TRMFI Analysis Balance Sheet Assets Liabilities Cash in
TRMFI Analysis Balance Sheet Assets Liabilities Cash in bank Loan outstanding Vehicles & equipment Rs. 500000 Rs. 4000000 Rs. 500000 Bank loan Donated equity 500000 4500000 Total Rs. 5000000 Total 5000000
TRMFI Analysis Profit and Loss Account Income Interest on loans Operating grant Total Expenditure 1000000 2000000 Field staff Head office Travel Depreciation Bank interest Bed debt 1000000 400000 300000 100000 2000000
Options before TRMFI n n n n n Increase interest rate Increase turnover (lend more money) Get cheap funds from other concessional sources Eliminate defaults Lend to fewer clients, and reduce the field staff Lend out the money which is in bank Replace bank loan with members’ savings Increase group size to reduce staff requirement Reduce head office costs and traveling
Options before TRMFI n Double the interest rate (50 %) - increase the gross income by 1000000 at one stroke eliminate the loss will such interest rate acceptable? may possibly increase the default?
Options before TRMFI n Double the portfolio to Rs. 80, 00 - Additional interest income: Additional cost of funds: Provision for bad debts: Net additional income: 10, 00000 8, 00000 1, 00000 - staff numbers will have to be increased to manage the higher portfolio - bad debt may increase because of reduced supervision
Breakeven model n n Maintain average loan size of Rs. 4000 Increase interest rate to 30 % Increase group size to 30, and increase staff load to 2 groups a day or 10 per week, making a total of 100 groups and 3000 clients Induce a Rs. 100 per client annual service charge
Breakeven model n n Loan portfolio, 3000 clients @ Rs. 4000 = Rs. 1, 20, 00000 Interest @ 30 % = Rs. 36, 00000 Annual service charge, 3000 clients @ Rs. 100 = Rs. 3, 00000 Total income = Rs. 39, 00000 n Cost of additional funds borrowed from banks 80, 00000 @ 20% = Rs. 16, 00000 Bad debts, 2. 5 % = Rs. 3, 00000 Other cost unchanged = Rs. 19, 00000 Total costs = Rs. 38, 00000 n Annual Profit = Rs. 1, 00000 n n n
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