MICRO-AND SMALL/MEDIUM ENTERPRISE FINANCE (MSME)

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Harvey Lindsey
6 years ago
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1 CORE SECTOR INDICATORS AND DEFINITIONS MICRO-AND SMALL/MEDIUM ENTERPRISE FINANCE (MSME) MSME finance core indicators should be reported for all operations in which World Bank funds are used to support financial institutions that provide financing for micro, small and medium enterprises. These operations may be in the form of lines of credit, institutional development, and/or enabling environment. Supported financial institutions include community managed loan funds (CMLF) and participating financial institutions (PFI). For full definitions of these operations and financial institutions please read the Guidance Note on the MSME Finance core indicators webpage (Financial and Private Sector Development - Micro, Small and Medium Enterprise (MSME) Finance Core Indicators). These core indicators are required for all investment loans funded through IBRD and IDA. They do not apply for Development Policy Loans, fully GEF funded projects, and other forms of budget support. The ISR reporting system will automatically alert all MSME finance projects tagged to Sector code FE (Micro and SME finance), FZ (General finance), and/or Theme 41 (Small and medium enterprise support). If a project is not coded to any of these sectors but has a significant MSME finance component, the project team will need to pull relevant MSME finance core indicators from the tab listing all core indicators. If a project was approved before July 1, 2009, and it is still active, it has to report on Volume of Bank Funding and Outreach indicators in all upcoming ISRs and in the ICR. If Portfolio Quality and/or Financial Sustainability are available, they should be included as well, but are not mandatory. If a project has been approved/ restructured on or after July 1, 2009, it is necessary to report on all relevant core indicators in the PAD, in each ISR, as well as in the ICR. Volume of Bank Funding for MSME Finance 1. Volume of Bank Funding: Lines of Credit - Microfinance (amount US$) 2. Volume of Bank Funding: Lines of Credit - SME (amount US$) 3. Volume of Bank Funding: Institutional Development - Microfinance (amount US$) 4. Volume of Bank Funding: Institutional Development SME (amount US$) 5. Volume of Bank Funding: Enabling Environment Microfinance (amount US$) 6. Volume of Bank Funding: Enabling Environment SME (amount US$) Outreach 1. Outstanding Microfinance Loan Portfolio (amount US$) 2. Outstanding SME Loan Portfolio (amount US$) 3. Number of active loan accounts - Microfinance 4. Percentage of active loans to women - Microfinance 5. Number of active loan accounts - SME 6. Number of active micro-savings accounts 7. Percentage of active micro-savings accounts held by women

2 8. Number of active micro-insurance accounts 9. Percentage of active micro-insurance accounts held by women Portfolio Quality 1. Portfolio at Risk - Microfinance (%) 2. Portfolio at Risk - SME (%) 3. Loans at Risk - Microfinance (%) 4. Annual Loan-loss Rate - Microfinance (%) Financial Sustainability 1. Return on Assets/Equity (%) 2. Adjusted Return on Assets/Equity (%) 3. Financial Self-Sufficiency (%) Definitions and Supplemental Requirements Volume of Bank Funding for MSME Finance The Volume of Bank Funding indicators should include the cumulative amounts disbursed by the Bank to the client as of the most recent date available for each type of operation, and broken down by Micro and SME where relevant. 1. Volume of Bank Funding: Lines of Credit - Microfinance (amount US$) A line of credit is classified microfinance if supporting sub loans a) Have an average outstanding balance (gross loan portfolio number of active borrowers) < 300% of the latest per capita GNI, OR b) Have an average original loan amount less than $1,000. EITHER circumstance triggers classification as microfinance. Report on the cumulative amounts disbursed as of most recent date available. If split by micro and SME is not available or possible, please use 50% for each as proxy. 2. Volume of Bank Funding: Lines of Credit SME (amount US$) A project is considered SME finance if supporting sub-loan portfolios have original loan amounts above the cut-off for microfinance as noted above but no more than US $1 million for most countries. 1 Report on the cumulative amounts disbursed as of most recent date available. If split by micro and SME is not available or possible, please use 50% for each as proxy. 3. Volume of Bank Funding: Institutional Development Microfinance (amount US$) Institutional development funding relates to capacity building at institutions including technical assistance, training, fixed assets etc. Report the cumulative amounts disbursed as of most recent date available. If split by micro and SME is not available or possible, please use 50% for each as proxy. 4. Volume of Bank Funding: Institutional Development SME (amount US$) 1 A limit of the original loan size of up to US $2 million applies for the following countries: Argentina, Brazil, Chile, China, Colombia, India, Korea, Mexico, Morocco, Peru, Russia, South Africa, Thailand, Tunisia, Turkey, and EU countries Poland, Hungary, Czech Republic, Slovakia, the Baltics, and Slovenia. February

