Measuring Performance of Microfinance Institutions A Framework For Reporting Analysis and Monitoring Toolkit

MEASURING PERFORMANCE
OF MICROFINANCE INSTITUTIONS:
A FRAMEWORK FOR REPORTING,
ANALYSIS, AND MONITORING
TRAINER’S GUIDE
AUGUST 2005
This publication was produced for review by the United States Agency for International Development.
It was prepared by Development Alternatives, Inc.
MEASURING PERFORMANCE OF
MICROFINANCE INSTITUTIONS:
A FRAMEWORK FOR REPORTING,
ANALYSIS, AND MONITORING
TRAINER’S GUIDE
The authors’ views expressed in this publication do not necessarily reflect the views of the United
States Agency for International Development or the United States Government.
TABLE OF CONTENTS
OVERVIEW 1
MODULE 1: THE PERFORMANCE MONITORING FRAMEWORK 1-1
MODULE 2: FINANCIAL STATEMENTS AND REPORTS 2-1
MODULE 3: ANALYTICAL ADJUSTMENTS MATERIAL 3-1
MODULE 4: FINANCIAL RATIOS AND INDICATORS 4-1
MODULE 5: CREATING AND ANALYZING PERFORMANCE

MONITORING REPORTS 5-1
TRAINING OF TRAINERS 2 DAY COURSE—TRAINER’S GUIDE T-1
POWERPOINT PRESENTATION P-1
TABLE OF CONTENTS III

OVERVIEW
Measuring Performance of Microfinance Institutions: A Framework for Reporting, Analysis, and
Monitoring, is a training course to provide microfinance practitioners with the skills, knowledge and
tools to develop financial statements and reports for meaningful analysis and monitoring, and that are
in accordance with International Financial Reporting Standards. The centerpiece of the training is a
spreadsheet tool that practitioners will learn how to use in the training environment and be able to
incorporate into their microfinance institutions’ financial reporting systems.
Microfinance is a diverse and growing industry around the world. As the industry matures the
importance of common standards by which MFIs can be measured increases. This training course has
been developed in response to the growing need to continue the standardization of financial terms,
formats, and indicators so that MFI managers can develop consistent performance monitoring systems
based on international standards. The training course presents an integrated framework for
developing financial statements and reports, making adjustments to financial statements, an in-depth
look at the recommended indicators to monitor, and templates for creating performance monitoring
reports. The framework presented throughout the training is enhanced and complemented by a
spreadsheet tool that mirrors the framework and is a ready to use excel spreadsheet.
The result of this training course is that MFI managers will be able to create performance monitoring
reports to make decisions, inform board of directors, report to donors, investors and other interested
parties based on sound and meaningful financial information.
WHO SHOULD ATTEND

Managers, finance and accounting staff of microfinance institutions who are instrumental in creating
financial statements and/or responsible for using financial reports for analysis and monitoring.
Prerequisites include familiarity with the microfinance industry and basic knowledge of accounting
and financial reporting of a microfinance institution. This training course is also appropriate for staff
of donor organizations who have worked with microfinance institutions and have an understanding of
basic financial statements and reports.
AN INTEGRATED TRAINING DESIGN

The training design is an integrated approach to teaching Measuring Performance of Microfinance
Institutions: A Framework for Reporting, Analysis, and Monitoring. The design of the training is
based on the guide “Measuring Performance of Microfinance Institutions: A Framework for
Reporting, Analysis, and Monitoring and uses a spreadsheet Tool as the centerpiece for creating
financial statements, indicators, and reports. The design of the training is based on a participatory
training model and incorporates theory, skill development, and practice through exercises, a case
study, and practical use of the spreadsheet tool.
USING THE TRAINERS GUIDE

The Trainers’ Guide is a suggested format to facilitate the training. This has been written as a guide
to assist the trainer in conducting an efficient 3-day training program. The learning steps and
activities outlined in this guide are based on adult learning principles and incorporate theory, skill
development, practice, and relating the learned knowledge to participants’ workplace. The trainer
should use discretion when using this training guide to make decisions in regard to how fast/slow or
thorough/brief each learning step should be. The trainers’ knowledge of participant skill level will
help to define those elements of the training.
OVERVIEW 1
This guide contains a brief section on Introduction to the Spreadsheet Tool that describes how to
introduce the tool during the training and how to input the data into the tool using the case study
financial data and information. The trainer must decide how to integrate the case study financial data
and information and the use of the tool for analytical adjustments, ratios and indicators, and creating
and analyzing performance monitoring reports.. The training timeline identifies times during the
three days when to use the tool.
A powerpoint presentation accompanies the training. For this training the powerpoint slides are brief
notes to accompany the training. Depending on your situation you can also write this information on
flipcharts.
Pages 1 and 2 for each module is a description of the goals and objectives for the module and a
session plan that includes topics, technique, time, and materials needed.
The training agenda is very aggressive, with approximately 7 and a half hours of training for day 1
and 2. There are evening assignments that must be completed. Day 3 is not as defined so that the
trainer has some time at the end of the training if needed.
As the training is very intensive, the trainer might need to use some energizers during the day based
on participants’ ability to focus and concentrate. A list of energizers is presented in this guide at the
end of the Introduction Module.
PARTICIPANT GUIDE
For this training participants will be given a copy of the guide Measuring Performance Of
Microfinance Institutions: A Framework For Reporting, Analysis, And Monitoring. At times during
the training participants will be asked to refer to their guide or read a section of their guide for the
evening assignment. The small/large group exercises are all based on material that is in the guide.
DAILY AND END OF TRAINING EVALUATION
To regularly assess the relevancy, flow, timing, etc of the training two quick training assessments are
included at the end of the Introduction module. These can be used at the end of the day for a quick
assessment of participant’s perceptions of the training.
Additionally a more detailed end of training is included at the end of the Introduction module.
THE TRAINING TIMELINE
The 3-day training timeline describes the flow of training topics and suggested timeframes. The
timeframes are for time budgeting only as they will vary depending on the audience and the trainer.
This training timeline does not include time for breaks or an evening assignment. The training
timeline does include time for lunch.
2 MEASURING PERFORMANCE OF MICROFINANCE INSTITUTIONS: A FRAMEWORK FOR

REPORTING, ANALYSIS, AND MONITORING
TRAINING TIMELINE
DAY ONE
35 minutes Introduction
20 minutes Module 1: The Performance Monitoring Framework
Module 2: Financial Statements and Reports
10 minutes Overview
1 hour 20 minutes Income Statement
1 hour 20 minutes The Balance Sheet
1 hour Lunch Break
45 minutes Introduction to the Spreadsheet Tool
1 hour 20 minutes Cash Flow Statement
40 minutes Portfolio Reports
20 minutes Non-Financial Data Report
45 minutes Using the Framework Tool and Financial Statements
DAY TWO
1 hour Module 2: Financial Statements and Reports
The Tool and Financial Statements
45 minutes Wrap-up: Linking Financial Statements
Module 3: Analytical Adjustments
10 minutes Overview of Analytical Adjustments
30 minutes Making Adjustments in Subsidized Funds
30 minutes In-Kind Subsidy Adjustments
30 minutes Inflation Adjustments
30 minutes Portfolio at Risk Adjustments
45 minutes Understanding Adjusted Financial Statements
1 hour Lunch
1 hour Using the Spreadsheet Tool and Analytical
Adjustments
Module 4: Financial Ratios and Indicators
1 hour 30 minutes An In-Depth Look at the SEEP 18
DAY THREE
1 hour Using Ratios to Identify Changes in Performance
1 hour Using the Spreadsheet Tools and Financial Ratios
Module 5: Creating and Analyzing Financial
Reports
5 minutes Overview
25 minutes Trend Analysis
25 minutes Variance Analysis
5 minutes Benchmarking
1 hour 30 minutes Performance Monitoring Reports
TBD Using Tool and Creating Reports
TBD Analyzing Reports
OVERVIEW 3
INTRODUCTION
Technique and
Session Materials
Time
Lecturette and Welcome and Overview of Course

discussion
Welcome participants and introduction of trainers
5 minutes
Overview of training course
Group Activity Ice Breaker Handout 4.1

Instructions for
20 minutes Participant and Trainer introductions People Hunter
Lecturette Goals, Objectives and Agenda Powerpoint 2-4
Question and Review goals, objectives and agenda

Answer
Discuss expectations
5 minutes
Lecturette Additional Business
Discussion House Rules
5 minutes Training Methodology
Other
Additional Materials Additional ice

breakers
Daily Evaluation
Forms
End of Training
Evaluation
Energizer ideas
Step 1: Introduction
Lecturette
Welcome participants to the training.
5 minutes
Representative from the host or partner organization welcomes
participants and opens training. Introduction of and hand-over
to Facilitators.
Introduce main facilitators including background and additional

biographical information appropriate for the specific country
and/or setting.
Setting the stage for the training
Facilitator to welcome participants to the training. The welcome

will include a brief overview of the training. Key points to
discuss:
The title of this course is Measuring Performance of

Microfinance Institutions: A Framework for Reporting,
Analysis, and Monitoring.
As practitioners in the microfinance industry we need a way

Technique and
Session Materials
Time
to measure the performance of the institutions we work for.
By “measure” we mean that we need to be able to take the
financial information and create reports to manage for
results and monitor progress. In order to do this a financial
institution must first organize the data and information in
formats that can then be meaningfully summarized into
financial statements. The financial information needs to be
“adjusted” to assess accurately the viability and soundness
of a microfinance institution. You need to analyze ratios
and indicators to get a multidimensional perspective on the
financial health of the institutions, and then create reports
to be able to analyze the performance of the institution.
You may be saying to yourself we already do this, so why

am I here. We will present a framework to provide
microfinance practitioners with a means to develop
financial statements and reports so that they can be used
for analysis and monitoring and that are in accordance with
International Financial Reporting Standards. This
framework is the accepted standards by which MFIs can be
measured, communicate with other MFIs in the industry,
and compare performance to other MFIs.
The framework presented in this course works hand-in-

hand with a spreadsheet tool that will allow your institution
to capture financial data and information and generate
reports.
Step 2: Group Ice Breaker Handout Intro.1:

Activity People Hunter guide
The ice breaker is used to introduce participants to one another.
20 minutes Below is an example of an ice breaker to use. Additional ice
breaker activities are include at the end of the introduction.
Explain
To the group that they will play an introduction game called

people hunter. Give each participant a people hunter
worksheet (Handout Intro.1). Tell participants that we will be
“hunting” for other people in the group with certain qualities.
This exercise is to help us get to know each other a little better.
Instructions for People Hunter:
1. Tell participants that they will have 5 minutes to circulate

and find people who meet a requirement of each box on
the handout sheet. When they find a person who meets a
requirement, they are to write that person’s name on the
sheet in the appropriate space and then move on to find
someone else. A participant is only allowed to sign one
box on any sheet even though they may meet the
requirements of another box.
2. After 5 minutes tell participants they are to stop what they

are doing and stay with the person they are with. In these
groups, participants are to interview each other.
Participants are to get the following information from the
person they will interview: name, name of organization,
nature of job, time with organization, biggest challenge of
the job. The groups will have 5 minutes to get this
information. Each person should be prepared to introduce
OVERVIEW 5
Technique and
Session Materials
Time
that person to the rest of the group.
3. Each participant has one minute to introduce their partner

to the entire group. Facilitator keep time.
Facilitator note: Optional – you can give a prize or

congratulations to the person who is the best hunter by asking
by a show of hands how many had 5 names on their list, etc.
Step 3: Lecture Goals, Objectives, Agenda Powerpoint 2-4
Question & Show PPT Slide 2-4

Answer
Explain
5 minutes
The goals and objectives of the course.
Goal: Microfinance practitioners will create and use financial

performance monitoring reports that have been developed
using International Financial Reporting Standards to be able to
assess with accuracy the performance of their institution, make
decisions in regard to future directions, inform boards of
directors, and report to donors, investors and other interested
parties.
Objectives: At the end of the training, participants will be able

to:
Describe the importance of a consistent financial reporting

framework and how a framework can be used to make
decisions, provide important internal information, and be
used for external reporting and comparisons.
Produce accurate financial statements and reports in

accordance with International Financial Reporting
Standards (IFRS) to be used to measure performance of a
microfinance institution.
Create an adjusted income statement and balance sheet,

using commonly accepted adjustments and standard
calculations, to analyze and measure the “true
performance” of a microfinance institution, analyze long-
term viability, and make meaningful comparisons across
the industry.
Calculate and analyze up to 18 financial ratios and

indicators to be able to evaluate the performance of a
microfinance institutions’ activities.
Create financial performance monitoring reports for a

microfinance institution and analyze, using recommended
tools, the performance and condition of the microfinance
institution.
Use the SEEP Framework tool to monitor financial

performance of a microfinance institution.
Ask
Participants if anyone has other expectations about what they

will get from this course. If the expectation cannot be met
discuss with participants. If the expectation will be met explain.

Technique and
Session Materials
Time
Show PPT 5 Training Agenda
Explain the training agenda. Point out times for start and finish,
tea/coffee break, lunch.
Step 4: Other Business

Lecturette
Present Training Rules on flip chart
5 minutes
There is no such thing as a stupid question.
Everyone needs to participate in order to succeed and

reach goals.
Please turn off cellphones or ask your friends, family and

colleagues to minimize calls
Please be on time.
There is a blank flipchart posted titled “questions,

clarifications and issues for further discussion”. That will
remain posted for facilitators and participants to record
unanswered and additional questions and issues on which
they want further discussion.
Leave the flip chart with rules posted on the wall throughout the
training.
Facilitator Note: This is a guideline of rules. You need to make

your rules list based on your situation.
Methodology
Explain to participants the course has been developed using a

participatory training model. This means that participants will
have an active role in driving the training. The expectation the
trainers have is that people will actively participate in large and
small group discussions and activities.
OVERVIEW 7
HANDOUT INTRO.1
PEOPLE HUNTER
Instructions: Find someone who has or did one of the following. When you have found a person,
write the person’s name in the box. A participant may appear only once on your sheet.
Has the same birth month as Has worked at their institution

you for 2 years or more
Has a name beginning with Comes from the same city,

the same alphabet letter as town, village as you
you
Graduated from college the Has the same number of

same year as you children as you
Is wearing the same color Is not married

clothes as you
Is the same height as you Has the same hobby as you

do
Works in the same Has been to Thailand

geographic area as you

ADDITIONAL ICE BREAKER IDEAS
THE CIRCLE GAME
This activity is for people to introduce themselves to the large group.

Time: For a group of 20 participants and trainers approximately 15 minutes.
Material:
20 Statements that are written down, one statement per card/piece of paper. You need as many
statements as participants. The statements should be a mixture of fun and work related. Examples of
statements are included below.
Letter size paper: You will need one less piece of paper as there are participants, trainers, and
observers.
1. Place the letter sized pieces of paper in a big circle.

2. Ask all participants and trainers to stand on one piece of paper. The trainer should be standing in
the middle of the circle.
3. Tell participants that you will read a statement. If a participant agrees with the statement they
need to step off their paper and move to another empty paper. The rule is when a participant
moves they cannot move to a spot next to where they are standing, but across the circle. The
trainer in the middle must also find an open spot.
4. The participant that is left without a piece of paper to stand on must introduce him/herself to the
group. Name, organization work for, job position, location, etc.
5. Trainer to start the game by first introducing him/herself. The trainer then selects and reads a
statement. Participants are to move around to find a new spot if they agree with the statement.
The person without a spot must introduce them self and then select a statement and read it aloud.
6. Game continues until everyone has introduced them self.
Statements for the Circle Game
1. I work in a microfinance institution.
2. The institution I work for currently creates performance monitoring reports.
3. For my job I work with our institutions financial statements.
4. The financial institution I work for produces adjusted income statements and balance sheets.
5. I am familiar with financial ratios and indicators
6. My shirt has the color blue in it.
7. I have children.
8. I traveled over 6 hours to get to this training course.
9. I will be staying an extra day for shopping.
10. I work in the same place that I grew up.
11. I am not married.
OVERVIEW 9
FIND SOMEONE
This activity is for people to get acquainted with each other.

Time: 15-20 minutes
Material: Index card for each participant (you can include trainers as well)
1. Pass out one index card per participant.

2. Tell participants to write three statements on their card (such as favourite sports team, color,
interest, book, etc).
3. Collect the cards and pass them out so everyone gets someone else’s card.
4. Tell participants they need to find the person who wrote the card they were given. As they are
mingling to find the person they should introduce themselves to people they meet.
MY NAME
This activity is for people to introduce themself to the group.

Time: 15-20 minutes (depending on how many participants)
People introduce themselves and tell what they know about why they have their name (their mother
wanted to name me after her great aunt Helen who once climbed Pike's Peak in high heels, etc.). It
could be the first, middle or nickname.

DAILY FEEDBACK/EVALUATION FORMS
ONE MINUTE FEEDBACK
So far I’m finding this training to be (circle your response)…
Interesting 1 2 3 4 5 Uninteresting
Too fast 1 2 3 4 5 Too slow
Too easy 1 2 3 4 5 Too difficult
Relevant 1 2 3 4 5 Irrelevant
Organized 1 2 3 4 5 Disorganized
Relaxed 1 2 3 4 5 Tense
Please provide a brief comment for improving this day.
ONE MINUTE FEEDBACK
So far I’m finding this training to be (circle your response)…
Interesting 1 2 3 4 5 Uninteresting
Too fast 1 2 3 4 5 Too slow
Too easy 1 2 3 4 5 Too difficult
Relevant 1 2 3 4 5 Irrelevant
Organized 1 2 3 4 5 Disorganized
Relaxed 1 2 3 4 5 Tense
Please provide a brief comment for improving this day.
OVERVIEW 11
DAILY FEEDBACK/EVALUATION FORMS
END OF SESSION/ DAY FEEDBACK
I found the following most useful…
Why:
I found the following least useful…
Why:
Suggestions for improving this session/day ...
END OF SESSION/ DAY FEEDBACK
I found the following most useful…
Why:
I found the following least useful…
Why:
Suggestions for improving this session/day ...

MEASURING PERFORMANCE OF MICROFINANCE INSTITUTIONS: A FRAMEWORK
FOR REPORTING, ANALYSIS, AND MONITORING
COURSE EVALUATION
1. What are the most significant skills and/or knowledge you gained from the course Measuring
Performance of Microfinance Institutions?
2. What additional skills and knowledge do you need to learn more about to create financial statements
in the recommended format?
3. What additional skills and knowledge do you need to be able to use the spreadsheet tool at the MFI
you work at?
4. What will you do differently in your work as a result of this training?
5. What will you have difficulty applying to your work that you learned this week? Why?
6. What did you not learn in this training that you were expecting to learn:
OVERVIEW 13
7. How did you feel about the length of the program?
□ Too Short □ Just Right □ Too Long
8. Please rate and comment on the following:
1=Poor 2=Fair 3=Average 4=Good 5=Excellent
Course Content 1 2 3 4 5
Comments:
Course Methods 1 2 3 4 5
Comments:
Course Materials 1 2 3 4 5
Comments:
Course Exercises and Activities 1 2 3 4 5
Comments:
Overall Course 1 2 3 4 5
Comments:
Course Organization 1 2 3 4 5
Comments:
Pre-Course 1 2 3 4 5
Organization/communication/
Advertising
Comments:
Facilities 1 2 3 4 5
Comments:

Feedback for the Trainers: To improve our training skills please provide feedback to the trainers.
1=Poor 2=Fair 3=Average 4=Good 5=Excellent
Knowledge Style and Responsiveness Producing a Comments

of Subject Delivery to Group Good Learning
Climate
Trainer name
Trainer name
Trainer name
Trainer name
OVERVIEW 15
ENERGIZERS
1. Simon Says: Tell all participants to stand up. The rules of the game are that the trainer will
tell the group to do something by saying “Simon says…” For example “Simon says touch
your head”. The trainer will then tell the group to do something without saying simon says.
Those people who did as they were told must sit down. Continue until there is one
participant left standing.
2. Ha Ha: Tell everyone to stand up. Explain that you will give the first person a word to say.
The next person must repeat the same word saying it twice, the next person three times, etc.
around the room. The word is ha. Try to go as fast as possible.
3. Scavenger Hunt: Put participants in teams of three or four people. Tell them this is a
scavenger hunt. All teams must bring to you the items that you tell them. Come up with
three or four items. Tell the teams that the items must be presented to you at one time.
4. Human Machines: Put participants into groups of 5 to 8 people. Each team has 5 minutes to
design a human machine where the members are the components of the machine. At the end
of 5 minutes the teams must demonstrate its human machine. The trainer can assign a
machine to each team. Ideas include a clock, a bicycle, a computer, a motorboat, a fan.
5. Tied in Knots: (This energizer may not be appropriate for all groups). Ask the participants to
stand and form a circle. Tell participants to raise their left hand in the air and place their right
hand into the center of the circle. All participants must take their left hand and grab someone
else’s right hand. Participants are to untangle themselves without breaking their grip on each
other. Some of the participants could be facing away from the center of the circle at the end
of this.

MODULE 1: THE PERFORMANCE MONITORING FRAMEWORK
Goal Microfinance Practitioners will articulate how their microfinance institution will benefit
from using a performance monitoring framework.
Objectives By the end of Module 1, participants will:
Describe what a performance monitoring framework is and why a framework is

critical to monitoring their institutions performance.
Discuss how the framework provides standards for the microfinance industry and
how individual institutions can benefit from those standards.
Be familiar with the framework’s referencing system to better identify terms used
in the framework and help interpret formulas.
Duration 20 minutes
MODULE 1 SUMMARY
Time and
Session Materials
Technique
Lecturette and Step 1: Introduction Powerpoint Slide 6

discussion
Facilitator provides an overview of the session goal and
1 minute objectives.
Lecture and Step 2: Overview of The Performance Monitoring Flipchart

Guided Framework
Discussion Markers
Performance monitoring system
10 minutes
Overview of what this course will provide to assist an
institution to create and use a performance monitoring
system
The SEEP Framework and standardizing financial

reporting systems for MFIs
Lecturette Step 3: Using the SEEP Performance Monitoring PowerPoint Slides 7-

Framework 12
10 minutes
The SEEP Framework
The Tool
Important information to know before learning about the

SEEP Framework

MODULE 1 FACILITATOR NOTES
STEP 1: INTRODUCTION
LECTURE AND
DISCUSSION Display
1 minute PPT 6 Goals and Objectives: Module 1 The Performance Monitoring Framework
PowerPoint Describe
Slide 6
The objectives and discuss the topics for this module. By the end of Module 1,
participants will:
Describe what a performance monitoring framework is and why a framework is
critical to monitoring their institutions performance.
Discuss how the framework provides standards for the microfinance industry and
how individual institutions can benefit from those standards.
Be familiar with the framework’s referencing system to identify terms used in the
framework and help interpret formulas.
STEP 2: OVERVIEW OF THE PERFORMANCE MONITORING FRAMEWORK

LECTURE AND
DISCUSSION Ask
10 minutes What is a performance monitoring system?
Flipchart Write responses on a flipchart.
Markers Ask
Why does an institution need a performance monitoring system?
Write responses on flipchart.
Evaluate the financial performance
Improve financial performance
Make informed decisions
Provide accurate and timely reports
Accountability of management and staff
Summarize (if possible based on participants’ responses) what a performance
monitoring system is.
A performance monitoring system is a process and a set of tools that can help managers
make decisions, inform board of directors, and report to donors, investors, and other
interested parties. A performance monitoring system begins with a business plan and
includes managing for results, monitoring progress, and holding management and staff
accountable for results.
Describe to participants that the training will focus on creating standardized
1-2 MEASURING PERFORMANCE OF MICROFINANCE INSTITUTIONS: A FRAMEWORK FOR

financial statements and reports to use for analysis and monitoring.
One part of a performance monitoring system is creating financial statements and reports
that can provide you with important information that can be used for analysis and
monitoring of your institution. During this training we will focus on a framework that
will provide you with tools and resources to develop these financial statements and
reports and use the data for analysis, reporting, and monitoring.
Provide an overview of the Performance Monitoring Framework to include a brief
narrative of why the industry needs standards
As with any global industry, microfinance needs accepted standards by which MFIs can
be measured. The purpose of this Framework is to provide microfinance practitioners
with a means to develop financial statements and reports. Your institutions already have
the capacity to do this, so you could be asking yourself, “why am I here”. The difference
is that we have developed a standardized framework that uses the most up-to-date terms
and calculations in the industry. By using this framework you will be:
Institutionalizing a financial reporting framework that is defining the industry
standard and in accordance with International Financial Reporting Standards.
Creating meaningful reports for managers and board members to assess more
accurately institutional performance.
Creating transparency so that it is easier to benchmark good performance.
Using common standards that other MFIs are using to enable you to communicate
with others in the industry and measure your institution against those.
For MFIs that lack a comprehensive financial reporting framework, this Framework may
provide it. Microfinance managers who already have reporting formats may also find this
Framework useful to align their own framework with the industry-standard terms, ratios,
and adjustments
This Framework will move the industry one step further in the standardization effort by
providing examples, identifying adjustments, and highlighting the indicators that are
most important to monitor.
STEP 3: USING THE SEEP PERFORMANCE MONITORING FRAMEWORK

LECTURETTE
Explain the SEEP Performance Monitoring Framework
10 minutes
Show PPT 7
Powerpoint
Slides 7-12 The purpose of the Framework is for managers to know:
How to categorize data into statements and reports
Analyze the statements and reports
Use the information for monitoring purposes
To use the Framework effectively managers and others involved in performance
monitoring need to know the most up-to-date definitions, suggested formats and
calculations. The Framework is divided into 4 sections:
Show PPT 8

Financial Statements and Reports
Analytical Adjustments
Financial Ratios and Indicators
Creating and Analyzing Performance Monitoring Reports
The sections of the Framework are linked and build on each other as, for instance, data
from the financial statements and reports and analytical adjustments is used when
calculating financial ratios and indicators. So in order to understand and use the
Framework we will go through a step-by-step process of putting data into the suggested
financial statements and report formats, how to express those financial statements on an
adjusted basis, calculating and understanding financial ratios, and creating financial
performance monitoring reports.
Explain how the Framework Tool will be a resource for people to use.
The performance monitoring framework that we will learn about works together with a
spreadsheet tool that has been developed to match the format of the Framework. During
this training we will learn how to use the Framework, what kink of information the
Framework can provide to you as a manager of a microfinance institution, and how to
use the spreadsheet tool to create financial statements and reports.
Review the referencing and calculation conventions
Show PPT 9
Describe the reference system
For each statement or report, the line items are numbered consecutively and begin with
one of the following letters:
I Income Statement
B Balance Sheet
C Cash Flow Statement
P Portfolio Report and Activity Report
R Ratios
A Adjustments
N Non-Financial Data Report
Give example.
Show PPT 10
Discuss how multiple periods are described
To refer to accounts from different periods (that is, data from a previous period and data
from the current period), a superscript number identifies the period as follows:
¹ = end of current period
0
= end of previous period

As an example, during the calendar year 2004:
P1 = December 31, 2004
If a period is not indicated, then the account is for the current period.
Show PPT 11
Describe how to calculate averages
In this Framework, averages are indicated by the use of the superscript letters “avg”—for
example:
Pavg
Show PPT 12
Averages for a period, such as a year, can be calculated by adding a beginning amount
and an end amount and dividing the result by two—for example:
Pavg = [(P0 + P¹)/2]
This is how averaging is calculated throughout this Framework.

