Benchmarking Microfinance in Nicaragua 2005 Introduction This first edition of the “Benchmarking Microfinance in Nicaragua 2005” focuses on the performance of Nicaraguan MFI’s under the lens of the standard indicators using local and regional peer groups. This report shows that Nicaraguan MFI’s at the country level have an outstanding performance with respect to Central America and have similar results to those of the rest of Latin America and the Caribbean, standing out in some areas. Nevertheless, the peer groups themselves show notable differences, such as the challenges faced by medium scale MFI’s confronted with close competition from large scale MFI’s. To enrich the analysis and make the information more comparable, Nicaraguan MFI’s have been classified by credit methodology and scale in order to differentiate the segment of clients they serve, their financial structures, and determine how these influence their results.

Nicaraguan Microfinance in Context The credit portfolio of Nicaraguan MFI’s as a whole has grown at a pace of 45% and 48% in the last two years (2004 and 2005 respectively), supported by a stable economy and the exploration of untapped markets through the opening of new branches in locations distant from the capital city. Even faced with strong competition and with the thrust of MFIs such as FINDESA and ProCredit intermediating deposits, the market for credit remains strong due to the persistent unsatisfied demand in the country. Nicaragua also maintains favorable levels of portfolio quality, which stand out in Central America as well as in the rest of Latin America and the Caribbean.

Onerous financial costs and funding limitations are driving some Nicaraguan MFIs to consider changing their legal status, mainly to attract deposits and reduce costs. However the current legal framework makes the situation difficult. Meanwhile, due to the number of MFIs that publish their audited data and ratings in the MIX Market (www.mixmarket.org), the microfinance industry in Nicaragua exhibits high levels of financial transparency. Additionally, several Nicaraguan MFIs have received international recognition for their excellence. These factors should serve to attract more investment and funding for the sector.

Benchmarking Microfinance in Nicaragua 2005

Data and Data Preparation The data used in this report was recorded as of December 31 2005. The sample contains 150 Latin American MFIs, 16 of which are Nicaraguan (10.7% of MFIs). All the information has been provided voluntarily, standardized and adjusted according to the standards of the MicroBanking Bulletin of the Microfinance Information eXchange (MIX)1. The information used in this report has been

collected and processed by the Analytical Unit for Central America created at REDCAMIF (August 2005) with technical support from MIX. We would like to thanks ASOMIF (Asociación Nicaragüenses de Instituciones de Microfinanzas) and their affiliates that provided their data, as well as FINDESA and ProCredit for contributing to the transparency of microfinance in Nicaragua.

Eight peer groups have been considered2:

Acronym*

Definition

ININ

Nicaraguan MFIs using exclusively Individual credit methodology

INIS

Nicaraguan MFIs using simultaneously Individual and Solidarity Group methodology

INGR

Nicaraguan MFIs with a Gross Loan Portfolio over US$ 15 million

INME

Nicaraguan MFIs with a Gross Loan Portfolio between US$ 4 and 15 million

INPE

Nicaraguan MFIs with a Gross Loan Portfolio less than US$ 4 million

NICT

The total of Nicaraguan MFIs

CASN

Central American MFIs, not including Nicaragua

LSCA

Latin American and Caribbean MFIs, not including Central America

*Acronyms correspond with the initials of the peer group name in Spanish.

Acrónimo

Participating3 Nicaraguan MFIs (16) Definición

ACODEP, ADIM, CEPRODEL, FAMA, FDL, FINDESA, FJ Nieborowski, FODEM, FUDEMI, Fundación León 2000, FUNDENUSE, FUNDESER, PRESTANIC, ProMujer – NIC, ProCredit – NIC, PRODESA.

Analyst: Gerardo Talavera - REDCAMIF / MIX

1

For more information on the definitions and methods used please go to the following Web sites: www.mixmbb.org and www.themix.org 2 See details of MFIs by Peer Groups on page 17. 3 MFIs unadjusted individual data is available on the website: www.mixmarket.org

REDCAMIF / MIX

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Benchmarking Microfinance in Nicaragua 2005

MFIs Performance Analysis Scale and Outreach Nicaraguan MFI’s gender focus is similar to the rest of Latin America (LSCA). However, it is notably less than that of the rest of Central America (CASN).

Many of the largest and highest outreach MFIs in Central America are in Nicaragua, and as a whole they stand out when compared with the rest of Central America (CASN). However, when next to the rest of Latin America and the Caribbean (LSCA), they are smaller in scale and outreach due the lower Average Loan Balances maintained in a country with a high level of poverty and a small population.

Inside Nicaragua, MFIs making exclusively individual loans (ININ) reach a higher Scale and Outreach with respect to those using simultaneously individual and solidarity credit methodology (INIS). However, the former have a lower market depth, indicating that they are not necessarily reaching the poorest. On the other hand, these are the fastest growing MFIs due mainly to serving borrowers with higher incomes with individual loans more than increasing the number of borrowers.

