Downloading - Microfinance Information Exchange
Downloading - Microfinance Information Exchange
Downloading - Microfinance Information Exchange
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CASE STUDIES<br />
Figure 3: A breakdown of PADME’s profitability, 1994–2003<br />
40%<br />
35%<br />
30%<br />
25%<br />
20%<br />
15%<br />
10%<br />
5%<br />
0%<br />
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003<br />
Operating Expense Ratio<br />
Financial Expense Ratio<br />
Loan Loss Provision Expense Ratio<br />
Financial Revenue Ratio<br />
Source: MicroBanking Bulletin no. 10 data. PADME data shown for the period 1994-2003. Africa data shown only for 1999-2002.<br />
Efficiency and Productivity<br />
PADME has made significant gains in efficiency<br />
over time: operating expenses dropped from 45.8<br />
percent of its gross loan portfolio in 1994 to 20.5<br />
percent in 1995 and 10.1 percent in 2003. Otherwise<br />
stated, in 1994 PADME spent 45.8 cents to<br />
maintain each dollar of its loan portfolio, whereas in<br />
2003 it spent only 10.1 cents, far less than its peers<br />
or even the MFI average worldwide. In parallel,<br />
PADME’s cost per borrower fell from USD 277 in<br />
1994 to USD 54 in 1999, at which point it stabilized.<br />
Surprisingly, cost per borrower has been significantly<br />
lower than that of its peers, although larger<br />
loan sizes ⎯ which permit lower operating costs as<br />
a percentage of gross loan portfolio ⎯ are often<br />
accompanied by a larger cost per borrower.<br />
PADME’s remarkable efficiency is largely due to the<br />
large size of its loan portfolio relative to total assets.<br />
Figure 4: PADME’s gains in efficiency, 1994–2003<br />
Operating Expense / Avg.<br />
Portfolio<br />
60%<br />
50%<br />
40%<br />
30%<br />
20%<br />
10%<br />
Cost per Borrower<br />
300<br />
250<br />
200<br />
150<br />
100<br />
50<br />
0%<br />
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003<br />
Operating Expense / Avg. Portfolio<br />
Cost per borrower<br />
Source: MicroBanking Bulletin no. 10 data.<br />
0<br />
PADME’s high level of efficiency is also enabled by<br />
the strong productivity of its staff. Staff members<br />
served an average of 194 borrowers each in 2003,<br />
compared with 53 in 1994 and 85 in 1995. This impressive<br />
level of productivity results from a highly<br />
motivated staff that progresses through a welldeveloped<br />
internship program and is rewarded by<br />
an original incentive system. Staff are highly paid<br />
(in 2003, the average staff salary represented 22.2x<br />
GNI per capita) and extremely productive. PADME<br />
has, in fact, been able to reduce its cost in personnel<br />
over time while still investing heavily in human<br />
resources. Empirical research indicates that human<br />
MICROBANKING BULLETIN, MARCH 2005 15