I'm currently writing my bachelors thesis on microfinancing in Ghana, analysing the effects of gender on repayment and portfolio performance. Now I'm searching for a good way to analyse the loan portfolio quality and performance of MFIs.
So far I have several indicators, however I have the feeling that these are not enough.
Indicators:
- portfolio-at-risk >30
- portfolio-at-risk >90
- write-off ratio
- loan loss rate
- net impairment loss, gross loan portfolio
- provision for loan impairments / assets
- yield on gross loan portfolio (real)
I'm using mixmarkets for almost all of my data, as I haven't been able to get any other data of FSPs which include gender, so I'm dealing with a certain degree of imcomplete data.
Any advice on how suitable these indicators are, if they are enough or even too many?
I also haven't been able to find extensive literature on loan portfolio performance itself, so any literature suggestions are also greatly appreciated, I'll gladly read up on it myself.
Although it's been a while, I'd like to answer the question myself in case someone in the future comes across the same problem I had as I took me quite some time:
First of all, as performance in the microfinance sector differs from performance in the traditional banking sector, as its primary target is not solely based on profitability of the institution, but rather on the social impact it has. Therefore, performance may be split into 1) social performance and 2) financial performance.
Concerning social performance, the most widely accepted indicator is outreach (see Rosenberg; Measuring Results of Microfinance Institutions, 2009), although there have been a number of accepted indicators which have been defined by the Social Performance Task Force together with MIX. I mainly used average loan portfolio divided by GNI per capita as a proxy for outreach (see Cull et. al.; Microfinance Meets the Market; 2009:173).
In regards to financial performance, which was of greater concern to myself, I decided to use Ledgerwood (Microfinance Handbook, 1999:205) as a fundamental basis for performance analysis. From there on I went with five indicators, namely:
Portfolio quality: par-30 (see Rosenberg; Measuring Microcredit Delinquency, 1999:12f, very interesting read concerning the use of portfolio at-risk for performance analysis, especially in the microfinance sector)
Efficiency/Productivity: OER (see Ledgerwood, 1999:212)
Financial viability: OSS and FSS (see Ledgerwood, 1999:215f)
Profitablity: Portfolio yield (see Von Stauffenberg; Performance Indicators for Microfinance Institutions, 2003:3 and Cull; Financial Performance and Outreach, 2006:9 on why ROA and ROE are considered insufficient as isolated profitability indicators)
Moreover I ran controls for total assets and portfolio size, as well as dummies for profit status and regulatory status and time controls while regressing, but those should be matched the specific case.
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