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

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  • Effective Supervision:Reading and Analyzing the MIS ReportsMICROFINANCE MANAGEMENT DEVELOPMENT WORKSHOP

  • *Session ObjectivesAt the end of the session, participants are expected to:Have a fresh understanding and appreciation of microfinance reportsBe able to read and analyze the important microfinance reportsUnderstand the relationship of data across reports

  • *IntroductionAppropriate, 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.

  • *MABS Monitoring ReportsListing of Loans Collection Due ReportDelinquency Report Portfolio at Risk Report Indicates loan portfolio data and qualityIndicates revenue, growth and performance.Analyze quality based on client, business and characteristics..Interest Collected by MF Unit Performance Report by AO Microfinance Monthly ReportClient Status Report PAR by Aging and Business ActivityPAR by Loans Disbursed and Business ActivityLoan Profile by Gender

  • *Listing of Loans (Monthly)List of all active accounts; accounts with outstanding balance current or overdueShows static information such as; borrowers name and account number, loan cycle, release and maturity date, amount borrowed, outstanding loan balance, amortization due, and hold out depositsIt also shows amount overdue and portfolio at risk (PAR) amount

    Users: MF Unit supervisor and staff, branch manager

  • *Listing of Loans (Monthly)

  • *Delinquency Report1 (Daily)List of delinquent accounts; missed amortization repayment for 1 day or moreShows static information such as; borrowers name and account number, release and maturity date, PAR amount, total amount dueIt also shows the number of amortization payments missed and how many days the borrower is overdueThis report shows the hold out balance and the exposed amount.

    Users: MF Unit supervisor and staff, branch manager1Delinquency report is an exception report

  • *Delinquency Report1 (Daily)

  • *Exposed AmountRefers 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

  • *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

  • PAR Report

    RURAL BANK OF ABCPortfolio at Risk ReportAs of June 30, 2010Days OverdueNo. of Borrowers% of ClientsLoan Amount Overdue% in ArrearsOutstanding BalanceOutstanding Balance %

    Current43896.26% - 0.00% 2,945,840.57 96.37%

    1-7 days81.76% 5,302.58 0.17% 52,314.64 1.71%8-14 days30.66% 1,994.03 0.07% 14,505.39 0.47%15-30 days20.44% 8,571.44 0.28% 30,666.70 1.00%31-60 days20.44% 6,567.70 0.21% 6,820.11 0.22%61-90 days00.00% - 0.00% - 0.00%Over 90 days20.44% 6,855.02 0.22% 6,538.31 0.21%

    Subtotal173.74% 29,290.77 0.96% 110,845.15 3.63%

    Total455100.00% 29,290.77 0.96% 3,056,685.72 100.00%

  • PAR 7PAR 7 = 1.91% with 9 accounts(Delinquent loans over 7 days)

    RURAL BANK OF ABCPortfolio at Risk ReportAs of June 30, 2010Days OverdueNo. of BorrowersOutstanding BalanceOutstanding Balance %

    Current438 2,945,840.57 96.37%

    1-7 days8 52,314.64 1.71%8-14 days3 14,505.39 0.47%15-30 days2 30,666.70 1.00%31-60 days2 6,820.11 0.22%61-90 days0 - 0.00%Over 90 days2 6,538.31 0.21%

    Subtotal17 110,845.15 3.63%

    Total455 3,056,685.72 100.00%

  • PAR 30PAR 30 = 0.44%with 4 accounts (Delinquent loans over 30 days)

    RURAL BANK OF ABCPortfolio at Risk ReportAs of June 30, 2010Days OverdueNo. of BorrowersOutstanding BalanceOutstanding Balance %

    Current438 2,945,840.57 96.37%

    1-7 days8 52,314.64 1.71%8-14 days3 14,505.39 0.47%15-30 days2 30,666.70 1.00%31-60 days2 6,820.11 0.22%61-90 days0 - 0.00%Over 90 days2 6,538.31 0.21%

    Subtotal17 110,845.15 3.63%

    Total455 3,056,685.72 100.00%

  • *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 monthlyShows the yield % for the period

    Users: MF Unit supervisor and staff, branch manager, top management

  • *Formula for YIELD %Total Revenue(OLP1 beginning + OLP End)/2YIELD %=1 Outstanding Loan PortfolioTotal Revenue = Interest Income + Fees and Other Charges

  • *Total Interest Collected from MFU (Monthly)

  • *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 percentageIt 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

  • *Performance Report by Account Officers (Weekly, Monthly)

  • *Clients Status Report (As needed)This report shows the credit history of the borrowerShows the # of loans the borrower has availedShows the repayment performance of the borrower: percentage payments made on timeShows the detailed repayment performance of the borrowers current loan

    Users: MF Unit supervisor and staff, branch manager, credit committee

  • *Clients Status Report (As needed)

