Download
1 / 7
70 likes | 234 Views
SDFIs- Assessment Of Their Performance The Financial Forum September 23, 2004 Jacob Yaron. The role of DFIs was reduced in recent years. SDFIs still play an important role and are likely to continue to play such role.
E N D
SDFIs- Assessment Of Their PerformanceThe Financial ForumSeptember 23, 2004Jacob Yaron
The role of DFIs was reduced in recent years • SDFIs still play an important role and are likely to continue to play such role. • The call for eliminating DFIs and cutting them off from Bank operations is not instrumental and in some instances not justified economically. • The issue is the lack of agreed assessment criteria that facilitate meaningful performance evaluation of SDFIs. • Possibly this is the main failure of salient donors that often initiated, supported and bailed- out SDFIs.
The double objectives “development” and adequate profitability (subsidy adjusted). • For a full cost: benefit analysis a very demanding econometric study is needed. It is rarely done. • Relying exclusively on the accounting financial data of the SDFI provide often a partial if not meaningless performance picture • States and donors that foot the bill of maintaining the SDFI need agreed performance criteria. • Measuring the performance of SDFIs in a systematic way would contribute to improved performance.
Cont. - It is difficult to assess and measure the benefits to the target clientele - It is relatively easy and much less demanding to measure the cost of maintaining the DFI - There is a lot that can be learnt from cost: cost comparison even when the benefits are not fully known. What should the Bank and donors measure? • The subsidy per average annual $ outstanding loan portfolio • The annual subsidy received by the DFI measured against the annual interest income paid by the target clientele.
Contributions of the SDI Methodology 1. Often subsidization of SDFIs is not explicit. The numerator of the SDI quantifies the total explicit and implicit subsidies. thereby allowing cost comparisons with other programs. 2. The SDI compares subsidization with revenue from lending, thereby providing the notion of a matching grant. 3. The SDI tracks subsidy dependence over time and can be used as a planning and monitoring tools to evaluate progress toward subsidy independence. 4. The SDI compares subsidy dependence of different SDFIs that provide similar services to similar clientele.
Outreach Index (OI) • An arbitrary, hybrid output index - reflecting the priorities. • Costs and subsidies should be measured against specific “products” • Generating transparency badly needed with respect to costs, subsidies and “products” provided to target clientele. • The SDI and OI should be used for ex-post analysis, for planning and budgeting. Subsidies should be budgeted per “product” delivered to target client. • An important role for second- tier DFI .
The SDI is expressed below. • . • SDI = Annual net subsidies received (S) / • Average annual yield obtained on the loan portfolio (LP * i) • SDI = (A (m - c) + [(E * m) - P] + K) / (LP * i) • Where: • A = Average annual outstanding concessionally-borrowed funds; • m = Interest rate the SDFI is assumed to pay for borrowed funds if access to concessionary borrowed funds were eliminated. • c = Weighted average annual concessional interest rate actually paid by the SDFI on its average annual outstanding concessionally borrowed funds; • E = Average annual equity; • P = Reported annual profit before tax (adjusted for appropriate loan loss provisions and inflation); • K = The sum of all other annual subsidies received by the SDFI • LP = Average annual loan portfolio of the SDFI; and • i = Average annual yield obtained on the SDfIs loan portfolio • LP =Average annual loan portfolio.
