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