MODULE 2: FINANCIAL STATEMENTS AND REPORTS
Goal To construct and analyze financial statements and reports using terminology and formats that
promote global standards for microfinance institutions.
Describe the income statement, balance sheet, cash flow statement, portfolio report and non-
financial data report, and explain their significance and how they are related.
Construct financial statements and reports based on the SEEP Framework.
Discuss how the financial statements and report are interrelated.
Duration 8 hours
MODULE 2 SUMMARY
Time and
Session Materials
Technique
Lecturette and Overview of Financial Statements and Reports Powerpoint slides 13-14
discussion
Facilitator provides an overview of the session goal and
10 minutes objectives.
Guided Step 2: Income Statement Overhead/handout 2.1

Discussion Income Statement
Demonstration Overview of income statement Template
Activity
Income statement construction 2.2 Sample Income
1 hour 20 minutes Statement
Terminology, definitions, xrefs
2.3 Case Study Instructions
Practice
w/Income and Expense
Information
Guided Step 3: Balance Sheet Overhead /handout

Discussion
Demonstration Overview of balance sheet 2.4 Balance Sheet
Activity Template
Construction of a balance sheet
1 hour 20 minutes 2.5 Sample Balance Sheet
2.6 Case Study Instructions
Practice w/Balance Sheet
information
Guided Step 4: Cash Flow Statement Overhead

Discussion Group
Activity Overview of cash flow statement 2.7 Classification of Cash
Demonstration Receipts and Payments
Cash Flow construction
1 hour 20 minutes Overhead/Handout
2.9 Cash Flow Template
2.10 Sample Cash Flow

Activity Material 2.8 Cash
Flow Activity
2.11 Indirect Cash Flow

Example
2.12 Case Study Cash

Flow Instructions
Discussion Step 5: Portfolio Reports Overhead/handout 2.13

Lecturette Sample Portfolio Report
Overview of portfolio report
40 minutes Handout 2.14 Micro MFI
Portfolio activity information, movement in the Portfolio Report
impairment loss allowance, and aging report
Sample Portfolio report
Discussion Step 6: Non-Financial Data Report Overhead/Handout 2.15

Non-financial Data Report
20 minutes Overview of non financial data report
Operational and macroeconomic data
Sample non-financial data report
Discussion Step 7: Linking Financial Statements Overhead/Handout 2.16

Activity Matrix
Importance of understanding the links between financial
45 minutes statements Need handouts 2.2 2.5,
2.10, 2.13
Links between the financial statements and reports
MODULE 2 FACILITATOR NOTES
STEP 1: OVERVIEW OF FINANCIAL STATEMENTS AND REPORTS

DISCUSSION
Show PPT 13 and explain objectives of module 2 Financial Statements and
10 minutes Reports. Describe what will be covered during this module.
Powerpoint slides Ask
13-14
What is financial management?
Write answers on a flipchart.
Timely and accurate production of financial reports
Financial records
Recording financial transactions and categorizing them by groups, and
summarizing the information
Ask
What types of statements and reports are included in a financial management system?
List answers on flipchart. After a statement or report has been identified ask the
class for a brief description of the statement.
Answers should include the following:

Income Statement (or profit and loss statement): A flow statement that
summarizes all revenues, expenses, gains, and losses over a given period.
Balance Sheet (or statement of financial position): A stock statement that shows
the financial position of the institution at a point in time, including its economic
resources, claims on those resources, and the residual interest in them.
Cash Flow Statement: A flow statement that summarizes the inflows and
outflows of cash for an institution over a given period.
Portfolio Report: A portfolio report represents an MFI’s microlending activity,
presents the quality of the loan portfolio, and provides detail on how the MFI has
provisioned against potential losses. Unlike other statements, the design of this
report varies from MFI to MFI.
Explain that the statements and reports are part of the Framework
Explain that common statements and reports, such as the ones the class identified, are
included in the Framework. Add that to complete this Framework, a fifth report, a
non-financial data report, is part of the Framework and needs to be completed for the
Framework.
Facilitator to ask participants for a brief description of the non-financial data report.
The non-financial data report includes data on products and clients served by the
institution, as well as data on the resources used to serve them.
Describe to participants the statement and reporting formats that are presented
in the Framework.
In designing the statements, the most commonly used formats were selected and the
ones that contained a reasonable number of accounts organized as clearly as possible.
The formats presented include the minimum breakdown of financial information
required to complete the overall Framework and be in accordance with IFRS. These
formats have been reviewed for IFRS compliance and no material conflicts exist.
Show PPT 13
Discuss with participants important clarifying information before financial
statements are explored.
Mapping Accounts: MFIs use different terminology. For example one MFI can
refer to revenue and another use income. (You can ask the participants for
additional examples). Encourage participants to begin using the terminology
presented in this Framework. Stress that the terminology used in the Framework
is the standard that will be used in the industry. Point out that the definitions
presented in the following sessions will help participants match their MFIs
accounts to the framework
Adding Accounts: Participants may want to add sub-accounts under the income
statement and balance sheet accounts for management purposes. Give example
or use: The framework contains two categories of Administrative Expenses. If
your institution has particular accounts that you want to track you just need to
add the accounts such as: Write on flipchart.
(I20) Other Administrative Expense

(I20-1) Rent
(I20-2) Transportation Expenses
(I20-3) Office Supplies
Give participants another example and ask them to add accounts.
Segregating Financial and Non-Financial Service: If non-financial services
account for a small portion of the MFI’s activities you might want to classify all
income and expenses as non-operating items. If non-financial operations are
significant, a manager should allocate costs among different programs and
develop segregated financial statements that treat the financial service operations
as a separate business.
Cash or Accrual: Institutions use cash or accrual accounting or a mixture of both.
This Framework can be used for either method of accounting.
STEP 2: GUIDED INCOME STATEMENT

DISCUSSION
DEMONSTRATION Handout
1 hour 20 minutes Give participant’s handout 2.1 The Income Statement.
Handouts: Ask
2.1 Income What is an income statement?
Statement
Template Expected responses:
2.2 Sample Is a flow statement

Income Statement Represents activity over a given period, day, month, quarter or year
2.3 Case Study Summaries of the revenue and expense transactions for a defined period
Instructions and
Micro MFI Shows profit and loss (which flows to the net worth of the balance sheet)
Income and
Summarize the income statement
Expense
Information The income statement reflects a dynamic picture of (1) what is earned from the
provision of financial services, (2) what the total costs involved in carrying out those
Overheads:
activities, and (3) whether a net surplus or deficit (profit or loss) exists for the period.
2.1 Income
Show the overhead 2.1 Sample income statement.
Statement
Point out that an income statement is divided between revenue accounts and expense
accounts. Write Financial Revenue at the top of the income statement (I1) and
Financial Expense (I7). Ask participants to fill in their income statements as you go
along.
Ask. Write responses on flipchart.
What are revenue accounts?
What are expense accounts?
Summarize revenue and expenses.

As defined by IAS, REVENUE is the gross inflow of economic benefits during a
period arising in the course of ordinary activities of an institution when those inflows
result in increases in equity other than increases relating to contributions from equity
participants.
As defined by IAS, EXPENSES are decreases in economic benefits during the
accounting period in the form of outflows, depletions of assets, or incurred liabilities
that result in decreases in equity other than those relating to distributions to equity
participants.
Say that an income statement usually includes a division of operating accounts
and non-operating accounts.
Write on the overhead
Operating Expense (I16), Non Operating Revenue (I23), Non-Operating Expense
((I24).
Ask
What are operating accounts?
What are non-operating accounts?
Summarize
Operating accounts include all revenue and expense accounts related to the
institution's core business—the provision of financial services.
Non-operating accounts include all revenue and expense accounts not related to the
institution's core business—the provision of financial services. This could include
training or the sale of merchandise.
Add that donations and grant funds from donors are considered to be non-operating
revenue. In this Framework, all donations for loan capital and operating expenses are
included in the income statement.
Ask
What accounts are included under financial revenue?
Responses include:
Financial revenue from loan portfolio to include interest on loan portfolio and
fees and commissions on loan portfolio
Financial revenue from investments
Other operating revenue
Write the account names on the overhead.
Participants could use different terminology for account names. The Facilitator must
understand the type of account that is being discussed and translate the account to the
terminology that is described in the Framework. The terminology in the Framework
is the terminology that participants are encouraged to use.

Review the definition of each account of financial revenue
As you review the definition of each account identify the cross reference statement.
For instance when talking about Financial Revenue from Loan Portfolio tell
participants that this is cross referenced to the Cash Flow Statement (C1). This
should be stated for all applicable accounts.
Ask participants how you calculate Financial Revenue from Loan Portfolio?
Response:
Interest on Loan Portfolio + Commission and Fees on Loan Portfolio
I3 +I4. Write this calculation on the overhead under calculations for Financial
Revenue from Loan Portfolio.
Tell
Financial revenue is the total value earned from the provision of financial services.
Ask
How do we calculate financial revenue?
Response
Financial Revenue from Loan Portfolio + Financial Revenue from Investments + Other Operating Revenue
I2 + I5 + I6. Write this calculation on the overhead under calculations for financial revenue (I1).
Ask
What accounts are included under financial expense?
Responses include:
Financial expense on funding liabilities to include interest and fee expense on
deposits and interest and fee expense on borrowing
Other financial expense
Write the account names on the overhead/word document.
Participants might use different terminology for account names. The Facilitator must
understand the type of account that is being discussed and if necessary translate that
language to use the terminology that is described in the Framework. The terminology
in the Framework is the terminology that participants are encouraged to use.
Review the definition of each account
Ask
How do you calculate Financial Expense on Funding Liabilities?
Response
Interest and Fee Expense on Deposits + Interest and Fee Expense on Borrowings
I9 + I10.
Write the response on the overhead in the calculation column for Financial Expense

on Funding Liabilities (I8).
Ask
How do you calculate Financial Expense?
Response
Financial Expense on Funding Liabilities + Other Financial Expense
(I8 + I11)
Write the response on the overhead in the calculation column for Financial Expense
(I7).
Tell
The Net value of financial earnings from financial services is called Net Financial
Income.
Write
Net Financial Income on (I12).
Ask
How do you calculate Net Financial Income?
Response
Financial Revenue – Financial Expense (I1) – (I7).
Ask
What does the net financial income tell you?
Describe Impairment Losses on Loans, Provision Expense for Loan Impairment,
and Value of Loans Recovered
Impairment Losses on Loans: Previously knows as net loan loss provision
expense, it is ([I14]) Provision for Loan Impairment net of the (I15]) Value of
Loans Recovered. This amount is used to create or increase the (B5) Impairment
Loss Allowance on the balance sheet
Provision Expense for Loan Impairment: Previously known as the Gross Loan
Loss Provision Expense, the non-cash expense calculated as a percentage of the
value of the loan portfolio that is at risk of default. This value is calculated in the
portfolio report.
Value of Loans Recovered: Total value of principal recovered on all loans
previously written off. This includes principal on partially recovered loans and
those recovered in full. Subsequent recoveries of loans previous written off
decrease the amount of the (I14) Provision for Loan Impairment, and the net
amount is booked as (113) Impairment Losses on Loans.
Ask
What accounts are included under Operating Expense?

Responses include:
Personnel Expense
Administrative Expense to include depreciation and amortization expense and
other administrative expense
Write the account names on the overhead.
Participants might use different terminology for account names. The Facilitator must
understand the type of account that is being discussed and use the terminology that is
described in the Framework. The terminology in the Framework is the terminology
that participants are encouraged to use.
Review the definition of each account (for definitions see XXX)
When reviewing the definitions remember to discuss how to calculate Administrative
expense. The response you are looking for is:
Depreciation and amortization expense + other administrative expense. I19 + I20.
Remember to write this calculation on the overhead.
Ask
How do you calculate the total Operating Expenses?
(I17) Personnel + (I18) Administrative Expenses
Describe Net Operating Income
Net Operating Income is the net earnings from the provision of financial services. To
calculate this you must:
Net Financial Income - Impairment Losses on Loans – Administrative Expenses
I12 – I13 – I18

Review non-operating revenue and non-operating expense
Summarize or ask participants to review what was discussed about non-operating
revenue and expense.
Non-operating Revenue: All revenue not directly related to core microfinance
operations, such as revenue from business development services, training,
consulting services, management information system sales, or sale of
merchandise. It does not include donations (see I28). This account also includes
any exceptional gains and revenues. Large or relevant non-operating revenue
categories should be listed as separate line items as appropriate.
Non-Operating Expense: All expenses not directly related to the core
microfinance operation, such as the cost of providing business development
services or training. This account also includes any exceptional losses and
expenses. Large or relevant expense categories should be listed as separate line
items as appropriate.
Point out on the overhead these two accounts.
Describe Net Non-Operating Income/(Expense) and how it is calculated.

The net earnings from products and services not directly related to core microfinance
operations. Institutions should disclose large material amounts of non-operating
revenue separately by creating accounts under (I23) Non-Operating Revenue or (I24)
Non-Operating Expense.
Ask
What is net income (before taxes and donations)?
Response to include All net earnings from the institution's operations before the
inclusion of taxes and donations.
Describe how to calculate Net Income
Net Operating Income + Net Non-Operating Income/(Expense)
I21 + I22
Write the calculation on the overhead.
Discuss and define Taxes and Net Income (After Taxes and Before Donations.
Taxes: Includes all taxes paid on (I26) Net Income or other measure of profit as
defined by local tax authorities
Net Income (After taxes and before donations): All net earnings from the
institution's operations, net of (I26) Taxes, and before the inclusion of (I28)
Donations.
Ask how Net Income is calculated.
Response Net Income Before Taxes and donations – Taxes
I25 – I26
Discuss donations
It was described earlier that in this Framework all donations are included in the
income statement. This includes donations for loan capital and donations for
operating expenses.
Write
Donations for Loan Capital (I29) and Donations for Operating Expenses (I30) on the
income statement overhead.
Ask
Why are donations in the income statement? To increase transparency.
Show that (I28) Donations is the value of all donations recognized as revenue
during the period, whether restricted or not.
To calculate Donations:
Donations for Loan Capital + Donations for Operating Expenses
(I29) + (I30)

Ask
How do we calculate Net Income (After Taxes and Donations)?
Net Income (After Taxes and Before Donations) + Donations
(I27) + (I28)
Ask
What does Net Income tell you about the institution?
Describe
Institutions may want to create subaccounts under some of the income statement and
balance sheet accounts for management purposes. As an example, the Framework
contains only two categories of Administrative Expenses: (I19) Depreciation and
Amortization; and (I20) Other Administrative Expenses.
Ask
How would you add additional accounts under (I20) Other Administrative Expense?
(I20) Other Administrative Expense
(I20-1) Rent
(I20-2) Transportation Expenses
(I20-3) Office Supplies
Describe
Adding subaccounts enables users to track certain accounts particular to their
business while maintaining consistency with industry standards. Note that this
Framework is not a substitute for a chart of accounts, and any accounts added are for
analytical rather than accounting purposes.
Show
Sample income statement (handout 2.2) on overhead projector. Give participants a
copy of the income statement .
Practice mapping income and expense information into the SEEP Framework
income statement.
After introducing the SEEP Framework income statement participants need to
practice and use the new information.
Tell
Participants they will start to work with financial information from Micro MFI, a
micro finance institution. This organization has made the decision to use the SEEP
Framework as part of their performance monitoring system. In order to use the
framework Micro MFI must create financial statements in the SEEP Framework
format. As managers your job is to map the income and expense information into the
SEEP Framework income statement.

Divide
Participants into pairs. These teams will work together during the training when
working on the case study. It is recommended to have participants from the same
organization work together during the case study.
Distribute
Handout 2.3 Micro MFI Income and Expense Information. This handout has 4 pages:
an instruction page, Micro MFI Income and Expense Information (2 pages), a blank
SEEP Framework Income Statement.
Describe
To participants that in their teams they need to review the income and expense
information provided. Based on this information they need to map Micro MFI’s
income statement into the SEEP Framework Income Statement. This task requires
identifying what account information from the institutions previous statements needs
to be relocated into new accounts for the SEEP framework format. Participants need
to create an Income Statement for two years. Participants have 30 minutes to work
on this.
Review activity in large group. Depending on time there are a few ways to process
this activity.
1. Option one: The facilitator can show an overhead of the completed Income
Statement. The facilitator can walk participants through the mapping of the
income and expense information through question and answer.
2. Option two: Using a blank overhead of the Income Statement the facilitator can
ask one group at a time for specific information. For example, ask” What is the
Financial Revenue from Loan Portfolio?” Ask what financial information they
used to get this financial revenue? Write this information into the overhead.
Continue asking each group for specific pieces of information to fill in the
Income Statement.
Ask
Participants what was difficult/challenging about mapping the information? How can
this be done efficiently in their organizations?
STEP 3: GUIDED THE BALANCE SHEET

DISCUSSION
DEMONSTRATION Give participants handout 2.4 The Balance Sheet
1 hour 20 min Ask
Handouts: What is a balance sheet?
2.4 Balance Sheet When is a balance sheet produced?
Template
Summarize the balance sheet
2.5 Sample
Balance Sheet The balance sheet is a stock statement.
Overhead: Captures the financial position or financial structure of an MFI at a moment in

time.
2.3 Balance Sheet
Template A balance sheet is usually produced monthly or quarterly (at a minimum,
annually.
The balance sheet summarizes the ending balance of all asset, liability, and equity
accounts
Ask
What are the three major categories of accounts of the balance sheet?
Assets—everything an MFI has (such as investments, vehicles) or is owed (such
as microloans, interest receivable);
Liabilities—everything the MFI owes to others (such as borrowings, deposits);
and
Equity—the MFI’s net worth; that is, the difference between assets and liabilities.
As the name implies, the balance sheet is presented in a way that shows the
following:
Write on flipchart Assets = Liabilities + Equity
Describe short-term and long-term
Assets and liabilities are divided into short-term and long-term accounts in
financial statements. Short-term (or current) assets and liabilities can be turned
into cash within a year from the date of the statement or report - not from the date
of disbursement, issuance, or purchase.
In addition, short-term assets and liabilities include any portion of a long-term
asset or liability that is receivable or payable within a year, even if the final
maturity date is more than a year from the report or statement date.
Ask
How do you group assets and liabilities on the balance sheet?
According to IAS, the most useful approach to the classification of assets and
liabilities on a balance sheet is to group them first by type and second by maturity.
Ask a participant to review what an asset is.
Everything an MFI has (such as investments, vehicles) or is owed (such as
microloans, interest receivable); A resource controlled by an institution as a result of
past events and from which future economic benefits are expected to flow to the
institution.
Generate a list of assets to include on the balance sheet. Ask participants What
accounts are included as Assets?
Write this list on a flipchart.
Facilitator to remember that the terminology participants’ use may be different
then the terminology in the Framework. Understand what kind of account a
participant is describing and then translate that to use the terminology from the

Framework.
Any accounts that are not introduced by the participants must be described by the
Facilitator.
Additional talking point about assets on the balance sheet
Contra Asset Accounts: Most accounts have positive numbers. In a few cases,
accounting principles require an account that has a negative number. These
subaccounts represent a reduction of an asset and are referred to as contra asset
accounts. A typical contra asset account for an MFI is (B5) Impairment Loss
Allowance (previously known as Loan Loss Allowance), which has the effect of
reducing the value of the gross loan portfolio on the balance sheet.
Define and record assets on the balance sheet as presented in the Framework
Facilitator to specifically note that the Framework balance sheet refers to (B2)
Trade Investments and (B8) Other Investments rather than short-term and long-
term investments. This reflects IFRS principles that state that an MFI’s use or
intended use of a financial asset is more relevant than its actual maturity.
Include a description of how to calculate Net Loan Portfolio, Net Fixed Assets,
and Total Assets.
Review what liabilities are. Ask a participant to summarize liabilities.
Everything the MFI owes to others (such as borrowings, deposits)A present
obligation of the institution arising from past events, the settlement of which is
expected to result in an outflow from the institution of resources with economic
benefits.
Generate a list of liabilities
Tell participants to turn to their neighbor and work on a list of accounts to include as
liabilities on the balance sheet. (5 minutes)
Go around the room and ask each group to name and describe one liability account.
Write this on a flipchart.
When all accounts have been identified write the liability accounts on the balance
sheet.
Facilitator to remember that the terminology that participants use may be
different then the terminology in the Framework. Understand what kind of
account a participant is describing and then use the terminology from the
Framework.
Facilitator.
Define liabilities on the balance sheet as presented in the Framework
Review Equity
As defined by IAS, the residual interest in the assets of an institution after deducting
all its liabilities. The MFI’s net worth.

Generate a list of accounts to include under Equity. Write these on the flipchart
Facilitator to remember that the terminology participants’ use may be different
then the terminology in the Framework. Understand what kind of account a
participant is describing and then use the terminology from the Framework.
Facilitator.
Define and record equity accounts on the balance sheet as presented in the
Framework
Ask participants to list the equity accounts so that you can write them on the balance
sheet. Remember to use the terminology presented in the framework.
Additional talking point
Donations
— This Framework recommends the income approach to donations so that all
donations for operations and loan funds used in the current operating period
are recorded as (I28) Donations on the income statement, which flow into
(B25) Donations, Current Year on the balance sheet. At the beginning of a
new year, they are transferred from (B25) to (B24) Donations, Previous
Years. Donations for operations and loan funds to be used beyond the current
operating period are recorded as deferred revenue. If the donation or grant
agreement specifies when the donations must be used, record those that must
be used within 12 months as (B17) Accounts Payable and Other Short-term
Liabilities, and record the remainder as (B20) Other Long-term Liabilities.
When a portion of donations is used, that portion is transferred to the income
statement (I28) Donations
— MFIs may record grants for fixed assets as deferred revenue (B20) Other
Long-term Liabilities. When the asset is purchased, an the purchase amount
is transferred to (I30) Donations for Operating Expense
— If fixed assets are donated, MFIs should record their value as deferred
revenue in (B20) Other Long-term Liabilities. Each accounting period,
usually monthly or quarterly, an amount equal to the period's depreciation for
the donated asset is transferred to (I28) Donations for Operating Expense,
and the same amount is credited to (I17) Depreciation and Amortization. If
the MFI is not recognizing a fixed asset donation in this manner, it should
include the value of the fixed asset as part of the adjustment.
Include a description of how to calculate
Donated Equity B24 + B25
Retained earnings B27 + B28
Total Equity B22 + B23 +B26 +B29 +B30 + B31
Handout and show overhead 2.5
Tell

Participants they will continue to work with financial information from Micro MFI.
They now have the information from Micro MFI’s balance sheet. As was done with
the income statement participants must map the financial information from the
balance sheet into the SEEP Framework balance sheet format
Tell Participants they will work in their same groups as before.
Distribute
Handout 2.6 Micro MFI Balance Sheet Information. This handout has 4 pages: an
instruction page, Micro MFI Balance Sheet (2 pages), a blank SEEP Framework
Balance Sheet. Also included is the Micro MFI Balance Sheet Information with
notes for facilitator, and a completed SEEP Framework Balance Sheet with
Facilitator notes.
Describe
To participants that in their teams they need to review the information provided.
Based on this information they need to map Micro MFI’s balance sheet financial
information into the SEEP Framework balance sheet. This task requires identifying
what account information from the institutions previous statements needs to be
relocated into new accounts for the SEEP framework format. Participants need to
create a balance sheet for two years. Participants have 30 minutes to work on this.
this activity.
1. Option one: The facilitator can show an overhead of the completed Balance
Sheet. The facilitator can walk participants through the mapping of the balance
sheet through question and answer.
2. Option two. Using a blank overhead of the Balance Sheet the facilitator can ask
one group at a time for specific information.
Ask
Participants what was difficult/challenging about mapping the information? How can
this be done efficiently in their organizations?
Note To Facilitator: At the end of the session on the balance sheet introduce the
spreadsheet tool. Refer to the section in this manual on the Tool. As time is limited
in this session participants can begin to use the tool to input data from the case study.
They can continue with data input at the end of the day and into the evening.

STEP 4: GUIDED THE CASH FLOW STATEMENT
DISCUSSION
ACTIVITY Note to Facilitator: This session reviews in detail a Direct Cash Flow Statement. At
the end of the session the Indirect Cash Flow Statement is mentioned but not in
1 hour 20 min detail. Depending on time, participant interest, and knowledge the indirect cash
Handouts: flow statement can be expanded or just referenced.
2.8 Cash Flow Ask

Template What is a cash flow statement?
2.9 Sample Cash What valuable information does a cash flow statement provide?
Flow
The cash flow statement is a flow statement that represents the inflows and
Overhead: outflows of cash during a specified period.
2.6 Classification The cash flow statement summarizes each transaction or event that causes cash
of Cash Receipts to increase (sources of cash) or decrease (uses of cash).
and Payments
Describe that a cash flow statement classifies the inflows and outflows of cash
2.8 Cash Flow into three major categories.
Template
Operating Activities
2.10 Indirect
Cash Flow Investing Activities
Activity Financing Activities
Material:
Ask what each of the categories is? Have a prepared flipchart with the
2.7 Cash Flow following information:
Activity
Cash Flow Statement Categories with Definitions
Prepared
Flipchart: Operating Activities, the cash receipts and payments related to the MFI’s
ongoing provision of financial services, including lending and deposit services;
Cash Flow
Statement Investing Activities, the cash receipts or outlays for acquiring or selling (B10)
Categories with Fixed Assets or financial investments; and
Definitions Financing Activities, the borrowing and repayment of borrowings, the sale and
redemption of (B22) Paid-In Capital, and the payment of dividends.
Show overhead 2.6 Classification of Cash Receipts or Payments or a flipchart
that has a similar table
So that participants understand the differences of the classifications ask the group to
list examples of receipts and payments for each classification. Responses that can be
included are on the following page.

Classification Receipts Payment
Operating Principal repayments Loan disbursements

Activities
Interest and fee receipts on the (B4) (B2) Purchase of Trade
Gross Loan Portfolio and Investments
investments
Interest and fee payments
Other receipts for the provision of
financial services Payment to Personnel or for
(I18) Administrative
Funds received from accepting Expenses
deposits
Taxes paid
Funds repaid to depositors
Investing Proceeds from the sale of an Purchase of (B8) Other

Activities investment Investments
Proceeds from the sale of (B10) Purchase of (B10) Fixed

Fixed Assets Assets
Financing Funds received from borrowings Principal repaid on

Activities borrowings
Receipt of (B22) Paid-In Capital from
the sale of shares or membership Repurchase of (B22) Paid-In
Capital
Payment of dividends
Explain that there are two ways a cash flow statement can be constructed
Direct method that shows all the cash transactions in and out of the Cash and
Due from Banks account.
The direct method for preparing a cash flow statement is the most intuitive of the
methods. It reconstructs the income statement by tracing the movement of cash
and adds other events not included on the income statement that have caused an
inflow or outflow of cash.
Indirect method deduces the movement of cash based on the changes in specific
income statement and balance sheet accounts.
It begins with the (I28) Net Income (After Taxes and Before Donations) and then
adds back all other sources of cash (such as loan payments) and subtracts all
other uses (such as loan disbursements) that can be deduced by changes in
balance sheet accounts.
Add that both methods can be used for this Framework.
Construct, Define and review a direct cash flow statement.
1. Pass out to all participants 1 or 2 cards from material 2.7 (Constructing a Cash
Flow Statement) and a copy of overhead/handout 2.8 Direct Cash Flow
Statement Template. Each card has one term written on it from either operating
activities, investing activities, or financing activities. Depending on how many
participants are in the training, each person should get at least one card. If some

people need to get more than one card, make sure the cards they have are from
the same category. Make sure that the cards are large enough so that people can
read them from the back of the room.
2. Instruct participants to group themselves according to what “category” of
account they have. For instance, operating, investing, or finances activity.
3. Once all participants are in their appropriate category, tell them to arrange
themselves according to how a cash flow statement is constructed.
4. Start with the operating activities group. Ask them to describe how they
constructed this category. Write this on the overhead 2.8 Direct Cash Flow
Statement or on a prepared flipchart.
5. Ask the large group what they think about the ordering of this account. Change
the account ordering on the overhead or flipchart when/if appropriate.
6. Ask the investing activities group how they constructed this category. Write this
on the overhead 2.8 Direct Cash Flow Statement or on a prepared flipchart.
8. Finish with asking the finances activities group how they constructed their
account. Write this on the overhead 2.8 Direct Cash Flow Statement or on a
prepared flipchart.
Show overhead 2.8. Starting with the first account of the direct cash flow statement
Cash Received from interest, fees, and Commissions on Loan Portfolio, ask the
participant with that card to describe the account in more detail . Ask other
participants for additions or corrections to the definition. Ask the participant to cross
reference the account. Tell participants the cross reference if necessary. Write a
brief definition and the cross reference on the overhead/projector. Proceed with
working your way through the other terms until the Cash Flow Statement is
complete.
Show and handout overhead/handout 2.9 Sample Direct Cash Flow Statement.
State that many of the accounts used for the indirect cash flow statement are the
same as those in the direct cash flow statement.
Show overhead 2.10 Indirect Cash Flow Statement.
Review the accounts of the Indirect Cash Flow Statement, specifically
identifying the cross references to the Direct Cash Flow Statement.
Tell Participants they will work on their case study in their same groups as before.
Distribute
Handout 2.12 Micro MFI Cash Flow. This handout has 3 pages: an instruction
page, Micro MFI Cash Flow Data, a blank SEEP Framework Cash Flow Statement.
Also included is a completed SEEP Framework Cash Flow.

