Monthly Product Performance Report

2 What Is The Monthly Product Performance Report? Shows the performance of the bank’s microfinance product, particularly the size, quality, and profitability of its microfinance operations.

3 Importance of The Monthly Product Performance Report Enables management to regularly monitor the performance of the microfinance product and the accomplishments of the microfinance unit.

4 Format of the Report Consists of two parts: the product performance data and the statement of income and expenses. Allows banks to either report only the direct or incremental expenses of their microfinance product, or include the indirect expenses. Compares the performance of the product during the current month and the previous month.

5 Sources of Information Product performance data are sourced from the MIS reports. Data for the statement of income and expenses are sourced from the bank’s financial statements.

6 Who Prepares the Report? The Microfinance Supervisor or the branch bookkeeper. The report should be completed as soon as the branch monthly financial statements have been prepared. Should be reviewed by the branch bookkeeper or accountant and by the branch manager before its submission to head office.

7 Who Gets the Report? The bank president or general manager RBAP-MABS One copy each of the Portfolio At Risk report and the AO Performance Report should always be attached to the report.

8 Format of the Report Product Performance Data Shows the size and quality of the bank’s microfinance operation Statement of Income and Expense Shows whether the bank is making money from its microfinance operation

9 Sample Report

10 Sample Report

11 Product Performance Data

12 Client Outreach Number of Active Borrowers - total number of clients with outstanding loans as of the reporting date. Information can be derived from the MIS reports.

13 Number of New Borrowers - total number of clients borrowing for the first time from the bank during the month. Includes regular loan clients of the bank that have, for whatever reason, shifted to borrowing under its microfinance loan facility. Information can be derived from the MIS reports (i.e. AO Performance Report). Number of Repeat Loans - total number of repeat loans granted to existing microfinance borrowers. Information can be derived from the MIS reports (i.e. AO Performance Report). Loan Portfolio Balance - the total balances of all outstanding microfinance loans as of the reporting date. Only includes the principal amount of the loan. Information can be derived from the MIS reports.

14 Micro-Deposits Number of Deposit Accounts (P15,000 & Below) - total number of all deposit accounts (including those of non-microfinance clients) with outstanding deposit balances of up to P15,000, as of the reporting date. Includes all types of deposit accounts (i.e., savings, time, & current accounts). Data can be obtained from the monthly report submitted by the bank to PDIC.

15 Amount of Deposit Accounts (P15,000 & Below) - total amount of all deposit accounts with balances up to P15,000. Data can be obtained from the monthly report submitted by the bank to PDIC. The benchmark, against which the growth in the number and balance of micro deposit accounts may be compared with, is the month before the start of the bank’s microfinance lending operation.

16 Size of the Microfinance Unit Number of Microfinance field staff - total number of Account Officers working full-time in the microfinance unit. Excludes MFU staff, if any, that are not directly involved in generation and supervision of microfinance loan accounts, such as the MFU Supervisors and loan bookkeepers or clerks.

17 Loan Disbursements Number of Loans Disbursed During the Month - Total number of loans disbursed during the month. The data can be obtained from the MIS report (i.e. AO Performance Report). The total number of loans disbursed should be equal to the sum of the Number of New Borrowers and Number of Repeat Loans.

18 Cumulative Number of Borrowers - Total number of loans disbursed since the start of the microfinance lending operation. Equal to the sum of the number of new borrowers in the previous month and that of the current month. Amount of Loans Disbursed During the Month - Total amount of loans disbursed during the month. The data can be obtained from the MIS report (i.e. AO Performance Report). Cumulative Amount of Loans Disbursed - Total amount of loans disbursed since the start of the microfinance lending operation. Equal to the sum of the amount of loans disbursed in the previous month and that of the current month.

19 Loan Portfolio Quality Loan Amount Overdue - Total amount of past due installments (principal amount only). Data can be obtained from the MIS report (i.e. Portfolio At Risk Report).

20 Number of Accounts with an Overdue Amount - Number of loans with at least one past due installment. Data can be obtained from the MIS report (i.e. Portfolio At Risk Report). Portfolio At Risk 1 Day or More - Total balance of all loans with at least one past due installment. Data can be obtained from the MIS report (i.e. Portfolio At Risk Report). Portfolio At Risk More than 7 Days - Total balance of loans with installments that are past due for more than 7 days. Data can be obtained from the MIS report (i.e. Portfolio At Risk Report). Portfolio At Risk More than 30 days - Total balance of loans with installments that are past due for more than 30 days. Data can be obtained from the MIS report (i.e. Portfolio At Risk Report).

