedback mechanism 8% Quality of social data collected 3% Exhibit 2B.6: Staff Incentives related to SPM RSPs MFIs MFBs No. of responses 15 12 2 9 9 1 6 1 2 4 3 3 3 Total number of clients Number of new clients Pakistan Microfinance Review 2014 3 31 Client retention Exhibit 2B.7: Method for incentivizing number of clients governance trainings for Board members, as well as trainings on effective risk management have been conducted to create greater responsibility within these institutions’ towards their social objectives. part) on whether staff members consistently collect loan payments on time. The second most prevalent factor is number of clients, which means MFPs have incentives and/or bonus systems designed to reward Financial Services for all Industry Performance RSPs MFIs MFBs 30 3 No. of responses 25 20 3 2 2 19 15 15 17 1 7 10 11 5 5 4 5 4 4 Social protection (medical insurance and/or pension contribution) Safety policy Anti-harassment policy Non-discrimination policy Grievance resolution policy Exhibit 2B.8: HR policies related to SP Human resource policies related to SP include the presence of social protection (medical insurance and/or pension contribution), safety policy (protecting staff members from external harm while in the field), anti-harassment policy, non-discrimination policy (explicit policy against discrimination based on sex or ethnicity in matters of hiring, firing, and payment of staff members) and a grievance resolution policy (a formal channel or channels for communicating and redressing problems staff may have on the job). Exhibit 2B.8 shows that all reporting MFPs have strong reporting on having anti-harassment policy in place, a grievance resolution policy for staff, a safety policy and non-discrimination policy. Products and Services: Financial Microfinance refers to a range of financial services for the low income and poor households. These include savings, insurance and money transfer services along with credit. This sub-section summarizes the range of financial products offered by MFPs in Pakistan, based on the assumption that microfinance clients are a heterogeneous group with varying financial needs. Credit All reporting organizations offer microcredit services, including both for income generating purposes and non-income generating purposes. According to Exhibit 2B.9a, all reporting MFPs offer income generating loans, while a few also offer non-income generating or consumption based loans. Non-income generating loans 5% Income generating loans 95% Annual Assessment of the Microfinance Industry staff based (in whole or in part) on the number of clients in field officers’ portfolios. These can be based on total number of clients, number of clients meeting specific criteria (e.g. new clients, returning clients, etc.), or both. Exhibit 2.B.7 shows that all MFPs use a combination of these measures for calculating staff incentives, with the most common being total number of clients, followed by client retention. Exhibit 2B.9a: Type of Credit Products offered by MFPs 32 Financial Services for all Section 2 RSPs MFIs MFBs 30 No. of responses 25 3 3 20 15 19 14 10 5 7 5 Microenterprise loans SME loans 5 Agriculture/livestock loans 2 Express loans Exhibit 2B.9b: Credit Offerings The number and kinds of credit products vary across institutions. Due to the range of clients targeted, it is important for MFPs to develop a product mix that accounts for the multi-dimensional needs of a diverse set of clients. Increasing competition and maturing markets require MFPs to go beyond generic product design and differentiate their products to serve different market segments and customer demands. Exhibit 2B.9b shows the range of activities for which income-generating loans are available in Pakistan. Loans for microenterprises are by far the most common, with all reporting MFPs offering these, followed by agricultural/livestock microcredit. Other activities for which a growing number of MFPs offer credit products include SME loans and express loans. This suggests that product differentiation in credit is under way and MFPs are beginning to offer products beyond the typical microenterprise loan; with some MFPs moving up the market to target SMEs as well as offer timely express loans. Deposits Only about 37 percent of the reporting MFPs offer savings products. The ability to offer this service is largely determined by the legal status of an MFP: all MFBs, by virtue of being regulated banks, are allowed to intermediate client deposits, and thus all reporting MFBs take deposits. Non-bank MFPs can only mobilize deposits. It is important to note that all savings products reported are voluntary, as none of the reporting MFBs impose compulsory savings on clients. That is, deposit accounts are not required by MFPs as collateral for another financial product/service and instead offered to clients as an independent product. All MFBs offer both demand deposit accounts and time deposit accounts, based on the needs of their clients; though further diversified savings products and access to these savings products would help boost uptake among small-holder savers. Insurance A majority of reporting MFPs offer insurance prodDoes not offer savings accounts 63% Pakistan Microfinance Review 2014 Savings accounts 37% Exhibit 2B.10: Savings Products Offered 33 Financial Services for all Industry Performance ucts to meet clients’ needs and to protect them against risk of losses. This indicator looks both at compulsory insurance, which is typically clubbed with credit products, and voluntary insurance offered to clients as a stand-alone product. Out of the reporting MFPs offering compulsory insurance products, the majority offer credit life insurance only, with limited MFPs offering other types of insurance such as life/ accident and agriculture etc. (see Exhibit 2B.11a). with insurance providers, offering life/accident, agriculture/livestock and health insurance products. Selected partner organizations of PPAF have piloted agriculture/crop and livestock insurance products for their clients with explicit monitoring indexes to insure clients’ losses to crops or livestock in the event of external risks. While a more diversified range of insurance products is welcome, there is also a need to create greater awareness around benefits of existing RSPs MFIs MFBs No. of responses 20 3 15 10 10 2 5 2 2 1 1 1 Life/accident insurance Agriculture insurance 5 Credit life insurance Exhibit 2B.11a: Compulsory Insurance Provision by Peer Groups RSPs MFIs MFBs 8 6 6 4 2 2 2 Credit Life Insurance 1 Life/accident insurance 3 1 Agriculture insurance Health insurance Exhibit 2.B.2.11b: Types of Voluntary Insurance by Peer Groups Over the past few years, some MFIs have introduced voluntary insurance products through partnerships insurance products available to clients. Annual Assessment of the Microfinance Industry No. of responses 10 34 Financial Services for all Section 2 Other Financial Services neurial skills of clients or the performance of their enterprises. This category includes education related to running a business but not financial literacy as such. Non-financial services can be offered by the institution directly or through a partnership. Other financial services provided by MFPs tend to be dominated by MFBs, offering one or more other financial services amongst the following categories: debit/credit card, mobile banking services, savings facilitation, remittances services/money transfer services, payment services and scholarship/educational grants (as shown in Exhibit 2B.12). Some MFIs are now offering clients the facility to repay loan in- In most cases, MFPs offer non-financial services in addition to financial products and services; these services vary according to the capacity and vision of the institution, but the purpose is to develop client skills RSPs MFIs MFBs No. of MFP Responses 8 7 4 6 5 1 4 1 3 2 1 4 3 Debit/credit card 4 4 Remittance/money transfer services Payment services 3 Mobile/branchless banking services Savings facilitation services Exhibit 2B.12: Provision of other financial services Products and Services: NonFinancial and/or provide basic services that they are unable to attain due to financial limitations. This can take the form of provision of basic services like health and education or business and/or technical skills training. For the purpose of this analysis, such services are grouped into four main categories: enterprise, education, health and women’s empowerment. Nonfinancial enterprise services are any non-financial services aimed at improving either the entrepre- MFIs and RSPs are actively providing all types of non-financial services in the market; especially those stallments through branchless banking agents, while some have also supported clients’ families through educational grants/scholarships. RSPs No. of MFP Responses Pakistan Microfinance Review 2014 15 2 12 2 2 9 6 13 12 7 6 3 1 Enterprise services Womens empowerment Education services Exhibit 2B.13: Provision of other financial services 35 MFIs Health services MFBs Financial Services for all Industry Performance N/A, 5% Declining balance 39% Flat interest 57% Exhibit 2B.14a: How Service Cost is Communicated committed to a particular social mission (see Exhibit 2B.13). While MFIs and RSPs are offering at least one (in some cases multiple) non-financial service, only one MFB is offering education services to its clients. Women’s empowerment services are the most popular non-financial service being offered by MFPs; this is not surprising since the majority of MFPs in Pakistan target women as their priority market, and their fundamental social mission relates to women’s economic uplift. Such services usually include women’s rights education/gender issues training and leadership training. Enterprise services, such as enterprise skills development and business development services are also popular; followed by education services like financial literacy education, child and youth education and basic health/nutrition education; and health services like basic medical and special medical services for women and children. ized pricing methodology for easier understanding and comparison across products and MFPs for decision-making. The Pricing Transparency Initiative conducted in Pakistan in collaboration with MFTransparency led to the publication of standardized APRs of loan products across MFPs in Pakistan. Transparency of Cost The industry is making a concentrated effort to promote greater pricing transparency using a standard- RSPs MFIs 20 1 No. of MFP 15 10 5 2 13 6 3 2 1 Declining balance Flat interest N/A MFBs Annual Assessment of the Microfinance Industry While this indicates a positive step towards increased transparency in displaying costs, a majority of MFPs in Pakistan continue to use the flat methodology to communicate prices to clients – where interest rate is communicated on the basis of the stated initial principal amount of the loan irrespective of the payment plan. Around 57 percent of reporting MFPs are using the flat interest rate method; this is primarily due to the simplicity in calculation and marketing. 39 percent use the declining balance method – which means interest is communicated on the amount of the loan principal which the borrower has not yet repaid. One MFP reported interest rates as not being applicable (n/a), offering only Islamic products, as shown in Exhibit 2B.14a. Exhibit 2B.14b: Methods of Stating Service Cost by Peer Group 36 Financial Services for all Section 2 Client Protection Client Protection (CP) principles refer to the minimum ‘do no harm’ standards that clients should expect to receive when doing business with a microfinance institution. These principles help protect clients and help institutions practice good ethics and smart business – which is good for the industry as a whole. There are seven all-encompassing principles of client protection developed by the SMART Campaign, an in- principles, particularly with all reporting MFPs having in place strong repayment capacity analysis, internal audit systems, full pricing terms disclosure, and defined code of conduct. However, as indicated in the sub-section above, not all pricing is disclosed in Annual percentage rates (APR) format, particularly by the non-Bank MFIs. Due to the regulatory framework under which MFBs fall, all reporting Banks show full compliance to the basic CP indicators. RSPs MFIs MFBs No. of MFP responses 30 25 3 3 3 3 3 3 20 15 17 19 19 18 19 19 12 11 10 5 5 5 5 5 5 5 5 P o re lici pa es ym su en pp t c ort a g an pa oo co al cit d m In ys y pl te is ia rn nc a l e a u w d ith it po ve te lic rify rm ie P s s ri an c e di d c s, i n s A cl on st nn os d a ed itio llm ua to ns en of l pe cl fu ts, lo rc ie lly an e nt n s pr ta od ge uc ra ts te di s ( sc AP lo R se ) d Co cl de ea o rl f c y on de d fin uc ed t V co iola nd ti uc ons Cl ts o ea an f c rr ct od ep io e o or ne f tin d fo g s r cl co ys ie m te nt p m s la i at in n br ts pla an fr ce ch om C es da on ta tra pr ct s iv i ac nc y lu cl de au a se 5 3 2 Exhibit 2B.15: Client Protection Indicators Pakistan Microfinance Review 2014 ternational consortium of microfinance stakeholders, which coordinates with the work of MFTransparency in the area of pricing transparency. The seven CP principles include: • Appropriate product design and delivery • Prevention of over-indebtedness • Transparency • Responsible pricing • Fair and respectful treatment of clients • Privacy of client data • Mechanisms for complaint resolution 37 For the purpose of self-reporting on social performance indicators, MFPs provided information regarding the presence of various institutional-level client protection indicators, including policies supporting good repayment capacity analysis, internal audit compliance, full pricing terms disclosure, APR disclosure, CP code of conduct, sanctions for code of conduct violations, clear reporting systems and data privacy clauses. Overall, the sector shows positive compliance to CP Environmental Policies For the first year, SP reporting to MIX consisted of MFPs providing information regarding elements of their environmental policies, often considered to be the ‘triple bottom-line’ for microfinance. These environmental policies refer to MFPs promoting awareness on environmental impacts, having tools to evaluate environmental risks’ of clients activities and including clauses in loan contracts to ensure mitigation of environmental risks through the clients’ businesses (see Exhibit 2B.16a). In addition to this, a few MFPs reported on various types of environmentally friendly products and/or practices that they are currently piloting, including products related to renewable energy, for example solar panels, biogas digesters and so on. Some MFPs are also engaged in financing environmentally friendly businesses, for example organic farming, recycling and/or waste management (see Exhibit 2B.16b). The strong performance of the MFI peer group in this area reflects the efforts carried out by the PPAF, to ensure compliance of all its partner organizations Financial Services for all Industry Performance RSPs MFIs MFBs 2 15 10 3 1 15 10 5 4 5 4 2 3 en vi ro r Cl nm eq au en uir ses ta ing in l l en pra clie oa vi ct nt n c ro ic s t on nm es o tr / i en mi mr act ta tig ov s l r at e is e ks To ol s to e ri val sk u s at of e cl en ie v nt iro s' n ac m tiv en iti tal es en Aw vi ar ro e nm ne en ss r ta ai l i sin m g pa o ct n s 1 pr en Sp od vir ec uc on ific ts m lo an en an d/ tal s l or ly ink pr frie ed ac n to tic dly es No. of MFP responses 20 Exhibit 2B.16a: Environmental Policies in Place to the ‘Environment and Social Management (ESM) Framework. As PPAF-funded institutions, these MFIs are trained on the ESM framework and required to provide quarterly progress update on ESM compliance. External environmental and/or social performance audits are commissioned by PPAF to monitor and physically verify PO compliance of the ESMF. Finally, MFIs are encouraged to incorporate ESM objectives into the Terms of Partnership that they signs with their respective community based institutions. While the reporting is relatively new in this respect, the industry is taking positive steps in moving towards supporting/financing more environmentally sustainable businesses. There is still a need for more comprehensive work in this area, specifically a natural disaster risk mitigation strategy not just to protect MFPs but also clients and their businesses. RSPs 1 4 4 5 3 1 1 ie Pr nd od u re ly p ct cy ra s r cl ct ela in ic t g, e ed w s ( to as e.g e te . o nv m rg ir an a on ag nic m em fa ent r en m ally t e ing tc , ) 1 fr ro du c en ts er rel g a bi y ( ted og e. t as g. s o r di ola ene ge r w st pa ab er n le s els et , c) 1 1 3 P r im e odu pr ffic ct ov ie s r ed nc ela co y (e te ok .g d t in . in o e g s n st ul er ov at g e ion y et , c) 2 MFBs 1 6 5 MFIs Annual Assessment of the Microfinance Industry 7 P No. of MFP responses 8 Exhibit 2B.16b: Environmentally friendly Products/Services offered 38 39 Pakistan Microfinance Review 2014 Financial Services for all Section 2 Annual Assessment of the Microfinance Industry Financial Services for all The Way Forward Section 3 The Way Forward 40 Financial Services for all Section 3 The Way Forward With the industry growing at a double digit rate over the last few years buoyed by an enabling regulatory and policy environment some of the key challenges and opportunities faced by the practitioners are as follow: Inclusive Finance and Microfinance Industry Financial exclusion has been labelled the “new apartheid”. Access to financial services plays an important role in the development of the financial sector and the economy at large. Pakistan Microfinance Review 2014 Access to financial services is one of the key challenges faced by the country. Keeping this in view the State Bank of Pakistan in collaboration with World Bank (WB) has recently developed the National Financial Inclusion Strategy (NFIS) with an aim of improving access to financial services for the unbanked population of the country. 41 Pakistan continues to lag behind in the World Bank’s Financial Inclusion Index (FINDEX). Only 8.7 percent of the adult population in the country has an account with a formal financial institution as compared to 45.5 percent for South Asia . In addition, only 3.3 percent of the adults placed their savings with financial institutions while only 1.5 percent borrowed from financial institutions as against 39.3 percent who borrowed from family and informal money lenders . This shows there is a huge unmet demand which has not yet been tapped by the formal financial sector forc- ing large segments of population to rely on informal sources for financial services. The Microfinance industry can play a crucial and critical role in the inclusive finance sphere. It can offer a wide array of financial services including not only credit products but also savings, insurance and payments services. With its potential clientele being those who belong to the lower income strata of the society, the microfinance industry can bring a large segment of population into formal financial system as compared to other players in the financial industry. Utilizing its synergies with branchless banking and outreach in rural areas the sector can be an effective conduit for improving access to financial services across the country. Areas like low cost housing segments, loans to small and marginalized farmers, value chains and health insurance can be best extended by the microfinance industry as compared to other players in the financial sectors. It is felt that clear demarcation is needed for the role of MFPs in the inclusive finance sphere in the upcoming NFIS. Financial Services for all The Way Forward Towards Accelerated Growth The microfinance industry in the country despite the enabling environment and progressive regulatory framework, investments in industry infrastructure and institutional strengthening, and entry of a new range of practitioners in the market, has been growing at a rate far below its potential in the past few years. Current penetration of 11.5 percent is inadequate showing that practitioners have to cover a lot of ground. Despite all its achievements to date, the industry is far from realizing its potential and contributing significantly to the financial inclusion agenda in Pakistan. Policymakers and financial industry stakeholders are starting to analyze and question the ability of the microfinance sector to make a significant and large scale contribution to the financial exclusion challenge in the country: with such an enabling environment and extensive, sustained support from the donors, why is the sector unable to grow and achieve the scale it needs to have? Thus, in order for microfinance to remain relevant and become an important, integral part of the financial industry, the sector needs to demonstrate it can scale up and grow sustainably, and resultantly have meaningful impact on the financial inclusion landscape within Pakistan and globally. According to recently authored strategy paper by PMN on growth, setting an ambitious credit outreach target for itself will not only allow the industry to fur- ther its goal of inclusive finance but also make it a permanent feature of the financial landscape. Moreover, that level of scale and growth would permanently place microfinance on the policy and growth agenda of the State. A larger size would also increase the industry’s ability to absorb distortions and threats emanating from external interference either in the form of government led credit schemes or issues pertaining to pricing of loans. MFPs can utilize government directed credit schemes and government initiatives like credit guarantees for small and marginalized farmers and low cost housing guarantee schemes to increase outreach in rural areas and enter new market segments like low cost housing. In addition, the fast growing branchless banking segment can be utilized to expand outreach by identifying potential clients based on cell phone usage similar what is being done by M-Shawri in Kenya. Moreover, apprehensions regarding whether growth at accelerated growth could lead to delinquency crisis as witnessed globally in 2008 in Nicaragua, Bosnia, Morocco and Pakistan have been addressed by setting up of MF-CIB, launch of responsible finance and client protection initiatives, strengthening of corporate governance among the players and developing regulatory umbrella for the entire sector. Pakistan’s economy has witnessed the launch of a number of government sponsored credit schemes by various administrations over the years. The aim of these schemes has largely been provision of employment coupled with poverty alleviation. The conduit for these schemes has generally been public sector banks and DFIs whose number has substantially declined due to privatization over the last few decades. Moreover, the result of the schemes has been far from satisfactory. The fault largely lies with the structure of the scheme and the design of the products offered to clients. The incumbent government soon after taking office in 2013 launched two credit schemes namely the Prime Minister (PM) Youth Loan Scheme and Prime Minister (PM) Interest-Free Loan Scheme with an aim of employment generation and poverty alleviation. The interest-free loan scheme was s source of concern for the microfinance industry stakeholders as it had the potential to distort the conventional microfinance industry. However, the scheme was structured and designed in such a manner that rather than overlapping with conventional microfinance it now complements it. The funding for the scheme has been routed through the national apex, PPAF, and loans are extended by selected MFPs to clients Only clients falling below 40 on the poverty scorecard and belonging to those areas where there little or no outreach of conventional microfinance. This successful adaptation of a government credit scheme can work as prelude to how other similar schemes can be structured and designed in a man- Annual Assessment of the Microfinance Industry Adapting Government Credit Schemes 42 Financial Services for all Section 3 ner which would result in a win-win situation for all. Similarly, PM Youth Loan Scheme under which subsidized loans are extended to existing and new business can be modified and adapted. In addition, other recently announced government initiatives like the Credit Guarantee Scheme for Small & Marginalized Farmers and Low Cost Housing Guarantee can be utilized for expanding outreach in rural areas and housing segments. experience in extending non-collateralized loans to borrowers from lower income strata. This experience, market awareness and skill set can be used to channel government credit initiatives. Finally, for an industry which counts funding as one of the key constraints to growth these credit schemes can prove to be quite useful. Moreover, the schemes can be handled efficiently and generate the required impact if they are channelized through MFPs. Microfinance practitioners have Impact Investment According to Global Impact Investing Network (GIIN), “Impact investments are investments made into companies, organizations, and funds with the intention to generate social and environmental impact alongside a financial return.” The impact investors provide funds, both equity and debt, to meet the world’s most pressing challenges in areas like agriculture, housing, education, renewable energy, healthcare, clean technology, and access to financial services. There are over three hundred impact funds globally. In 2012, over USD 8 billion were committed by impact investors as compared to USD 2.5 billion in 2010 . More than 70 percent of the impact investing allocations is to the microfinance industry . Pakistan Microfinance Review 2014 In its report “The Landscape for Impact Investing in South Asia”, GIIN has stated that Pakistan has one of the largest impact investment landscapes in the region. Impact investors have deployed over USD 2 billion so far. There are a variety of impact investors in the country including fund managers, high net worth 43 individuals, development financial institutes (DFIs) and other financial institutions. However, most of the capital has been deployed by DFIs and mostly in the form of debt. The majority of the impact investments in the country so far have been in the energy sector. With increasing global popularity of impact investing and additional funds being committed by impact investors, microfinance players in Pakistan provide an ideal channel for these investors. Moreover, both impact investors and microfinance players share similar objectives i.e. social impact and also, to earn a near market return on their investments. MFPs can work with impact investors for specific interventions like access to financial services, funding low cost private schools, provide off-grid energy solutions and low cost housing. This would require MFPs to develop innovative products to tap these market segments. Impact investments provide MFPs with an opportunity to not only grow but also enter into other market segments. Diversifying Funding Sources A key challenge for the microfinance industry in Pakistan to grow and reach scale is funding. MFPs have been relying for funding upon the national apex, guarantee schemes and deposits (in case of MFBs only). To grow and expand outreach MFPs will have to diversify their sources of funds to meet financing needs in the future. Deposits MFBs have witnessed exponential growth in deposit mobilization in the last few years. The growth has come at the back of above market rates being offered to institutional clients and high net-worth individuals. However, opening of national clearing house membership for MFBs will allow them to mobilize Financial Services for all The Way Forward retail deposits effectively. This would lead to not only increase in deposits but also lower cost of funds. In addition as a result of recent biometric re-verification of SIMs, m-wallet accounts can now be opened without even visiting an agent by customers have had their SIM verified. This initiative is a big opportunity for the sector to migrate the large number of overthe-counter users of branchless banking services to m-wallets. With this step MFBs can extend financial services to a large number of unbanked client and enhance their deposit base. To be able to truly extend saving products to client at the base of pyramid innovative products need to be developed. Currently, clients are being offered a stereotypical product mix which is similar to the one being offered by commercial banks. In addition, MFBs can link up with RSPs and MFIs to attract the savings being mobilized by them and parked at various