The Nicaraguan microfinance sector exhibits a market depth notably less than the rest of Central America, in spite of managing very similar Loan Balances per Borrower. This same indicator as percent of the GNP per capita4 varies significantly (68.7% vs. 25.2%) because Nicaragua has the second lowest GNP per capita in Latin America and the Caribbean 5. Table 1: Scale and Outreach Indicators

ININ

INIS

INGR

INME

INPE

NICT

CASN

LSCA

Number of Borrowers

12,894

10,338

48,093

10,115

4,771

12,641

8,139

19,459

Percent of Women Borrowers

57.1%

61.0%

60.6%

55.8%

86.7%

60.0%

77.0%

60.1%

Gross Loan Portfolio (US$ Thousands)

10,492

5,635

32,576

6,999

2,286

7,075

2,963

15,440

Average Loan Balance per Borrower

761

503

677

569

344

543

542

814

Average Loan Balance per Borrower / GNP per Capita

96.4%

63.7%

85.7%

72.0%

43.6%

68.7%

25.2%

39.8%

4

This indicator (Average Loan Balance per Borrower / GNP per capita) measures the average balance of a loan compared with a reference of the national per capita income. It allows international comparisons of the financial services scale of the MFI’s taking into account the different price index in the different countries. 5

Source: World Bank’s Statistics

REDCAMIF / MIX

13 3

Benchmarking Microfinance in Nicaragua 2005

Adj. Number of Borrowers and Gross Loan Portfolio

50,000

Number of Active Borrowers

Gross Loan Portfolio (US$ '000) 50,000

40,000

40,000

30,000

30,000

20,000

20,000

10,000

10,000

LSCA

CASN

NICT

INPE

INME

INGR

INIS

0

ININ

0

Number of Active Borrowers Gross Loan Portfolio (US$ '000)

Financial Structure microfinance initiatives, the high demand for credit among the population and the positive results of Nicaraguan MFIs have been key factors when approaching funds providers. Within the country, large scale MFIs (INGR) are the most highly leveraged and commercially funded.

Nicaraguan MFIs attract a higher percentage of commercially priced funds than the rest of Central America (71.3% vs. 58.5%) resulting in greater leverage (2.4 vs. 1.5 times). However, they still do not reach the level of leverage achieved by LSCA (2.4 vs. 3.7 times). The scarce Government resources in support of

Table 2: Financial Structure Indicators

ININ

INIS

INGR

INME

INPE

NICT

CASN

LSCA

Capital Assets Ratio

29.6%

24.2%

18.1%

29.6%

36.4%

29.6%

39.6%

21.4%

Commercial Funding Liabilities Ratio"

70.9%

75.2%

85.9%

66.9%

62.0%

71.3%

58.5%

82.6%

2.4

3.1

4.5

2.4

1.8

2.4

1.5

3.7

82.6%

83.8%

80.4%

86.0%

87.3%

82.5%

79.4%

80.8%

Debt Equity Gross Loan Portfolio / Total Assets

REDCAMIF / MIX

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Benchmarking Microfinance in Nicaragua 2005

Financing and Asset Structure 100%

80%

60%

40%

20%

Capital/ Asset Ratio

LSCA

CASN

NICT

INPE

INME

INGR

INIS

ININ

0%

Commercial Funding Liabilities Ratio

Profitability and Sustainability At country level, Nicaraguan MFIs stand out in Central America for their profitability and showed results similar to LSCA, measured in the Adjusted Return on Assets. It is interesting to note that among the Nicaraguan peer groups, medium scale MFIs (INME) are the least profitable. This is a consequence of competition

from former the larger scale MFIs in shared markets, considering that INME MFIs compete in the higher income segment also served by INGR. On the other hand, small scale MFIs (INPE) using group methodology exhibit higher profitability due to their focus on borrowers with a lower purchasing power who are not served by the competition.

Table 3: Profitability and Sustainability Indicators

ININ

INIS

INGR

INME

INPE

NICT

CASN

LSCA

Return on Assets

2.9%

3.7%

5.1%

1.1%

3.8%

2.9%

-0.3%

2.8%

Return on Equity

12.8%

15.3%

26.2%

3.4%

9.4%

12.8%

-0.9%

10.3%

Operational Selfsufficiency

121.4%

116.3%

124.0%

120.8%

116.2%

122.7%

109.7%

117.5%

Financial Selfsufficiency

113.3%

112.0%

119.4%

103.6%

108.9%

115.2%

99.3%

111.6%

REDCAMIF / MIX

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Benchmarking Microfinance in Nicaragua 2005

Adjusted Return on Assets (All LAC MFIs*) 20%

INPE 15%

INGR INIS

10%

INME

5% 0% -5%

NICT CASN

-10%

LSCA

ININ

-15% -20% -25% -30%

LAC = Latin American and Caribbean

Revenues compared to larger institutions (29.8%). The Financial Revenue Ratio of the small institutions is explained by their higher interest rates, as exhibited by their highest Nominal Yield on Gross Loan Portfolio (42.5%). The lower profit margin of medium Nicaraguan MFIs is due to the absorption of their revenue by expenses.

