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

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126 European Journal of Economics, Finance And Administrative Sciences - Issue 42 (2011) Table No. 2: Microfinance Outreach Key Performance Indicators KPIs in 2009 - continued Average Outstanding Balance (AOB) $ * 4047 10952 5574 8387 24312 1008 2210 5266 Average Outstanding Balance (AOB) Index ~ 0.8 2.1 1.1 1.6 4.6 0.2 0.4 1.0 AOB/GNI per capita % * 99 385 228 223 1155 91 26 176.4 AOB/GNI per capita Index ~ 0.6 2.2 1.3 1.3 6.5 0.5 0.1 1.0 GNP per Capita 4070 2848 2450 3766 2105 1108 8467 2985 GNP per Capita Index ~ 1.4 0.95 0.82 1.26 0.71 0.37 2.84 1.00 ^ ~ An Industry Norm is the Geometric Average of the Indicators. * Calculated by the researchers. Calculatedcomparing to the Industry Norm. Source: SANABEL & Mix, 2010 Arab Microfinance Analysis & Benchmarking Report. 4.2.2. Financial Performance & Revenue Indicators The financial performances of the Arab KPIs are drawn by Table No. 3 as follows: Return on Assets ROA: Jordan MFIs’ROA is 7% compared to Arabs norm of 2.1%, only Egypt MFIs are higher, and the lowest country is Morocco of 0.2%. Also, for Return on Equity ROE, Jordan rated the third toexercise 14.7%after Yemen and, Egypt of 32.3% and 21.4% respectively. Operational Self-Sufficiency: Financial revenue to financial expenses and losses on loans is shown to be highest among Arab countries for Egypt MFIs; it achieved 168.2% followed by Lebanon and Jordan of a rate of 134.8% and 133.3% respectively. Thereby, the Financial Self-Sufficiencyof Jordan MFIs is shown to be in the middle among Arab countries. Financial Revenue / Assets: Yemen experienced the highest rate of 29.8%, and Jordan came at the second rate to achieve 25.7%, and the lowest is Palestine MFIs among Arabs. Profit Margin:Jordan ranked the third among Arabs; its net operating income to financial revenue was amounted to 25.1%. Whereas, Egypt was the highest, its profit matches 41%, followed by Lebanon of 25.8%. On the contrary, Morocco exercised a loss of 7.4%. Finally, Real Yield on Gross Loan Portfolio: yield on gross portfolio excluding Inflation rate toone bar plus Inflation rate is shown to be the highest for Jordanian MFIs, it amounts to 36.2%, followed by Yemen and Lebanon of 31% and 28.3% respectively. Table No. 3: Microfinance Financial Returns Key Performance Indicators KPIs in 2009 Financial KPI (Returns) Return on Assets Return on Equity Operation al Self Sufficienc y Financial Self Sufficienc y Financial Revenue / Assets Profit Margin Real Yield on Gross Loan Portfolio Tunis 1.5% 7.3% 108.8% 100.0% 23.1% 8.3% 21.3% Morocco 0.2% 0.5% 100.9% 93.5% 20.4% -7.4% 27.4% Egypt 8.0% 21.4% 168.2% 168.2% 22.0% 41.0% 16.9% Jordan 7.0% 14.7% 133.3% 133.3% 25.7% 25.0% 36.2% Palestine 1.6% 4.1% 125.4% 112.2% 14.5% 16.5% 11.4% Yemen 2.1% 32.3% 107.3% 107.3% 29.8% 6.7% 31.1% Lebanon 3.4% 10.9% 134.8% 134.8% 17.7% 25.8% 28.3% Arab Industry Norm 2.12% 7.73% 123.83% 119.11% 21.37% 16.55% 23.16% ^ Source: 1) SANABEL & Mix, 2010 Arab Microfinance Analysis & Benchmarking Report, 2) Mixmarket.org. ^ Industry Norm is mainly calculated as the Geometric Average due to a wide dispersion of KPIs, but for the cases of zero or minus figures, an Average (Mean) is utilized. 4.2.3. Risk& Liquidity Indicators Portfolio at Risk (PAR): For the indicator of theoutstanding portfolio overdue more than 30& 90 days plus renegotiated portfolio to loan portfolio, Jordan ranked the third best among the Arab MFIs, it’s