financial institutes since non-bank MFPs are legally not allowed to mobilize deposits. This would require creating partnerships and incentive structure between deposit-taking and non-deposit taking institutes. Debt Currently, the practitioners are availing debt facilities primarily from the national apex and funds obtained under the two loan guarantee schemes. While the bigger players have been successful is raising funds from commercial banks which are partially or fully secured by the guarantee funds but the same cannot be said for the mid and small sized practitioners. But recent enhancement of risk coverage MFCG to 60 percent for these MFPs will better place them to tap finances from commercial sources. In order to meet their increasing funding needs, MFPs would need to explore options to avail loans from international lenders and also tap debt capital markets. A number of international development financial institutions (DFIs) and microfinance investment vehicles (MIVs) have been exploring the market over the years for possible debt placements. However, the high hedging costs and availability of funds at competitive rates locally had been the inhibiting factors. But recent growth in outreach and lowering of hedging premiums has led to two successful debt placements by an international lender. With continued investor interest in the sector, there is potential for players to tap international lenders to meet their funding needs. Debt capital markets offer microfinance practitioners another avenue to raise funds. Although, there have been only two instances when MFPs have issued redeemable capital but their success coupled with the extension of MCGF coverage to debt capital markets make it an attractive option for practitioners. In addition as large firms move globally towards creating shared values which focuses on the connection between societies and economic progress, microfinance practitioners can tap these shared value initiatives to meet their funding needs. Capacity Building Program: Laying the foundation for a With the sector growing at a steady rate, the demand for capacity building initiatives, in terms of the provision of consistent training opportunities, far outstripped the supply. Since then the Microfinance sector has made many strides through an enabling environment created by the State Bank of Pakistan, Pakistan Poverty Alleviation Fund, UK-Aid’s DFID, PMN and other stakeholders, but the goal of achieving scale has yet to be realized. It is believed that one of the major impediments to achieving growth and sustainability is lack of staff capacities, especially at the middle and lower management levels at the MFPs. It is also true that trained human resource is one of the pre-requisites for a strong, dynamic and growing Microfinance sector, which would need to invest in enhancing capacity by imparting the necessary knowledge and skills which will help equip staff to shoulder their responsibilities effectively in the microfinance organizations they are employed. Efforts to develop the capacity of the human resource in the past were primarily focused on undertaking one-off training programs while the demand for such trainings has been increasing rapidly. The unavailability of adequate external training facilities has also minimized the long-term impact of the various training programs carried out arbitrarily by different sector level institutions. With less dependable sources to provide assistance to help meet the technical and management training needs for microfinance and for Annual Assessment of the Microfinance Industry Training Centre of Excellence for MFPs 44 Financial Services for all Section 3 Inclusive Finance in general, most of the MFPs are currently grappling with issues related to growth and cost effectiveness. However, to reach scale will be challenging for the sector given its current capacity and state. Human Resource Development is a key area that needs to be focused on to achieve such scale, as mentioned earlier. HRD is also of critical importance for the industry given the labor intensive nature of the work and limited trained staff is considered a major barrier to achieving scale through product diversification. With the focus on growth, the staff in the microfinance industry is estimated to increase four fold over the next five years. With current staff capacity already being a major issue, a strategic approach to HRD at the sector level needs to be undertaken. Currently PMN facilitates the provision of opportunities to the senior management tier to enhance its capacity through exposure visits, corporate governance and international trainings with the primary focus on strategic leadership. It is also important to know that the industry is comprised of diverse players each having its own different set of requirements. Whereas large for-profit organizations can support in-house training programs for their mid and lower level staff, medium sized and smaller organizations which constitute the bulk of the industry cannot afford similar trainings. Keeping this in view, the establishment of a Training Centre of Excellence for the Microfinance Providers would be the need of the hour, where technical and managerial trainings can be offered on consistent basis to the increasing number of mid and operational level staff which will be employed in the coming years as the sector moves up on the growth trajectory. Consequently, the long term objective of increasing outreach through the development of innovative products will come to fruition. Micro, Small & Medium Enterprise (MSME) Lending Pakistan Microfinance Review 2014 Micro and Small enterprises in Pakistan face serious issues with access to formal finance given their informal nature, lack of documentation and acceptable collateral. Although commercial banks have had some success with downscaling to meet the needs of medium sized firms in Pakistan, small entrepreneurs remain off their radar and it seems highly unlikely that the mainstream banks will serve this segment in the near future. However, MFPs, especially the MFBs and large MFIs, seem well positioned to enter this market due to its similarities with the microfinance clientele. 45 During the year 2012, the State Bank of Pakistan has revised the loan limits for MFBs from PKR 150,000 to PKR 500,000 in order to promote enterprise lending. Furthermore, the State Bank also initiated the SME Guarantee Fund during the same period. The purpose of the fund was to facilitate MFBs in raising capital from financial institutions in order to move up-market. With the introduction of the above mentioned government initiatives, majority of the MFBs have been successfully piloting microenterprise lending and are continuously improving their product offerings to fully cater the niche market. Many MFBs are in the process of establishing dedicated departments for MSE lending and have also trained their staff with the necessary skills for serving the needs small enterprises. However, this shift will represent some challenges to MFPs lacking expertise in larger enterprise lending. It requires significant up-scaling of loan sizes from the present average loan of PKR 28,269 . In order to fully capture the enterprise segment, MFBs will need to treat micro and small enterprise clients differently from the conventional retail segment. Emphasis should be on product development that can fulfill the requirements of small enterprises while not burdening the resources of the microfinance banks. Moreover, the focus of conventional microfinance has been on household repayment capacity which will now have to shift to the enterprise’s repayment capacity. This will require investment into understanding the demands and needs of the market segment, building a different skill set amongst field staff, finding sources of funds to meet the financing needs driven by the relatively larger loan sizes, and understanding the risks. Despite many challenges, MFPs might bring important advantages to the MSE market. Compared to mainstream banks, MFPs may have closer relationships with their customers, maintaining a high level of trust and making it easy to understand client Financial Services for all The Way Forward needs. Another advantage is that MFPs often have faster lending procedures and require less collateral than commercial banks. Finally, MFPs can reach customers who do not have access to banks or who face serious obstacles, such as their own informality or high bank fees. Anti-Money Laundering (AML), Customer Due Diligence (CDD) and Terrorist Financing Over the past year, the SBP has taken comprehensive measures to combat money laundering and terrorist financing activities. These measures were visible in the revision of prudential regulations for MFBs in 2014 which introduced a broad set of guidelines covering areas such as customer identification and verification requirements, ongoing and enhanced due diligence, record retention, cash and suspicious transactions reporting in line with standards prescribed by Financial Action Task Force (FATF). Moreover, SBP has allowed MFBs to take additional measures as per risk involved in line with the FATF recommendations. The AML and CDD requirements may entail some MFBs to enhance their internal controls by updating their client in-take forms, operating procedures, and information systems. Similarly, training staff in new procedures is vital to the successful implementation of the AML and CDD guidelines. In addition, these regulations would impact branchless banking where operators are aiming for convenience and hassle opening of m-wallets. This would require balancing of AML and CDD requirements with ease of opening of accounts. The guidelines introduced by SBP are aimed to safeguard MFBs from the threat of money laundering, terrorist financing and other related unlawful activities which can damage the national financial system. Illegitimate financial holdings and assets are unreliable sources of investment capital for sustainable economic development and can destabilize the national economy. Agriculture is the backbone of the economy for majority of the developing countries. The potential of this segment becomes fully clear if we look at the value chains that link farm production to rural trading and other sectors of the economy. These chains show that farmers do not operate in isolation, but are part of a wider system which encompasses processors, traders, transporters, input suppliers and retailers. However, the lack of financing limits the growth potential of different micro-entrepreneurs at different parts of the value chain. Private financial institutions have tended to regard such micro-entrepreneurs as un-bankable as they lack the kind of collateral and guarantees banks demand before lending. For bankers it is easier and more lucrative to provide a handful of large loans to well-established businesses, rather than lots of small loans to such micro-entrepreneurs. In Pakistan, the State Bank of Pakistan is taking commendable steps to ensure the success of value chains by facilitating various chain actors. A component of these initiatives is the ‘Value-Chain Contract Farmer Financing’ scheme to build a link between banks and small farmers who have no access to formal financing . The introduction of the Value Chain Contract Farmer Financing scheme will enable farmers to avail financing from banks backed by a processor’s guarantee and in return buyers/processors may get assurance of getting required quantity and quality of agricultural produce. Under the scheme, banks will be accepting guarantees from a lead firm acting as a bridge between banks and farmers. The term ‘lead firm’ applies to the processors of agricultural produce, input suppliers, stockist, a marketing company, trader or exporter. Annual Assessment of the Microfinance Industry Agriculture Value Chains Furthermore, SBP has also introduced ‘Warehouse 46 Financial Services for all Section 3 Pakistan Microfinance Review 2014 Receipt Financing’ to reduce uncertainty and increase efficiency in the agriculture market. The warehouse receipts system, also known as inventory credits, can facilitate financing for inventory or products held in storage. Warehouse receipt financing is a collateralized commodity transaction where the goods themselves provide security for the loan. This type of financing allows lenders to immediately sell off a very liquid asset, namely the commodities they grow, if a 47 farmer defaults on the loan. The underlying collateral is usually a soft commodity like wheat, rice, maize, cotton and other grains . On the whole, agriculture value chains provide an ideal platform to extend credit in the rural areas at a relatively lower cost and reduced risk for the MFPs. Annual Assessment of the Microfinance Industry Financial Services for all The Way Forward 48 49 Pakistan Microfinance Review 2014 Financial Services for all Section 3 Annual Assessment of the Microfinance Industry Financial Services for all Annexures Annexures Annexures 50 Financial Services for all Annexures AI - Performance Indicators of Industry 2014 Infrastructure 2010 2011 2012 2013 2014 35,826,211 48,569,411 61,928,036 81,557,894 105,443,135 1,405 1,550 1,630 1,606 2,026 12,005 14,202 15,153 17,456 21,516 Total Assets 17.6% 35.6% 27.5% 31.7% 29.3% Branches (Including Head Office) 15.1% 10.3% 5.2% -1.5% 26.2% 3.9% 18.3% 6.7% 15.2% 23.3% 2010 2011 2012 2013 2014 Total Assets (PKR 000) 35,826,211 48,569,411 61,928,036 81,557,894 105,443,135 Total Equity (PKR 000) 8,359,260 10,314,307 11,679,373 17,049,706 22,873,920 Total Debt (PKR 000) 27,466,951 38,255,104 25,876,598 26,913,359 34,682,369 Commercial Liabilities (PKR 000) 4,910,265 12,332,456 19,361,179 21,662,200 18,679,724 Deposits (PKR 000)* 10,132,332 13,908,759 20,840,990 32,925,558 42,715,846 Gross Loan Portfolio (PKR 000) 20,295,915 24,854,747 33,877,284 46,613,582 63,531,465 Equity-to-Asset Ratio 23.3% 21.2% 18.9% 20.9% 21.7% Commercial Liabilities-to-Total Debt 17.9% 32.2% 74.8% 80.5% 53.9% 3.29 3.41 2.22 1.58 1.52 49.9% 56.0% 61.5% 70.6% 67.2% Total Assets (PKR 000) Branches (Including Head Office) Total Staff Growth Rate Total Staff Pakistan Microfinance Review 2014 Financing Structure 51 Ratios Debt-to-Equity Ratio Deposits-to-Gross Loan Portfolio *Only MFB deposits included Financial Services for all AI - Performance Indicators of Industry 2014 2010 2011 2012 2013 2014 Deposits-to-Total Assets 28.3% 28.6% 33.7% 40.4% 40.5% Gross Loan Portfolio-to-Total Assets 56.7% 51.2% 54.7% 57.2% 60.3% *Only MFB deposits included 2010 2011 2012 2013 2014 1,567,355 1,661,902 2,040,518 2,392,874 2,997,868 811,520 917,058 1,275,387 1,442,197 1,692,451 20,295,915 24,854,747 33,877,284 46,613,582 63,531,465 Annual per capita income (PKR)* 105,300 107,505 118,085 143,808 143,808 Number of Loans Outstanding 1,547,197 1,661,902 2,040,518 2,401,849 2,998,895 Depositors** 764,271 1,332,705 1,730,823 2,150,675 5,675,437 Number of Deposit Accounts 764,271 1,332,705 1,730,823 2,998,641 5,675,437 Number of Women Depositors 64,159 259,104 334,994 837,144 2,503,582 10,132,332 13,908,759 20,840,990 32,925,559 42,715,786 Weighted Avg. Weighted Avg. Active Borrowers Active Women Borrowers Gross Loan Portfolio (PKR 000) Deposits Outstanding Proportion of Active Women Borrowers (%) 51.8% 55.2% 62.5% 60.3% 56.5% 12,949 14,956 16,602 19,480 21,192 Average Loan Balance per Active Borrower/Per Capita Income 12.3% 13.9% 14.1% 13.5% 14.7% Average Outstanding Loan Balance (PKR) 13,118 14,956 16,602 19,407 21,185 Average Outstanding Loan Balance /Per Capita Income 12.5% 13.9% 14.1% 13.5% 14.7% Proportion of Active Women Depositors (%) 8.4% 19.4% 19.4% 38.9% 44.11% Average Saving Balance per Active Depositor (PKR) 13,258 10,436 12,041 15,309 7,526 Active Deposit Account Balance (PKR) 13,258 10,436 12,041 10,980 7,526 Average Loan Balance per Active Borrower (PKR) * Source: http://www.sbp.org.pk/reports/stat_reviews/Bulletin/2012/Feb/EconomicGrowth.pdf ** Only MFB deposits included Annual Assessment of the Microfinance Industry Outreach 52 Financial Services for all Annexures Financial Performance 2010 2011 2012 2013 2014 6,122,154 7,998,956 10,040,720 13,542,893 18,581,489 Income from investments 870,809 1,203,306 1,774,610 1,742,975 2,051,547 Income from other sources 528,457 899,713 816,461 2,093,035 3,707,417 Income from loan portfolio Total revenue 7,521,420 10,101,975 12,631,792 17,378,903 24,340,453 Less : financial expense 2,016,795 2,905,049 3,974,467 4,767,589 5,451,197 Gross financial margin 5,504,624 7,196,926 8,657,325 12,611,314 18,889,256 Less: loan loss provision expense 745,660 623,988 643,991 658,812 794,500 Net financial margin 4,758,964 6,572,938 8,013,334 11,952,503 18,094,756 Personnel expense 2,819,891 3,345,284 3,784,676 5,032,342 6,557,709 Admin expense 1,961,816 2,446,750 2,886,025 3,880,920 5,951,408 Less: operating expense 4,781,707 5,792,035 1,342,633 8,913,262 12,509,117 257,651 380,993 1,546,240 1,084,982 2,658,248 4,039,399 Other Non operating expense Net income before tax Provision for tax (22,742) 780,903 (7,047) 116,314 152,380 503,118 614,684 (15,696) 664,589 932,602 2,155,130 3,424,715 Adjusted Financial Expense on Borrowings - 372,524 205,943 181,422 113,553 Inflation Adjustment Expense - (3,073) 870 1,152 916 Adjusted Loan Loss Provision Expense - 357,688 49,456 18,743 13,625 Total Adjustment Expense - 727,138 256,270 201,317 128,095 (15,696) (62,549) 676,332 1,953,814 3,296,620 Average total assets 30,399,088 42,282,393 57,182,714 70,192,281 95,494,664 Average total equity 7,854,713 8,719,204 11,594,943 14,513,187 Net income/(loss) Net Income/(Loss) After Adjustments Pakistan Microfinance Review 2014 Ratios 53 20,629,780 weighted avg. Adjusted Return-on-Assets (0.1%) (0.1%) 1.2% 3.3% 3.5% Adjusted Return-on-Equity (0.2%) (0.7%) 5.8% 16.1% 16.0% Operational Self Sufficiency (OSS) 99.7% 108.4% 109.4% 118.1% 119.9% Financial Self Sufficiency (FSS) 81.7% 100.5% 107.0% 116.5% 117.7% Financial Services for all AI - Performance Indicators of Industry 2014 Operating Income 2010 2011 2012 2013 2014 Revenue from Loan Portfolio 6,122,154 7,998,956 10,040,720 13,542,893 18,581,489 Total Revenue 7,521,420 10,101,975 12,631,792 17,378,903 24,821,486 Adjusted Net Operating Income / (Loss) -22,742 5,252 828,712 2,456,931 3,286,779 Average Total Assets 30,399,088 42,282,393 57,182,714 70,192,281 95,494,664 Gross Loan Portfolio (Opening Balance) 16,948,466 20,576,342 25,743,757 34,668,730 48,423,008 Gross Loan Portfolio (Closing Balance) 20,295,915 24,854,747 33,877,284 46,105,712 63,531,465 Average Gross Loan Portfolio 18,622,190 22,715,544 29,810,520 40,387,221 55,977,237 15.0% 11.2% 10.4% 9.2% 8% Inflation Rate * weighted avg. Total Revenue Ratio (Total Revenue-to-Average Total Assets) 24.7% 23.9% 22.3% 24.8% 26.0% Adjusted Profit Margin (Adjusted Profit/(Loss)-to-Total Revenue) (0.3%) 0.1% 7.0% 14.1% 13.2% Yield on Gross Portfolio (Nominal) 32.9% 35.2% 34.2% 33.5% 34.6% Yield on Gross Portfolio (Real) 15.5% 21.6% 21.6% 22.3% 24.4% * Source: http://www.sbp.org.pk/reports/stat_reviews/Bulletin/2012/Feb/IND.pdf 2010 2011 2012 2013 2014 Adjusted Total Expense 7,544,162 10,096,723 11,803,080 14,540,979 20,842,120 Adjusted Financial Expense 2,016,795 3,304,504 4,181,281 4,950,162 5,742,091 Adjusted Loan Loss Provision Expense 745,660 1,000,184 693,447 677,555 808,125 Adjusted Operating Expense 4,781,707 5,792,035 6,928,352 8,913,262 14,291,904 Adjustment Expense - 775,651 256,270 201,317 453,639 Average Total Assets 30,399,088 42,282,393 57,182,714 Ratios 70,192,281 95,494,664 Weighted avg. Weighted avg. Adjusted Total Expense-to-Average Total Assets 24.8% 23.9% 20.6% 20.7% 21.8% Adjusted Financial Expense-to-Average Total Assets 6.6% 7.8% 7.3% 7.1% 6.0% Annual Assessment of the Microfinance Industry Operating Expense 54 Financial Services for all Annexures 2010 2011 2012 2013 2014 Adjusted Loan Loss Provision Expense-to-Average Total Assets 2.5% 2.4% 1.2% 1.0% 0.8% Adjusted Operating Expense-to-Average Total Assets 15.7% 13.7% 12.1% 12.7% 15.0% Adjusted Personnel Expense 9.3% 7.9% 6.6% 7.2% 6.9% Adjusted Admin Expense 6.5% 5.8% 5.0% 5.5% 6.2% Adjustment Expense-to-Average Total Assets 0.0% 1.8% 0.4% 0.3% 0.5% 2010 2011 2012 2013 2014 Operating Expense (PKR 000) 4,781,707 5,792,035 6,928,352 8,913,262 12,745,665 Personnel Expense (PKR 000) 2,819,891 3,345,284 3,784,676 5,032,342 6,794,257 Average Gross Loan Portfolio (PKR 000) 18,622,190 22,715,544 29,810,520 40,387,221 55,977,237 Average Number of Active Borrowers 1,567,355 1,661,902 2,040,518 2,350,650 2,997,868 Average Number of Active Loans 1,567,355 1,661,902 2,040,518 2,359,625 2,998,895 weighted avg. weighted avg. Pakistan Microfinance Review 2014 Operating Efficiency 55 Adjusted Operating Expense-to-Average Gross Loan Portfolio 25.7% 25.5% 23.2% 22.1% 22.8% Adjusted Personnel Expense-to-Average Gross Loan Portfolio 15.1% 14.7% 12.7% 12.5% 12.1% Average Salary/ Gross Domestic Product per Capita 2.23 2.19 2.12 2.00 2.2 Adjusted Cost per Borrower (PKR) 3,051 3,485 3,395 3,792 4,252 Adjusted Cost per Loan (PKR) 3,051 3,485 3,395 3,777 4,250 Financial Services for all AI - Performance Indicators of Industry 2014 2010 2011 2012 2013 2014 Number of Active Borrowers 1,567,355 1,661,902 2,040,518 2,255,126 2,997,868 Number of Active Loans 1,567,355 1,661,902 2,040,518 2,263,432 2,997,868 Number of Active Depositors 764,271 1,332,705 1,730,823 1,897,872 5,675,437 Number of Deposit Accounts 764,271 1,332,705 1,730,823 2,707,872 5,675,437 12,005 14,202 15,153 15,673 19,281 5,148 7,165 7,541 Total Staff Total Loan Officers 6,892 8,838 weighted avg. weighted avg. Borrowers per Staff 131 117 135 144 156 Loans per Staff 131 117 135 144 156 Borrowers per Loan Officer 304 232 271 327 328 Loans per Loan Officer 304 232 271 328 328 Depositors per Staff 64 94 114 121 294 Deposit Accounts per Staff 64 94 114 173 294 42.9% 50.5% 49.8% 44.0% 45.8% Personnel Allocation Ratio Annual Assessment of the Microfinance Industry Productivity 56 Financial Services for all Annexures Pakistan Microfinance Review 2014 Risk 57 2010 2011 2012 2013 2014 Portfolio at Risk > 30 days 829,314 793,966 1,232,842 1,157,297 659,418 Portfolio at Risk > 90 days 577,972 516,623 1,020,316 932,166 379,637 Adjusted Loan Loss Reserve 733,338 623,988 759,621 708,355 1,189,884 Loan Written Off during Year 335,463 592,429 675,835 615,293 1,222,076 Gross Loan Portfolio 20,295,915 24,854,747 33,877,284 46,105,712 63,531,465 Average Gross Loan Portfolio 18,622,190 22,715,544 29,810,520 40,387,221 55,977,237 weighted avg. weighted avg. Portfolio at Risk (>30)-to-Gross Loan Portfolio 4.1% 3.2% 3.6% 2.5% 1.0% Portfolio at Risk(>90)-to-Gross Loan Portfolio 2.8% 2.1% 3.0% 2.0% 0.6% Write Off-to-Average Gross Loan Portfolio 1.8% 2.6% 2.3% 1.5% 2.2% Risk Coverage Ratio (Adjusted Loan Loss Reserve-to-Portfolio at Risk > 30 days) 88.4% 78.6% 61.6% 61.2% 180.4% Annual Assessment of the Microfinance Industry Financial Services for all AI - Performance Indicators of Industry 2014 58 Financial Services for all Annexures AII - Performance Indicators of Individual MFPs 2014 Infrastructure MFB KBL TMFB Total Assets (PKR 000) 16,692,434 Total Equity (PKR 000) 3,285,461 13,406,972 Total Liabilities (PKR 000) Branches (including Head Office) Personnel POMFB FMFB NRSP-B FINCA 16,393,293 1,114,932 10,674,730 11,797,616 6,380,471 2,843,921 1,069,234 1,237,139 2,126,104 1,263,975 13,549,372 45,698 9,437,591 9,671,512 5,116,495 118 149 16 100 58 100 2,622 2,058 206 1,169 1,429 1,268 MFB AMFB WASEELA U-Bank Sub Total Assets (PKR 000) 1,758,955 2,540,847 1,832,009 69,185,285 Total Equity (PKR 000) 542,609 1,036,330 956,749 14,361,522 1,216,346 1,504,517 875,260 54,823,764 17 41 28 627 271 412 338 9,773 OCT KASHF SAFCO DAMEN CSC GBTI 681,771 5,311,217 611,905 1,331,084 747,631 125,416 Total Liabilities (PKR 000) Branches (including Head Office) Personnel MFI Total Assets (PKR 000) Total Equity (PKR 000) 283,345 414,033 93,172 251,241 62,629 98,135 Total Liabilities (PKR 000) 398,426 4,897,184 518,733 1,079,843 685,003 27,281 21 178 27 30 17 13 100 2,064 245 228 180 67 FFO ASA-P BRAC-P JWS Sungi ORIX 360,506 Pakistan Microfinance Review 2014 Branches (including Head Office) 59 Personnel MFI Total Assets (PKR 000) 350,324 2,810,461 1,238,183 725,716 114,187 Total Equity (PKR 000) 17,024 1,140,198 113,310 236,474 90,243 65,249 333,299 1,670,263 1,124,873 489,243 23,914 295,257 Total Liabilities (PKR 000) Financial Services for all AII - Performance Indicators of Individual MFPs 2014 MFI FFO Branches (including Head Office) Personnel ASA-P BRAC-P JWS Sungi ORIX 18 171 68 25 4 10 176 1,044 610 197 54 70 MFI Total Assets (PKR 000) RCDS Agahe AMRDO MO Mojaz Naymet 938,441 107,524 214,795 115,388 274,208 10,295 Total Equity (PKR 000) 321,592 23,072 39,750 31,039 61,005 9,452 Total Liabilities (PKR 000) 616,849 84,452 175,044 84,349 213,203 620 35 6 15 5 11 6 297 46 119 26 158 14 BEDF OPD SAATH SRDO SVDP DEEP Branches (including Head Office) Personnel MFI Total Assets (PKR 000) 24,429 137,221 83,441 79,728 138,089 1,300 Total Equity (PKR 000) 12,048 18,587 20,213 6,260 36,606 -2,336 Total Liabilities (PKR 000) 12,381 118,634 63,229 73,469 101,483 3,636 2 6 4 4 4 2 14 59 25 21 47 15 Branches (including Head Office) Personnel MFI BAIDARIE Wasil VDO Akhuwat Sub 120,480 205,538 56,039 4,048,211 20,963,530 Total Equity (PKR 000) 20,713 -121,269 3,352 767,292 4,112,428 Total Liabilities (PKR 000) 99,767 326,807 52,687 3,280,919 16,850,847 Total Assets (PKR 000) Branches (including Head Office) Personnel 3 17 2 261 965 56 82 16 1,549 7,579 NRSP PRSP SRSP TRDP SRSO Sub Total Assets (PKR 000) 9,777,107 2,522,339 74,496 1,557,256 1,363,123 15,294,320 Total Equity (PKR 000) 2,633,849 1,272,129 26,965 387,618 79,409 4,399,970 Total Liabilities (PKR 000) 7,143,258 1,250,210 47,559 1,169,638 1,283,714 10,894,379 161 61 9 151 52 434 2,572 643 26 589 334 4,164 Sub MFB Sub MFI Sub RSP Total 105,443,135 Branches (including Head Office) Personnel Total Assets (PKR 000) 69,185,285 20,963,530 15,294,320 Total Equity (PKR 000) 14,361,522 4,112,428 4,399,970 22,873,920 Total Liabilities (PKR 000) 54,823,764 16,850,847 10,894,379 82,568,989 Branches (including Head Office) Personnel 627 965 434 2,026 9,773 7,579 4,164 21,516 Annual Assessment of the Microfinance Industry RSP 60 Financial Services for all Annexures Financing Structure in PKR ‘000 MFB KBL TMFB POMFB FMFB NRSP-B FINCA 16,692,434 16,393,293 1,114,932 10,674,730 11,797,616 6,380,471 Total Equity 3,285,461 2,843,921 1,069,234 1,237,139 2,126,104 1,263,975 Total Debt 3,729,877 239,211 - 289,880 4,204,216 201,100 2,182,377 - - - - - Total Assets - Subsidized debt* 1,547,500 239,211 - 289,880 4,204,216 201,100 Total Deposits - Commercial debt 8,682,473 12,261,354 22,128 8,749,901 5,159,810 4,656,177 Total Liabilities 13,406,972 13,549,372 45,698 9,437,591 9,671,512 5,116,495 Gross loan portfolio 12,238,252 8,981,390 223,832 4,479,999 5,192,071 4,028,415 Weighted Avg. Equity-to-asset ratio 19.7% 17.3% 95.9% 11.6% 18.0% 19.8% Commercial liabilities-to-total debt 41.5% 100.0% 0.0% 100.0% 100.0% 100.0% 1.1 0.1 0.0 0.2 2.0 0.2 Deposits-to-gross loan portfolio 70.9% 136.5% 9.9% 195.3% 99.4% 115.6% Deposits-to-total assets 52.0% 74.8% 2.0% 82.0% 43.7% 73.0% 6.5% 6.1% 1.1% 6.5% 8.5% 7.4% 73.3% 54.8% 20.1% 42.0% 44.0% 63.1% Debt-to-equity ratio Cost of funds Gross loan portfolio-to-total assets *Below market rate MFB AMFB WASEELA U-Bank Sub Total Assets 1,758,955 2,540,847 1,832,009 69,185,285 Total Equity 542,609 1,036,330 956,749 14,361,522 - - - 8,664,284 - Subsidized debt* - - - 2,182,377 - Commercial debt - - - 6,481,907 Total Deposits 1,193,507 1,287,919 702,579 42,715,846 Total Liabilities 1,216,346 1,504,517 875,260 54,823,764 798,673 500,402 346,493 Total Debt Gross loan portfolio 36,789,528 Weighted Avg. Equity-to-asset ratio Commercial liabilities-to-total debt Pakistan Microfinance Review 2014 Debt-to-equity ratio 61 Deposits-to-gross loan portfolio Deposits-to-total assets Cost of funds Gross loan portfolio-to-total assets *Below market rate 30.8% 40.8% 52.2% 20.8% 0.0% 0.0% 0.0% 74.8% 0.0 0.0 0.0 0.6 149.4% 257.4% 202.8% 116.1% 67.9% 50.7% 38.4% 61.7% 6.6% 2.3% 2.4% 6.7% 45.4% 19.7% 18.9% 53.2% Financial Services for all AII - Performance Indicators of Individual MFPs 2014 MFI OPP KASHF SAFCO DAMEN CSC GBTI 125,416 Total Assets 681,771 5,311,217 611,905 1,331,084 747,631 Total Equity 283,345 414,033 93,172 251,241 62,629 98,135 Total Debt 365,663 4,692,724 498,695 1,074,253 515,286 26,028 26,028 - Subsidized debt* 170,333 1,840,000 444,695 1,039,409 396,342 - Commercial debt 195,330 2,852,724 54,000 34,844 118,944 - - - - - Total Deposits - Total Liabilities 398,426 4,897,184 518,733 1,079,843 685,003 27,281 Gross loan portfolio 460,538 3,752,325 422,532 1,003,160 381,000 81,252 Weighted Avg. Equity-to-asset