Nicaraguan MFIs as a whole, are charging lower interest rates (measured by Nominal Yield on Gross Loan Portfolio) than CASN and LSCA, but retain a higher proportion of the generated revenue. However, these results vary widely among peer groups, especially in size (INGR and INME). Small Nicaraguan MFIs have a higher Financial Revenue Ratio (43.5%) Table 4: Revenues Indicators

ININ

INIS

INGR

INME

INPE

NICT

CASN

LSCA

Financial Revenue Ratio

31.4%

36.1%

29.8%

31.5%

43.5%

32.2%

29.0%

29.5%

Profit Margin

11.7%

10.3%

16.2%

3.5%

8.0%

13.2%

-0.8%

10.4%

Nominal Yield on Gross Loan Portfolio

31.4%

36.9%

31.4%

31.1%

42.5%

32.2%

33.1%

34.0%

Real Yield on Gross Loan Portfolio

20.1%

25.1%

20.1%

19.8%

30.2%

20.8%

22.6%

29.7%

REDCAMIF / MIX

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Benchmarking Microfinance in Nicaragua 2005

Loan Portfolio and Revenues 90% 80% 70% 60% 50% 40% 30% 20% 10%

Yield on Gross Portfolio (nominal)

LSCA

CASN

NICT

INPE

INME

INGR

INIS

ININ

0%

Gross Loan Portfolio/ Total Assets

Financial Revenue Ratio

Expenses Expense Ratio (25.5%) while small MFIs have the highest (42.1%). The situation for small MFIs is explained mainly by the higher Operating Expense Ratio (28.4%), for Personnel and Administrative Expense. The expense ratios for the groups ININ and INGR are the lowest, which is due to the fact that the majority of the larger scale institutions operate exclusively with individual loans.

Nicaraguan MFIs as a whole exhibit a lower Total Expense Ratio than the rest of Central America, but is higher when compared with LSCA (28.6% vs. 24.0%), as a result of the higher cost of their funding sources and loan loss provision. When breaking down the Expense ratios, the same distribution as the Revenue ratios repeats itself: large Nicaraguan MFIs have the lowest Total Table 5: Expenses Indicators

ININ

INIS

INGR

INME

INPE

NICT

CASN

LSCA

Total Expense Ratio

26.7%

31.9%

25.5%

28.3%

42.1%

28.6%

32.1%

24.0%

Financial Expense Ratio

10.0%

11.2%

10.0%

10.6%

10.8%

10.4%

7.4%

6.4%

Loan Loss Provision Ratio

1.6%

2.7%

1.8%

1.5%

3.4%

2.1%

1.5%

1.8%

Operating Expense Ratio

14.1%

18.1%

13.3%

14.4%

28.4%

14.4%

19.1%

14.2%

Personnel Expense Ratio

7.6%

9.1%

7.6%

7.8%

14.9%

8.5%

11.7%

7.9%

Administrative Expense Ratio

6.5%

8.9%

6.1%

6.2%

13.0%

6.9%

8.4%

6.9%

REDCAMIF / MIX

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Benchmarking Microfinance in Nicaragua 2005

Deconstructing Return on Assets 50%

40%

30%

20%

10%

LSCA

CASN

NICT

INPE

INME

INGR

INIS

ININ

0%

Financial Expense Ratio Loan Loss Provision Expense Ratio Operating Expense Ratio Financial Revenue Ratio

Efficiency and Productivity Loan Balance per Borrower. As would be expected, the Cost per Borrower is lower in INIS (US$ 145 vs. US$ 90) stemming from the practice of group credit methodology which allows them to distribute their Operating Expense more adequately.

In terms of Efficiency, Nicaraguan MFI compare favorably with CASN and LSCA, partially explained by their high productivity. Within Nicaragua, the ININ group exhibits a lower proportion of Operating Expenses with respect to their Gross Loan Portfolio compared to INIS (16.5% vs. 21.8%), as a result of their larger size operations and their larger Table 6: Efficiency and Productivity

Indicators

ININ

INIS

INGR

INME

INPE

NICT

CASN

LSCA

Operating Expense / Loan Portfolio

16.5%

21.8%

16.6%

16.5%

32.2%

16.8%

26.3%

18.8%

Cost per Borrower

145.2

88.9

109.5

120.4

115.5

114.9

120.2

145.8

Borrowers per Staff Member

119

119

125

119

93

120

103

147

Borrowers per Loan Officer

320

256

418

268

185

307

206

277

Personnel Allocation Ratio

39.7%

45.0%

39.7%

42.2%

42.3%

41.0%

52.5%

49.8%

REDCAMIF / MIX

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Benchmarking Microfinance in Nicaragua 2005

LSCA. The productivity of loan officers in Nicaraguan MFIs varies by peer groups, with the larger institutions standing out from the rest. Paradoxically, the productivity of the loan officers of INIS is lower compared to ININ, even though the former use group methodology and have a lower average loan balance.

