Mix And The Value Of Comparitive Analysis

Elizabeth Larson Regional Manager for Asia, MIX Market 2009 RBAP-MABS National Roundtable Conference May 12-13, 2009 Hyatt Hotel and Casino Manila

What is the MIX? OUR MISSION: To support the growth of the microfinance industry through a world-class public information platform

The Problem: Overcoming data dearth  Limited ability for MFIs and banks to benchmark Lack of performance for management diagnostic and transparency business planning stymies industry  New capital cannot connect with second tier MFIs growth  Policy makers have limited picture of areas requiring support … because …  Lack of consistent, reliable data in public domain  Private data costly to aggregate on representative scale and coverage for any single actor

MIX delivers Standards  The authoritative voice on definitions and selection of core indicators for microfinance data analysis Data  The leader in fundamental MFI data for banks and other institutions  An independent source – no other business interest Analysis  The researcher’s choice for MFI performance benchmarks and global, regional analysis including banks with microfinance operations Company data – on MFIs, Banks & Investors Through MFI performance data – individual and in aggregate Training – financial & operational reporting Leadership – performance standards

Products: MicroBanking Bulletin MicroBanking Bulletin is a global leading publication on the sector  xpert author contributions on E latest industry topics  ndustry leading annual / time I series MFI performance benchmarks and analysis

Products: Customized MFI performance reports, CPRs Performance reports for MFIs, covering:  nalysis of trends in performance A  omparison to peer institution C benchmarks Diagnostic tools for:  anagers M  oard B  takeholders S

Products: MIX Market Public profiles:  ,400 MFIs 1  03 Investors / Donors 1  84 Market Facilitators 1 Information:  eneral information and contacts G  utreach O  inancial Performance F  udits / Ratings A Tools:  omparative Analysis C  rend Analysis T  eat Map H

Asia Coverage: MIX Market Growth 70  60  50  Cambodia  40  China  Indonesia  30  Philippines  Vietnam  20  10  0  1900  1900  1900  1900  1900  1900  1900  1900  2000 2001 2002 2003 2004 2005 2006 2007

Products: Regional/Country analysis Annual surveys of microfinance performance in a region or country, including:  erformance analysis P  ector development S  ocal performance benchmarks L  ome latest reports: including S Asia 2008 report, Global 100 Benchmarking Report, MCPI report Written, published and disseminated with local partners

Working with Partners MIX Partners (examples): Latin America • ProDesarrollo • REDCAMIF (C. America) • COPEME (Peru) • RFR (Ecuador) • ASOFIN (Bolivia) Africa • Ghamfin (Ghana) • AEMFI (Ethiopia) Arab States • Sanabel E. Europe / C. Asia • RMC (Russia) • AMFA (Azerbaijan) Asia • PMN (Pakistan) • M-Cril (India) • RBAP (Philippines) • MCPI (Philippines) • MICRA (East Asia)

How can you use this information?  Understand sector trends  Set the context for rural banks  Compare your rural bank

Asia Trends: Growth Philippines 6% Cambodia Cambodia 5% Others 9% 0% Philippines Vietnam Vietnam 4% 25% 21% Indonesia Indonesia Others 64% 66% 0% Loan Portfolio 2006 Loan Portfolio 2007 Cambodia and Philippines lead portfolio growth in East Asia, with borrowers growing by 32% and 36%.

Asia Trends: Funding Patterns Country Equity Liabilities Afghanistan Afghanistan 20% 84% Bangladesh Bangladesh 21% 48% Cambodia Higher Growth in Cambodia 18% 130% India Indonesia Debt Nepal 11% 31% Nepal Pakistan 5% 36% Pakistan Vietnam 66% 82% Philippines Higher Growth in Sri Lanka Equity India 216% 91% Vietnam Indonesia 25% 27% 0% 20% 40% 60% 80% 100% Equal growth in Philippines 77% 72% Debt / Equity Vol. Deposits Borrowings Sri Lanka 20% 28% Comp. Savings Other Debt As leverage increases in Asian microfinance, countries with savings based funding (incl. Philippines) keep stable funding structure.

Asia Trends: Returns 20% 10% 0% -10% -20% -30% -40% -50% Asia Afgh. Bangla. Camb. India Indo. Nepal Pak. Phil. RoA 2006 RoA 2007 RoE 2006 RoE 2007 Asia returns are stable, with slight increase in returns on equity from higher leverage. Returns on equity in the Philippines are increasing especially in 2007.

Asia Trends: Efficiency 100% 100 80% 80 60% 60 40% 40 20% 20 0% - 06 07 06 07 06 07 06 07 06 07 06 07 06 07 06 07 06 07 Asia Afgh. Bangla. Camb. India Indo. Nepal Pak. Phil. Cost Per Borrower Operating Expense / GLP Asian efficiency remains stable, with biggest gains in developing Afghan sector. Indian subcontinent leads through group lending but Philippines is improving.

