understanding microfinance performance of rural banks through the mabs eagle standard and rating...

Understanding Microfinance Performance of Rural Banks through the

MABS EAGLE Standard and Rating System

Presentation OutlinePresentation Outline

I. Background on the EAGLE Rating System

II. The EAGLE Rating Process

III. The EAGLE Components

IV. The EAGLE Grades

V. Performance

BackgroundBackground

•The EAGLE Rating System assesses the The EAGLE Rating System assesses the performance of the micro-enterprise performance of the micro-enterprise finance finance portfolio;portfolio;•A management tool for rural banks for A management tool for rural banks for monitoring and evaluating factors monitoring and evaluating factors affecting affecting its microfinance operations.its microfinance operations.

EAGLE Rating ProcessEAGLE Rating Process

5. Conduct EAGLE Validation

4. Compute Initial EAGLE rating

6. Compute Final EAGLE Rating

2. Satisfy Microfinance-specific Minimum Criteria

3. Submit Various Bank Reports to MABS for

Computation of EAGLE Rating

1. Satisfy Bank-Wide Minimum Criteria

The EAGLE Rating ProcessThe EAGLE Rating Process

Step 1. Satisfy Bank-wide Criteria

1. BSP CAMELS rating 3 & above for the past

2 years (for AA rated

banks, at least 3.5)

2. Overall past-due ratio less than 15% for the

past year

3. Capital adequacy At least 12%

Step 2. Satisfy MF-Specific Criteria

1. Recipient of MABS Compliance Certification

2. Experience in microfinance operations

at least one (1)

3. Number of active microfinance borrowers

At least 100

4. Dedicated and trained loan officers for microenterprise finance activities

3 (full-time)

5. With MIS capability to produce PAR reports with portfolio ageing

6. Has been reporting to MABS for at least one year

7. Has Operations Manual

Step 2. Satisfy MF-Specific Criteria (contd.)Step 2. Satisfy MF-Specific Criteria (contd.)

a. MABS Performance Monitoring System (MPMS) reports

b. Other bank reports, such as: • CSOC• CSIE• Schedule of Microfinance Loans • CSIE on Microfinance Program • Schedule of Deposit Liabilities, By Size of

Accounts

Step 3. Submit various required reports to MABS

EE – Efficiency – 30%

AA – Asset quality – 30%

GG – Growth – 10%

LL – Liability structure – 10%

EE – Earnings – 20%

The EAGLE ComponentsThe EAGLE Components

Asset Quality,

Growth, 10%

Liability Structure,

Earnings, 20%

Efficiency, 30%

COST EFFICIENCY, 10%

LOAN OFFICER PRODUCTIVITY,

COST PER BORROWER, 10%

Cost Efficiency (10%)Cost Efficiency (10%)

- Highlights personnel and

administrative expenses relative

to the loan portfolio

Loan Officer Productivity* (10%)Loan Officer Productivity* (10%)

- Measures the average number of

borrowers managed by each

account officer

Cost Per Active Borrower* (10%)Cost Per Active Borrower* (10%)

- Average no. of active borrowers

for the year/Average no. of

microfinance account officer for

the year

Efficiency (30%)Efficiency (30%)

* Separate computation for Individual and Group loans

Efficiency, 30%

Earnings, 20%

Growth, 10%

Liability Structure, 10%

Asset Quality,

PAR 7, 10%

PAR 30, 10%

LOAN LOSS RESERVE RATIO , 5%

LOAN LOSS RATE, 5%

Asset Quality (30%)Asset Quality (30%) PAR > 7 days (10%) and PAR > 7 days (10%) and

PAR > 30 days (10%)PAR > 30 days (10%)

- Show the degree of risk of the

total microfinance portfolio

Loan Loss Reserve Ratio (5%)Loan Loss Reserve Ratio (5%)

- Indicates the degree of

protection of the bank against

expected losses due to

delinquency

Loan Loss Rate (5%)Loan Loss Rate (5%)

- Indicates the level of actual and

adjusted write-off over ave.

loan outstanding.