The productivity of loan officers in Nicaraguan MFIs is higher compared to the rest of Central America and slightly higher than Latin America and the Caribbean. Considering the staff as a whole, the level of productivity of Nicaraguan MFIs is lower than LSCA (120 vs. 147), and can be explained by the higher Personnel Allocation Ratio in

Efficiency: Two Perspectives Operating Expense/ Loan Portfolio

Cost per Borrower

8%

50.0

0%

0.0

LSCA

100.0

CASN

16%

NICT

150.0

INPE

24%

INME

200.0

INGR

32%

INIS

250.0

ININ

40%

Operating Expense/ Loan Portfolio Cost per Borrower

Borrowers per Staff Member and per Loan Officer Borrowers per Loan Officer

Borrowers per Staff Member

80

160

40

80

0

0

LSCA

240

CASN

120

NICT

320

INPE

160

INME

400

INGR

200

INIS

480

ININ

240

Borrowers per Staff Member Borrowers per Loan Officer

REDCAMIF / MIX

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Benchmarking Microfinance in Nicaragua 2005

Portfolio Quality Nicaraguan MFIs as whole exhibit portfolio quality indicators slightly more favorable compared to LSCA, but with lower risk coverage. Likewise, Nicaraguan MFIs stand out for their portfolio quality and higher risk coverage compared to the rest of Central America. This is a result of a more effective control of arrears and progress made by MFIs in joining the risk information services available in the country.

Within Nicaragua, MFIs exhibit similar portfolio quality indicators, except for the high Portfolio at Risk greater than 30 days of the INIS peer group. This indicator is lower in the ININ and INGR groups compared to the rest of Nicaraguan MFIs, but it INPE wins out a loan write-off more than half that of any other group. The risk coverage was higher than 100% in all the peer groups, with the exception of the smaller Nicaraguan MFIs.

Table 7: Portfolio Quality Indicators

ININ

INIS

INGR

INME

INPE

NICT

CASN

LSCA

Portfolio at Risk > 30 Days

1.8%

3.2%

1.7%

2.2%

2.1%

1.9%

4.3%

2.5%

Portfolio at Risk > 90 Days

0.7%

1.6%

0.6%

0.7%

1.3%

0.8%

1.7%

1.5%

Write-off Ratio

1.6%

1.6%

1.6%

1.6%

0.8%

1.4%

1.6%

1.8%

Risk Coverage Ratio

107.3%

104.5%

116.0%

107.3%

93.9%

107.9%

86.2%

136.8%

Portfolio Quality 5%

4%

3%

2%

1%

Portfolio at Risk > 30 Days

REDCAMIF / MIX

LSCA

CASN

NICT

INPE

INME

INGR

INIS

ININ

0%

Write-off Ratio

13 10

Benchmarking Microfinance in Nicaragua 2005

Conclusion Nicaraguan MFIs show results similar to those of the rest of Latin America and the Caribbean, performing well aspects such as operating expense. They exhibit higher efficiency measured against their gross loan portfolio, allowing for slightly lower interest rates. Their loan officers are slightly less productive but manage healthier loan portfolios. At the same time, Nicaraguan MFIs offer services at a smaller scale, finance their activities with a higher level of equity by having a lower proportion of liabilities, resulting in smaller size and operations outreach. Finally, the microfinance sector in Nicaragua at the closing of the year 2005 was as profitable as the rest of the region, even though the high of Financial Expense prevents them from increasing their margins.

Compared to the rest of Central America, Nicaraguan MFIs stand out in several areas. They are larger in scale and outreach, have higher leverage and as a result of their efficiency are several times more profitable than the rest of the isthmus.

Within the country, we observe that many MFIs operate simultaneously with Individual and Solidarity lending methodology and that small scale MFIs serve lower income sectors, which explains the smaller size of their operations. Even though they have the highest expense ratios, small Nicaraguan MFIs are more profitable than medium size MFIs as a result of the higher interest rates they charge. In contrast, mediumsize MFIs see lower profitability due to direct competition from large MFIs. Looking ahead, Nicaraguan MFIs will have to create strategies to meet their funding needs to maintain growth in the sector without abandoning the microfinance approach that was the origin of these institutions. It is important to find new mechanisms that allow for increased access to capital and mobilization of deposits. Furthermore, MFIs will have to constantly improve to face growing competition. Finally, the entire sector will be influenced by the political environment in Nicaragua a new government in power after the 2006 Elections.