Describe
To participants that in their teams they need to review the information provided.
Based on this information they need to map Micro MFI’s cash flow financial
information into the SEEP Framework cash flow. This task requires identifying what
account information from the institutions previous statements needs to be relocated
into new accounts for the SEEP framework format. Participants need to create a
cash flow statement. Participants have 30 minutes to work on this.
this activity.
1. Option one: The facilitator can show an overhead of the completed cash flow
statement. The facilitator can walk participants through the mapping of the cash
flow through question and answer.
2. Option two: Using a blank overhead of the cash flow statement the facilitator
can ask one group at a time for specific information. For example “Describe the
financial data for cash flow from operating activities. Write this information into
the overhead. Continue asking each group for specific pieces of information to
fill in the cash flow statement.
Ask
Participants what was difficult/challenging about mapping the information? How
can this be done efficiently in their organizations?
Note To Facilitator: At the end of the day there is time allocated for participants to
continue with inputting data into the spreadsheet tool.
STEP 5: THE PORTFOLIO REPORT AND ACTIVITY REPORT

DISCUSSION
LECTURETTE Say
40 minutes A portfolio report and an activity report link the loan portfolio information of the
income statement, balance sheet, and cash flow statement.
Handout:
Ask
2.13 Sample
Portfolio Report What is the purpose of a Portfolio Report?
2.14 Micro MFI Responses:
Portfolio Report
Represent in detail an MFI’s microlending activity
Overhead:
Present the quality of the loan portfolio
2.13 Sample
Portfolio Report Provide detail on how the MFI has provisioned against potential losses
Ask
What is included in a Portfolio Report?
Portfolio activity information
Movement in the Impairment Loss Allowance

Portfolio aging schedule
Show overhead 2.13 Sample Portfolio Report and describe
The Portfolio Report is the one statement that does not have a consistent design. Say
that this is a sample portfolio report. Many MFI’s design their reports differently.
What is included in the Portfolio Report, however, should be the portfolio activity
information, movement in the impairment loss allowance, and portfolio aging
schedule.
Go through each account and describe and define.
Tell Participants they will work on their case study in their same groups as before.
Distribute
Handout 2.14 Micro MFI Portfolio Report. This handout has 2 pages: an instruction
page and Micro MFI Portfolio Report.
Describe
To participants that in their teams they need to review the information provided in
the Portfolio Report. Participants need to determine if the data presented is
appropriate. Participants need to pay particular attention to the rescheduled loans.
Participants have 10 minutes to review the report.
Ask
Participants in the large group what they uncovered during their review of the
portfolio report.
Key points that need to be emphasized is that even though the rescheduled loans are
tracked Micro MFI does not treat them different for provisioning. Micro MFI
guesses that most of its overdue rescheduled loans are less than 60 days past due, and
applies the rate of 25% to them.
Ask
Participants what they will do with this information. Will they change anything in
this report?
Note To Facilitator: The data from the case study will be used as the financial data
for the portfolio report for the case study. At the end of the session on the non-
financial data report there will be additional time for inputting this data into the
tool.
STEP 6: NON-FINANCIAL DATA REPORT

DISCUSSION
SMALL GROUP
20 minutes Ask
Handout: Whose institution produces a non-financial data report?
2.15 Non- Why does the institution collect this information?
Financial Data
How do you use this information?

Report
Describe
Overhead:
To use this Framework, Operational and Macroeconomic data must be captured to
2.15 Non- calculate key financial ratios.
Financial Data
Report Ask
What does operational data refer to?
Operational data refers to products and clients served by the institution as well as the
resources used to serve the clients. An example of this is number of clients served.
Ask
Participants to work with their neighbor to come up with a list of additional
examples of operational data that either their institution uses or they are familiar
with.
Solicit responses of operational data and write this on a flipchart
Ask
What does macroeconomic data refer to?
Why do you need macroeconomic data?
Describe
Macroeconomic refers to data from the local economy, such as exchange rate.
Ask for additional examples of macroeconomic data. Write this on a flipchart.
Show overhead 2.15 Non-Financial Data Report
Review and Define the terms.
Say and ask
You may want to include additional items of interest in this report. What are other
sources of data that we might want to include in this report? Why is that information
important?
Give
To participants handout 2.16 Micro MFI Non-Financial Data.
Ask
Participants to review the information presented in the table and see if there are any
questions.
Tell
Participants to keep all the case study information together as they will be using this
over the next few days.
Note To Facilitator: After the session on non-financial data report, time is allocated
for the tool. You can use this time for participants to input their data into the
spreadsheet and to become more familiar with the tool.

At the beginning of day 2, time is allocated for the tool and financial statements.
This time can be used to discuss questions the participants may have about the tool.
Additionally, the time can be used to print the financial statements and to talk about
what the financial statements are revealing about MICRO MFI and how the financial
statements are linked.
Remind
Participants that for tomorrow they need to review the chapter in their books on
Ratios and Indicators.
STEP 7 LINKING FINANCIAL STATEMENTS
45 minutes Review key points about financial statements and reports. Emphasize:
Overhead/ A lot of time was spent on reviewing financial statements, learning how to
Handout: categorize data into statements and reports, and becoming familiar with new
terminology.
2.16 Matrix to
Identify Linkages The financial statements and reports presented in this chapter include the
between minimum of information necessary to present accurately an MFI’s activities and
Financial results. All information presented in this framework is significant and
Statements noteworthy.
Every item is also necessary for managers to analyze the MFI’s performance and
condition and to create performance monitoring reports for themselves and
others.
Communicating less (but meaningful) information is sometimes better than
providing detailed information without explanation. Executive summaries,
narratives, and footnotes are vital to making financial statements transparent and
accessible to non-financial readers and financial analysts alike.
Say
The financial statements used in this Framework are linked. Managers should
learn the primary connections among the statements.
Ask
Why is it important to know and understand the linkages between the financial
statements? What does this tell us?
Describe activity
To understand and become more familiar with how the financial statements are
linked we will work on an activity.
The purpose of the activity is for participants to compile a list of main links between
financial statements that we have worked with. For this activity participants will
need their copy of handout 2.2 Sample Income Statement, handout 2.5 Sample
Balance Sheet, handout 2.10 Sample Direct Cash Flow Statement, handout 2.13
Sample Portfolio Report.
1. Describe the outcome of this activity: Each group is to identify as many linkages

between the financial statements (income statement, balance sheet, cash flow
statement, and portfolio report.) in 20 minutes. Using the handout/overhead 2.16
Matrix to Identify Linkages Between Financial Statements the groups are to
write the main links they can identify between the statements and determine the
relationship in the last column. There is one example of a link in the matrix.
The facilitator can show the overhead 2.16 and describe the example.
2. Divide participants into groups of 3 people. Tell participants that each person
needs a copy of the sample income statement, balance sheet, direct cash flow
statement, and portfolio report. They need to consult these statements to identify
the common links. Remind participants that cross references are included in
their sample statements.
3. Give each participant a copy of handout 2.16.
4. The groups have 20 minutes to work.
5. Process activity. At the end of 20 minutes review the list of links that the groups
identified.
6. Ask one group at a time to discuss one link they identified. They need to
articulate the link between the statements and then describe the relationship.
Write the information on the overhead 2.13 Matrix. Go around the room so all
groups discuss at least one link.
Ask again
Why, as managers, do we need to know and understand the links between the
financial statements?
What information can this tell us or reveal to us?

OVERHEAD AND HANDOUT 2.1
INCOME STATEMENT TEMPLATE
Ref. X-Ref. Account Name Calculation
I1
I2
I3
I4
I5
I6
I7
I8
I9
I10
I11
I12 Net Financial Income
I13
I14
I15
I16
I17
I18
I19
I20
I21 Net Operating Income
I22
I23
I24

I25
I26
I27
I28
I29
I30
I31
a
If an MFI uses cash accounting, these accounts will have the same value as the
cross-referenced accounts. If the MFI uses accrual accounting, these values will not
be the same as the cross-referenced account.

SAMPLE INCOME STATEMENT
From From
Ref. X-Ref. Account Name 1/1/2004 to 1/1/2003 to
12/31/2004 12/31/2003
I1 Financial Revenue 18,976,898 10,521,727
I2 C1a Financial Revenue from Loan Portfolio 17,053,668 9,302,491
I3 Interest on Loan Portfolio 13,867,568 7,494,464
I4 Fees and Commissions on Loan Portfolio 3,186,100 1,808,027

a
I5 C2 Financial Revenue from Investments 1,597,830 1,003,556
I6 C3 a Other Operating Revenue 325,400 215,680
I7 Financial Expense 1,287,719 853,197

a
I8 C5 Financial Expense on Funding Liabilities 1,039,719 797,869
I9 Interest and Fee Expense on Deposits 256,343 250,000
I10 Interest and Fee Expense on Borrowings 783,376 547,869

a
I11 C6 Other Financial Expense 248,000 55,328
I12 Net Financial Income 17,689,179 9,668,530
I13 C29 Impairment Losses on Loans 439,972 162,862
I14 P8 Provision for Loan Impairment 489,154 297,368
I15 P10 Value of Loans Recovered (49,182) (134,506)
I16 C7a Operating Expense 15,072,242 6,633,187
I17 Personnel Expense 8,700,000 4,594,436
I18 Administrative Expense 6,372,242 2,038,751
I19 C28 Depreciation and Amortization Expense 1,597,669 317,057
I20 Other Administrative Expense 4,774,573 1,721,694
I21 Net Operating Income 2,176,965 2,872,482

a
I22 C22 Net Non-Operating Income/(Expense) (1,403,143) (1,838,992)
I23 Non-Operating Revenue 586,471 —
I24 Non-Operating Expense (1,989,614) (1,838,992)
I25 C27 Net Income (Before Taxes and Donations) 773,822 1,033,490
a a
I26 C8 , C30 Taxes 760,816 732,306
I27 B28 Net Income (After Taxes and Before 13,006 301,184
Donations)

I28 B25, C20a, C44a Donations 4,582,000 3,442,986
I29 Donations for Loan Capital — 1,258,291
I30 Donations for Operating Expense 4,582,000 2,184,695
I31 Net Income (After Taxes and Donations) 4,595,006 3,744,170

a
If an MFI uses cash accounting, these accounts will have the same value as the cross-referenced
accounts. If the MFI uses accrual accounting, these values will not be the same as the cross-
referenced account.

HANDOUT 2.3
MICRO MFI INCOME AND EXPENSE INFORMATION
CASE STUDY INSTRUCTIONS
Micro MFI, a microfinance institution that you work for as a manager, has made a decision to use the
SEEP Framework as part of their performance monitoring system. In order to use the framework Micro
MFI must create financial statements in the SEEP Framework format. As managers your job is to map
the income and expense information into the SEEP Framework income statement.
1. The task for your team is to create an income statement using the SEEP Framework Format.
2. The first step is to review the income and expense information and the trial balance of Micro MFI.
When reviewing this information you need to determine what accounts, if any, need to be relocated
into different accounts based on the SEEP Framework Income Statement.
3. Map the financial information into the SEEP Framework Income Statement format. To do this use
the worksheet Micro MFI Income and Expense Information. The last column in this worksheet is to
write the reference number for the SEEP Framework Income Statement. The last column is a guide
for you to use if you choose.
4. Complete Micro MFI’s SEEP Framework Income Statement for the current year and the past year.

HANDOUT 2.3
MICRO MFI INCOME AND EXPENSE INFORMATION
in thousands From Income Statement From Trial Balance Current Year Last Year Framework Account
Interest and Fees on Loans 136,896.4 77,975.4 Interest on Loans 128,777.9 67,290.8
Registration Fees 6,097.2 3,704.0
Loan Application Fees 2,021.3 -
Risk Premium 6,980.6
Direct Expenses
Interest Expense 3,923.8 1,165.4 Interest on Loan 30.0 124.7
Interest on Savings 3,893.8 1,040.7
Provision for Loan Losses 10,034.8 5,138.1
Total Direct Expenses 13,958.6 6,303.5
Net Interest after Provision for Loan Loss 122,937.8 71,671.9

Other Operating Revenue 1,473.3 814.0 Bad Debt Recovered 503.5
Bank Interest Received 13.5 9.5
Income on Investments 260.5 254.2
Pass book sales 184.5 228.7
Sale of Fixed Assets 100.0 -
Other 411.3 321.6
Net Operating Revenue 124,411.1 72,485.9
Non-Interest Expenses

Salaries and Benefits 45,252.4 28,575.3
Administrative Expenses 42,283.6 22,676.7 Finance and Bank Charges 2,029.9
Services Charges 725.9

Overdraft Interest 1,304.0
Occupancy Expenses 2,226.0 1,840.0
Travel 15,399.6 9,250.0
Telephone 3,302.7 2,540.0
Printing and Stationary 4,987.8 3,878.5
Board Meetings 1,292.7 1,140.3
Professional Fees 3,547.7 1,580.7
Licensing and Insurance 502.6
Cleaning 873.9 587.4
Advertising 124.1
Repairs and Maintenance 5,751.4 586.8
Training Expenses 2,245.2 1,273.0
Depreciation of Fixed Assets 5,139.1 3,654.3
Other Expenses 3,108.4 1,791.5 Audit Expense 217.0 580.1
MIS Expenses 1,964.6
Miscellaneous 926.8
Bank Charges 1,211.4
Total Non-interest Expenses 95,783.4 56,697.8 Service Charges 664.1
Overdraft Interest 547.3
Net Operating Surplus/(Loss) 28,627.7 15,788.1
2-32 MEASURING PERFORMANCE OF MICROFINANCE INSTITUTIONS: A FRAMEWORK FOR REPORTING, ANALYSIS, AND MONITORING
Operating Grants - 748.2
Loan Capital Grants 20,897.2 43,159.9
Fixed Asset Grants - -

Net Surplus After Grant 28,627.7 16,536.3

MICRO MFI INCOME AND EXPENSE INFORMATION - FACILITATORS NOTES
in thousands From Income Statement From Trial Balance Current Year Last Year Account
Interest and Fees on Loans 136,896.4 77,975.4 Interest on Loans 128,777.9 67,290.8 I3
Registration Fees 6,097.2 3,704.0 I4
Loan Application Fees 2,021.3 - I4
Risk Premium 6,980.6 I4
Direct Expenses
Interest Expense 3,923.8 1,165.4 Interest on Loan 30.0 124.7 I10
Interest on Savings 3,893.8 1,040.7 I9
Provision for Loan Losses 10,034.8 5,138.1 I14
Total Direct Expenses 13,958.6 6,303.5
Net Interest after Provision for Loan Loss 122,937.8 71,671.9
Other Operating Revenue 1,473.3 814.0 Bad Debt Recovered 503.5 I15
Bank Interest Received 13.5 9.5 I5
Income on Investments 260.5 254.2 I5
Pass book sales 184.5 228.7 I6
Sale of Fixed Assets 100.0 - I6
Other 411.3 321.6 I6
Net Operating Revenue 124,411.1 72,485.9
Non-Interest Expenses
Salaries and Benefits 45,252.4 28,575.3 I17
Administrative Expenses 42,283.6 22,676.7 Finance and Bank Charges 2,029.9
Services Charges 725.9 I19
Overdraft Interest 1,304.0 I10
Occupancy Expenses 2,226.0 1,840.0 I19
Travel 15,399.6 9,250.0 I19

Telephone 3,302.7 2,540.0 I19
Printing and Stationary 4,987.8 3,878.5 I19
Board Meetings 1,292.7 1,140.3 I19
Professional Fees 3,547.7 1,580.7 I19
Licensing and Insurance 502.6 I19
Cleaning 873.9 587.4 I19
Advertising 124.1 I19
Repairs and Maintenance 5,751.4 586.8 I19
Training Expenses 2,245.2 1,273.0 I19
Depreciation of Fixed Assets 5,139.1 3,654.3 I19
Other Expenses 3,108.4 1,791.5 Audit Expense 217.0 580.1 I19
MIS Expenses 1,964.6 I19
Miscellaneous 926.8 I19
Bank Charges 1,211.4 I19
Total Non-interest Expenses 95,783.4 56,697.8 Service Charges 664.1 I19
Overdraft Interest 547.3 I10
Net Operating Surplus/(Loss) 28,627.7 15,788.1
Operating Grants - 748.2 I30
Loan Capital Grants 20,897.2 43,159.9 I29
Fixed Asset Grants - - I30
Net Surplus After Grant 28,627.7 16,536.3
HANDOUT 2.3
SEEP FRAMEWORK INCOME STATEMENT
Ref. Term Current Year Last Year
I1 Financial Revenue
I2 Financial Revenue from Loan Portfolio
I3 Interest on Loan Portfolio

Fees and Commissions on Loan
I4 Portfolio
I5 Financial Revenue from Investments
I6 Other Operating Revenue
I7 Financial Expense
I8 Financial Expense on Funding Liabilities
I9 Interest and Fee Expense on Deposits
I10 Interest and Fee Expense on Borrowings
I11 Other Financial Expenses
I12 Net Financial Income

I13 Impairment Loss on Loans
I14 Provision for Loan Impairment
I15 (Value of Loans Recovered)
I16 Operating Expense
I17 Personnel Expense
I18 Administrative Expense
I19 Depreciation Expense
I20 Other Administrative Expense
I21 Net Operating Income

I22 Net Non-operating Income/(Expense)
I23 Non-operating Revenue
I24 (Non-operating Expense)
Net Income (Before Taxes and

I25 Donations)
I26 Taxes

Net Income (After Taxes and Before
I27 Donations)
I28 Donations
I29 Donations for Loan Capital
I30 Donations for Operating Expense
I31 Net Income (After Taxes and Donations)

SEEP FRAMEWORK INCOME STATEMENT
FACILITATOR NOTES
The result is the following income statement for the past two years.
Ref. Term Current Year Last Year
I1 Financial Revenue 137,866 78,789

I2 Financial Revenue from Loan Portfolio 136,896 77,975
I3 Interest on Loan Portfolio 128,778 67,291
I4 Fees and Commissions on Loan Portfolio 8,119 10,685
I5 Financial Revenue from Investments 274 264
I6 Other Operating Revenue 696 550
I7 Financial Expense 5,228 1,713
I8 Financial Expense on Funding Liabilities 5,228 1,713
I10 Interest and Fee Expense on Borrowings 1,334 672
I11 Other Financial Expenses
I12 Net Financial Income 132,638 77,077
I13 Impairment Loss on Loans 9,531 5,138
I14 Provision for Loan Impairment 10,035 5,138
I15 (Value of Loans Recovered) (504) -
I16 Operating Expense 93,553 56,151
I17 Personnel Expense 45,252 28,575
I18 Administrative Expense 48,300 27,575
I19 Depreciation Expense 5,139 3,654
I20 Other Administrative Expense 43,161 23,921
I21 Net Operating Income 29,555 15,788
I22 Net Non-operating Income/(Expense) (927) -
I23 Non-operating Revenue
I24 (Non-operating Expense) (927)
I25 Net Income (Before Taxes and Donations) 28,628 15,788
I26 Taxes
I27 Net Income (After Taxes and Before 28,628 15,788
Donations)
I28 Donations 20,897 43,908
I29 Donations for Loan Capital 20,897 43,160
I30 Donations for Operating Expense - 748
I31 Net Income (After Taxes and Donations) 49,525 59,696

BALANCE SHEET TEMPLATE

As of As of Calculation
Ref. X-Ref. Account Name
12/31/2004 12/31/2003
Assets
B1
B2
B3
B4
B5
B6
B7
B8
B9
B10
B11
B12 Total Assets
Liabilities
B13
B14
B15
B16
B17
B18
B19
B20
B21 Total Liabilities
Equity
B22
B23
B24
B25
B26

As of As of Calculation
12/31/2004 12/31/2003
B27
B28
B29
B30
B31
B32 Total Equity

SAMPLE BALANCE SHEET

Ref. X-Ref. Account Name As of 12/31/2004 As of 12/31/2003
ASSETS
B1 C26, C50 Cash and Due from Banks 3,261,195 1,146,142
B2 Trade Investments 10,611,928 27,096,586
B3 Net Loan Portfolio 54,338,636 33,471,489
B4 Gross Loan Portfolio 55,609,309 34,701,961
B5 Impairment Loss Allowance (1,270,673) (1,230,473)
B6 Interest Receivable on Loan Portfolio 1,604,993 954,993
B7 Accounts Receivable and Other Assets 1,610,308 1,010,308
B8 Other Investments 1,165,420 1,165,420
B9 Net Fixed Assets 5,567,936 4,272,836
B10 Fixed Assets 10,640,051 7,747,282
B11 Accumulated Depreciation and (5,072,115) (3,474,446)

Amortization
B12 Total Assets 78,160,416 69,117,773
LIABILITIES
B13 Demand Deposits — —
B14 Short-term Time Deposits 3,423,878 1,030,868
B15 Short-term Borrowings 2,737,009 1,371,768
B16 Interest Payable on Funding Liabilities 237,177 137,177
B17 Accounts Payable and Other Short-term 500,100 548,000

Liabilities
B18 Long-term Time Deposits 3,000,000 3,000,000
B19 Long-term Borrowings 16,661,750 16,661,750
B20 Other Long-term Liabilities 3,699,498 4,199,498
B21 Total Liabilities 30,259,412 26,949,061
EQUITY
B22 Paid-In Capital 12,000,000 10,000,000
B23 Donated Equity 37,175,822 32,593,822
B24 Prior Years 32,593,822 29,150,836
B25 I28, C20a, Current Year 4,582,000 3,442,986

C44a

Ref. X-Ref. Account Name As of 12/31/2004 As of 12/31/2003
B26 Retained Earnings (1,401,678) (914,683)
B27 Prior Years (1,414,683) (1,215,867)
B28 I27 Current Year 13,006 301,184
B29 Reserves 126,860 489,574
B30 Other Equity Accounts
B31 Adjustments to Equity
B32 Total Equity 47,901,004 42,168,713

a
If an MFI uses cash accounting, these accounts will have the same value as the cross-referenced accounts. If the MFI uses
accrual accounting, these values will not be the same as the cross-referenced account.

HANDOUT 2.6
MICRO MFI BALANCE SHEET AND TRIAL BALANCE INFORMATION
To continue your work in organizing Micro MFI’s financial statements into the SEEP Framework
formats, you have been given the balance sheet information. You must map the balance sheet data into
the SEEP Framework balance sheet
1. The task for your team is to create a balance sheet using the SEEP Framework Format.
2. The first step is to review the balance sheet and the trial balance from Micro MFI. When reviewing
this information you need to determine what accounts, if any, need to be relocated into different
accounts based on the SEEP Framework Balance Sheet.
3. Map the financial information into the SEEP Framework Balance Sheet format. To do this use the
worksheet Micro MFI Balance Sheet and Trial Balance Information. The last column in this
worksheet is to write the reference number for the SEEP Framework Balance Sheet. The last column
is a guide for you to use.
Complete Micro MFI’s SEEP Framework Balance Sheet for the current year and the past year.