127 European Journal of Economics, Finance And Administrative Sciences - Issue 42 (2011) PAR is amounted to 1% - 1.3%. Yemen and Egypt MFIs are in less risk, and the most risky MFIs are Morocco and Palestine, as can be driven from Table No. 4. Write-off Ratio: Yemenand Egypt MFIs are experienced the lowest value of loans written–off to average loan portfolio among Arabs, and Jordan and Tunis came at the third rank among Arab MFIs. Also, for the Loan Loss Rate; which is the write-offs excluding loans recovered to loan portfolio, Yemen, Palestineand Egypt MFIs are experienced the lowest value, then Jordan came to be the fourth among Arabs. Risk Coverage:Jordan is experiencing the first country for the impairment loss allowance to PAR more than 30 days, it was amounted to 195.9%, then Egypt followed by 153.5%, and Yemen for 105%. Finally, Non-Earning Liquid Assets to Total Assets:the cash at banks to total assets is shown to be the highest to Egypt’s MFIs of 31.2%, and Yemen of 20.7%. Unfortunately, Jordan came at the lowest rank among Arabs of 7.9%. Table No. 4: Microfinance Financial Risks' Key Performance Indicators KPIs in 2009 Risk & Liquidity KPIs Portfolio @ Risk >30 Days Portfolio @ Risk >90 Days Write-Off Ratio Loan Loss Rate Risk Coverage Non-Earning Liquid Assets/ Total Assets Tunis 4.7% 2.9% 0.6% 0.3% 79.6% 13.5% Morocco 6.4% 4.5% 7.3% 6.6% 59.9% 16.5% Egypt 1.2% 0.8% 0.0% 0.0% 153.5% 31.2% Jordan 1.3% 1.0% 0.6% 0.6% 195.9% 7.9% Palestine 7.5% 4.4% 0.7% 0.0% 56.2% 12.1% Yemen 0.9% 0.3% 0.0% 0.0% 105.1% 20.7% Lebanon 2.3% 0.9% 0.7% 0.7% 61.1% 13.4% Arab Industry Norm ^ 2.56 1.43 1.41 1.17 91.02 15.16 Source: 1) SANABEL & Mix, 2010 Arab Microfinance Analysis & Benchmarking Report, 2) Mixmarket.org. ^ Industry Norm is mainly calculated as the Geometric Average due to a wide dispersion of KPIs, but for the cases of zero or minus figures, an Average (Mean) is utilized. 4.3. Microfinance at Jordan Level In general, the financial viability of Jordan’s MFIs enables them to widening their outreach activities. As can be driven from Table No. 5, the eight Jordanian MFIs have 85 offices throughout the country with 854 personnel; this means 71 employees, on the average, are serving each governorate in Jordan, noting that Jordan has 12 governorates; this KPI indicates to MFIs outreach. As mentioned earlier, Jordan MFIs are not tolerated to collect savings either from their clients (borrowers), or from others. Thereby, deposits are zero to all MFIs. Development & Employment Fund DEF is shown to have around half of the microfinance market in Jordan; it has 42.5% of the MFIs total assets, 59.6% of total equities, and 43.6% of gross loans portfolio. On the other hand, its liabilities are minimal; total borrowing is amounted to 11.4% of the market, debt/equity is 0.12 and, total write off is zero; this is due to the government support and donations, and also its Law No. 33 of the year 1992 that protects its funds from write offs; due to the Law of State Funds applied. Thereby, DEF has the capability to extend its operations all over the remote areas and poverty enclaves; it can and should maximize its outreach to combat poverty and unemployment. Especially, it’s cleared that its impairment loss allowances come in the middle of Jordan MFIs, and also its borrowings is the least among them, in comparison to AlWatani bank and FINCA’s borrowings of 51.4% and 88.1% of their total assets respectively.
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