• Growth in active clients Growth in active clients (5%)(5%)

– Active borrowers as of end of period vs. active borrowers as of end of previous period

• Growth in loan portfolio Growth in loan portfolio outstanding (5%)outstanding (5%)

– Loan portfolio as of end of period vs. loan portfolio as of end of previous period

Earnings, 20%

Asset Quality, 30%

Efficiency, 30%

Growth in Volume of microfinance portfolio, 5%

Growth in No. of Outstanding Clients, 5%

Growth, 10%

Growth (10%)Growth (10%)

Growth, 10%

Efficiency, 30%

Asset Quality,

Liability Structure,

Earnings, 20%

Liability Structure (10%)Liability Structure (10%)

• Deposit to Loan Ratio Deposit to Loan Ratio (10%)(10%)

– Looks at the ability of the bank in terms of liquidity management.

Bank-wide Gross Bank-wide Gross Loan PortfolioLoan Portfolio

15. DEPOSIT LIABILITIES (Schedule 5) 180 -

a. Demand - 181 -

1. Taxable Demand Deposits 189

2. Non-Taxable Demand Deposits 190

b. Savings Deposits - 182 -

1. With Automatic Transfer - 183 -

a. Taxable Deposits 191

b. Non-Taxable Deposits 192

2. Without Automatic Transfer - 184 -

a. Taxable Deposits 193

b. Non-Taxable Deposits 194

c. Time Certificate of Deposits - 185 -

1. Taxable Deposits 195

2. Non-Taxable Deposits 196

d. NOW Accounts - 186 -

1. Taxable Deposits 197

2. Non-Taxable Deposits 201

L I A B I L I T I E S

CONSOLIDATED STATEMENT OF CONDITIONAs of _________________________

_____________________________________

____________________________________Name of Rural Bank

Address

ADDITIONAL INFORMATION: 1. TOTAL LOANS PORTFOLIO - GROSS (Schedule 2) 900 -

a) Current 901 -

b) Past Due 902 -

c) Items in Litigation 903 -

2. Less: Specific Loan Loss Provision 904 -

3. Loan Portfolio (Net of Specific Loan Loss Provision) 906 -

4. Less: GENERAL LOAN LOSS PROVISION 910 -

5. LOAN PORTFOLIO - NET 920 -

6. Total Allowance for Probable Losses 460 -

a) 2% General Provision for Probable Loan Losses 461 -

b) Allowance for Probable Losses on Loan Accounts and Other Risk Assets 462 -

b.1 Loans 463 -

b.2 Other Risk Assets 464 -

7. Total Non-Performing Loans (Cir. No. 202 dated May 27, 1999) 930 -

a) Non-performing Regular Loans (Other than Restructured Loans) 931

b) Non-performing Restructured Loans 932

7a. Loans Classified as "Loss" which are fully covered by Allowance for Probable

Losses 933

7b. Outstandng Credit Receivables Classified as Loss 934

in the latest BSP examination, net of write offs, recoveries and collections7bc Credit Card Receivables classified as loss by the bank as of this month 935

Total Bank-wide Total Bank-wide Deposit LiabilitiesDeposit Liabilities

1. TOTAL LOANS PORTFOLIO - GROSS (Schedule 2) 900 -

15. DEPOSIT LIABILITIES (Schedule 5) 180 -

Growth, 10%

Efficiency, 30%

Asset Quality, 30%

Earnings, 20%

Earnings (20%)Earnings (20%)

Loan Portfolio ProfitabilityLoan Portfolio Profitability (20%)(20%)- measures the bank’s ability to generate earnings with a given asset base.

Average outstanding microloan portfolio for the Year being rated

* Data culled from MPMS based on bank’s submission: Total financial income Less: Total financial expense Total direct operating expense Required Loan Loss Provision per BSP Circular 409 Net MF Operating Income

Net MF Operating Income*==

Loan Portfolio Loan Portfolio ProfitabilityProfitability

(20%)(20%)

EAGLE StandardEAGLE Standard

Components Components (Indicators)Standard Standard

(EAGLE Score of 5)(EAGLE Score of 5)