HANDOUT 2.6
BALANCE SHEET AND TRIAL BALANCE INFORMATION
in thousands Current Year Last Year From Trial Balance Current Year Last Year Account
Assets From Balance Sheet
Cash and Bank Balances 20,444 5,458
Deposits and Short-term
Investments 3,450 9,450
Loan Portfolio 248,875 179,816
Less Reserve (6,177) (4,058)
Loan Portfolio (net of
reserve) 242,698 175,758
Other Current Assets 27,414 14,050 Prepayments 1,712 1,421
Employee Advances 16,351 5,486
Accrued Interest 2,650 2,354
Capitalized MIS Expenses 1,913 2,476
Subsidiary Investments 4,788 2,313
Total Current Assets 294,005 204,716
Fixed Assets (Net) 49,402 40,897 Vehicles 9,067 8,717
Computer Equipment 5,987 1,508
Furniture 14,232 9,419
Machinery 3,992 2,727
Land and Building 35,505 33,597
Accumulated Depreciation on:

Vehicles (6,820) (6,891)
Computer Equipment (2,519) (627)
Furniture (4,767) (3,697)

Machinery (840) (151)
Land and Building (4,434) (3,706)
Long-Term Investment 22,310 22,360 49,402 40,897
Total Non-current Assets 71,712 63,257
Total Assets 365,717.50 267,973.24 0
Liabilities
Client Deposits 101,062 58,799 Members Savings 97,168 58,799
Interest Due 3,894 -
Other Liabilities 9,517 3,297 Accounts Payable 463 657
Bank Overdraft 3,196 2,380
Accrued Audit Fees 350 260
Due to Subsidiaries 3,604
Total Current Liabilities 110,579 62,096 Deferred Grants 1,904
Long-Term Debt 54,805 53,680
Total Liabilities 165,384 115,776
Equity
Previous Year Loan Fund
Loan Fund Grant 99,298 78,401 Grant Balance 78,401 35,241
Increase in Loan Fund
Grants 20,897 43,160
Capital Grant 43,310 43,310 Previous Year Capital 43,310 43,310
Grant Balance
- -
Previous Year
Accumulated Operating
Accumulated Surplus 57,725 30,486 Surplus 15,788 (3,700)
Previous Year
Grants 19,034 18,286
Net Operating Surplus 28,628 15,788
Operating Grants - 748
Total Equity 200,334 152,197 Difference (5,725) (637)
Total Liabilities and Equity 365,718 267,973

BALANCE SHEET AND TRIAL BALANCE INFORMATION FACILITATOR NOTES
in thousands Current Year Last Year From Trial Balance Current Year Last Year Account
Assets From Balance Sheet
Cash and Bank Balances 20,444 5,458 B1
Deposits and Short-term
Investments 3,450 9,450 B2
Loan Portfolio 248,875 179,816 B5
Less Reserve (6,177) (4,058) B5
Loan Portfolio (net of
reserve) 242,698 175,758 B4
Other Current Assets 27,414 14,050 Prepayments 1,712 1,421 B7
Employee Advances 16,351 5,486 B7
Accrued Interest 2,650 2,354 B6
Capitalized MIS Expenses 1,913 2,476 B10
Subsidiary Investments 4,788 2,313 B8
Total Current Assets 294,005 204,716
Fixed Assets (Net) 49,402 40,897 Vehicles 9,067 8,717 B10
Computer Equipment 5,987 1,508 B10
Furniture 14,232 9,419 B10
Machinery 3,992 2,727 B10
Land and Building 35,505 33,597 B10
Accumulated Depreciation on:
Vehicles (6,820) (6,891) B11
Computer Equipment (2,519) (627) B11
Furniture (4,767) (3,697) B11
Machinery (840) (151) B11
Land and Building (4,434) (3,706) B11
Long-Term Investment 22,310 22,360 49,402 40,897

Total Non-current Assets 71,712 63,257
Total Assets 365,717.50 267,973.24 0
Liabilities
Client Deposits 101,062 58,799 Members Savings 97,168 58,799 B14
Interest Due 3,894 - B16
Other Liabilities 9,517 3,297 Accounts Payable 463 657 B17
Bank Overdraft 3,196 2,380 B15
Accrued Audit Fees 350 260 B17
Due to Subsidiaries 3,604 B17
Total Current Liabilities 110,579 62,096 Deferred Grants 1,904 B17
Long-Term Debt 54,805 53,680 B19
Total Liabilities 165,384 115,776
Equity
Previous Year Loan Fund
Loan Fund Grant 99,298 78,401 Grant Balance 78,401 35,241 B24
Increase in Loan Fund
Grants 20,897 43,160 B25
Previous Year Capital
Capital Grant 43,310 43,310 Grant Balance 43,310 43,310 B24
- - B25
Previous Year
Accumulated Surplus 57,725 30,486 Surplus 15,788 (3,700) B27
Previous Year
Grants 19,034 18,286 B24
Net Operating Surplus 28,628 15,788 B28
Operating Grants - 748 B25
Total Equity 200,334 152,197 Difference (5,725) (637) B30
Total Liabilities and Equity 365,718 267,973
HANDOUT 2.6
SEEP FRAMEWORK BALANCE SHEET
As of As of
Ref. X-Ref. Term
31/12/2004 31/12/2003
ASSETS
B1 Cash and Due from Banks
B2 Short-term Investments
B3 Net Loan Portfolio
B4 Gross Loan Portfolio
B5 Loan Loss Allowance
B6 Interest Receivable on Loan Portfolio
B7 Accounts Receivable and Other Assets
B8 Other Investments
B9 Net Fixed Assets
B10 Fixed Assets
B11 Accumulated Depreciation
B12 Total Assets
LIABILITIES
B13 Demand Deposits
B14 Short-term Time Deposits
B15 Short-term Borrowings
B16 Interest Payable on Funding Liabilities
B17 Accounts Payable and Other Short-term Liabilities
B18 Long-term Time Deposits
B19 Long-term Borrowings
B20 Other Long-term Liabilities
B21 Total Liabilities
EQUITY
B22 Paid-in Capital
B23 Donated Equity
B24 Prior Years
B25 Current Year

B26 Retained Earnings
B27 Prior Years
B28 Current Year
B29 Reserves
B30 Other Equity Accounts
B32

SEEP FRAMEWORK BALANCE SHEET
FACILITATOR NOTES
As of As of
Ref. X-Ref. Term
31/12/2004 31/12/2003
ASSETS
B1 Cash and Due from Banks 20,444 5,458
B2 Short-term Investments 3,450 9,450
B3 Net Loan Portfolio 242,698 175,758
B4 Gross Loan Portfolio 248,875 179,816
B5 Loan Loss Allowance (6,177) (4,058)
B6 Interest Receivable on Loan Portfolio 2,650 2,354
B7 Accounts Receivable and Other Assets 18,063 6,907
B8 Other Investments 27,097 24,673
B9 Net Fixed Assets 51,316 43,373
B10 Fixed Assets 70,697 58,445
B11 Accumulated Depreciation (19,381) (15,072)
B12 Total Assets 365,718 267,973
LIABILITIES
B13 Demand Deposits - -
B14 Short-term Time Deposits 97,168 58,799
B15 Short-term Borrowings 3,196 2,380
B16 Interest Payable on Funding Liabilities 3,894 -
B17 Accounts Payable and Other Short-term Liabilities 6,321 917
B18 Long-term Time Deposits - -
B19 Long-term Borrowings 54,805 53,680
B20 Other Long-term Liabilities
B21 Total Liabilities 165,384 115,776
EQUITY
B22 Paid-in Capital
B23 Donated Equity 161,643 140,745
B24 Prior Years 140,745 96,837

B25 Current Year 20,897 43,908
B26 Retained Earnings 44,416 12,088
B27 Prior Years 15,788 (3,700)
B29 Reserves
B30 Other Equity Accounts (5,725) (637)
B32 200,334 152,197

OVERHEAD 2.7
CLASSIFICATION OF CASH RECEIPTS AND PAYMENTS
Classification Receipts Payment
Operating Activities
Investing Activities

Financing Activities

MATERIAL 2.8
MATERIAL 2.8 CASH FLOW STATEMENT ACTIVITY
Cash Received from Interest, Fees, and Commissions on Net (Purchase)/Sale of Other Investments
Loan Portfolio
Investing Activity
Operating Activity
Cash Received from Interest on Investments Net (Purchase)/Sale of Fixed Assets
Operating Activity Investing Activity
Cash Received as Other Operating Revenue Net Cash from Investing Activities
Operating Activity Investing Activity
Value of Loans Repaid Net Cash Received /(Repaid) for Short- and Long-term
Borrowings Financing Activity
Operating Activity
(Cash Paid for Financial Expenses on Funding Liabilities) Issuance/(Repurchase) of Paid-In Capital
Operating Activity Financing Activity
(Cash Paid for Other Financial Expenses) (Dividends Paid)
(Cash Paid for Operating Expenses) Operating Activity Donated Equity
Financing Activity
(Cash Paid for Taxes) Net Cash from Financing Activities
(Value of Loans Disbursed) Net Cash Received/(Paid) for Non-Operating Activities
Net (Purchase)/Sale of Trade Investments Net Change in Cash and Due from Banks
Deposits/(Withdrawals) from Clients Cash and Due from Banks at the Beginning of the Period
Cash Received/(Paid) for Other Operating Assets and Exchange Rate Gains/(Losses) on Cash and Cash
Liabilities Equivalents
Net Cash from Operating Activities Cash and Due from Banks at the End of the Period

DIRECT CASH FLOW STATEMENT TEMPLATE
Ref. X-Ref. Account Name Period Period Calculation
Cash Flows from Operating Activities
C1
C2
C3
C4
C5
C6
C7
C8
C9
C10
C11
C12
C13
Cash Flows from Investing Activities
C14
C15
C16
Cash Flows from Financing Activities
C17
C18
C19
C20
C21
C22
C23
C24
C25
C26

SAMPLE DIRECT CASH FLOW STATEMENT
From 1/1/2004 to From 1/1/2003 to

Ref. X-Ref. Term
12/31/2004 12/31/2003
C1 I2a Cash Received from Interest, Fees, and Commissions 16,403,668 8,847,498
on Loan Portfolio
C2 I5a Cash Received from Interest on Investments 1,597,830 1,003,556

a
C3 I6 Cash Received as Other Operating Revenue 325,400 215,680
C4 C31 Value of Loans Repaid 137,620,072 107,900,427
C5 I8a (Cash Paid for Financial Expenses on Funding (939,719) (810,692)

Liabilities)
C6 I11a (Cash Paid for Other Financial Expenses) (248,000) (55,328)
C7 I16a (Cash Paid for Operating Expenses) (13,522,473) (7,426,274)

a
C8 I26 (Cash Paid for Taxes) (760,816) (732,306)
C9 C32, P2 (Value of Loans Disbursed) (159,603,437) (121,456,864)
C10 C33 Net (Purchase)/Sale of Trade Investments 16,484,658 3,406,301
C11 C34 Deposits/(Withdrawals) from Clients 2,393,010 1,030,868
C12 Cash Received/(Paid) for Other Operating Assets and (1,100,000) (1,010,308)
Liabilities
C13 C37 Net Cash from Operating Activities (1,349,808) (9,087,441)
C14 C38 Net (Purchase)/Sale of Other Investments — 334,580
C15 C39 Net (Purchase)/Sale of Fixed Assets (2,892,769) (747,282)
C16 C40 Net Cash from Investing Activities (2,892,769) (412,702)
C17 C41 Net Cash Received /(Repaid) for Short- and Long-term 1,365,241 6,533,518
Borrowings
C18 C42 Issuance/(Repurchase) of Paid-In Capital 2,000,000 1,000,000
C19 C43 (Dividends Paid) (500,000) —
C20 I28a, Donated Equity 4,582,000 3,442,986

C44,
B25
C21 C45 Net Cash from Financing Activities 7,447,241 10,976,504

a
C22 I22 , C46 Net Cash Received/(Paid) for Non-Operating Activities (1,403,143) (1,838,992)

From 1/1/2004 to From 1/1/2003 to
Ref. X-Ref. Term
12/31/2004 12/31/2003
C23 C47 Net Change in Cash and Due from Banks 1,801,521 (362,632)
C24 C48 Cash and Due from Banks at the Beginning of the 1,146,142 900,000
Period
C25 C49 Exchange Rate Gains/(Losses) on Cash and Cash 313,532 609,774
Equivalents
C26 C50 Cash and Due from Banks at the End of the Period 3,261,195 1,146,142
a
If an MFI uses cash accounting, these accounts will have the same value as the cross-referenced accounts. If the MFI uses
accrual accounting, these values will not be the same as the cross-referenced account. In the example above, the MFI uses
accrual-based accounting for financial revenue, financial expense, and operating expenses so that (C1), (C5), and (C7) are not the
same value as their income statement references.

OVERHEAD 2.11
SAMPLE INDIRECT CASH FLOW STATEMENT
From 1/1/2004 From 1/1/2003

to 12/31/2004 to 12/31/2003

a
C27 I25 Net Income (Before Taxes and Donations) 2,176,965 2,872,482
C28 I19 Depreciation and Amortization 1,597,669 317,057
C29 I13 Impairment Losses on Loans 439,972 297,368
C30 I26a, C8 (Cash Paid for Taxes) (760,816) (732,306)
C31 C4 Value of Loans Repaid 137,620,072 107,765,921
C32 C9, P2 (Value of Loans Disbursed) (159,603,437) (121,456,864)
C33 C10 (Increase)/Decrease in Trade Investments 16,484,658 3,406,301
C34 C11 Increase/(Decrease) in Deposits 2,393,010 1,030,868
C35 (Increase)/Decrease in Receivables and Other Assets (1,250,000) (1,465,301)
C36 Increase/(Decrease) in Payables and Other Liabilities (447,900) (1,122,967)
C37 C13 Net Cash from Operating Activities (1,349,808) (9,087,441)
C38 C14 (Increase)/Decrease in Other Investments — 334,580
C39 C15 (Increase)/Decrease in Book Value of Gross Fixed Assets (2,892,769) (747,282)
C40 C16 Net Cash from Investing Activities (2,892,769) (412,702)
C41 C17 Increase/(Decrease) in Short- and Long-term Borrowings 1,365,241 6,533,518
C42 C18 Increase/(Decrease) in Paid-In Capital 2,000,000 1,000,000
C43 C19 (Dividends Paid) (500,000) —
C44 C20, I28a, Donated Equity 4,582,000 3,442,986

B25
C45 C21 Net Cash from Financing Activities 7,447,241 10,976,504
C46 I22a, C22 Net Cash Received/(Paid) for Non-Operating Activities (1,403,143) (1,838,992)
C47 C23 Net Change in Cash and Due from Banks 1,801,521 (362,632)
C48 C24 Cash and Due from Banks at the Beginning of the Period 1,146,142 900,000
C49 C25 Effect of Exchange Rate Changes on Cash and Cash 313,532 608,774
Equivalents
C50 C26, B1 Cash and Due from Banks at the End of the Period 3,261,195 1,146,142

HANDOUT 2.12
MICRO MFI CASH FLOW INFORMATION
You have now been told to create a cash flow for Micro MFI. You know from experience that Micro
MFI does not usually create this document on its own. In preparation for your task Micro MFI has
created a chart that you can use that compares how balance sheet accounts have increased or decreased.
Micro MFI does not have detailed information for 2002 and decides that you should construct a cash flow
for 2004, showing the movement in cash from the end of 2003 to the end of 2004. Using the financial
data presented create a cash flow using the indirect method.
1. The task for your team is to create a Micro MFI cash flow, using the indirect method, for the period
from the end of 2003 to the end of 2004.
2. The first step is to review the financial data. When reviewing this information determine what
accounts, if any, need to be relocated into different accounts based on the SEEP Framework Indirect
Cash Flow.
3. Map the financial information into the SEEP Framework Cash Flow format.

HANDOUT 2.12
CASH FLOW INFORMATION
Difference
Current Year Previous Year Net Change
Loans to Clients
Beginning 179,816
Loans Disbursed 620,532
Loans Repaid (543,696)
Principal Before Write-Off 256,652
Write-off of Bad Debt (7,777)
Principal Balance At End 248,875
Demand Deposits - - -
Short-term Time Deposits 97,168 58,799 38,369
Long-term Time Deposits - - -

Total Deposits 38,369
Short-term Investments 3,450 9,450 (6,000)

Interest Receivable on Loan Portfolio 2,650 2,354 296
Accounts Receivable and Other Assets 18,063 6,907 11,156
Other Investments 27,097 24,673 2,424
Total Other Assets 13,876

Interest Payable on Funding Liabilities 3,894 - 3,894
Accounts Payable and Other Short-term Liabilities 6,321 917 5,404
Other Long-term Liabilities - - -

Total Liabilities 9,298
Other Investments 27,097 24,673 2,424
Fixed Assets 70,697 58,445 12,252
Short-term Borrowings 3,196 2,380 816
Long-term Borrowings 54,805 53,680 1,125
Total Borrowings 1,942

HANDOUT 2.12
SEEP FRAMEWORK CASH FLOW
From 1/1/2004 From 1/1/2003

to 12/31/2004 to 12/31/2003

a
C27 I25 Net Income (Before Taxes and Donations)
C28 I19 Depreciation and Amortization
C29 I13 Impairment Losses on Loans

a
C30 I26 , C8 (Cash Paid for Taxes)
C31 C4 Value of Loans Repaid
C32 C9, P2 (Value of Loans Disbursed)
C33 C10 (Increase)/Decrease in Trade Investments
C34 C11 Increase/(Decrease) in Deposits
C35 (Increase)/Decrease in Receivables and Other Assets
C36 Increase/(Decrease) in Payables and Other Liabilities
C37 C13 Net Cash from Operating Activities
C38 C14 (Increase)/Decrease in Other Investments
C39 C15 (Increase)/Decrease in Book Value of Gross Fixed Assets
C40 C16 Net Cash from Investing Activities
C41 C17 Increase/(Decrease) in Short- and Long-term Borrowings
C42 C18 Increase/(Decrease) in Paid-In Capital
C43 C19 (Dividends Paid)
C44 C20, I28a, Donated Equity

B25
C45 C21 Net Cash from Financing Activities
C46 I22a, C22 Net Cash Received/(Paid) for Non-Operating Activities
C47 C23 Net Change in Cash and Due from Banks
C48 C24 Cash and Due from Banks at the Beginning of the Period
C49 C25 Effect of Exchange Rate Changes on Cash and Cash

Equivalents
C50 C26, B1 Cash and Due from Banks at the End of the Period

MICRO MFI CASH FLOW
FACILITATOR NOTE
From 1/1/2004 to From 1/1/2003 to

Ref. X-Ref. Term
31/12/2004 31/12/2003
C26 I21 Net Operating Income 29,555
C27 I19 Depreciation 5,139
C28 I13 Impairment Loss on Loans 9,531
C8 I26* (Cash Paid for Taxes) -
C29 Value of Loans Repaid 543,696
C30 P2 (Value of Loans Disbursed) (620,532)
C31 (Increase)/Decrease in Short-term 6,000

Investments
C32 Increase/(Decrease) in Deposits 38,369
C33 (Increase)/Decrease in Receivables and (13,876)

Other Assets
C34 Increase/(Decrease) in Payables and 9,298

Other Liabilities
C35 Net Cash from Operating Activities 7,179
C36 (Increase)/Decrease in Long-Term (2,424)

Investments
C37 (Increase)/Decrease in the Book Value of (12,252)

Gross Fixed Assets
C38 Net Cash from Investing Activities (14,676) -
C39 Increase/(Decrease) in Short-and Long- 1,942

term Borrowings
C40 Increase/(Decrease) in Paid-in Capital -
C41 Dividends paid
C42 I28*, B25 Donated Equity 20,897
C43 Net Cash from Financing Activities 22,839
C21 I22* Net Cash Received/(Paid) for Non- (927)

operating Activities

C44 Net Change in Cash and Due from Banks 14,414
C45 Cash and Due from Banks at the 5,458

Beginning of the Period
C46 Effect of Exchange Rate Changes on 571

Cash and Cash Equivalents
C47 B1 Cash and Due from Banks at the End of 20,444 5,458
the Period

SAMPLE PORTFOLIO REPORT
From 1/1/2004 to 12/31/2004 From 1/1/2003 to 12/31/2003

Number of Value of Number Value of
Loans Portfolio of Loans Portfolio
Portfolio Activity
P1, P2 C9, Loans Disbursed 32,148 159,603,437 26,990 121,456,864

C32
P3, P4 B4 Loans Outstanding 14,587 55,609,309 11,183 34,701,961
Movement in Impairment Loss Allowance
P50 B50 Impairment Loss Allowance, 1,230,473 933,150

Beginning of Period
P51 B51 Impairment Loss Allowance, 1,230,473

End of Period 1,270,673
P6, P7 Loans Written Off 147 0 0

448,954
P8 I14 Provision for Loan 489,154 297,368

Impairment
P9, P10 Loans in Recovery or 14 49,182 53 134,506

Recovered
Portfolio Aging Schedule
Number of Value of Loss Impairment

Loans Portfolio Loss
Ref. Allowance Allowance
P11, Current Portfolio 8,729 0
P12 51,155,003 -
P13, Portfolio at Risk 1 to 30 days 2,110 10

P14 2,224,372 222,437
Portfolio at Risk 31 to 60
days 2,022 25
1,112,186 278,047
days 927 50
556,093 278,047
days 556 75
166,828 125,121
Portfolio at Risk more than
180 days 204 100
244,681 244,681
P15, Renegotiated Portfolio 1–30 28 50

P16 days 55,609 27,805
Renegotiated Portfolio > 30 11 100

From 1/1/2004 to 12/31/2004 From 1/1/2003 to 12/31/2003
Loans Portfolio of Loans Portfolio
days 94,536 94,536
P3, P4 B4 Loans Outstanding 14,587

55,609,309 1,270,673

HANDOUT 2.14
MICRO MFI PORTFOLIO REPORT
Another Micro MFI manager has prepared the Portfolio Report and you are asked to review the report.
1. The task for your team is to review the prepared Portfolio Report to determine if Micro MFI has
appropriately represented the Portfolio Activity, Movement in Impairment Loss Allowance, and the
Portfolio Aging Schedule.
2. If your group determines that data in the report needs to be modified, identify that information and
determine what you would do to the data.

HANDOUT 2.14
MICRO MFI PORTFOLIO REPORT
From 1/1/2004 to
From 1/1/2003 to 31/12/2003
31/12/2004
Ref. X-Ref.
Loans Portfolio Of Loans Portfolio
Portfolio Activity
P1, C9, Loans Disbursed during the 52,146 620,532 28,440 361,190
P2 C30 period
P3, B4 Loans Outstanding, end of 31,254 248,875 21,053 179,816

P4 period
Number of Value of Number of Value of

Loans Portfolio Loans Portfolio
P50 B50 Loan Loss Allowance, 4,058 -

beginning of period
P51 B51 Impairment Loss Allowance, 6,010 4,058

end of period
P6, Loans Written Off 1,155 8,083 -

P7
P8 Provision Expense for Loan 10,035 4,058

Impairment
P9 Loans Recovered 504 0
. Number of Value of Loan Loss Loan Loss

Loans Portfolio Allowance
Allowance
Rate
P10, Current Portfolio 23,286 223,646 1% 2,236

P11
P2,P Portfolio at Risk 1 to 30 days 4,315 12,328 1% 123

13
Portfolio at Risk 31 to 60 days 1,974 4,650 25% 1,163
Portfolio at Risk 61 to 90 days 687 2,368 50% 1,184
Portfolio at Risk 91 to 180 401 1,286 50% 643

days
Portfolio at Risk over 180 days 120 459 100% 459
P14, Renegotiated Portfolio 420 3,469 1% 35

P15

Renegotiated Portfolio over 31 51 669 25% 167
days
P3, B4 Gross Loan Portfolio 31,254 248,875 6,010

P4

SAMPLE NON-FINANCIAL DATA REPORT
Account Name As of 12/31/2004 As of 12/31/2003
Operational Data
N1 Number of Active Clients 14,658 11,458
N2 Number of New Clients during Period 7,584 7,589
N3 Number of Active Borrowers 13,472 10,857
N4 Number of Voluntary Depositors 752 254
N5 Number of Deposit Accounts 752 254
N6 Number of Savers Facilitated 13,005 11,023
N7 Number of Personnel 115 89
N8 Number of Loan Officers 75 48
Macroeconomic Data
N9 Inflation Rate 5.6% 4.3%
N10 Market Rate for Borrowing 9.5% 8.6%
N11 Exchange Rate (Local Currency: U.S. Dollar, Euro, 48.0 45.0
or other)
N12 Gross National Income (GNI) per capita 12,000.0 12,000.0

OVERHEAD/HANDOUT 2.16
MATRIX TO IDENTIFY LINKAGES BETWEEN FINANCIAL STATEMENTS
Cash Flow
Income Balance Portfolio
Statement
Statement Sheet report Relationship
(Tables 2.6 and
(Table 2.1) (Table 2.3) (Table 2.10)
2.8
(I14) Provision (B5) (P7) Value of B51 = B50 +

for Loan Impairment Loans Written CI141 – P71
Impairment Loss Off
Allowance

Cash Flow
Statement
(Tables 2.6 and
2.8

MATRIX TO IDENTIFY LINKAGES BETWEEN FINANCIAL STATEMENTS
FACILITATOR NOTES
Cash Flow
Statement
(Tables 2.6 and
2.8
(I14) Provision (B5) (P7) Value of B51 = B50 +

for Loan Impairment Loans Written CI141 – P71
Impairment Loss Off
Allowance
(I19) (B11) (C28) Depreciation B111 = B110

Depreciation Accumulated and Amortization + I191
and Depreciation
Amortization and
Expense Amortization
(I28) Donations (B25) (C20, C44) B241 = B240

0
Donated Donated Equity + I28
Equity,
Current Year
(I27) Net (B28) I27 = B28

Income (After Retained
Taxes and Earnings,
Before Current Year
Donations)
(B1) Cash (C23) Net Change B11 = B10 +

and Due From in Cash and Due C23 + C25
Banks from Banks;
(C25) Exchange
Rate Gains/
(Losses) on Cash
and Cash
Equivalents
(B4) Gross (C9) Value of (P4) Value of B41 = B40 +

Loan Portfolio Loans Disbursed; Loans C9 – C4 – P7
Outstanding;
(C4) Value of
Loans Repaid (P7) Value of
Loans Written
Off;
(P2) Value of
Loans
Disbursed

INTRODUCTION TO THE TOOL
Explain
Now that we are familiar with some of the statements and reports used in this Framework, complete with
knowing the standardized formats and new terminology, we are going to take a look at the Framework
Show PPT 15 and describe what the tool is and what it is designed to do.
• To provide a spreadsheet tool that follows the format of the SEEP Framework document.
• The tool is designed to:
Offer a simple financial performance monitoring tool that will satisfy an MFI Manager’s basic
financial performance monitoring needs
Be a user-friendly tool that can maintain and export data.
Explain
This tool is a framework to organize your information and data so that you can focus on analyzing the
information and understanding the financial condition of the MFI. Remember that the SEEP Framework
and the Tool work together. The framework is the recommended method to organize, forecast and adjust
financial data and the tool is a spreadsheet that will allow you to generate important ratios and
management reports.
Show PPT 16 and explain the structure of the Tool.
Describe that the tool has input worksheets and result sheets. An input sheet is where you input your
institutions’ information and an output sheet is what is generated from the information.
Describe that the first input sheet is for institutional information and choices. The second worksheet is for
data input. The data that is put into this worksheet is financial information from the income statement,
balance sheet, cash flow statement, portfolio report, and non-financial information. Briefly describe the
additional sheets.
Describe that for this course we will be learning about and using the advanced features of the tool. The
advanced features of the tool include adjustments.
Continue the demonstration of the Tool by having the Tool displayed through a projection unit and all
participants at their computer stations. Participants will work in pairs when they are working on the Tool.
During this session participants will get an overview of the tool, how to set up the tool and enable
features, and how to input data.
NOTE TO FACILITATOR: As you are instructing participants how to do this you must be inputting the
information as a demonstration. First give a demonstration and then give participants time to work
Tell participants to open the Tool and to go to the first worksheet titled SETUP.
Walk participants through each line item and what they need to do for the Setup Sheet and the Enable
Features. Describe how this information is used throughout the tool.
Instruct
Participants to go to data input.

Explain
The formats of the financial statements and reports are the same as those presented earlier and used in the
SEEP Framework. Participants may need to refer to their handouts of sample income statement, balance
sheet, cash flow statement, and portfolio report.
Describe
How the financial statements are layed out in the spreadsheet.
Tell
Participants that they will become familiar with using the tool by using the financial information they
have been working with in the case study. Participants will use the financial information from the case
study to first input the financial information and data.
Ask participants
To work in their small groups and input the financial data for the income statement and the balance sheet.
Tell
Participants that at the end of the day there will be additional time to work with the tool so that if they do
not finish the data inputting now there will be time later.

MODULE 3: ANALYTICAL ADJUSTMENTS MATERIAL
HANDOUT 3.1
SUMMARY OF ADJUSTMENTS
Ref. Account Explanation

Subsidies
A1 Subsidized Examines the difference between an MFI’s financial expense and the financial
Cost of Funds expense it would pay if all its funding liabilities were priced at market rates.
Adjustment
A2 In-Kind The difference between what the MFI is actually paying for a donated or subsidized
Subsidy good or service and what it would have to pay for the same good or service on the
Adjustment open market. Donors often give MFIs funds and also goods and services at no cost
or at below-market cost. Common examples of these in-kind subsidies are
computers, consulting services, free office space, and free services of a manager.
Inflation
A3 Inflation The rationale behind the inflation adjustment is that an MFI should, at a minimum,
Adjustment preserve the value of its equity (and shareholders or donors’ investments) against
erosion due to inflation. In addition, this adjustment is important to consider when
benchmarking institutions in different countries and economic environments. Unlike
subsidy adjustments, recording an inflation adjustment is common in many parts of
the world and is mandated by Section 29 of the International Accounting Standards
(IAS) in high inflation economies.
Non-performing loans
A4 Write-off Intended to identify loans on an MFI’s books that, by any reasonable standard,
Adjustment should be written off. This adjustment can significantly reduce the value of an
MFI’s assets if persistent delinquent loans are not counted as part of the gross
loan portfolio.
A5 Impairment Intended to bring an MFI’s Impairment Loss Allowance in line with the quality of its
Loss Gross Loan Portfolio.
Allowance
Adjustment

HANDOUT 3.2
SUBSIDIZED COST OF FUNDS ADJUSTMENT

MICRO MFI is primarily funding its loan portfolio with its own equity and a $100,000 six-year loan from
an international development agency. The loan was received two years ago and carries an interest rate of
5 percent per annum in local currency. The management team has recently begun negotiations with a
local bank to obtain additional funding and was quoted a rate of 13 percent per annum on those
commercial funds. To analyze true performance of its MFI for the year, the manager opts to use the 13-
percent rate as the alternate market rate of funds.
Calculate the subsidized cost of funds adjustment to measure true performance.

SUBSIDIZED COST OF FUNDS ADJUSTMENT FOR BENCHMARKING
Adjustment for Subsidized Cost of Fund Formula Adjustment
Average Short-term Borrowings plus

B15 avg + B19 avg 18,716,138
Average Long-term Borrowings
1
Market Rate, End of Period N10 9.5%
avg
Market Cost of Funds (B15 + B19 avg) x N101 1,778,033
Interest and Fee Expense I10 1,039,719
avg
Adjustment for Subsidized Cost of Funda [(B15 + B19 avg) x N101] – I10 738,314
a
The adjustment is applied only if the result is > 0.