Rural Banks: Size 12,000,000 20,000 18,000 10,000,000 16,000 14,000 8,000,000 12,000 6,000,000 10,000 8,000 4,000,000 6,000 4,000 2,000,000 2,000 - - Asia Philippines Asia Rural Bank Indonesia Rural Philippines Bank Rural Bank Assets Loans Deposits Borrowers Depositors Philippine rural banks are much larger than regional peers with the greatest number of depositors and borrowers.

Rural Banks: Deposit funding 120% 100% 80% 60% 40% 20% 0% Asia Philippines Asia Rural Bank Indonesia Rural Philippines Bank Rural Bank Capital/ Asset Ratio Deposits to Loans Rural banks have same leverage as peers, with Philippine Rural Banks having the highest deposit to loan ratio.

Strong returns … 35,000 7% 30,000 6% 25,000 5% 20,000 4% 15,000 3% 10,000 2% 5,000 1% - 0% (5,000) -1% Philippines Indonesia Rural Philippines Rural MIX Super Bank Bank Bank Borrowers Loan Portfolio (USD '000 ) Return on Assets Return on Equity “MIX Super Bank” serves 2x more borrowers than peer rural banks, and earns higher returns. What drives returns?

… from high revenues … 35% 30% 25% 20% 15% 10% 5% 0% Philippines Indonesia Rural Philippines Rural MIX Super Bank Bank Bank Total Expense/ Assets Financial Revenue/Assets “MIX Super Bank” has much higher (+33%) revenues to cover costs and still maintain strong returns. What drives revenues and costs?

… from high yield and allocation … 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Philippines Indonesia Rural Philippines Rural MIX Super Bank Bank Bank Portfolio Yield Financial Revenue/Assets Portfolio to Assets “MIX Super Bank” has higher yield, and maximizes its yield through high asset allocation to portfolio. What about costs?

… but high costs … 35% 30% 25% 20% 15% 10% 5% 0% Philippines Indonesia Rural Philippines Rural MIX Super Bank Bank Bank Operating Expense / Assets Provision for Loan Impairment/ Assets Financial Expense/Assets “MIX Super Bank” has higher costs due to higher operating expenses. What drives its higher operating costs?

… due to salary structure. 120 450% 400% 100 350% 80 300% 250% 60 200% 40 150% 100% 20 50% - 0% Philippines Indonesia Rural Philippines Rural MIX Super Bank Bank Bank Borrowers per Staff Member Average Salary/ GNI per Capita “MIX Super Bank” maintains same productivity as peers, but high salary structure raises costs. So, in summary …

Summary MIX Super Philippines Philippines Indonesia Rural Bank Rural Bank Bank Return on Assets 1% 1% 1% -1% Financial Revenue/Assets 31% 31% 22% 24% Total Expense/ Assets 29% 31% 22% 23% Portfolio Yield 35% 43% 30% 29% Portfolio to Assets 83% 66% 67% 69% Financial Expense/Assets 5% 5% 5% 10% Provision for Loan Impairment/ 2% 2% 1% 3% Assets Operating Expense / Assets 22% 23% 12% 9% Average Salary/ GNI per Capita 427% 239% 261% 195% Borrowers per Staff Member 100 109 95 48 Despite high salary structure, “MIX Super Bank” achieves high returns through strong yield and asset allocation.

Benefits to you  Realistic context on the market  Benchmarks for peer performance  Quick identification of strengths, weaknesses, and drivers of performance  Comparable information recognized globally by 1000s of microfinance providers, 100s of investors, and regulators and networks.  CPRs are FREE to participating banks!!!

How to participate  Provide current data to MABS or MCPI  Audited financial statements  One page questionnaire (outreach, product, portfolio, background of organization)  Deadline: August 2009 – elarson@themix.org  All benchmarked institutions receive  Custom Performance Report  Trend Report (with 2-3 years data)  Recognition in MicroBanking Bulletin (MBB)  Inclusion in analytical reports  Profile on MIX Market site for global visibility

MICROFINANCE INFORMATION EXCHANGE, INC. The leading provider of business information and data services for the microfinance industry. THANK YOU!!! Web: www.themix.org Email: info@themix.org Headquarters: 1901 Pennsylvania Ave., NW, Suite 307 Washington, D.C. 20006 USA Other Locations Lima, Peru ● Dakar, Senegal ● Gurgoan, India ● Jakarta, Indonesia

Mix And The Value Of Comparitive Analysis

by MABSIV on May 26, 2009

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Mix And The Value Of Comparitive Analysis — Presentation Transcript