Mr. Milan Regmi presented on the impact of microfinance on client income and savings. He summarized surveys with three clients who took microfinance loans and were now earning higher monthly incomes between Rs. 45,000-60,000 and saving between Rs. 1,000-5,000 per month. He compared two microfinance institutions, Paschimanchal Grameen Bikas Bank and Muktinath Bikas Bank, and found clients of both had increased income, savings, and investment after taking loans. Finally, he discussed various risks faced by microfinance institutions and the measures taken to mitigate risks.

1. Field Presentation
Pokhara, 2012
Presented By : Mr. Milan Regmi
National College (CED’s)
1/14/2013 Regmi Milan 1

2. Comprehensive Analysis on Different
Thematic Areas
Impact of Income and saving on client
Different types of Risks associated with MFI’s
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3. Muktinath Bikas Bank
Established as a Limited Bank as per Bank and
Financial Institution Act, 2063 and Company Act,
2053 on 2063/9/19.
• "B" class regional financial institution
• Providing micro finance services since Baishak
2065
• working areas: Syangja, Kaski and Tanahun of
Gandaki Zone
• Main Branch Prithivichowk
• 13 branches providing microfinance services
• Number of active borrowers: 26,046
• Number of depositors: 40,576

4. Paschimanchal Grameen bikas bank
• Established in january 1st 1994
• Head office: Butwal
• Sub branches: 39
• Developed from grameen model
• Objective: poverty alleviation of the rural poor
through credit delivery system of the western
region of Nepal
• The unique features of the bank are: Area
approach, well defined target group, group
guarantee landing approach, no physical
collateral required, disbursement of loan at the
centre.

5. • Number of Clients Served 52,824
• Number of Active Borrowers 40,322
• Number of Active Depositors 52,824

6. Impact of microfinance on client’s income & savings
Survey
HH1
• Duration 3yrs
• Initially took Rs.30000 loan
• Now a fancy owner,
• Monthly income Rs.60000
• Monthly savings of Rs 3000(used for general purpose)
HH2
• Initial loan amt Rs. 20000, 30000, 40000
• Now a restaurateur and also does vegetable farming
• Monthly income Rs.150000
• Monthly savings of Rs 5000( invested in shop)
HH3
• Initial loan amt Rs.20000
• Now involved in poultry farm
• Monthly income Rs.45000
• Monthly savings of Rs 1000

7. Impact of income & saving of PDB
Before After
• Loan Sources:
Moneylenders(36%), relatives PDB (20%)
• Income
Rs 500-4000 p.m. Rs 5000-20000
• Saving
0 Rs 100-1000 p.m.
• Investment
0 Rs 50-1000 p.m
• Consumption Expenditure
Rs 500-4000 Rs2000-8000 p.m.
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8. Impact of income & saving of MDB
Before After
• Loan Sources:
Moneylenders(36%), relatives MDB (20%)
• Income
Rs 500-4000 p.m. Rs 5000-20000
• Saving
0 Rs 500-5000 p.m.
• Investment
0 Rs 500-3000 p.m
• Consumption Expenditure
Rs 500-4000 Rs3000-10000 p.m.
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9. Comparison between PDB and MDB
• PDB • MDB
 Loan use • Same; e.g.
 Income generating Poultry(20000)
activities; e.g. Goat farming
(8ooo-60000)
 House Hold Expenditure • Rs25000-28000 p.m.
Rs. 13000-15000 p.m.
 Savings Rs 500-900 p.a • Rs4000-5000 p.a.
 Investment
• Poultry & business(bulk) • General use
 Profit
• Rs 40000-45000 p.a. • Rs 50000-60000 p.a.
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11. Comparison Through Pie Chart
PDB Loan MDB Loan
Expenditure Savings Expenditure Savings
Investment Profit Investment Profit
4% 7%
2%
19%
16%
58%
87%
7%
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12. Risk : Types and Its Comparison
• What is risk?
Uncertainty/Variability around the possible
future returns.
Standard deviation is the measure of risk,and
can be related with the expected rate of return.
σ =Diversifiable risk+ Non Diversifiable risk
=unsystematic Risk + Systematic risk(β)
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13. Return SML
Rm Risk
premium
Rf
β β1=1 β2 Risk
Relating Risk and return Under Capital Asset Pricing Model(CAPM)
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14. Calculation Based on CAPM approach
• E(Rj)=Rf+βj[E(Rm)-Rf]
Where,
E(Rj)=Expected or required rate of return on asset i
Rf = Risk fre rate of return
βj =Beta of asset i
E(Rm)= Expected rate of return on market portfolio
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15. Paschimanchal
Graameen Bikash
Bank
Muktinath Bikash
Bank
General Banking
Risks: on
Microfinance
Banking
Visited
Organizations
Risks
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16. Paschimanchal Grameen Bikas Bank
Risks undertaken/Faced Adopted Mitigation Measures
 Household Conflict  House hold Counseling
 Will full defaulter(1.5% of  Community
3%) Discouragement/Distrust
 Multiple Financing  Capacity Building
 Technological know how? Trainings
 Project Failure  Client Awareness
 No Insurance Coverage  Continuous follow up
 Staff sincerity is the prime
most important!!
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17. Muktinath Bikash Bank
MicroFinance Banking
Risks under taken/faced Mitigation Measures
 Collateral Free Loan  Orientation to clients
 Low networking strength  Hiring effective HR and
 Poor database management implementing HR plans
 Political Influence  13 guideline risk mitigating
 Falsification/ False rumors fame work
 Liquidity Management  Round table talk
 Encouraging Short term -
Investments
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19. Conclusions and Recommendations
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20. Greeting from Pokhara!!!
Thank you for your patience!
1/14/2013 Regmi Milan 20