  • *READING THE REPORTSCheck the accuracy of the figures and amounts in the reportsCross check figures and amounts of items between and among related reportsAnalyze the reports

  • *Random check if the sub-total by account officer adds upCheck if all AO sub-totals add up with the over-all totalCheck 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. Validate whether the loan cycle or cumulative loan matches with the Clients Status ReportVerify whether the loan balance is correct at the time the report was generatedValidate whether there is lump-sum payment schedule

    Listing of LoansANALYZING THE REPORTS

  • *Duplicate accounts

  • *Loan Cycle Validation

  • *Check whether horizontal and vertical totals and percentages are accurateValidate 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.Using the Delinquency Report, check if the accounts with overdue amortization add up with the summary totals per age.Analyze the extent of the delinquencyAfter determining the extent, identify which accounts are involvedPortfolio at Risk ReportANALYZING THE REPORTS

  • *Random check if the sub-total by account officer adds upCheck if all AO sub-totals add up with the over-all totalCheck horizontal totals and computations e.g. exposed amount, etcThe 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 ReportRandomly validate the # of amortization missed and days overdue with the individual Clients Status ReportUsing the information gathered from the PAR Report, manually age the account over 90 days

    Delinquency ReportANALYZING THE REPORTS

  • *Check if totals add upCheck horizontal computations e.g. total revenue, and yield%, etcValidate whether figures in this report tally with the related reports e.g. listing of loans and performance report by AOOLP1 ending should be equal to Total Loan Balance of the Listing of Loans & Total Loan Account Balance of the Performance Report by AOTotal Revenue should be equal to Total Revenue of the Performance Report by AO

    Total Interest Collected from MFU1OLP Outstanding Loan Portfolio ANALYZING THE REPORTS

  • *Check if totals add upCheck horizontal computations if all figures add up e.g. # loans disbursed = # new loans disbursed + # repeat loans disbursed, etcValidate whether figures in this report tally with the related reports e.g. listing of loans and total interest collected by MFULoan Account Balance should be equal to the OLP1 ending of the Total Interest Collected & Total Loan Account balance of Listing of LoansTotal Revenue should be equal to Total Revenue of the Total Interest Collected from MFU

    Performance Report by AO1OLP Outstanding Loan Portfolio ANALYZING THE REPORTS

  • *ANALYZING THE REPORTSValidate # 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 ReportPortfolio at Risk amount tally with Total PAR amount of the Listing of LoansPAR % tally with the Outstanding Balance % Sub-Total of the PAR reportValidate 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 AO1OLP Outstanding Loan Portfolio

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

  • *Comparison Across Reports

    REPORT TITLE# AccountsO/BalanceAmount O/DuePARPAR%Listing of LoansDelinquency ReportPAR ReportInterest CollectedMABS MonthlyPerformance ReportPAR by AgingPAR by Loans DisbursedLoan Profile by Gender

  • *SUMMARYIn this session we learned the following:

    How to read the important MF reports How to detect erroneous reportsHow to analyze and make use of these reports in making timely decisions.

  • *LINKS

  • *How to Verify the Accuracy of Loan BalanceIdentify the repayment frequency to determine the principal amortizationDetermine the number of should be payments since the first paymentMultiply the principal amortization to the number of should be payments and deduct the product from the loan amount disbursedThe difference should be equal to the listed loan balance

  • *Determining the Lump Sum PaymentsIdentify the repayment frequency of the accountDetermine the correct amortization by dividing the loan disbursed amount with repayment frequency or installmentCompare 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

  • *PAR Report versus Listing of Loans

    PAR ReportListing of LoansTotal: Number of BorrowersTotal: Number of AccountsTotal: Loan Amount OverdueTotal: Amount OverdueTotal: Outstanding BalanceTotal: Loan BalanceSub-Total: Outstanding BalanceTotal: Portfolio at Risk

  • *PAR Report versus Listing of Loans

    PAR Report AnalysisOutstanding OutstandingDelinquencyBalanceBalance %AnalysisCurrent 5,700,328.34 89.51%1 - 7 days 128,997.24 2.03%19.31%8 - 14 days 131,678.68 2.07%19.71%15 - 30 days 114,920.96 1.80%17.20%31 - 60 days 108,665.95 1.71%16.27% 484,262.83 72.50%61 - 90 days 66,302.14 1.04%9.93%Over 90 days 117,403.93 1.84%17.58% 183,706.07 27.50%Sub-Total 667,968.90 10.49%Total 6,368,297.24 100.00%

  • Thank you!

    **Session objectives, no need to read

    Note to speaker: At this point, ask the participants why are reports important and when are reports needed? Follow these questions with another question: How do reports help the operation of the bank?After soliciting ideas from the participants, proceed to the introduction of the session.

    Click to show the next slide*Note: Do not read whole slide, just pick up important words like appropriate, accurate and timely.