HANDOUT 3.4
IN-KIND SUBSIDY ADJUSTMENT FOR TRUE PERFORMANCE

MICRO MFI was founded by a large international organization, RELIEF, which continues to provide it
with support. In addition to supplying an international executive director, RELIEF provides in-country
staff that supports MICRO MFI by providing accounting services, management information systems
assistance, and a full-time business trainer for MICRO’s clients. MICRO MFI’s headquarters is in a
building owned by RELIEF, and MICRO has a five-year agreement to rent the building at a below-market
rate. RELIEF also granted two one-year-old vehicles and four computers to MICRO from its flood relief
program in the south of the country. MICRO did not account for these donated Fixed Assets when it
received them.
Calculate the In-Kind Subsidy Adjustment using the information below.
No. of Subsidy
Estimated Monthly Actual
Personnel Months (a – b) x
MarketCost (a) Monthly Cost (b)
(c) c
i Executive Director 2,000 0 12
ii Accountant 800 0 12
iii Part-time MIS Manager 400 100 12
iv Trainer 400 200 6
Adjustment for Personnel Expenses
Other Administrative Expenses
i Rent 1,500 400 12
ii Software Support 50 0 12
Adjustment for Other Administrative Expenses —
Fixed Assets Depreciation Rate Depreciation Rate
i Head Office Vehicle 12,000 0 20%
ii Branch Office Vehicle 18,000 0 20%
iii Four Computers, Branch Office 3,600 500 33.33%
Adjustment to Depreciation Expense
Total In-Kind Subsidy Adjustment

OVERHEAD 3.5
SAMPLE INCOME STATEMENT
From 1/1/2004 From 1/1/2003

to 12/31/2004 to 12/31/2003

I2 C1a Financial Revenue from Loan Portfolio 17,053,668 9,302,491
I5 C2 a Financial Revenue from Investments 1,597,830 1,003,556
I6 C3 a Other Operating Revenue 325,400 215,680
I7 Financial Expense 1,287,719 853,197
I8 C5a Financial Expense on Funding Liabilities 1,039,719 797,869
I11 C6a Other Financial Expense 248,000 55,328
I13 P9 Impairment Losses on Loans 439,972 162,862
I14 C29, P6 Provision for Loan Impairment 489,154 297,368
I15 P8 Value of Loans Recovered (49,182) (134,506)
a
I16 C7 Operating Expense 15,072,242 6,633,187
I17 Personnel Expense 8,700,000 4,594,436
I19 C28 Depreciation and Amortization Expense 1,597,669 317,057
I20 Other Administrative Expense 4,774,573 1,721,694
I21 Net Operating Income 2,176,965 2,872,482
I22 C22a Net Non-Operating Income/(Expense) (1,403,143) (1,838,992)
I23 Non-Operating Revenue 586,471 —
I25 C27 Net Income (Before Taxes and Donations) 773,822 1,033,490
I26 C8a, C30a Taxes 760,816 732,306
I27 B28 13,006 301,184
Donations)
I28 B25, C20a, C44a Donations 4,582,000 3,442,986
I29 Donations for Loan Capital — 1,258,291
I31 Net Income (After Taxes and Donations) 4,595,006 3,744,170

HANDOUT 3.6
INFLATION ADJUSTMENT FOR TRUE PERFORMANCE
MICRO MFI operates in a country where inflation is fairly stable each year and is usually between 4 and 12 percent.
According to the Central Bank, the average annualized inflation rate for the year was 6.5 percent. MICRO MFI has a
grant agreement with a multilateral donor. The MFI draws down funds at the beginning of every month according to
its grant agreement and liquidates the advances at the end of each quarter. At the end of the year, MICRO MFI used
some of its cash from retained earning to purchase two new vehicles. The purchase nearly doubled the value of the
MFI’s net fixed assets.
To calculate the true performance inflation adjustment, MICRO MFI determined that it was best to use the value of its
Net Fixed Assets from the beginning of the year before the purchase of the two new vehicles shortly before the end of
the year. At the same time, management believes that using average equity is the best approach because its
Donated Equity and Retained Earnings were fairly steady throughout the year. Management uses a monthly average.
Net Fixed Assets, Beginning of Year = 150,000
Average Equity = 1,800,000
Inflation Rate = 6.5%
MICRO MFI calculates its Inflation Adjustment as follows:
A3.1 = Average Equity x Inflation Rate =
A3.2 = Net Fixed Assets x Inflation Rate =
A3 = A3.1 – A3.2 =
The effect on MICRO MFI’s income statement is to increase the Net Inflation Expense by 107,250, resulting in the
same decrease in Net Income (After Taxes and Before Donations). On its balance sheet, management records an
increase of 9,750 in Net Fixed Assets. Because Assets have increased by 9,750, and Equity has decreased by
107,250, MICRO MFI must add 117,000 to the Adjustments to Equity account to bring the balance sheet back in
balance.

HANDOUT 3.7
INFLATION ADJUSTMENT
Adjustment for Inflation Formula Adjustment

0
Equity, Beginning of Period B32
Inflation Rate N9
Adjustment to Equity A3.1 = B320 x N9
Net Fixed Assets, Beginning of Period B90
Inflation Rate N9
Adjustment to Fixed Assets A3.2 = B90 x N9
Net Adjustment for Inflation A3.1 – A3.2

HANDOUT 3.8
ADJUSTMENT FOR IMPAIRMENT LOSS ALLOWANCE

Complete the table below to adjust for impairment loss allowance. Refer to the sample portfolio report
and use the minimum recommended loan loss allowance rates discussed.
Adjustment for
Number of Loss Allowance Impairment
Provision Expense Value of Portfolio
Loans Rate (%) Loss Allowance
Loan Impairment
Current Portfolio
PAR 1–30 days
PAR 31–90 days
PAR 91–180 days
PAR > – 180 days
Renegotiated
Portfolio
Total Gross Loan Adjusted Loan
B4
Portfolio Loss Allowance
B5adj Adjusted Impairment Loss Allowance
P8 Less Value of Recovered Loans (489,154)
B5 Less Actual Impairment Loss Allowance
A4 = B5adj – B5 Adjustment to Impairment Loss Allowance (if > 0)

SAMPLE PORTFOLIO REPORT
From 1/1/2004 to 12/31/2004 From 1/1/2003 to 12/31/2003

Ref. X-Ref. Account Name Number of Value of Portfolio Number of Value of
Loans Loans Portfolio
Portfolio Activity
P1, P2 C9, C32 Loans Disbursed 32,148 159,603,437 26,990 121,456,864
P3, P4 B4 Loans Outstanding 14,587 55,609,309 11,183 34,701,961
P50 B50 Impairment Loss Allowance, 1,230,473 933,150
Beginning of Period
P51 B51 Impairment Loss Allowance, 1,270,673 1,230,473
End of Period
P6, P7 Loans Written Off 147 448,954 0 0
P8 I14 Provision for Loan Impairment 489,154 297,368
P9, P10 Loans in Recovery or 14 49,182 53 134,506
Recovered
Loss
Ref. Number of Impairment
Value of Portfolio Allowance
Loans Loss Allowance
Rate (%)a
R f
P11, P12 Current Portfolio 8,729 51,155,003 0 -
P13, P14 Portfolio at Risk 1 to 30 days 2,110 2,224,372 10 222,437
Portfolio at Risk 31 to 60 days 2,022 1,112,186 25 278,047
Portfolio at Risk 61 to 90 days 927 556,093 50 278,047
Portfolio at Risk 91 to 180 days 556 166,828 75 125,121
Portfolio at Risk more than 180 204 244,681 100 244,681

days
P15, P16 Renegotiated Portfolio 1–30 28 55,609 50 27,805
days
Renegotiated Portfolio > 30 11 94,536 100 94,536
days
P3, P4 B4 Loans Outstanding 14,587 55,609,309 1,270,673

HANDOUT 3.9
SUMMARY OF THE EFFECTS OF ADJUSTMENTS
Key Accounts Effect of Adjustments on Financial Type of Institution Most

Adjustment
Affected Statements Affected by Adjustment
A1 I8 Increase Interest and Fee Expense on Funding MFIs with heavily subsidized
Adjustment for B28 Liabilities borrowings
Subsidized Cost of B31 (II8 + A1)
Funds Decrease Retained Earnings, Current Year
(B28 + A1)
Increase Adjustments to Equity
(B31 + A1)
A2 I17 Personnel Expense: MFIs with expatriate staff
Adjustment for In- I20 Increase Personnel Expense financed by third-party
Kind Subsidy B28 (I17 + A2.1) supporters; MFIs using
B31 Increase Administrative Expense1 goods or services for which
(I20 + A2.2) they are not paying market
Decrease Retained Earnings, Current Year rates.
(B28 + A2)
(B31 + A2)
A3 B9 Increase Net Fixed Assets MFIs funded more by equity
Adjustment for I11 (B9 + A3.2) than by liabilities; MFIs in
Inflation B31 Increase Net Inflation Expense high-inflation countries
(I11 + A3)
(B31 + A3.1)
A4 B5 Increase Impairment Loss Allowance MFIs that have lenient loan
Adjustment for I13 (B5 + A4) loss provisioning policies and
Impairment Loss B28 Increase Impairment Losses on Loans a high portfolio at risk
Allowance (I13 + A4)
Decrease Retained Earnings
(B28 – A4)
A5 B4 Decrease Gross Loan Portfolio MFIs that do not write off
Write-off B5 (B4 – A5.1) nonperforming loans
Adjustment P3 Decrease Impairment Loss Allowance aggressively
P6 (B5 – A5.1)
Decrease Number of Loans Outstanding
(P3 – A5.2)
Increase Number of Loans Written Off during the
Period
(P6 + A5.2)
1
If the MFI is adjusting for donated fixed asset, this item may also include (I17) Depreciation and Amortization Expense.

HANDOUT 3.10
ADJUSTED INCOME STATEMENT
From 1/1/2004 to
X- From 1/1/2004 to
Ref. Term Adjustments 31/12/2004
Ref. 31/12/2004
Adjusted
I2 Financial Revenue from Loan Portfolio 17,053,668 17,053,668

I5 Financial Revenue from Investments 1,597,830 1,597,830

I6 Other Operating Revenue 325,400 325,400
I7 Financial Expense 1,287,719 4,148,202
I8 A1 Financial Expense on Funding Liabilities 1,039,719 738,314 1,778,033
I11 A3 Other Financial Expense 248,000 2,122,169 2,370,169

I13 A4 Impairment Losses on Loans 439,972 — 439,972
I14 Provision Expense for Impaired Loans 489,154 134,506
I15 Value of Loans Recovered (49,182) —
I16 Operating Expense 15,072,242 17,641,842
I17 A2.1 Personnel Expense 8,700,000 670,000 9,370,000
I19 Depreciation and Amortization 1,597,669 1,597,669
Expense
I20 A2.2 Other Administrative Expense 4,774,573 1,899,600 6,674,173
I21 Net Operating Income 2,176,965 (3,253,119)
I22 Net Non-Operating Income (1,403,143) (1,403,143)
I23 Non-Operating Revenue 586,471 586,471
I25 Net Income (Before Taxes and 773,822 (4,656,262)
Donations)
I26 Taxes 760,816 760,816
I27 Net Income (After Taxes and Before 13,006 (5,417,078)
Donations)
I28 Donations 4,582,000 4,582,000
I29 Donations for Loan Capital — —
I31 Net Income (After Taxes and Donations) 4,595,006 (835,078)

HANDOUT 3.11
ADJUSTED BALANCE SHEET
Adjusted
Ref. Adj. Account Name Current Year Adjustment
Current Year
Assets
B1 Cash and Due from Banks 3,261,195 3,261,195
B2 Trade Investments 10,611,928 10,611,928
B3 Net Loan Portfolio 54,338,636 54,338,638
B4 A5 Gross Loan Portfolio 55,609,309 (244,681) 55,364,628
A4
B5 Impairment Loss Allowance (1,270,673) 244,681 (1,025,992)
A5
B6 Interest Receivable on Loan Portfolio 1,604,993 1,604,993
B7 Accounts Receivable and Other Assets 1,610,308 1,610,308
B8 Other Investments 1,165,420 1,165,420
B9 A3.2 Net Fixed Assets 5,567,936 239,279 5,807,215
B10 Fixed Assets 10,640,051 10,640,051
B11 Accumulated Depreciation and Amortization (5,072,115) (5,072,115)
B12 Total Assets 78,160,416 239,279 78,399,695
Liabilities
B13 Demand Deposits — —
B14 Short-term Time Deposits 3,423,878 3,423,878
B15 Short-term Borrowings 2,737,009 2,737,009
B16 Interest Payable on Funding Liabilities 237,177 237,177
Accounts Payable and Other Short-term
B17 500,100 500,100
Liabilities
B18 Long-term Time Deposits 3,000,000 3,000,000
B19 Long-term Borrowings 16,661,750 16,661,750
B20 Other Long-term Liabilities 3,699,498 3,699,498
B21 Total Liabilities 30,259,412 30,259,412
Equity
B22 Paid-In Capital 12,000,000 12,000,000
B23 Donated Equity 37,175,822 37,175,822
B24 Prior Years 32,593,822 32,593,822
B25 Current Year 4,582,000 4,582,000
B26 Retained Earnings (1,401,678) (6,831,761)
B27 Prior Years (1,414,683) (1,414,683)
A1, A2,
B28 Current Year 13,006 (5,430,083) (5,417,078)
A3, A4
B29 Reserves 126,860 126,860
B30 Other Equity Accounts —
B31 Adjustments to Equity 5,669,362 5,669,362
B31-1 A1 Subsidized Cost of Funds Adjustment 738,314
B31-2 A2 In-Kind Subsidy Adjustment 2,569,600
B31-3 A3 Inflation Adjustment 2,361,448
B32 Total Equity 47,901,004 48,140,283

HANDOUT 3.12
MICRO MFI ADJUSTMENT INFORMATION
Using the information provided below, create a set of adjusted financial statements for the current year for
MICRO MFI.
1. To calculate the subsidized cost of funds adjustment for benchmarking MICRO MFI has told you to
use a market rate of 18%
2. MICRO MFI does not have all the information on in-kind subsidies, but provides information on
what they can estimate. This information is provided to you on the in-kind subsidy adjustment
worksheet.
3. For the adjustment for inflation MICRO MFI wants you to use 10%
4. Use the MicroBanking Bulletins minimum allowance rates to calculate the loan loss allowance.

HANDOUT 3.12
ADJUSTMENT WORKSHEETS
ADJUSTMENT FOR SUBSIDIZED COST OF FUND
Formula Adjustment
Average Short-term Borrowings + Average avg

B15 +B19 avg
Long-term Borrowings
Market Rate, End of Period N101
Market Cost of Funds (B15 avg +B19 avg) x N101
Interest and Fee Expense I10

avg
((B15 +B19 avg) x N101) –
I10
ADJUSTMENT FOR IN-KIND SUBSIDIES
Estimated Actual Paid Adjustment
(x) (y) (x-y)
Personnel Expenses
i Technical Advisor (Part-time) 2,100
ii On-Site MIS Advisor 3,240

A2.1 Sub-total Personnel
Adjustment
Administrative Expenses
On and Off-site Technical

i 6,300 1,575
Support from Network
A2.2 Sub-total
Administrative Adjustment
Subsidies: A2.1 + A2.2
Adjustment for In-kind

HANDOUT 3.12
ADJUSTMENT FOR INFLATION
Formula Adjustment
Average Equity B32
Inflation Rate N9
Adjustment to Equity A3.1 = B32avg x N9
Net Fixed Assets B9avg
Inflation Rate N9
Adjustment to Fixed Assets A 3.2 = B9avg x N9
Net Adjustment for Inflation A3.1 – A3.2

Adjustment for Loan Loss
Number of Loan Loss
Formula Loan Loss Value of Portfolio Allowance
Loans Allowance
Allowance Rate (%)
P11,P12 Current Portfolio 23,286 223,646
PAR 1-30 days 4,315 12,328
PAR 31 - 90 days 2,661 7,018

P13,P14
PAR 91 - 180 days 401 1,286
PAR > 180 days 120 459

Renegotiated
P15,P16 471 4,138
Portfolio
Total Adjusted Adjusted
Gross Loan 248,875 Loan Loss
Portfolio Allowance
Adjusted Loan
B5adj 8,707
Loss Allowance
Less Value of
(504)
Loans Recoverd
Less Actual Loan
B5 6,177
Loss Allowance
Adjustment to
A4 =
adj- Loan Loss 2,530 -
B5 B5
Allowance

HANDOUT 3.12
ADJUSTMENT FOR WRITE-OFFS
Formula Adjusted Value
PAR > 180 days past due A5.1 =P14 > 180 days
Number of Loans > 180 past due A5.2 =P13> 180 days

HANDOUT 3.12
ADJUSTED INCOME STATEMENT WORKSHEET
From 1/1/2004 to
From 1/1/2004
Ref. X-Ref. Term Adjustments 31/12/2004
to 31/12/2004
Adjusted
I1 Financial Revenue 137,866
I2 Financial Revenue from Loan Portfolio 136,896
I3 Interest on Loan Portfolio 128,778

I4 8,119
Portfolio
I5 Financial Revenue from Investments 274
I6 Other Operating Revenue 696

I7 Financial Expense 5,228
Financial Expense on Funding
I8 A1 5,228
Liabilities
I9 Interest and Fee Expense on Deposits 3,894
Interest and Fee Expense on

I10 1,334
Borrowings
I11 A3 Other Financial Expenses -
I12 Net Financial Income 132,638
I13 A4 Loan Loss Provision Expense 9,531
Provision Expense for Loan

10,035
Impairment
(Value of Loans Recovered) (504)
I14 Operating Expense 93,553
I15 A2.1 Personnel Expense 45,252
I16 Administrative Expense 48,300
I17 Depreciation Expense 5,139
I18 A2.2 Other Administrative Expense 43,161
I19 Net Operating Income 29,555
I20 Net Non-Operating Income (927)
I21 Non-Operating Revenue -
I22 Non-Operating Expense (927)
I23 28,628
Donations)
I24 Taxes -
I25 28,628
Donations)
I26 Donations 20,897

I27 Donations for Loan Capital 20,897
I28 Donations for Operating Expense -
Net Income (After Taxes and
I29 49,525
Donations)

HANDOUT 3.12
ADJUSTED BALANCE SHEET WORKSHEET
Adjusted
Ref. Adj. Term Current Year Adjustment
Current Year
Assets
B1 Cash and Due from Banks 20,444
B2 Short-term Investments 3,450
B3 Net Loan Portfolio 242,698
B4 A5 Gross Loan Portfolio 248,875
B5 A4, A5 Loan Loss Allowance (6,177)
B6 Interest Receivable on loanportfolio 2,650
B7 Accounts Receivable and Other Assets 18,063
B8 Long-term Investments 27,097
B9 A3.2 Net Fixed Assets 51,316
B10 Fixed Assets 70,697
B11 Accumulated Depreciation (19,381)
B12 Total Assets 365,718
Liabilities
B13 Demand Deposits -
B14 Short-term Time Deposits 97,168
B15 Short-term Borrowings 3,196
B16 Interest Payable on fundingliabilities 3,894
Accounts Payable and OtherShort-term
B17 6,321
Liabilities
B18 Long-term Time Deposits -
B19 Long-term Borrowings 54,805
B20 Other Long-term Liabilities -
B21 Total Liabilities 165,384
Equity
B22 Paid-in Capital -
B23 Donated Equity 161,643
B24 Prior Years 140,745
B25 Current Year 20,897
B26 Retained Earnings 44,416
B27 Prior Years 15,788
A1, A2, A3,
B28 Current Year 28,628
A4
B29 Reserves -
B30 Other Equity Accounts (5,725)
B31-1 A1 Subsidized Cost of Funds Adjustment
B31-2 A2 In-kind Subsidy Adjustent
B31-3 A3.1 Inflation Adjustment
B32 Total Equity 200,334

CASE STUDY ADJUSTMENT FACILITATOR NOTES
ADJUSTMENT FOR SUBSIDIZED COST OF FUND
Formula Adjustment
Average Short-term Borrowings + Average

B15 avg +B19 avg 57,030
Long-term Borrowings
Market Rate, End of Period N101 18.0%
Market Cost of Funds (B15 avg +B19 avg) x N101 10,265
Interest and Fee Expense I10 5,228

avg avg 1
((B15 +B19 ) x N10 ) –
5,038
I10
A2 IN-KIND SUBSIDY ADJUSTMENT
Estimated Actual Paid Adjustment
(x) (y) (x-y)
Personnel Expenses
Technical Advisor
i 2,100 2,100
(Part-time)
ii On-Site MIS Advisor 3,240 - 3,240
A2.1 Sub-total
Personnel 5,340
Adjustment
Administrative
Expenses
On and Off-site
i Technical Support from 6,300 1,575 4,725
Network
A2.2 Sub-total
Administrative
Adjustment 4,725
Subsidies: A2.1 +
A2.2
Adjustment for In-
10,065
kind

ADJUSTMENT FOR INFLATION

Formula Adjustment
Average Equity B32 152,197
Inflation Rate N9 10.0%
Adjustment to Equity A3.1 = B32avg x N9 15,220
Net Fixed Assets B9avg 43,373
Inflation Rate N9 10.0%
Adjustment to Fixed Assets A 3.2 = B9avg x N9 4,337
Net Adjustment for Inflation A3.1 – A3.2 10,882

Adjustment for Loan Loss
Number of Loan Loss
Formula Loan Loss Value of Portfolio Allowance
Loans Allowance
Allowance Rate (%)
P11,P12 Current Portfolio 23,286 223,646 0% -
PAR 1-30 days 4,315 12,328 10% 1,233
PAR 31 - 90 days 2,661 7,018 30% 2,105

P13,P14
PAR 91 - 180 days 401 1,286 60% 772
PAR > 180 days 120 459 100% 459

Renegotiated
P15,P16 471 4,138 100% 4,138
Portfolio
Total Adjusted Adjusted
Gross Loan 248,875 Loan Loss 8,707
Portfolio Allowance
Adjusted Loan
B5adj 8,707
Loss Allowance
Less Value of
(504)
Loans Recoverd
Less Actual Loan
B5 6,177
Loss Allowance
Adjustment to
A4 =
adj- Loan Loss 2,530 -
B5 B5
Allowance

Adjustment for Write-offs Formula Adjusted Value
PAR > 180 days past due A5.1 =P14 > 180 days 459
Number of Loans > 180 past due A5.2 =P13> 180 days 120

ADJUSTED INCOME STATEMENT
FACILITATOR NOTES
From
From 1/1/2004 1/1/2004 to
Ref. X-Ref. Term Adjustments
to 31/12/2004 31/12/2004
Adjusted
I1 Financial Revenue 137,866 137,866
Financial Revenue from Loan
I2 136,896 136,896
Portfolio
I3 Interest on Loan Portfolio 128,778 128,778
I4 8,119 8,119
Portfolio
Financial Revenue from
I5 274 274
Investments
I6 Other Operating Revenue 696 696
I7 Financial Expense 5,228 21,148
Financial Expense on Funding
I8 A1 5,228 5,038 10,265
Liabilities
I9 3,894 3,894
Deposits
I10 1,334 1,334
Borrowings
I11 A3 Other Financial Expenses - 10,882 10,882
I12 Net Financial Income 132,638 116,718
I13 A4 Loan Loss Provision Expense 9,531 2,530 12,061
Provision Expense for Loan

10,035 5,138
Impairment
(Value of Loans Recovered) (504) -
I14 Operating Expense 93,553 103,618
I15 A2.1 Personnel Expense 45,252 5,340 50,592
I16 Administrative Expense 48,300 53,025
I17 Depreciation Expense 5,139 5,139
I18 A2.2 Other Administrative Expense 43,161 4,725 47,886
I19 Net Operating Income 29,555 1,040

I20 Net Non-Operating Income (927) (927)
I21 Non-Operating Revenue - -
I22 Non-Operating Expense (927) (927)
I23 28,628 113
Donations)
I24 Taxes - -

I25 28,628 113
Before Donations)
I26 Donations 20,897 20,897
I27 Donations for Loan Capital 20,897 20,897
I28 Donations for Operating Expense - -

I29 49,525 21,010
Donations)

ADJUSTED BALANCE SHEET
FACILITATOR NOTES
Adjusted
Ref. Adj. Term Current Year Adjustment
Current Year
Assets
B1 Cash and Due from Banks 20,444 20,444
B2 Short-term Investments 3,450 3,450
B3 Net Loan Portfolio 242,698 240,168
B4 A5 Gross Loan Portfolio 248,875 (459) 248,416
B5 A4, A5 Loan Loss Allowance (6,177) (2,071) (8,248)
B6 Interest Receivable on loanportfolio 2,650 2,650
B7 Accounts Receivable and Other Assets 18,063 18,063
B8 Long-term Investments 27,097 27,097
B9 A3.2 Net Fixed Assets 51,316 4,337 55,653
B10 Fixed Assets 70,697 70,697
B11 Accumulated Depreciation (19,381) (19,381)
B12 Total Assets 365,718 1,808 367,525
Liabilities
B13 Demand Deposits - -
B14 Short-term Time Deposits 97,168 97,168
B15 Short-term Borrowings 3,196 3,196
B16 Interest Payable on fundingliabilities 3,894 3,894
Accounts Payable and OtherShort-term
B17 6,321 6,321
Liabilities
B18 Long-term Time Deposits - -
B19 Long-term Borrowings 54,805 54,805
B20 Other Long-term Liabilities - -
B21 Total Liabilities 165,384 165,384
Equity
B22 Paid-in Capital - -
B23 Donated Equity 161,643 161,643
B24 Prior Years 140,745 140,745
B26 Retained Earnings 44,416 15,901
B27 Prior Years 15,788 15,788
A1, A2, A3,
B28 Current Year 28,628 (28,515) 113
A4
B29 Reserves - -
B30 Other Equity Accounts (5,725) (5,725)
B31 Adjustments to Equity 30,322 30,322
B31-1 A1 Subsidized Cost of Funds Adjustment 5,038
B31-2 A2 In-kind Subsidy Adjustent 10,065
B31-3 A3.1 Inflation Adjustment 15,220
B32 Total Equity 200,334 202,141

MODULE 4: FINANCIAL RATIOS AND INDICATORS
Goal Understand and calculate “The SEEP 18” indicators and apply these to measure the
performance of an MFI.
Calculate and understand “The SEEP 18” recommended ratios

Describe why each ratio is important in measuring performance of a MFI
Use adjusted data in calculating the SEEP 18 ratios and understand how using
adjusted data affects the information.
Duration 2 hours 30 minutes
Time and
Technique Session Materials
Lecturette and Overview of “The SEEP 18” Powerpoint Slide 21

Discussion
Purpose and Importance of Ratios
10 minutes
Why The SEEP 18
Review of how ratios are grouped
Game The SEEP 18 Ratios Handout 4.1
Instructions for the
Group Detailed study of each ratio to include the ratio formula, why Name that Ratio
Discussion the ratio is important and how to use adjusted data in the Game
calculation and the effects of using adjustments
1 hour 30 minutes 4 pieces of paper
with the name of one
group of ratios
Group Using Ratios to Identify Changes in Performance Handout 4.2 The

Discussion SEEP 18 Ratios
Identify potential causes that result in changes in ratios
Exercise
1 hour

STEP 1: OVERVIEW OF “THE SEEP 18” RATIOS
Lecturette Present an overview of the importance and purpose of ratios

10 minutes Describe how the 18 ratio’s were selected emphasizing the fact that they help
managers evaluate the performance of their organization in several different
aspects of its activity. The 18 indicators selected in this Framework reflect the
areas of measurement that are priorities for most MFIs.
Show PPT 31 and Describe
The “SEEP 18” are divided into the following four groups:
• Profitability and sustainability,
• Asset/liability management,
• Portfolio quality, and
• Efficiency and productivity.
Explain
Briefly the purpose of each group of ratios.
Say
During this module we will present each ratio, its formula, and an explanation
of its purpose within each of the four groups of ratios. Specifically the
following:
• The formula,
• Why the ratio is important, and
• How to use adjusted data in the calculations and the effects of using
adjustments.
Summarize by telling participants that the ratios in this Framework provide a
multidimensional perspective on the financial health of the lending and savings
operations of the institution. The ratios must be analyzed together; selective
ratio use can create an incomplete picture.
STEP 2 THE 18 SEEP RATIOS: NAME THAT RATIO GAME
1 hour 30 minutes Note to Facilitator: A more detailed description of Name that Ratio game is
included at the end of the facilitator notes for module 4.
Write
on small pieces of paper the name of each one of the four ratio groups:

• Efficiency and productivity
Divide
the participants into four sub-groups and have one member of each group draw
the name of a ratio group.
Each group of participants will be given 45 minutes to create 6 questions and an
answer sheet related to the group of ratios they have selected. (see the handout
of the ratio game and refer participants to Chapter 4 in the measuring
Performance Guidebook. This is their study guide.)
Facilitate the Ratio Game
To conduct a game each group will need to have four bells and will need select
one participant for the following roles:
1. a person to pose the question
2. a person to identify which team hit the bell first
3. a person to check the answer and then to read out a complete explanation of
the answer
4. a person to keep score by team.
The facilitator serves as overall judge in matters of disagreement.
Keep in mind that the objective of the game is to get the participants to review
and study the definitions and formulas related to the ratios and to create a fun
way of sharing the information. Don’t be afraid to stop the game for a few
minutes to clarify a technical issue on the ratio.
Provide members of the winning group with pre-determined prizes and make
sure you have consolation prizes for the remaining three teams.
STEP 3 USING RATIOS TO IDENTIFY CHANGES IN PERFORMANCE
1 hour During this session the participants will review the ratios calculated for an MFI
during two separate periods. The objective of the session is for the participants
to review ratios and to generate ideas on what might have caused the change in
ratio.
Explain the activity
1. Ask the participant to break into the same group that they were in during the
game.
2. Explain that each group must review the results for the ratio group they
have been assigned (this is the same group of ratios that they created the
questions for during the game). When reviewing the rations on handout 4.2
they must identify:
• The change between 2003 and 2004

• Identify possible explanations for what might have led to positive or
negative change in the ratio.
3. The groups have 30 minutes to identify possible explanations. Remind the
participants that they should consult the relevant section of Chapter 4 to
help them develop their theories on why the change occurred.
4. Ask each group to give a brief presentation.
Refer to the TBD facilitator answer sheet for highlights of changes in each
group and potential explanation. (Need Till to Create)
NOTE TO FACILITATOR:
Go back to the tool to have participants generate the SEEP 18 Ratios and
Indicators using the financial information from the case study.
Review this information. At the end of this section are the calculated SEEP 18
Ratios for the facilitator.

