1. Effective Supervision: Reading and Analyzing the MIS Reports MICROFINANCE MANAGEMENT DEVELOPMENT WORKSHOP

2. 2 Session Objectives At the end of the session, participants are expected to: Have a fresh understanding and appreciation of microfinance reports Be able to read and analyze the important microfinance reports Understand the relationship of data across reports

3. 3 Introduction Appropriate, accurate and timely reports and indicators greatly contribute to the participating banks’ success in microfinance and in making microfinance a part of the regular banking operation. It is important for middle management to know how to read and understand the reports in order to make the right and timely decision. It is important to know the relationship of data across reports to be able to spot errors and detect fraud.

4. 4 MABS Monitoring Reports Listing of Loans  Collection Due Report Delinquency Report  Portfolio at Risk Report  Indicates loan portfolio data and quality Indicates revenue, growth and performance. Analyze quality based on client, business and characteristics.. Interest Collected by MF Unit  Performance Report by AO  Microfinance Monthly Report Client Status Report  PAR by Aging and Business Activity PAR by Loans Disbursed and Business Activity Loan Profile by Gender

5. 5 Listing of Loans (Monthly) List of all active accounts; accounts with outstanding balance – current or overdue Shows static information such as; borrower’s name and account number, loan cycle, release and maturity date, amount borrowed, outstanding loan balance, amortization due, and hold out deposits It also shows amount overdue and portfolio at risk (PAR) amount Users: –MF Unit supervisor and staff, branch manager

6. 6 Listing of Loans (Monthly)

7. 7 Delinquency Report 1 (Daily) List of delinquent accounts; missed amortization repayment for 1 day or more Shows static information such as; borrower’s name and account number, release and maturity date, PAR amount, total amount due It also shows the number of amortization payments missed and how many days the borrower is overdue This report shows the hold out balance and the exposed amount.exposed amount. Users: –MF Unit supervisor and staff, branch manager 1 Delinquency report is an exception report

8. 8 Delinquency Report 1 (Daily)

9. 9 Exposed Amount Refers to the difference between the outstanding loan balance and the savings balance. This amount bears the risk of not being collected. The exposed amount represents the amount the clients still owes to the bank after her/his savings have been applied to the loan amount due

10. 10 Portfolio at Risk Report (Daily, Weekly, Mo.) This is a summary report showing the number of borrowers, loan amount overdue, outstanding balance or PAR amount by age. Also shows the percentages e.g. % clients, % in arrears, and PAR % Users: –MF Unit supervisor and staff, branch manager, top management

11. PAR Report RURAL BANK OF ABC Portfolio at Risk Report As of June 30, 2010 Days Overdue No. of Borrowers % of Clients Loan Amount Overdue % in Arrears Outstanding Balance Outstanding Balance % Current43896.26% -0.00% 2,945,840.5796.37% 1-7 days81.76% 5,302.580.17% 52,314.641.71% 8-14 days30.66% 1,994.030.07% 14,505.390.47% 15-30 days20.44% 8,571.440.28% 30,666.701.00% 31-60 days20.44% 6,567.700.21% 6,820.110.22% 61-90 days00.00% - - Over 90 days20.44% 6,855.020.22% 6,538.310.21% Subtotal173.74% 29,290.770.96% 110,845.153.63% Total455100.00% 29,290.770.96% 3,056,685.72100.00%

12. PAR 7 RURAL BANK OF ABC Portfolio at Risk Report As of June 30, 2010 Days Overdue No. of Borrowers Outstanding Balance Outstanding Balance % Current438 2,945,840.5796.37% 1-7 days8 52,314.641.71% 8-14 days3 14,505.390.47% 15-30 days2 30,666.701.00% 31-60 days2 6,820.110.22% 61-90 days0 -0.00% Over 90 days2 6,538.310.21% Subtotal17 110,845.153.63% Total455 3,056,685.72100.00% PAR 7 = 1.91% with 9 accounts (Delinquent loans over 7 days)

13. PAR 30 RURAL BANK OF ABC Portfolio at Risk Report As of June 30, 2010 Days Overdue No. of Borrowers Outstanding Balance Outstanding Balance % Current438 2,945,840.5796.37% 1-7 days8 52,314.641.71% 8-14 days3 14,505.390.47% 15-30 days2 30,666.701.00% 31-60 days2 6,820.110.22% 61-90 days0 -0.00% Over 90 days2 6,538.310.21% Subtotal17 110,845.153.63% Total455 3,056,685.72100.00% PAR 30 = 0.44% with 4 accounts (Delinquent loans over 30 days)

14. 14 Total Interest Collected from MFU (Monthly) This is a summary report showing the monthly growth of the loan portfolio (outstanding balance: beginning & ending). Shows the interest, fees & other charges, and the total revenue collected within the period; usually monthly Shows the yield % for the periodyield % Users: –MF Unit supervisor and staff, branch manager, top management

15. 15 Formula for YIELD % Total Revenue (OLP 1 beginning + OLP End)/2 YIELD %= 1 Outstanding Loan Portfolio Total Revenue = Interest Income + Fees and Other Charges

16. 16 Total Interest Collected from MFU (Monthly)

17. 17 Performance Report by Account Officers (Weekly, Monthly) This is a summary report that determines the performance of each account officer (AO) Shows the # of borrowers handled by an AO, loan balance, # of accounts that are overdue, par amount and percentage It also shows the # of new and repeat loans released during the period and the total revenue generated by the AO Users : –MF Unit supervisor and staff, branch manager, top management

18. 18 Performance Report by Account Officers (Weekly, Monthly)

19. 19 Client’s Status Report (As needed) This report shows the credit history of the borrower Shows the # of loans the borrower has availed Shows the repayment performance of the borrower: percentage payments made on time Shows the detailed repayment performance of the borrowers current loan Users: –MF Unit supervisor and staff, branch manager, credit committee

