Financial Ratio Analysis of Community-Managed Micro-Finance Institutions

Presented by the SEEP Network Savings-led Financial Services Working Group: Ratios sub-group

The microfinance industry has reached a high degree of consensus about the measurement of results for MFIs, with SEEP taking the lead in 1995 with the publication of Financial Ratio Analysis of Micro Finance Institutions. But community-managed microfinance institutions (CMMFIs) are very small-scale and different in kind to MFIs in terms of cost, complexity, products on offer and financial administration.

Thus, most CMMF programmes need to ask four sets of questions:

• Member satisfaction: Because members are investors are they sufficiently satisfied with the performance of their CMMFIs to continue their membership?
• Financial performance: Do CMMFIs provide a competitive return on member investment at an acceptable level of risk?
• Operating efficiency (CMMFI): Do CMMFIs succeed in facilitating member access to loans and maximise the use of performing assets?
• Operating efficiency (Implementing organisation): Are IOs efficient and effective in providing training and supervision services at the lowest possible cost, compatible with maintaining high CMMFI performance standards?