THE RATIO GAME
The point of this game is to create a competition among participant groups to see who has the best
understanding of the SEEP 18 ratios, how they are calculated and what the ratio measures. The game
is played in two phases:
1. Creation of questions and preparing for the Competition
2. The Competition
Each group of participants will be given 45 minutes to create 5 questions (with answers) and a bonus
question (with answers) related to the group of ratios they have been assigned. The groups need to
allocate time within the 45 minutes to refresh their knowledge of the other ratios.
CREATING THE QUESTIONS:
The questions should generally end with the phase name that ratio….
For example:
This ratio measures how well an MFI covers its costs related to operating revenues, expenses also
taking into account adjustments….
(the answer is Financial Sustainability)
The bonus question should be more elaborate.
Tell me why this ratio is sometimes used as a proxy for commercial viability….
(the answer is “because the numerator does not include non-operating items or donations and is net of
taxes.”)
The questions created by each group will be asked to the other three groups during the competition.
THE COMPETITION
The competition will be completed in four rounds. During each round one group will pose the
questions they have created to the members of the other teams. Before starting with the question the
presenter will read a brief overview of the group of ratios. For example:
Profitability and sustainability ratios reflect the MFI’s ability to continue operating and grow in the
future. Most reputable MFIs are striving for sustainability, regardless of their nonprofit or for-profit
status; donors and investors alike look to fund sustainable institutions. Several factors can affect
profitability and sustainability. Although startup or rapidly growing institutions may have low
profitability, they are building the basis for a sustainable future. The ratios recommended in this
section are the most widely accepted in the industry.
The designated presenter from each group will pose the questions one at a time. The groups
responding must listen to the question and when they believe they know the answer, they must ring a
bell. The first team to ring the bell gets five seconds to answer the question. If they guess incorrectly,
then the question is read again (in its entirety) and the remaining two groups get the chance to ring the
bell to answer. If the second guess fails, the third team gets to answer.
The team posing the questions will ask all six questions.

Teams answering the question correctly get 5 points and bonus question get 10 points for a total of 35
points per round.
A complete game consists of all four groups asking a total of 20 questions.
At the end of each round the facilitator must provide a summary of the ratios to include:
• The formula,
• Why the ratio is important, and
• How to use adjusted data in the calculations and the effects of using adjustments.

HANDOUT 4.2
THE SEEP 18 RATIOS
As of As of
Ref. Account Name Formula
31/12/2004 31/12/2003
R1 Operational Self- R1 = I1 113% 138%

sufficiency (OSS) (I7 + I13 + I16)
Financial self-sufficiency R1ADJ = I1 85% 73%

(FSS) (Adjusted I7 + Adjusted I13
+ Adjusted I16)
R2 Return on Assets (ROA) R2 = (I21 – I26) 1.9% 3.4%

B12avg
Adjusted Return on R2ADJ = Adjusted I21 – I26 – 5.5% – 17.6%

Assets (AROA) Adjusted B12avg
R3 Return on Equity (ROE) R3 = (I21 – I26) 3.1% 5.4%

B32avg
Adjusted Return on R3ADJ = Adjusted I21 – I26 – 8.9% – 28.4%

Equity (AROE) Adjusted B32avg
R4 Yield on Gross Portfolio R4 = C1 36.3% 29.6%

B4avg
R5 Portfolio to Assets R5 = B4 71% 50%

B12
R6 Cost of Funds Ratio R6 = I8 (B13avg + B14avg + B15avg+ 4.3% 4.4%

B18 + B19avg)
avg
Adjusted Cost of Funds R6ADJ = (Adjusted I8) 7.4% 8.6%

(B13avg + B14avg + B15avg +
B18avg + B19avg)
R7 Debt to Equity R7 = B21 63% 64%

B32
Adjusted Debt to Equity R7ADJ = B21 63% 64%

Adjusted B32
R8 Liquid Ratio R8 = B1 + B2 201% 915%

(B13 + B14 + B15 +
B16 + B17)
R9 PAR Ratio R9 = P14 > 30 Days + P16 3.8% 4.5%

B4
Adjusted PAR Ratio R9ADJ= Adjusted P14 > 30 3.8% 6.8%

Days + P16
Adjusted B4
R10 Write-off Ratio R10 = P7 1.0% 0%

B4avg
Adjusted Write-off Ratio R10ADJ = P7 + A5 1.6% 4.4%

Adjusted B4avg

As of As of
Ref. Account Name Formula
31/12/2004 31/12/2003
R11 Risk Coverage Ratio R11 = B5 60% 78%

P14 > 30 Days
Adjusted Risk Coverage R11ADJ = Adjusted B5 54% 26%

Ratio Adjusted P14 > 30 Days – A5
R12 Operating Expense Ratio R12 = I16 33% 22%

B4avg
Adjusted Operating R12ADJ = Adjusted I16 40% 34%

Expense Ratio Adjusted B4avg
R13 Cost per Active Client R13 = I16 1,154 650

N1avg
Adjusted Cost per Active R13ADJ = Adjusted I16 1,351 951

Client N1avg
R14 Borrowers per Loan R14 = N3 180 226

Officer N8
R15 Active Clients per Staff R15 = N1 127 129

Member N7
R16 Client Turnover R16 = N10 + N2 – N11 7.9% 10.3%

N1avg
R17 Average Outstanding R17 = B4 3,812 3,103

Loan Size P3
Adjusted Average R17ADJ = Adjusted B4 3,849 3,239

Outstanding Loan Size P3 – A5.2
R18 Average Loan Disbursed R18 = P2 4,965 4,500

P1

THE SEEP 18 RATIOS – FACILITATOR NOTES
R1 Operational
Self 137,866 78,789
127.3% 125.1%
Sufficiency 108,312 63,001
(OSS)
Financial
self- 137,866
100.8%
sufficiency 136,826
(FSS)
R2 Return on
29,555 15,788
Assets 9.3% 7.0%
316,845 224,352
(ROA)
Adjusted
Return on 1,040
0.3%
Assets 319,955
(AROA)
R3 Return on
29,555 15,788
Equity 16.8% 0.4%
176,265 3,745,278
(ROE)
Adjusted
Return on 1,040
0.6%
Equity 178,237
(AROE)
R4 Yield on
136,896 77,975
Gross 63.9% 52.0%
214,345 149,783
Portfolio
R5 Portfolio to 248,875 179,816
68.1% 67.1%
Assets 365,718 267,973
R6
Cost of 5,228 1,713
3.9% 2.1%
Funds Ratio 135,014 82,929
Adjusted
10,265
Cost of 7.6%
135,014
Funds
R7 Debt to 165,384 115,776

82.6% 76.1%
Equity 200,334 152,197
Adjusted
165,384
Debt to 81.8%
202,141
Equity
R8
23,894 14,908
Liquid Ratio 21.6% 24.0%
110,579 62,096
R9
12,232 1,568,972
PAR Ratio 4.9% 872.5%
248,875 179,816
Adjusted
4.9%
PAR Ratio

R10
Write-off 8,083 -
3.8% 0.0%
Ratio 214,345 149,783
Adjusted
8,542
Write-off 4.0%
214,116
Ratio
R11 Risk
6,177 4,058
Coverage 50.5% 0.3%
12,232 1,568,972
Ratio
Adjusted
Risk 8,248
70.1%
Coverage 11,773
Ratio
R12 Operating
93,553 56,151
Expense 43.6% 37.5%
214,345 149,783
Ratio
Adjusted
Operating 103,618
48.4%
Expense 214,116
Ratio
R13
Cost per 93,553 56,151
4 4
Active Client 24,819 13,828
Adjusted
103,618
Cost per 4
24,819
Active Client
R14 Borrowers
29,812 19,139
per Loan 262 195
114 98
Officer
R15 Active
Clients Per 32,983 16,655
190 127
Staff 174 131
Member
R16
Client 5,880
23.7%
Turnover 24,819
R17 Average
248,875 179,816
Outstanding 7,963 8,541
31,254 21,053
Loan Size
Adjusted
Average 248,416 179,816
7,979 8,948
Outstanding 31,134 20,095
Loan Size
R18
Average
620,532 361,190
Loan 11,900 12,700
52,146 28,440
Disbursed

MODULE 5: CREATING AND ANALYZING PERFORMANCE
MONITORING REPORTS
Goal Understand common approaches to analyzing MFI performance and the types of
reports that to include in an MFI monitoring system.
Describe the three common types of analysis including trend analysis,

variance analysis, and benchmarking.
Know how to analyze trends, variances and benchmarks results against
comparable MFIs.
Define the priority reports required to monitor financial performance of an
MFI.
Identify the type and frequency of monitoring reports to be created
Duration 2 hours 30 minutes
MODULE 1 SUMMARY
Time and
Lecturette Overview Creating and Analyzing Performance Monitoring Powerpoint 33

Reports
5 minutes
Objectives of module
Overview of performance monitoring reports
Guided Trend Analysis Powerpoint 34-35
Discussion
What is trend analysis Handout 5.1 Trend
Exercise Analysis
Why perform trend analysis Calculations
25 minutes
Method for performing trend analysis
Trend analysis and ratios
Guided Variance Analysis Powerpoint 36-39
Discussion
What is variance analysis Handout 5.2
Exercise Variance Analysis
What variance tells you Calculations
25 minutes
Method for performing variance analysis
Variance analysis and ratios
Lecturette Benchmarking Handout 5.3 Peer
Groups for
5 minutes Benchmarking
MODULE 5: CREATING AND ANALYZING PERFORMANCE MONITORING REPORTS 5-1

Time and
Lecturette Performance Monitoring Reports Handout 5.4 Sample

Quarterly
Guided What are performance monitoring reports and why are Management Report
Discussion they important
Handout 5.5 Sample
Activity Reporting Checklist
Description of different reports
1 hour 30 minutes
Type and Frequency of reports

STEP 1 INTRODUCTION TO CREATING AND ANALYZING PERFORMANCE REPORTS
5 minutes Describe
Powerpoint slide 33 Objectives of the module
Emphasize:
Creating financial performance monitoring reports is only part of an overall
performance monitoring system. This system begins with drafting a business
plan, managing for results, monitoring progress, and holding management and
staff accountable for results. The reports must include not only data and details,
but they must also provide some meaningful analysis of an MFI’s performance
and condition. Managers of MFI should determine the content of these reports
by analyzing the following four issues:
timeliness
accuracy and integrity
relevance, and
requirements.
STEP 2 TREND ANALYSIS
25 minutes Ask
Handout: What is trend analysis? Why do trend analysis?
5.1 Trend Analysis Responses should include
Calculations
Trend analysis is the examination of a company’s financial statements and
Powerpoint slides indicators over time to determine how actions affect results.
34-35
Ask
What is a method for performing trend analysis?
Responses should include
compare the current period to a previous period of the same length, such as the
previous quarter and the current quarter,
to annualize the indicators for the current period and compare the annualized
indicators to the previous year.
Exercise
On a flip chart write out the following number indicating growth in number of
loans issued each month and ask a participant to describe the trend:
120 150 190 220 240

Potential Answers
The number of loans has double over the last five months
The number of loans is increasing at varying rates per period.
Show PPT 34 or write on flipchart
the basic formula for determining the change in an account as follows:
Ptrend = P1 – P0
P0
Ask participants to use the data from the previous example, and the basic
formula, to define the percentage rate of change. Participants should do this
individually.
Answer
Ask
Participants to describe the percentage rate of change.
Point out
the number of loans issued per month has double over the last five months and
the trend related to the increase is declining. When analyzing the changes in
accounts or ratios, determining why the accounts or ratios are increasing or
decreasing is important. For example, management should be familiar with
seasonal trends, such as strong portfolio growth during a holiday season, to
distinguish seasonal fluctuations from general business trends.
Explain
For ratios, examining the absolute change between periods rather than the
relative change is customary. The calculation for the absolute change is more
common when comparing ratios from two different periods.
The following formula is used:
Show PPT 35 or write:
Rtrend = R1 – R0
In this case, the following result occurs:
FSStrend = 85% – 73% = 12%

Exercise
Ask participants to work with their neighbor to complete the information in
handout 5.1Trend Analysis Calculations. Give participants 15 minutes to
complete the exercise and then ask for a volunteer to present their findings.
An answer guide is included with the handout
STEP 3 VARIANCE ANALYSIS
25 minutes Define Variance Analysis

Handout: Variance analysis is a powerful tool to measure management’s success or
failure in meeting its goals
5.2 Variance
Analysis Variance analysis is accomplished by comparing actual performance to the
Calculations MFI’s projected or planned performance.
PowerPoint slides Show PPT slide 36 or write on a flipchart the formula for Variance
36-39 analysis:
Pvar = Pactual
Pplan
Tell participants that this ratio enables managers to calculate the relative change
between periods.
Show PPT slide 37 or write on a flipchart
Gross Loan Portfoliovar = 1,500,000 = 93.75%

1,600,000
Ask a participant to tell you in simple terms what the 93.75% indicates?
Answer:
The MFI met 93.75% of its goal for growth in its Loan Portfolio.
Demonstrate
that the same formula can be used with ratios
Show PPT 38 or write on a flipchart:
OSSvar = 109% = 87.2%
125%
Ask
What does this tell you?
This equation indicates that the MFI reached 87.2% of its OSS goal.

Similar to trend analysis, comparing planned and actual performance may be
compared by looking at the absolute difference between the two ratios:
Show PPT 39 or write on a flipchart:
Rvar = Ractual – Rplan
OSSvar = 109% – 125% = –16%
Ask
What does this information tell you?
In this case, the MFI is said to have missed its OSS goal by 16%.
Give participants handout 5.2.
Ask
Participants to review this information to determine whether or not the MFI is
meeting its targets. Give participants a few minutes to review the information.
Ask
Participants if the MFI is meeting its target?
Refer
To facilitator notes for answers and highlight the point that sound variance
analysis like other types of analysis should not focus on result in one area (one
ratio) but rather look at a broader set of ratios.
STEP 4 BENCH MARKING
5 minutes Ask
Handout: Participants to define benchmarking and its usefulness to an MFI.
5.3 Peer Groups for Answer:
Benchmarking
Benchmarking is the process of comparing a single institution’s performance to
that of its peers.
The value of benchmarking depends on the availability and quality of
comparative data.
Comparisons across institutions or peer groups require caution.
Local conditions, institutional characteristics, and the management choices
affect institutional performance.
Unless the number of institutions in the peer group is sufficient, averages and
median calculations may be misleading.
Give
Participants handout 5.3.

Describe
How the MicroBanking Bulletin defines peer groups to use when
benchmarking.
STEP 5 PERFORMANCE MONITORING REPORTS
1 hour 30 minutes Say

Handout: Management is responsible for designing reports for performance monitoring.
Performance monitoring reports are not a replacement for financial statements
5.4 Sample or annual reports, rather they combine important data—accounts, ratios, and
Quarterly indicators—that are important to the user. They may also include some analysis
Management for the user.
Report
Ask participants
Define the four main users of management reports.
Answer:
Managers themselves
Board Directors
Investors,
Donors
Ask
What is the timing of these reports?
Expected responses:
Monthly
Quarterly
semi-annually
upon request by the board, donors and investors.
Review the different types of reports
Explain activity
Divide participants into 5 groups.
Explain
that their GM has asked them to complete the information required in the
quarterly management report that will be submitted to the board later in the
week.
She has also asked them to identify the significant issues or areas of concern
that might arise from the board’s review of the information.

Assign each group one reporting area they need to focus on for this activity.
Outreach
Profitability
Portfolio Quality
Asset Liability Management, and
Efficiency and Productivity
Each group is responsible for calculating the trend and variance analysis for
their assigned area. Additionally each group must identify significant issues or
areas of concern.
Give the groups 40 minutes to complete their calculations and prepare their
summary analysis of issues.
Process
Activity by having each group present their calculations and the summary
analysis of issues.
To summarize the module review with participants
The sample reporting checklist (table 5.5).
NOTE TO FACILITATOR
Go back to the tool and generate different reports. Review for analysis the
reports generated.

HANDOUT 5.1
TREND ANALYSIS CALCULATIONS

MICRO MFI wants to determine if it has improved its performance over the previous year. To do
this, management wants to look at the MFI’s performance at the end of the first semester and compare
it to the previous year’s performance. It chooses to look at three accounts and three ratios.
A B C D E =(C – D)/C
Current Annualization Annualized Previous Increase/(Decrease)

Account
period factor (12/6 = 2) Account year (%)
II19 Net Operating

65,000 120,000
Income
PP2 Value of Loans

5,500,000 8,600,000
Disbursed
BB4 Gross Loan

2,340,000 1,850,000
Portfolio
A B C=(A x C) D E=(C – D)
Quarterly Annualization Annualized Previous Increase/(Decrease)
ratio (%) factor (12/3 = 4) ratio (%) year (%) (%)
RR1 Operational Self-

92 91
Sufficiency
RR2 Adjusted Return

– 1.3 –4
on Asset
RR12 Operating
19 35
Expense Ratio

TREND ANALYSIS CALCULATIONS
FACILITATORS NOTES
MICRO MFI wants to determine if it has improved its performance over the previous year. To do
this, management wants to look at the MFI’s performance at the end of the first semester and compare
it to the previous year’s performance. It chooses to look at three accounts and three ratios.
A B C D E =(C – D)/C
Current Annualization Annualized Previous Increase/(Decrease)

Account
period factor (12/6 = 2) Account year (%)
II19 Net Operating 2 190,000 8.3

65,000 120,000
Income
PP2 Value of Loans 2 11,000,000 28

5,500,000 8,600,000
Disbursed
BB4 Gross Loan N/A 2,340,000 26

2,340,000 1,850,000
Portfolio
Quarterly Annualization Annualized Previous Increase/(Decrease)

ratio (%) factor (12/3 = 4) ratio (%) year (%) (%)
RR1 Operational Self- N/A 92 1

92 91
Sufficiency
RR2 Adjusted Return 2 – 2.6 1.4

– 1.3 –4
on Asset
RR12 Operating 2 38 –3
19 35
Expense Ratio
In calculating the trends, the MFI must annualize all flow data, such as (I19) Net Operating Income
and (P2) Value of Loans Disbursed, and ratios that contain a mixture of flow data and stock data,
such as (R2) Adjusted Return on Assets and (R12) Operating Expense Ratio. Because the (B4) Gross
Loan Portfolio is stock data and (R1) Operational Self-Sufficiency contains only flow data,
neither needs to be annualized.
The analysis reveals that the MFI is performing better overall than the previous year. This
improvement is led by the increase in Net Operating Income, up 8.3 percent on an annualized basis.
As noted above, Operational Self-Sufficiency is up only slightly (1 percent), but this is with a much
larger increase in the Value of Loans Disbursed (28 percent) and Gross Loan Portfolio (26 percent).
MICRO MFI management should investigate why strong growth has led to only modest increases in
profitability.

HANDOUT 5.2
VARIANCE ANALYSIS CALCULATIONS

MICRO MFI wants to determine how well it is meeting its annual revenue targets. To do this,
management wants to look at the MFI’s performance at the end of the third quarter to determine its
progress. They choose to look at two accounts and two indicators.
A B C = A/C D E =C/D
Account Current Annualization Annualized Annual Achieved

Period Factor Target
Account (annualized)
(12/9 = 1.33)
(%)
I1 Financial 900,000 1.33 1,197,000 950,000 126

Revenue
I19 Net Operating 120,000 1.33 159,600 175,000 91

Income
Quarterly Annualization Annualized Target Over/ (Under)

Ratio Factor Ratio Ratio Target (%)
(12/9 = 1.33)
R4 Yield on Gross 51% 1.33 67.8% 55% 12.8

Portfolio
R1 Operational Self- 87% N/A 87% 100% – 13

Sufficiency

VARIANCE ANALYSIS CALCULATIONS
FACILITATOR NOTE
MICRO MFI wants to determine how well it is meeting its annual revenue targets. To do this,
management wants to look at the MFI’s performance at the end of the third quarter to determine its
progress. They choose to look at two accounts and two indicators.
A B C = A/C D E =C/D
Account Current Annualization Annualized Annual Achieved

Period Factor Target
Account (annualized)
(12/9 = 1.33)
(%)
I1 Financial 900,000 1.33 1,197,000 950,000 126

Revenue
I19 Net Operating 120,000 1.33 159,600 175,000 91

Income
Quarterly Annualization Annualized Target Over/ (Under)

Ratio Factor Ratio Ratio Target (%)
(12/9 = 1.33)
R4 Yield on Gross 51% 1.33 67.8% 55% 12.8

Portfolio
R1 Operational Self- 87% N/A 87% 100% – 13

Sufficiency
In calculating the variance, the MFI must annualize all flow data, such as (I1) Financial Revenue and
(I19) Net Operating Income, and ratios that contain a mixture of flow data and stock data, such as
(R4) Yield on Gross Portfolio. Because (R1) Operational Self-Sufficiency contains only flow data, it
does not need to be annualized.
Variance analysis reveals that MICRO MFI has already achieved its year-end target for Financial
Revenue (126 percent) and is well on its way to achieving its Net Operating Income target by the end
of the year, having already reached 91 percent of that target. This might be explained by the next two
ratios, which show that MICRO MFI’s yield is 12 percent higher than projected, leading to higher
than expected Financial Revenue. At the same time, its Operational Self-Sufficiency is 13 percent
below the target. This analysis suggests that although MICRO MFI is exceeding its revenue targets
and is also exceeding its budgeted expenses. Expanding this analysis to other accounts and ratios will
help management pinpoint the cause and magnitude of the higher costs.

HANDOUT 5.3
PEER GROUPS FOR BENCHMARKING

Peer groups are sets of programs that have similar characteristics—similar enough that their managers
find it useful to compare their results with those of other organizations in their peer groups. The
MicroBanking Bulletin forms peer groups based on three main indicators: region, scale of operations,
and target market. Although the criteria are occasionally modified to reflect changes in the global
industry, peer groups are created using the following guidelines.
Region Scale of Operations Target Market
Gross Loan Portfolio (in Average Outstanding Loan Size

US$)
GNP per capita
Africa
Asia Large—8 million or more

Eastern Europe/Central Asia Medium—2–8 million High—150–249%
(ECA)
Small—2 million or less Broad—20–149%
Middle East/North Africa
(MENA) Low— < 20% or Average Outstanding
Loan Size ≤ $150 ]
Large—15 million or more
Latin America Medium—4–15 million
Small—4 million or less

HANDOUT 5.4
SAMPLE QUARTERLY MANAGEMENT REPORT
As of As of Trend as of Plan Target Variance

Ref. Account Name Benchmark
12/31/2003 9/30/2004 9/30/2004 (%) for 9/30/2004 (%)
Outreach and Activity

Number of
N1 11,458 13,960 15,000
Active Clients
Number of
N3 Active 10,857 13,058 13,500 22,627
Borrowers
Number of
N5 Deposit 254 489 750 N/A
Accounts
Number of
P1 Loans 26,990 23,147 30,000 N/A
Disbursed
Value of Loans
P2 121,456,864 122,664,850 150,000,000 N/A
Disbursed
Number of
N7 89 102 110 118
Personnel
Number of Loan
N8 48 70 75 N/A
Officers
Profitability
Financial
I1 10,564,338 12,926,563 18,000,000 N/A
Revenue
Net Operating
I21 2,915,093 332,681 2,500,000 N/A
Income
Operational
Self-Sufficiency 138% 103% 130% 128%
(OSS)
R1
Financial Self-
Sufficiency 73% 80% 100% 123%
(FSS)
Return on
3.4% 1.1% 5% N/A
Assets (ROA)
a
R2 Adjusted Return
on -18% -3.0% -5% 4%
Assets(AROA)
Return on
5.4% 1.8% 15% N/A
Equity (ROE)
R3a Adjusted Return
on -28.4% -9.7% -10% 9%
Equity(AROE)

12/31/2003 9/30/2004 9/30/2004 (%) for 9/30/2004 (%)
Portfolio Quality
Impairment
I13 Losses on 162,862 815,644 1,500,000 N/A
Loans
PAR Ratio 4.5% 5.1% 5.0% N/A
R9 Adjusted PAR
6.8% 5.1% 5.0% 3.4%
Ratio
Write-off Ratio 0.3% 1.8% 0.5% N/A
R10 Adjusted Write-
3.5% 2.1% 0.5% N/A
off Ratio
Risk Coverage
78% 82% 75.0% N/A
Ratio
R11
Adjusted Risk
26% 74% 75.0% 120%
Coverage Ratio
Asset/Liability Management
Gross Loan
B4 34,701,961 49,228,881 50,000,000 323,371,248
Portfolio
Portfolio to
R5 50% 67% 75% 78%
Assets
B13
+
B14 Total Deposits 4,030,868 5,054,327 5,000,000 12,047,040
+
B18
Yield on Gross
R4a 30% 38% 32% 38%
Portfolio
Cost of Funds
4.4% 4.2% 5% N/A
Ratio
R6a
Adjusted Cost
8.6% 7.2% 8% 7%
of Funds
Debt to Equity 64% 61% 65% 1.7
R7 Adjusted Debt
64% 61% 65% N/A
to Equity
Cash and Due

B1 1,146,142 4,168,880 4,600,000 N/A
from Banks
Cash Flows
C13,
from Operating (8,985,325) (1,070,260) (1,000,000) N/A
C37
Activities
R8 Liquid Ratio 9.1 4.06 2.0 N/A
Operating
I16 6,633,187 11,107,910 12,000,000 N/A
Expense

12/31/2003 9/30/2004 9/30/2004 (%) for 9/30/2004 (%)
Operating
22% 35% 27% N/A
Expense Ratio
a
R12
Adjusted
Operating 34% 40% 32% 19.8%
Expense Ratio
Cost per Active

650 874 650 N/A
Client
a
R13
Adjusted Cost
951 978 950 N/A
per Active Client
Borrowers per
R14 226 187 22 552
Loan Officer
Active Clients
R15 per Staff 129 137 150 190
Member
R16a Client Turnover 10% 8% 10% N/A
Average
Outstanding 3,103 3,770 4,000 18,480
Loan Size
R17
Adjusted
Average
3,239 3,526 4,000 N/A
Outstanding
Loan Size
Average Loan
R18 4,500 4,835 5,000 N/A
Disbursed
a
Indicates annualized indicator.
N/A = not applicable.

