MONTHLY MONITORING REPORT

A GUIDE ON HOW TO ACCOMPLISH

THE REPORT

August 2000

MONTHLY MONITORING REPORT

• DIVIDED IN TWO SECTIONS– PERFORMANCE DATA– STATEMENT OF INCOME AND EXPENSE

• PERFORMANCE DATA SHOW STATUS OF PRODUCT IMPLEMENTATION

• INCOME & EXPENSE STATEMENT SHOWS PRODUCT INCOME FOR THE PERIOD.

SOURCES OF DATA• Performance Data are from the MIS Reports.

– Performance Report, by Account Officer– Portfolio at Risk (PAR) Report– Delinquency Report

• Statement of Income and Expense– Financial Income comes from the MIS report on

Income Earned– Branch FS for the month to estimate share of

product in branch operating expenses

• Product Business Plan for targets.

Performance Data

• “As of end of the month data”– # Active Borrowers– Loan Portfolio

Balance– Amount Past Due– # Accounts with

Amount Past Due– Portfolio at Risk– # Depositors Outstanding*

– Total Deposit Balance*

• “For the month” data– # New Borrowers– # Repeat Loans– # Loans Disbursed

during the month• # New Borrowers

PLUS # Repeat Loans

– Amount Disbursed during month

• Amount New Loans PLUS Amount Repeat Loans

Performance Data

• Cumulative data– Cumulative # of Loans Disbursed: ADD

• # of loans disbursed during the month

• Cumulative # loans disbursed PREVIOUS MONTH

– Cumulative Amount of Loans Disbursed: ADD• Amount of loans disbursed during the month

• Cumulative amount of loans disbursed previous month

Performance Data: *Deposits...

• Indicators: # of Depositors and Deposit Balance Outstanding are from the Quarterly PDIC Report, which shows the number and deposit balances by deposit size.

• These two indicators are updated in the Monitoring Report every quarter.

Performance Data: *Deposits...

• Establish the baseline quarter. Say, if the branch started with MABS in June ‘00, the baseline quarter is March ‘00.

• The relevant data are those pertaining to deposits P15,000 and below.

• The report for June will thus reflect:– June data Less March

data

Performance Data...

• Amount Past Due: – DIVIDE Amount of Missed Payments by

Total Portfolio Balance

• No. of accounts with an amount past due:--COUNT all accounts with missed payments

Performance Data...

• Portfolio at Risk (PAR): Balance of accounts with missed payments.– PAR 1 day or more = total outstanding

balance of all accounts with PAR– PAR more than 7 days = total balance of all

loans with payments missed more than 7 days.

Performance Data: PAR...

• % PAR 1 day or more: – (Divide PAR 1 day or more by the

Total Loan Portfolio) X 100

• % PAR more than 7 days: – (Divide PAR 7 days or more by the

Total Loan Portfolio) X 100

INCOME & EXPENSE

• Total Financial Income: ADD– Interest income – Service charge– Penalty fee

• Total Financial Expense: ADD– Interest expense

on deposits– Interest expense

on borrowings

Income & Expense...

• Gross Financial Margin (Spread)– Total financial income

MINUS – Total financial expense

Income & Expense...

• Provisioning varies depending on the # of days payments had been missed.

• Loan loss provision, by age of PAR– 7 days & below 2%– 8 -15 days 10%– 16-30 days 25%– 31-60 days 50%– 61 & over 100%

Income & Expense...

• Net Financial Margin– Spread MINUS Loan Loss Provision

• Operating Expense Components– Direct Expenses attributable to the Product – Indirect expenses: Share of Product in other

expenses incurred by the branch (these are expenses the branch would have incurred with or without the Product).

Direct or Incremental Expenses

• Micro-finance salaries = Basic plus Benefits Ex.: AO basic = P4,500/month;

Benefits = 70% of basic.

# AO s = 3

P4,500 * 1.70 * 3 = P22,950

• Transportation: Expenses incurred by the

MFU staff for motorcycle gasoline & oil,

jeep or tricycle fares reimbursed by AO s.

Direct or Incremental Expenses...• Gross Receipts tax: 5% of Total Gross

Income

• Direct Depreciation on equipment, software, tables & chairs, motorcycles, etc. used by MFU 100%– Use the depreciation policy of the bank– Depreciation period for pieces of computer

equipment is usually 24 months; motorcycle, 36 months.

Indirect Expenses

• Represent the share of the Product or MFU in the other expenses of the branch.

• To get the % share of the Product: Example# Loans #Deposit accts Total

MF Product 150 477 627

Total Branch 2,801 10,151 12,952

% Share MF 627/12952 = 4.8%

Indirect expenses (con’t)

• Apply the % share of MFU to the other expenses incurred by the branch for the month.

