Efficiency and productivity can be difficult KPIs to measure in any industry, but these 10 metrics and ratios can help microfinance institutions to measure them effectively. These can all be calculated manually, using spreadsheets, or automated with banking business intelligence or financial performance software.
Microfinance institutions need to understand how efficiently they are serving their customers, and how productive their staff and customers are.
These 10 ratios and metrics can help indicate inefficient use of funds, highlight opportunities for improving customer service to certain sectors or types of client, or the productivity of each member of staff.
1. Portfolio to Assets
This ratio demonstrates how much an MFI has allocated to its loan business. Low levels may indicate inefficient use of funds and too high a level may indicate a problem in liquidity.
2. Cost Income Ratio
This ratio shows cost as a percentage of revenues and provides an indication of how efficient the MFI is. Declining trends or a rising ratio may give an indication of declining efficiency and lower profitability.
3. Cost Per Active Client
This ratio expresses operating expenses as a percentage of active clients. Clear policies will be required to define an active client as clients may have multiple accounts or services.
4. Borrowers Per Loan Officer
This measures the loan application load per loan officer. It can be used to give an indication of which loan officers are serving the most customers or to identify opportunities to spread the workload more effectively across the team.
5. Active Clients Per Staff Member
This metric demonstrates the overall productivity of each member of the MFI’s staff who manages clients.
6. Client Drop Out Rate
This metric shows the percentage of clients that had no transaction activity with the MFI in the designated period. When broken down by member of staff, it can give an indication of how well staff are serving clients. Alternatively, it can be broken down by type of client to identify broader patterns and customer service weaknesses.
7. Average Outstanding Loan Size
This measures the average outstanding loan balance per borrower and can provide an indication of the typical outstanding financing accessed by clients.
8. Average Loan Disbursed
This metric shows the average value of each loan disbursed. This can be compared to the national income per capita or as a % of a national poverty line to be used as an outreach indicator.
9. Average Deposit Account Balance
This average can provide information on the socio-economic level of the client base. It can be used as an indicator for the effectiveness of new client acquisition.
10. Average Deposit Account Balance Per Depositor
This average provides a ratio for analysing client outreach for deposit-taking MFIs.
To find out how Microfinance institutions can balance the dual bottom lines of financial and social performance, download our guide.