ratio 41.6% 7.8% 15.2% 18.9% 8.4% 78.2% Commercial liabilities-to-total debt 53.4% 60.8% 10.8% 3.2% 23.1% 0.0% 1.3 11.3 5.4 4.3 8.2 0.3 Debt-to-equity ratio Deposits-to-gross loan portfolio - - - - - - Deposits-to-total assets - - - - - - Cost of funds Gross loan portfolio-to-total assets 7.5% 11.2% 6.6% 10.4% 8.3% 11.4% 67.6% 70.6% 69.1% 75.4% 51.0% 64.8% *Below market rate MFI FFO ASA-P BRAC-P JWS Sungi ORIX Total Assets 350,324 2,810,461 1,238,183 725,716 114,187 360,506 Total Equity 17,024 1,140,198 113,310 236,474 90,243 65,249 288,353 Total Debt 295,902 1,437,120 918,868 467,359 20,001 - Subsidized debt* 148,853 382,187 584,900 - - - - Commercial debt 147,048 1,054,933 333,968 467,359 20,001 288,353 - - - - - - Total Liabilities Total Deposits 333,299 1,670,627 1,124,873 489,243 23,914 295,257 Gross loan portfolio 263,747 2,733,482 1,224,784 509,994 107,700 315,559 4.9% 40.6% 9.2% 32.6% 79.0% 18.1% 49.7% 73.4% 36.3% 100.0% 100.0% 100.0% 4.4 Commercial liabilities-to-total debt 17.4 1.3 8.1 2.0 0.2 Deposits-to-gross loan portfolio Debt-to-equity ratio - - - - - - Deposits-to-total assets - - - - - - Cost of funds Gross loan portfolio-to-total assets 7.6% 5.2% 7.4% 8.8% 9.3% 7.4% 75.3% 97.3% 98.9% 70.3% 94.3% 87.5% Annual Assessment of the Microfinance Industry Weighted Avg. Equity-to-asset ratio 62 Financial Services for all Annexures MFI RCDS Agahe AMRDO MO Mojaz Naymet Total Assets 938,441 107,524 214,795 115,388 274,208 10,295 Total Equity 321,592 23,072 39,750 31,039 61,005 9,452 Total Debt 577,572 81,467 169,016 84,070 171,352 - - Subsidized debt* 527,921 81,467 164,077 78,115 171,302 - - Commercial debt 49,651 - 4,939 5,955 50 - - - - - - - Total Deposits Total Liabilities 616,849 84,452 175,044 84,349 213,203 620 Gross loan portfolio 617,401 74,556 114,414 86,663 163,612 9,713 Weighted Avg. Equity-to-asset ratio Commercial liabilities-to-total debt Debt-to-equity ratio 34.3% 21.5% 18.5% 26.9% 22.2% 91.8% 8.6% 0.0% 2.9% 7.1% 0.0% 0.0% 1.8 3.5 4.3 2.7 2.8 0.0 Deposits-to-gross loan portfolio - - - - - - Deposits-to-total assets - - - - - - Cost of funds 10.1% 7.6% 6.8% 6.3% 9.1% 0.0% Gross loan portfolio-to-total assets 65.8% 69.3% 53.3% 75.1% 59.7% 94.3% DEEP *Below market rate MFI BEDF OPD SAATH SRDO SVDP Total Assets 24,429 137,221 83,441 79,728 138,089 1,300 Total Equity 12,048 18,587 20,213 6,260 36,606 (2,336) Total Debt 10,036 107,608 52,351 67,990 96,653 3,179 - Subsidized debt* 10,036 107,608 33,800 60,104 87,267 3,179 - Commercial debt - - 18,551 7,886 9,386 - - - - - - - Total Liabilities Total Deposits 12,381 118,634 63,229 73,469 101,483 3,636 Gross loan portfolio 16,264 99,648 55,936 60,477 93,443 825 49.3% 13.5% 24.2% 7.9% 26.5% -179.7% 0.0% 0.0% 35.4% 11.6% 9.7% 0.0% -1.4 Weighted Avg. Equity-to-asset ratio Commercial liabilities-to-total debt 0.8 5.8 2.6 10.9 2.6 Deposits-to-gross loan portfolio Debt-to-equity ratio - - - - - - Deposits-to-total assets - - - - - - Pakistan Microfinance Review 2014 Cost of funds 63 Gross loan portfolio-to-total assets *Below market rate 0.0% 8.7% 11.5% 10.0% 8.4% 274.6% 66.6% 72.6% 67.0% 75.9% 67.7% 63.5% Financial Services for all AII - Performance Indicators of Individual MFPs 2014 MFI BAIDARIE Wasil VDO Akhuwat Sub 20,963,530 Total Assets 120,480 205,538 56,039 4,048,211 Total Equity 20,713 (121,269) 3,352 767,292 4,112,428 Total Debt 96,088 286,423 27,865 3,248,297 15,680,221 - Subsidized debt* 88,129 286,423 19,084 3,248,297 9,999,558 - Commercial debt 7,959 - 8,782 - 5,680,663 - - - - - Total Deposits Total Liabilities 99,767 326,807 52,687 3,280,919 16,851,211 Gross loan portfolio 56,105 115,659 29,047 2,465,625 15,315,461 Weighted Avg. Equity-to-asset ratio Commercial liabilities-to-total debt Debt-to-equity ratio 17.2% -59.0% 6.0% 19.0% 19.6% 8.3% 0.0% 31.5% 0.0% 36.2% 4.6 -2.4 8.3 4.2 3.81 Deposits-to-gross loan portfolio - - - - - Deposits-to-total assets - - - - - Cost of funds Gross loan portfolio-to-total assets 7.0% 8.9% 19.7% 35.4% 7.3% 46.6% 56.3% 51.8% 60.9% 73.1% *Below market rate RSP NRSP PRSP SRSP TRDP SRSO Sub Total Assets 9,777,107 2,522,339 74,496 1,557,256 1,363,123 15,294,320 Total Equity 2,633,849 1,272,129 26,965 387,618 79,409 4,399,970 10,337,864 Total Debt 6,844,633 1,064,064 34,500 1,124,667 1,270,000 - Subsidized debt* 2,091,544 - 34,500 974,667 720,000 3,820,710 - Commercial debt 4,753,089 1,064,064 - 150,000 550,000 6,517,153 - - - - - - Total Liabilities Total Deposits 7,143,258 1,250,210 47,559 1,169,638 1,283,714 10,894,351 Gross loan portfolio 7,653,444 1,149,283 37,519 1,376,726 1,209,504 11,426,476 Equity-to-asset ratio 26.9% 50.4% 36.2% 24.9% 5.8% 28.8% Commercial liabilities-to-total debt 69.4% 100.0% 0.0% 13.3% 43.3% 63.0% 2.35 2.6 0.8 1.3 2.9 16.0 Deposits-to-gross loan portfolio Debt-to-equity ratio - - - - - - Deposits-to-total assets - - - - - - Cost of funds Gross loan portfolio-to-total assets *Below market rate 8.3% 9.7% 7.0% 8.5% 7.5% 8.3% 78.3% 45.6% 50.4% 88.4% 88.7% 74.7% Annual Assessment of the Microfinance Industry Weighted Avg. 64 Financial Services for all Annexures Sub MFB Sub MFI Sub RSP Total Total Assets 69,185,285 20,963,530 15,294,320 105,443,135 Total Equity 14,361,522 4,112,428 4,399,970 22,873,920 Total Debt 8,664,284 15,680,221 10,337,864 34,682,369 - Subsidized debt* 2,182,377 9,999,558 3,820,710 16,002,646 - Commercial debt 6,481,907 5,680,663 6,517,153 18,679,724 Total Deposits 42,715,846 - - 42,715,846 Total Liabilities 54,823,764 16,851,211 10,894,351 82,569,216 Gross loan portfolio 36,789,528 15,315,461 11,426,476 63,531,465 Weighted Avg. Equity-to-asset ratio 20.8% 19.6% 28.8% 21.7% Commercial liabilities-to-total debt 74.8% 36.2% 63.0% 53.9% 0.6 3.81 2.35 1.52 116.1% - - 67.2% 61.7% - - 40.5% 6.7% 7.3% 8.3% 7.0% 53.2% 73.1% 74.7% 60.3% Debt-to-equity ratio Deposits-to-gross loan portfolio Deposits-to-total assets Cost of funds Gross loan portfolio-to-total assets Pakistan Microfinance Review 2014 *Below market rate 65 Financial Services for all AII - Performance Indicators of Individual MFPs 2014 Outreach MFB Active Borrowers Active Women Borrowers Gross Loan Portfolio (PKR 000) Annual Per Capita Income (PKR)* KBL TMFB POMFB FMFB NRSP-B FINCA 468,638 226,870 6,220 148,776 194,489 75,804 119,925 75,583 1,523 52,212 27,744 3,532 12,238,252 8,981,390 223,832 4,479,999 5,192,071 4,028,415 143,808 143,808 143,808 143,808 143,808 143,808 Number of Loans outstanding 468,638 226,870 6,220 148,776 194,489 76,791 Depositors 900,081 3,481,340 18,301 270,787 327,128 267,913 Number of Deposit Accounts 900,081 3,481,340 18,301 270,787 327,128 267,913 Number of Women Depositors Deposits Outstanding (PKR 000) 223,286 2,133,294 5,160 73,872 49,281 13,341 8,682,473 12,261,354 22,128 8,749,901 5,159,810 4,656,177 Weighted Avg. Proportion of active women borrowers (%) 25.6% 33.3% 24.5% 35.1% 14.3% 4.7% Average loan balance per active borrower (PKR) 26,115 39,588 35,986 30,112 26,696 53,143 Average loan balance per active borrower/per capita income 18.2% 27.5% 25.0% 20.9% 18.6% 37.0% Average outstanding loan balance (PKR) 26,115 39,588 35,986 30,112 26,696 52,459 Average outstanding loan balance / per capita income 18.2% 27.5% 25.0% 20.9% 18.6% 36.5% Proportion of active women depositors (%) 24.8% 61.3% 28.2% 27.3% 15.1% 5.0% Average saving balance per active depositor (PKR) 9,646 3,522 1,209 32,313 15,773 17,379 Active deposit account balance (PKR) 9,646 3,522 1,209 32,313 15,773 17,379 * http://www.sbp.org.pk/reports/stat_reviews/Bulletin/2013/Jun/EconomicGrowth.pdf Active Borrowers Active Women Borrowers AMFB WASEELA U-Bank Sub 11,930 11,402 8,786 1,152,915 4,350 1,205 822 286,896 Gross Loan Portfolio (PKR 000) 798,673 500,402 346,493 36,789,528 Annual Per Capita Income (PKR)* 143,808 143,808 143,808 143,808 Number of Loans outstanding 11,930 11,402 8,786 1,153,902 Depositors 43,532 311,920 54,435 5,675,437 Number of Deposit Accounts 43,532 311,920 54,435 5,675,437 3,278 2,070 - 2,503,582 1,193,507 1,287,919 702,519 Number of Women Depositors Deposits Outstanding (PKR 000) 42,715,786 Weighted Avg. Proportion of active women borrowers (%) 36.5% 10.6% 9.4% 24.9% Average loan balance per active borrower (PKR) 66,947 43,887 39,437 31,910 * http://www.sbp.org.pk/reports/stat_reviews/ Bulletin/2013/Jun/EconomicGrowth.pdf Continued on next page Annual Assessment of the Microfinance Industry MFB 66 Financial Services for all Annexures MFB AMFB WASEELA U-Bank Sub 46.6% 30.5% 27.4% 22.2% Average outstanding loan balance (PKR) 66,947 43,887 39,437 31,883 Average outstanding loan balance / per capita income 46.6% 30.5% 27.4% 22.2% 7.5% 0.7% 0.0% 44.1% Average saving balance per active depositor (PKR) 27,417 4,129 12,906 7,526 Active deposit account balance (PKR) 27,417 4,129 12,906 7,526 SAFCO DAMEN Average loan balance per active borrower/per capita income Proportion of active women depositors (%) * http://www.sbp.org.pk/reports/stat_reviews/ Bulletin/2013/Jun/EconomicGrowth.pdf MFI OCT KASHF CSC GBTI Active Borrowers 47,486 230,810 38,234 38,063 19,753 8,835 Active Women Borrowers 13,296 230,810 19,004 38,063 19,607 8,237 Gross Loan Portfolio (PKR 000) 460,538 3,752,325 422,532 1,003,160 381,000 81,252 Annual Per Capita Income (PKR)* 143,808 143,808 143,808 143,808 143,808 143,808 47,486 230,810 38,234 38,063 19,753 8,835 Number of Loans outstanding Depositors Number of Deposit Accounts Number of Women Depositors Deposits Outstanding (PKR 000) Pakistan Microfinance Review 2014 Weighted Avg. 67 Proportion of active women borrowers (%) 28.0% 100.0% 49.7% 100.0% 99.3% 93.2% Average loan balance per active borrower (PKR) 9,698 16,257 11,051 26,355 19,288 9,197 Average loan balance per active borrower/per capita income 6.7% 11.3% 7.7% 18.3% 13.4% 6.4% Average outstanding loan balance (PKR) 9,698 16,257 11,051 26,355 19,288 9,197 Average outstanding loan balance / per capita income 6.7% 11.3% 7.7% 18.3% 13.4% 6.4% Proportion of active women depositors (%) - - - - - - Average saving balance per active depositor (PKR) - - - - - - Active deposit account balance (PKR) - - - - - - * http://www.sbp.org.pk/reports/stat_reviews/Bulletin/2013/Jun/EconomicGrowth.pdf Financial Services for all AII - Performance Indicators of Individual MFPs 2014 MFI FFO ASA-P BRAC-P JWS Sungi ORIX Active Borrowers 20,861 220,606 58,389 28,239 11,559 19,140 Active Women Borrowers 20,741 218,097 55,385 27,342 11,599 18,095 Gross Loan Portfolio (PKR 000) 263,747 2,733,482 1,224,784 509,994 107,700 315,559 Annual Per Capita Income (PKR)* 143,808 143,808 143,808 143,808 143,808 143,808 20,861 220,606 58,389 28,239 11,599 19,140 Number of Loans outstanding Depositors Number of Deposit Accounts Number of Women Depositors Deposits Outstanding (PKR 000) Weighted Avg. Proportion of active women borrowers (%) 99.4% 98.9% 94.9% 96.8% 100.3% 94.5% Average loan balance per active borrower (PKR) 12,643 12,391 20,976 18,060 9,317 16,487 Average loan balance per active borrower/per capita income 8.8% 8.6% 14.6% 12.6% 6.5% 11.5% Average outstanding loan balance (PKR) 12,643 12,391 20,976 18,060 9,285 16,487 Average outstanding loan balance / per capita income 8.8% 8.6% 14.6% 12.6% 6.5% 11.5% Proportion of active women depositors (%) - - - - - - Average saving balance per active depositor (PKR) - - - - - - Active deposit account balance (PKR) - - - - - - MO Mojaz Naymet * http://www.sbp.org.pk/reports/stat_reviews/Bulletin/2013/Jun/EconomicGrowth.pdf Agahe AMRDO Active Borrowers 41,023 6,826 14,386 4,833 9,121 2,498 Active Women Borrowers 37,289 6,679 7,306 2,583 4,998 1,365 Gross Loan Portfolio (PKR 000) 617,401 74,556 114,414 86,663 163,612 9,713 Annual Per Capita Income (PKR)* 143,808 143,808 143,808 143,808 143,808 143,808 41,023 6,826 14,386 4,833 9,121 2,498 Number of Loans outstanding Depositors Number of Deposit Accounts Number of Women Depositors Deposits Outstanding (PKR 000) Weighted Avg. Proportion of active women borrowers (%) 90.9% 97.8% 50.8% 53.4% 54.8% 54.6% Average loan balance per active borrower (PKR) 15,050 10,922 7,953 17,932 17,938 3,888 Average loan balance per active borrower/per capita income 10.5% 7.6% 5.5% 12.5% 12.5% 2.7% * http://www.sbp.org.pk/reports/stat_reviews/Bulletin/2013/Jun/EconomicGrowth.pdf Continued on next page Annual Assessment of the Microfinance Industry MFI RCDS 68 Financial Services for all Annexures MFI RCDS Agahe AMRDO MO Mojaz Naymet Average outstanding loan balance (PKR) 15,050 10,922 7,953 17,932 17,938 3,888 Average outstanding loan balance / per capita income 10.5% 7.6% 5.5% 12.5% 12.5% 2.7% Proportion of active women depositors (%) - - - - - - Average saving balance per active depositor (PKR) - - - - - - Active deposit account balance (PKR) - - - - - - * http://www.sbp.org.pk/reports/stat_reviews/Bulletin/2013/Jun/EconomicGrowth.pdf Active Borrowers Active Women Borrowers Gross Loan Portfolio (PKR 000) Annual Per Capita Income (PKR)* Number of Loans outstanding BEDF OPD SAATH SRDO SVDP DEEP 1,480 7,319 4,309 2,452 4,244 450 1,115 4,472 2,642 874 1,527 450 16,264 99,648 55,936 60,477 93,443 825 143,808 143,808 143,808 143,808 143,808 143,808 1,480 7,319 4,309 2,452 4,244 450 Depositors Number of Deposit Accounts Number of Women Depositors Deposits Outstanding (PKR 000) Pakistan Microfinance Review 2014 Weighted Avg. 69 Proportion of active women borrowers (%) 75.3% 61.1% 61.3% 35.6% 36.0% 100.0% Average loan balance per active borrower (PKR) 10,989 13,615 12,981 24,664 22,018 1,833 Average loan balance per active borrower/per capita income 7.6% 9.5% 9.0% 17.2% 15.3% 1.3% Average outstanding loan balance (PKR) 10,989 13,615 12,981 24,664 22,018 1,833 Average outstanding loan balance / per capita income 7.6% 9.5% 9.0% 17.2% 15.3% 1.3% Proportion of active women depositors (%) - - - - - Average saving balance per active depositor (PKR) - - - - - Active deposit account balance (PKR) - - - - - * http://www.sbp.org.pk/reports/stat_reviews/Bulletin/2013/Jun/EconomicGrowth.pdf MFI BAIDRE Wasil VDO Akhuwat Sub Active Borrowers 3,376 5,482 2,787 235,517 1,088,078 Active Women Borrowers 1,484 1,864 1,518 89,497 845,939 56,105 115,659 29,047 2,465,625 15,315,461 Gross Loan Portfolio (PKR 000) * http://www.sbp.org.pk/reports/stat_reviews/Bulletin/2013/Jun/EconomicGrowth.pdf Continued on next page Financial Services for all AII - Performance Indicators of Individual MFPs 2014 MFI Annual Per Capita Income (PKR)* Number of Loans outstanding BAIDRE Wasil VDO Akhuwat Sub 143,808 143,808 143,808 143,808 143,808 3,376 5,482 2,787 235,517 1,088,118 Depositors - Number of Deposit Accounts - Number of Women Depositors - Deposits Outstanding (PKR 000) Weighted Avg. Proportion of active women borrowers (%) 44.0% 34.0% 54.5% 38.0% 77.7% Average loan balance per active borrower (PKR) 16,619 21,098 10,422 10,469 14,076 Average loan balance per active borrower/per capita income 11.6% 14.7% 7.2% 7.3% 10% Average outstanding loan balance (PKR) 16,619 21,098 10,422 10,469 14,075 Average outstanding loan balance / per capita income 11.6% 14.7% 7.2% 7.3% 9.8% Proportion of active women depositors (%) - - - Average saving balance per active depositor (PKR) - - - Active deposit account balance (PKR) - - - SRSP TRDP SRSO * http://www.sbp.org.pk/reports/stat_reviews/Bulletin/2013/Jun/EconomicGrowth.pdf RSP PRSP Sub Active Borrowers 492,338 74,864 4,770 109,688 75,215 756,875 Active Women Borrowers 383,814 38,705 4,342 62,383 70,372 559,616 7,653,444 1,149,283 37,519 1,376,726 1,209,504 11,426,476 Annual Per Capita Income (PKR)* 143,808 143,808 143,808 143,808 143,808 143,808 Number of Loans outstanding 492,338 74,864 4,770 109,688 75,215 756,875 - - - - - - Gross Loan Portfolio (PKR 000) Depositors Number of Deposit Accounts - - - - - - Number of Women Depositors - - - - - - Deposits Outstanding (PKR 000) - - - - - Weighted Avg. Proportion of active women borrowers (%) 78.0% 51.7% 91.0% 56.9% 93.6% 73.9% Average loan balance per active borrower (PKR) 15,545 15,352 7,866 12,551 16,081 15,097 Average loan balance per active borrower/per capita income 11% 11% 5% 9% 11% 10% Average outstanding loan balance (PKR) 15,545 15,352 7,866 12,551 16,081 15,097 Average outstanding loan balance / per capita income 10.8% 10.7% 5% 9% 11.2% 10.5% * http://www.sbp.org.pk/reports/stat_reviews/Bulletin/2013/Jun/EconomicGrowth.pdf Continued on next page Annual Assessment of the Microfinance Industry NRSP 70 Financial Services for all Annexures RSP NRSP PRSP SRSP TRDP SRSO Sub Proportion of active women depositors (%) - - - - - - Average saving balance per active depositor (PKR) - - - - - - Active deposit account balance (PKR) - - - - - - * http://www.sbp.org.pk/reports/stat_reviews/Bulletin/2013/Jun/EconomicGrowth.pdf Active Borrowers Active Women Borrowers Gross Loan Portfolio (PKR 000) Annual Per Capita Income (PKR)* Sub MFB Sub MFI Sub RSP Total 1,152,915 1,088,078 756,875 2,997,868 286,896 845,939 559,616 1,692,451 36,789,528 15,315,461 11,426,476 63,531,465 143,808 143,808 143,808 143,808 Number of Loans outstanding 1,153,902 1,088,118 756,875 2,998,895 Depositors 5,675,437 - - 5,675,437 Number of Deposit Accounts 5,675,437 - - 5,675,437 2,503,582 - - 2,503,582 42,715,786 - - 42,715,786 Number of Women Depositors Deposits Outstanding (PKR 000) Weighted Avg. Proportion of active women borrowers (%) 24.9% 77.7% 73.9% 56.5% Average loan balance per active borrower (PKR) 31,910 14,076 15,097 21,192 Average loan balance per active borrower/per capita income 22.2% 10% 10% 14.7% Average outstanding loan balance (PKR) 31,883 14,075 15,097 21,185 Average outstanding loan balance / per capita income 22.2% 9.8% 10.5% 14.7% Proportion of active women depositors (%) 44.1% - - 44.11% Average saving balance per active depositor (PKR) 7,526 - - 7,526 Active deposit account balance (PKR) 7,526 - - 7,526 Pakistan Microfinance Review 2014 * http://www.sbp.org.pk/reports/stat_reviews/Bulletin/2013/Jun/EconomicGrowth.pdf 71 Financial Services for all AII - Performance Indicators of Individual MFPs 2014 Financial Performance in PKR ‘000 MFB Income from loan portfolio KBL TMFB POMFB FMFB NRSP-B FINCA 3,483,074 2,934,536 127,903 1,292,267 1,791,295 1,364,494 101,576 Income from investments 124,303 446,494 - 471,001 127,957 Income from other sources 216,810 967,975 5,514 16,621 140,010 16,292 3,824,187 4,349,005 133,418 1,779,889 2,059,262 1,482,362 Total revenue Less : financial expense 809,557 766,186 250 590,199 793,087 361,258 3,014,629 3,582,819 133,167 1,189,690 1,266,174 1,121,104 157,686 115,582 1,512 109,972 62,231 47,016 2,856,943 3,467,237 131,655 1,079,718 1,203,943 1,074,089 872,220 1,155,631 64,948 479,259 472,418 537,350 Admin expense 1,017,612 1,269,769 64,010 497,463 445,795 505,943 Less: operating expense 1,889,832 2,425,400 128,958 976,722 918,213 1,043,293 24,701 21,348 1,532 2,817 10,032 - 942,410 1,020,489 1,165 100,179 275,698 30,796 Gross financial margin Less: loan loss provision expense Net financial margin Personnel expense Other Non operating expense Net income before tax Provision for tax 239,198 311,996 8,437 (9,232) 88,053 (145,350) Net income/(loss) 703,212 708,493 (7,272) 109,411 187,646 176,146 22,109 - - Adjusted Financial Expense on Borrowings 42,702 Inflation Adjustment Expense 205 142 66 79 99 71 Adjusted Loan Loss Provision Expense - - - - - - 42,907 142 66 22,189 99 71 660,305 708,351 (7,338) 87,222 187,547 176,075 Average total assets 14,991,045 15,791,681 997,014 10,094,386 10,800,815 5,179,667 Average total equity 3,018,975 2,526,673 944,002 1,169,601 1,758,422 1,184,257 Adjusted return-on-assets 4.4% 4.5% -0.7% 0.9% 1.7% 3.4% Adjusted return-on-equity 21.9% 28.0% -0.8% 7.5% 10.7% 14.9% Total Adjustment Expense Net Income/(Loss) After Adjustments 7.7% 8.9% 0.1% 14.8% 15.8% 11.9% Operational self sufficiency (OSS) Financial expense ratio 132.7% 130.7% 100.9% 106.0% 115.5% 102.1% Financial self sufficiency (FSS) 130.8% 130.7% 100.8% 104.6% 115.5% 102.1% Annual Assessment of the Microfinance Industry weighted avg. 72 Financial Services for all Annexures MFB AMFB WASEELA U-Bank Sub Income from loan portfolio 163,101 91,440 64,671 11,312,781 Income from investments 76,317 133,484 95,333 1,576,465 Income from other sources 39,483 1,404,855 120,167 2,927,726 15,816,972 Total revenue 278,901 1,629,780 280,170 Less : financial expense 78,964 30,188 16,533 3,446,223 Gross financial margin 199,937 1,599,591 263,637 12,370,749 Less: loan loss provision expense Net financial margin Personnel expense Admin expense 25,550 1,583 1,358 522,490 174,387 1,598,008 262,279 11,848,259 79,992 271,058 197,901 4,130,777 85,673 303,262 201,014 4,390,540 165,665 574,320 398,915 8,521,318 - 1,172,592 - 1,233,022 Net income before tax 8,722 (148,904) (136,636) 2,093,920 Provision for tax 2,573 (41,850) (39,671) 414,155 Net income/(loss) 6,148 (107,054) (96,965) 1,679,765 - 64,811 Less: operating expense Other Non operating expense Adjusted Financial Expense on Borrowings Inflation Adjustment Expense 36 (3) 83 778 Adjusted Loan Loss Provision Expense - - - - 36 (3) 83 65,590 6,112 (107,051) (97,048) 1,614,175 Average total assets 1,536,169 2,227,122 1,606,760 63,224,661 Average total equity 529,825 1,090,188 997,783 Total Adjustment Expense Net Income/(Loss) After Adjustments 13,219,726 weighted avg. Adjusted return-on-assets Adjusted return-on-equity Pakistan Microfinance Review 2014 -4.8% -6.0% 2.6% 12.2% 1.2% -9.8% -9.7% 13.8% 8.9% 8.5% 10.6% Operational self sufficiency (OSS) 103.2% 91.6% 67.2% 115.3% Financial self sufficiency (FSS) 103.2% 91.6% 67.2% 114.7% Financial expense ratio 73 0.4% Financial Services for all AII - Performance Indicators of Individual MFPs 2014 MFI OCT KASHF SSF DAMEN CSC GBTI Income from loan portfolio 60,661 1,391,408 141,266 325,191 152,759 26,348 Income from investments 11,374 82,582 13,669 39,507 20,179 - 259 181,435 3,650 3,939 2,114 4,206 30,554 Income from other sources Total revenue 72,294 1,655,425 158,584 368,637 175,052 Less : financial expense 27,301 526,211 33,080 111,873 42,764 2,965 Gross financial margin 44,993 1,129,213 125,504 256,764 132,288 27,589 7,833 15,514 21,667 24,664 4,475 - Net financial margin Less: loan loss provision expense 37,160 1,113,700 103,838 232,101 127,813 27,589 Personnel expense 18,270 535,866 57,900 80,472 52,923 8,851 Admin expense 12,458 161,031 42,860 50,561 45,008 3,163 Less: operating expense 30,728 696,897 100,760 131,033 97,931 12,014 125,486 118,478 - - - 1,144 (119,054) 298,324 3,078 101,068 29,882 14,431 - - - - - - (119,054) 298,324 3,078 101,068 29,882 14,431 Other Non operating expense Net income before tax Provision for tax Net income/(loss) Adjusted Financial Expense on Borrowings Inflation Adjustment Expense 2,178 27 3,224 1,143 (17) 5 16 1 7 - - - - - 2,205 (17) 3,230 16 1,144 7 (121,259) 298,341 (152) 101,052 28,738 14,425 Average total assets 608,230 4,945,872 579,693 1,191,631 673,544 118,629 Average total equity 141,672 257,513 89,683 228,025 47,687 Adjusted Loan Loss Provision Expense Total Adjustment Expense Net Income/(Loss) After Adjustments 90,919 Adjusted return-on-assets -19.9% 6.0% 0.0% Adjusted return-on-equity 85.6% 115.9% -0.2% 0.1% 14.4% 7.9% Operational self sufficiency (OSS) 37.8% 122.0% 102.0% Financial self sufficiency (FSS) 37.4% 122.0% FFO Financial expense ratio 8.5% 4.3% 12.2% 44.3% 60.3% 15.9% 12.8% 12.7% 4.5% 137.8% 120.6% 189.5% 99.9% 137.8% 119.6% 189.4% ASA-P BRAC-P JWS Sungi ORIX 56,438 959,387 452,081 145,120 36,689 91,667 - - 34 23,153 2,466 - 5,883 51,391 358,187 4,799 32 3,227 MFI Income from loan portfolio Income from investments Income from other sources Total revenue 62,321 1,010,778 810,302 173,072 39,187 94,894 Less : financial expense 22,514 74,082 67,551 41,089 1,860 21,332 Gross financial margin 39,807 936,695 742,751 131,983 37,327 73,562 1,721 22,153 25,733 11,284 453 441 Less: loan loss provision expense Net financial margin 38,086 914,543 717,018 120,700 36,874 73,121 Personnel expense 19,833 224,027 279,789 66,891 6,361 19,891 Admin expense 16,797 94,213 393,717 33,758 10,485 23,437 Annual Assessment of the Microfinance Industry weighted avg. Continued on next page 74 Financial Services for all Annexures MFI Less: operating expense Other Non operating expense Net income before tax Provision for tax Net income/(loss) FFO ASA-P BRAC-P JWS Sungi ORIX 36,631 318,240 673,506 100,649 16,846 43,328 1,349 11,926 7,427 173 - 7,829 106 584,376 36,085 19,878 20,028 21,964 - 192,569 4,702 - - - 106 391,808 31,383 19,878 20,028 21,964 3,402 21,210 - - 2,371 Adjusted Financial Expense on Borrowings Inflation Adjustment Expense 1 0 (26) 16 6 3 Adjusted Loan Loss Provision Expense - - - - - 70 Total Adjustment Expense 1 3,402 21,185 16 6 2,445 106 388,406 10,199 19,862 20,023 19,519 Average total assets 288,358 2,388,094 1,291,247 628,067 105,011 308,377 Average total equity 16,998 975,253 43,527 226,535 80,229 Net Income/(Loss) After Adjustments 54,267 weighted avg. Adjusted return-on-assets 0.0% 16.3% 0.8% 3.2% 19.1% 6.3% Adjusted return-on-equity 0.6% 39.8% Financial expense ratio 1.0% 3.2% -23.4% 8.8% -25.0% 36.0% 6.4% 9.9% 0.7% Operational self sufficiency (OSS) 100.2% 7.8% 237.0% 104.7% 113.0% 204.5% 130.1% Financial self sufficiency (FSS) 100.2% 235.2% 101.9% 113.0% 204.5% 125.9% RCDS Agahe AMRDO MO Mojaz Naymet Income from loan portfolio 213,655 21,113 36,464 27,108 41,651 472 Income from investments 22,253 1,278 2,333 - - 275 MFI Income from other sources Total revenue 2,024 5,863 4,449 13,083 40,821 32,971 46,100 13,830 Less : financial expense 58,368 6,168 11,508 5,325 15,616 - 186,055 19,947 29,313 27,647 30,484 13,830 22,001 1,651 4,117 2,073 4,251 224 13,606 Net financial margin Pakistan Microfinance Review 2014 3,725 26,116 Gross financial margin Less: loan loss provision expense 75 8,515 244,423 164,054 18,296 25,195 25,574 26,234 Personnel expense 59,196 8,126 15,429 6,908 15,529 3,423 Admin expense 40,358 7,226 8,258 8,513 9,534 10,043 Less: operating expense 99,554 15,352 23,687 15,422 25,062 13,467 - 2,656 - 35 2,944 1,508 7,496 1,171 105 - - - - 60,294 2,944 1,508 7,496 1,171 105 - - - 1,516 Inflation Adjustment Expense 14 1 3 2 3 1 Adjusted Loan Loss Provision Expense - Other Non operating expense Net income before tax Provision for tax Net income/(loss) Adjusted Financial Expense on Borrowings 4,206 60,294 - Continued on next page Financial Services for all AII - Performance Indicators of Individual MFPs 2014 MFI Total Adjustment Expense Net Income/(Loss) After Adjustments RCDS Agahe AMRDO MO Mojaz Naymet 14 1 3 1,518 3 1 60,280 2,943 1,505 5,979 1,168 104 10,501 Average total assets 851,842 95,714 107,487 100,334 249,777 Average total equity 268,445 21,599 19,896 27,291 57,676 9,399 weighted avg. Adjusted return-on-assets 7.1% 3.1% 1.4% 6.0% 0.5% 1.0% Adjusted return-on-equity 22.5% 13.6% 7.6% 21.9% 2.0% 1.1% 11.0% 10.4% 12.0% 7.1% 12.9% 0.0% Operational self sufficiency (OSS) Financial expense ratio 132.7% 112.7% 103.8% 129.4% 102.6% 100.8% Financial self sufficiency (FSS) 132.7% 112.7% 103.8% 122.1% 102.6% 100.8% Income from loan portfolio Income from investments Income from other sources Total revenue BEDF OPD SAATH SRDO SVDP DEEP 6,966 30,856 16,875 9,844 26,046 10,057 992 2,996 914 406 1,855 - 6,040 2,636 766 5,304 6,070 10,057 13,999 36,488 18,555 15,554 33,970 Less : financial expense 2,103 9,342 6,036 6,807 8,143 8,731 Gross financial margin 11,896 27,146 12,519 8,748 25,828 1,326 Less: loan loss provision expense Net financial margin Personnel expense 341 1,444 1,990 1,326 1,109 - 11,555 25,702 10,529 7,422 24,718 1,326 3,826 10,582 4,348 2,850 12,231 359 Admin expense 3,633 7,490 4,609 3,127 11,149 1,300 Less: operating expense 7,459 18,071 8,957 5,976 23,380 1,659 Other Non operating expense 4,106 2,054 - - 3 - (9) 5,577 1,572 1,446 1,336 (333) - 2,269 - - - - (9) 3,308 1,572 1,446 1,336 (333) 188 - 663 - 1 1 3 (185) Net income before tax Provision for tax Net income/(loss) Adjusted Financial Expense on Borrowings Inflation Adjustment Expense Adjusted Loan Loss Provision Expense Total Adjustment Expense 58 0 - - 188 1 58 0 666 (185) (197) 3,307 1,514 1,445 670 (149) Average total assets 60,132 121,399 72,595 73,285 138,689 1,328 Average total equity 41,132 16,445 14,534 5,630 35,938 Net Income/(Loss) After Adjustments (2,170) weighted avg. Adjusted return-on-assets -0.3% Adjusted return-on-equity -0.5% 20.1% 10.4% 25.7% 1.9% 6.9% 4.0% 12.2% 15.3% 12.9% 9.7% 1103.8% Operational self sufficiency (OSS) 99.9% 118.0% 109.3% 110.2% 104.1% 96.8% Financial self sufficiency (FSS) 98.6% 118.0% 108.9% 110.2% 102.0% 98.5% Financial expense ratio 2.7% 2.1% 2.0% 0.5% -11.2% Annual Assessment of the Microfinance Industry MFI 76 Financial Services for all Annexures MFI BAIDRE Wasil Income from loan portfolio 15,886 43,644 Income from investments 1,333 - - 17,936 Income from other sources Total revenue VDO Akhuwat Sub 8,391 32,239 4,380,283 1,482 32,778 229,080 2,491 448,255 698,023 17,220 61,580 12,364 513,272 5,307,386 Less : financial expense 6,747 25,473 5,477 - 1,148,463 Gross financial margin 10,472 36,107 6,887 513,272 4,158,923 Less: loan loss provision expense 1,246 5,322 (1,008) 15,522 197,547 Net financial margin 9,226 30,785 7,895 497,750 3,961,376 Personnel expense 4,470 18,874 2,845 236,547 1,540,071 Admin expense 3,374 13,166 2,440 113,168 1,134,877 Less: operating expense 7,844 32,040 5,284 349,715 2,674,948 Other Non operating expense 677 - 240 18,792 306,580 Net income before tax 705 (1,256) 2,371 129,242 979,849 - 991 - - 200,530 Provision for tax Net income/(loss) 705 (2,247) 2,371 129,242 779,319 Adjusted Financial Expense on Borrowings 713 - - 254,283 290,893 Inflation Adjustment Expense 16 (11) - 43 (12) Adjusted Loan Loss Provision Expense - - 12,588 - 12,658 Total Adjustment Expense 729 (11) 12,588 254,326 303,540 Net Income/(Loss) After Adjustments (23) (2,236) (10,217) (125,085) 475,779 Average total assets 101,356 180,945 58,789 3,414,924 18,765,849 Average total equity 19,421 (120,146) 2,166 702,671 3,372,239 weighted avg. Adjusted return-on-assets -17.4% -3.7% 2.5% 14.1% Adjusted return-on-equity -0.1% 1.9% -471.7% -17.8% 23.7% 24.1% 14.0% 0.0% 8.5% 104.3% 98.0% 123.7% 133.7% 122.6% 99.9% 98.0% 54.8% 80.4% 114.6% Financial self sufficiency (FSS) Pakistan Microfinance Review 2014 -1.2% Financial expense ratio Operational self sufficiency (OSS) 77 0.0% Financial Services for all AII - Performance Indicators of Individual MFPs 2014 RSP Income from loan portfolio NRSP PRSP SRSP TRDP SRSO Sub 2,070,895 230,464 6,901 327,582 252,585 2,888,425 Income from investments 129,953 71,655 - 23,022 21,371 246,002 Income from other sources 19,900 7,616 16,317 24,923 12,912 81,668 2,220,748 309,734 23,218 375,527 286,868 3,216,095 569,281 103,164 2,402 86,526 95,137 856,511 1,651,467 206,570 20,816 289,001 191,731 2,359,584 Total revenue Less : financial expense Gross financial margin Less: loan loss provision expense Net financial margin Personnel expense 20,365 1,349 28 2,852 49,868 74,463 1,631,101 205,221 20,788 286,149 141,862 2,285,121 668,229 35,429 6,183 93,189 83,832 886,861 Admin expense 304,717 20,181 6,974 38,280 55,839 425,991 Less: operating expense 972,946 55,610 13,157 131,469 139,671 1,312,852 - 3,348 - 1,860 1,430 6,638 658,155 146,263 7,631 152,820 761 965,631 658,155 146,263 7,631 152,820 761 965,631 - - - - 12,132 12,132 Inflation Adjustment Expense 157 - - 20 16 192 Adjusted Loan Loss Provision Expense - - - 967 - 967 157 - - 987 12,148 13,291 657,998 146,263 7,631 151,834 (11,386) 952,340 Average total assets 8,551,884 2,678,281 59,970 779,284 1,434,735 13,504,154 Average total equity 2,303,229 1,192,351 27,705 193,936 320,595 Other Non operating expense Net income before tax Provision for tax Net income/(loss) Adjusted Financial Expense on Borrowings Total Adjustment Expense Net Income/(Loss) After Adjustments - 4,037,815 Adjusted return-on-assets 7.7% 5.5% 12.7% 19.5% -0.8% 7.1% Adjusted return-on-equity 28.6% 12.3% 27.5% 78.3% -3.6% 23.6% 8.6% 10.1% 6.9% 8.0% 8.3% 8.6% Operational self sufficiency (OSS) 142.1% 189.5% 149.0% 168.6% 100.3% 142.9% Financial self sufficiency (FSS) 142.1% 189.5% 149.0% 167.9% 96.2% 142.1% Financial expense ratio Annual Assessment of the Microfinance Industry weighted avg. 78 Financial Services for all Annexures Sub MFB Sub MFI Sub RSP Total Income from loan portfolio 11,312,781 4,380,283 2,888,425 18,581,489 Income from investments 1,576,465 229,080 246,002 2,051,547 Income from other sources 2,927,726 698,023 81,668 3,707,417 15,816,972 5,307,386 3,216,095 24,340,453 Less : financial expense 3,446,223 1,148,463 856,511 5,451,197 Gross financial margin 12,370,749 4,158,923 2,359,584 18,889,256 Total revenue Less: loan loss provision expense 522,490 197,547 74,463 794,500 11,848,259 3,961,376 2,285,121 18,094,756 Personnel expense 4,130,777 1,540,071 886,861 6,557,709 Admin expense 4,390,540 1,134,877 425,991 5,951,408 Less: operating expense 8,521,318 2,674,948 1,312,852 12,509,117 Other Non operating expense 1,233,022 306,580 6,638 1,546,240 Net income before tax 2,093,920 979,849 965,631 4,039,399 414,155 200,530 - 614,684 1,679,765 779,319 965,631 3,424,715 64,811 290,893 12,132 367,837 Inflation Adjustment Expense 778 (12) 192 959 Adjusted Loan Loss Provision Expense - 12,658 967 13,625 65,590 303,540 13,291 382,421 1,614,175 475,779 952,340 3,042,294 Average total assets 63,224,661 18,765,849 13,504,154 95,494,664 Average total equity 13,219,726 3,372,239 4,037,815 Net financial margin Provision for tax Net income/(loss) Adjusted Financial Expense on Borrowings Total Adjustment Expense Net Income/(Loss) After Adjustments 20,629,780 Pakistan Microfinance Review 2014 weighted avg. 79 Adjusted return-on-assets 2.6% 2.5% 7.1% 3.2% Adjusted return-on-equity 12.2% 14.1% 23.6% 14.7% Financial expense ratio 10.6% 8.5% 8.6% 9.7% Operational self sufficiency (OSS) 115.3% 122.6% 142.9% 119.9% Financial self sufficiency (FSS) 114.7% 114.6% 142.1% 117.7% Financial Services for all AII - Performance Indicators of Individual MFPs 2014 Operating Income in PKR ‘000 MFB KBL TMFB POMFB FMFB NRSP-B FINCA Revenue from loan portfolio 3,483,074 2,934,536 127,903 1,292,267 1,791,295 1,364,494 Total revenue 3,824,187 4,349,005 133,418 1,779,889 2,059,262 1,482,362 660,305 708,351 (7,338) 87,222 187,547 176,075 Adjusted net operating income / (loss) 14,991,045 15,791,681 997,014 10,094,386 10,800,815 5,179,667 Gross loan portfolio (opening balance) Average total assets 8,859,405 8,331,554 117,931 3,499,317 4,845,000 2,036,069 Gross loan portfolio (closing balance) 12,238,252 8,981,390 223,832 4,479,999 5,192,071 4,028,415 Average gross loan portfolio 10,548,829 8,656,472 170,882 3,989,658 5,018,536 3,032,242 8% 8% 8% 8% 8% Inflation rate * 8% weighted avg. Total revenue ratio (total revenue-to-average total assets) 25.5% 27.5% 13.4% 17.6% 19.1% 28.6% Adjusted profit margin (adjusted profit/(loss)-to-total revenue) 17.3% 16.3% -5.5% 4.9% 9.1% 11.9% Yield on gross portfolio (nominal) 33.0% 33.9% 74.8% 32.4% 35.7% 45.0% Yield on gross portfolio (real) 22.9% 23.8% 61.6% 22.4% 25.4% 34.0% * http://www.sbp.org.pk/reports/stat_reviews/Bulletin/2013/May/IND.pdf WASEELA U-Bank Sub Revenue from loan portfolio 163,101 91,440 64,671 11,312,781 Total revenue 278,901 1,629,780 280,170 15,816,972 6,112 (107,051) (97,048) 1,614,175 Adjusted net operating income / (loss) Average total assets 1,536,169 2,227,122 1,606,760 63,224,661 Gross loan portfolio (opening balance) 341,838 178,328 41,381 28,250,823 Gross loan portfolio (closing balance) 798,673 500,402 346,493 36,789,528 Average gross loan portfolio 570,256 339,365 193,937 32,520,176 8% 8% 8% Inflation rate * 8% weighted avg. Total revenue ratio (total revenue-to-average total assets) 18.2% 73.2% 17.4% 25.0% Adjusted profit margin (adjusted profit/(loss)-to-total revenue) 2.2% -6.6% -34.6% 10.2% Yield on gross portfolio (nominal) 28.6% 26.9% 33.3% 34.8% Yield on gross portfolio (real) 18.9% 17.5% 23.2% 24.6% * http://www.sbp.org.pk/reports/stat_reviews/Bulletin/2013/May/IND.pdf Annual Assessment of the Microfinance Industry MFB AMFB 80 Financial Services for all Annexures MFI OPP KASHF SAFCO DAMEN CSC GBTI Revenue from loan portfolio 60,661 1,391,408 141,266 325,191 152,759 26,348 Total revenue 72,294 1,655,425 158,584 368,637 175,052 30,554 (121,259) 298,341 (152) 101,052 28,738 14,425 Adjusted net operating income / (loss) Average total assets 608,230 4,945,872 579,693 1,191,631 673,544 118,629 Gross loan portfolio (opening balance) 470,392 3,543,155 413,875 750,530 293,493 50,763 Gross loan portfolio (closing balance) 460,538 3,752,325 422,532 1,003,160 381,000 81,252 Average gross loan portfolio 465,465 3,647,740 418,203 876,845 337,247 66,007 8% 8% 8% 8% 8% 8% Inflation rate * weighted avg. Total revenue ratio (total revenue-to-average total assets) 11.9% 33.5% 27.4% 30.9% 26.0% 25.8% Adjusted profit margin (adjusted profit/(loss)-to-total revenue) -167.7% 18.0% -0.1% 27.4% 16.4% 47.2% Yield on gross portfolio (nominal) 13.0% 38.1% 33.8% 37.1% 45.3% 39.9% 4.5% 27.7% 23.6% 26.7% 34.3% 29.3% BRAC-P JWS Sungi ORIX Yield on gross portfolio (real) * http://www.sbp.org.pk/reports/stat_reviews/Bulletin/2013/May/IND.pdf MFI FFO ASA-P Revenue from loan portfolio 56,438 959,387 452,081 145,120 36,689 91,667 Total revenue 62,321 1,010,778 810,302 173,072 39,187 94,894 106 388,406 10,199 19,862 20,023 19,519 Adjusted net operating income / (loss) Average total assets 288,358 2,388,094 1,291,247 628,067 105,011 308,377 Gross loan portfolio (opening balance) 125,333 1,896,801 884,295 319,169 89,582 233,715 Gross loan portfolio (closing balance) 263,747 2,733,482 1,224,784 509,994 107,700 315,559 Average gross loan portfolio 194,540 2,315,142 1,054,540 414,581 98,641 274,637 8% 8% 8% 8% 8% Inflation rate * 8% weighted avg. Total revenue ratio (total revenue-to-average total assets) Pakistan Microfinance Review 2014 Adjusted profit margin (adjusted profit/(loss)-to-total revenue) 81 21.6% 42.3% 62.8% 27.6% 37.3% 30.8% 0.2% 38.4% 1.3% 11.5% 51.1% 8.4% Yield on gross portfolio (nominal) 29.0% 41.4% 42.9% 35.0% 37.2% 33.4% Yield on gross portfolio (real) 19.2% 30.7% 32.0% 24.8% 26.8% 23.3% * http://www.sbp.org.pk/reports/stat_reviews/Bulletin/2013/May/IND.pdf Financial Services for all AII - Performance Indicators of Individual MFPs 2014 MFI RCDS Agahe AMRDO MO Mojaz Naymet Revenue from loan portfolio 213,655 21,113 36,464 27,108 41,651 472 Total revenue 244,423 26,116 40,821 32,971 46,100 13,830 60,280 2,943 1,505 5,979 1,168 104 Adjusted net operating income / (loss) Average total assets 851,842 95,714 107,487 100,334 249,777 10,501 Gross loan portfolio (opening balance) 444,610 43,725 78,150 64,083 78,601 9,511 Gross loan portfolio (closing balance) 617,401 74,556 114,414 86,663 163,612 9,713 Average gross loan portfolio 531,006 59,141 96,282 75,373 121,106 9,612 8% 8% 8% 8% 8% 8% Inflation rate * weighted avg. Total revenue ratio (total revenue-to-average total assets) 28.7% 27.3% 38.0% 32.9% 18.5% 131.7% Adjusted profit margin (adjusted profit/(loss)-to-total revenue) 13.6% 6.7% 1.9% 9.3% 1.5% 1.1% Yield on gross portfolio (nominal) 40.2% 35.7% 37.9% 36.0% 34.4% 4.9% Yield on gross portfolio (real) 29.6% 25.4% 27.4% 25.7% 24.2% -3.0% SAATH SRDO SVDP DEEP * http://www.sbp.org.pk/reports/stat_reviews/Bulletin/2013/May/IND.pdf MFI BEDF Revenue from loan portfolio Total revenue Adjusted net operating income / (loss) OPD 6,966 30,856 16,875 9,844 26,046 10,057 13,999 36,488 18,555 15,554 33,970 10,057 (197) 3,307 1,514 1,445 670 (149) Average total assets 60,132 121,399 72,595 73,285 138,689 1,328 Gross loan portfolio (opening balance) 89,582 53,404 22,907 45,092 74,448 757 Gross loan portfolio (closing balance) 16,264 99,648 55,936 60,477 93,443 825 Average gross loan portfolio 52,923 76,526 39,421 52,785 83,946 791 8% 8% 8% 8% 8% Inflation rate * 8% Total revenue ratio (total revenue-to-average total assets) 23.3% 30.1% 25.6% 21.2% 24.5% 757.2% Adjusted profit margin (adjusted profit/(loss)-to-total revenue) -0.2% 6.2% 6.6% 3.2% 0.9% -19.6% Yield on gross portfolio (nominal) 13.2% 40.3% 42.8% 18.6% 31.0% 1271.4% 4.8% 29.7% 32.0% 9.7% 21.1% 1167.5% Yield on gross portfolio (real) * http://www.sbp.org.pk/reports/stat_reviews/Bulletin/2013/May/IND.pdf Annual Assessment of the Microfinance Industry weighted avg. 82 Financial Services for all Annexures MFI BAIDRE Wasil VDO Akhuwat Sub Revenue from loan portfolio 15,886 43,644 8,391 32,239 4,380,283 Total revenue 17,220 61,580 12,364 513,272 5,788,419 (23) (2,236) (10,217) (125,085) 720,264 101,356 180,945 58,789 3,414,924 18,765,849 825 96,080 49,194 1,562,109 11,784,181 Gross loan portfolio (closing balance) 56,105 115,659 29,047 2,465,625 15,315,461 Average gross loan portfolio 28,465 105,869 39,120 2,013,867 13,549,821 8% 8% 8% Adjusted net operating income / (loss) Average total assets Gross loan portfolio (opening balance) Inflation rate * 8% weighted avg. Total revenue ratio (total revenue-to-average total assets) 17.0% 34.0% 21.0% 15.0% 30.8% Adjusted profit margin (adjusted profit/(loss)-to-total revenue) -2.8% -2.3% -20.8% -8.0% 12.4% Yield on gross portfolio (nominal) 55.8% 41.2% 21.4% 1.6% 32.3% Yield on gross portfolio (real) 44.3% 30.8% 12.2% 1.6% 22.3% SRSP TRDP SRSO * http://www.sbp.org.pk/reports/stat_reviews/Bulletin/2013/May/IND.pdf RSP NRSP PRSP Sub Revenue from loan portfolio 2,070,895 230,464 6,901 327,582 252,585 2,888,425 Total revenue 2,220,748 309,734 23,218 375,527 286,868 3,216,095 657,998 146,263 7,631 151,834 (11,386) 952,340 Adjusted net operating income / (loss) Average total assets 8,551,884 2,678,281 59,970 779,284 1,434,735 13,504,154 Gross loan portfolio (opening balance) 5,584,405 903,664 32,174 789,789 1,077,973 8,388,005 Gross loan portfolio (closing balance) 7,653,444 1,149,283 37,519 1,376,726 1,209,504 11,426,476 Average gross loan portfolio 6,618,924 1,026,474 34,846 1,083,258 1,143,738 9,907,240 8% 8% 8% 8% 8% Inflation rate * 8% Pakistan Microfinance Review 2014 weighted avg. 83 Total revenue ratio (total revenue-to-average total assets) 26.0% 11.6% 38.7% 48.2% 20.0% 23.8% Adjusted profit margin (adjusted profit/(loss)-to-total revenue) 29.6% 47.2% 32.9% 40.4% -4.0% 29.6% Yield on gross portfolio (nominal) 31.3% 22.5% 19.8% 30.2% 22.1% 29.2% Yield on gross portfolio (real) 21.3% 13.2% 10.7% 20.4% 12.8% 19.4% * http://www.sbp.org.pk/reports/stat_reviews/Bulletin/2013/May/IND.pdf Sub MFB Sub MFI Sub RSP Total Revenue from loan portfolio 11,312,781 4,380,283 2,888,425 18,581,489 Total revenue 15,816,972 5,788,419 3,216,095 24,821,486 1,614,175 720,264 952,340 3,286,779 Average total assets 63,224,661 18,765,849 13,504,154 95,494,664 Gross loan portfolio (opening balance) 28,250,823 11,784,181 8,388,005 48,423,008 Gross loan portfolio (closing balance) 36,789,528 15,315,461 11,426,476 63,531,465 Average gross loan portfolio 32,520,176 13,549,821 9,907,240 55,977,237 8% 8% 8% 8% Adjusted net operating income / (loss) Inflation rate * Financial Services for all AII - Performance Indicators of Individual MFPs 2014 weighted avg. Total revenue ratio (total revenue-to-average total assets) 25.0% 30.8% 23.8% 26.0% Adjusted profit margin (adjusted profit/(loss)-to-total revenue) 10.2% 12.4% 29.6% 13.2% Yield on gross portfolio (nominal) 34.8% 32.3% 29.2% 34.6% Yield on gross portfolio (real) 24.6% 22.3% 19.4% 24.4% Annual Assessment of the Microfinance Industry * http://www.sbp.org.pk/reports/stat_reviews/Bulletin/2013/May/IND.pdf 84 Financial Services for all Annexures Operating Expense MFB KBL TMFB POMFB FMFB NRSP-B FINCA 2,881,777 3,328,516 132,253 1,679,710 1,783,563 1,451,566 Adjusted financial expense 809,557 766,186 250 590,199 793,087 361,258 Adjusted loan loss provision expense 157,686 115,582 1,512 109,972 62,231 47,016 1,043,293 Adjusted total expense 1,914,533 2,446,748 130,490 979,539 928,245 Adjustment expense Operating expense 42,907 142 66 22,189 99 71,289 Average total assets 14,991,045 15,791,681 997,014 10,094,386 10,800,815 5,179,667 Weighted avg. Adjusted total expense-to-average total assets 19.2% 21.1% 13.3% 16.6% 16.5% 28.0% Adjusted financial expense-to-average total assets 5.4% 4.9% 0.0% 5.8% 7.3% 7.0% Adjusted loan loss provision expense-to-average total assets 1.1% 0.7% 0.2% 1.1% 0.6% 0.9% 12.8% 15.5% 13.1% 9.7% 8.6% 20.1% Adjusted personnel expense 5.8% 7.3% 6.5% 4.7% 4.4% 10.4% Adjusted admin expense 6.8% 8.0% 6.4% 4.9% 4.1% 9.8% Adjustment expense-to-average total assets 0.3% 0.0% 0.0% 0.2% 0.0% 1.4% Adjusted operating expense-to-average total assets MFB AMFB WASEELA U-Bank Sub 270,179 1,778,683 416,806 13,723,052 Adjusted financial expense 78,964 30,188 16,533 3,446,223 Adjusted loan loss provision expense 25,550 1,583 1,358 522,490 165,665 1,746,912 398,915 9,754,340 Adjusted total expense Operating expense Adjustment expense 36 (3) 83 136,808 Average total assets 1,536,169 2,227,122 1,606,760 63,224,661 Pakistan Microfinance Review 2014 Weighted avg. 85 Adjusted total expense-to-average total assets 17.6% 79.9% 25.9% 21.7% Adjusted financial expense-to-average total assets 5.1% 1.4% 1.0% 5.5% Adjusted loan loss provision expense-to-average total assets 1.7% 0.1% 0.1% 0.8% 10.8% 78.4% 24.8% 15.4% Adjusted personnel expense 5.2% 12.2% 12.3% 6.5% Adjusted admin expense 5.6% 13.6% 12.5% 6.9% Adjustment expense-to-average total assets 0.0% 0.0% 0.0% 0.2% Adjusted operating expense-to-average total assets Financial Services for all AII - Performance Indicators of Individual MFPs 2014 MFI Adjusted total expense OPP KASHF SAFCO DAMEN CSC GBTI 193,526 1,357,101 158,731 267,570 146,313 16,122 Adjusted financial expense 29,479 526,211 36,304 111,873 43,907 2,965 Adjusted loan loss provision expense 7,833 15,514 21,667 24,664 4,475 13,158 156,214 815,376 100,760 131,033 97,931 Adjustment expense Operating expense 2,205 (17) 3,230 16 1,144 7 Average total assets 608,230 4,945,872 579,693 1,191,631 673,544 118,629 Weighted avg. Adjusted total expense-to-average total assets 31.8% 27.4% 27.4% 22.5% 21.7% 13.6% Adjusted financial expense-to-average total assets 4.8% 10.6% 6.3% 9.4% 6.5% 2.5% Adjusted loan loss provision expense-to-average total assets 1.3% 0.3% 3.7% 2.1% 0.7% 0.0% 25.7% 16.5% 17.4% 11.0% 14.5% 11.1% Adjusted operating expense-to-average total assets Adjusted personnel expense 3.0% 10.8% 10.0% 6.8% 7.9% 7.5% Adjusted admin expense 2.0% 3.3% 7.4% 4.2% 6.7% 2.7% Adjustment expense-to-average total assets 0.4% 0.0% 0.6% 0.0% 0.2% 0.0% FFO ASA-P BRAC-P JWS Sungi ORIX MFI Adjusted total expense 62,214 429,803 795,428 153,194 19,159 75,372 Adjusted financial expense 22,514 77,484 88,762 41,089 1,860 23,703 Adjusted loan loss provision expense 1,721 22,153 25,733 11,284 453 512 51,157 37,979 330,166 680,933 100,822 16,846 Adjustment expense Operating expense 1 3,402 21,185 16 6 2,445 Average total assets 288,358 2,388,094 1,291,247 628,067 105,011 308,377 Adjusted total expense-to-average total assets 21.6% 18.0% 61.6% 24.4% 18.2% 24.4% Adjusted financial expense-to-average total assets 7.8% 3.2% 6.9% 6.5% 1.8% 7.7% Adjusted loan loss provision expense-to-average total assets 0.6% 0.9% 2.0% 1.8% 0.4% 0.2% 13.2% 13.8% 52.7% 16.1% 16% 16.6% Adjusted personnel expense 6.9% 9.4% 21.7% 10.7% 6.1% 6.5% Adjusted admin expense 5.8% 3.9% 30.5% 5.4% 10.0% 7.6% Adjustment expense-to-average total assets 0.0% 0.1% 1.6% 0.0% 0.0% 0.8% Adjusted operating expense-to-average total assets Annual Assessment of the Microfinance Industry Weighted avg. 86 Financial Services for all Annexures MFI Adjusted total expense RCDS Agahe AMRDO MO Mojaz Naymet 184,129 23,171 39,313 26,991 44,928 13,726 Adjusted financial expense 58,368 6,168 11,508 6,841 15,616 - Adjusted loan loss provision expense 22,001 1,651 4,117 2,073 4,251 224 13,501 103,760 15,352 23,687 18,077 25,062 Adjustment expense Operating expense 14 1 3 1,518 3 1 Average total assets 851,842 95,714 107,487 100,334 249,777 10,501 Weighted avg. Adjusted total expense-to-average total assets 21.6% 24.2% 36.6% 26.9% 18.0% 130.7% Adjusted financial expense-to-average total assets 6.9% 6.4% 10.7% 6.8% 6.3% 0.0% Adjusted loan loss provision expense-to-average total assets 2.6% 1.7% 3.8% 2.1% 1.7% 2.1% 12.2% 16.0% 22.0% 18.0% 10.0% 128.6% Adjusted operating expense-to-average total assets Adjusted personnel expense 6.9% 8.5% 14.4% 6.9% 6.2% 32.6% Adjusted admin expense 4.7% 7.5% 7.7% 8.5% 3.8% 95.6% Adjustment expense-to-average total assets 0.0% 0.0% 0.0% 1.5% 0.0% 0.0% BEDF OPD SAATH SRDO SVDP DEEP 14,195 30,911 16,983 14,109 33,298 10,390 2,291 9,342 6,036 6,807 8,806 8,731 341 1,444 1,990 1,326 1,109 1,659 MFI Adjusted total expense Adjusted financial expense Adjusted loan loss provision expense 11,564 20,126 8,957 5,976 23,383 Adjustment expense Operating expense 188 1 58 0 666 (185) Average total assets 60,132 121,399 72,595 73,285 138,689 1,328 Pakistan Microfinance Review 2014 Weighted avg. 87 Adjusted total expense-to-average total assets 23.6% 25.5% 23.4% 19.3% 24.0% 782.3% Adjusted financial expense-to-average total assets 3.8% 7.7% 8.3% 9.3% 6.3% 657.4% Adjusted loan loss provision expense-to-average total assets 0.6% 1.2% 2.7% 1.8% 0.8% 0.0% 19.2% 16.6% 12.3% 8.2% 16.9% 124.9% Adjusted personnel expense 6.4% 8.7% 6.0% 3.9% 8.8% 27.0% Adjusted admin expense 6.0% 6.2% 6.3% 4.3% 8.0% 97.9% Adjustment expense-to-average total assets 0.3% 0.0% 0.1% 0.0% 0.5% -13.9% Adjusted operating expense-to-average total assets Financial Services for all AII - Performance Indicators of Individual MFPs 2014 MFI BAIDRE Adjusted total expense Wasil VDO Akhuwat Sub 17,227 62,835 22,581 638,314 4,867,637 Adjusted financial expense 7,460 25,473 5,477 254,283 1,439,357 Adjusted loan loss provision expense 1,246 5,322 11,580 15,522 210,205 Operating expense 3,218,075 8,521 32,040 5,525 368,508 Adjustment expense 729 (11) 12,588 254,326 303,540 Average total assets 101,356 180,945 58,789 3,414,924 18,765,849 Weighted avg. Adjusted total expense-to-average total assets 17.0% 34.7% 38.4% 18.7% 25.9% Adjusted financial expense-to-average total assets 7.4% 14.1% 9.3% 7.4% 7.7% Adjusted loan loss provision expense-to-average total assets 1.2% 2.9% 19.7% 0.5% 1.1% Adjusted operating expense-to-average total assets 8.4% 17.7% 9.4% 10.8% 17.1% Adjusted personnel expense 4.4% 10.4% 4.8% 6.9% 8.2% Adjusted admin expense 3.3% 7.3% 4.1% 3.3% 6.0% Adjustment expense-to-average total assets 0.7% 0.0% 21.4% 7.4% 1.6% NRSP PRSP SRSP TRDP SRSO Sub RSP 1,562,593 163,471 15,587 223,674 286,107 2,251,431 Adjusted financial expense Adjusted total expense 569,281 103,164 2,402 86,526 95,137 856,511 Adjusted loan loss provision expense 20,365 1,349 28 3,819 49,868 75,430 1,319,490 972,946 58,958 13,157 133,329 141,101 Adjustment expense Operating expense 157 - - 987 12,148 13,291 Average total assets 8,551,884 2,678,281 59,970 779,284 1,434,735 13,504,154 Adjusted total expense-to-average total assets 18.3% 6.1% 26.0% 28.7% 19.9% 16.7% Adjusted financial expense-to-average total assets 6.7% 3.9% 4.0% 11.1% 6.6% 6.3% Adjusted loan loss provision expense-to-average total assets 0.2% 0.1% 0.0% 0.5% 3.5% 0.6% 11.4% 2.2% 21.9% 17.1% 9.8% 9.8% Adjusted personnel expense 7.8% 1.3% 10.3% 12.0% 5.8% 6.6% Adjusted admin expense 3.6% 0.8% 11.6% 4.9% 3.9% 3.2% Adjustment expense-to-average total assets 0.0% 0.0% 0.0% 0.1% 0.8% 0.1% Adjusted operating expense-to-average total assets Annual Assessment of the Microfinance Industry Weighted avg. 88 Financial Services for all Annexures Adjusted total expense Adjusted financial expense Adjusted loan loss provision expense Operating expense Sub MFB Sub MFI Sub RSP Total 13,723,052 4,867,637 2,251,431 20,842,120 3,446,223 1,439,357 856,511 5,742,091 522,490 210,205 75,430 808,125 9,754,340 3,218,075 1,319,490 14,291,904 Adjustment expense 136,808 303,540 13,291 453,639 Average total assets 63,224,661 18,765,849 13,504,154 95,494,664 Weighted avg. Adjusted total expense-to-average total assets 21.7% 25.9% 16.7% 21.8% Adjusted financial expense-to-average total assets 5.5% 7.7% 6.3% 6.0% Adjusted loan loss provision expense-to-average total assets 0.8% 1.1% 0.6% 0.8% 15.4% 17.1% 9.8% 15.0% Adjusted personnel expense 6.5% 8.2% 6.6% 6.9% Adjusted admin expense 6.9% 6.0% 3.2% 6.2% Adjustment expense-to-average total assets 0.2% 1.6% 0.1% 0.5% Pakistan Microfinance Review 2014 Adjusted operating expense-to-average total assets 89 Financial Services for all AII - Performance Indicators of Individual MFPs 2014 Operating Efficiency MFB KBL TMFB POMFB FMFB NRSP-B FINCA Operating expense (PKR 000) 1,889,832 2,425,400 128,958 976,722 918,213 1,043,293 Personnel expense (PKR 000) 872,220 1,155,631 64,948 479,259 472,418 537,350 10,548,829 8,656,472 170,882 3,989,658 5,018,536 3,032,242 Average number of active borrowers 468,638 226,870 6,220 148,776 194,489 75,804 Average number of active loans 468,638 226,870 6,220 148,776 194,489 76,791 17.92% 28.0% 75.5% 24.5% 18.3% 34.4% 8.27% 13.3% 38.0% 12.0% 9.4% 17.7% 2.3 3.9 2.2 2.9 2.3 2.9 Average gross loan portfolio (PKR 000) Adjusted operating expense-to-average gross loan portfolio Adjusted personnel expense-to-average gross loan portfolio Average salary/gross domestic product per capita Adjusted cost per borrower (PKR) 4,033 10,691 20,733 6,565 4,721 13,763 Adjusted cost per loan (PKR) 4,033 10,691 20,733 6,565 4,721 13,586 AMFB WASEELA U-Bank Sub Operating expense (PKR 000) 165,665 574,320 398,915 8,521,318 Personnel expense (PKR 000) 79,992 271,058 197,901 4,130,777 570,256 339,365 193,937 32,520,176 Average number of active borrowers 11,930 11,402 8,786 1,152,915 Average number of active loans 11,930 11,402 8,786 MFB Average gross loan portfolio (PKR 000) 1,153,902 Adjusted operating expense-to-average gross loan portfolio 29.1% 169.2% 205.7% 26.2% Adjusted personnel expense-to-average gross loan portfolio 14.0% 79.9% 102.0% 12.7% 2.1 4.6 4.1 2.9 Adjusted cost per borrower (PKR) 13,886 50,370 45,403 7,391 Adjusted cost per loan (PKR) 13,886 50,370 45,403 7,385 Average salary/gross domestic product per capita Annual Assessment of the Microfinance Industry weighted avg. 90 Financial Services for all Annexures MFI OPP KASHF SAFCO DAMEN CSC GBTI Operating expense (PKR 000) 30,728 696,897 100,760 131,033 97,931 12,014 Personnel expense (PKR 000) 18,270 535,866 57,900 80,472 52,923 8,851 465,465 3,647,740 418,203 876,845 337,247 66,007 Average number of active borrowers 47,486 230,810 38,234 38,063 19,753 8,835 Average number of active loans 47,486 230,810 38,234 38,063 19,753 8,835 Average gross loan portfolio (PKR 000) weighted avg. Adjusted operating expense-to-average gross loan portfolio 6.6% 19.1% 24.1% 14.9% 29.0% 18.2% Adjusted personnel expense-to-average gross loan portfolio 3.9% 14.7% 13.8% 9.2% 15.7% 13.4% Average salary/gross domestic product per capita 1.3 1.8 1.6 2.5 2.0 0.9 Adjusted cost per borrower (PKR) 647 3,019 2,635 3,443 4,958 1,360 Adjusted cost per loan (PKR) 647 3,019 2,635 3,443 4,958 1,360 FFO ASA-P BRAC-P JWS Sungi ORIX MFI Operating expense (PKR 000) 36,631 318,240 673,506 100,649 16,846 43,328 Personnel expense (PKR 000) 19,833 224,027 279,789 66,891 6,361 19,891 194,540 2,315,142 1,054,540 414,581 98,641 274,637 Average number of active borrowers 20,861 220,606 58,389 28,239 11,559 19,140 Average number of active loans 20,861 220,606 58,389 28,239 11,599 Average gross loan portfolio (PKR 000) 19,140 weighted avg. Adjusted operating expense-to-average gross loan portfolio 18.8% 13.7% 63.9% 24.3% 17.1% 15.8% Adjusted personnel expense-to-average gross loan portfolio 10.2% 9.7% 26.5% 16.1% 6.4% 7.2% 0.8 1.5 3.2 2.4 0.8 2.0 Pakistan Microfinance Review 2014 Average salary/gross domestic product per capita Adjusted cost per borrower (PKR) 1,756 1,443 11,535 3,564 1,457 2,264 Adjusted cost per loan (PKR) 1,756 1,443 11,535 3,564 1,452 2,264 RCDS Agahe AMRDO MO Mojaz Naymet Operating expense (PKR 000) 99,554 15,352 23,687 15,422 25,062 13,467 Personnel expense (PKR 000) 59,196 8,126 15,429 6,908 15,529 3,423 531,006 59,141 96,282 75,373 121,106 9,612 Average number of active borrowers 41,023 6,826 14,386 4,833 9,121 2,498 Average number of active loans 41,023 6,826 14,386 4,833 9,121 2,498 MFI Average gross loan portfolio (PKR 000) Continued on next page 91 Financial Services for all AII - Performance Indicators of Individual MFPs 2014 MFI RCDS Agahe AMRDO MO Mojaz Naymet weighted avg. Adjusted operating expense-to-average gross loan portfolio 18.7% 26.0% 24.6% 20.5% 20.7% 140.1% Adjusted personnel expense-to-average gross loan portfolio 11.1% 13.7% 16.0% 9.2% 12.8% 35.6% 1.4 1.2 0.9 1.8 0.7 1.7 Average salary/gross domestic product per capita Adjusted cost per borrower (PKR) 2,427 2,249 1,647 3,191 2,748 5,391 Adjusted cost per loan (PKR) 2,427 2,249 1,647 3,191 2,748 5,391 MFI BEDF OPD SAATH SRDO SVDP DEEP Operating expense (PKR 000) 7,459 18,071 8,957 5,976 23,380 1,659 Personnel expense (PKR 000) 3,826 10,582 4,348 2,850 12,231 359 52,923 76,526 39,421 52,785 83,946 791 Average number of active borrowers 1,480 7,319 4,309 2,452 4,244 450 Average number of active loans 1,480 7,319 4,309 2,452 4,244 450 Average gross loan portfolio (PKR 000) weighted avg. Adjusted operating expense-to-average gross loan portfolio 14.1% 23.6% 22.7% 11.3% 27.9% 209.8% 7.2% 13.8% 11.0% 5.4% 14.6% 45.4% 1.9 1.2 1.2 0.9 1.8 0.2 Adjusted cost per borrower (PKR) 5,040 2,469 2,079 2,437 5,509 3,687 Adjusted cost per loan (PKR) 5,040 2,469 2,079 2,437 5,509 3,687 Wasil VDO Akhuwat Sub Adjusted personnel expense-to-average gross loan portfolio Average salary/gross domestic product per capita Operating expense (PKR 000) 7,844 32,040 5,284 349,715 2,911,495 Personnel expense (PKR 000) 4,470 18,874 2,845 236,547 1,776,618 28,465 105,869 39,120 2,013,867 13,549,821 Average number of active borrowers 3,376 5,482 2,787 235,517 1,088,078 Average number of active loans 3,376 5,482 2,787 235,517 Average gross loan