November, 2006

REDCAMIF / MIX

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Benchmarking Microfinance in Nicaragua 2005

Indicators Definition INSTITUTIONAL CHARACTERISTICS Number of MFIs Age Total Assets Offices Personnel FINANCIAL STRUCTURE Capital / Asset Ratio Commercial Funding Liabilities Ratio Debt/ Equity Ratio Deposits to Loans Deposits to Total Assets Gross Loan Portfolio/ Total Assets SCALE AND OUTREACH Number of Active Borrowers Percent of Women Borrowers Number of outstanding loans Gross Loan Portfolio Average Loan Balance per Borrower Average Loan Balance per Borrower/ GNP per Capita Number of Voluntary Savings Average Savings Balance per Saver MACROECONOMIC INDICATORS GNP per capita GIP Growth Rate Deposit Rate Inflation Rate Financial Penetration PROFITABILITY AND SUSTAINABILITY Adjusted Return on Assets Adjusted Return on Equity Operational Self-Sufficiency Financial Self-Sufficiency REVENUE Financial Revenue Ratio Profit Margin Yield on Gross Portfolio (nominal) Yield on Gross Portfolio (real) EXPENSE Total Expense Ratio Financial Expense ratio Loan Loss Provision Expense ratio Operating Ratio Personnel Expense Ratio Administrative Expense Ratio Adjustments Expense Ratio EFFICIENCY Operating Expense/ Loan Portfolio Personnel Expense/ Loan Portfolio Average Salary/ GNP per Capita Cost per Borrower Cost per Loan PRODUCTIVITY Borrowers per Staff Members Loans per Staff Membersl Borrowers per Loan Officer Loans per Loan Officer Voluntary savers per Staff Members Number Voluntary Savings x Staff Members Personnel Allocation Ratio PORTFOLIO QUALITY Portfolio at Risk> 30 Days Portfolio at Risk > 90 Days Write-offs Ratio Risk Coverage Liquid Assets No Prod./ Total Assets

REDCAMIF / MIX

Sample size of group Years functioning as an MFI Total assets, adjusted for inflation and standardized loan portfolio provisioning and write-offs Number, including head office Total number of employees Total Equity, adjusted/ Total Assets, adjusted All liabilities with “market” price/ Average Gross Loan Portfolio Total liabilities, adjusted/ Total Equity, adjusted Voluntary Savings/ Gross Loan Portfolio, adjusted Voluntary Savings/ Total Assets, adjusted Gross Loan Portfolio, adjusted/ Total Assets, adjusted Number of Borrowers with loans outstanding, adjusted for standardized write-offs Number of active women borrowers/ Number of Active Borrowers adjusted Number of outstanding loans, adjusted for standardized write-offs Gross Loan Portfolio, adjusted for standardized write-offs Gross Loan Portfolio adjusted/ Number of active Borrowers adjusted Average Loan Balance per Borrower, adjusted/ GNP per Capita Number of Voluntary Savings and fixed term deposits Voluntary Savings/ Number of Voluntary Savers US$ Annual Average % % M3/ GIP Net Operating Income, adjusted and net of taxes/ Average Total Assets adjusted Net Operating Income, adjusted and net of taxes/ Average Total Equity adjusted Financial Revenue/ (Financial Expense + Net Loan Loss Provision Expense + Operating Expense) Financial Revenue, adjusted/ (Financial Expense + Net Loan Loss Provision Expense + Operating Expense), adjusted Financial Revenue, adjusted/ Average Total Assets adjusted Net Operating Income, adjusted/ Financial Revenue, adjusted Financial Revenue from Loan Portfolio/ Average Gross Loan Portfolio (Yield on Gross Portfolio (nominal) – Inflation Rate)/ (1+ Inflation rate) (Financial Expense + Net Loan Loss Provision Expense + Operating Expense), adjusted/ Average Total Assets Financial Expense, adjusted/ Average Total Assets Net Loan Loss Provision Expense, adjusted/ Average Total Assets Operating Expense, adjusted/ Average Total Assets Personnel Expense, adjusted/ Average Total Assets Administrative Expense, adjusted/ Average Total Assets Net Operating Income - Net Operating Income not adjusted / Average Total Assets adjusted Operating Expense, adjusted/ Average Gross Loan Portfolio adjusted Personnel Expense, adjusted/ Average Gross Loan Portfolio adjusted Average Personnel Expense, adjusted/ GNP per Capita Operating Expense, adjusted/ Average Number of Active Borrowers adjusted Operating Expense, adjusted/ Average Number of Outstanding Loans adjusted Number of Active Borrowers, adjusted / Number of Personnel Number of Outstanding Loans, adjusted / Number of Personnel Number of Active Borrowers / Number of Loan Officers Number of Outstanding Loans, adjusted/ Number of Loan Officers Number of Voluntary Savers / Number of Personnel Number of Voluntary Savings / Number of Personnel Number of Loan Officers / Number of Personnel Outstanding balance, loans overdue> 30 days / Gross Loan Portfolio, adjusted Outstanding balance, loans overdue> 90 days / Gross Loan Portfolio, adjusted Value write-offs adjusted / Average Gross Loan Portfolio adjusted Loan loss reserve, adjusted/ PAR > 30 days Cash and Bank adjusted / Total Assets adjusted

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Benchmarking Microfinance in Nicaragua 2005

Benchmarks for Nicaragua (Reference Data 2005) INSTITUTIONAL CHARACTERISTICS

Number of MFIs Age Total Assets (in thousands US$)

