Jordan Microfinance Institutions' Financial Viability to ... - EuroJournals

130 European Journal of Economics, Finance And Administrative Sciences - Issue 42 (2011)
4.3.3. Risk & Liquidity Indicators
Portfolio at Risk (PAR): theoutstanding portfolio overdue for more than 30 & 90 days is proven to be
too small for almost all Jordan MFIs, the industry average amounts to 3%, only AMC is shown to be
around 15%; this is due to the fact that its operations are more likely similar to banks, it’s actually
established and operating under the privilege of Jordan Ahli Bank, whereas, all other agencies, except
DEF, are non-profit MFIs and have their own management board.
Write-off Ratio: as mentioned before, DEF has no write offs. Also, AMC’s write off is zero,
and FINCA and MEMC are approaching zero. AlWatani Bank is shown to be the highest write off to
match 3.2%. On the other hand,Loan Loss Rate; which is the write-offs excluding loans recovered to
loan portfolio, is proving to be thepostive trend for Jordans’ MFIs; its industry average is 1%.
Risk Coverage: MEMC is shown to be the best among Jordan MFIs that covered risk for a rate
of 374.9%, followed by MFW, and DEF of 274.5% and 270.3% respectively. AMC is exercised the
lowest risk coverage of only 79.3% versus the industry norm of 215%.
Finally,Non-Earning Liquid Assets to Total Assets: this indicator shows a wide dispersion
between Jordan MFIs, due to the variety of MFIs cash at banks relative to their assets shown. On the
average, the industry norm is 10%, while it was 29% for AMC and 18.3% for UNRWA, and decrease
to 3% for DEF and 5-9% for the other MFIs, except FINCA which exercised down rate to 0.02% only.
In sum, this reflects the MFI desire to have the least reserved liquid assets; non-operating money or
assets, and to fully exploit their assets, especially cash assets.
5. Conclusions and Recommendations
5.1. The Main Conclusions
The study has proved that Jordanian MFIs have ranked at the 2 nd. best ROA and ROE among Arab
MFIs, the 3 rd. operational and financial self-sufficiency, the 2 nd. financial revenue to assets, the 2 nd. in
profit margin, and rated the 1 st. in yield on real gross loan portfolio.
On the other hand, Jordan MFIs were in the middle of the seven Arab countries in comparison
to risk & liquidity indicators. Also, these MFIs proved to be above Arab industry norm to all outreach
KPIs; which reflects the depth of their activities.
When comparing outreach KPIs for Jordan’s eight MFIs industry norm against Arab norms, we
conclude that, Jordan MFIs net activities were shown to be better to almost all outreach KPIs, this
proves that Jordan had widening its Microcredit professional activities, and its MFIs set a platform to
prosper Microfinance sector in the country. This fact can be drawn also by comparing active
borrowers, percentage of females’ loans, loans outstanding, and loans’ portfolio to population; the per
capita Microfinance achievements, Jordan is seen to be the first Arab country thereof.
5.2. Recommendations
Due to the abovementioned facts, Jordan MFIs have the financial viability to maximize their
Microcredit outreach to penetrate more in the Jordanian financialmarket, especially more focus on
serving in the poor and remote areas. Therefore, promoting Jordan MFIs will nourish Microcredit
sector, mainly when compiling up with international best practices. Thereby, the study recommends the
followings:
1. Releasing deposit gathering to MFIs in order to widen its sources of capital in one side
and, to have complementary interests with their clients on the other side. The Central
Bank of Jordan should facilitate it under itscontroland follow-up.
2. Establishing a Credit Bureau and facilitating the transparent mainstream of credit
information.
3. The government of Jordan should promote the MFIs to focus their activities on remote
areas and poverty enclaves, and maximize their outreach.