3 Institutional development funding relates to capacity building at institutions including technical assistance, training, fixed assets etc. Report the cumulative amounts disbursed as of most recent date available. If split by micro and SME is not available or possible, please use 50% for each as proxy. 5. Volume of Bank Funding: Enabling Environment Microfinance (amount US$) Enabling environment funding involves support at the wholesale level for Microfinance, as opposed to support for specific institutions. This includes support for financial infrastructure (such as training programs, industry networks, credit registries), and direct policy support (such as reform of laws/regulations). Report the cumulative amounts disbursed as of most recent date available. If split by micro and SME is not available or possible, please use 50% for each as proxy. 6. Volume of Bank Funding: Enabling Environment SME (amount US$) Enabling environment funding involves support at the wholesale level for SME Finance, as opposed to support for specific institutions. This includes support for financial infrastructure (such as training programs, industry networks) and direct policy support (such as reform of laws/regulations). Report the cumulative amounts disbursed as of most recent date available. If split by micro and SME is not available or possible, please use 50% for each as proxy. OUTREACH Required for projects where the Bank is funding sub-loans or supporting institutional development of MSME finance institutions or institutions directly linked to MSME finance. Not required for enabling environment operations. 1. Outstanding Microfinance Loan Portfolio (amount US$) Provide the total outstanding (i.e., not yet repaid or written off) amount of the micro-finance loan portfolio for all PFIs and CMLF promoters receiving Bank support. Report the entire portfolio of the institution as of a reasonably recent date, not just the Bank-financed portion. The optional breakdown tab can be used to report by institution. 2. Outstanding SME Loan Portfolio (amount US$) Provide the outstanding (i.e., not yet repaid or written off) amount of the SME loan portfolio for all PFIs and CMLF promoters receiving Bank support. Report the entire portfolio of the institution as of a reasonably recent date, not just the Bank-financed portion. The optional breakdown tab can be used to report by institution. 3. Number of active loan accounts Microfinance Report on the total number of active microfinance loan accounts for all institutions supported by the project. Do not report the cumulative number of loans over the life of the project. Report on the entire microfinance portfolio of the PFI/CMLF, not just the Bank-financed portion. If number of loan accounts is not available, use number of borrowers as a proxy. The optional breakdown tab can be used to report by institution. February

4 4. Percentage of active loans to women Microfinance Report percentage of the total number of active loan accounts noted above that are held by women. 5. Number of active loan accounts SME Report on the total number of active SME loan accounts for all institutions supported by the project. Do not report the cumulative number of loans over the life of the project. Report on the entire SME portfolio of the PFI/CMLF, not just the Bank-financed portion. If number of loan accounts is not available, use number of borrowers as a proxy. The optional breakdown tab can be used to report by institution. 6. Number of active micro-savings accounts Micro-savings means savings products whose average outstanding balance (total deposit amounts number of open accounts) is 150 percent of the latest GNI per capita. Report on the entire Micro-savings portfolio of the supported institutions, not just the Bank-financed portion. The optional breakdown tab can be used to report by institution. 7. Percentage of active micro-savings accounts held by women Report on the percentage of the total active savings accounts noted above that are held by women. 8. Number of active micro-insurance accounts For operations that support insurance or payment/remittance services, "microfinance" means services designed for poor and low-income clients. Report on the entire Micro-insurance portfolio of the supported institutions, not just the Bank-financed portion. The optional breakdown tab can be used to report by institution. 9. Percentage of active micro-insurance accounts held by women Report the percentage of total micro-insurance policies noted above that are held by women. Portfolio Quality February