SAMPLE QUARTERLY MANAGEMENT REPORT
FACILITATOR NOTES
Plan Target
Account As of As of Trend as of Variance
Ref. for Benchmark
Name 12/31/2003 9/30/2004 9/30/2004 (%) (%)
9/30/2004
Outreach and Activity

Number of
N1 11,458 13,960 22 15,000 93
Active Clients
Number of
N3 Active 10,857 13,058 20 13,500 97 22,627
Borrowers
Number of
N5 Deposit 254 489 93 750 65 N/A
Accounts
Number of
P1 Loans 26,990 23,147 – 14 30,000 77 N/A
Disbursed
Value of Loans
P2 121,456,864 122,664,850 1 150,000,000 82 N/A
Disbursed
Number of
N7 89 102 15 110 93 118
Personnel
Number of
N8 48 70 46 75 93 N/A
Loan Officers
Profitability
Financial
I1 10,564,338 12,926,563 22 18,000,000 72 N/A
Revenue
Net Operating
I21 2,915,093 332,681 – 89 2,500,000 13 N/A
Income
Operational
Self- 138% 103% – 35 130% – 27 128%
Sufficiency(OS
R1 S)
Financial Self-
Sufficiency(FS 73% 80% 6 100% – 20 123%
S)
Return on
3.4% 1.1% -2.3% 5% -4% N/A
Assets (ROA)
a
R2 Adjusted
Return on -18% -3.0% 14.6% -5% 2% 4%
Assets(AROA)
Return on
R3a 5.4% 1.8% -3.6% 15% -13% N/A
Equity (ROE)

Plan Target
Ref. for Benchmark
Name 12/31/2003 9/30/2004 9/30/2004 (%) (%)
9/30/2004
Adjusted
Return on -28.4% -9.7% 18.7% -10% 0% 9%
Equity(AROE)
Portfolio Quality
Impairment
I13 Losses on 162,862 815,644 401% 1,500,000 54% N/A
Loans
PAR Ratio 4.5% 5.1% 0.6% 5.0% 0% N/A
R9 Adjusted PAR
6.8% 5.1% – 1.7% 5.0% 0% 3.4%
Ratio
Write-off Ratio 0.3% 1.8% 1.5% 0.5% 1% N/A
R10 Adjusted
3.5% 2.1% – 1.4% 0.5% 2% N/A
Write-off Ratio
Risk Coverage
78% 82% 3.6% 75.0% 7% N/A
Ratio
R11 Adjusted Risk
Coverage 26% 74% 48.1% 75.0% – 1% 120%
Ratio
Asset/Liability Management
Gross Loan
B4 34,701,961 49,228,881 42% 50,000,000 98% 323,371,248
Portfolio
Portfolio to
R5 50% 67% 17% 75% – 8% 78%
Assets
B13 +
B14 + Total Deposits 4,030,868 5,054,327 25% 5,000,000 101% 12,047,040
B18
Yield on Gross
R4a 30% 38% 8% 32% 6% 38%
Portfolio
Cost of Funds
4.4% 4.2% – 0.2% 5% – 1% N/A
a
Ratio
R6
Adjusted Cost
8.6% 7.2% – 1.4% 8% – 1% 7%
of Funds
Debt to Equity 64% 61% – 3% 65% – 4% 1.7
R7 Adjusted Debt
64% 61% – 4% 65% – 4% N/A
to Equity
Liquidity
Cash and Due
B1 1,146,142 4,168,880 264% 4,600,000 91% N/A
from Banks
Cash Flows
C13,
from Operating (8,985,325) (1,070,260) – 88% (1,000,000) – 7% N/A
C37
Activities
R8 Liquid Ratio 9.1 4.06 – 56% 2.0 203% N/A

Plan Target
Ref. for Benchmark
Name 12/31/2003 9/30/2004 9/30/2004 (%) (%)
9/30/2004

Operating
I16 6,633,187 11,107,910 67% 12,000,000 93% N/A
Expense
Operating
22% 35% 13% 27% 8% N/A
Expense Ratio
R12a Adjusted
Operating 34% 40% 6% 32% 8% 19.8%
Expense Ratio
Cost per Active
650 874 34% 650 134% N/A
Client
R13a Adjusted Cost
per Active 951 978 3% 950 103% N/A
Client
Borrowers per
R14 226 187 – 18% 22 83% 552
Loan Officer
Active Clients
R15 per Staff 129 137 6% 150 91% 190
Member
Client
R16a 10% 8% – 3% 10% – 3% N/A
Turnover
Average
Outstanding 3,103 3,770 21% 4,000 94% 18,480
Loan Size
R17 Adjusted
Average
3,239 3,526 9% 4,000 88% N/A
Outstanding
Loan Size
Average Loan
R18 4,500 4,835 7% 5,000 97% N/A
Disbursed
a
Indicates annualized indicator.
N/A = not applicable.

HANDOUT 5.5
SAMPLE REPORTING CHECKLIST
Due date:
Date
Report Frequency No. of days after Recipients
Completed
the end of period
Income Statement Monthly 7 days Senior management,
branch managers
Adjusted Income Quarterly 15 days Board,

Statement
senior management,
branch managers
Balance Sheet Quarterly 10 days Board,
senior management
Adjusted Balance Quarterly 7 days Board,

Sheet
senior management
Cash Flow Statement Monthly 7 days Senior management,
branch managers
Audited Financial Annual 90 days Investors,

Statements
donors,
board,
senior management
Portfolio report Monthly 7 days Board,
senior management,
branch managers,
credit staff
Non-Financial Data Monthly 7 days Senior management,

Report
branch managers
SEEP 18 Ratio Report Quarterly 15 days Board,
senior management,
branch managers
Monthly Management Monthly 7 days Senior management,

Report
branch managers

Due date:
Date
Report Frequency No. of days after Recipients
Completed
the end of period
Quarterly Management Quarterly 15 days Senior management,

Report
branch managers
Quarterly Board Quarterly 15 days Board

Report
Semiannual Donor Semiannual 15 days Donors

Report
Semiannual Investor Semiannual 15 days Investors

Report

TRAINING OF TRAINERS 2 DAY COURSE—TRAINER’S GUIDE
OVERVIEW
The two-day Training of Trainers (TOT) course is designed to introduce participants to the training
course Measuring Performance of Microfinance Institutions: A Framework for Reporting, Analysis,
and Monitoring and to impart knowledge about, and skills to deliver, a participatory training model.
This training course provides a foundation of adult learning theory and integrates these ideas with
learning how to deliver the Measuring Performance of Microfinance Institutions training. As the
participants will be trainers themselves, all activities and discussions are intended to provide
examples of how active participation and learning by experience are used as effective learning tools.
The way the course is delivered is in itself an example of effective learning methodology, especially
in combination with the various activities and discussions.
OBJECTIVES
• Demonstrate skills associated with good training to enhance the learning environment for the
training course Measuring Performance of Microfinance Institutions: A Framework for Reporting,
Analysis, and Monitoring
• Interact effectively with participants to maximize the learning experience
• Use a variety of training techniques to enhance instructional material and in-class learning
• Know how to use the trainer’s guide for the training course Measuring Performance of
Microfinance Institutions: A Framework for Reporting, Analysis, and Monitoring and be familiar
with the flow of topics and session.
GENERAL OUTLINE
DAY 1
1.1 Course Introduction
1.2 Icebreaker – Join the Dots Game (5 minutes)
1.3 Participant Introductions and Course (20 minutes)
Overview
1.4 How Adults Learn Total: 45 minutes
-Activity – Dream Visualization (15 minutes)
-Child Learner vs. Adult Learner (15 minutes)
-Training vs. Education (15 minutes)
1.5 Experiential Learning Cycle Total: 40 minutes
-Activity – The Numbers Game (10 minutes)
-Description of the experiential learning (30 minutes)
cycle
1.6 Process Training (20 minutes)

2.1 Introduction to Training Course Measuring Total 2 hours 35 minutes
Performance of Microfinance Institutions
-Instruction of Module 1: The SEEP (20 minutes)
Framework
-Instruction of Module 2: Financial (1 hour 20 min)
Statements (only income statement)
-Introduction of Tool (45 minutes)
2.2 Process Training (20 minutes)
3.0 Role of the Trainer (30 minutes)
3.1 Using the Trainers Guide (30 minutes)
3.2 Practice Training (30 minutes)
DAY 2
3.2 Practice Training Continued (3 to 4 hours)
3.3 Process Practice Training (30 minutes)
4.0 Using the Case Study (1 hour)
5.0 Wrap-up
DAY 1
1.1 COURSE INTRODUCTION
Welcome participants and introduce the trainers. Explain that before you jump into the training you
will first do a warm up activity.
1.2 ICEBREAKER – JOIN THE DOTS GAME
This game is intended to relax the participants and begin the course by encouraging innovative ideas
and thoughts. It also encourages active participation right from the start.
a.) Hand out copies of the game so that each participant has one copy of the dots. (Handout 1).
Solutions to this exercise are included at the end with the handout material.
b.) Explain the rules of the game – each person will have two minutes to try and connect all the dots
using 4 straight lines and that they are not allowed to lift their pencil from the paper.
c.) After time has expired, inquire as to how many people came up with solutions. Have someone
demonstrate his/her solution on the flipchart or just by displaying his/her copy.
d.) Briefly discuss what the purpose of this activity is. Solicit answers from the participants as much
as possible. The main teaching points that should arise from this activity are
• solutions can be found outside the boundaries and normal ways of thinking
• one needs to consider all possibilities when solving a problem and not be closed in
e.) Hand out one copy to each participant of the 12-dot problem (Handout 2). Explain to participants
they must join the 12 dots with 5 consecutive straight lines. They are not allowed to lift their pen
off the paper or repeat a line.
T-2 MEASURING PERFORMANCE OF MICROFINANCE INSTITUTIONS: A FRAMEWORK FOR

f.) For participants who have not arrived at the correct solution, show them the answer and again
reinforce the idea of thinking outside the self-imposed boundaries.
g.) In a brief guided discussion, have participants explain how these ideas can be used in the training
context.
1.3 INTRODUCTIONS AND COURSE OVERVIEW
The trainers and the participants should all introduce themselves and tell a little about themselves.
The trainer can start the introductions by saying that everyone needs to say their name, where they
work, what their job is, and something unique about him/herself.
The trainer should explain the objectives. Write the objectives on a flipchart.
Discuss the trainer expectations for the TOT. Describe that the TOT is for participants to become
familiar with adult learning theory and to integrate that knowledge and skill with the delivery of the
training course Measuring Performance of Microfinance Institutions. Further the training will impart
in detail how to deliver the course Measuring Performance through demonstration and actual delivery
by participants.
The trainer should then have participants describe what their expectations for the course are.
1.4 HOW ADULTS LEARN
The objective of this section is to have participants analyze and understand the differences between
the way a child learns and the way an adult learns.
Activity – Dream Visualization
This activity is intended to provide the participants with the opportunity to compare the differences
between the way they learned as children compared to the way they learn as adults.
a.) The trainer should dim the lights and ask the participants to relax and close their eyes.
b.) Tell participants to visualize their childhood and what it was like to attend school. Example
questions are:
• Remember getting ready for school. What did you wear to school?
• You are going to school now. How did you get to school?
• You walk into your classroom. How was the classroom arranged?
• You sit down. What was this like?
• The teacher comes into the class. What was the teacher like? How did they talk? What did they
look like?
• You look around the room. You see all the students. How many students were in your class?
• The teacher starts the lesson. How does your teacher talk to the students?
c.) After these or similar questions, the trainer asks the participants to open their eyes and begins a
general discussion by letting the participants share what they visualized during the exercise. This
should lead into a guided discussion about how people learn as children compared to adults.

The main teaching points of the ensuing guided discussion are broken down into 2 main subject areas:
Child Learner vs. Adult Learner and Training vs. Education.
Child Learner vs. Adult Learner:
• Adult learners have practical learning needs
• Directive vs. Participative. Adults bring knowledge and experience into the classroom and they
learn best by being able to participate and not by being just lectured to.
• Teacher Centered vs. Learner Centered. Adult learning should focus on the participants and their
experience.
• Adults are motivated by “what’s in it for me” and expect to use what they learn immediately
• Theoretical vs Practical
Training vs. Education
• Training provides a tangible skill that will have an immediate use for the participant. Education
aims for broader, more generalized teaching of subjects and ideas.
• The goal of training is to change behavior. Behavior can be changed by changing attitudes,
acquiring skills, and increasing knowledge. The goal of education is to provide knowledge, but not
necessarily for any immediate purpose.
Give Handout 3 From Pedagogy to Andragogy
1.5 THE EXPERIENTIAL LEARNING CYCLE
Activity – The Numbers Game

The handouts are Handout 4.
a.) Give each participant 3 copies of the game all face down on the table.
b.) Explain that when you say go, the participants are to flip over the first sheet of paper. On the
paper is an array of numbers. The participants are to connect the numbers sequentially by drawing
lines from number to number. Number 1 has been circled for them to get them started.
c.) They will have one minute to complete the exercise. Have the participants write “1” on the back
on the first sheet and then have them begin.
d.) After the minute is completed, tell the participants to put the sheet aside. Then, have them write
“2” on the back of the next sheet and do the process again as they did for the first sheet. Repeat
the same process for the third sheet.
e.) After the exercise has been done three times, ask two to three of the participants to tell what
number they reached on each attempt. It should be higher on every attempt.
f.) Ask participants what this means to them in the context of being a trainer and working with adults
in a training situation?
• The point of this exercise is to have people experience that one gets better and better the more they
practice. This relates to their own training as well as to the participants that will be in the courses.

Guided Discussion – Learning Something New as an Adult
After the Numbers Game, the trainer should lead a guided discussion about a skill the participants
have learned as an adult. Examples are “using a computer”, “baking a cake”, “driving a car”, or any
other subject which is relevant to the particular group. What the trainer wants to do is have the
participants examine carefully the processes of learning and how they learn. The trainer should ask
questions that lead the participants step by step through the learning cycle. For instance, the steps of
learning how to use a computer could be as follows:
Using a Computer
• Played around on a friend’s computer or one at work or school
• Someone showed me how to do the basics of certain applications
• Practiced what I learned and experimented around some more
• Read some books or instructional guides
• Thought about how I could use applications to help my business
• Started using word processing for business correspondence and spreadsheets in my financial
management
Once the trainer has led the group to realize that there are different steps in learning, he/she presents
the “Learning by Experience Model” which is one theory about the way adults learn. Because this can
be somewhat complicated, it might be presented in a short lecture instead of a guided discussion, but
at every step, the trainer can relate back to the previous discussion about the steps of learning a skill,
like the computer
The Experiential Learning Cycle
The experiential learning model is based on the theory that people learn best by actually doing. It is
learner centered meaning that the focus is on the participant and not on the teacher. The model has
four stages as shown below.
• Experiencing: Participating in some activity which is designed to produce information or
understanding — to identify, explore, examine, or study a problem, topic, or issue and generate a
common base of knowledge or skill. This is the “doing” part. Experiences can be individual, small
group, or large group.
• Processing: Sharing and reporting reactions/observations that were experienced and examining and
analyzing the experience to look for themes, patterns, etc. The facilitator or trainer helps to
structure the reporting stage; members discuss "What happened?” and "How did it go?" When your
structured activities are small group rather than individual learning based, different groups may
experience the activity in different ways. Each group may be given a slightly different assignment
so its members have a somewhat different experience. Reporting enables the entire group to share
these varied experiences. Systematically examining and analyzing the experience, looking for
patterns, themes, relationships, and group interactions. Members are most likely to learn from the
experience if they consider "What kinds of things happened and why?”
• Generalizing: Linking the experience to the real world, by identifying useful concepts or
approaches. Generalizing about "So what?" or "How can this be used in your work?”
• Applying: Using the new information and skills in real-life situations. This can be done through
planning and discussing how to apply what was learned, role-playing its use, or actually putting it

to use through planning group activities. Giving members the opportunity not only to use the
learning but also to share with and teach others further enhances learning retention.
With this model, it’s important to understand that the defined goals of the training session need to
drive the process. Also, theory needs to come into the process either before the experience or after
when it can be considered during the generalization phase.
Give participants a copy of the handout The Experiential Learning Cycle Handout 5.
1.6 PROCESS
Ask participants to describe what they saw you do as a trainer that was effective?
Ask participants to describe what they saw you do as a trainer that was ineffective?
Write responses on a flipchart. Starting with the responses that they considered were ineffective go
down the list to determine what a more effective training technique/method would have been or what
you could have done differently as a trainer.
Go through the list of what the trainer did that was effective. Emphasize the skills that a good trainer
needs.
2.1 INTRODUCTION TO TRAINING COURSE MEASURING PERFORMANCE OF MICROFINANCE

INSTITUTIONS
Note: It is assumed that all participants have read the trainer’s guide, the technical guide and are
familiar with the tool.
Trainer to begin by teaching Module 1: The SEEP Framework. Go through the material as if you
were conducting a training.
Continue training the first part of Module 2: Financial statements and reports and teach through the
income statement.
After the income statement introduce participants to the tool. Go through the introduction of the tool
and the demonstration of the tool.
2.2 PROCESS THE TRAINING
Ask participants to describe the different training methods that were used during the
“demonstration” of the training.
Responses should include:
• Lecture/lecturette
• Guided discussion
• Small group work
• Question and answer
Ask participants
• how they felt as learners during the session.

• Their reactions to the different training methods used
• How the use of the different methods impacted their learning.
Ask participants what visuals techniques/aides were used?
Responses should include:
• Powerpoint
• Overhead projector
• Written instructions on case study
Ask participants:
• How was using different visual aides helpful to you as the learner?
• Can too many visual aides be used?
• What happens if you don’t use visual aides?
Ask participants how are they going to use this information and insight about how adults learn,
effective and non-effective techniques, and using visual aides during their trainings?
3.1 ROLE OF THE TRAINER
Say to participants that a lot is going on in this training environment. We are learning about the
SEEP training course and we are also brushing up on our skills as trainers. Let’s reflect on what we
have learned about how adults learn, why adults learn and think about what our role is as a trainer.
Ask the participants to talk to their neighbor about what the role of a trainer is. They should write
this information down. Give participants a few minutes to do this.
Ask one group to describe one trainer role and write this on the flipchart. Go around the room to
generate other ideas. Do not comment on the list.
Go down the list and discuss each issue. When discussing each issue come up with a separate list of
skills/qualities that a trainer needs to have. Write this on a separate flipchart.
Go through each skill/quality and discuss. Ask questions such as what does this mean/how does a
trainer do this, etc.
Give participants handout 6,7,8,9
3.2 USING THE TRAINER’S GUIDE
Ask participants, “what is a trainer’s guide?” Comment on responses and add that a trainer’s guide is
a format that has been developed for trainers to use. The learning has been sequenced into
steps/stages that allow the learner to build on knowledge and skill that has previously been learned.
The learning step/stages are broken into manageable parts so that the trainer can introduce a
topic/develop a skill etc, and then build on that knowledge. In the trainer’s guide for Measuring
Performance the topics have been sequenced so that the information is presented in an order that will
make sense to a learner, time has been allocated based on factors such as importance of the topic,
previous knowledge of learners, time required to teach topic, etc. Activities and exercises have been
developed to support/enhance and reinforce the theory that participants are learning.

Ask participants to open the trainers guide to the introduction and the timeline page. Discuss that the
times allocated are approximations. Time allocation could change depending on the audience’s
knowledge and skill level as well as the trainer’s discretion.
Ask participants to turn to Module 2: Financial Statements and Reports, Module summary. Ask
participants to describe what they see on this page and what information is presented to them. Show
participants how this is organized and talk about what they do with this information.
Ask participants to review briefly the facilitator’s notes for the balance sheet.
Tell participants these are notes/a guide. What does that mean/say to you? Responses include that
this is an outline to follow, not a lecture to recite word for word. This is a plan.
Summarize with the trainer’s guide is a resource to use. The training method presented in this guide
is based on an experiential, participatory training method. This is an effective way to develop skill
and knowledge in adult learners. A trainer has discretion to present information differently but
remember the training method is based on best practices for adult learners.
3.3 PRACTICE TRAINING
Tell participants that they will get to practice their training skills and become more familiar with the
SEEP training by actually delivering a part of the training.
Assign each participant a manageable piece from the trainer’s guide. Depending on the size of the
class assign pieces of the training so that on day 2 of your training the morning will be devoted to
practice training. If the class is small give participants approximately 30 minutes for their
presentations.
Tell participants that they will need to prepare the material they need for the class. Give participants
time to review the section of the trainer’s guide that they are to deliver. Be available to answer
questions about how to deliver the training. Suggest to participants that they give serious
consideration as to how they will deliver their piece and to practice their session.
Inform the participants of the order they will be presenting on the following morning. The order of
the presentations should be in accordance with the training timeline.
Note to Trainer: Keep in mind that this training is two-fold; introduce trainers in training to the
SEEP training course and introduce them to how to use the material effectively in the classroom.
3.4 PRACTICE TRAINING CONTINUED
Tell participants that this practice training has two objectives; one for all participants to become
more familiar with the SEEP training, and two for participants to practice their training skills. At the
end of each participant practice time, the class will give constructive feedback to the “trainer”.
Ask participants to describe what constructive feedback is so that everyone understands it is an
opportunity to learn from the training experience.
Have the first participant present their training piece. Again the size of the class will dictate how
long each participant has for their presentation.
Note to facilitator: Be a timekeeper for the “trainer”.
At the end of the training time, start off the constructive feedback session with giving a few
comments to the “trainer”. Example I liked the way you controlled the person who was talking a lot

and got other people to participate. I did notice that when you asked a question, you answered the
question as well. What is a technique to get participants to answer a question?
Write the comment on a flipchart to keep a list of effective techniques used. If there is some
negative feedback ask participants to describe a different way that the trainer should think about
presenting the material/different method, etc. Encourage other participants to add their comments.
This list should become “Good practices to use in the training room”.
3.5 PROCESS THE PRACTICE TRAINING
Go back to the flipchart on effective techniques developed during the practice training. Go through
the techniques/skills demonstrated and ask participants to describe in more detail the technique or
skill.
Ask participants to think about the three most important lessons they learned during this practice
training.
Go around the room and ask people to share one of their lessons. If there is time solicit additional
lessons.
4.0 USING THE CASE STUDY
Have participants get their copy of the case study for all topics. This session is to discuss how to use
the case study to reinforce the theory learned in the class and then use the data to learn about the tool.
Point out to participants that at the end of each topic the case study is introduced. Talk about why the
case study is introduced.
Point out that after the case study the class uses the tool. Discuss with participants ideas for using the
tool with the continued addition of new data.
Final discussion on how to integrate the information generated from the tool to reinforce the topics.
Specifically discuss what do you do with the information generated from the data that is inputted into
the tool. How do the trainers talk about analysis of the information.
Go through each module Financial Statements and Reports, Analytical Adjustments, Ratios and
Indicators, and Creating and Analyzing Performance Monitoring Reports and discuss how to integrate
the analysis of the information into the training.
5.0 WRAP-UP
Prior to lunch on the second day tell participants to think about any concerns or questions they have
related to technical areas of the training, the training, use of the tool, etc. If possible have participants
tell you these so that you can prepare for the wrap-up session beforehand.
Explore with participants any parts of the Performance Monitoring training they have questions or
concerns about. This could be technical or training related.

HANDOUT 1

HANDOUT 2

Solutions:

HANDOUT 3
ADULT LEARNING
FROM PEDAGOGY TO ANDRAGOGY
Andragogy Pedagogy
Adult Learning – Training Child Learning - Traditional Teaching
Self Concept
Autonomous – makes own decisions Dependent – guided by adults
Mutual exchange in teaching /learning transactions Dominant teacher – dependent learning
A helping relationship A directing relationship
Experience
Able to use/link to life Limited life experience
Multi - communication shared by all 1 way communication given by teacher to learner
Experience of teacher valued as the primary
Experience of all valued as resources for learning
resource
Readiness to Learn
Know what they want to learn Curriculum is set
Learners group themselves according to interests Learners are grouped by grade and class
Facilitator helps learners diagnose learning needs Teacher makes curriculum decisions
Time Perspective/Orientation to Learning

Need to apply learning to life/work Learn for the future/banking
Problem centered Subject centered
Work on today’s problem today Subjects studied now for use some

HANDOUT 4
THE NUMBERS GAME

HANDOUT 5
EXPERIENTIAL LEARNING
Experiential approach is learner-centered and allows the individual participants to manage and share
responsibility for their learning with their teachers. Effective training strategies which incorporate
experiential learning approaches provide opportunities for a person to engage in an activity, review
this activity critically, draw some useful insight from the analysis, and apply the result in a practical
situation.
A graphic representation of the experiential model is presented below and may be applied to training
in the following ways:
Experience
Activity, Doing
Application Process
Planning more effective Sharing, comparing
Post training behavior processing, reflecting
Generalization
Drawing conclusions,
Identifying general principles
The experience phase is the initial activity and data-producing part of the experiential learning cycle.
This phase is structured to enable participants to become actively involved in "doing" something.
Doing, in this instance, has a rather broad definition, and includes a range of activities like the
following:
• case studies • role plays • simulations

• lecturettes • films and slide shows • skill practice
• completing an instrument • games

This sample list indicates that the range of training techniques varies from the more passive and
artificial (lecturettes) to the more active and real (skill practice). Which technique one chooses as an
educational activity will depend largely on the goals of the training session.
Once the experience stage is completed, the trainer or instructor guides the group into the process
part of the cycle. During this phase, participants reflect on the activity undertaken during the
experience phase, and share their reactions in a structured way with other members of the group.
They may speak individually, in small groups, or as a full training group. They discuss both their
intellectual and attitudinal (cognitive and affective) reactions to the activities in which they have
engaged. In addition, with the trainer' s assistance, they try to link these thoughts and feelings
together in order to derive some meaning from the experience.
The trainer's role as facilitator is very important during each phase of the cycle. During the process
phase, he/she should be prepared to help the participants think critically about the experience and to
help them verbalize their feelings and perceptions, as well as draw attention to any recurrent themes
or patterns which appear in the participants' reactions to the experience. The trainer's role involves
helping the participants to conceptualize their reflections on the experience so that they can move
towards drawing conclusions.
The generalization stage is that part of the experiential learning cycle in which the participants form
conclusions and generalizations which might be derived from, or stimulated by the first two phases of
the cycle. During this phase, participants are helped to "take a step back" from the immediate
experience and discussion, and to think critically in order to draw conclusions that might generally or
theoretically apply to "real life." This stage is perhaps best symbolized by the following questions:
• What did you learn from all this?
• What more general meaning does this have for you?
The trainer or instructor structures this part of the experiential learning model so that the participants
work alone first, and then are guided into sharing conclusions with each other, In this way,
participants exchange thoughts and ideas so that they may act as catalysts to one another. The trainer
helps to facilitate this step by:
• Asking and helping individual to summarize what they have learned into concise statements or
generalizations
• Pushing back at people to help make their thinking more rigorous
• Relating the conclusions reached and integrating them into a theoretical model
• Making sure, within reasonable time boundaries, that everyone who wishes to share a significant
insight is given a chance to contribute
• Helping the group compare and contrast different conclusions, identifying patterns where they
exist, and identifying legitimate areas of disagreement
After participants have formed some generalizations, they are guided into the application stage of the
cycle. Drawing upon insights and conclusions reached during the previous phase (and other phases),
they can begin to incorporate what they have learned into their lives by developing plans for more
effective behavior in the future. In an ideal educational or training event, participants would be able to
apply what they have learned immediately after the workshop ends. The applications that they plan
may relate to their profession or personal life, depending on the background and needs of the specific
groups.