portfolio (PKR 000) 1,088,118 weighted avg. Adjusted operating expense-to-average gross loan portfolio 27.6% 30.3% 13.5% 17.4% 21.5% Adjusted personnel expense-to-average gross loan portfolio 15.7% 17.8% 7.3% 11.7% 13.1% 0.6 1.6 1.2 1.1 1.6 Average salary/gross domestic product per capita Annual Assessment of the Microfinance Industry MFI BAIDRE Continued on next page 92 Financial Services for all Annexures MFI BAIDRE Wasil VDO Akhuwat Sub Adjusted cost per borrower (PKR) 2,323 5,845 1,896 1,485 2,676 Adjusted cost per loan (PKR) 2,323 5,845 1,896 1,485 2,676 RSP NRSP PRSP SRSP TRDP SRSO Sub Operating expense (PKR 000) 972,946 55,610 13,157 131,469 139,671 1,312,852 Personnel expense (PKR 000) 668,229 35,429 6,183 93,189 83,832 886,861 6,618,924 1,026,474 34,846 1,083,258 1,143,738 9,907,240 Average number of active borrowers 492,338 74,864 4,770 109,688 75,215 756,875 Average number of active loans 492,338 74,864 4,770 109,688 75,215 756,875 Average gross loan portfolio (PKR 000) weighted avg. Adjusted operating expense-to-average gross loan portfolio 14.7% 5.4% 37.8% 12.1% 12.2% 13.3% Adjusted personnel expense-to-average gross loan portfolio 10.1% 3.5% 17.7% 8.6% 7.3% 9.0% 1.8 0.4 1.7 1.1 1.7 1.5 Adjusted cost per borrower (PKR) 1,976 743 2,758 1,199 1,857 1,735 Adjusted cost per loan (PKR) 1,976 743 2,758 1,199 1,857 1,735 Sub MFB Sub MFI Sub RSP Total Operating expense (PKR 000) 8,521,318 2,911,495 1,312,852 12,745,665 Personnel expense (PKR 000) 4,130,777 1,776,618 886,861 6,794,257 32,520,176 13,549,821 9,907,240 55,977,237 Average number of active borrowers 1,152,915 1,088,078 756,875 2,997,868 Average number of active loans 1,153,902 1,088,118 756,875 2,998,895 Average salary/gross domestic product per capita Average gross loan portfolio (PKR 000) Pakistan Microfinance Review 2014 weighted avg. 93 Adjusted operating expense-to-average gross loan portfolio 26.2% 21.5% 13.3% 22.8% Adjusted personnel expense-to-average gross loan portfolio 12.7% 13.1% 9.0% 12.1% 2.9 1.6 1.5 2.2 Adjusted cost per borrower (PKR) 7,391 2,676 1,735 4,252 Adjusted cost per loan (PKR) 7,385 2,676 1,735 4,250 Average salary/gross domestic product per capita Financial Services for all AII - Performance Indicators of Individual MFPs 2014 Productivity MFB Number of active borrowers KBL TMFB POMFB FMFB NRSP-B FINCA 468,638 226,870 6,220 148,776 194,489 75,804 Number of active loans 468,638 226,870 6,220 148,776 194,489 76,791 Number of active depositors 900,081 3,481,340 18,301 270,787 327,128 267,913 Number of deposit accounts 900,081 3,481,340 18,301 270,787 327,128 267,913 2,622 2,058 206 1,169 1,429 1,268 480 982 92 535 743 Total staff Total loan officers 434 weighted avg. Borrowers per staff 179 110 30 127 136 60 Loans per staff 179 110 30 127 136 61 Borrowers per loan officer 976 231 68 279 262 175 Loans per loan officer 976 231 68 279 262 177 Depositors per staff 343 1,692 89 232 229 211 Deposit accounts per staff 343 1,692 89 232 229 211 18.3% 47.7% 44.7% 45.8% 52.0% 34.2% AMFB WASEELA U-Bank Sub Number of active borrowers 11,930 11,402 8,786 1,152,915 Number of active loans 11,930 11,402 8,786 1,044,993 Number of active depositors 43,532 311,920 54,435 5,675,437 Number of deposit accounts 43,532 311,920 54,435 5,675,437 271 475 338 7,484 Total loan officers 62 74 31 2,832 Borrowers per staff 44 24 26 140 Loans per staff 44 24 26 140 Borrowers per loan officer 192 154 283 369 Loans per loan officer 192 154 283 369 Depositors per staff 161 657 161 758 Deposit accounts per staff 161 657 161 758 22.9% 15.6% 9.2% 37.8% Personnel allocation ratio MFB Total staff Personnel allocation ratio Annual Assessment of the Microfinance Industry weighted avg. 94 Financial Services for all Annexures MFI OPP KASHF SAFCO DAMEN CSC GBTI Number of active borrowers 47,486 230,810 38,234 38,063 19,753 8,835 Number of active loans 47,486 230,810 38,234 38,063 19,753 8,835 - - - - - - Number of active depositors Number of deposit accounts - - - - - - 100 2,064 245 228 180 67 26 935 123 103 55 6 Borrowers per staff 475 112 156 167 110 132 Loans per staff 475 112 156 167 110 132 Total staff Total loan officers weighted avg. Borrowers per loan officer 1,826 247 311 370 359 1,473 Loans per loan officer 1,826 247 311 370 359 1,473 0 0 0 0 0 0 Depositors per staff Deposit accounts per staff Personnel allocation ratio 0 0 0 0 0 0 26.0% 45.3% 50.2% 45.2% 30.6% 9.0% AKHUWAT MFI FFO ASA-P BRAC JWS SUNGI Number of active borrowers 20,861 220,606 58,389 28,239 11,559 235,517 Number of active loans 20,861 220,606 58,389 28,239 11,599 235,517 Number of active depositors - - - - - - Number of deposit accounts - - - - - - 176 1,044 610 197 54 1,549 40 634 329 96 41 1,015 Borrowers per staff 119 211 96 143 214 152 Loans per staff 119 211 96 143 215 152 Total staff Total loan officers weighted avg. Borrowers per loan officer 522 348 177 294 282 232 Loans per loan officer 522 348 177 294 283 232 0 0 0 0 0 0 Depositors per staff Deposit accounts per staff Personnel allocation ratio 0 0 0 0 0 0 22.7% 60.7% 53.9% 48.7% 75.9% 65.5% Mojaz Pakistan Microfinance Review 2014 MFI ORIX RCDS Agahe AMRDO MO Number of active borrowers 19,140 41,023 6,826 14,386 4,833 9,121 Number of active loans 19,140 41,023 6,826 14,386 4,833 9,121 Number of active depositors - - - - - - Number of deposit accounts - - - - - - Total staff 70 297 46 119 26 158 Total loan officers 41 140 27 32 12 15 weighted avg. Borrowers per staff 273 138 148 121 186 58 Continued on next page 95 Financial Services for all AII - Performance Indicators of Individual MFPs 2014 MFI ORIX RCDS Agahe AMRDO MO Mojaz Loans per staff 273 138 148 121 186 58 Borrowers per loan officer 467 293 253 450 403 608 Loans per loan officer 608 467 293 253 450 403 Depositors per staff 0 0 0 0 0 0 Deposit accounts per staff 0 0 0 0 0 0 58.6% 47.1% 58.7% 26.9% 46.2% 9.5% Naymet BEDF OPD SAATH SRDO SVDP Number of active borrowers 2,498 1,480 7,319 4,309 2,452 4,244 Number of active loans 4,244 Personnel allocation ratio MFI 2,498 1,480 7,319 4,309 2,452 Number of active depositors - - - - - - Number of deposit accounts - - - - - - 14 14 59 25 21 47 4 6 17 10 6 15 Total staff Total loan officers weighted avg. Borrowers per staff 178 106 124 172 117 90 Loans per staff 178 106 124 172 117 90 Borrowers per loan officer 625 247 431 431 409 283 Loans per loan officer 283 625 247 431 431 409 Depositors per staff 0 0 0 0 0 0 Deposit accounts per staff 0 0 0 0 0 0 28.6% 42.9% 28.8% 40.0% 28.6% 31.9% BAIDRE Wasil VDO Sub Personnel allocation ratio Number of active borrowers 450 3,376 5,482 2,787 1,088,078 Number of active loans 450 3,376 5,482 2,787 1,099,717 - - - - - Number of active depositors Number of deposit accounts Total staff Total loan officers - - - - - 15 56 82 16 7,633 3 14 44 8 3,834 weighted avg. Borrowers per staff 30 60 67 174 144 Loans per staff 30 60 67 174 144 Borrowers per loan officer 150 241 125 348 287 Loans per loan officer 287 150 241 125 348 Depositors per staff 0 0 0 0 - Deposit accounts per staff 0 0 0 0 - 20.0% 25.0% 53.7% 50.0% 50.2% Personnel allocation ratio Annual Assessment of the Microfinance Industry MFI DEEP 96 Financial Services for all Annexures RSP NRSP PRSP SRSP TRDP SRSO Sub Number of active borrowers 492,338 74,864 4,770 109,688 75,215 756,875 Number of active loans 492,338 74,864 4,770 109,688 75,215 756,875 - - - - - - Number of active depositors - - - - - - Total staff Number of deposit accounts 2,572 643 26 589 334 4,164 Total loan officers 1,842 64 6 230 30 2,172 Borrowers per staff 191 116 183 186 225 182 Loans per staff 191 116 183 186 225 182 weighted avg. Borrowers per loan officer 267 1,170 795 477 2,507 348 Loans per loan officer 267 1,170 795 477 2,507 348 - - - - - - Depositors per staff Deposit accounts per staff Personnel allocation ratio - - - - - - 71.6% 10.0% 23.1% 39.0% 9.0% 52.2% Sub MFB Sub MFI Sub RSP Total Number of active borrowers 1,044,993 1,099,637 756,875 2,997,868 Number of active loans 1,044,993 1,099,717 756,875 2,901,585 Number of active depositors 5,675,437 - - 5,675,437 Number of deposit accounts 5,675,437 - - 5,675,437 Total staff 7,484 7,633 4,164 19,281 Total loan officers 2,832 3,834 2,172 8,838 weighted avg. Borrowers per staff 140 144 182 150 Loans per staff 140 144 182 150 Borrowers per loan officer 369 287 348 328 Loans per loan officer 369 287 348 328 Depositors per staff 758 - - 294 Deposit accounts per staff Pakistan Microfinance Review 2014 Personnel allocation ratio 97 758 - - 294 37.8% 50.2% 52.2% 45.8% Financial Services for all AII - Performance Indicators of Individual MFPs 2014 Risk in PKR ‘000 MFB Portfolio at risk > 30 days Portfolio at risk > 90 days KBL TMFB POMFB FMFB NRSP-B FINCA 112,973 74,381 2,275 37,104 51,109 35,550 35,170 25,176 1,197 21,490 27,490 14,147 Loan loss reserve 132,413 39,631 2,855 63,308 66,894 33,747 Loan Portfolio written off during year 127,783 11,429 52,160 128,046 49,981 30,091 Gross loan portfolio 12,238,252 8,981,390 223,832 4,479,999 5,192,071 4,028,415 Average gross loan portfolio 10,548,829 8,656,472 170,882 3,989,658 5,018,536 3,032,242 weighted avg. Portfolio at risk (>30)-to-gross loan portfolio 0.9% 0.8% 1.0% 0.8% 1.0% 0.9% Portfolio at risk(>90)-to-gross loan portfolio 0.3% 0.3% 0.5% 0.5% 0.5% 0.4% Write off-to-average gross loan portfolio 1.2% 0.13% 30.5% 3.2% 1.0% 1.0% 117.2% 53.3% 125.5% 170.6% 130.9% 94.9% AMFB WASEELA U-Bank Sub Portfolio at risk > 30 days 101,396 7 267 415,062 Portfolio at risk > 90 days 39,561 - 20 164,251 Loan loss reserve 32,535 2,590 2,366 376,338 Loan Portfolio written off during year 15,836 - 22 415,348 Gross loan portfolio 798,673 500,402 346,493 36,789,528 Average gross loan portfolio 570,256 339,365 193,937 Risk coverage ratio (adjusted loan loss reserve-to-portfolio at risk >30days) MFB 32,520,176 Portfolio at risk (>30)-to-gross loan portfolio 12.7% 0.0% 0.1% 1.1% Portfolio at risk(>90)-to-gross loan portfolio 5.0% 0.0% 0.0% 0.4% Write off-to-average gross loan portfolio 2.8% 0.0% 0.0% 1.3% 32.1% 36160.9% 884.8% 90.7% Risk coverage ratio (adjusted loan loss reserve-to-portfolio at risk >30days) Annual Assessment of the Microfinance Industry weighted avg. 98 Financial Services for all Annexures MFI OPP KASHF SAFCO DAMEN CSC GBTI Portfolio at risk > 30 days 7,833 20,878 12,998 7,920 2,333 - Portfolio at risk > 90 days 7,833 17,708 12,244 4,378 2,333 - 13,248 73,991 21,127 50,158 19,060 - - 601,390 12,419 12,032 316 - Loan loss reserve Loan Portfolio written off during year Gross loan portfolio 460,538 3,752,325 422,532 1,003,160 381,000 81,252 Average gross loan portfolio 465,465 3,647,740 418,203 876,845 337,247 66,007 weighted avg. Portfolio at risk (>30)-to-gross loan portfolio 1.7% 0.6% 3.1% 0.8% 0.6% 0.0% Portfolio at risk(>90)-to-gross loan portfolio 1.7% 0.5% 2.9% 0.4% 0.6% 0.0% Write off-to-average gross loan portfolio 0.0% 16.5% 3.0% 1.4% 0.1% 0.0% 169.1% 354.4% 162.5% 633.3% 816.8% 0.0% FFO ASA-P BRAC-P JWS Sungi ORIX Risk coverage ratio (adjusted loan loss reserve-to-portfolio at risk >30days) MFI Portfolio at risk > 30 days 216 4,985 26,859 2,637 - 4,422 Portfolio at risk > 90 days 216 3,838 21,418 2,637 - 4,342 8,005 29,812 225,884 26,695 1,615 4,162 799 7,579 - 899 182 11,886 Loan loss reserve Loan Portfolio written off during year Gross loan portfolio 263,747 2,733,482 1,224,784 509,994 107,700 315,559 Average gross loan portfolio 194,540 2,315,142 1,054,540 414,581 98,641 274,637 weighted avg. Portfolio at risk (>30)-to-gross loan portfolio 0.1% 0.2% 2.2% 0.5% 0.0% 1.4% Portfolio at risk(>90)-to-gross loan portfolio 0.1% 0.1% 1.7% 0.5% 0.0% 1.4% Write off-to-average gross loan portfolio 0.4% 0.3% 0.0% 0.2% 0.2% 4.3% 3710.9% 598.1% 841.0% 1012.5% 100.0% 94.1% RCDS Agahe AMRDO MO Mojaz Naymet 1,017 - 5,494 1,292 27 - Pakistan Microfinance Review 2014 Risk coverage ratio (adjusted loan loss reserve-to-portfolio at risk >30days) MFI Portfolio at risk > 30 days Portfolio at risk > 90 days Loan loss reserve Loan Portfolio written off during year 924 - 4,256 903 7 - 30,852 - 5,679 5,277 8,181 224 3,802 - 1,880 - - - Gross loan portfolio 617,401 74,556 114,414 86,663 163,612 9,713 Average gross loan portfolio 531,006 59,141 96,282 75,373 121,106 9,612 Continued on next page 99 Financial Services for all AII - Performance Indicators of Individual MFPs 2014 MFI RCDS Agahe AMRDO MO Mojaz Naymet weighted avg. Portfolio at risk (>30)-to-gross loan portfolio 0.2% 0.0% 4.8% 1.5% 0.0% 0.0% Portfolio at risk(>90)-to-gross loan portfolio 0.1% 0.0% 3.7% 1.0% 0.0% 0.0% Write off-to-average gross loan portfolio 0.7% 0.0% 2.0% 0.0% 0.0% 0.0% 3033.1% 0.0% 103.4% 100% 100.0% 100.0% BEDF OPD SAATH SRDO SVDP DEEP Risk coverage ratio (adjusted loan loss reserve-to-portfolio at risk >30days) MFI Portfolio at risk > 30 days 146 1,025 1,096 1,885 1,570 137 Portfolio at risk > 90 days 427 943 858 744 1,216 137 Loan loss reserve 488 2,346 2,797 3,024 4,672 824 Loan Portfolio written off during year 512 1,263 339 608 - - Gross loan portfolio 16,264 99,648 55,936 60,477 93,443 825 Average gross loan portfolio 52,923 76,526 39,421 52,785 83,946 791 weighted avg. Portfolio at risk (>30)-to-gross loan portfolio 0.9% 1.0% 2.0% 3.1% 1.7% 16.6% Portfolio at risk(>90)-to-gross loan portfolio 2.6% 0.9% 1.5% 1.2% 1.3% 16.6% Write off-to-average gross loan portfolio 1.0% 1.7% 0.9% 1.2% 0.0% 0.0% 200.0% 228.9% 255.2% 160.4% 297.6% 601.5% Risk coverage ratio (adjusted loan loss reserve-to-portfolio at risk >30days) Portfolio at risk > 30 days Wasil VDO Akhuwat Sub 1,938 7,487 17,241 11,850 143,286 Portfolio at risk > 90 days 1,398 4,792 15,952 11,850 121,354 Loan loss reserve 3,331 5,120 1,452 24,525 572,548 549 15,647 1,008 6,504 679,613 Loan Portfolio written off during year Gross loan portfolio 56,105 115,659 29,047 2,465,625 15,315,461 Average gross loan portfolio 28,465 105,869 39,120 2,013,867 13,549,821 weighted avg. Portfolio at risk (>30)-to-gross loan portfolio 3.5% 6.5% 59.4% 0.5% 0.9% Portfolio at risk(>90)-to-gross loan portfolio 2.5% 4.1% 54.9% 0.5% 0.8% Write off-to-average gross loan portfolio 1.9% 14.8% 2.6% 0.3% 5.0% Continued on next page Annual Assessment of the Microfinance Industry MFI BAIDRE 100 Financial Services for all Annexures MFI Risk coverage ratio (adjusted loan loss reserve-to-portfolio at risk >30days) BAIDRE Wasil VDO Akhuwat Sub 171.9% 68.4% 8.4% 207.0% 399.6% NRSP PRSP SRSP TRDP SRSO Sub 101,070 RSP Portfolio at risk > 30 days 23,148 2,032 - 22,674 53,216 Portfolio at risk > 90 days 20,152 1,922 - 22,425 49,532 94,032 Loan loss reserve 88,494 79,562 28 967 71,946 240,997 Loan Portfolio written off during year 81,476 - 28 - 45,611 127,115 Gross loan portfolio 7,653,444 1,149,283 37,519 1,376,726 1,209,504 11,426,476 Average gross loan portfolio 6,618,924 1,026,474 34,846 1,083,258 1,143,738 9,907,240 weighted avg. Portfolio at risk (>30)-to-gross loan portfolio 0.3% 0.2% 0.0% 1.6% 4.4% 0.9% Portfolio at risk(>90)-to-gross loan portfolio 0.3% 0.2% 0.0% 1.6% 4.1% 0.8% Write off-to-average gross loan portfolio 1.2% 0.0% 0.1% 0.0% 4.0% 1.3% 382.3% 3916.2% 0.0% 4.3% 135.2% 238.4% Sub MFB Sub MFI Sub RSP Total Portfolio at risk > 30 days 415,062 143,286 101,070 659,418 Portfolio at risk > 90 days 164,251 121,354 94,032 379,637 Loan loss reserve 376,338 572,548 240,997 1,189,884 Loan Portfolio written off during year 415,348 679,613 127,115 1,222,076 Gross loan portfolio 36,789,528 15,315,461 11,426,476 63,531,465 Average gross loan portfolio 32,520,176 13,549,821 9,907,240 55,977,237 Risk coverage ratio (adjusted loan loss reserve-to-portfolio at risk >30days) Pakistan Microfinance Review 2014 weighted avg. 101 Portfolio at risk (>30)-to-gross loan portfolio 1.1% 0.9% 0.9% 1.0% Portfolio at risk(>90)-to-gross loan portfolio 0.4% 0.8% 0.8% 0.6% Write off-to-average gross loan portfolio 1.3% 5.0% 1.3% 2.2% 90.7% 399.6% 238.4% 180.4% Risk coverage ratio (adjusted loan loss reserve-to-portfolio at risk >30days) Annual Assessment of the Microfinance Industry Financial Services for all AII - Performance Indicators of Individual MFPs 2014 102 Financial Services for all Annexures AIII - Social Performance Indicators of Individual MFPs 2014 MFPs Social Goals 1.1 Target market KBL TMFB FMFBP FINCA WMFB Clients living in rural areas P P P P P Clients living in urban areas P P P P P Women P P P P P Increased access to financial services P P P P P Poverty reduction P P P Adolescents and youth (below 18) None of the above 1.2 Development goals P P Employment generation P P Development of start-up enterprises P Pakistan Microfinance Review 2014 Growth of existing businesses 103 P P P P Improvement of adult education Youth opportunities Children’s schooling Health improvement P Gender equality and women’s empowerment P Water and sanitation Housing None of the above P P Financial Services for all AIII - Social Performance Indicators of Individual MFPs 2014 1.3 Poverty level Very poor clients Poor clients P P P P P Low income clients P P P P P P P P P P No specific poverty target 1.4 Does MFP measure poverty Yes No Unknown 1.5 Poverty measurement tool Grameen Progress out of Poverty Index (PPI) P USAID Poverty Assessment Tool (PAT) Per capita household expenditure P Per capita household income P P Participatory Wealth Ranking (PWR) Housing index Food security index Means test P Own proxy poverty index P None of the above P P Governance and HR 2.1 Board orientation of social mission Yes P P P P P P P P No Unknown SPM champion/ committee at Board Yes No P Unknown 2.3 Board experience in SPM Yes P P P P P No Unknown 2.4 Staff incentives related to SP Number of clients P P P P Quality of interactionw ith clients based on client feedback mechanism P P Quality of social data collected Portfolio quality P P P P P Annual Assessment of the Microfinance Industry 2.2 104 Financial Services for all Annexures None of the above 2.5 How number of clients is incentivized Total number of clients P P Number of new clients P P P Client retention P P None of the above 2.6 HR policies related to SP P P P Social protection (medical insurance and/or pension contribution) P P Safety policy P P Anti-harassment policy P P Non-discrimination policy P Grievance resolution policy P P P P P P P P P P P P P P P P P P P P P P P P P P None of the above Products and Services 3.1 Types of credit products Income generating loans Non-income generating loans Does not offer credit products 3.2 Types of income generating loans Microenterprise loans P SME loans Agriculture/livestock loans P P Express loans P P P P P P P P P P None of the above Pakistan Microfinance Review 2014 3.3 105 Types of non-income generating loans Education loans Emergency loans P Housing loans P P Other household needs/ consumption P P None of the above 3.4 Types of savings products P P Compulsory sacings accounts Voluntary savings accounts Does not offer savings accounts P P P Financial Services for all AIII - Social Performance Indicators of Individual MFPs 2014 3.5 Types of voluntary savings products Demand deposit accounts P P P P Time deposit accounts P P P P None of the above 3.6 Compulory insurance required Yes P P P P P P P P P P P No Unknown 3.7 Types of compulory insurance required Credit life insurance Life/accident insurance P Agriculture insurance P P None of the above 3.8 Voluntary insurance offered Yes P P P No P P P P Unknown 3.9 Types of voluntary insurance offered Credit life insurance Life/accident insurance P Agriculture insurance Health insurance P P P House insurance Workplace insurance None of the above 3.10 Other financial services offered Yes P P Debit/credit card P P Mobile/branchless banking services P P P P No Unknown Types of other financial services offered Savings facilitation services P Remittance/money transfer services P Payment services P P P P P P P P P P P P P P P P Microleasing Scholarship/educational grants None of the above 3.12 Enterprise services offered Yes No Unknown P Annual Assessment of the Microfinance Industry 3.11 106 Financial Services for all Annexures 3.13 Types of enterprise services offered Enterprise skills development Business development services None of the above 3.14 Women’s enpowerment services P P P P P P P P P P P P P P P P P P P Yes No Unknown 3.15 Types of women’s empowerment services offered Leadership training for women Women’s rights education/ gender issues training Counseling/legal services for female victims of voilence None of the above 3.16 Education services offered Yes No P P P Unknown 3.17 Types of education services offered Financial literacy education P Basic health/nutrition education Child and youth education Occupational health and safety in the workplace education None of the above 3.18 Health services offered P P P P P P P None of the above P P P P P Yes P P P P P Yes No Unknown Pakistan Microfinance Review 2014 3.19 107 Types of health services offered Basic medical services Special medical services for women and children Client Protection 4.1 Do policies support good repayment capacity analysis No Unknown Financial Services for all AIII - Social Performance Indicators of Individual MFPs 2014 4.2 Does internal audit verify compliance with policies Yes P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P P No Unknown 4.3 Are prices, installments, terms and conditions fully disclosed to clients Yes No Unknown 4.4 Are annual percentage rates (APR) of loan products disclosed Yes No Unknown 4.5 Is the code of conduct clearly defined Yes No Unknown 4.6 Are violations of the code of conduct sanctioned Yes No Unknown 4.7 4.8 Is there a clear reporting system in place for complaints from clients at branches Yes Do contracts include a data privacy clause Yes No Unknown No Unknown How interest rate of most representative credit product is stated Declining balance interest method P Flat interest method P P P P Environment 5.1 Environmental policies in place Awareness raising on environmental impacts P Clauses in loan contracts requiring clients to imrove environmental practices/ mitigate environmental risks Tools to evaluate environmental risks of clients’ activities P P P P P P Annual Assessment of the Microfinance Industry 4.9 108 Financial Services for all Annexures Specific loans linked to environmentally friendly products and/or practices P P P P P P None of the above 5.2 Types of environmentally friendly products and/or practices offered Products related to renewable energy (e.g. solar panels, biogas digesters etc) Products related to energy efficiency (e.g. insulation, improved cooking stove etc) P Products related to environmentally friendly practices (e.g. organic farming, recycling, waste management etc) Pakistan Microfinance Review 2014 None of the above 109 P P Financial Services for all AIII - Social Performance Indicators of Individual MFPs 2014 MFIs Social Goals 1.1 Target market AGAHE Akhuwat AMRDO ASA Pak BEDF Clients living in rural areas P P P P P Clients living in urban areas P P P P Women P P P P P CSC DAMEN FFO JWS Kashf Clients living in rural areas P P P P P Clients living in urban areas P P P P P Women P P P P Adolescents and youth (below 18) None of the above Adolescents and youth (below 18) P None of the above MOJAZ NRDP Nayment OCT Clients living in rural areas P P P P Clients living in urban areas P P Women P P RCDS Clients living in rural areas OPD P P P P P Sungi SSF SVDP P P P P Clients living in urban areas P P P Women P P P Adolescents and youth (below 18) Adolescents and youth (below 18) P P None of the above 1.2 Development goals AGAHE Akhuwat AMRDO ASA Pak BEDF Increased access to financial services P P P P P Poverty reduction P P P P P Employment generation P P P P Development of start-up enterprises P Annual Assessment of the Microfinance Industry None of the above 110 Financial Services for all Annexures Growth of existing businesses P P P P P P P Improvement of adult education Youth opportunities Children's schooling Health improvement P Gender equality and women's empowerment P Water and sanitation P Housing P P None of the above CSC DAMEN FFO JWS Kashf Increased access to financial services P P P P P Poverty reduction P P P P P Employment generation P P Development of start-up enterprises P P P Growth of existing businesses P P P P P Improvement of adult education Youth opportunities Children's schooling Health improvement P Gender equality and women's empowerment P P P P Water and sanitation Housing P None of the above MOJAZ NRDP Nayment OCT OPD Increased access to financial services P P P P P Poverty reduction P P P P P Employment generation P P Pakistan Microfinance Review 2014 Development of start-up enterprises Growth of existing businesses P P Improvement of adult education Youth opportunities P P Children's schooling Health improvement Gender equality and women's empowerment Water and sanitation Housing 111 P P P Financial Services for all AIII - Social Performance Indicators of Individual MFPs 2014 None of the above RCDS Sungi SSF SVDP Increased access to financial services P P P P Poverty reduction P P P P Employment generation P P P P P P P P P P Development of start-up enterprises Growth of existing businesses P P Improvement of adult education Youth opportunities P Children's schooling Health improvement Gender equality and women's empowerment P P Water and sanitation P P P Housing None of the above AGAHE Poverty level AMRDO ASA Pak Very poor clients P Poor clients Low income clients BEDF P P P P P P P P FFO JWS Kashf No specific poverty target CSC DAMEN Poor clients P P Low income clients P P P P P MOJAZ NRDP Nayment OCT OPD P Very poor clients P No specific poverty target Very poor clients P Poor clients P P Low income clients P P P P RCDS Sungi SSF SVDP No specific poverty target Very poor clients P Poor clients P Low income clients P No specific poverty target P P P P Annual Assessment of the Microfinance Industry 1.3 Akhuwat 112 Financial Services for all Annexures 1.4 Does MFP measure poverty Yes AGAHE Akhuwat AMRDO ASA Pak BEDF P P P P P CSC DAMEN FFO JWS Kashf P P P P P MOJAZ NRDP Nayment OCT OPD P P P P P RCDS Sungi SSF SVDP P P AMRDO ASA Pak BEDF P P JWS Kashf No Unknown Yes No Unknown Yes No Unknown Yes P No P Unknown AGAHE 1.5 Poverty measurement tool Akhuwat Grameen Progress out of Poverty Index (PPI) USAID Poverty Assessment Tool (PAT) Per capita household expenditure Per capita household income P Participatory Wealth Ranking (PWR) Housing index P Food security index Means test Own proxy poverty index None of the above P CSC DAMEN FFO Grameen Progress out of Poverty Index (PPI) Pakistan Microfinance Review 2014 USAID Poverty Assessment Tool (PAT) 113 Per capita household expenditure Per capita household income Participatory Wealth Ranking (PWR) Housing index Food security index P Means test Own proxy poverty index P P P Financial Services for all AIII - Social Performance Indicators of Individual MFPs 2014 None of the above P MOJAZ P NRDP Grameen Progress out of Poverty Index (PPI) Nayment OCT P P SSF SVDP OPD USAID Poverty Assessment Tool (PAT) Per capita household expenditure Per capita household income Participatory Wealth Ranking (PWR) Housing index Food security index Means test Own proxy poverty index None of the above Grameen Progress out of Poverty Index (PPI) P P RCDS Sungi P P USAID Poverty Assessment Tool (PAT) Per capita household expenditure P Per capita household income P Participatory Wealth Ranking (PWR) Housing index Food security index Means test Own proxy poverty index None of the above P P Akhuwat AMRDO ASA Pak BEDF P P P P CSC DAMEN FFO JWS Kashf P P P AGAHE 2.1 Board orientation of social mission Yes No Unknown Yes P No P P Unknown Yes No Unknown MOJAZ NRDP Nayment OCT P P P P OPD P Annual Assessment of the Microfinance Industry Governance and HR 114 Financial Services for all Annexures RCDS Yes Sungi P SSF SVDP P P AMRDO ASA Pak No Unknown P AGAHE 2.2 SPM champion/ committee at Board Yes No Akhuwat P P BEDF P P P FFO JWS Kashf P P OCT OPD P P Unknown CSC DAMEN P P Yes No Unknown P MOJAZ NRDP Yes No Nayment P P P RCDS Sungi Unknown Yes SSF SVDP P P Akhuwat AMRDO ASA Pak P P P No Unknown P AGAHE 2.3 Board experience in SPM Yes BEDF P No Unknown Yes P P CSC DAMEN FFO JWS Kashf P P P P P MOJAZ NRDP Nayment OCT OPD P P P P No Unknown Yes Pakistan Microfinance Review 2014 No 115 P Unknown Yes No Unknown RCDS Sungi SSF SVDP P P P P Financial Services for all AIII - Social Performance Indicators of Individual MFPs 2014 AGAHE 2.4 Staff incentives related to SP Number of clients Akhuwat AMRDO ASA Pak BEDF P P P P P P Quality of interactionw ith clients based on client feedback mechanism Quality of social data collected Portfolio quality None of the above P CSC P DAMEN Number of clients FFO JWS P Kashf P Quality of interactionw ith clients based on client feedback mechanism Quality of social data collected Portfolio quality None of the above Number of clients P P MOJAZ NRDP P P P P P Nayment OCT OPD P Quality of interactionw