    Explain: It is important that reports are accurate and updated. Reports that are not accurate lead to wrong decisions. Garbage in, garbage outReports should be timely in order for management to make timely decisions.

    Click to show the next slide *Explain:These are the 11 essential microfinance reports. In this session, we will only focus on the reports that are frequently used by the MFU and the management. These are the reports with a red arrow.

    At this point, distribute/show a sample of these reports.

    Click to show the next slide*Read and refer the participants to the sample report.*Read and refer the participants to the sample report.*Read and refer the participants to the sample report.

    Explain that: Exposed amount is considered the actual sum of money that the bank has been exposed to a particular borrower. Exposed Amount = Portfolio at Risk Amount Hold Out Balance

    So by looking at the formula, the exposed amount is the amount that the bank might lose once the borrower ceases to pay the loan.

    *Read and refer the participants to the sample report.

    Explain that: Exposed amount is considered the actual sum of money that the bank has been exposed to a particular borrower. Exposed Amount = Portfolio at Risk Amount Hold Out Balance

    So by looking at the formula, the exposed amount is the amount that the bank might lose once the borrower ceases to pay the loan.

    *Read and refer the participants to the sample report.

    At this point, ask the participants how they understand PAR7 and PAR30. At this point some confusions concerning these two terms may surface; ensuring a clear understanding of these two terms is essential.

    It is important to remind the participants that microfinance has its own parlance and PAR 7 means PAR more than 7 days or PAR 8 days and above, AND NOT PAR 1-7 DAYS. The same true with PAR 30. PAR 30 means PAR more than 30 days or PAR 31 days and above, AND NOT PAR 1-30 DAYS.

    Stop the presentation here and come up with a short PAR exercise where you ask the participant to identify how much is PAR 7 and how much is PAR 30.*Read and refer the participants to the sample report.Yield is the estimated gross income before expenses and taxes of the MFU. It is computed as follows

    *Read and refer the participants to the sample report.*Read and refer the participants to the sample report.*Read and refer the participants to the sample report.*Read and refer the participants to the sample report.*Read and refer the participants to the sample report.*What do we achieve by knowing how to read the reports? If we know how to read the reports, well be able to:Read bullets***This matrix will tell the participants what information or data are similar and should be the same across reports. For participants to easily remember the items in each report, it is advised that they focus more on what is similar than what is different.

    Take the # Accounts or Number of Accounts as an example. Guide the participants in examining the reports the reports with a check mark under # accounts. Together with the participants examine the reports whether the values are consistent.

    Distribute the worksheets (Comparison Across Reports) and ask the participants to examine all the reports.

    *Example:Borrower: Lolita EnriquezLoan amount : 12,000Loan term: 6 monthsDate Released: February 15, 2004Monthly principal amortization: P2,000Loan Balance: P4,000

    Identify the repayment frequency to determine the principal amortization.Example: Monthly payment

    Determine the number of should be payments since the first paymentExample: If Loan was released Feb. 15 and its already the June 20, there should have already been 4 payments made.

    Multiply the principal amortization to the number of should be payments and deduct the product from the loan amount disbursed.Example: P2,000 x 4 payments = P8,000P12,000 P8,000 = P4,000

    The difference should be equal to the listed loan balanceExample: If in the Listing of Loans, the Loan Balance of Lolita Enriquez as of June 30 is P4,000, then you know that the figures in the Listing of Loans are correct.

    *Example:Borrower: Lolita EnriquezLoan amount : 12,000Loan term: 6 monthsDate Released: February 15, 2004

    Identify the repayment frequency of the accountExample: Monthly

    Determine the correct amortization by dividing the loan disbursed amount with repayment frequency or installmentExample: P12,000 / 6 months = P2,000 per month

    Compare the result with the Amount of Amortization found in the report. Example: If the Amount of Amortization found in the report for the account of Lolita Enriquez is P2,000, then the loan is amortized and not lump sum.

    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

    *The Portfolio At Risk Report and the Listing of Loans have four similar contents but with difference account titles. To validate the accuracy of the information in the PAR report, cross-check the following information against the Listing of Loans Report.

    PAR ReportListing of LoansNumber of BorrowersThis is called Number of Accounts in the Listing of Loans ReportLoan Amount OverdueThis is called Amount Overdue in the Listing of Loans ReportOutstanding BalanceThis is called Loan Balance in the Listing of Loans ReportSub-Total: Outstanding BalanceThis is called Portfolio At Risk in the Listing of Loans Report

    While these four accounts have different account titles, they mean the same.*Delinquency analysis: This only shows how much of the total delinquency is aged 1-7, 8-15, etc. (Amount of PAR 1-7 days over the total Amount of Delinquency)

    The total outstanding balance shows the TOTAL PAR (sub-total). Total amount of accounts with past due amortization even for one day over total outstanding balance equals PAR.

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