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Sponsored by:
Sanabel Fourth Annual Conference
Serving the Poor:
“10 Million Clients by 2010”
Financial Decision Making for Managers
Measuring Performance of Microfinance Institutions:
A Framework for Reporting, Analysis and Monitoring
Mohammed Khaled, MicroserveSteve Wardle, Grameen Foundation
Sanabel Fourth Annual Conference
Serving the Poor: “10 Million Clients by 2010”
Financial Decision Making for Managers
Managers need to:Know what to measure, ensure accuracy of those
measures, set optimal standards for performance, and monitor performance.
Practically speaking this means:• Categorize data into statements and reports• Analyze the statements and reports• Use the information for monitoring purposes
Sanabel Fourth Annual Conference
Serving the Poor: “10 Million Clients by 2010”
SEEP Performance Monitoring Framework What is it?
Industry Consensus Standards for:• Standard Financial Statements and Reports• Analytical Adjustments• Financial Ratios and Indicators• Performance Monitoring Reports
Framework for Reporting, Analysis, Monitoring &
Evaluation
Sanabel Fourth Annual Conference
Serving the Poor: “10 Million Clients by 2010”
SEEP Performance Monitoring Framework What is it?
Framework for Reporting, Analysis, Monitoring &
Evaluation
Commonly referred to as the SEEP FRAME:
Sanabel Fourth Annual Conference
Serving the Poor: “10 Million Clients by 2010”
Chronology of Standardization
• 1995: SEEP produced an earlier work—Microfinance Consensus Guidelines: Definitions of Selected Financial Terms, Ratios, and Adjustments for Microfinance (the Blue Book).
• 2003: CGAP published- Microfinance Consensus Guidelines: Definitions of Selected Financial Terms, Ratios and Adjustments.
• 2005: Measuring Performance of Microfinance Institutions: A Framework for Reporting, Analysis and Monitoring
Sanabel Fourth Annual Conference
Serving the Poor: “10 Million Clients by 2010”
Industry Consensus
This Framework is based on the work performed by a roundtable of donors, rating agencies, and The SEEP
Network.
Sanabel Fourth Annual Conference
Serving the Poor: “10 Million Clients by 2010”
SEEP FRAME: What is New?
• Industry consensus
• A comprehensive Framework for Reporting, Analysis and Monitoring
• It takes into consideration the latest developments in the Industry.
Sanabel Fourth Annual Conference
Serving the Poor: “10 Million Clients by 2010”
Industry Adoption
• Retail Level (MFIs)– Adopting Financial Statement Formats– Utilizing FRAME Tool for Financial Management
• Meso Level– Networks have adopted the FRAME Tool for partner
reporting (GF, GJPAM, Global Partnerships, etc.)– MIS Developers Adapting Reports
• Macro Level– CGAP is Revising their Financial Analysis Course – The MIX is fully FRAME Compliant
Sanabel Fourth Annual Conference
Serving the Poor: “10 Million Clients by 2010”
A Full Package
1. The Framework: Manual
2. The Tool: Excel Workbook
3. User’s Manual (for the Tool)
(Each of the above are available in
Arabic1, French1 & English)
4. A Training Course on how to use the tool and the framework
(currently available in Arabic1 & English)
1 Translation provided by Grameen-Jameel Pan-Arab Microfinance, Ltd.
Sanabel Fourth Annual Conference
Serving the Poor: “10 Million Clients by 2010”
What is the FRAME Tool?
• A sophisticated Excel Workbook that allows you to input up to three years of financial data and then generate a variety of performance indicators and financial and management reports.
• The FRAME Tool is not an accounting system. It is a tool for you to use to analyze the information generated by your accounting system.
• Once you have learned FRAME, you can input your financial data for each reporting period into the FRAME tool in just a short amount of time, typically less than an hour. FRAME then provides a broad array of analytical tools and reports that are ready to print out for distribution.
Sanabel Fourth Annual Conference
Serving the Poor: “10 Million Clients by 2010”
External Communication: • Conforms to International Financial Reporting Standards (IFRS) • MFIs, Networks, Donors and Investors all “speak the same language”
Internal Reporting, Performance Monitoring and Decision Making:• Creates Unadjusted and Adjusted Financial Statements in up to 3 currencies• Analytical Adjustments allow an MFI to:
– Analyze “true performance” considering inflation and subsidy – Benchmark against other MFIs
• Automatic calculation of 18 standard financial ratios (+ 11 adjusted) and up to 25 additional ratios as defined by the user.
• Automatic generation customizable financial performance monitoring reports for internal and external reporting.
• Analyzes variance against MFI business plan / projections • Allows for 3 years of Monthly, Quarterly or Annual trend analysis
SEEP FRAME Tool What are the Benefits?