ith clients based on client feedback mechanism P Quality of social data collected Portfolio quality P P RCDS Sungi None of the above Number of clients P P P SSF SVDP P Quality of interactionw ith clients based on client feedback mechanism Quality of social data collected P Portfolio quality P P None of the above How number of clients is incentivized Akhuwat Total number of clients AMRDO ASA Pak P BEDF P Number of new clients Client retention None of the above Total number of clients P P CSC DAMEN P P FFO JWS P Number of new clients P Client retention None of the above Kashf P P Annual Assessment of the Microfinance Industry P AGAHE 2.5 P 116 Financial Services for all Annexures MOJAZ NRDP Nayment Total number of clients P P None of the above P P SSF SVDP P RCDS Total number of clients OPD P Number of new clients Client retention OCT Sungi P P Number of new clients Client retention P None of the above AGAHE 2.6 HR policies related to SP Social protection (medical insurance and/or pension contribution) Safety policy Anti-harassment policy P P P Akhuwat AMRDO ASA Pak BEDF P P P P P P P Non-discrimination policy P P P P Grievance resolution policy P P P P CSC DAMEN FFO JWS Kashf P P P P P P None of the above Social protection (medical insurance and/or pension contribution) Safety policy Anti-harassment policy P P P P P P P P P P P P P P P MOJAZ NRDP Nayment OCT OPD P P P P Non-discrimination policy Grievance resolution policy P None of the above Social protection (medical insurance and/or pension contribution) Pakistan Microfinance Review 2014 Safety policy 117 P P Anti-harassment policy P P P Non-discrimination policy P P P Grievance resolution policy P P P P P None of the above RCDS Sungi SSF Social protection (medical insurance and/or pension contribution) P P P Safety policy P Anti-harassment policy P P P P SVDP P Financial Services for all AIII - Social Performance Indicators of Individual MFPs 2014 Non-discrimination policy P Grievance resolution policy P P P P AGAHE Akhuwat AMRDO ASA Pak BEDF P P P P P None of the above Products and Services 3.1 Types of credit products Income generating loans Non-income generating loans P Does not offer credit products Income generating loans CSC DAMEN FFO JWS Kashf P P P P P MOJAZ NRDP Nayment OCT OPD P P P P P Non-income generating loans Does not offer credit products Income generating loans Non-income generating loans P Does not offer credit products RCDS Sungi SSF SVDP Income generating loans P P P P Non-income generating loans P AGAHE Akhuwat AMRDO ASA Pak BEDF P P P P P P P 3.2 Types of income generating loans Microenterprise loans SME loans Agriculture/livestock loans P P P P CSC DAMEN FFO JWS Kashf P P P P P Express loans None of the above Microenterprise loans SME loans Agriculture/livestock loans P P Express loans None of the above Microenterprise loans MOJAZ NRDP Nayment OCT OPD P P P P P Annual Assessment of the Microfinance Industry Does not offer credit products 118 Financial Services for all Annexures SME loans P P P Agriculture/livestock loans P P P P Express loans None of the above RCDS Sungi SSF SVDP Microenterprise loans P P P P SME loans P Agriculture/livestock loans P P P P AGAHE Akhuwat AMRDO ASA Pak BEDF P P P P Express loans None of the above 3.3 Types of non-income generating loans Education loans P Emergency loans P Housing loans P Other household needs/ consumption None of the above P CSC DAMEN FFO JWS Kashf P P P P P MOJAZ NRDP Education loans Emergency loans Housing loans Other household needs/ consumption None of the above Nayment OCT OPD Education loans P P P Emergency loans P Housing loans Other household needs/ consumption None of the above P P RCDS Sungi P P SSF SVDP Education loans Pakistan Microfinance Review 2014 Emergency loans 119 P P Housing loans Other household needs/ consumption None of the above AGAHE 3.4 Types of savings products Compulsory savings accounts Voluntary savings accounts P P Akhuwat AMRDO ASA Pak BEDF Financial Services for all AIII - Social Performance Indicators of Individual MFPs 2014 Does not offer savings accounts P P P P P CSC DAMEN FFO JWS Kashf P P Nayment OCT OPD P P P Sungi SSF SVDP P P P AGAHE Akhuwat AMRDO ASA Pak BEDF P P P P P CSC DAMEN FFO JWS Kashf P P Compulsory savings accounts P Voluntary savings accounts P Does not offer savings accounts P P MOJAZ NRDP Compulsory savings accounts Voluntary savings accounts Does not offer savings accounts P P RCDS Compulsory savings accounts Voluntary savings accounts P Does not offer savings accounts 3.5 Types of voluntary savings products Demand deposit accounts Time deposit accounts None of the above Demand deposit accounts Time deposit accounts None of the above P P P MOJAZ NRDP Nayment OCT OPD P P P P P RCDS Sungi SSF SVDP P P P P AGAHE Akhuwat AMRDO ASA Pak Demand deposit accounts Time deposit accounts None of the above Time deposit accounts None of the above 3.6 Compulory insurance required Yes P No BEDF P P P P CSC DAMEN FFO JWS Kashf P P P P P Unknown Yes No Annual Assessment of the Microfinance Industry Demand deposit accounts Unknown 120 Financial Services for all Annexures MOJAZ Yes NRDP P No Nayment OCT OPD P P P P Unknown RCDS Yes Sungi SSF P No SVDP P P P Akhuwat AMRDO Unknown AGAHE 3.7 Types of compulory insurance required Credit life insurance P ASA Pak BEDF P Life/accident insurance Agriculture insurance None of the above Credit life insurance P P CSC DAMEN FFO JWS P Kashf P P P P P MOJAZ NRDP Nayment OCT OPD P P Life/accident insurance Agriculture insurance None of the above Credit life insurance P Life/accident insurance P P P Sungi SSF P P Akhuwat AMRDO ASA Pak BEDF P P P FFO JWS Kashf Agriculture insurance None of the above RCDS Credit life insurance SVDP P Life/accident insurance Agriculture insurance P None of the above AGAHE Pakistan Microfinance Review 2014 3.8 Voluntary insurance offered Yes No P Unknown CSC DAMEN Yes No P P P P P MOJAZ NRDP Nayment OCT OPD P P P Unknown Yes No Unknown 121 P P P Financial Services for all AIII - Social Performance Indicators of Individual MFPs 2014 Yes RCDS Sungi SSF P P P No SVDP P Unknown AGAHE 3.9 Types of voluntary insurance offered Akhuwat AMRDO ASA Pak BEDF P P P FFO JWS Kashf Credit life insurance Life/accident insurance P Agriculture insurance Health insurance P House insurance Workplace insurance None of the above P CSC DAMEN Credit life insurance P Life/accident insurance Agriculture insurance P Health insurance P P House insurance Workplace insurance None of the above Credit life insurance P P P MOJAZ NRDP Nayment OCT P OPD P P Life/accident insurance Agriculture insurance Health insurance House insurance Workplace insurance None of the above P RCDS P P Sungi SSF SVDP P P Life/accident insurance P Agriculture insurance Health insurance P House insurance Workplace insurance None of the above P AGAHE 3.10 Other financial services offered Yes No Unknown Akhuwat AMRDO ASA Pak BEDF P P P P P Annual Assessment of the Microfinance Industry Credit life insurance 122 Financial Services for all Annexures CSC Yes No DAMEN FFO JWS Kashf P P P P Nayment OCT OPD P P P P Unknown MOJAZ NRDP Yes No P P RCDS Sungi SSF SVDP P P P P AGAHE Akhuwat AMRDO ASA Pak BEDF Unknown Yes No Unknown 3.11 Types of other financial services offered Debit/credit card Mobile/branchless banking services Savings facilitation services Remittance/money transfer services Payment services Microleasing Scholarship/educational grants None of the above P P CSC P P P DAMEN FFO JWS Kashf P P P P OCT OPD Debit/credit card Mobile/branchless banking services Savings facilitation services P Remittance/money transfer services Payment services Microleasing Scholarship/educational grants Pakistan Microfinance Review 2014 None of the above 123 P MOJAZ NRDP Nayment Debit/credit card Mobile/branchless banking services Savings facilitation services Remittance/money transfer services Payment services Microleasing P Financial Services for all AIII - Social Performance Indicators of Individual MFPs 2014 Scholarship/educational grants None of the above P P RCDS Sungi P P SSF SVDP Debit/credit card Mobile/branchless banking services P Savings facilitation services Remittance/money transfer services Payment services Microleasing Scholarship/educational grants None of the above 3.12 Enterprise services offered Yes P P AGAHE Akhuwat P No P AMRDO ASA Pak P P BEDF P P Unknown Yes CSC DAMEN FFO JWS Kashf P P P P P MOJAZ NRDP Nayment OCT OPD P P P P No Unknown Yes No P Unknown Yes RCDS Sungi P P No SSF SVDP P P AMRDO ASA Pak AGAHE 3.13 Types of enterprise services offered Enterprise skills development Akhuwat P P BEDF P Business development services P None of the above P CSC DAMEN Enterprise skills development P P Business development services P None of the above P MOJAZ NRDP P FFO JWS Kashf P P P P P Nayment OCT OPD Annual Assessment of the Microfinance Industry Unknown 124 Financial Services for all Annexures Enterprise skills development P Business development services P P P P P None of the above P RCDS Sungi Enterprise skills development P P SSF SVDP Business development services P P P Akhuwat AMRDO ASA Pak P P None of the above AGAHE 3.14 Women’s enpowerment services Yes No P BEDF P P Unknown CSC Yes DAMEN P No FFO JWS Kashf P P P OPD P Unknown Yes MOJAZ NRDP Nayment OCT P P P P No P Unknown Yes RCDS Sungi P P No SSF SVDP P P AMRDO ASA Pak Unknown AGAHE 3.15 Types of women’s empowerment services offered Akhuwat Leadership training for women Women's rights education/ gender issues training P BEDF P P P P Counseling/legal services for female victims of voilence Pakistan Microfinance Review 2014 None of the above 125 P CSC P FFO JWS Kashf Leadership training for women P DAMEN P P P Women's rights education/ gender issues training P P Counseling/legal services for female victims of voilence None of the above P P Financial Services for all AIII - Social Performance Indicators of Individual MFPs 2014 MOJAZ Leadership training for women NRDP Nayment OCT P P P SSF SVDP P P AMRDO ASA Pak OPD Women's rights education/ gender issues training Counseling/legal services for female victims of voilence None of the above P P P RCDS Sungi Leadership training for women P P Women's rights education/ gender issues training P P Counseling/legal services for female victims of voilence P None of the above AGAHE 3.16 Education services offered Akhuwat Yes No BEDF P P P P P CSC DAMEN FFO JWS Kashf P P OCT OPD P P Unknown Yes No P P P Unknown MOJAZ Yes No NRDP Nayment P P P Unknown RCDS Yes Sungi SSF P No SVDP P P P Akhuwat AMRDO AGAHE 3.17 Types of education services offered ASA Pak Financial literacy education BEDF P Basic health/nutrition education Child and youth education Occupational health and safety in the workplace education None of the above Financial literacy education P P P P CSC DAMEN FFO JWS P Kashf P Annual Assessment of the Microfinance Industry Unknown 126 Financial Services for all Annexures Basic health/nutrition education P Child and youth education Occupational health and safety in the workplace education None of the above P MOJAZ P NRDP Financial literacy education P Basic health/nutrition education P Child and youth education P Nayment OCT OPD P P P Occupational health and safety in the workplace education None of the above P RCDS Financial literacy education P Basic health/nutrition education P Child and youth education P Occupational health and safety in the workplace education P None of the above AGAHE 3.18 Health services offered Yes Sungi P P Akhuwat AMRDO ASA Pak BEDF P P P FFO JWS Kashf P P CSC DAMEN Yes No SVDP P No Unknown SSF P P P P MOJAZ NRDP Nayment P Unknown Yes Pakistan Microfinance Review 2014 No 127 OCT OPD P P P P P RCDS Sungi P P Unknown Yes No Unknown SSF SVDP P P Financial Services for all AIII - Social Performance Indicators of Individual MFPs 2014 AGAHE 3.19 Types of health services offered Basic medical services Akhuwat AMRDO ASA Pak BEDF P P P FFO JWS Kashf P Special medical services for women and children None of the above P CSC DAMEN Basic medical services P Special medical services for women and children None of the above P P P MOJAZ NRDP Nayment P OCT OPD P P Basic medical services Special medical services for women and children None of the above Basic medical services P P P RCDS Sungi P P SSF SVDP P Special medical services for women and children None of the above P Client Protection 4.1 Do policies support good repayment capacity analysis Yes AGAHE Akhuwat AMRDO ASA Pak BEDF P P P P P CSC DAMEN FFO JWS Kashf P P P P P MOJAZ NRDP Nayment OCT OPD P P P P No Unknown Yes No Yes No Unknown Yes P RCDS Sungi SSF SVDP P P P P AGAHE Akhuwat AMRDO ASA Pak BEDF P P P P P No Unknown 4.2 Does internal audit verify compliance with policies Yes No Annual Assessment of the Microfinance Industry Unknown Unknown 128 Financial Services for all Annexures Yes CSC DAMEN FFO JWS Kashf P P P P P MOJAZ NRDP Nayment OCT OPD P P P P P RCDS Sungi SSF SVDP P P P P AGAHE Akhuwat AMRDO ASA Pak BEDF P P P P P CSC DAMEN FFO JWS Kashf P P P P P MOJAZ NRDP Nayment OCT OPD P P P P P RCDS Sungi SSF SVDP P P P P AGAHE Akhuwat AMRDO ASA Pak P P P DAMEN FFO JWS Kashf P P P P NRDP Nayment OCT OPD No Unknown Yes No Unknown Yes No Unknown 4.3 Are prices, installments, terms and conditions fully disclosed to clients Yes No Unknown Yes No Unknown Yes No Unknown Yes No Unknown 4.4 Are annual percentage rates (APR) of loan products disclosed Yes P No BEDF P Pakistan Microfinance Review 2014 Unknown 129 CSC Yes No P Unknown MOJAZ Yes No Unknown P P P P P Financial Services for all AIII - Social Performance Indicators of Individual MFPs 2014 Yes RCDS Sungi P P No SSF SVDP P P Unknown AGAHE 4.5 Is the code of conduct clearly defined Akhuwat AMRDO ASA Pak BEDF P P P P CSC DAMEN FFO JWS Kashf P P P P P MOJAZ NRDP Nayment OCT OPD P P P P P RCDS Sungi SSF SVDP P P P P AGAHE Akhuwat AMRDO ASA Pak BEDF P P P P P CSC DAMEN FFO JWS Kashf P P P P P MOJAZ NRDP Nayment OCT OPD P P P P P RCDS Sungi SSF SVDP P P P P AGAHE Akhuwat AMRDO ASA Pak BEDF P P P P P Yes No P Unknown Yes No Unknown Yes No Unknown Yes No Unknown 4.6 Are violations of the code of conduct sanctioned Yes No Unknown Yes No Yes No Unknown Yes No Unknown 4.7 Is there a clear reporting system in place for complaints from clients at branches Yes No Annual Assessment of the Microfinance Industry Unknown 130 Financial Services for all Annexures Unknown Yes CSC DAMEN FFO JWS Kashf P P P P P MOJAZ NRDP Nayment OCT OPD P P P P P RCDS Sungi SSF SVDP P P P P AGAHE Akhuwat AMRDO ASA Pak BEDF P P No Unknown Yes No Unknown Yes No Unknown 4.8 Do contracts include a data privacy clause Yes P No P P DAMEN FFO JWS Kashf P P P P NRDP Nayment OCT OPD Unknown CSC Yes No P Unknown MOJAZ Yes P No P P P P Unknown RCDS Yes Sungi SSF P No SVDP P P P Akhuwat AMRDO ASA Pak BEDF P P P FFO JWS Kashf Unknown AGAHE Pakistan Microfinance Review 2014 4.9 131 How interest rate of most representative credit product is stated Declining balance interest method Flat interest method P CSC Declining balance interest method Flat interest method DAMEN P P MOJAZ Declining balance interest method P Flat interest method P NRDP P P P P Nayment OCT OPD P P P Financial Services for all AIII - Social Performance Indicators of Individual MFPs 2014 RCDS Sungi SSF Declining balance interest method Flat interest method SVDP P P P P AGAHE Akhuwat AMRDO P P P Clauses in loan contracts requiring clients to imrove environmental practices/ mitigate environmental risks P P Tools to evaluate environmental risks of clients' activities P Environment Environmental policies in place Awareness raising on environmental impacts BEDF P Specific loans linked to environmentally friendly products and/or practices P None of the above P CSC DAMEN FFO JWS Awareness raising on environmental impacts P P P P Clauses in loan contracts requiring clients to imrove environmental practices/ mitigate environmental risks P P Tools to evaluate environmental risks of clients' activities Kashf P P Specific loans linked to environmentally friendly products and/or practices None of the above MOJAZ Awareness raising on environmental impacts Clauses in loan contracts requiring clients to imrove environmental practices/ mitigate environmental risks P Tools to evaluate environmental risks of clients' activities NRDP Nayment P P OCT OPD P P P Specific loans linked to environmentally friendly products and/or practices P P None of the above RCDS Sungi SSF SVDP Awareness raising on environmental impacts P P P P Clauses in loan contracts requiring clients to imrove environmental practices/ mitigate environmental risks P P P Annual Assessment of the Microfinance Industry 5.1 ASA Pak 132 Financial Services for all Annexures Tools to evaluate environmental risks of clients' activities P Specific loans linked to environmentally friendly products and/or practices P None of the above AGAHE 5.2 Types of environmentally friendly products and/or practices offered Products related to renewable energy (e.g. solar panels, biogas digesters etc) Akhuwat AMRDO ASA Pak BEDF P Products related to energy efficiency (e.g. insulation, improved cooking stove etc) Products related to environmentally friendly practices (e.g. organic farming, recycling, waste management etc) None of the above P P P P CSC DAMEN FFO JWS Kashf P P P P P MOJAZ NRDP Nayment OCT OPD P P Products related to renewable energy (e.g. solar panels, biogas digesters etc) Products related to energy efficiency (e.g. insulation, improved cooking stove etc) Products related to environmentally friendly practices (e.g. organic farming, recycling, waste management etc) None of the above Products related to renewable energy (e.g. solar panels, biogas digesters etc) Products related to energy efficiency (e.g. insulation, improved cooking stove etc) Pakistan Microfinance Review 2014 Products related to environmentally friendly practices (e.g. organic farming, recycling, waste management etc) 133 P P P None of the above P RCDS Products related to renewable energy (e.g. solar panels, biogas digesters etc) None of the above SSF SVDP P P P Products related to energy efficiency (e.g. insulation, improved cooking stove etc) Products related to environmentally friendly practices (e.g. organic farming, recycling, waste management etc) Sungi P P Financial Services for all AIII - Social Performance Indicators of Individual MFPs 2014 RSPs Social Goals 1.1 Target market Clients living in rural areas P P Clients living in urban areas P P Women P P P Adolescents and youth (below 18) None of the above . 1.2 Development goals Increased access to financial services P P Poverty reduction P P Employment generation P P Development of start-up enterprises P P P P P Gender equality and women’s empowerment P P P Water and sanitation P Growth of existing businesses Improvement of adult education Youth opportunities Children’s schooling Health improvement Housing None of the above . Poverty level Very poor clients P Poor clients P P Low income clients P P No specific poverty target . 1.4 Does MFP measure poverty Yes P No Unknown P . 1.5 Poverty measurement tool Grameen Progress out of Poverty Index (PPI) USAID Poverty Assessment Tool (PAT) P Annual Assessment of the Microfinance Industry 1.3 134 Financial Services for all Annexures Per capita household expenditure Per capita household income Participatory Wealth Ranking (PWR) P Housing index Food security index Means test Own proxy poverty index None of the above P P Governance and HR 2.1 Board orientation of social mission Yes P P No Unknown P . 2.2 SPM champion/ committee at Board Yes No P P P Unknown . 2.3 Board experience in SPM Yes P P P No Unknown . 2.4 Staff incentives related to SP Number of clients P Quality of interactionw ith lients based on client feedback mechanism P Quality of social data collected Portfolio quality P P None of the above P . Pakistan Microfinance Review 2014 2.5 135 How number of clients is incentivized Total number of clients P P Number of new clients P Client retention P None of the above P . 2.6 HR policies related to SP Social protection (medical insurance and/or pension contribution) P Safety policy P Anti-harassment policy P Non-discrimination policy P P P P P Financial Services for all AIII - Social Performance Indicators of Individual MFPs 2014 Grievance resolution policy P P P None of the above . Products and Services 3.1 Types of credit products Income generating loans P P P Non-income generating loans Does not offer credit products . 3.2 Types of income generating loans Microenterprise loans P P P P P P SME loans Agriculture/livestock loans Express loans None of the above . 3.3 Types of non-income generating loans Education loans P Emergency loans P Housing loans P Other household needs/consumption P None of the above P P . 3.4 Types of savings products Compulsory sacings accounts Voluntary savings accounts Does not offer savings accounts P P P . 3.5 Types of voluntary savings products Demand deposit accounts Time deposit accounts None of the above P P P 3.6 Compulory insurance required Yes P P P . . No Unknown 3.7 Types of compulory insurance required Credit life insurance P Life/accident insurance P Agriculture insurance P P P None of the above . 3.8 Voluntary insurance offered Yes No P P P . . Unknown Annual Assessment of the Microfinance Industry . 136 Financial Services for all Annexures 3.9 Types of voluntary insurance offered Credit life insurance Life/accident insurance Agriculture insurance Health insurance House insurance Workplace insurance None of the above P P P . 3.10 Other financial services offered Yes P No P P . . P P Unknown 3.11 Types of other financial services offered Debit/credit card Mobile/branchless banking services Savings facilitation services P Remittance/money transfer services Payment services Microleasing Scholarship/educational grants None of the above . 3.12 Enterprise services offered Yes P No P P Unknown . 3.13 Types of enterprise services offered Enterprise skills development P Business development services P None of the above P P . 3.14 Women’s enpowerment services Yes P No P P Unknown Pakistan Microfinance Review 2014 . 137 3.15 Types of women’s empowerment services offered Leadership training for women P Women’s rights education/gender issues training P P Counseling/legal services for female victims of voilence None of the above P . 3.16 Education services offered Yes No P P P Financial Services for all AIII - Social Performance Indicators of Individual MFPs 2014 Unknown . 3.17 Types of education services offered Financial literacy education P P Basic health/nutrition education P P Child and youth education P Occupational health and safety in the workplace education None of the above P . 3.18 Health services offered Yes No P P P Unknown . 3.19 Types of health services offered Basic medical services Special medical services for women and children None of the above P P P . Client Protection 4.1 Do policies support good repayment capacity analysis Yes P P P No Unknown . 4.2 Does internal audit verify compliance with policies Yes P P P P P No Unknown . 4.3 Are prices, installments, terms and conditions fully disclosed to clients Yes P No Unknown 4.4 Are annual percentage rates (APR) of loan products disclosed Yes P No P P Unknown . 4.5 Is the code of conduct clearly defined Yes P P P No Unknown . 4.6 Are violations of the code of conduct sanctioned Yes P P No Unknown P Annual Assessment of the Microfinance Industry . . 138 Financial Services for all Annexures 4.7 Is there a clear reporting system in place for complaints from clients at branches Yes P P P No Unknown . 4.8 Do contracts include a data privacy clause Yes P P P No Unknown . 4.9 How interest rate of most representative credit product is stated Declining balance interest method P Flat interest method P P . Environment 5.1 Environmental policies in place Awareness raising on environmental impacts P P Clauses in loan contracts requiring clients to imrove environmental practices/mitigate environmental risks Tools to evaluate environmental risks of clients’ activities P Specific loans linked to environmentally friendly products and/ or practices None of the above . 5.2 Types of environmentally friendly products and/or practices offered Products related to renewable energy (e.g. solar panels, biogas digesters etc) P Products related to energy efficiency (e.g. insulation, improved cooking stove etc) P Products related to environmentally friendly practices (e.g. organic farming, recycling, waste management etc) P Pakistan Microfinance Review 2014 None of the above 139 P P Financial Services for all Annexure B - Regional Benchmarks 2014 Annexure B - Regional Benchmarks 2014 Outreach Number of MFIs Africa Asia EAP1 ECA2 LAC3 MENA4 All Regions 309 179 158 208 374 40 1,268 Gross Loan Portfolio (in USD million) 7,037 9,453 9,661 12,105 35,963 1,125 54,943 Number of active borrowers (in '000) 4,719 52,871 12,781 2,680 20,558 1,601 87,476 Deposits (in USD million) 5,017 3,446 46,654 7,298 24,133 22 86,702 16,000 27,348 10,190 4,344 17,977 63 71,373 Average loan balance per borrower (in USD) 327 18 1,538 1,490 360 234 392 Average loan balance per borrower / GNI per capita 59% 1.60% 55.80% 53.60% 5.80% 6.70% 17.00% 9,695 1,780 4,605 11,509 7,911 660 70,665 Number of depositors (in '000) Funding Structure Assets (in USD million) Debt to equity ratio 3.2 6.7 2.5 4.7 3.4 1 3.7 Capital /asset ratio 23.70% 12.90% 29% 18% 23% 51% 21.10% Gross loan portfolio to total assets 65.60% 79.40% 69% 67% 90% 76% 77.80% Operating expense / loan portfolio 15.40% 9.10% 5% 11% 15% 16% 10.90% Operating expense / assets 15.50% 8.80% 9% 7% 11% 13% 10.30% Cost per borrower (in USD) 147 14 74 295 239 95 86 Profitability Return on assets 1.10% 0.03% 1.00% 0.90% 0.80% 0.50% 0.80% Return on equity 4.20% 0.60% 3.20% 5.30% 4.90% 1.40% 4.40% 103.10% 93.30% 122% 109% 103% 105% 106% 1.80% 0.40% 0.00% 1.60% 5.20% 1.50% 1.10% Operational self sufficiency Risk Profile Portfolio at risk > 30 days Portfolio at risk > 90 days 1.10% 0.20% 0.00% 1.10% 3.40% 1.20% 0.70% Write-off ratio 4.30% 0.10% 0.00% 0.80% 0.60% 0.90% 0.70% Annual Assessment of the Microfinance Industry Effeciency 140 Financial Services for all Annexures Annexure C Sources of data (2014) Microfinance Banks (MFBs) APNA Microfinance Bank Ltd (AMFB) • • • • • AMFB provided PMN with its audited accounts. The numbers reported in the PMR match these reports. Riaz Ahmad and Co. audited the annual accounts of AMFB for the year ending at 31st December 2014. The financial statements have been presented as per the requirements of the State Bank of Pakistan. The related party transactions have been properly disclosed in notes to the financial statements. The grant income has been properly disclosed in financial statements and there is proper disclosure on grants in notes to the financial statements. The following numbers have been taken from AMFB’s MIS: i). rural-urban clients; ii). male-female clients; iii). Number of staff; iv). Number of credit officers; and v). Number of branches (also available in audited accounts). FINCA Microfinance Bank Ltd (FINCA) (Formerly Kashf Microfinance Bank Ltd) • • • • Pakistan Microfinance Review 2014 • 141 FINCA provided PMN with its audited accounts. The numbers reported in the PMR match these reports. M. Yossuf Adil Saleem and Co. audited the annual accounts of FINCA for the year ending at 31st December 2014. The financial statements have been presented as per the requirements of the State Bank of Pakistan. The related party transactions have been properly disclosed in notes to the financial statements. The grant income has been properly disclosed in financial statements and there is proper disclosure on grants in notes to the financial statements. The following numbers have been taken from FINCA’s MIS: i). rural-urban clients; ii). male-female clients; iii). Number of staff; iv). Number of credit officers; and v). Number of branches (also available in audited accounts). Khushhali Bank Ltd (KBL) • • • • • KBL provided PMN with its audited accounts. The numbers reported in the PMR match these reports. A.F. Ferguson audited the annual accounts of KBL for the year ending at 31st December 2014. The financial statements have been presented as per the requirements of the State Bank of Pakistan. The related party transactions have been properly disclosed in notes to the financial statements. The grant income has been properly disclosed in financial statements and there is a proper disclosure on grants in notes to the financial statements. The following numbers have been taken from KBL’s MIS: i). rural-urban clients; ii). male-female clients; iii). Portfolio aging; iv). Number of staff; v). Number of credit officers; and vi). Number of branches (also available in audited accounts). Financial Services for all Annexure C Sources of data (2014) The First Microfinance Bank Ltd (FMFBL) • • • • • FMFB