20. 20 Client’s Status Report (As needed)

21. 21 READING THE REPORTS Check the accuracy of the figures and amounts in the reports Cross check figures and amounts of items between and among related reports Analyze the reports

22. 22 Random check if the sub-total by account officer adds up Check if all AO sub-totals add up with the over-all total Check for duplicate accounts or accounts that show up more than once. This could indicate that the account of the borrower, if fully paid, was not properly closed in the system.duplicate Validate whether the loan cycle or cumulative loan matches with the Client’s Status Reportloan cycle Verify whether the loan balance is correct at the time the report was generatedloan balance Validate whether there is “lump-sum” payment schedulelump-sum Listing of Loans ANALYZING THE REPORTS

23. 23 “Duplicate” accounts

24. 24 Loan Cycle Validation

25. 25  Check whether horizontal and vertical totals and percentages are accurate  Validate if the figures in this report, e.g. # of borrowers, loan overdue amount, outstanding balance, and PAR are consistent with the Listing of Loans report.Listing of Loans  Using the Delinquency Report, check if the accounts with overdue amortization add up with the summary totals per age.  Analyze the extent of the delinquencydelinquency  After determining the extent, identify which accounts are involved Portfolio at Risk Report ANALYZING THE REPORTS

26. 26 Random check if the sub-total by account officer adds up Check if all AO sub-totals add up with the over-all total Check horizontal totals and computations e.g. exposed amount, etc… The Portfolio at Risk amount on this report should be equal to the Portfolio at Risk amount on the Listing of Loans and Portfolio At Risk Report Randomly validate the # of amortization missed and days overdue with the individual Client’s Status Report Using the information gathered from the PAR Report, manually age the account over 90 days Delinquency Report ANALYZING THE REPORTS

27. 27  Check if totals add up  Check horizontal computations e.g. total revenue, and yield%, etc…  Validate whether figures in this report tally with the related reports e.g. listing of loans and performance report by AO OLP 1 ending should be equal to Total Loan Balance of the Listing of Loans & Total Loan Account Balance of the Performance Report by AO Total Revenue should be equal to Total Revenue of the Performance Report by AO Total Interest Collected from MFU 1 OLP – Outstanding Loan Portfolio ANALYZING THE REPORTS

28. 28  Check if totals add up  Check horizontal computations if all figures add up e.g. # loans disbursed = # new loans disbursed + # repeat loans disbursed, etc…  Validate whether figures in this report tally with the related reports e.g. listing of loans and total interest collected by MFU Loan Account Balance should be equal to the OLP 1 ending of the Total Interest Collected & Total Loan Account balance of Listing of Loans Total Revenue should be equal to Total Revenue of the Total Interest Collected from MFU Performance Report by AO 1 OLP – Outstanding Loan Portfolio ANALYZING THE REPORTS

29. 29 ANALYZING THE REPORTS  Validate … # of Borrowers tally with # of accounts of the Listing of Loans # of loans w/ overdue amount tally with the number of accounts listed on the Delinquency Report Portfolio at Risk amount tally with Total PAR amount of the Listing of Loans PAR % tally with the Outstanding Balance % Sub-Total of the PAR report  Validate the # loan disbursed per AO by counting all accounts released within the specified range e.g. 06/01/2004 to 06/28/2004. This can be done by manually counting the accounts released within the period in the Listing of Loans. Performance Report by AO 1 OLP – Outstanding Loan Portfolio

30. 30 Client Status Report Validate release and maturity dates of current loan against the Listing of Loans Useful when evaluating an application for a repeat loan, or when determining course of action for a delinquent borrower

31. 31 Comparison Across Reports REPORT TITLE# AccountsO/BalanceAmount O/Due PARPAR% Listing of Loans Delinquency Report PAR Report Interest Collected MABS Monthly Performance Report PAR by Aging PAR by Loans Disbursed Loan Profile by Gender

32. 32 SUMMARY In this session we learned the following: How to read the important MF reports How to detect erroneous reports How to analyze and make use of these reports in making timely decisions.

33. 33 LINKS

34. 34 How to Verify the Accuracy of Loan Balance Identify the repayment frequency to determine the principal amortization Determine the number of “should be” payments since the first payment Multiply the principal amortization to the number of “should be” payments and deduct the product from the loan amount disbursed The difference should be equal to the listed loan balance

35. 35 Determining the Lump Sum Payments Identify the repayment frequency of the account Determine the correct amortization by dividing the loan disbursed amount with repayment frequency or installment Compare the result with the Amount of Amortization found in the report. Another way of knowing if the payment schedule is lump sum: when the amortization amount listed is either zero or equal to the loan amount granted or disbursed

36. 36 PAR Report versus Listing of Loans PAR ReportListing of Loans Total: Number of BorrowersTotal: Number of Accounts Total: Loan Amount OverdueTotal: Amount Overdue Total: Outstanding BalanceTotal: Loan Balance Sub-Total: Outstanding Balance Total: Portfolio at Risk

37. 37 PAR Report versus Listing of Loans PAR Report Analysis Outstanding Delinquency BalanceBalance %Analysis Current 5,700,328.3489.51% 1 - 7 days 128,997.242.03%19.31% 8 - 14 days 131,678.682.07%19.71% 15 - 30 days 114,920.961.80%17.20% 31 - 60 days 108,665.951.71%16.27% 484,262.83 72.50% 61 - 90 days 66,302.141.04%9.93% Over 90 days 117,403.931.84%17.58% 183,706.07 27.50% Sub-Total 667,968.9010.49% Total 6,368,297.24100.00%

38. Thank you!