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

More documents

Recommendations

Info

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.
131 European Journal of Economics, Finance And Administrative Sciences - Issue 42 (2011) 4. The MFIs should, by themselves, focus their activities on establishing start-up projects as income-generating projects to serve as an active tool to combat poverty and unemployment. 5. MFIs in Jordan have the capability to be a private-led sector not to continue working as non-profit agencies. Therefore, an exit strategy should be drawn to transfer to private sector agencies. References 1] Al Atoum, Radi, Microfinance Inthe MENA Countries: A position paper on Partnership for Development, prepared to MENA - Net Conference, Cairo - Egypt Dec. 13-17, 1998. 2] Brandsma, Judith, Microfinance sector in Jordan; World bank, NY, USA, 2001. 3] Planet Finance; National Impact & Market Study of Microfinance in Jordan, Ministry of Planning & International Cooperation and, GroupeAgenceFrancise de Development. Oct. 2007. 4] World Bank, Social Productivity; from Concept to Action, NY, 1998. 5] Brandsma, Judith and Bourjorjee, Deena, Microfinance in the Arab States; Building Inclusive Financial Sectors, United Nations Capital Development Fund (UNCDF), NY, USA, 2004. 6] SANABEL and Mix, Arab Microfinance Analysis & Benchmarking Report 2010. 7] www.themix.org/mfi/country/Jordan&www.mixmarket.org. 8] Planet Finance; National Impact & Market Study of Microfinance in Jordan, Ministry of Planning & International Cooperation and the Agence Française de Développement, Oct. 2007. 9] Seep, Citi Foundation and, SANABEL, Arab Microfinance Regional Report: An Industry Update, (April 2009 and Dec. 2010). 10] Economic & Social Council, Micofinance in Jordan, Policy Paper, 2011. 11] www.microfinancegateway.com. Appendix: The KPIs’ Utilized by this Study Outreach Indicators 1. Active Borrowers: No. of borrowers with loans outstanding, adjusted for standardize write-offs. 2. Percent of Female Borrowers: No. of active women borrowers/ Adjusted No. of active borrowers. 3. Total Loans Outstanding: No. of outstanding loans adjusted for standardized writeoffs. 4. Gross Loan Portfolio: Gross loan portfolio adjusted for standardized write-offs. 5. Average Balance per Borrower: Gross loan portfolio, adjusted / No. of active borrowers, adjusted. 6. AverageBalance per Borrower/GNI per Capita: Average loan balance per borrower / GNP per capita. 7. Average Outstanding Balance: Adjusted gross loan portfolio/ Adjusted no. of loans outstanding. 8. Average Outstanding Balance per Capita: Adjusted average outstanding balance/ GNI per capita. Overall Financial Performance & Revenue Indicators 1. Return on Assets: Adjusted net operating income-Taxes /Adjusted average total assets. 2. Return on Equity: Adjusted net operating income-Taxes /Adjusted average total equity.
Page 1 and 2: European Journal of Economics, Fina
Page 3 and 4: 123 European Journal of Economics,
Page 9: 129 European Journal of Economics,

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

Create successful ePaper yourself

Delete template?

Save as template?