21 PAR Ratio, 1 Day or More - (Portfolio At Risk 1 Day or More)/(Loan Portfolio Balance) x 100 PAR Ratio, More than 7 Days - (Portfolio At Risk More Than 7 Days)/(Loan Portfolio Balance) x 100 PAR Ratio, More than 30 Days - (Portfolio At Risk More Than 30 Days)/(Loan Portfolio Balance) x 100

22 Statement of Income and Expense

23 Financial Income Interest Income on Loans - Total interest income earned for the month. Data can be obtained from the MIS report (i.e. AO Performance Report).

24 Service Charge - Total service charges earned for the month. Data can be obtained from the branch bookkeeper or accountant. If the service charge is deducted from the loan proceeds (as it usually is), the amount should be equal to the rate (%) times the total amount of loans disbursed during the month. Penalty Fee on Loans - Total penalty fees collected on late installment payments during the month. Data can be obtained from the branch bookkeeper or accountant. Total Financial Income - Sum of Interest Income, Service Fee, and Penalty Fee.

25 Total Financial Expenses Interest Expense on Deposits - Interest expense on deposits incurred for the month. Interest Expenses on Borrowed Funds - Interest expenses on borrowings for the month. Total Financial Expenses - Sum of the Interest Expense on Deposits and Interest Expense on Borrowed Funds

26 Gross Financial Margin Gross Financial Margin - the difference of Total Financial Income and Total Financial Expenses. Also called spread, which is the difference of the loan interest rate and the cost of funds expressed as percentage (%) of the loan portfolio.

27 Loan Loss Provision Loan-Loss Provision - is the amount allocated for increasing the loan-loss reserve to an adequate level. Loan- Loss Reserve is the amount used for covering up losses when writing-off bad loans. The amount to be allocated for loan-loss provision is based on the aging of portfolio at risk as shown in the MIS report (Portfolio At Risk Report).

28 Required Loan-Loss Reserve, Current Month is the amount that should be provided to cover for losses if bad loans are written off. Available Reserve, Previous Month can be found in the previous month’s bank performance report. Remember that loans written off in the previous month reduce loan loss reserves by the amount written off during the month. Loan-Loss Provision, Current Month is the amount needed to increase the loan-loss reserve to the required level. The loan-loss reserve should only be increased if the available reserve is not enough – that is, if it is smaller than the required loan-loss reserve.

29 Net Financial Margin Net Financial Margin - the difference of Gross Financial Margin and Loan-Loss Provision, Current Month

30 Direct Operating Costs Direct Operating Expenses, also called incremental expenses, are those expenses that can be directly attributable to the microfinance product. These are expenses that the bank will not have incurred without its microfinance operation.

31 Microfinance staff salaries and benefits - the basic salary and allowances received by full-time microfinance staff. Those of other staff working part-time in the microfinance unit (e.g part-time microfinance supervisor) are excluded here. Depreciation-MFU Equipment - the depreciation expense for equipment used exclusively by the microfinance unit. The depreciation period and method should be based on the accounting policy of the bank.

32 Transportation expense - expenses incurred by the microfinance staff for motorcycle gas and oil, or for transportation fares in public utility vehicles. Includes expenses for lodging and meals while on travel, in cases where these are provided Supplies - expenses for stationeries, loan forms and documents, and other office supplies used by the microfinance unit Communications - expenses incurred for phone calls, fax and mails

33 Training & Professional Fees - expenses for training and technical assistance provided to the microfinance unit by training organizations and other microfinance service providers such as the RBAP-MABS Other Direct Expenses - other expenses incurred by the microfinance unit such as representation expenses, write-off of bad debts, membership fees in microfinance networks, and expenses incurred in meetings and special events.

34 Computing for the Depreciation Expense The depreciation expense for equipment exclusively used by the microfinance unit may be estimated as shown in the following table. The depreciation period or economic life should be based on the bank’s accounting policies.

35 Other Income Other Income refers to income generated by the microfinance unit outside of their regular lending activities. An example of this may include fees for training or exposure visits hosted by the bank.

36 Net Income Before Indirect Expenses Net Income Before Indirect Expenses is computed as follows: Net Financial Margin less Total Direct Expenses plus Other Income. This item shows whether the product is generating enough revenue to cover the direct or incremental expenses incurred by the bank.