• To get branch expenditure for the month, – Current month’s expense LESS Previous

months expense for the cost item

• Then, expense for the month by the MFU % share to get the amount chargeable to MFU.

Financial Expense: How to Compute

• Case 1. Funds comes solely from Deposits.

Data Needed: (Example)– Interest Rate on Deposits : 5% p.a.– Total deposit liabilities : P600,000– Reserve reqts. for deposits : 2%– MFU Portfolio previous month : P350,000– MFU Portfolio current month : P500,000

Determine the cost of funds.

Case 1. Funds from deposits

• To get financial expense (FE), say for May:

FE = (Avg. portfolio x 5%) x 31days/365 days

(1 minus 2% or .02)

• To get avg. portfolio (AP):

AP = (MFU Portfolio previous mo. + MFU Portfolio current mo.)/2

Case 1: Funds from Deposits...

• To illustrate:

AP = (350,000+500,000)/2

= 425,000

FE = (425,000 x .05) x 31/365

(1-.02)

= (21,250 x .0849)/ 0.98

= 1,804/0.98

= P 1,841

Case 2. Funds From Borrowings

Data needed:

– Interest rate on borrowed funds (ex. PCFC=13% p.a.)

– MFU Loan portfolio end of previous month

– MFU Loan portfolio end of current month

Get Average Portfolio (AP) for the month.

AP = Portfolio previous mo. +Portfolio current mo.

2

Calculate Financial Expense (FE):

FE = (AP x 13%) x # days in month/360 days

Case 2: Funds Solely from Borrowed Funds

• For example:– AP previous month = 350,000– AP Current month = 500,000– Interest rate on funds = 13% p.a.

• FE = (350,000+500,000)/2 x 13% x (31/360)

= 425,000 x 0.13 x 0.0861

= P 4,757

Case 3: Funds are from Deposits & Borrowings• Data needed from Branch FS

– Interest expense -- Deposits Branch– Interest expense -- Borrowed Funds Branch– Total Deposit Liabilities of Branch– Total Borrowed Funds of Branch

• Other data needed– Reserve Requirements on Deposits (2%)– Product Loan Portfolio ( from MIS)

Case 3. Deposits & Borrowings...

• To illustrate, consider the following data:

Interest Expense--Deposits: 49,758

Interest Expense--Bor.Funds: 160,000

Total Deposit Liabilities: 12,636,617

Total Borrowed Funds: 18,312,790

Reserve Requirement : 2%

Product Loan Portfolio: 722,933

Case 3: Deposits & Borrowings… Share in Total

• Get the total of deposits & borrowings: 12,636,617 + 18,312,790 = 30,949,407

• Get the share of Deposits to Total:

12,636,617/30,949,407 = 40%

• Get the share of Borrowings to Total:

18,312,790/30,949,407 = 60%

Case 3: Deposits & Borrowings… Interest Expense on Deposits

• Steps to get the cost of the deposit component of the Product loan portfolio: – A) Divide Branch Interest Expense for the

month by Total Deposit Liabilities as of end of month. Given the sample data:

• A = P49,759/12,636,617 = 0.00394

Case 3: Deposits & Borrowings… Interest Expense on Deposits

– B) Multiply (A) by the MFU Loan Portfolio

• B = (722,933)*0.00394 = 2,847– C) Multiply (B) by the share of deposits (40%)

• C = 2,847*0.40 = 1,139– D) Divide (C) by the factor (1 - 2%)

• D = 1,139/(1-0.02) = 1,162

Case 3: Deposits & Borrowings: Interest Expense on Deposits...

• Given the sample data in a previous slide, the whole arithmetic operation can be summarized as follows:– (722,933*(P49,759/12,636,617)*40%)/(1-2%)

=(722,933*0.00394*0.40)/1-.02)

=1,162

• Thus, for our example, the interest expense on the deposit component is P1,162.

Case 3: Deposits & Borrowings: Interest Expense on Borrowings...

• Steps to get the cost of borrowings as a component of the Product loan portfolio: – A) Divide Branch Interest Expense on

borrowings for the month by Total Borrowings as of end of month. Given the sample data:

• A = 160,000/18,312,790 = 0.00874

Case 3: Deposits & Borrowings: Interest Expense on Borrowings...

– B) Multiply (A) by the MFU Loan Portfolio

• B = (722,933)*0.00874 = 6,316– C) Multiply (B) by % borrowings (60%)

• C = 6,316*0.60 = 3,790

• Hence, for our example, the interest expense on the borrowing component of the product loan portfolio is P3,790.

POST SCRIPT

• The Monthly Monitoring Report Form can be accomplished using the form in Excel which is already automated.

• Doing the Report manually initially as an exercise will help you understand better the procedures for accomplishing the Product income and expense statement.