Offices Personnel FINANCIAL STRUCTURE

Capital / Asset Ratio Commercial Funding Liabilities Ratio Debt/ Equity Ratio

ININ

INIS

INGR

INME

INPE

NICT

CASN

LSCA

9 12

6 13

5 13

7 12

4 10

16 12

38 13

96 13

11,307

6,466

40,657

8,146

2,524

8,519

3,705

18,696

13 117

13 71

23 372

10 75

7 56

12 76

7 59

13 147

ININ

INIS

INGR

INME

INPE

NICT

CASN

LSCA

29.6%

24.2%

18.1%

29.6%

36.4%

29.6%

39.6%

21.4%

70.9%

75.2%

85.9%

66.9%

62.0%

71.3%

58.5%

82.6%

2.4

3.1

4.5

2.4

1.8

2.4

1.5

3.7

Deposits to Loans

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Deposits to Total Assets

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

82.6%

83.8%

80.4%

86.0%

87.3%

82.5%

79.4%

80.8%

ININ

INIS

INGR

INME

INPE

NICT

CASN

LSCA

12,894

10,338

48,093

10,115

4,771

12,641

8,139

19,459

57.1%

61.0%

60.6%

55.8%

86.7%

60.0%

77.0%

60.1%

12,894

10,338

50,801

10,267

4,771

13,164

8,142

20,890

10,492

5,635

32,576

6,999

2,286

7,075

2,963

15,440

761

503

677

569

344

543

542

814

96.4%

63.7%

85.7%

72.0%

43.6%

68.7%

25.2%

39.8%

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

ININ

INIS

INGR

INME

INPE

NICT

CASN

LSCA

Gross Loan Portfolio/ Total Assets SCALE AND OUTREACH

Number of Active Borrowers Percent of Women Borrowers Number of outstanding loans Gross Loan Portfolio (in thousands US$)

Average Loan Balance per Borrower Average Loan Balance per Borrower/ GNP per Capita Number of Voluntary Savings Average Savings Balance per Saver MACROECONOMIC INDICATORS GNP per capita

790

790

790

790

790

790

2,130

2,180

GDP Growth Rate

3.7%

3.7%

3.7%

3.7%

3.7%

3.7%

2.7%

5.1%

Deposit Rate

4.0%

4.0%

4.0%

4.0%

4.0%

4.0%

4.4%

3.5%

Inflation Rate

9.4%

9.4%

9.4%

9.4%

9.4%

9.4%

8.4%

2.4%

Financial Penetration

43.8%

43.8%

43.8%

43.8%

43.8%

43.8%

32.1%

27.7%

ININ

INIS

INGR

INME

INPE

NICT

CASN

LSCA

2.9%

3.7%

5.1%

1.1%

3.8%

2.9%

-0.3%

2.8%

PROFITABILITY AND SUSTAINABILITY Adjusted Return on Assets Adjusted Return on Equity

12.8%

15.3%

26.2%

3.4%

9.4%

12.8%

-0.9%

10.3%

Operational Self-Sufficiency

121.4%

116.3%

124.0%

120.8%

116.2%

122.7%

109.7%

117.5%

Financial Self-Sufficiency

113.3%

112.0%

119.4%

103.6%

108.9%

115.2%

99.3%

111.6%

REVENUE REVENUE Financial Revenue Ratio

ININ

INIS

INGR

INME

INPE

NICT

CASN

LSCA

Profit Margin Yield on Gross Portfolio (nominal) Yield on Gross Portfolio (real)

REDCAMIF / MIX

31.4%

36.1%

29.8%

31.5%

43.5%

32.2%

29.0%

29.45%

11.7%

10.3%

16.2%

3.5%

8.0%

13.2%

-0.8%

10.4%

31.4%

36.9%

31.4%

31.1%

42.5%

32.2%

33.1%

34.0%

20.1%

25.1%

20.1%

19.8%

30.2%

20.8%

22.6%

29.7%

13

Benchmarking Microfinance in Nicaragua 2005

ININ

INIS

INGR

INME

INPE

NICT

CASN

LSCA

Total Expense Ratio

26.7%

31.9%

25.5%

28.3%

42.1%

28.6%

32.1%

24.0%

Financial Expense ratio

10.0%

11.2%

10.0%

10.6%

10.8%

10.4%

7.4%

6.4%

1.6%

2.7%

1.8%

1.5%

3.4%

2.1%

1.5%

1.8%

14.1%

18.1%

13.3%

14.4%

28.4%

14.4%

19.1%

14.2%

7.6%

9.1%

7.6%

7.8%

14.9%

8.5%

11.7%

7.9%

6.5%

8.9%

6.1%

6.2%

13.0%

6.9%

8.4%

6.9%

2.4%

1.8%

1.3%

2.4%

4.3%

2.4%

3.6%

0.6%

ININ

INIS

INGR

INME

INPE

NICT

CASN

LSCA

16.5%

21.8%

16.6%

16.5%

32.2%

16.8%

26.3%

18.8%

8.8%

10.9%

8.7%

9.0%

16.7%

10.3%

14.7%

9.8%

10.8

8.1

10.8

9.4

5.5

9.8

3.5

4.5

145.2

88.9

109.5

120.4

115.5

114.9

120.2

145.8

ININ

INIS

INGR

INME

INPE

NICT

CASN

LSCA

119

119

125

119

93

120

103

147

320

256

418

268

185

307

206

277

39.7%

45.0%

39.7%

42.2%

42.3%

41.0%

52.5%

49.8%

EXPENSE

Loan Loss Provision Expense ratio Operating Ratio Personnel Expense Ratio Administrative Expense Ratio Adjustments Expense Ratio EFFICIENCY