EFFICIENCYEFFICIENCY

Cost efficiency < 10%

Loan officer productivity – group loan > 300

Loan officer productivity – individual loan > 150

Cost per Active Borrower – group loan < 1499

Cost per Active Borrower – individual loan < 499

ASSET QUALITYASSET QUALITY

PAR Over 7 Days < 5%

PAR Over 30 Days < 3%

Loan Loss Provision > 100%

Loan Loss Rate < 2%

EAGLE StandardEAGLE Standard

Components Components (Indicators)StandardStandard

(EAGLE Score of 5)(EAGLE Score of 5)

GROWTH IN PORTFOLIOGROWTH IN PORTFOLIO

Growth in Active Borrowers > 20%

Growth in Loan Portfolio > 20%

LIABILITY STRUCTURELIABILITY STRUCTURE

Liability Structure > 100%

EARNINGSEARNINGS

Earnings > 35%

Components Components (Indicators) FormulaFormula

EFFICIENCYEFFICIENCY

Cost efficiency Total Direct Operating Costs, Sum for Period being rated

Avg. MF Gross Loan Portfolio, Period being rated

Loan officer productivity – group loan

Avg # active borrowers, Group Loans, For Period being rated

Avg # MF field staff, Group Loans, 1st 9 mos. for Period being rated

Loan officer productivity – individual loan

Avg # active borrowers, Indiv. Loans, For Period being rated

Avg # MF field staff, Indiv. Loans, 1st 9 mos. for Period being rated

Cost per Active Borrower – group loan

Total Direct Operating Costs for Group Loans, Sum for Period being rated

Avg. No.of Active MF Borrowers for Group Loans, for Period being rated

Cost per Active Borrower – individual loan

Total Direct Operating Costs for Individual Loans, Sum for Period being rated

Avg. No. of Active MF Borrowers for Individual Loans, for Period being rated

Performance Indicators & Corresponding FormulaPerformance Indicators & Corresponding Formula

ASSET ASSET QUALITYQUALITY

PAR Over 7 Days

Avg. Principal Balance of Loans with more than 7 days missed payment, for Period being rated

Avg. Gross MF Loan Portfolio, for Period being rated

PAR Over 30 Days

Avg. Principal Balance of Loans with more than 30 days missed payment, for Period being rated

Avg. Gross MF Loan Portfolio, for Period being rated

Loan Loss Reserve Ratio

Actual MF Loan Loss ProvisionRequired MF Loan Loss Provision per BSP Circular 409

Loan Loss Rate Total MF Loan Write-Offs, for Period being rated

Average Loan Portfolio Outstanding, for Period being rated

GROWTH IN GROWTH IN PORTFOLIOPORTFOLIO

Growth in Active Borrowers

(End of Rated Period, No. of Active MF Borrowers – End of Previous Period, No. of Active MF Borrowers) End of Previous Period, No. of Active MF Borrowers

Growth in Loan Portfolio (End of Rated Period, MF Gross loan portfolio – End of Previous Period, MF Gross loan portfolio) End of Previous Period, MF Gross loan portfolio

LIABILITY LIABILITY STRUCTURESTRUCTURE

Deposit to Loan Ratio Total Bank-Wide DepositsTotal Bank-Wide Gross Loan Portfolio

EARNINGSEARNINGS

Loan Portfolio Profitability

Net MF Operating IncomeAvg. Gross MF Loan Portfolio

Computing for the EAGLE GradeComputing for the EAGLE Grade

EAGLE gradeEAGLE grade is finally derived based is finally derived based on the computed overall weighted on the computed overall weighted

score.score.

The component score is then weighted to arrive at a weighted component

score.All weighted component scores are All weighted component scores are

then added to get the then added to get the overall weighted overall weighted scorescore..

A A component scorecomponent score is computed by is computed by getting the sum of the weighted scores getting the sum of the weighted scores of each component’s underlying of each component’s underlying indicators.indicators.

AA: Overall weighted score of 4.25 and above and no zero score for any individual component; To be qualified for an EAGLE Award, a candidate bank should have at least 500 average active borrowers over the last 3 months of the year.

A: (i) Overall weighted score between

3.5 and 4.24; (ii) a bank with score of 4.25 and over but less than 500 ave. active borrowers over last 3 months

B: Overall weighted score between 2.5

and 3.49 No grade: Overall weighted score less

than 2.49.