Techniques used to facilitate the application stage can include:
• individual work to develop a thoughtful action plan which puts "thought into action"
• Participants review each other's plans and assist in formulating ideas for action
• Parts of individual action plans are shared with the whole group in order to create a sense of joint
effort
• additional learning needs are identified by participants
One of the ways the trainer assists during this process is by helping participants be as specific as
possible in developing their action plans.
It is important to stress two other points about the experiential learning model. First, the exact nature
of each phase of the model is determined by the goals of the training session or program. Once the
goals are defined, then the session can be designed using the model as the framework. Second, theory
can come in two different places - either before the experience, in which case the experience becomes
a way to test the theory or try out the skills implied by it, or after, when it is interwoven into the
generalization phase as participants develop their own "theory".
In order for this model to be effective, it must be rigorously applied, both in the design and delivery
stages. "Experiential training or learning" is a phrase often heard in the educational world. However,
it is frequently misused in practice where it seems to mean letting people participate in a presentation,
having a question and answer session after a lecture, or a role play or case study by itself without the
subsequent steps in the model. Most frequently, the generalizing and application stages are simply left
out of the design or the program. As a result, the power of experiential learning is significantly
diminished or is negated altogether.
Although the model, when correctly explained, looks very clear, its practical application is not always
as clear. There are transitions between phases, and occasionally (especially if the trainer is going too
fast), the group will return to a phase until it is ‘finished’. Also, individuals within the group may not
approach the learning process in such a linear fashion, and that is perfectly legitimate. The model is
meant to serve as a guide for the trainer or instructor who is trying to design and carry out an
educational experience for the group.
The model is especially useful for skill training because most of its techniques are active and are
designed to involve the participants in skill practice. The experiential model helps people assume
responsibility for their own learning because it asks them to reflect on their experience, draw
conclusions and identify applications. The effective instructor or trainer does not do this for the
participants. Thus, they are not spoon-fed, nor are they led to be dependent on experts. Of course, this
model requires a special trainer or instructor style for it to be implemented effectively, and it is to that
subject which we will now turn.
DESIGN COMPONENTS OF AN EXPERIENTIAL TRAINING SESSION

Before we begin to design a training session we should recall the basic principles of the experiential
learning model. First, the application of each phase of the model is driven by the goals of the training
session. Once the goals are defined, the session can be designed using the model as the framework.
Second, theory can be inserted in two different places—either before the experience, in which case
the experience becomes a way to test the theory or try out the skills implied by it—or after, when it is
interwoven Into the generalization phase as; participants develop their own “theory”.

Often times the model is misused in practice where certain components are left out of the design or
the program. As a result, the power of experiential learning is significantly diminished or is negated
altogether. However, when the 7 components are applied rigorously in sequence, the potential for
effective experiential learning can be dramatic.
In order to ensure a clear understanding of the experiential learning model, it is important to define
the design components individually,
1. CLIMATE SETTING
• Stimulates interest, curiosity, and enables the participants to begin thinking about the subject at
hand.
• Provides rationale for why the subject is important to the participants and how it will be useful to
them.
• Links this training session to previous ones and places it into the overall framework of the
workshop.
2. GOAL CLARIFICATION
• Presents statements to the participants which describe the intent, aim or purpose of the training
activity.
• Provides an opportunity for participants to get a clear understanding of the goals of the session, and
allows them to explore additional issues or raise concerns.
3. EXPERIENCE
• An activity in which the group engages that will provide an opportunity for them to "experience" a
situation relevant to the goals of the training session.
• This "experience" becomes the data producing event from which participants can extract and
analyze as they complete the 'learning cycle.
• Common "experiences" are role plays, case studies, self diagnostic instruments, games,
simulations, etc.
4. PROCESSING
• Participants share individual experiences and their reactions to the experience.
• The group analyzes and thoughtfully reflects on the experience.
• The trainer guides and manages the processing of information.
5. GENERALIZING
• Participants determine how the patterns that evolved during the experience phase of the learning
cycle relate to the experiences of everyday life.
• Participants seek to identify key generalizations that could be derived from the experience.

6. APPLYING
• Using the insights and conclusions gained from the previous steps, the participants identify and
share how they plan to use thew new insights in their everyday life.
• Participants answer the questions, "Now what?” and "How can I use what I learned?"
7. CLOSURE
• The events of the training session are briefly summarized.
• Provides a link to the original goals of the session and seeks to determine if the goals have been
met.
• Wraps up the training session and gives a sense of completion.
• Provides an opportunity to link the session to the rest of the program, especially the next training
activity.

HANDOUT 6
10 TIPS WHEN FACILITATING DISCUSSIONS

Your role during a group discussion is to facilitate the flow of comments from participants. Although
it is not necessary to interject your comments after each participant speaks, periodically assisting the
group with their contributions can be helpful. Here is a ten-point facilitation menu to use as you lead
group discussions.
1. Paraphrase what a participant has said so that he or she feels understood and so that the other
participants can hear a concise summary of what has been said.
So, what you're saying is that you have to be very careful about asking applicants where they live
during an interview because it might suggest some type of racial or ethnic affiliation. You also
told us that it's okay to ask for an interviewee's address on a company application form.
2. Check your understanding of a participant's statement or ask the participant to clarify what he or
she is saying.
Are you saying that this plan is not realistic? I'm not sure that I understand exactly what you
meant. Could you please run it by us again?
3. Compliment an interesting or insightful comment.
That's a good point. I'm glad that you brought that to our attention.
4. Elaborate on a participant's contribution to the discussion with examples, or suggest a new way
to view the problem.
Your comments provide an interesting point from the employee's perspective. It could also be
useful to consider how a manager would view the same situation.
5. Energize a discussion by quickening the pace, using humor, or, if necessary, prodding the group
for more contributions.
Oh my, we have lots of humble people in this group! Here's a challenge for you. For the next two
minutes, let's see how many ways you can think of to increase cooperation within your
department.
6. Disagree (gently) with a participant's comments to stimulate further discussion.
I can see where you are coming from, but I'm not sure that what you are describing is always the
case. Has anyone else had an experience that is different from Jim's?
7. Mediate differences of opinion between participants and relieve any tensions that may be
brewing.
I think that Susan and Mary are not really disagreeing with each other but are just bringing out
two different sides of this issue.

8. Pull together ideas, showing their relationship to each other.
As you can see from Dan's and Jean's comments, personal goal setting is very much a part of
time management. You need to be able to establish goals for yourself on a daily basis in order
to more effectively manage your time.
9. Change the group process by altering the method for obtaining participation or by having the
group evaluate ideas that have been presented.
Let's break into smaller groups and see if you can come up with some typical customer objections
to the products that were covered in the presentation this morning.
10. Summarize (and record, if desired) the major views of the group.
I have noted four major reasons that have come from our discussion as to why managers do not
delegate: (1) lack of confidence, (2) fear of failure, (3) comfort in doing the task themselves, and
(4) fear of being replaced.
Reproduced from 101 Ways To Make Training Active by M. Silberman
Copyright 1995 by Pfeiffer and Company, San Diego, CA

HANDOUT 7
10 STEPS TO USE WHEN FACILITATING EXPERIENTIAL ACTIVITIES

Experiential activities really help to make training active. It is often far better for participants to
experience something rather than to hear it talked about. Such activities typically involve role
playing, games, simulations, visualization, and problem-solving tasks. The following ten steps will
help to make your experiential activities a success.
1. Explain your objectives. Participants like to know what is going to happen and why.
2. Sell the benefits. Explain why you are doing the activity and how the activity connects with any
preceding activities.
3. Speak slowly when giving directions. You might also provide visual backup. Make sure the
instructions are understood.
4. Demonstrate the activity if the directions are complicated. Let the participants see the activity
in action before they do it.
5. Divide participants into the subgroups before giving further directions. If you do not,
participants may forget the instructions while the subgroups are being formed.
6. Inform participants how much time they have. State the time you have allotted for the entire
activity and then periodically announce how much time remains.
7. Keep the activity moving. Don't slow things down by endlessly recording participant
contributions on flip charts or blackboards and don't let a discussion drag on for too long.
8. Challenge the participants. More energy is created when activities generate a moderate level of
tension. If tasks are a snap, participants will get lethargic.
9. Always discuss the activity. When an activity has concluded, invite participants to process their
feelings and to share their insights and learnings.
10. Structure the first processing experiences. Guide the discussion carefully and ask questions
that will lead to participant involvement and input. If participants are in subgroups, ask each
person to take a brief turn sharing his or her responses.
Reproduced from 101 Ways To Make Training Active by M. Silberman
Copyright 1995 by Pfeiffer and Company, San Diego, CA

HANDOUT 8
EFFECTIVE USE OF QUESTIONS

Questions can be used as effective instructional tools without embarrassing participants who don't
have the 'right' answer, without students guessing what you want them to say, without the awkward
pauses that occasionally set in when you say "Are there any questions?"
TRY THESE:
• Ask for more information by requiring the responder to be more explicit and perhaps more sure of
his answer; "Can you give me an example?" Or "When you say xyz, what do you mean?"
• Restate what you have heard: "So, are you saying that people should … or did I misunderstand
you?" By stating what your understanding is to this point (rather than "Would you say that
again?")' you provide the other with a point from which to proceed. She may respond, "No that's
not what I meant. What I am trying to say is that...."
• Make critical observations to make learners look at their answer in a more probing and critical
way: "Why do you think this is so?" Or: "How would you explain your answer to someone who
feels quite the opposite?"
• Try to intensify the learner's statement if the response is important, requires no instructor comment,
and could be added to by others. You could say: "Very good, Colin. What implications would your
statement have for...?" (turning to the whole group). Or: "How can we use Colin's solution to solve
our dilemma?"
MORE TRICKS TO STIMULATE PARTICIPATION:

• Ask a question, pause for five seconds and then ask for a response. Often students give non-verbal
hints that they are ready to respond.
• React to "false" answers with acceptance, even if you do not agree with them. Use probing
questions to refocus on the discussion topic. ·
• Encourage silent members to comment if you think they might have the answer but are reluctant to
speak up: "This is probably something you know quite a bit about, David..." ·
• Ask the same question of several students. Don't stop after the first response, which often comes
from the same core group of participants. ·
• Formulate questions that cause people to give long answers. Do this by (a) referring to areas of
knowledge, rather than simple facts, and (b) making it difficult to answer with a simple YES or
NO.
• Piggy-back your new questions on top of the responses you got for your previous question: "OK,
let's take that approach and take it one step further..."
• Pick out certain aspects of the response and refocus the group's attention on them.
• Try not to answer your own questions. After a while you will be performing a one-person show.

• Avoid questions to which the answer is obvious: "Don't you agree that...?" Make a statement
instead ("I believe that...") and invite reactions.
• Taking that last suggestion one step further, if you ask a question, be prepared to hear the answer
even if it does not coincide with your own. Be flexible.
WHEN DID YOU LAST ASK, "ARE THERE ANY QUESTIONS?"

You can probably remember the silence that often follows this question. Some instructors use this line
one minute before the class time is up (and after they have spoken for one solid hour). Would you
bring up a point that you missed half way through the lecture if you were a student? Would you
expect full consideration of your questions when you knew that any minute the group would get up
and leave? If the instructor really wants to hear "any questions," then he must allow for time and
create an atmosphere which makes it OK for people to ask. Here are some openers that can yield
responses:
• “Before I go on, does this make any sense to you?”
• “How are we doing?”
• “Where did I lose you?”
• “Do my examples make sense to you?”
• “What additional information do you want from me?”
You have probably seen the following technique used by someone experienced in political meetings:
“Are there any questions you want me to answer?” Five second pause, and then, addressing a person
who either has, or ought to have, a question: “Perhaps you could start, Eileen?”
Also-watch for non-verbal signals, “You seem puzzled, Ron. Can I help?” Having the instructor
accept responsibility for “helping you to understand me” makes it easier for participants to ask for
clarification and additional information.
Buzz groups, Response Cards and Speedy Memo are additional ways to get around the “are there
any questions? Silence”.

HANDOUT 9
LISTENING METHODS
PARAPHRASING
Paraphrasing is simply restating what another person has said in your own words.
The best way to paraphrase is to listen carefully to what the other person is saying. If while the other
person is talking we worry about what we are going to say next or are making mental evaluations and
critical comments, we are not likely to hear enough of the message being sent to paraphrase it
accurately.
It is helpful to paraphrase often so that you develop a habit of doing so. You can throw back the other
person’s ideas by using such beginning phrases as
…So what you are saying is….
…In other words….
…I gather that….
…If I understand what you are saying….
You can at times even interrupt to paraphrase since people don’t generally mind interruptions that
communicate understanding.
…Pardon my interruption, but let me see if I understand what you are saying….
SUMMARIZING
The purpose of summarizing is to
• pull important ideas, facts or data together
• establish a basis for further discussion
• review progress
Summarizing can encourage people to be more reflective about their statements as they listen for
accuracy and emphasis. It is a skill which requires that the one who intends to summarize listen
carefully in order to organize the information systematically.
Summarizing is very useful for emphasizing key points; it is a deliberate effort to pull together the
main points made by the person who is talking.
…These seem to be the key ideas you have expressed…
…If I understand you, you feel this way about the situation….
QUESTIONING
Questioning is a critical facilitation skill. There are two basic types closed and open-ended.

Closed questions generally result in short yes/no or other one-word answers. They should be used
only when you want precise quick answers. Otherwise, they inhibit communication.
“Was the last activity useful?”
Open-ended questions ask for more detailed information. HOW? WHAT? and WHY? are examples
of words that begin an open-ended question.
“How was the last activity useful?”

POWERPOINT PRESENTATION
POWERPOINT PRESENTATION P-1

P-2 MEASURING PERFORMANCE OF MICROFINANCE INSTITUTIONS: A FRAMEWORK FOR
REPORTING, ANALYSIS AND MONITORING
MEASURING PERFORMANCE OF
MICROFINANCE INSTITUTIONS:
A FRAMEWORK FOR
REPORTING, ANALYSIS, AND
MONITORING
A TRAINING COURSE PRESENTED BY THE SEEP NETWORK
COURSE GOAL
• Microfinance practitioners will create and use

financial performance monitoring reports that have
been developed using International Financial
Reporting Standards to be able to assess with
accuracy the performance of their institution, make
decisions in regard to future directions, inform boards
of directors, and report to donors, investors and other
interested parties.
MEASURING PERFORMANCE OF MICROFINANCE INSTITUTIONS: A FRAMEWORK FOR 2

COURSE OBJECTIVES
• Describe the importance of a consistent financial

reporting framework and how a framework can be
used to make decisions, provide important internal
information, and be used for external reporting and
comparisons.
• Produce accurate financial statements and reports in
accordance with International Financial Reporting
Standards (IFRS) to be used to measure
• Create an adjusted income statement and balance
sheet, using commonly accepted adjustments and
standard calculations, to analyze and measure the
“true performance” of a microfinance institution,
analyze long-term viability, and make meaningful
comparisons across the industry.
COURSE OBJECTIVES
• Calculate and analyze up to 18 financial ratios and

indicators to be able to evaluate the performance of a
microfinance institutions’ activities.
• Create financial performance monitoring reports for a
microfinance institution and analyze, using
recommended tools, the performance and condition
of the microfinance institution.
• Use the SEEP Framework tool to monitor financial

TRAINING AGENDA
DAY ONE
• Introduction
• Module 1: The Performance Monitoring Framework
• Module 2: Financial Statements and Reports
• Introduction to the Spreadsheet Tool
DAY TWO
• Module 2: Financial Statements and Reports continued
• The Tool and Financial Statements
• Module 3: Analytical Adjustments
• The Tool and Analytical Adjustments
• Module 4: Financial Ratios and Indicators
• The Tool and Financial Ratios
DAY THREE
• Module 5: Creating and Analyzing Financial Reports
• Using the Tool and Creating Reports

MODULE 1 OBJECTIVES:
By the end of Module 1, participants will:

• Describe what a performance monitoring framework
is and why a framework is critical to monitoring their
institutions performance.
• Discuss how the framework provides standards for
the microfinance industry and how individual
institutions can benefit from those standards.
• Be familiar with the framework’s referencing system
to identify terms used in the framework and help
interpret formulas.

SEEP PERFORMANCE MONITORING FRAMEWORK
Managers need to know how to:

• Categorize data into statements and reports
• Analyze the statements and reports
• Use the information for monitoring purposes

THE FRAMEWORK
• Financial Statements and Reports

• Analytical Adjustments
• Financial Ratios and Indicators
• Performance Monitoring Reports

FRAMEWORK REFERENCE SYSTEM
• I Income Statement
• B Balance Sheet
• C Cash Flow Statement
• P Portfolio Report and Activity Report
• R Ratios
• A Adjustments
• N Non-Financial Data Report

MULTIPLE PERIODS
¹ = end of current period

0 = end of previous period
During the calendar year 2004:


AVERAGING
Averages are indicated by the use of the superscript

letters “avg”
PAVG

CALCULATING AVERAGES
Pavg = [(P0 + P¹)/2]
or
Pavg = (P0 + P¹ + P2 + P3 + P4)

5

MODULE 2 OBJECTIVES

• Describe the income statement, balance sheet, cash
flow statement, portfolio report and non-financial data
report, and explain their significance and how they
are related.
• Construct financial statements and reports based on
the SEEP Framework.
• Discuss how the financial statements and report are
interrelated.
• Use the SEEP Framework tool to input data for
financial statements and reports.

BEFORE YOU USE THE FRAMEWORK
• Mapping Accounts
• Adding Accounts
• Segregating Financial and Non-Financial Services
• Cash or Accrual

THE FRAMEWORK TOOL
What is the Tool?

• A spreadsheet that follows the format of the SEEP
Framework document
How is the Tool designed?

• It is a simple financial performance monitoring tool
that will satisfy an MFI Manager’s basic financial
performance monitoring needs
• To be a user-friendly tool that can maintain and
export data.

FRAME TOOL STRUCTURE
EXCEL Workbook Sheets:
Forecast Data Monthly Data – Adjustments

User Set-up Data Input
Input Unadjusted Input
Monthly Data- Fin. Reports – Fin. Reports – Ratios –

Adjusted Unadjusted Adjusted SEEP 18
Reports
-Management
-Board User-sheets
-Donor
Input sheets
-Investor
Result sheets

FRAME TOOL STRUCTURE User Set-up
• Enter general information (e.g. name of the

institution)
• Make the following choices
- Monthly/Quarterly/Annual/No input for each of three years of
data
- Enable direct or indirect cash flow?
- Enable Adjustments?
- Enable CRS gender ratios?
- Enable Forecast sheet and Variance analysis?
- Enable user-defined sub-accounts?
- Enable BASIC set of ratios or ALL ratios?

FRAME TOOL STRUCTURE Data Input
• Enter the information required for each of the

Financial Statements and Reports:
- Income Statement
- Balance Sheet
- Cash Flow Statement
• Direct or Indirect depending on user-choice
- Portfolio Report
- Non-Financial Data Report
• Must:
- Input data for the periods selected in the “Set-up” sheet
- Input “Initial Balances” for certain line items so that the tool is
able to calculate averages needed for ratios
- Input YTD data

MODULE 3: ANALYTICAL ADJUSTMENTS
• Describe the importance of financial statement

adjustments that reflect results based on non subsidized
operations, inflation and portfolio at risk to be able to
understand the true performance of an institution and
compare financial results to other MFIs.
• Use specific techniques to make adjustments for
subsidized funds and in-kind subsidies obtained by an
MFI as well as adjustments based on current levels of
inflation in a country and on impairment Loss Allowance
and Write-offs to the loan portfolio to understand common
adjustment methods.
• Discuss the effects of properly calculated adjustments on
the financial statements of the MFIs to understand their
effects on the bottom line
ANALYTICAL ADJUSTMENTS
Purpose of Adjustments
• True Performance
• Benchmarking

Types of Adjustments
• Subsidizes
• Inflation
• Portfolio at Risk

Key points:
• If an adjustment calculation produces a negative
number, the adjustment is not applied. Managers
should explain the adjustment calculation and which
variables they chose.
• Adjustments can be applied for any period of time.
The method used to calculate averages makes a
difference.

SUBSIDIZED FUNDS ADJUSTMENTS
Formula for adjusting for the cost of funds =
The extra expense that the MFI would incur if it were

paying market rates for funds from commercial
(market) sources.

STANDARD FOR BENCHMARKING
A1 = [(B15 avg +B19 avg) x N10] – I10

A1 = [(Average Short-term Borrowings + Average Long-

term Borrowings) x Market Rate for Borrowing] –
Interest and Fee Expense on Borrowings

IN-KIND SUBSIDY ADJUSTMENT
A2 = Period Estimated Market Cost of [Accounts] –

Period Actual Cost of [Accounts]

A2.1 = Estimated Market Cost of I17 – Actual I17

A2.2 = Estimate Market Cost of I20 – Actual I20

A2 = A2.1 + A2.2 where:
A2.1 = Estimated Market Cost of Personnel – Actual

Cost of Personnel
A2.2 = Estimated Cost of Other Administrative

Expenses – Actual Cost of Other Administrative
Expenses

A3 = A3.1 – A3.2 where:
A3.1 = (Equity, Beginning of Period x Inflation Rate)

A3.2 = (Net Fixed Assets, Beginning of Period x
inflation rate)
A3.1 = (B320 x N9)

A3.2 = (B90 x N9)

STANDARDS FOR BENCHMARKING ALLOWANCE
RATES
• Current Portfolio → 0%
• PAR 1–30 days → 10%
• PAR 31–90 days → 30%
• PAR 91–180 days → 60%
• PAR > 180 days → 100%
• Renegotiated Portfolio → 100%

MODULE 4: RATIOS AND INDICATORS

• Calculate and understand “The SEEP 18”
recommended ratios
• Describe why each ratio is important in measuring
performance of a MFI
• Use adjusted data in calculating the SEEP 18 ratios
and understand how using adjusted data affects
information.

FINANCIAL RATIOS AND INDICATORS
The “SEEP 18” are divided into the following four

groups:
• Efficiency and productivity.

MODULE 5: PERFORMANCE MONITORING REPORTS
• Describe the three common types of analysis

including trend analysis, variance analysis, and
benchmarking.
• Know how to analyze trends, variances and
benchmarks results against comparable MFIs.
• Define the priority reports required to monitor
financial performance of an MFI.
• Identify the type and frequency of monitoring reports
to be created.

PERCENTAGE RATE OF CHANGE
Ptrend = P1 – P0
P0

ABSOLUTE CHANGE
Rtrend = R1 – R0

FORMULA FOR COMPARATIVE ANALYSIS
Pvar = Pactual
Pplan

CALCULATING THE RELATIVE CHANGE BETWEEN
PERIODS
Gross Loan Portfoliovar = 1,500,000 = 93.75%

1,600,000

USING THE FORMULA FOR RATIOS
OSSvar = 109% = 87.2%

125%

Rvar = Ractual – Rplan
OSSvar = 109% – 125% = –16%


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MEASURING PERFORMANCE

MODULE 1: THE PERFORMANCE MONITORING FRAMEWORK 1-1

MODULE 2: FINANCIAL STATEMENTS AND REPORTS 2-1

MODULE 3: ANALYTICAL ADJUSTMENTS MATERIAL 3-1

MODULE 4: FINANCIAL RATIOS AND INDICATORS 4-1

MODULE 5: CREATING AND ANALYZING PERFORMANCE

TRAINING OF TRAINERS 2 DAY COURSE—TRAINER’S GUIDE T-1

POWERPOINT PRESENTATION P-1

TABLE OF CONTENTS III

WHO SHOULD ATTEND

AN INTEGRATED TRAINING DESIGN

USING THE TRAINERS GUIDE

DAILY AND END OF TRAINING EVALUATION

THE TRAINING TIMELINE

2 MEASURING PERFORMANCE OF MICROFINANCE INSTITUTIONS: A FRAMEWORK FOR

Lecturette and Welcome and Overview of Course

Group Activity Ice Breaker Handout 4.1

Lecturette Goals, Objectives and Agenda Powerpoint 2-4

Question and  Review goals, objectives and agenda

Lecturette Additional Business

Discussion  House Rules

5 minutes  Training Methodology

Additional Materials Additional ice

Introduce main facilitators including background and additional

Setting the stage for the training

Facilitator to welcome participants to the training. The welcome

 The title of this course is Measuring Performance of

 As practitioners in the microfinance industry we need a way

4 MEASURING PERFORMANCE OF MICROFINANCE INSTITUTIONS: A FRAMEWORK FOR

 You may be saying to yourself we already do this, so why

 The framework presented in this course works hand-in-

Step 2: Group Ice Breaker Handout Intro.1:

To the group that they will play an introduction game called

Instructions for People Hunter:

1. Tell participants that they will have 5 minutes to circulate

2. After 5 minutes tell participants they are to stop what they

3. Each participant has one minute to introduce their partner

Facilitator note: Optional – you can give a prize or

Step 3: Lecture Goals, Objectives, Agenda Powerpoint 2-4

Question & Show PPT Slide 2-4

Goal: Microfinance practitioners will create and use financial

Objectives: At the end of the training, participants will be able

 Describe the importance of a consistent financial reporting

 Produce accurate financial statements and reports in

 Create an adjusted income statement and balance sheet,

 Calculate and analyze up to 18 financial ratios and

 Create financial performance monitoring reports for a

 Use the SEEP Framework tool to monitor financial

Participants if anyone has other expectations about what they

6 MEASURING PERFORMANCE OF MICROFINANCE INSTITUTIONS: A FRAMEWORK FOR

Show PPT 5 Training Agenda

Step 4: Other Business

 Everyone needs to participate in order to succeed and

 Please turn off cellphones or ask your friends, family and

 There is a blank flipchart posted titled “questions,

Facilitator Note: This is a guideline of rules. You need to make

Explain to participants the course has been developed using a

Has the same birth month as Has worked at their institution

Question and Review goals, objectives and agenda

Discussion House Rules

5 minutes Training Methodology

The title of this course is Measuring Performance of

As practitioners in the microfinance industry we need a way

You may be saying to yourself we already do this, so why

The framework presented in this course works hand-in-

Describe the importance of a consistent financial reporting

Produce accurate financial statements and reports in

Create an adjusted income statement and balance sheet,

Calculate and analyze up to 18 financial ratios and

Create financial performance monitoring reports for a

Use the SEEP Framework tool to monitor financial

Everyone needs to participate in order to succeed and

Please turn off cellphones or ask your friends, family and

There is a blank flipchart posted titled “questions,

Describe what a performance monitoring framework is and why a framework is

The SEEP Framework and standardizing financial

Important information to know before learning about the

Sample Portfolio report

Terminology, definitions, xrefs

Operational and macroeconomic data