Operating Expense/ Loan Portfolio Personnel Expense/ Loan Portfolio Average Salary/ GNP per Capita Cost per Borrower PRODUCTIVITY

Borrowers per Staff Members Borrowers per Loan Officer Personnel Allocation Ratio PORTFOLIO QUALITY

ININ

INIS

INGR

INME

INPE

NICT

CASN

LSCA

Portfolio at Risk> 30 Days Portfolio at Risk > 90 Days Write-offs Ratio Risk Coverage

1.8% 0.7% 1.6%

3.2% 1.6% 1.6%

1.7% 0.6% 1.6%

2.2% 0.7% 1.6%

2.1% 1.3% 0.8%

1.9% 0.8% 1.4%

4.3% 1.7% 1.6%

2.5% 1.5%

107.3%

104.5%

116.0%

107.3%

93.9%

107.9%

86.2%

136.8%

5.3%

9.6%

8.8%

9.9%

7.0%

9.2%

5.5%

6.8%

Liquid Assets No Prod./ Total Assets

REDCAMIF / MIX

1.8%

13 14

Benchmarking Microfinance in Nicaragua 2005

The analysis in this report is based on a comparison between similar Peer Groups, classified by the following criteria: credit methodology, scale, country and region. The financial statements are adjusted to make comparison possible, taking into account the effect of inflation, subsidies and the differences in loan loss provisions.

Peer Group Criteria and Information Quality The information included in the peer groups’ median is not proved independently. It has been presented voluntarily by transparent MFIs. We show our level of support in the data supplied by each peer group with a quality grading. The information of participating MFIs is classified in this report according to the level verified independently for reliability. The information graded *** is supported by a detailed financial analysis from an independent entity, for example an evaluation by CAMEL, by CGAP or by a reliable agency. The information graded ** is supported by accompanying documents such as audited financial statements, annual reports or evaluations by independent programs which provide our adjustments with a reasonable level of reliability. The information graded * is from MFIs that have limited themselves to answering our questionnaire. This grading represents levels of reliability of the information provided by the MFIs and not a rating of their financial performance. Neither the drafting group, nor the consultant, nor the studies commission, and neither REDCAMIF nor MIX accept responsibility for the validity of the information presented in this report. Page 17 offers a brief description of the Peer Groups, its members and the number and classification of each one of the participating institutions. More detailed information is available on the MicroBanking Bulletin.

Adjustments The cost of funds in the financial statements of all the participating MFIs has been adjusted to reflect the long term effect of inflation on the MFIs equity. This adjustment is reflected in the financial statement as a net expense account which at the same time reduces the net income. It is compensated by an equity account reflecting the distribution between real net income and the effect of inflation over equtiy. This adjustment has been made on all MFIs financial statements with the exception of those using accounting methods adjusted for inflation which are generally accepted. The profits of the majority of the participating institutions have been adjusted by deducting subsidies in order to reflect real profit. The adjustment of funds expense due to subsidies is the most common adjustment for the institutions participating in this round. In order to be able to compare the institutions with different levels of subsidies, as if they were not subsidized, an additional cost is added for any liability significantly lower than the commercial price. Determining the commercial price is a difficult task. Nevertheless, for comparison reasons, the most important objective is to ensure the uniform application of the selected method to all institutions. We have decided to use the interest on deposits presented by MFI as the price of commercial rates. We have also excluded donations and revenue is calculated only on the basis of income and operating expenses. Expenses paid by another entity, such as the director’s salary, free rent or any other operating expenses, are considered subsidies. Finally, we normalized the norms for loan loss provisions and write-offs. We provided 50% for outstanding loans over 90 days but under 180 days, and 100% for outstanding loans over 180 days. Outstanding loans over 365 days are total write-offs.

REDCAMIF / MIX

13 15

Benchmarking Microfinance in Nicaragua 2005

Data Quality DATA QUALITY†

PERÍOD

Asociación de Consultores para el Desarrollo de la Pequeña, Mediana y Microempresa