provided PMN with its audited accounts. The numbers reported in the PMR match these reports. KPMG audited the annual accounts of FMFBL for the year ending at 31st December 2014. The financial statements have been presented as per the requirements of the State Bank of Pakistan. The related party transactions have been properly disclosed in notes to the financial statements. The grant income has been properly disclosed in financial statements and there is proper disclosure on grants in notes to the financial statements. The following numbers have been taken from the MIS: i). rural-urban clients; ii). male-female clients; iii). Portfolio aging; iv). Number of staff; v). Number of credit officers; and vi). Number of branches (also available in audited accounts). National Rural Support Programme Microfinance Bank (NRSP-B) • • • • • NRSP-B provided PMN with its audited accounts. The numbers reported in the PMR match these reports. M. Yossuf Adil Saleem and Co. audited the annual accounts of NRSP-B for the year ending at 31st December 2014. The financial statements have been presented as per the requirements of the State Bank of Pakistan. The related party transactions have been properly disclosed in notes to the financial statements. The grant income has been properly disclosed in financial statements and there is proper disclosure on grants in notes to the financial statements. The following numbers have been taken from the MIS: i). rural-urban clients; ii). male-female clients; iii). Portfolio aging; iv). Number of staff; v). Number of credit officers; and vi). Number of branches (also available in audited accounts). Pak Oman Microfinance Bank Ltd (POMFB) • • • • • POMFB reported its audited accounts in newspapers, from whence the accounts were obtained. The numbers reported in the PMR match these reports. M. Yossuf Adil Saleem and Co. audited the annual accounts of POMFB for the year ending at 31st December 2014. The financial statements have been presented as per the requirements of the State Bank of Pakistan. The related party transactions have been properly disclosed in notes to the financial statements. The grant income has been properly disclosed in financial statements and there is proper disclosure on grants in notes to the financial statements. The following numbers have been taken from the MIS: i). rural-urban clients; ii). male-female clients; iii). Portfolio aging; iv). Number of staff; v). Number of credit officers; and vi). Number of branches (also available in audited accounts). • • • • • TMFB provided PMN with its audited accounts. The numbers reported in the PMR match these reports. Ernst and Young Ford Rhodes Sidat Hyder and Co. audited the annual accounts of TMFB for the year ending at 31st December 2014. The financial statements have been presented as per the requirements of the State Bank of Pakistan. The related party transactions have been properly disclosed in notes to the financial statements. The grant income has been properly disclosed in financial statements and there is proper disclosure on grants in notes to the financial statements. The following numbers have been taken from the MIS: i). rural-urban clients; ii). male-female clients; iii). Portfolio aging; iv). Number of staff; v). Number of credit officers; and vi). Number of branches (also available in audited accounts). U Microfinance Bank Ltd (U-bank) • • U-bank provided PMN with its audited accounts. The numbers reported in the PMR match these reports. A.F. Ferguson audited the annual accounts of FINCA for the year ending at 31st December 2014. The financial statements have been presented as per the requirements of the State Bank of Pakistan. Annual Assessment of the Microfinance Industry Tameer Microfinance Bank Ltd (TMFB) 142 Financial Services for all Annexures • • • The related party transactions have been properly disclosed in notes to the financial statements. The grant income has been properly disclosed in financial statements and there is proper disclosure on grants in notes to the financial statements. The following numbers have been taken from the MIS: i). rural-urban clients; ii). male-female clients; iii). Portfolio aging; iv). Number of staff; v). Number of credit officers; and vi). Number of branches (also available in audited accounts). Waseela Microfinance Bank Ltd (WMFB) • • • • • Waseela provided PMN with its audited accounts. The numbers reported in the PMR match these reports. KPMG audited the annual accounts of FINCA for the year ending at 31st December 2014. The financial statements have been presented as per the requirements of the State Bank of Pakistan. The related party transactions have been properly disclosed in notes to the financial statements. The grant income has been properly disclosed in financial statements there is proper disclosure on grants in notes to the financial statements. The following numbers have been taken from the MIS: i). rural-urban clients; ii). male-female clients; iii). Portfolio aging; iv). Number of staff; v). Number of credit officers; and vi). Number of branches (also available in audited accounts). Microfinance Institution (MFI) ASA Pakistan limited (ASA-P) • • • • • • ASA-P provided PMN with its audited accounts. The numbers reported in the PMR match these reports. Ernst and Young Ford Rhodes Sidat Hyder and Co has audited the annual accounts of ASA-P for the year ending at 31st December 2014. ASA-P prepares its financial statements under the historical cost convention and in conformity with accepted accounting practices. Adjustments were not made to loan loss provisioning expense as ASA-P is aggressive in its policies. The following numbers have been taken from the organization’s MIS: i). rural-urban clients; and ii). male-female clients; There is proper disclosure on the balance sheet of loan portfolio, and loan loss provision; expense charged during the year is disclosed on the income statement. The related party transactions have been properly disclosed in notes to the financial statements. Agahe • • Pakistan Microfinance Review 2014 • 143 • • Agahe provided PMN with its audited accounts. The numbers reported in the PMR match these reports. Uzair Hammad Faisal & Co. has audited the annual accounts of Agahe for the year ending at 31st December 2014. Agahe prepares its financial statements under the historical cost convention, in conformity with accepted accounting practices. All necessary adjustments to Agahe data have been made in order to remove subsidies. No adjustment was made to loan loss provisioning expense as Agahe is aggressive in its policies. The related party transactions have been properly disclosed in notes to the financial statements. The grant income has been properly disclosed in financial statements. Additionally, there is proper disclosure on grants in notes to the financial statements. Akhuwat • • • Akhuwat provided PMN with its audited accounts. The numbers reported in the PMR match these reports. M. Yossuf Adil Saleem and Co. has audited the annual accounts of ASA-P for the year ending at 30th June 2014. Akhuwat prepares its financial statements under the historical cost convention and in conformity with accepted accounting practices. All necessary adjustments to data have been made in order to remove subsidies. No adjustment was made to • • Financial Services for all Annexure C Sources of data (2014) loan loss provisioning expense as the institute is aggressive in its policies. The following numbers have been taken from the organization’s MIS: i). rural-urban clients; and ii). male-female clients; The grant income has been properly disclosed in financial statements and there is proper disclosure on grants in notes to the financial statements. Al-Mehran Rural Development Organization (AMRDO) • • • • • AMRDO provided PMN with its audited accounts. The numbers reported in the PMR match these reports. Hafizullah & Co. has audited the annual accounts of AMRDO for the year ending at 30th June 2014. AMRDO prepares its financial statements under the historical cost convention, in conformity with accepted accounting practices. All necessary adjustments to data have been made in order to remove subsidies. No adjustment was made to loan loss provisioning expense as the institute is aggressive in its policies. The related party transactions have been properly disclosed in notes to the financial statements. The grant income has been properly disclosed in financial statements. Additionally, there is proper disclosure on grants in notes to the financial statements. BRAC-Pakistan • • • BRAC-Pakistan provided PMN with its audited accounts. The numbers reported in the PMR match these reports. KPMG (Taseer Hadi and Co) has audited the annual accounts of BRAC-Pakistan for the year ending at 31st December 2014. BRAC prepares its financial statements under the historical cost convention and in conformity with accepted accounting policies. BRAC is an integrated program and, therefore, prepares separate financial accounts for all its programs. The audit is done and a consolidated audit report is prepared with clear differentiations of both revenue and costs for each program in light of accounting standards. Baidarie • • • Baidarie provided PMN with its audited accounts. The numbers reported in the PMR match these reports. Ale Imran & Co. audited the annual accounts of Baidarie for the year ending at 30th June 2014. All necessary adjustments to Baidarie data have been made in order to remove subsidies. No adjustment was made to loan loss provisioning expense as CSC is aggressive in its policies. The following numbers have been taken from the organization’s MIS: i). rural-urban clients; ii). male-female clients; iii). Aging on number of loans and value of portfolio (verifiable from audited accounts); iv). Number of staff; v). Number of credit officers; and vi). Number of offices. The grant income has been properly disclosed in financial statements and there is proper disclosure on grants in notes to the financial statements. Community Support Concern (CSC) • • • • • CSC provided PMN with its audited accounts. The numbers reported in the PMR match these reports. Riaz Ahmad & Co. audited the annual accounts of CSC for the year ending at 30th June 2014. All necessary adjustments to CSC data have been made in order to remove subsidies. No adjustment was made to loan loss provisioning expense as CSC is aggressive in its policies. CSC prepares its financial statements under the historical cost convention and in conformity with accepted accounting practices. The following numbers have been taken from the organization’s MIS: i). rural-urban clients; ii). male-female clients; iii). Aging on number of loans and value of portfolio (verifiable from audited accounts); iv). Number of staff; v). Number of credit officers; and vi). Number of offices. The grant income has been properly disclosed in financial statements and there is proper disclosure on grants in notes to the financial statements. Annual Assessment of the Microfinance Industry • 144 Financial Services for all Annexures Farmers Friend Organization (FFO) • • • • • FFO provided PMN with its audited accounts. The numbers reported in the PMR match these reports. Tariq Abdul Ghani Maqbool & Co audited the annual accounts for FFO for the year ending at 30th June 2014. All necessary adjustments to FFO data have been made in order to remove subsidies. There is no adjustment on loan loss provisioning expense as FFO is aggressive in its policies. FFO prepares its financial statements under the historical cost convention and in conformity with accepted accounting practices. The following numbers have been taken from the organization’s MIS: i). rural-urban clients; ii). male-female clients; iii). Aging on number of loans and value of portfolio iv). Number of staff; v). Number of credit officers; and vi). Number of offices. The grant income has been properly disclosed in financial statements. Additionally, there is proper disclosure on grants in notes to the financial statements. DEEP Foundation (DEEP) • • • • DEEP provided PMN with its audited accounts. The numbers reported in the PMR match these reports. Salman Arshad audited the annual accounts for DEEP for the year ending at 30th June 2014. DEEP prepares its financial statements under the historical cost convention and in conformity with accepted accounting practices. The following numbers have been taken from the organization’s MIS: i). rural-urban clients; ii). male-female clients; iii). Aging on number of loans and value of portfolio iv). Number of staff; v). Number of credit officers; and vi). Number of offices. The grant income has been properly disclosed in financial statements. Additionally, there is proper disclosure on grants in notes to the financial statements. Development Action for Mobilization and Emancipation (DAMEN) • • • • • • DAMEN provided PMN with its audited accounts. The numbers reported in the PMR match these reports. Grant Thornton (Anjum Asim Shahid Rehman) audited the annual accounts for DAMEN for the year ending at 31st December 2014. As DAMEN is a multi-dimensional development organization accounts for its microfinance function are kept separate. There is no adjustment on cost of borrowing since DAMEN’s actual cost is higher than the adjusted cost. Similarly, no adjustment was made to loan loss provisioning expense; DAMEN is aggressive in its policies. DAMEN prepares its financial statements under the historical cost convention and in conformity with accepted accounting practices. The grant income has been properly disclosed in financial statements. Additionally, there is proper disclosure on grants in notes to the financial statements. The following numbers have been taken from the organization’s MIS: i). rural-urban clients; ii). male-female clients; iii). Aging on number of loans and value of portfolio (verifiable from audited accounts); iv). Breakup for the number of loans doubtful; v). Number of staff; vi). Number of credit officers Pakistan Microfinance Review 2014 Kashf Foundation (KF) • • • • • • 145 KF provided PMN with its audited accounts. The numbers reported in the PMR match these reports. KPMG (Taseer Hadi and Co) audited the annual accounts for KF for the year ending at 30th June 2014. The financial statements have been presented as per the requirements of the State Bank of Pakistan. All necessary adjustments to KF data have been made in order to remove subsidies. Adjustments were not made for loan loss provisioning expense, since KF is aggressive in its policies. Adjustment for cost of borrowing was not made since it was entirely commercial borrowing. KF prepares accounts on historical cost basis using the accrual system of accounting. The related party transactions have been properly disclosed in notes to the financial statements. The grant income has been properly disclosed in financial statements and there is a proper disclosure on grants in notes to the financial statements. The following numbers have been taken from KF’s MIS: i). rural-urban clients; ii). male-female clients; iii). Financial Services for all Annexure C Sources of data (2014) Number of staff; iv). Number of credit officers; and v). Number of branches (also available in audited accounts). Ghazi Barotha Taraqiati Idara (GBTI) • • • • • • • GBTI provided PMN with its audited accounts. The numbers reported in the PMR match these reports. KPMG (Taseer Hadi and Co) audited the annual accounts for GBTI for the year ending at 30th June 2014. GBTI prepares its financial statements under the historical cost convention and in conformity with accepted accounting practices. Revenue is recognized on receipt basis. The following numbers have been taken from the organization’s MIS: i). rural-urban clients; ii). male-female clients; iii). Aging on number of loans and value of portfolio (not verifiable from audited accounts); iv). Number of staff; v). Number of credit officers; and vi). Number of offices. There is proper disclosure on the balance sheet of loan portfolio, and loan loss provision; expense charged during the year is disclosed on the income statement. The grant income has been properly disclosed in financial statements. Additionally, there is proper disclosure on grants in notes to the financial statements. The related party transactions should be presented in notes to the financial statements. Jinnah Welfare Society (JWS) • • • • JWS provided PMN with its audited accounts. The numbers reported in the PMR match these reports. Tariq Abdul Ghani Maqbool & Co. audited the annual accounts for JWS for the year ending at 30th June 2014. JWS prepares its financial statements under the historical cost convention and in conformity with accepted accounting practices. Revenue is recognized on receipt basis. The following numbers have been taken from the organization’s MIS: i). rural-urban clients; ii). male-female clients; iii). Aging on number of loans and value of portfolio (verified from audited accounts); iv). Number of staff; v). Number of credit officers; and vi). Number of branches (also available in audited accounts). The related party transactions have been properly disclosed in notes to financial statements. Micro Options (MO) • • • • MO provided PMN with its audited accounts. The numbers reported in the PMR match these reports. Baker Tilly Mehmood Idrees Qamar has audited the annual accounts of MO for the year ending at 31st December 2014. MO prepares its financial statements under the historical cost convention, in conformity with accepted accounting practices. All necessary adjustments to data have been made in order to remove subsidies. No adjustment was made to loan loss provisioning expense as the institute is aggressive in its policies. The related party transactions have been properly disclosed in notes to the financial statements. The grant income has been properly disclosed in financial statements. Additionally, there is proper disclosure on grants in notes to the financial statements. Mojaz Foundation (Mojaz) • • • • • Mojaz provided PMN with its audited accounts. The numbers reported in the PMR match these reports. Ibrahim, Shaikh & Co has audited the annual accounts of Mojaz for the year ending at 30th June 2014. Mojaz prepares its financial statements under the historical cost convention, in conformity with accepted accounting practices. All necessary adjustments to data have been made in order to remove subsidies. No adjustment was made to loan loss provisioning expense as the institute is aggressive in its policies. The related party transactions have been properly disclosed in notes to the financial statements. The grant income has been properly disclosed in financial statements. Additionally, there is proper disclosure on grants in notes to the financial statements. Annual Assessment of the Microfinance Industry • 146 Financial Services for all Annexures Naymet Trust (Naymet) • • • • • Naymet provided PMN with its audited accounts. The numbers reported in the PMR match these reports. Izhar & Co has audited the annual accounts of Naymet for the year ending at 30th June 2014. Naymet prepares its financial statements under the historical cost convention, in conformity with accepted accounting practices. All necessary adjustments to data have been made in order to remove subsidies. No adjustment was made to loan loss provisioning expense as the institute is aggressive in its policies. The related party transactions have been properly disclosed in notes to the financial statements. The grant income has been properly disclosed in financial statements. Additionally, there is proper disclosure on grants in notes to the financial statements. National Rural Development Program (NRDP) • • • • • NRDP provided PMN with its audited accounts. The numbers reported in the PMR match these reports. Izhar & Co has audited the annual accounts of NRDP for the year ending at 30th June 2014. NRDP prepares its financial statements under the historical cost convention, in conformity with accepted accounting practices. All necessary adjustments to data have been made in order to remove subsidies. No adjustment was made to loan loss provisioning expense as the institute is aggressive in its policies. The related party transactions have been properly disclosed in notes to the financial statements. The grant income has been properly disclosed in financial statements. Additionally, there is proper disclosure on grants in notes to the financial statements. Organization for Participatory Development (OPD) • • • • • OPD provided PMN with its audited accounts. The numbers reported in the PMR match these reports. Izhar & Co has audited the annual accounts of OPD for the year ending at 30th June 2014. OPD prepares its financial statements under the historical cost convention, in conformity with accepted accounting practices. All necessary adjustments to data have been made in order to remove subsidies. No adjustment was made to loan loss provisioning expense as the institute is aggressive in its policies. The related party transactions have been properly disclosed in notes to the financial statements. The grant income has been properly disclosed in financial statements. Additionally, there is proper disclosure on grants in notes to the financial statements. Orangi Charitable Trust (OCT) • • Pakistan Microfinance Review 2014 • • • Orix Leasing Pakistan Ltd. (OLP) • • • • 147 OCT provided PMN with its audited accounts. The numbers reported in the PMR match these reports. Tanzeem & Co. has audited the annual accounts of OCT for the year ending at 30th June 2014. OCT prepares its financial statements under the historical cost convention, in conformity with accepted accounting practices. All necessary adjustments to data have been made in order to remove subsidies. No adjustment was made to loan loss provisioning expense as the institute is aggressive in its policies. The related party transactions have been properly disclosed in notes to the financial statements. The grant income has been properly disclosed in financial statements. Additionally, there is proper disclosure on grants in notes to the financial statements. OLP has provided its audited accounts for the reporting period to PMN. However, given that OLP’s audited accounts do not disclose figures related to its Microfinance Division (MFD), the data reported in the PMR is not verifiable with audited accounts. OLP has separate staff and offices for microfinance. OLP’s MFD has provided data specific to its microfinance operations. OLP prepares its financial statements under the historical cost convention in using accrual system of ac- • Financial Services for all Annexure C Sources of data (2014) counting. Adjustments to the data have been made as per the PMN’s adjustment policies. These adjustments are in line with international practices being followed by The MIX. Rural Community Development Society (RCDS) • • • • RCDS provided PMN with its audited accounts. The numbers reported in the PMR match these reports. Ijaz Tabassum & Co. audited the annual accounts for RCDS for the year ending at 30th June 2014. RCDS prepares its financial statements under the historical cost convention and in conformity with accepted accounting practices. Revenue is recognized on receipt basis. The following numbers have been taken from the organization’s MIS: i). rural-urban clients; ii). male-female clients; iii). Aging on number of loans and value of portfolio (verified from audited accounts); iv). Number of staff; v). Number of credit officers; and vi). Number of branches (also available in audited accounts). The related party transactions have been properly disclosed in notes to financial statements. SAFCO Support Fund (SAFCO) • • • • • • SAFCO provided PMN with its audited accounts. The numbers reported in the PMR match these reports. Grant Thornton (Anjum Asim Shahid Rehman) audited the annual accounts for SAFCO for the year ending at 30th June 2014. Income and expense are booked on an accrual basis. All necessary adjustments to SAFCO data have been made in order to remove subsidies. SAFCO prepares its financial statements under the historical cost convention and in conformity with accepted accounting practices using the principles of fund accounting. The following numbers have been taken from the organization’s MIS: i). rural-urban clients; ii). male-female clients; iii). Aging on number of loans and value of portfolio (not verifiable from audited accounts); iv). Number of staff; and v). Number of credit officers. The grant income has been properly disclosed in financial statements. Additionally, there is proper disclosure on grants in notes to the financial statements. Saath Development Society (SDS) • • • • SDS provided PMN with its audited accounts. The numbers reported in the PMR match these reports. Tanwir Arif & Co. has audited the annual accounts of OCT for the year ending at 30th June 2014. SDS prepares its financial statements under the historical cost convention, in conformity with accepted accounting practices. All necessary adjustments to data have been made in order to remove subsidies. No adjustment was made to loan loss provisioning expense as the institute is aggressive in its policies. The related party transactions have been properly disclosed in notes to the financial statements. The grant income has been properly disclosed in financial statements. Additionally, there is proper disclosure on grants in notes to the financial statements. Shadab Rural Development Organization (SRDO) • • • • • SRDO provided PMN with its audited accounts. The numbers reported in the PMR match these reports. Tanwir Arif & Co. has audited the annual accounts of SRDO for the year ending at 30th June 2014. SRDO prepares its financial statements under the historical cost convention, in conformity with accepted accounting practices. All necessary adjustments to data have been made in order to remove subsidies. No adjustment was made to loan loss provisioning expense as the institute is aggressive in its policies. The related party transactions have been properly disclosed in notes to the financial statements. The grant income has been properly disclosed in financial statements. Additionally, there is proper disclosure on grants in notes to the financial statements. Annual Assessment of the Microfinance Industry • 148 Financial Services for all Annexures Soon Valley Development Program (SVDP) • • • • • SVDP provided PMN with its audited accounts. The numbers reported in the PMR match these reports. Zahid Jamil & Co. has audited the annual accounts of SVDP for the year ending at 30th June 2014. SVDP prepares its financial statements under the historical cost convention, in conformity with accepted accounting practices. All necessary adjustments to data have been made in order to remove subsidies. No adjustment was made to loan loss provisioning expense as the institute is aggressive in its policies. The related party transactions have been properly disclosed in notes to the financial statements. The grant income has been properly disclosed in financial statements. Additionally, there is proper disclosure on grants in notes to the financial statements. Villagers Development Organization (VDO) • • • • • VDO provided PMN with its audited accounts. The numbers reported in the PMR match these reports. Tanwir Arif & Co. has audited the annual accounts of VDO for the year ending at 30th June 2014. VDO prepares its financial statements under the historical cost convention, in conformity with accepted accounting practices. All necessary adjustments to data have been made in order to remove subsidies. No adjustment was made to loan loss provisioning expense as the institute is aggressive in its policies. The related party transactions have been properly disclosed in notes to the financial statements. The grant income has been properly disclosed in financial statements. Additionally, there is proper disclosure on grants in notes to the financial statements. Wasil Foundation (Wasil) • • • • • Wasil provided PMN with its audited accounts. The numbers reported in the PMR match these reports. Grant Thornton (Anjum Asim Shahid Rehman) has audited the annual accounts of VDO for the year ending at 30th June 2014. VDO prepares its financial statements under the historical cost convention, in conformity with accepted accounting practices. All necessary adjustments to data have been made in order to remove subsidies. No adjustment was made to loan loss provisioning expense as the institute is aggressive in its policies. The related party transactions have been properly disclosed in notes to the financial statements. The grant income has been properly disclosed in financial statements. Additionally, there is proper disclosure on grants in notes to the financial statements. Rural Support Programme (RSP) National Rural Support Programme (NRSP) Pakistan Microfinance Review 2014 • • • • • 149 NRSP has provided its audited accounts for the reporting period to PMN and the figures tally with the reported data. Ernst & Young Ford Rhodes Sidat Hyder and Co. audited the annual accounts for NRSP for the year ending at 30th June 2014. All necessary adjustments to NRSP data have been made in order to remove subsidies. Adjustment for cost of borrowing was not made since it was entirely commercial borrowing. Similarly, there is no adjustment on loan loss provisioning expense, since NRSP is aggressive in its policies and all loans > 90 days past due are 100% provisioned for. NRSP prepares its financial statements under the historical cost convention, in conformity with accepted accounting practices. Data on distribution of clients in terms of the urban-rural mix is not provided in the disclosures. However, given that NRSP has a separate program for urban areas and rural areas and their information is available separately, the disaggregation can be made quite accurately. The data on gender segregation was taken from the MIS and is not available in notes to the accounts. Data on the number of total staff, loan officers and branches has been drawn from audited accounts. • • Financial Services for all Annexure C Sources of data (2014) The related party transactions have been properly disclosed in notes to financial statements. As per the CGAP requirements, portfolio quality, sustainability/profitability and asset/liability management ratios are presented in the notes to financial statements. Punjab Rural Support Programme (PRSP) • • • • • • • • PRSP has provided its audited accounts for the reporting period to PMN. Ernst & Young Ford Rhodes Sidat Hyder and Co. audited the annual accounts for PRSP for the year ending at 30th June 2014. Since PRSP is an integrated programme, the following resource allocation process was followed: 1. The identified accounts for credit and non-credit functions were directly transferred to the respective programs. 