Excellent Excellent microenterprismicroenterprise finance e finance performanceperformance

Very goodVery good

AverageAverage

Below average Below average performanceperformance

The EAGLE GradesThe EAGLE Grades

Distribution of Banks by Distribution of Banks by EAGLE Grade (46 PBs, 2005)EAGLE Grade (46 PBs, 2005)

The EAGLE GradesThe EAGLE Grades

No Grade

18.6%17.0%

18.1% 17.4%

Cost Efficiency, Group 1, Dec 2005Cost Efficiency, Group 1, Dec 2005

The EAGLE Grades - EfficiencyThe EAGLE Grades - Efficiency

PilotMABS 1st Rollout 2nd Rollout

13.8%12.1%

15.1%16.8%

MABS 4th Rollout 5th Rollout3rd Rollout

28.3%26.0%

MABS 7th Rollout

106.1 105.8 107.8111.4

75.680.0

143.6 142.1

91.390.6 87.5 92.7

Loan Officer Productivity – Individual LoansLoan Officer Productivity – Individual LoansGroup 1, As of Dec 2005Group 1, As of Dec 2005

MABS Pilot 2nd Rollout1st Rollout

80.2 82.6

67.663.4

MABS 5th Rollout4th Rollout3rd Rollout

98.891.8

57.347.9

139.9127.5

MABS 7th Rollout

10.3%10.7%

10.3%9.2%

5.4%5.9%6.2%

PAR > 7 days, Group 1, 2005PAR > 7 days, Group 1, 2005

The EAGLE Grades – Asset The EAGLE Grades – Asset QualityQuality

MABS Pilot 1st Rollout 2nd Rollout

PAR > 7 days, Group 2, 2005 PAR > 7 days, Group 2, 2005

MABS 3rd Rollout 5th Rollout4th Rollout

1.6%2.2%

1.2% 1.3%0.0%0.4%

1.9%0.9%

PAR > 7 days, Group 3, 2005PAR > 7 days, Group 3, 2005

MABS 7th Rollout

5.5%4.5%

8.8%8.1%

Banks by PAR > 30 days Banks by PAR > 30 days Group 1, 2005Group 1, 2005

MABS Pilot 1st Rollout 2nd Rollout

5.6%4.6%

5.5%5.6%

MABS 3rd Rollout 5th Rollout4th Rollout

0.7%0.9%

0.0%0.1%0.7%

MABS 7th Rollout

-57.2%

-43.2%

-20.1%

-18.8%11.2%

-12.3%

-32.6%

-18.1% -9.0% -10.0%

-14.3%

-59.1%

-36.8%

-14.4%

0.8%-12.4%

-17.1%

-44.5%

-6.2% -18.2%

-17.1%

-100.0%

-50.0%

100.0%

-100.0%

-50.0%

100.0%

Growth in Active Borrowers and Loan Portfolio, Group 1, 2005Growth in Active Borrowers and Loan Portfolio, Group 1, 2005

The EAGLE Grades – GrowthThe EAGLE Grades – Growth

Growth in Loan Portfolio

-17.9%

39.5%29.2%

121.7%

-41.7%

-31.7%

8.3% 21.1%

170.3%

-36.7%

44.3%49.9%

-22.0%

20.4%33.2%

-19.4%

31.2% 34.9%

137.1%

-100.0%

100.0%

200.0%

-100.0%

-50.0%

100.0%

150.0%

200.0%

128.3%

226.2%

173.2%

122.6%

129.6%

229.3%

286.0%

150.9%

1291.7%

165.8%

569.9%

107.5%112.3%

173.7%

169.4%

393.8%

259.4%

181.8%

298.3%

2253.9%

163.4%

505.1%

150.7%

571.3%

250.0%

500.0%

750.0%

500.0%

1000.0%

155.1%

97.8%84.7%82.9%

100.0%

150.0%

200.0%Deposit to Loan Ratio, Group 1, Dec 2005Deposit to Loan Ratio, Group 1, Dec 2005