***

2005

ADIM

Asociación Alternativa para el Desarrollo Integral de las Mujeres

**

2005

CEPRODEL

Centro de Promoción del Desarrollo Local

***

2005

FAMA

Fundación para el Apoyo a la Microempresa

***

2005

FDL

Fondo de Desarrollo Local

***

2005

FINDESA

Financiera Nicaragüense de Desarrollo

***

2005

FJ Nieborowski

Fundación José Nieborowski

***

2005

FODEM

Fondo de Desarrollo para la Mujer

**

2005

FUDEMI

Fundación para el Desarrollo de la Microempresa

**

2005

Fundación León 2000

Fundación León 2000

***

2005

FUNDENUSE

Fundación para el Desarrollo de Nueva Segovia

**

2005

FUNDESER

Fundación para el Desarrollo Socioeconómico Rural

***

2005

PRESTANIC

Fondo Nicaragüense para el Desarrollo Comunitario

***

2005

ProMujer – NIC

Programa para la Mujer – Nicaragua

***

2005

ProCredit – NIC

ProCredit – Nicaragua

***

2005

PRODESA

Fundación para la Promoción y Desarrollo

***

2005

ACRONYM

NAME

ACODEP

† The MicroBanking Bulletin (MBB) uses the following grading system to classify information received from MFIs: *** The information is supported by an in-depth financial analysis conducted by an independent entity in the last three years. ** The MBB questionnaire plus audited financial statements, annual reports and other independent evaluations. * The MBB questionnaire or audited financial statements without additional documentation.

REDCAMIF / MIX

13 16

Benchmarking de las Microfinanzas en Nicaragua 2005

Participating MFIs in Central America Nicaragua (NICT: 16 MFIs) ACODEP, ADIM, CEPRODEL, FAMA, FDL, FINDESA, FJ Nieborowski FODEM, FUDEMI, Fundación León 2000, FUNDENUSE, FUNDESER, PRESTANIC, ProMujer – NIC, ProCredit – NIC, PRODESA.

Rest of Central America (CASN: 38 MFIs) Costa Rica (6 MFIs)

ADRI, CrediMujer, FOMIC, Fundación Mujer, FUNDECO, FUNDECOCA

El Salvador (8 MFIs)

ACCOVI, AMC de R.L, Apoyo Integral, ASEI, ENLACE, Fundación Campo, FUNSALDE, ProCredit – SLV.

Guatemala (15 MFIs)

AGUDESA, ASDIR, AYNLA, Bancafe Mipyme, CDRO, CRYSOL, FAFIDESS, FAPE, FINCA – GTM, Friendship Bridge, Fundación MICROS, FUNDEA, FUNDESPE, Génesis Empresarial, Asociación Raíz.

Honduras (9 MFIs)

ADICH, FAMA OPDF, FINCA – HND, FINSOL, FUNDAHMICRO, FUNED, Hermandad de Honduras, ODEF, World Relief – HND.

Peer Groups Credit Methodology

Scale

REDCAMIF / MIX

Characteristics

ININ (9 MFIs)

Individual

INIS (6 MFIs)

Individual / Solidarity

INGR (5 MFIs)

Large: MFIs with Gross Loan Portfolio over US$ 15 millions.

INME (7 MFIs)

Medium: MFIs with Gross Loan Portfolio between US$ 4 to 15 millions.

INPE (4 MFIs)

Small: MFIs with Gross Loan Portfolio under US$ 4 millions.

Members of the Group CEPRODEL, FAMA, FINDESA, FODEM, Fundación León 2000, Fundación Nieborowski, PRESTANIC, ProCredit - NIC, PRODESA.

ACODEP, ADIM, FDL, FUDEMI, FUNDENUSE, FUNDESER.

ACODEP, FAMA, FDL, FINDESA, ProCredit – NIC.

CEPRODEL, Fundación León 2000, Fundación Nieborowski, FUNDENUSE, FUNDESER, PRESTANIC, PRODESA.

ADIM, FODEM, FUDEMI, Pro Mujer – NIC.

17

Analytic Unit REDCAMIF – MIX The Analytic Unit is the result of the Cooperation Agreement for MFIs Transparency in Central America between Red Centroamericana de Microfinanzas & Microfinance Information eXchange. Its goal is to promote transparency in microfinance institutions in Central America by fulfilling the following objectives:  To Increase the availability of standardized information on MFI performance in the region.  To promote investment in microfinance institutions in Central America.  Benchmark the performance of institutions in the region.

Red Centroaméricana de Microfinanzas (REDCAMIF) REDCAMIF is a non-profit organization whose mission is to consolidate the microfinance industry in Central America by representing the sector, promoting the institutional strengthening of the networks and their associates and generating strategic alliances which contribute to improve the quality of life of their programs’ clients. Managua, Nicaragua. Telephone: (505) 278-8613, Fax: (505) 252-4005 E-mail: [email protected] Web site: www.redcamif.org

Microfinance Information eXchange (MIX) The MIX is a non-profit organization whose mission is to help build a microfinance market infrastructure by offering data sourcing, benchmarking and performance monitoring tools, as well as specialized information services. The MIX is a recent association of CGAP, Citigroup Foundation, Deutsche Bank America Foundation, Open Society Institute, Rockdale Foundation and others. Washington DC, USA. Telephone: (202) 259-9094, Fax: (202) 259-9095 E-mail: [email protected] Website: www.themix.org

REDCAMIF thanks the following institutions for the support given to the Transparency and Benchmarking Program in Central America:

fundación ford