2. All other accounts that were common to the institution were transferred in the ratio of 60% to credit and 40% to non-credit functions. 3. 60% of PRSP’s investment income was credited to its credit operations All necessary adjustments to PRSP data have been made in order to remove subsidies. Adjustment for cost of borrowing was not made since it was entirely commercial borrowing. Similarly, there is no adjustment on loan loss provisioning expense, since PRSP is aggressive in its provisioning policies. PRSP prepares its financial statements under the historical cost convention, in conformity with accepted accounting practices. Data on distribution of clients in terms of the urban-rural mix is not provided in the disclosures. However, given that PRSP only works in rural Punjab the information can be accurately deduced. The data on gender segregation was taken from the MIS and is not available in notes to the accounts. Data on number of staff for PRSP as a whole is available. These numbers have been allocated between credit and non-credit functions of PRSP on the basis mentioned above. Data for credit officers has been obtained from the organization’s MIS. The grant income has been properly disclosed in financial statements and there is a proper disclosure on grants in notes to the financial statements. The related party transactions have been properly disclosed in notes to financial statements. • • • • • • SRSP has provided its audited accounts for the reporting period to PMN. KPMG (Taseer Hadi and Co) audited the annual accounts for SRSP for the year ending at 30th June 2014. SRSP is a multi-dimensional development organization. It has provided its integrated audited accounts for the reporting period to PMN and has also extracted accounts for its microfinance operations from the consolidated audited statements. All necessary adjustments to SRSP data have been made in order to remove subsidies. There is no adjustment on loan loss provisioning expense, since SRSP is aggressive in its policies and all loans > 90 days past due are 100% provisioned for. SRSP prepares its financial statements under the historical cost convention in conformity with accepted accounting practices. The ageing of portfolio in rupee value is not verifiable from audited accounts. Both ageing on number of loans and value of portfolio was obtained from the MIS. However, there is proper disclosure on the movement in portfolio and write-offs. It will be valuable if SRSP could provide separate disclosure on movement in provisioning of portfolio as suggested previously. Data on the number of total staff, loan officers and branches has been drawn from audited accounts. Thardeep Rural Development Programme (TRDP) • • • • TRDP has provided its audited accounts for the microfinance program (inclusive of credit and non-credit functions). Grant Thornton (Anjum Asim Shahid Rehman) audited the annual accounts for TRDP for the year ending at 30th June 2014. All necessary adjustments to TRDP data have been made in order to remove subsidies. TRDP prepares its financial statements under the historical cost convention in conformity with accepted accounting practices. The following numbers have been taken from the organization’s MIS: i). rural-urban clients; ii). male-female Annual Assessment of the Microfinance Industry Sarhad Rural Support Programme (SRSP) 150 Financial Services for all Annexures • clients; iii). Number of staff; and iv). Number of credit officers. The ageing of portfolio (in rupee value and number of loans) is taken from audited accounts. Sindh Rural Support Organization (SRSO) • • • • Pakistan Microfinance Review 2014 • 151 SRSO has provided its audited accounts for the microfinance program (inclusive of credit and non-credit functions). Ernst & Young Ford Rhodes Sidat Hyder and Co. audited the annual accounts for SRSO for the year ending at 30th June 2014. All necessary adjustments to PRSP data have been made in order to remove subsidies. There is no adjustment on loan loss provisioning expense, since PRSP is aggressive in its provisioning policies. SRSO prepares its financial statements under the historical cost convention in conformity with accepted accounting practices. The following numbers have been taken from the organization’s MIS: i). rural-urban clients; ii). male-female clients; iii). Number of staff; and iv). Number of credit officers. The ageing of portfolio (in rupee value and number of loans) is taken from audited accounts. Financial Services for all Annex D Adjustments to Financial Data Annex D Adjustments to Financial Data Rationale Adjustments to financial statements are made when doing benchmark analysis. Adjustments are made for two primary reasons: • • To give an institution a more accurate picture of its financial position, by accounting for factors unique to an MFP including the predominance of below-market-rate funding sources. Such factors distort an MFP’s on-going performance. To make the data of various MFPs comparable. Thus, adjustments are made in order to bring organizations operating under varying conditions and with varying levels of subsidy onto a level playing field. The following adjustments are made to data used for the PMR: A. Inflation Adjustment Inflation adjustment adjusts for the effect of inflation on an MFP’s equity and non-monetary assets i.e., fixed assets. Inflation decreases the real value of an MFP’s equity. Fixed assets are capable of tracking the increase in price levels; their monetary value is increased. The net loss (or gain) is considered to be a cost of funds, and results in a decrease (or increase) in net operating income. Inflation adjustment revenue Net Fixed Assets (Prior Year) X Average Annual Inflation Rate (Current Financial Year) Inflation adjustment expense Equity (Prior Year) X Average Annual Inflation Rate (Current Year) Net inflation adjustment expense Inflation Adjusted Revenue – Inflation Adjusted Expense B. Subsidies adjustment Adjustments for three types of subsidies are made: • A cost-of-funds subsidy from loans at below-market rates Annual Assessment of the Microfinance Industry Calculation of inflation adjustment 152 Financial Services for all Annexures • • Current year cash donations to fund portfolio and cover expenses In-kind subsidies, such as rent-free office space or the services of personnel not paid by the MFP and thus not reflected on its income statement. Additionally, for multipurpose MFPs, an attempt to isolate the performance of the financial services program is made by removing the effect of any cross-subsidization. Cash donations flowing through the income statement are accounted for by reclassifying them below net operating income on the income statement. Thus, adjustments for cash donations are not made since these are handled through a direct reclassification on the income statement. This year no MFP has disclosed receipt of in-kind subsidy. B.1 Cost-of-funds subsidy The cost-of-funds adjustment reflects the impact of soft loans on the financial performance of an MFP. The analyst needs to calculate the difference between what an MFP actually paid in interest on its subsidized liabilities and a shadow market rate for each country. This difference represents the value of the subsidy, considered an additional financial expense. Only funds received as loans need to be adjusted. Client deposits are not adjusted. Only loans that have a finite (1-5 years) term length are adjusted. Subordinated debt and other quasi-equity accounts are reclassified as ‘other equity’ on the balance sheet. Care is taken in the choice of an appropriate shadow rate thus, PMN has used the KIBOR rate on outstanding loans as reported by the State Bank of Pakistan on its website (12.5%) to make this adjustment. Calculation of cost-of-funds subsidy 1. Calculate average balance for all borrowings. Borrowings do not include deposits or “other liabilities”. If an MFI has given an average balance, see if this is more appropriate to use; if not, calculate average from last year’s ending balance. 2. Multiply the average balance by the shadow market rate 3. Compare with the amount actually paid in interest and fees. If less “market” rate, impute the difference (market price minus Financial Expense paid on Borrowings) to the Subsidized Cost of Funds Adjustment Expense B.2 Cash donations Pakistan Microfinance Review 2014 Funds donated to cover operational costs constitute a direct subsidy to an MFP. The value of the subsidy is therefore, equal to the amount donated to cover expenses incurred in the period reported. Some donations are provided to cover operating shortfall over a period greater than one year. Only the amount spent in the year is recorded on the income statement as revenue. Any amount still to be used in subsequent years appears as a liability on the balance sheet (deferred revenue). This occurs because theoretically, if an MFP stopped operations in the middle of a multi-year operating grant, it would have to return the unused portion of the grant to the donor. The unused amount is therefore, considered as a liability. 153 Funds donated to pay for operations should be reported on the income statement separately from the revenue generated by lending and investment activities. This practice is meant for accurately reporting the earned revenue of an MFP. Donated funds are deducted from revenue or net income prior to any financial performance analysis because they do not represent revenue earned from operations. Note: Costs incurred to obtain donor funds (fundraising costs) should also be separated from operating expenses, because the benefit of receiving the funds is not included. B.3 In-kind subsidy Imputed cost (book value) of donated/loaned-out vehicles, machinery and buildings need to be included in operating expenses. Expatriate staff salaries paid by donor or parent company, or other technical assistance, need to be accounted for. Here, imputed salaries are used instead of salaries actually received by them i.e., the salary range that a local hire would get for the same level of work-load/position is used. Note: The analyst must use his/her judgment in deciding whether or not the in-kind donation represents a key input to the on-going operations of the MFP. An appropriate basis for valuation is important. This could include Financial Services for all Annex D Adjustments to Financial Data selecting a percentage of the total cost and attributing it to program expense. The percentage may be selected on the basis of sales proportion, management input, etc. Calculation of in-kind subsidy Sum of in-kind subsidies by operating expense account, added to unadjusted numbers for each account. C. Loan loss provisioning PMN standardizes loan loss provisioning for MFPs to a minimum threshold or risk. MFPs vary tremendously in accounting for loan delinquency. Some count the entire loan balance as overdue the day a payment is missed. Others do not consider a loan delinquent until its full term has expired. Some MFPs write off bad debt within one year of the initial delinquency, while others never write off bad loans, thus carrying forward a default that they have little chance of ever recovering. The analyst applies a standard loan loss provisioning to all MFPs and adjusts, where necessary, to bring them to the minimum threshold. In some cases, these adjustments may not be precise. Portfolio aging information may only be available on different aging scales. Calculation of loan loss provisioning Step 1: Multiply the PAR age categories by the following reserve factors: PAR up to 89 days no provisioning PAR 91 – 180 x 0.50 PAR 181 – 360 x 1.00 Renegotiated loans x 0.50 Step 2: Sum above reserve calculations. If sum is more than current reserves make calculated reserve new Loan Loss Reserve. If not, keep current reserves. Step 3: Annual Assessment of the Microfinance Industry Add the Unadjusted Loan Loss Provision Expense to the difference between the Adjusted Net Loan Portfolio and the Unadjusted Net Loan Portfolio. This is the Adjusted Loan Loss Provision Expense. 154 Financial Services for all Annexures Annex E - Terms and Definitions Age Number of years an organization has been functioning as a microfinance provider (MFP). Active Saving Account Balance It is the average balance of savings per account (not per depositor). Adjustment Expense Total adjustment cost related to inflation, subsidized cost of borrowing, loan loss provisioning and in-kind subsidies. Adjusted Financial Expense Ratio It is calculated by using standardized ageing-of-portfolio technique. The principle of conservatism is used which is why loan loss provision in audited accounts is greater than the amount computed by the analyst. Adjusted Loan Loss Reserve Formula: Adjusted Financial Expense Adjusted Average Total Assets Adjusted Operating Expense Pakistan Microfinance Review 2014 Also included in operating expense: • Imputed cost (book value) of donated/loaned vehicles, machinery and buildings • Expatriate staff salaries paid by donor or parent company • Other technical assistance paid for with donations 155 NOTE: Imputed salaries should be used instead of salaries actually received by such persons, thus salary range that a local hire would get for the same level of work-load/position should be used. Judgment is used to decide whether or not the in-kind donation represents a key input to the on-going operations of the MFP Formula: Personnel Expense + Administrative Expense Adjusted Operating Expense Ratio Formula: Adjusted Operating Expense Adjusted Average Total Assets Financial Services for all Annex E - Terms and Definitions Adjusted Portfolio at Risk > (30, 60, 90 Days) Indicates the credit risk of a borrower above the specified number of days (30, 60, 90) past his/her due date for installment payment. Formula: Outstanding balance less loans overdue > (30 or 60 or 90) Days Adjusted Gross Loan Portfolio Adjusted Cost per Borrower In accounts for loan size differentials, generally operating expense ratio is lower (more efficient) for institutions with higher loan sizes, ceteris paribus. This indicator discounts the effect of loan size on efficient management of loan portfolio. Formula: Adjusted Operating Expense Average Number of Active Borrowers Adjusted Cost per Loan Formula: Adjusted Operating Expense Average Number of Active Loans Adjusted Financial Expense It includes actual cost of borrowing and shadow cost of subsidized funding. Adjusted Financial Expense on Borrowing The cost-of-funds adjustment reflects the impact of soft loans on the financial performance of the institution. The analyst calculates the difference between what the MFP actually paid in interest on its subsidized liabilities and what it would have paid at a shadow market rate for each country. This difference represents the value of the subsidy, considered an additional financial expense. Adjusted Loan Loss Provision Expense Ratio Formula: Adjusted Net Loan Loss Provision Expense Adjusted Average Total Assets Adjusted Loan Loss Provision Expense Loan loss provision expense calculated with standardized ageing-of-portfolio technique. It is however ensured that if the actual loan loss provision expense is higher than the adjusted then the conservatism principle is followed. It includes actual operational expenses and in-kind subsidy adjustments. Adjusted Operating Expense Ratio It indicates efficiency of an MFP’s loan portfolio. Formula: Adjusted Operating Expense Average Gross Loan Portfolio Adjusted Personnel Expense Includes actual personnel expenses (salaries and benefits), and in-kind subsidy adjustments. Adjusted Personnel Expense Ratio Formula: Adjusted Personnel Expense Average Gross Loan Portfolio Annual Assessment of the Microfinance Industry Adjusted Operating Expense 156 Financial Services for all Annexures Adjusted Profit Margin Formula: Adjusted Net Operating Income Adjusted Financial Revenue Adjusted Return on Assets Formula: Adjusted Net Operating Income, net of taxes Average Total Assets Adjusted Return on Equity Formula: Adjusted Net Operating Income, net of taxes Average Total Equity Adjusted Total Expense Includes all actual and adjusted expenses related to operations, cost of borrowings, loan losses and inflation adjustment. Adjusted Total Expense Ratio Formula: Adjusted (Financial Expense + Net Loan Loss Provision Expense + Operating Expense) Cost Average Total Assets Average Gross Loan Portfolio Average of opening and closing balance of Gross Loan Portfolio (GLP). Average Loan Balance per Active Borrower Indicates average loan balance outstanding. Average Loan Balance per Active Borrower to Per Capita Income Used to measure depth of outreach. The lower the ratio the more poverty-focused the MFP. Average Number of Active Borrowers It is average of opening and closing balance of active borrowers. Formula: [Active Borrowers (Opening Balance) + Active Borrowers (Closing Balance)] 2 Average Number of Active Loans Average of opening and closing balance of active loans Pakistan Microfinance Review 2014 Average Outstanding Balance 157 It indicates the average balance of loans outstanding. Formula: Adjusted Gross Loan Portfolio Adjusted Number of Loans Outstanding Average Outstanding Balance to Per Capita Income It measure of depth of outreach. The lower the ratio the more poverty-focused the MFP. Formula: Average Outstanding Balance Per Capita Income Financial Services for all Annex E - Terms and Definitions Average Saving Balance per Saver It indicates average amount of saving balance per saver. Average Total Assets It is average of opening and closing balance of total assets. Average Total Equity It is average of opening and closing balance of total equity. Borrowers per Loan Officer It measure of loan officer productivity. It indicates the number of borrowers managed by a loan officer. Formula: Number of Active Borrowers Number of Loan Officers Borrowers per Staff It measure of staff productivity. It indicates the number of borrowers managed by the staff on average. Formula: Number of Active Borrowers Number of Total Personnel Commercial Liabilities It is principal balance of all borrowings, including overdraft accounts, for which the organization pays a nominal rate of interest that may be greater than or equal to the local commercial interest rate. Commercial Liabilities-to-Gross Loan Portfolio Ratio It indicates efficiency of an MFP’s loan portfolio. Formula: All liabilities with “market” price Gross Loan Portfolio Deposits Demand deposits from the general public and members (clients) held with the institution. These deposits are not conditional to accessing a current or future loan from the MFP and include certificates of deposit or other fixed term deposits. It is inverse of the advance-to-deposit ratio. Formula: Deposits Gross Loan Portfolio Deposit-to-Total Asset Ratio Indicates the percentage of assets financed through deposits. Formula: Deposits Total Assets Equity-to-Asset Ratio This is a simple version of the capital adequacy ratio as it does not take in to account risk weighted assets. This ratio indicates the proportion of a company’s equity that is accounted for by assets. Formula: Total Equity Total Assets Annual Assessment of the Microfinance Industry Deposit-to-Gross Loan Portfolio Ratio 158 Financial Services for all Annexures Financial Expense This is total of financial expense on liabilities and deposits. Financial Revenue This is the total revenue from loan portfolio and other financial assets, as well as other financial revenue from financial services. Financial Revenue from Other Financial Assets This is net gains on other financial assets. Financial Revenue from Loan Portfolio This is total interest, fees and commission on loan portfolio. Financial Revenue Ratio Indicates the efficiency with which an MFP is utilizing its assets to earn income from them. Formula: Financial Revenue Average Total Assets Financial Self-Sufficiency Formula: Financial Revenue Adjusted (Financial Expense + Net Loan Loss Provision Expense + Operating Expense + Inflation Adjustment) Gross Loan Portfolio It is the outstanding principal for all outstanding client loans, including current, delinquent and restructured loans. It does not include: • Loans that have been written-off • Interest receivable • Employee loans For accounting purposes GLP is categorized as an asset. Gross Loan Portfolio-to-Total Asset Ratio Indicates the efficiency of assets deployed in high yield instruments and core business of an MFP. Formula: Gross Loan Portfolio Total Assets Inflation Adjustment Expense Pakistan Microfinance Review 2014 Inflation decreases the real value of an MFP’s equity. Fixed assets are considered to track the increase in price levels, and their value is considered increased. The net loss (or gain) is treated as a cost of funds, is disclosed on the income statement, and decreases net operating income. 159 Inflation Rate Latest annualized consumer price index (CPI) as reported by the State Bank of Pakistan. Liabilities-to-Equity Ratio (debt-equity ratio) Formula: Total Liabilities Total Equity Financial Services for all Annex E - Terms and Definitions Loan Loss Provision Expense It is the sum of loan loss provision expense and recovery on loan loss provision. Loans per Loan Officer Formula: Number of Active Loans Number of Loan Officers Loans per Staff Formula: Number of Active Loans Number of Personnel Net Adjusted Loan Loss Provision Expense It is the sum of loan loss provision expense and recovery on loan loss provision. MFPs vary tremendously in accounting for loan delinquency. Some count the entire loan balance as overdue the day a payment is missed. Others do not consider a loan delinquent until its full term has expired. Some MFPs write off bad debt within one year of the initial delinquency, while others never write off bad loans, thus carrying forward a defaulting loan that they have little chance of ever recovering. Number of Active Borrowers Number of borrowers with loan amount outstanding. Number of Active Loans The number of loans that have been neither fully repaid nor written off, and thus that are part of the MFP’s gross loan portfolio. Number of Active Women Borrowers Number of women borrowers with loan amount outstanding. Number of Active Women Borrowers to total Active Borrowers It indicates percentage of women borrower to total active borrowers. Number of Loans Outstanding It is the number of loans outstanding at the end of the reporting period. Depending upon the policy of an MFP one borrower can have two loans outstanding; hence, the number of loans could be more than the number of borrowers. Number of Savers Number of Saving Accounts One depositor can have more than two deposit accounts. Hence, the number of deposit accounts could be more than the number of depositors. Number of Women Savers It is the number of women savers with voluntary demand deposit and time deposit accounts. Offices The total number of staffed points of service (POS) and administrative sites (including head office) used to deliver or support the delivery of financial services to microfinance clients. Operating Expense It is total of Personnel Expense and Administrative Expense. Annual Assessment of the Microfinance Industry It is the number of depositors maintaining voluntary demand deposit and time deposit accounts with an MFP. 160 Financial Services for all Annexures Operational Self-Sufficiency Formula: Financial Revenue (Financial Expense + Net Loan Loss Provision Expense + Operating Expense) Per Capita Income It is average income per person. Percentage of Women Savers to Total Savers It indicates the percentage of women in the total saving portfolio. Personnel It is the number of individuals actively employed by an MFP. This number includes contract employees and advisors who dedicate the majority of their time to the organization, even if they are not on the MFP’s roster of employees. This number is expressed as a full-time equivalent, such that an advisor who spends 2/3 of his/her time with the MFP is accounted for as 2/3 of a full-time employee. Personnel Allocation Ratio The higher the indicator the more lean the head office structure of the organization. This indictor is used to measure organizational efficiency. Formula: Loan Officers Total Staff Risk Coverage Ratio Indicates the provision created by an MFP against its credit risk. Formula: Adjusted Loan Loss Reserve PAR > 30 Days Saving Outstanding Total value of demand deposit and time deposit accounts. Savers per Staff Formula: Number of Savers Number of Personnel Loan Loss Provision Expense It is the sum of loan loss provision expense and recovery on loan loss provision. Pakistan Microfinance Review 2014 Loans per Loan Officer 161 Formula: Adjusted Loan Loss Reserve PAR > 30 Days Total Assets Total net asset accounts i.e., all asset accounts net of any allowance. The one exception to this is the separate disclosure of the gross loan portfolio and loan loss reserve. Total Equity Equity represents the worth of an organization net of what it owes (liabilities). Equity accounts are presented net of distributions, such as dividends. Formula: Total Assets – Total Liabilities Financial Services for all Annex E - Terms and Definitions Total Liabilities Liabilities represent the borrowings of an organization i.e., the amount owed. Examples of liabilities include loans, and deposits. This number includes both interest and non-interest bearing liabilities of an MFP. Total Number of Loan Officers The number of staff members who dedicate the majority of their time to direct client contact. Front office staff include more than those typically qualified as credit or loan officers. They may also include tellers, personnel who open and maintain accounts—such as savings accounts—for clients, delinquent loan recovery officers, and others whose primary responsibilities bring them in direct contact with microfinance clients. Loan Written Off during Year It is the value of loans written off during the year. Write-Off Rate Formula: Loans written off during the year Average Gross Loan Portfolio Yield on Gross Portfolio (Nominal) Indicates the yield on an MFPs loan portfolio and is usually used as a proxy to look at MFPs (realized) effective interest rate. Formula: Financial Revenue from Loan Portfolio Average Gross Loan Portfolio Yield on Gross Portfolio (Real) Annual Assessment of the Microfinance Industry It is the number of depositors maintaining voluntary demand deposit and time deposit accounts with an MFP. Formula: (Yield on Gross Portfolio (nominal) - Inflation Rate) (1 + Inflation Rate) 162 FINANCIAL SERVICES FOR ALL Pakistan Microfinance Network Third Floor, Plot No. 12-3/2, Mandir Square, G-8/1 Markaz, Islamabad Tel: +92 51 2266214-17, Fax: +92 51 2266218 www.pmn.org.pk