5 Portfolio at Risk (PAR) is the PREFERRED Core Indicator. For microfinance support, if the PAR is not available, the project must choose one of two specified alternatives - Loans at Risk or Annual Loan Loss Rate. ONE of these three indicators is required for each PFI and CMLF that receives greater than $100,000 in aggregate Bank funding for sub-loan funding and/or institutional development. Not required for enabling environment operations. See the Guidance Note for further explanation. 1. Portfolio at Risk - Microfinance (%) Portfolio at Risk = Outstanding (or not yet repaid) balance of all loans where payment is late by > 30 days / Gross outstanding loan portfolio. Provide the PAR for PFI s entire microfinance portfolio. Do not report on the PAR for just the Bank-funded portion. Loans that have been rescheduled or renegotiated should also be included in the numerator for the PAR. Weight each institution's PAR by its outstanding Microfinance portfolio to calculate the average PAR for the project. The optional breakdown tab can be used to report institution. 2. Portfolio at Risk - SME (%) Portfolio at Risk = Outstanding (or not yet repaid) balance of all loans where payment is late by > 90 days / Gross outstanding loan portfolio Report the Portfolio at Risk (PAR) for the institutions entire SME portfolio. Do not report the PAR on just the Bank-funded portion. Loans that have been rescheduled or renegotiated should also be included in the numerator of the PAR. Weight each institution's PAR by its outstanding SME portfolio to calculate the average PAR for the project. The optional breakdown tab can be used to report institution. 3. Loans at Risk - Microfinance (%) Loans At risk (LAR) = Number of loans > 30 days late / Total number of outstanding loans. Loans At Risk (LAR) is a simplified version of the PAR and counts the number of loans instead of their amounts. As long as repayment is roughly the same for small loans, LAR will not differ much from PAR. Report the LAR for the entire portfolio of the institution, not just the Bank-financed portion. Weight each institution's LAR by its outstanding Microfinance balance to calculate the average LAR for the project. The optional breakdown tab can be used to report institution. 4. Annual Loan-loss Rate - Microfinance (%) Annual Loan Loss Rate = 2 [(1- Current Recovery Rate)/ Average term of loan in years] Current Recovery Rate = Cash collected during the period from borrowers/ Cash falling due for the first time during the period under the original loan contract. February

6 Report on the Annual Loan Loss Rate (ALR) for the entire portfolio of the institution, not just the Bankfinanced portion. Weight each institution's ALR by its outstanding Microfinance balance to calculate the average ALR for the project. The optional breakdown tab can be used to report institution. Financial Sustainability Report on ONE of the three financial sustainability indicators noted below. This is required for each PFI receiving over $100,000 in aggregate Bank support for sub-loan finding and/or institutional development. This is encouraged but not mandatory for CMLFs and for PFIs not meeting the above criterion. Not required for enabling environment operations. 1. Return on Assets /Equity (%) Return on Assets/Equity reflects that organization s ability to deploy its assets/equity profitably. This indicator may be used for commercial institutions that do not receive subsidies. The optional breakdown tab can be used to report institution. ROA/ROE = Annual After Tax Profits / Average Assets (Equity) over the Period. 2. Adjusted Return on Assets/Equity (%) AROA/AROE measures an institution's net profit (including adjustments) relative to its total assets/equity. The optional breakdown tab can be used to report institution. AROA/AROE = [Accounting profit/loss (excluding grants) Inflation Adjustment Cost of Funds Adjustment In-Kind Subsidy Adjustment] / Period average total assets (equity). Cost of Funds Adjustment = (Period Avg Borrowings Market Rate) - Actual Interest Paid by Institution. Inflation Adjustment = [Currency-denominated Assets - Currency-denominated Liabilities] Inflation Rate. In-kind Subsidy Adjustment = Estimated Market Cost of Goods and Services - Actual cost paid for the same goods or services. 3. Financial Self-Sufficiency (%) Financial Self-Sufficiency (FSS) measures how much of the PFI s cost is being covered by operating revenue. The optional breakdown tab can be used to report institution. FSS = [Accounting Costs + Inflation Adjustment + Cost of Funds Adjustment + In-kind Services Adjustment] / Accounting revenue (excluding grants). Cost of Funds Adjustment = (Period Avg Borrowings Market Rate) - Actual Interest Paid by Institution. Inflation Adjustment = [Currency-denominated Assets - Currency-denominated Liabilities] Inflation Rate. February

7 In-kind Subsidy Adjustment = Estimated Market Cost of Goods and Services - Actual cost paid for the same goods or services. February

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