The EAGLE Grades – LiabilitiesThe EAGLE Grades – Liabilities

Pilot 1st Rollout 2nd Rollout

153.5%

185.4%

174.7%

302.3%

279.9%

146.1%

112.3%104.7%

210.6%

100.0%

150.0%

200.0%

250.0%

300.0%

350.0%

Deposit to Loan Ratio, Group 2, Dec 2005Deposit to Loan Ratio, Group 2, Dec 2005

The EAGLE Grades - LiabilitiesThe EAGLE Grades - Liabilities

4th Rollout 5th Rollout3rd Rollout

180.5%

67.2%88.4%

210.3%

172.3%

105.0%

64.1%80.6%

120.0%

98.5%86.9%

100.0%

150.0%

200.0%

250.0%

300.0%

350.0%Deposit to Loan Ratio, Group 3, Dec 2005Deposit to Loan Ratio, Group 3, Dec 2005

The EAGLE Grades - LiabilitiesThe EAGLE Grades - Liabilities

7th Rollout

55.1%59.0%

64.2%66.9%

58.8%55.8%

100.0%

Microfinance Earnings, Group 1, 2005Microfinance Earnings, Group 1, 2005

The EAGLE Grades – EarningsThe EAGLE Grades – Earnings

Pilot 1st Rollout 2nd Rollout

41.3%41.0%

70.3%45.7%

311.8%

62.6%71.4%

100.0%

200.0%

300.0%

4th Rollout 5th Rollout

3rd Rollout

115.8%

172.3%

50.2% 40.4%

53.2% 52.8%

28.6%38.1%

26.7%27.7%

100.0%

150.0%

200.0%

7th Rollout

Distribution of Banks byDistribution of Banks byPAR > 7 days (47 PBs, 2005)PAR > 7 days (47 PBs, 2005)

13%15%

Score: 1 (>= 11.00) Score: 2 (9.01 - 11.00) Score: 3 (7.01 - 9.00)

Score: 4 (5.01 - 7.00) Score: 5 (<= 5.00)

Distribution of Banks byDistribution of Banks byPAR > 30 days (47 PBs, 2005)PAR > 30 days (47 PBs, 2005)

6%11% 13%

Score: 1 (>= 7.00) Score: 2 (6.01 - 7.00) Score: 3 (5.01 - 6.00)

Score: 4 (3.01 - 5.00) Score: 5 (<= 3.00)

1 1 10

21 1 1

Score of 5(>=20.00)

Score of 4 (15.01 - 20.00)

Score of 3 (10.01 - 15.00)

Score of 2 (1.01 - 10.00)

Score of 1 (0.01 - 1.00)

Score of 0(Negative Growth)

Distribution of Banks by Growth in Active Borrowers Distribution of Banks by Growth in Active Borrowers and Loan Portfolio, 2005and Loan Portfolio, 2005

Distribution of Banks by Deposit to Loan Distribution of Banks by Deposit to Loan Ratio, 2005Ratio, 2005

Score of 5 (>= 100.00) Score of 4 (60.01 - 80.00)Score of 3 (45.01 - 60.00) Score of 2 (0.01 - 45.00)Score of 1(>= 0)

understanding microfinance performance of rural banks through the mabs eagle standard and rating...

eagle rating processa

mabs eagle standard

microfinance operations

various required reports

mabseagle computation

bank reports

par reports

past year3

Documents

mabs report

microfinance sector - pacra · the pakistan credit rating...

mabs approach to agricultural microfinance module 6, session...

ic-global microfinance bank ltd. infinity microfinance...

mabs approach to agricultural microfinance module 2, session...

microfinance summit 2020 - eventsget.com€¦ ·...

mabs approach to agricultural microfinance module 4, session...

mabs approach to agricultural microfinance module 1, session...

product development a market driven approach. product...

mabs multicast authentication based on batch signature

assessment of participating banks microfinance performance...

european microfinance network daniel sorrosal - european...

1991 antigenic analysis of feline coronaviruses with...

mis reports & analysis mabs mindanao supervisors forum...

mabs pre budget submission · mabs pre budget submission...

mabs management meeting

designing a housing microfinance loan product lending...

microfinance - samata.org.np · microfinance -...

msms usermanual - mabs

autumn gold in lucan · talk to your lender. if you can’t...