Sanabel Fourth Annual Conference
Serving the Poor: “10 Million Clients by 2010”
A Very Flexible Tool
The FRAME tool has flexibility in a number of areas. As a few examples:
• Can input one, two, or three years of data
• Input can be monthly, quarterly, or annual data for each of those years
• The above reporting frequency can be changed year by year
• Option to create sub-accounts of existing line items in a number of areas
• Option to create new user-defined data points for inclusion in reports
• Printable financial statements can be converted into three currencies
• Two different methodologies for analytical adjustments (internal & external)
Sanabel Fourth Annual Conference
Serving the Poor: “10 Million Clients by 2010”
A Very Flexible Tool (continued)
• Information can be analyzed by historical trends, variance from actual, and variance from plan / projections
• You can extensively customize the design of various management reports
• The FRAME Tool can be converted between English, French, Arabic, Spanish and Chinese in seconds at the click of a button.
• Definitions of every item in the FRAME are optionally displayed
• The tool is available for download and use with no fees whatsoever. Future versions of the FRAME tool are currently planned for development.
Sanabel Fourth Annual Conference
Serving the Poor: “10 Million Clients by 2010”
Framework Reference System
• I Income Statement• B Balance Sheet• C Cash Flow Statement• P Portfolio Report and Activity Report • R Ratios• A Adjustments• N Non-Financial Data Report
Sanabel Fourth Annual Conference
Serving the Poor: “10 Million Clients by 2010”
Analytical Adjustments
• True performance Adjustments
– Help reverse accounting policies that can present a distorted picture of the MFI’s performance
– Help simulate an MFI’s performance under conditions similar to those of a commercially funded operation
• Benchmarking Adjustments
– Enable managers to compare or benchmark an MFI’s performance with other MFIs
– Create common minimum standards for recognizing and managing credit, country, and operational risk in financial reporting
Sanabel Fourth Annual Conference
Serving the Poor: “10 Million Clients by 2010”
Types of Adjustments
• Subsidies– Cost of funds– In-kind donations
• Inflation
• Portfolio at Risk– Impairment Loss Allowance– Written Off Loans
Sanabel Fourth Annual Conference
Serving the Poor: “10 Million Clients by 2010”
Financial Ratios The “SEEP 18”
The “SEEP 18” ratios are divided into the followoing categories:
• Profitability and Sustainability,
• Asset and Liability Management,
• Portfolio Quality
• Efficiency and Productivity
Sanabel Fourth Annual Conference
Serving the Poor: “10 Million Clients by 2010”
Profitability and Sustainability
• R1 Operational Self-Sufficiency (OSS)
Financial Self-Sufficiency (FSS)
• R2 Return on Assets (ROA)
Adjusted Return on Assets (AROA)
• R3 Return on Equity (ROE)
Adjusted Return on Equity (AROE)
Sanabel Fourth Annual Conference
Serving the Poor: “10 Million Clients by 2010”
Asset and Liability Management
• R4 Yield on Gross Portfolio
• R5 Portfolio to Assets
• R6 Cost of Funds
Adjusted Cost of Funds
• R7 Debt to Equity
Adjusted Debt to Equity
• R8 Liquid Ratio
Sanabel Fourth Annual Conference
Serving the Poor: “10 Million Clients by 2010”
Portfolio Quality
• R9 Portfolio at Risk
Adjusted Portfolio at Risk
• R10 Write-off Ratio
Adjusted Write-off Ratio
• R11 Risk Coverage Ratio
Adjusted Risk Coverage Ratio
Sanabel Fourth Annual Conference
Serving the Poor: “10 Million Clients by 2010”
Efficiency and Productivity
• R12 Operating Expense Ratio
Adjusted Operating Expense Ratio
• R13 Cost per Client
Adjusted Cost per Client
• R14 Borrowers per Loan Officer
• R15 Active Clients per Staff Members
• R16 Client Turnover
Sanabel Fourth Annual Conference
Serving the Poor: “10 Million Clients by 2010”
SEEP FRAME Tool 2.0 Planned Release: October 2007
Some of the items to be included for FRAME 2.0: • Monthly Budget Module• Variance Analysis Report • Microfin Import • Analytical Graphs• Branch Aggregation / Consolidation Feature• Enhanced Error Checking• Additional Input – 2 years Historical, 5 Years Projected• Improved Monthly / Quarterly Analysis
Sanabel Fourth Annual Conference
Serving the Poor: “10 Million Clients by 2010”
SEEP FRAME Resource Availability
• The Framework Manual, Tool, User’s Guide and Training Materials are available for download and use Free of Charge
• The Tool is constantly being updated, the Arabic version will be available in July and Version 2.0 of the FRAME Tool will be ready in October, so check the website:
www.seepnetwork.org/FRAME
Sanabel Fourth Annual Conference
Serving the Poor: “10 Million Clients by 2010”
Thank You
www.seepnetwork.org/FRAME
Financial Decision Making for Managers